Lying media scum

Here’s the headline: Poll: Clear majority supports nuclear deal with Iran. Here’s what the survey showed, according to the opening para:

By a nearly 2 to 1 margin, Americans support the notion of striking a deal with Iran that restricts the nation’s nuclear program in exchange for loosening sanctions, a new Washington Post-ABC News poll finds.

If it comes to that, I support a deal that restricts Iran’s ability to produce nuclear weapons. But it is the second para of the story that brings clarity to what American really believe:

But the survey — released hours before Tuesday’s negotiating deadline — also finds few Americans are hopeful that such an agreement will be effective. Nearly six in 10 say they are not confident that a deal will prevent Iran from developing nuclear weapons, unchanged from 15 months ago, when the United States, France, Britain, Germany, China and Russia reached an interim agreement with Iran aimed at sealing a long-term deal.

So try a question like this instead: Are you in favour of striking a deal that leaves Iran with nuclear weapons while their leaders continue to repeat, “Death to America”, and who threaten to use a nuclear weapon to obliterate Israel?

It is lying media scum who ask their own poorly framed question, leave out the necessary qualification, and have done so to help ease the way towards an outcome that achieves what absolutely no American could possibly want. We know whose side the media are on, but does anyone know why that is? We also know which side the American administration is on, which leads to exactly the same question again.

UPDATE: And from Drudge, the sub-heads at the top of the page:

Iran talks lead to more talks…
Tehran refuses to give up enriched nuclear material…
Iran militia chief: Destroying Israel ‘nonnegotiable’…
Hackers threaten ‘electronic holocaust’…
Drone Spat in Iraq…
Saudis Make Own Moves…
Rabbi compares Obama to Haman, archenemy of Jewish people…
French Fear Plans To Make Iran Key Middle East Ally…
Venue for talks is ‘gilded cage’ under constant surveillance…
ABCWASHPOST POLL: Clear majority of Americans support deal…

About that “nonnegotiable” destruction of Israel. This is the opening of the story linked above:

The commander of the Basij militia of Iran’s Revolutionary Guards said that “erasing Israel off the map” is “nonnegotiable,” according to an Israel Radio report Tuesday.

Militia chief Mohammad Reza Naqdi also threatened Saudi Arabia, saying that the offensive it is leading in Yemen “will have a fate like the fate of Saddam Hussein.”

So why are the Americans so intent on reaching a deal? Anyone’s guess, but protecting American interests does not appear to be amongst them.

The worst possible question in economic theory – where will the money come from?

I went along to hear Joe Hockey talk about tax and the world in 2055, and while I understood the problem, I was underwhelmed by the analysis. It is one of the legacies of modern macroeconomic analysis, one of the absolute worst, to continually think in terms of money and not in terms of value added. This is one of the consequences of thinking in terms of aggregates which can only be denominated in money values. But once you sink into money as your mode of thought, you are almost never going to get your head around the problem, which is where will the capital stock come from, and how can we be sure that the capital we are building today is actually going to strengthen our economy over the longer term.

Money is all right as a means of thinking about accounting, which a budget basically is. It’s a balance sheet writ large. It is also why the central concern of those who don’t know any better is merely to try to balance the budget, as if money-in equals money-out is the issue.

The issue is resource use. All forms of production use up resources. Only some forms of production create more value than is used up. The only source of value adding production is the private sector. Governments virtually never create value, other than when they have a monopoly in the production of something, and even then it could inevitably be done better by the private sector. But if a government has a monopoly, they can create value, but the outcome is still far from being as productive as it might have been.

You need to divide all forms of production into three categories: wealth creating, welfare and waste. Only wealth creation makes you better off, and that is almost entirely the province of business. Welfare and waste are the province of government. And while I have no in-principle objection to welfare expenditure that doesn’t eat too deeply into the wealth-creation process, I have a large objection to welfare spending that does. Waste, of course, should be eliminated to the greatest extent possible. But if you are looking for a greater ability to spend on welfare, it is value creation that must come first.

As it happens, the only economics text in the entire world that truly examines and explains value added, outside of the typically useless discussions sometimes found in looking at the national accounts, is my Free Market Economics. If you know of another, feel free to let me know. If you don’t know of another, then you should read my book. It is only if policy makers understand value added properly, and are not muddling themselves up by thinking in terms of money, is there even a ghost of a chance they will get their policies right.

And if you don’t want to take my word for it, here is John Stuart Mill trying to say exactly the same, in Book I, Chapter V, Paragraph XVI of his Principles of Political Economy, the greatest book on economic theory ever written.

It is the intervention of money which obscures, to an unpractised apprehension, the true character of these phenomena. Almost all expenditure being carried on by means of money, the money comes to be looked upon as the main feature in the transaction; and since that does not perish, but only changes hands, people overlook the destruction which takes place in the case of unproductive expenditure. The money being merely transferred, they think the wealth also has only been handed over from the spendthrift to other people. But this is simply confounding money with wealth. The wealth which has been destroyed was not the money, but the wines, equipages, and furniture which the money purchased; and these having been destroyed without return, society collectively is poorer by the amount. It may be said, perhaps, that wines, equipages, and furniture, are not subsistence, tools, and materials, and could not in any case have been applied to the support of labour; that they are adapted for no other than unproductive consumption, and that the detriment to the wealth of the community was when they were produced, not when they were consumed. I am willing to allow this, as far as is necessary for the argument, and the remark would be very pertinent if these expensive luxuries were drawn from an existing stock, never to be replenished. But since, on the contrary, they continue to be produced as long as there are consumers for them, and are produced in increased quantity to meet an increased demand; the choice made by a consumer to expend five thousand a year in luxuries, keeps a corresponding number of labourers employed from year to year in producing things which can be of no use to production; their services being lost so far as regards the increase of the national wealth, and the tools, materials, and food which they annually consume being so much subtracted from the general stock of the community applicable to productive purposes. In proportion as any class is improvident or luxurious, the industry of the country takes the direction of producing luxuries for their use; while not only the employment for productive labourers is diminished, but the subsistence and instruments which are the means of such employment do actually exist in smaller quantity. [Bolding added.

I think my version is easier to understand, but this confusion of money with wealth causes endless damage. You may, of course, disagree with Mill and think that following the money is all there is to it. But it’s not, and if you wish to understand why, read Mill, or again let me suggest, the second edition of my Free Market Economics, especially Chapters 3 and 5.

Psychopathic checklist

psychopath checklist

The chart is from an article, Obama’s Mental Health: A Checklist where it says:

This man who lies pathologically and feels no empathy (again, too many examples to list but his reactions to the murders of Christopher Stevens and James Foley are indicative), has disdain for America and has set out to do the nation harm as surely as a psychopathic murderer sets out to kill an innocent human being. And he does it all without breaking a sweat or feeling an iota of responsibility or guilt.

Psychopathology may come with the job. Sometimes, though, they are on your side, and sometimes they are not.

Even economists are beginning to notice there is something wrong with economic theory

The New York Review of Books ran a seminar series on “What’s Wrong with Economics” which may be found here, including the videos of the various sessions. It has taken more than half a decade for the penny to finally drop that the policies we have been applying do not work and that there may be something wrong with the economic theories we have been applying. This is the “preface” from the NYRB which is so wrong-headed in even setting out the issues that you can already see there is no possibility that they are going to get anywhere near the right answers. But at least the questions are finally being asked, because there is finally recognition that things have gone badly wrong.

This conference is taking place eight years after the onset of the Great Recession in December 2007, and nearly six years after the recession was declared to be officially over in the US in June 2009. Yet the events of six and eight years ago continue to haunt us. One of the great powers of the global economy, the Eurozone, has yet to put the recession behind it, while the uneven performance of the US economy—spurts of growth accompanied by stagnant real wages—has led economists such as Paul Krugman and Larry Summers to ask whether the US has succumbed to “secular stagnation”: Is the economy now burdened with structural impediments which will make strong and sustained growth difficult to achieve?

The Crash of 2007-2008 was an acute crisis of market disequilibrium which has imposed itself upon an economics discipline still giving pride of place to models where market forces nudge economies in the very opposite direction—towards equilibrium. Crises of disequilibrium have occurred with increasing frequency over the past thirty years: with the Latin American debt crises of the 1980s, the American Savings and Loans collapse of the late 1980s, the Scandinavian banking crisis of the early 1990s, the Asian and Russian financial crises of the late 1990s, the American “dot-com” bust of 2000, and the Crash of 2007-2008 itself which has been global in impact.

Yet treating these crises as a series of near-identical events susceptible to economic modelling does not, on the face of it, do justice to the complexity and singularity of the forces which combined to bring them about. Many of these influences seem to have had their origins well beyond the home territory of economics. Doing justice to these outside forces may require a knowledge of ethics, anthropology, contemporary history and politics, public policy, and an understanding of the beliefs, frequently delusional, which seized many of the economic actors before and during the crises.

Among these disciplines it is, unsurprisingly ethics which intrudes questions of value deepest within the territory of economics, and forces a reappraisal of where the discipline stands in the disciplinary continuum between the humanities and the natural sciences. The overwhelming preference of economists themselves is to be as closely aligned as possible with the natural sciences. But with the intrusion of such ethically charged issues as the human fallout from the Crash, and the unrelenting growth of economic inequality in the US and most European countries, the scientific and the normative in economics are becoming increasingly difficult to keep apart.

Disputes between economists which seem to derive from disagreements about data and methodologies may on closer examination be rooted in profound disagreements about values. So it can be argued, and often is, that all of us are responsible for making the best of the opportunities open to us. Those who have ended up on the wrong side of the inequality divide must have failed to make the best of these opportunities and must bear responsibility for their errors, with the state providing just enough support to save them from destitution.

Or, an opposing view, that those falling behind are very often the victims of circumstances beyond their control—globalization, technological change, corporate restructuring—and that the state has a strong obligation to support them generously through difficult times and to provide them with the knowledge and skills needed to cope with new technologies and work practices. But how are these conflicts of values embedded in conflicting views about policy to be resolved?

It may be that these are disagreements of a kind that arise frequently in political and moral philosophy and reflect conflicts of plural values which do not arise in the natural sciences and which cannot be resolved by the forms of reasoning employed by scientists. They may have to be resolved either by the choices and compromises achieved through the practice of liberal democracy, or by one set of values prevailing over another through intellectual and electoral force majeur—as for example the arguments for the legal equality of women prevailed over their opponents in the course of the twentieth century.

Once again a network of beliefs and judgments extending well beyond economics may be called into play, and once again these may be strung out along the ontological continuum between the humanities and the natural sciences. Does this mean that the economist as scientist is slowly but surely being displaced by that hybrid who seems better placed to bridge these divides—the political economist?

If you want to see things properly, you will, in my view, have to start if not exactly here, at least somewhere nearby. Paul Krugman can think we have fallen into some kind of secular stagnation which is not far from being the stupidest of all possible explanations. Having backed the stimulus and the fall of official interest rates to zero, he has no idea that there are others who think that is more than enough to account for the present dismal outcome. They are clueless in New York. I would leave them to their own devices except that they are likely to take the rest of us down along with them. With these people as the leaders of the profession, it is indeed a dismal science.

AND AN ADDED BONUS: There is also Jeff Madrick on Why the Experts Missed the Recession. And why was that? Whatever the reason, here’s why I know he doesn’t know:

By lowering the target rate of interest, known as the federal funds rate, the members of the FOMC can stimulate economic growth, and by raising it, they can dampen growth and inflation.

Harriet Taylor as she would be today

harriet taylor up to date

The picture has nothing to do with the story other than it was an ad on the New York Review of Books site where I was reading a review of Hayek on Mill: The Mill-Taylor Friendship and Related Writings (The Collected Works of F. A. Hayek) which has been edited by Sandra Peart and just released. Yet when I looked at the picture, I wasn’t sure that it wasn’t meant to illustrate the story. If Harriet Taylor were alive today, that is what she would be like. Below is what she was really like.

NPG 5489; Harriet Mill by Unknown artist

And while we’re at it:

harriet taylor mill on feminism

This is what I think too, and perfectly stated.

Check your privilege

There are some amongst us who, it seems, are able to do better in life because of the advantages that our in-built and inherited characteristics give us. This is a privilege meter that will determine just how privileged you are based on various characteristics.

If I understand the notion, those who have such privileged positions in life should have whatever advantages we have eroded by wealth transfers along with other encumbrances to our enjoying our privilege. If you are pretty, for example, you should perhaps be prevented from wearing make-up.

The meter conveniently puts the various characteristics in order from the most privileged to the least so you can see what they consider are the dregs of society.

The one category left out is to ask whether you think such a scale is “insane” through to whether you believe it to be “absolutely valid in every detail”. If you are able to understand that the people who take these things seriously are bonkers, you obviously have an advantage in life over those lower down the scale.

[From Tim Blair]

Hey hey FWA – how many jobs did you kill today?

The economic arguments in favour of the minimum wage are for all practical purposes non-existent. But our National Wage Case is an established ritual that will not be disappearing any time soon since it continues as the linchpin in our system of industrial relations. But for the system to work as it needs to, those who make the decisions have to understand in their bones that there are no good economic reasons for raising the minimum wage. It keeps many people unemployed who otherwise would have jobs. If anyone on the Fair Work Commission panel adjudicating this case believes they have a convincing and contrary argument to make, they ought to write it up and send it off to a journal. They would thereafter maintain an enduring fame as the person who showed that a higher cost of labour did not lead to a reduced demand for employees. Many have taken up that challenge, but no one has yet succeeded. It is something like the economics equivalent of squaring the circle.

Given that raising the minimum wage will cost jobs, the absolute necessity for those who make these wage decisions is that they balance the economic harm against whatever industrial relations peace it might bring. You cannot count on unions understanding any of this, but you would hope that the Commission does. With the first round of this year’s submissions having been submitted on Thursday, we will see all of this reach a peak sometime in June when the decision is brought down.

I mention all this for a second reason. I am, with Sinclair, on the editorial board of the Journal of Peace, Prosperity and Freedom whose third ever edition has just come out. As its editor, Sukrit Sabhlok, says, it is edited “by a graduate student (me) without administrative/marketing support”. He therefore adds that “letting your local libraries/databases know about print subscriptions would be appreciated”. He further adds that “the journal is the only Austrian economics, free market economics, libertarian academic journal in Australia.” So if you would like to subscribe, you can subscribe here.

And as one of many reasons to subscribe, let me draw your attention to the latest issue in which there is an article with the title, The Irony of the Minimum Wage Law: Limiting Choices Versus Expanding Choices written by the extraordinarily eminent Walter E. Block (PhD, Columbia University), the Harold Wirth Eminent Scholar and Professor of Economics at Loyola University New Orleans, whose co-authors are Robert Batemarco and Charles Seltzer.

Here is the abstract, whose contents will be of no surprise to anyone who understands economics, or indeed to anyone who possesses an ounce of common sense.

Persistently high unemployment among specific sub-groups, namely teenagers, African-Americans and workers with low skills has been a serious problem in the United States. In this paper, we trace a large portion of that problem to the existence of minimum wage laws that have been in force nation-wide since 1938. These laws remain popular despite their adverse effects because of a lack of economic understanding among the general public. In this paper, we aim to make clear even to those without advanced economic training why the minimum wage law is not a viable solution to the problems of those its proponents purport to help, but rather a cause of worse problems for them. Our method is to use elementary economic logic to show that the minimum wage must harm many of those it is claimed to help by costing them their jobs and to review the data to show that it always has harmed them. Our conclusion is that minimum wages have not achieved their putative goal, but have served the ulterior motives of limiting the competition faced by labor unions. Our recommendation is to repeal minimum wage laws, and failing that, to at least lower their rates, and in their place to help low-skill workers by reducing the barriers to their receiving enough education to raise their marginal revenue product so as to permit them to earn higher wages in a way that does not remove their employment opportunities.

As for the title, I know I am using the Commission’s now discarded name, Fair Work Australia, but then if I used its real name, it wouldn’t rhyme. I, of course, trust that you will know what I mean. But will they?

American foreign policy crashes and burns

At the end of a successful negotiation, both sides get something they want. The cave-in to Iran over nuclear weapons is absolute and complete: U.S. Caves to Key Iranian Demands as Nuke Deal Comes Together. What is clear is what Iran gets. What is invisible is what anyone else gets, not the US, not Israel, not the Saudis, not any other nation in the Middle East, not anyone else anywhere that I can see. Basically, Obama said, “stop me if you can”, and it turns out no one could.

The Obama administration is giving in to Iranian demands about the scope of its nuclear program as negotiators work to finalize a framework agreement in the coming days, according to sources familiar with the administration’s position in the negotiations.

U.S. negotiators are said to have given up ground on demands that Iran be forced to disclose the full range of its nuclear activities at the outset of a nuclear deal, a concession experts say would gut the verification the Obama administration has vowed would stand as the crux of a deal with Iran.

Until recently, the Obama administration had maintained that it would guarantee oversight on Tehran’s program well into the future, and that it would take the necessary steps to ensure that oversight would be effective. The issue has now emerged as a key sticking point in the talks.

Concern from sources familiar with U.S. concessions in the talks comes amid reports that Iran could be permitted to continue running nuclear centrifuges at an underground site once suspected of housing illicit activities.

This type of concession would allow Iran to continue work related to its nuclear weapons program, even under the eye of international inspectors. If Iran removes inspectors—as it has in the past—it would be left with a nuclear infrastructure immune from a strike by Western forces.

“Once again, in the face of Iran’s intransigence, the U.S. is leading an effort to cave even more toward Iran—this time by whitewashing Tehran’s decades of lying about nuclear weapons work and current lack of cooperation with the [International Atomic Energy Agency],” said one Western source briefed on the talks but who was not permitted to speak on record.

With the White House pressing to finalize a deal, U.S. diplomats have moved further away from their demands that Iran be subjected to oversight over its nuclear infrastructure.

“Instead of ensuring that Iran answers all the outstanding questions about the past and current military dimensions of their nuclear work in order to obtain sanctions relief, the U.S. is now revising down what they need to do,” said the source. “That is a terrible mistake—if we don’t have a baseline to judge their past work, we can’t tell if they are cheating in the future, and if they won’t answer now, before getting rewarded, why would they come clean in the future?”

The United States is now willing to let Iran keep many of its most controversial military sites closed to inspectors until international sanctions pressure has been lifted, according to sources.

Obama is the international equivalent of the pilot who has crashed the passenger jet into the Alps. Locked into the cockpit at the White House and doing whatever he wants.

WHEN YOU THINK THEY HAVE REACHED THE LOW POINT YOU THEN READ SOMETHING ELSE: This is quite an excellent summary of the unravelling going on in the Middle East: Obama’s Mideast ‘free fall’. It comes with the sub-head, “Mounting chaos in the region puts the administration on the defensive”.

Now the U.S. is in the strange position of fighting ISIL alongside Iran at the same time it backs the Sunni campaign against Iran’s allies in Yemen. . . .

On Thursday, Iran’s foreign minister, who has been meeting with Secretary of State John Kerry in Switzerland to discuss Iran’s nuclear program, demanded an immediate halt to the Yemen incursion.

At the same time, civil war rages on in Syria. On Thursday, Robert Menendez, the ranking Democrat on the Senate Foreign Affairs Committee, sent Obama a letter urging him to respond to charges that the regime of Bashar Assad — a close ally of Tehran — has used chlorine gas against civilians. In late 2013, Obama threatened to punish Assad with airstrikes after his forces deployed nerve gas.

OK, chaotic with the responsibility for most of it the idiocies of the Obama White House. And then the article comes to what it seems to see as upbeat and positive:

The official offered a hopeful note, adding that a nuclear deal with Iran — which some reports say could come as soon as Sunday — could be a turning point for the region.

“The truth is, you can dwell on Yemen, or you can recognize that we’re one agreement away from a game-changing, legacy-setting nuclear accord on Iran that tackles what every one agrees is the biggest threat to the region,” the official said.

There is seemingly no level of stupidity these people are incapable of transcending.

Real Keynesians and the long run

For sheer emptiness, you can now try this by Jonathan Schlefer: Not even Paul Krugman is a real Keynesian. And why not?

But isn’t Keynes now mainstream? No, say Foley and Taylor. The mainstream still sees economies as inherently moving to an optimal equilibrium, as Wicksell did. It still says demand causes short-run fluctuations, but only supply factors, such as the capital stock and technology, can affect long-run growth.

EVEN PAUL KRUGMAN, a self-described Keynesian, Nobel laureate, and New York Times columnist, writes in the 2012 edition of his textbook: “In the long run the economy is self-correcting: shocks to aggregate demand affect aggregate output in the short run but not in the long run.” He says Keynes and Wicksell are in key respects “essentially equivalent.”

Krugman does point to one exception: If interest rates are nearly zero, as during the financial crisis, markets lose restorative force.

The article is not worth the trouble, but the quote from Krugman does seem to suggest he is being pushed by reality. In the long-run (a year or two perhaps) Say’s Law dominates, the economy is production driven.

And there is this by John Cochrane, which was published in The Wall Street Journal in December: An Autopsy for the Keynesians . A bit premature so far as the academic world goes, but I think this is absolutely true:

This year the tide changed in the economy. Growth seems finally to be returning. The tide also changed in economic ideas. The brief resurgence of traditional Keynesian ideas is washing away from the world of economic policy.

No government is remotely likely to spend trillions of dollars or euros in the name of “stimulus,” financed by blowout borrowing. The euro is intact: Even the Greeks and Italians, after six years of advice that their problems can be solved with one more devaluation and inflation, are sticking with the euro and addressing—however slowly—structural “supply” problems instead.

C+I+G remains as the basic brainwashing tool, but even here it seems that the sleepers awake.