In a global era, the next crisis is always just around the corner. The continuous expansion of debt is the cause at the bottom of all of them.
I suspect that we have been living in a “global era” for the last 250 years at least so technically I suppose he’s right, but I think he is trying to say there is something new in the world. He could, if he cared to look, find the same kinds of instability across the whole of the nineteenth century. If he would like to go back farther, I could send him to The Wealth of Nations, or he could investigate the Mississippi or South Sea bubbles, both eighteenth century.
The point, of course, is that with the advent of Keynesian economics, the classical theory of the cycle has disappeared and to my knowledge a full discussion is available from only a single source at the present time, although the Austrians are pretty close.
So yes, there is always another crisis around the corner, all the more so since those who manage our economies are the single most certain cause of it. The real question, then Max is this: what should we do, right now, to prevent this crisis from coming full term, or at least what can we do to make it less of a problem? For this, too, you need to go back to the classical theory of the cycle. They had no guaranteed answers either, but at least they knew what you should not do. And if you would like to see the kinds of things they would not have done in action, check out the Federal Reserve in the US, along with most of the other central banks now in charge, and see what they are doing right now.
This is from The Age. I will know that things are really turning when we can see the same in The New York Times. The article is by Julie Szego and is titled, Let’s not pussyfoot around definitions, Man Haron Monis was a terrorist and comes with the sub-heading, “‘Lone wolves’ may have no formal ties to terror groups, be criminals or mentally ill, but their ideology is key to understanding their actions”.
To categorise Monis’ actions as those of an ordinary criminal rather than a religious extremist we have to deprive him of the “benefit” of being an individual. Monis had proclaimed his disgust for Australia’s military intervention in Afghanistan. He sent abusive letters to families of deceased Australian soldiers who served there. He converted from Shia Islam to Sunni, pledging allegiance to Islamic State. During the siege he requested an IS flag, obviously troubled that his banner wasn’t the pure article. He demanded Tony Abbott refer to his actions as a terrorist attack. It was prudent tactics to deny his self-definition during the siege, but to do so now is to flinch from reality. . . .
Monis should be seen as a violent criminal and a terrorist. We must name his extremist ideology, accept that it is influential and pernicious and redouble our efforts to confront it as a calm, harmonious community.
Together, the “lone wolves” form a rabid pack. Monis doesn’t need a certificate of authenticity signed by Islamic State.
The phone is my favourite example of a technology that never stops changing. And if we were to go back and think in terms of communications, the pony express existed for about two years and was almost immediately replaced by the telegraph. And all of it has been entrepreneurially driven, with governments only becoming involved because for the longest time, the phone was a natural monopoly where competition was constrained by the capital requirements. Still somewhat true, but nothing like it was, which is why the private sector has been finally able to muscle governments out of the way.
I have just finished a paper that will be published next year in a book that no one will read and so this will disappear. And to tell the truth, I cannot even tell how much this is even true, although it looks true enough to me. This is the conclusion to the paper, which seems to me to say all of this. But the point of the paper is that, because English did not originally have a word for “entrepreneur” our economic theories have been not just mis-shapen, but have led to such major distortions in our understanding of how economies work we ended up fostering the economic illiteracies of Marxism. Read the conclusion for yourself and see what you think.
Jean-Baptiste Say is properly recognised as the first economist to separate out the often entwined threads of the entrepreneur on the one hand and the owners of capital on the other. He did have, as John Stuart Mill noted, the advantage of having a separate word in French for this function, which allowed him a degree of conceptual clarity that was not available to those who wrote in English. But as noted, it was not until the fourth edition of his Treatise that even Say was able to see this distinction clearly, and even then placed his discussion within a footnote rather that make it a feature part of his text.
This distinction, as crucial as it is for clear thinking on economic issues, remained buried since the role of the capitalist at the time almost fully overlapped the role of the entrepreneur and therefore the term “capitalist” was used as an exact substitute. Marx in all his own works on economics, focused on the capitalist. There is not a single use by Marx of the term “entrepreneur” in the whole of the translated text of Volume 1 of Capital. But it is not due to any deficiencies on the part of the translator. The term “entrepreneur” does show up in Capital, but only once, in a footnote, and only because of a translation of a passage written originally by Molinari in French. This is the footnote:
“Even the mild, free-trade, vulgar economist, Molinari, says: “Dans les colonies l’esclavage a été aboli sans que le travail forcé se trouvait remplacé par une quantité équivalente de travail libre, on a vu s’opérer la contre-partie du fait qui se réalise tous les jours sous nos yeux. On a vu les simples travailleurs exploiter à leur tour les entrepreneurs d’industrie, exiger d’eux des salaires hors de toute proportion avec la part légitime qui leur revenait dans le produit. Les planteurs, ne pouvant obtenir de leurs sucres un prix suffisant pour couvrir la hausse de salaire, ont été obligés de fournir l’excédant, d’abord sur leurs profits, ensuite sur leurs capitaux mêmes. Une foule de planteurs ont été ruinés de la sorte, d’autres ont fermé leurs ateliers pour échapper à une ruine imminente…. Sans doute, il vaut mieux voir périr des accumulations de capitaux que des générations d’hommes [how generous of Mr. Molinaril]: mais ne vaudrait-il pas mieux que ni les uns ni les autres périssent?” (Molinari l. c. pp. 51, 52.) Mr. Molinari, Mr. Molinari! What then becomes of the ten commandments, of Moses and the prophets, of the law of supply and demand, if in Europe the “entrepreneur” can cut down the labourer’s legitimate part, and in the West Indies, the labourer can cut down the entrepreneur’s? And what, if you please, is this “legitimate part,” which on your own showing the capitalist in Europe daily neglects to pay? Over yonder, in the colonies where the labourers are so “simple” as to “exploit” the capitalist, Mr. Molinari feels a strong itching to set the law of supply and demand, that works elsewhere automatically, on the right road by means of the police.” (Marx [1867] 1906: 844)
In the wake of this tradition, even where the factors of production are discussed, they are usually summarised as land, labour and capital. It is only a rare exception in which there is any mention, let alone discussion, of the fourth possible factor which is the entrepreneur. Yet without the entrepreneur, the other three factors would lack direction and purpose.
There is, that is to say, the return on real capital, which is the return for ownership of various humanly produced tools and structures that are used in productive activity. There is then the return that comes from employing and directing each and every input as part of the production process in just such a way that a positive return over costs is earned. It is this second function that is the role of the entrepreneur. And it is this that is almost totally ignored in the economics of the English-speaking world, and as a result of the major influence of English-language economics on the world, with immense loss to our global understanding of the actual processes of a market economy, and indeed, of any economy beyond the primitive.
If you go into a cafe in Israel, it’s not quite like trying to board a plane but it’s not just a walk in and sit down experience either. This is, so far, a one-off. And while the man at the centre may be a nutter in some sense, he is not off the planet, but a rational actor fully responsible for what he did and fully aware that the rest of us would judge him very badly for what he has done. Criminally insane he was not. How many more like him there are only the future can tell.
John Stuart Mill’s Principles of Political Economy is the greatest text on economic theory ever written. It was put together over the period from 1845 till 1848 when he had come to the conclusion that it was impossible to write a book on sociology that could address all of the contradictions that exist within human life. There were no principles of human life that could be summarised in the way that could be contained within a single set of covers. He turned therefore to economics instead.
The book is, however, unreadable today, partly because of the density of his writing and partly because of the presuppositions he brings along with him. I am therefore about to write an edited version of Mill’s Principles in which I will keep Mill’s words but edit the text down to its essentials. That is still around 300 words, but even then there will be the need to include introductory passages to underline the points Mill is trying to make. And the main reason I think I can do this is because I share most of Mill’s presuppositions myself, which I had originally learned from reading his Principles at the very moment I had discovered Say’s Law for myself.
. . . and US senator Elizabeth Warren’s A Fighting Chance.
As with the election in 2008, the only way that Hillary Clinton won’t be the next President is if the Democrats come up with someone worse. And they have.
Members of her party’s anti-bank, anti-capitalist wing have found somebody to stir them as she never did. And Warren erases Clinton’s gender advantage.
Most telling, the left’s intensity is growing since the GOP midterm rout. Instead of being chastised, the populist wing absurdly claims that Democrats have been too willing to compromise.
No more of those Obama half measures for Warren, the fake Cherokee oddball far-left nutty professor now Senator from the great state of Massachusetts. She and Bill will make quite a pair. For those who think it can’t get any worse, oh yes it can.
I know your standards. You can see them in the bombing campaign in Dresden or the concentration camps and gulags that have appeared in various places in Europe from time to time. You make it up as you go along.
And here as a bonus is the great George Gilder with the “Israel Test”. “The central divide in the world today.”
Hostage takers want to talk to the Prime Minister. Have said they have devices all over the Sydney CBD.
11:30 – Say there is only one gunman holding the hostages.
12:15 –
Prime Minister Tony Abbott has offered NSW federal support to deal with the siege in Sydney’s CBD.
Mr Abbott on Monday met with the national security committee of cabinet as the siege unfolded around 10am.
“This is obviously a deeply concerning incident but all Australians should be reassured that our law enforcement and security agencies are well trained and equipped and are responding in a thorough and professional manner,” he said.
Up to a dozen hostages are believed to being held by gunmen inside the Lindt cafe in Sydney’s Martin Place with an Islamist flag pressed up against one of its windows.
Mr Baird said he had spoken to NSW Police Commissioner Andrew Scipione and had full confidence in the efforts being made to resolve the situation.
“All my thoughts and prayers are with those members of the public affected by the situation in Martin Place and the NSW Police who are trained to deal with these events,” he said in a statement.
12:28 – Police have made an arrest near the siege location in Martin Place – a handgun has been seized.
12:39 – Waiting for the Prime Minister to speak. The shot is of a Christmas tree behind the lectern where the PM will speak. Most appropriate.
12:57 – PM makes brief statement describing the situation as an “incident”. Did not discuss Islam, either to lay blame or to caution the rest of us not to lay blame and leap to conclusions. Says “we do not know the motivation of the perpetrator”. Meanwhile the Mid-Year Economic Statement is being released but there will not be a statement from the Treasurer.
1:56 – Premier and Police Commissioner are emphasising that this is a minor disruption. Just get on in life. Well trained officers are in situ and will bring this to an end. Motivation unknown. “Moved to a footing that is consistent with a terrorist event. . . . Not directly in contact with the armed offender.”
2:14 – The Treasurer is giving his Mid-Year Economic Review press conference. Good. The PM said everyone should go about their business and not be put off by a minor terrorist incident. Good advice. I suspect the government’s reaction will be very slow and deliberate but also very thorough.
4:50 – Couldn’t get anything done since this has preoccupied my thoughts. Therefore went out to get my editing done, and could think of no better place to go than to the local Max Brenner, which is the place boycotted by the usual deranged fringe groups of the BDS. Very pleasant, and thought about the good advice of the Prime Minister, to just go about our business without being deterred from such loony one-man distractions, however potentially lethal his actions may be. I also thought that not declaring the siege as politically driven was very astute. There will be lessons learned, but you, mate, are just a crazy nutter representative of nothing other than your own insanity. That is now, but the politics will follow. And our Prime Minister is not someone you would want to cross. As for the siege itself, the only development has been the escape of three chaps who had been in the cafe who have now been followed by two women, one who worked in the cafe.
5:11 – Police negotiators are talking to the hostage taker. They are going to wear him down.
5:45 – “#SydneySiege release says “we are operating according to Counter Terrorism protocol.” The police are treating this as a terrorist operation. How well selected the target was makes me sure that this was not a one-man operation.
Law of Markets 