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Monthly Archives: July 2018

Oxford University Press from out of nowhere quotes Mill’s fourth proposition on capital

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This is a tweet sent out by Oxford University Press Economics.

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“Demand for commodities is not demand for labour.” – John Stuart Mill

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1:14 AM – 30 Jul 2018

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From Oxford University Press with Mill’s fourth proposition on capital – demand for commodities is not demand for labour – just thrown out for comment. So I commented:

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The statement is true, much to the shame of modern economics. I have written an article on just this: “Mill’s Fourth Proposition on Capital: a Paradox Explained”, published in the March 2015 JHET. Ever wonder why no stimulus has ever led to recovery? Mill explained it in 1848.

As I wrote to my friend and colleague who had spotted the OUPE tweet and forwarded it to me:

From out of nowhere, really, that OUP should suddenly bring forward that quote of all quotes from Mill. Wondrous that you even saw it and thank you for sending it along. I have now added my own tweet to the rest. The destructiveness of Keynesian economics ought to be perfectly evident everywhere except that it’s not. Sad and yet funny that virtually no one today can even work out what Mill had meant even though it had been the universal view of every economist right up to the publication date of the General Theory. And I don’t mean that people disagree with Mill. I mean that no one can even explain why Mill and all of his contemporaries thought this was true so just end up befuddled but leave it alone.

Need I add that Leslie Stephen thought that Mill’s Fourth Proposition was “the best test of a sound economist”? Well, of course I don’t need to, but I will, and also add that Stephen was right and it is.

LET ME ALSO ADD THIS: From The Oz today, via David Uren:

“Average household incomes have not improved significantly since the global financial crisis in 2008-09.”

We are talking about a decade in which real incomes have not risen and during which the unemployment rate has hardly budged. I wrote this in 2008 (and published Feb 2009).

What is potentially catastrophic would be to try to spend our way to recovery. The recession that will follow will be deep, prolonged and potentially take years to overcome.

Mill’s fourth proposition is pure macro (or theory of the business cycle if you want to think in classical terms). You cannot generate a recovery from the demand side is how you might say it today. In the 82 years since The General Theory was published there has not been a single instance where this has been shown to be untrue.

Science is the belief in the ignorance of experts

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Via Instapundit. INTERESTING FT PIECE FROM THE DIRECTOR OF THE EUROPEAN COUNCIL ON FOREIGN RELATIONS: The Chinese are wary of Donald Trump’s creative destruction: The president is the first US leader in decades to challenge China on multiple fronts

Donald Trump is leading a double life. In the west, most foreign policy experts see him as reckless, unpredictable and self-defeating. But though many in Asia dislike him as much as the Europeans do, they see him as a more substantial figure. I have just spent a week in Beijing talking to officials and intellectuals, many of whom are awed by his skill as a strategist and tactician. . . .

Few Chinese think that Mr Trump’s primary concern is to rebalance the bilateral trade deficit. If it were, they say, he would have aligned with the EU, Japan and Canada against China rather than scooping up America’s allies in his tariff dragnet. They think the US president’s goal is nothing less than remaking the global order.

They think Mr Trump feels he is presiding over the relative decline of his great nation. It is not that the current order does not benefit the US. The problem is that it benefits others more in relative terms. To make things worse the US is investing billions of dollars and a fair amount of blood in supporting the very alliances and international institutions that are constraining America and facilitating China’s rise.

In Chinese eyes, Mr Trump’s response is a form of “creative destruction”. He is systematically destroying the existing institutions — from the World Trade Organization and the North American Free Trade Agreement to Nato and the Iran nuclear deal — as a first step towards renegotiating the world order on terms more favourable to Washington.

Once the order is destroyed, the Chinese elite believes, Mr Trump will move to stage two: renegotiating America’s relationship with other powers. Because the US is still the most powerful country in the world, it will be able to negotiate with other countries from a position of strength if it deals with them one at a time rather than through multilateral institutions that empower the weak at the expense of the strong.

My interlocutors say that Mr Trump is the US first president for more than 40 years to bash China on three fronts simultaneously: trade, military and ideology. They describe him as a master tactician, focusing on one issue at a time, and extracting as many concessions as he can. They speak of the skilful way Mr Trump has treated President Xi Jinping. “Look at how he handled North Korea,” one says. “He got Xi Jinping to agree to UN sanctions [half a dozen] times, creating an economic stranglehold on the country. China almost turned North Korea into a sworn enemy of the country.” But they also see him as a strategist, willing to declare a truce in each area when there are no more concessions to be had, and then start again with a new front.

For the Chinese, even Mr Trump’s sycophantic press conference with Vladimir Putin, the Russian president, in Helsinki had a strategic purpose. They see it as Henry Kissinger in reverse. In 1972, the US nudged China off the Soviet axis in order to put pressure on its real rival, the Soviet Union. Today Mr Trump is reaching out to Russia in order to isolate China.

The heading is a quote from Richard Feynman.

Economics as physics

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So the US economy is expanding at a 4.1% annual rate and is experiencing a tightening labour market and possibly even rising real wages. That the American economy under PDT would shed the shackles left by eight years of Obama mismanagement and the inept oversight of GWB was as straightforward as anything I could have imagined although never a certainty given all the unknowns that surround every economy all the time. A supply-side approach, in which the government removes regulations and does not try to spend its way to recovery, is the formula that has worked time and again: see, for example, the spectacular Costello recovery of 1996-98 which was driven by massive cuts to public spending and an entrepreneurial-focused policy framework. No Keynesian at the time had expected it – Treasury begged Costello to reverse his policies! – nor have I ever heard a Keynesian who could explain it. In the midst of the Asian Financial Crisis as well, just to show how difficult it is to find an explanation within modern economic theory for what everyone witnessed but no modern macroeconomist could explain. Which brings me to this.

Steve Hayward, who I usually agree with, has written on Universities: Euthanasia or Suicide in which he discusses how economics is turning itself into a STEM field rather than an area of the humanities, which he thinks of as a good thing. It is already a near useless field of study the way it is presently taught, but economics as physics is its absolute end as a useful empirical science if the aim is to understand how we can best provision ourselves. Nothing will leave economics with less penetration and use than to ship it off to the mathematical side of academic studies. Nothing is more likely to help us find a way to a Venezuelan future. There are numbers in economics, of course, and statistics, but to turn economic theory into nothing but a series of highly abstract mathematical models will ensure that virtually nothing found in an economics journal will provide practical solutions to actual problems related to the world. Once economics dealt with problems, and thought through to solutions, but economics-as-physics is the Death Star for the subject.

Here are a few of the commenters who seem to get it:

Don’ t economics departments want to do this to attract more federal dollars for STEM? Not a good sign. About 30 or so years ago, UVA’s economics department kicked out Buchanan and Coase to go more in the econometrics route. (Paul Craig Roberts wrote about this.) The economics department at my undergraduate university came to be dominated by Marxists. In short, the revolution is corrupting econ departments too.

STEM disciplines are evidence-based. Evidence overwhelmingly shows that Marxism does not work. If an econ department has not ejected all of its Marxists, it should not be allowed to work this dodge.

If Econ is a STEM field, does that mean that Econ Profs can’t point to Venezuela as an example of the success of socialism? Unless they can prove it?

I got a BA in History with a minor in Economics. Although I have had a life long love of history, some of my more enjoyable undergraduate classes were economics. My conversations with recent History and Economic graduates make me wonder if they really got degrees in those fields at all. Their ignorance of even the basics is truly astounding.

Economists almost killed off the history of economic thought and may still do it. For an account of this disastrous venture into academic suicide, see my Defending the History of Economic Thought. Marxists and socialists generally can do maths as well as anyone. But it is a rare temperament who can do economics, and understanding Adam Smith and John Stuart Mill does not require maths and stats. The more mathematical and models-oriented economics becomes the more it will prevent anyone from understanding how an economy actually works.

Economics is a social science not physics

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Economics as physics is the death of economics as a useful empirical science studying how we can best provision ourselves, but it does seem to have some self-preservation qualities as well. Steve Hayward has written on Universities: Euthanasia or Suicide in which he discusses how economics is turning itself into a STEM field rather than an area of the humanities. Nothing will leave economics with less penetration and use than to ship it off to the mathematical side of academic studies. Nothing is more likely to help us find a way to a Venezuelan future, as discussed in my post on Mill and the marginalists. There are numbers in economics, of course, and statistics, but to turn economic theory into highly rigorous models will ensure nothing found in an economics journal will ever provide a solution to an actual problem related to the world. Once economics dealt with problems and thought through to solutions, but economics-as-physics is the Death Star for the subject. In reaching his conclusions, Hayward discusses at the start a lecture he had previously given.

One of the points I made in that lecture is that universities would start to divide into practical subjects like business and economics and STEM sciences, and leave behind the humanities and social sciences:

I think we’re already seeing the beginnings of a de factodivorce of universities, in which the STEM fields and other “practical” disciplines essentially split off from the humanities and social sciences, not to mention the more politicized departments. One early sign—perhaps a canary in the university coal mine—can be seen in the recent announcement of the University of Wisconsin Stevens Point campus that it is shuttering 13 departments in the humanities and social sciences, and laying off tenured faculty, on account of declining enrollment and budget pressures, and reallocating funds to STEM subjects.   Another sign are the economics departments that have begun subdividing themselves into “general economics” and an even more-math centric “quantitative econometrics.” Several economics departments are formally reclassifying themselves as STEM departments (there are federal guidelines for this) for a variety of reasons, but among them has to be wishing to disassociate themselves further from other social sciences.

Lo and behold, more economics departments are deciding to become STEM subjects, supposedly for advantages STEM classification provides (especially in attracting and keeping talented foreign students), but I am sure it is in part to disassociate themselves from the rest of the politicized social science disciplines. If nothing else, economics is the one social science field where degree earners have good job prospects, and which doesn’t need propping up.

The Economist reports:

Economics departments appear to be catching on. Yale and Columbia have both changed the code for their economics major in the past few months; five of the eight Ivy League Universities have now done so. Students at Pennsylvania and Cornell are agitating for a switch.

And the American Institute for Economic Research gives five more reasons why economics is better suited as a STEM subject. If you read through these five reasons carefully, it’s what they don’t say that stands out loudly. See what is implied by this passage, for example:

The objective of STEM programs is to create professionally and socially qualified individuals to overcome 21st-century challenges. For that reason, these courses should make students learn how to apply the scientific method to everyday life and acquire useful skills for real-world applications. Economics promotes and develops both of them.

Due to the prevalence of mathematics and pragmatism in economics, positivism is the dominant research method in the field. Therefore, economists examine real-world problems and evaluate feasible solutions through economic positivism, a scientific method.

Further, this degree encourages students to acquire or improve on relevant skills for today’s life, such as critical thinking and problem-solving, entrepreneurship and innovation, resourcefulness and resilience, teamwork and collaboration, and a sense of civic responsibility.

Here are a few of the commenters who seem to get it:

Don’ t economics departments want to do this to attract more federal dollars for STEM? Not a good sign. About 30 or so years ago, UVA’s economics department kicked out Buchanan and Coase to go more in the econometrics route. (Paul Craig Roberts wrote about this.) The economics department at my undergraduate university came to be dominated by Marxists. In short, the revolution is corrupting econ departments too.

STEM disciplines are evidence-based. Evidence overwhelmingly shows that Marxism does not work. If an econ department has not ejected all of its Marxists, it should not be allowed to work this dodge.

If Econ is a STEM field, does that mean that Econ Profs can’t point to Venezuela as an example of the success of socialism? Unless they can prove it?

Economists almost killed off the history of economic thought and may still do it. For an account of this disastrous venture into suicide, see my Defending the History of Economic Thought. Marxists and socialists generally can do maths as well as anyone. But it is a rare temperament who can do economics, and understanding Adam Smith and John Stuart Mill not only does not require maths and stats, will actually prevent you from understanding anything they have to say.

 

Lunar eclipse tonight starting at 4:24 am, AEST

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I meant to mention it sooner: Longest lunar eclipse of the 21st century to shine bright red in Australia’s early morning sky tonight.

You’ll need to set your alarm clock if you want to see this century’s longest lunar eclipse on Saturday morning.

If you can brave the early morning winter chill, you’ll be rewarded with a spectacular red moon that fades into the western horizon as dawn approaches.

Weather permitting, the eclipse will be visible right across Australia at the same time, starting around 4:24am AEST (and equivalent local times) on July 28.

The future of their party and who knows who else

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Via Steve Hayward.

And yet another take:

1) I am not sorry.
2) It’s not coming down.
3) I will make another one.
4) You don’t have to hate Trump to use humor.
5) I don’t have to warn you when I’m about to tell a joke.

Allie Beth Stuckey

Enlightening & hard-hitting interview with Socialist “it girl” and fellow millennial, Alexandria Ocasio-Cortez [it is a joke]

So let us see what her supporters are like, although the reality is that you cannot parody them since they are such ignorant fodder for a tyranny they have no conception of. It’s only a not very random sample, but there are plenty more like them everywhere.

They are the very definition of drongo. Know-nothings about anything they need to know, whose arrogant stupidity may yet drag us into an abyss out of which even a century from now there will be no coming out of the depths into which our economies might yet descend.

Toronto the bad

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News from my home town although it does seem ever more remote from the place where I grew up. But this is beyond incompetence:

Detectives in Canada are still seeking a motive for a mass shooting which left three dead – including the gunman – and injured more than a dozen others, as residents of Toronto grapple with the latest in a string of violent incidents to hit Canada’s biggest city in recent months.

Federal officials said on Tuesday that there was no terror link to Sunday’s attack in which the lone gunman opened fire along a bustling avenue in the city, seemingly shooting at random at pedestrians and into shops and restaurants.

Nor is this just out of nowhere. Toronto has had a few of these of late:

Toronto has been rattled by a string of violent incidents this year.

In April, 10 people were killed and more than a dozen injured when a driver in a van ploughed into pedestrians on a city sidewalk. The following month, more than a dozen people were injured after a homemade bomb ripped through an Indian restaurant in May in nearby Mississauga.

The year started with the arrest of alleged serial killer Bruce McArthur, now charged with the deaths of eight men, and the high-profile homicides of billionaires Barry and Honey Sherman.

Gun violence has also tightened its grip on the city. Last month two sisters, ages five and nine, were shot while playing in a park. The two young girls survived, partly thanks to neighbours who used napkins to stem the bleeding. At the start of this month, two men were fatally gunned down in a brazen daytime shooting in the city’s downtown core.

So far this year 26 people have died from gun violence, a 59% increase from the same period last year. The number of shootings has risen 13%, according to police data.

“People now – whether you’re walking on Queen Street, walking on the Danforth, walking on Yonge Street – are going to be looking over their shoulder,” said Louis March, the founder of the Zero Gun Violence Movement in Toronto.

How about a zero robbery movement, or a zero double-parking movement. No one wants to identify the problem, and so neither will I. Here’s the mayor:

On Tuesday, Toronto city council, led by Toronto mayor John Tory, began debating a range of measures aimed at tackling gun violence in the city….

Measures being considered by the city include bolstering mentoring programs, the purchase of 40 new CCTV cameras and a contentious listening technology that claims to be able to detect and report the sound of gunshots to police.

“I’ve said for some time that the city has a gun problem, in that guns are far too readily available to far too many people,” Tory said on Monday.

It’s not too many guns but too many people who want to shoot other people that is the problem.

Talk about creepy

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Perhaps a bit of common sense at last from the Foreign Editor at the Oz: Back trump on Iran, with Netanyahu, Putin’s co-operation. But first he says this:

Now, I think that crew of creepy right-wingers in the US and Australia who think Putin is a great friend of Western civilisation are just about crazy.

My goodness, who are such people? What do they say? Quotes and references, please. The Russians have their interests and we have ours and sometimes they overlap. But Russia is no longer the Soviet Union and there are many things the US and Russia can achieve together since their and our interests often overlap. And guess what we find right after the above?

But in strategic policy, in the real world, the choice is often between the evil and the even more evil. Russia’s presence in Syria may have produced something somewhat less horrible than its absence would have produced. Look at the other main actors in Syria — Islamic State, Iran, ­Hezbollah. They are all worse for humanity in Syria, and worse for Western interests, than Russia has been.

For whatever its many sins, Moscow has played the role in Syria that the West once played in troubled countries — it has restored order.

And on the American president:

The Trump administration is right to repudiate the pathetically weak deal Barack Obama did with Iran. Trump wants to enforce the red lines Obama once had for Iran — no uranium enrichment, no ballistic missiles and so on. Canberra should support this.

With this conclusion:

Trump does good as well as bad. We should explicitly and publicly support US policy on Iran.

Well, yes indeed we should. And on much else as well. Did you see this, for example: North Korea: satellite images show dismantling of missile test facilities. Quite a lot of good is being done by PDT, in fact, with very little bad of any kind so far as I can see.