Yearly Archives: 2014

The socialist nightmare – Venezuelan edition

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This is about the collapse of the Venezuelan economy post-Chavez. It has seemingly taken place almost out of nowhere. Things limped along for a longish while and then, almost overnight, fell apart.

The problem in being unable to recognise what’s going on is due in large part to our economic notions now so firmly based on “flows” rather than “stocks”. We look at how much we are able to buy and not at the underlying productive apparatus. A bridge collapses and the effect on GDP is either nothing at all or perhaps even leads to an increase in output as more effort is required to get from place to place while there is activity in re-building the bridge. That’s the flow side of the story. The stock side, however, is to note that the actual productive apparatus of the economy has been impaired. It cannot produce as much as it could the day before the collapse.

What happens in a socialist economy like Venezuela, or the US at the moment, is that there is a time during which the capital is being run down and there is little recognition that there is major structural damage taking place. Then, in what seems almost inexplicable, the entire economy falls apart all at once. This is from an article on the collapse of the Venezuelan economy.

Welcome to Hugo Chavez’s Venezuela, a country with the fifth largest oil reserves in the world and absolutely broke. It’s a remarkable achievement for Chavismo. A just-wow moment. Socialism is useless at everything except for smashing things in record time. There it excels. It’s hard to imagine that as late as the 1980s Venezuela had the highest standard of living in Latin America. But then in 1960 Detroit was the richest city in the world in per capita income. Now it’s well … Detroit. . . .

The genius of the Left — Chavez’s for example — is that it destroys things from the inside out. They pervert religion, collapse the mores, abolish the family, shred the constitution and gradually expropriate the property. The differences from one day to the next are apparently imperceptible, but it is harder and harder to go back until finally there is no reversal of ‘progressive gains’ possible at all. The public is finally faced with the stark choice between chaos or authoritarianism. And most people will chose the Boss over the Mob.

The capital, both physical and social, is eaten away and then completely breaks down. Building is hard and requires patience. Destruction from the inside by socialists looks great for a while while the wealth is spread around. But when it falls, not only does it crumble, but no one knows how to put it together again, least of all the socialists who promise everything but deliver nothing but misery in the name of equity and justice.

The art and science of debate

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Let me start by taking up a couple of issue as examples of the lack of reasoned debate in our society.

The first of these is global warming. There has been an across-the-world debate on whether the planet is in the midst of unsustainable warming due to increased greenhouse gases. Even though I have had my doubts from the start, what you do is examine the arguments others bring up to see what truth content there is and you look at the evidence that’s presented along with the theoretical explanations. And OK, for a while, the temperatures were going up, which was a correlation but not proof. I, like others, therefore kept an open mind and watching brief. But then, around fifteen years ago, temperatures stopped rising even while atmospheric carbon continued to increase. As a result, my scepticism has been maintained and I think of such scepticism as fully justified. Yet I do not know of a single person of the green persuasion who has come to the conclusion that perhaps they might have been wrong?

Or take another of my areas of interest, Keynesian economics. I have, for theoretical reasons, strong doubts about modern macroeconomics and its focus on aggregate demand. In my view, Say’s Law is valid while the whole of modern macro is built on a well known classical fallacy. And what is the the fallacy: that increases in public spending will increase aggregate demand and therefore return an economy to low unemployment and faster growth. OK, comes the stimulus, I set down in print my expectation that it would fail on a grand scale, that it would make economic conditions far worse than they were, and would not return our economies to strong growth and full employment. And had our economies, contrary to my expectation, recovered I would have had to give up my opinions, not least because everyone would have reminded me of what I had written. But instead, the world’s economies have unfolded almost exactly as I expected they would. But has any Keynesian actually said that, well, you know, perhaps modern macroeconomics is wrong after all. If there is, I have not heard of a single instance.

This brings me to a very high level and interesting discussion on why arguing with people on the left is not the same as debating, more like talking to a wall. Beyond that, as Captain Capitalism, the name he calls himself, points out, a proper debate is about advancing the truth, whereas dealing with the left merely ends up with abuse but little advance of knowledge. A long post on the art and science of debate but here is one part of which the whole is well worth the effort:

Aurini . . . delves into detail explaining the “debate” structure of grammar, logic, and rhetoric. Grammar basically meaning you all have to agree on the definitions and meanings of words. Logic meaning you have to be intellectually honest and adhere to associative rules and other logical concepts that ensure integrity. And rhetoric meaning you apply it in the real world or test one another’s arguments with anecdotes from reality. If both parties in a debate or even a discussion have these three things, then the conversation/debate is much more productive and progresses towards an inevitable “conclusion,” “reality” or agreement.

What’s funny though is for the longest time I never viewed debate as a cooperative effort, but rather an adversarial one. One of competition. One where you had an enemy that needed to be defeated. Of course, this was the sad consequence of growing up with the mentally deficient people that populated my generation. Parties I attended in my 20’s I was regularly attacked and berated for being a conservative. Debates in college (or even post college) were filled with emotion and vitriol. And in nearly 100% of the cases my opponents degraded into name calling, ad hominem attacks, accusations of “ism,” or being a nazi, etc.

And then a little later in his article there is this:

The majority of people are weak-minded. They are also lazy. However, they are also egotistical . . . and so their mind reaches for something that will not only allow them to claim some kind of intellectual “superiority” or “achievement,” but also allow them to do so with no work.

Going green
Protesting
Claiming they’re a caring liberal
Joining a religion
Going vegan
Becoming a professor
etc.

This not only results in them living in a delusional, non-real world, but also makes them emotionally and egotistically invested in keeping up their ideological facade. Thus, when you make impassionate, logical, stoic arguments of fact, math, and statistics you (consciously or not) pierce their ego, expose their charade, and therefore trigger a visceral, emotional, and often hate-laden response from them.

The left tend to deal in feelings rather than facts and proof. It actually seems that facts and proof are no part of anything they propose. They believe what they wish to believe because it makes them feel better, not because it is actually valid or demonstrable to reason and common sense.

James Delingpole off to greener pastures

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Alas:

Today is the sad day when I must bid you all farewell. I have been appointed Chief Sustainability Consultant at the Department of Energy and Climate Change, working directly to one of my all-time-heroes Ed Davey, with a juicy, taxpayer-funded salary, a ring-fenced pension and a bio-fuel-powered Aston-Martin just like the Prince of Wales’s.
No, not really, about the second bit. Just the first bit: I’m off to pastures new. . . .

Thank you most of all to those of you who have supported me through thick and thin. Thanks for your technical expertise and advice (it prevented anyone ever noticing that I’m an English graduate and know NOTHING about science apart from, maybe, how to grow copper sulphate crystals); thanks for your jokes, links and irrelevant asides; thanks for your friendship and loyalty and courage in the face of sometimes, near insuperable odds, against the dark forces of statism, political correctness, and green-left-liberal lunacy. You are like brothers to me: all of you; apart from the ones who are more like sisters.

UPDATE: But still with The Spectator. Here is James discussing The martyrdom of Mark Steyn. A serious issue and part of the reason that free speech is not what it used to be in the US. This is the final para but all the paras before should be read as well.

Mann may or may not have a case against Steyn on technical grounds; but in terms of the bigger argument about empiricism, free speech and the scientific method, he doesn’t have a leg to stand on. Steyn gets this and — as he did in his case against the Ontario Human Rights Committee — is laying his neck on the line not solely because he’s a show-off and an awkward sod but for the greater cause of western civilisation. Now go to his website Steynonline.com and read what you can do to support him.

The science is settled – Capricorns are more pragmatic

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This is about the generation most worried about global warming: Majority of young adults think astrology is a science.

According to a new survey by the National Science Foundation, nearly half of all Americans say astrology, the study of celestial bodies’ purported influence on human behavior and worldly events, is either “very scientific” or “sort of scientific.” . . .

What’s more alarming, researchers show in the 2014 Science and Engineering Indicators study, is that American attitudes about science are moving in the wrong direction. Skepticism of astrology hit an all-time high in 2004, when 66 percent of Americans said astrology was total nonsense. But each year, fewer and fewer respondents have dismissed the connections between star alignment and personality as bunk. . . .

Young people are also especially inclined to offer astrology scientific legitimacy, with a majority of Americans ages 18 to 24 considering the practice at least “sort of” scientific, and the 25-34 age group is not far behind them

So let me re-write that, taking into account that 47% of adults (i.e. voters) in Australia still think global warming is a problem with presumably an even larger proportion of those under 30 having swallowed the Kool-Aid. Please bear in mind that this is a paraphrase just for satirical purposes:

According to a new survey, nearly half of all adults say anthropomorphic global warming (AGW), the study of carbon dioxide’s purported influence on our economy and world temperatures, is either “very scientific” or “sort of scientific. . . .”

What’s more alarming, researchers show in the study that attitudes about AGW are hardly budging. Skepticism about global warming still remains low, with only just over half of those surveyed saying AGW is total nonsense.

But don’t worry. When the moon is in the seventh house and Mars is at its zenith, things will begin to shift.

A level of ignorance only exceeded by his irresponsibility

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Melanie Phillips discusses the revamping of drug laws, and more importantly, drug morality in the US:

Rub your eyes: an American President, the nation’s ultimate role model, using his uniquely powerful position of influence to talk down the dangers of drug-taking – displaying a level of ignorance only exceeded by his irresponsibility – and talking up therefore the likely incidence of addiction, mental degeneration and death from narcotic abuse.

After Obamacare, Obamaddiction. It’s a tragedy all right – but on a rather larger and more devastating scale than one dead actor.

I wonder what this was about

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From Andrew Bolt:

People who airily deny that my free speech (and, by extension, yours) hasn’t been taken away in part by our courts should know that I have again been advised by my lawyers not to comment on a recent publication by the Department of Foreign Affairs and Trade, or even to simply republish the DFAT item without comment.

This is far from the first time. Our laws against free speech are a disgrace. The effect is to allow people – in this case DFAT – to promote a certain point of view on a matter of great moral importance without fear of contradiction.

This post, then, is a bookmark to note where an article should have appeared.

If the SHOE fits

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There has been a kind of hammer and tongs discussion at the Societies for the History of Economics (SHOE) website that began when I posted that the President of France had stated in support of a more “austerity”-oriented economic policy that, L’offre crée même la demande. Or in English, that supply really does create demand, a principle known in English as Say’s Law. Every economist is taught from the first day of macro that Say’s Law is wrong and that a Keynesian stimulus is the answer to recession. Sounded better five years ago but today, who would suggest more public spending even though our economies remain as dismally placed as they are. But part of what I found so charming is that the suggestion is made that I am near enough the only economist in the world who thinks “the strong version” of Say’s Law is true. How weird is that! But of course, that doesn’t mean that I think that I’m wrong, specially since all the evidence is so one way.

The SHOE website is filled with interesting discussion over a vast range of economic issues. You definitely do not have to be an economist either to join or to listen in on the discussion. You can register here. Meantime, this is my latest post on how I see the role of the history of economic thought.

I am rather charmed by Barkley Rosser’s last post, to wit:

So, my final comment will be directed very directly at Steve Kates and James Ahiakpor. Can you guys not figure out that you have totally and utterly lost this debate? Nobody here agrees with you, nobody. You have lost, period. Sure, you can get the occasional Per Berglund to sort of attempt to help you out by questioning details of the critiques of your arguments, but even those folks in the end do not come down on agreeing with your defense of a strong version of Say’s Law. Deal with it, please. We have all had more than enough.

I am more than aware that so far as numbers go, we are on the wrong side of the ledger. When I began to argue in public against the stimulus back in 2009, there were attempts made by that solid mainstream to have me sacked from my university appointment. There are risks in taking such positions. What protects me now from such attacks is the unbelievably dismal outcomes from the stimulus. You may not understand what I’m saying. But there is no doubt that, so far as the way our economies have performed, I have little reason to think anything other than that Mill was right, that the “strong version of Say’s Law” is valid, and classical economists knew what they were talking about. The modern Keynesian fashion, on the other hand, has little to show for it. Does evidence count for nothing?

But I come onto this thread firstly to thank our moderator for his willingness to let the previous thread on L’offre crée même la demande continue to its end. But there is more to it than that. I wrote my book on Defending the History of Economic Thought, not just to explain why making the effort to understand the economic theory of the past is an extremely good way to deepen an economist’s understanding of economic theory, but also to argue that HET is the place where economic theory goes to regenerate itself. This is the one and only place that economists from every one of the traditions in economic theory come to look in on what is being said by others.

There are mainstream journals, but also Austrian, Neo-Keynesian, Post-Keynesian, Institutionalist, Marxist and others, and if you are not part of whatever tradition that journal represents, it is unbelievably difficult to get published. HET has broken this tradition down, at least to some extent. It may well be that no one can follow what I or James or Per are trying to say, although we can follow each other with near perfect clarity. But where else are you going to even hear it at all?

The History of Economic Thought is by all accounts dying yet it is the most intellectually alive area in the whole of economic theory. It teems with ideas and there are economists from every tradition who are willing to fight it out before an audience of upwards of a thousand of their peers who can follow these discussions as they like. There is seldom a thread I don’t learn from and I typically read them through.

And there is no doubt that HET is under threat of extinction. There are people at the top of our hierarchies, and I am talking about our hierarchies within HET, who would willingly take this study into the History and Philosophy of Science and leave economics behind. There are also mainstream theorists who would be glad to see the end of us and our constant criticisms of established textbook economics.

But there are also people, like myself and others who come to this site, who just find it fascinating to listen in on alternative ways of thinking about economic issues. That is what HET is for. Rather than restrict this area to burrowing into particular issues related to economists who are no longer mentioned in our textbooks, it should also be a place where ancient economists are resurrected and their ideas discussed. And I don’t just mean on this site but across the entire expanse of the history of economic thought.

The journal, History of Economics and Policy, is a paradigm of just what is needed. Perhaps not for all of us, but certainly for some of us. This is not the end of HET but in my view is its salvation. Here is a link to its archive.

It is what every HET journal should become more like. Some traditional material but also some which see the relevance of past theory to our present problems.

And in furtherance of this post, I might just mention this news item, Canada charts comfortable course to 2015 budget surplus. If you are a Keynesian, your reaction would be, how terrible! If, however, you have been following the news for the past five years, you can see what a triumph it is. The strong version of Say’s Law remains an absolute necessity if you are to understand how an economy works and why public spending and deficits are the disasters they have so obviously proven to be.