It’s a new economic world coming

From Drudge:

 

You don’t get all that much credit for an economic upturn since life is never perfect even if everyone has a job, specially if everyone has to work to earn a living. But it will create wealth since the tax cuts are also coming with spending restraint (of a kind) and the removal of regulations at a rate of 22 gone for every new one introduced.

I know there are #NeverTrumpers out there but what exactly they could have expected to have occurred instead that was better remains a mystery. And speaking of which, here is a rhetorical question that needs no answer: Why Does the Media Not Report That ISIS Was Defeated in Iraq and Its Capital City of Raqqa in Syria Has Been Captured by US-Allied Troops? As he says, I would imagine for much the same reason the media is silent on the economy.

Two letters on Say’s Law

Once someone gets Say’s Law, the reality of what is going on in an economy becomes so obvious that it is impossible to go back to the pallid and utterly inadquate nonsense that passes for modern theory. The following is a letter I received the other day from someone I have been corresponding with for a while, and after that is my reply to him.

Hope you are well. Yes I read (and watched) all you have given me. [I even read (and bought) your conversation with Gregoire Canlorbe ‘Say’s Law, between Classical, Keynesian and Austrian Interpretations (2016)’ (from De Gruyter)].

I read your ‘200 years of Say’s Law (2003)’. Another thought provoking gem.

Back in the early 2000s I undertook 3 and a half years of bible college. I learnt the importance of hermeneutics and exegesis. Today, I am not surprised Economics scholars also struggle with proper interpretation of another author and can fall into eisegesis. The four scholars, arguing against Say’s Law, could only attack the many straw men (eg. ‘supply creates its own demand’, or Say’s economy is barter-only economy, or Say’s Equality, or change Savings’ definition) and reduce its meaning, or, read something of Say’s Law which wasn’t really there and added their own meaning (eisegesis). Misinterpreting is common, unfortunately, across disciplines as you well know. Let me illustrate my two theological favourites, however. If you can you find anywhere in the bible where it says “Money is the root of all evil” or “The truth will set you free” I will happily give you/anyone $15,000 cash and clean one’s house for a year! The point is: if we omit the few words before these popular phrases then the originator’s point is changed and COMPLETELY lost. Sound familiar?

In the tradition of Hayek’s name calling of some scholars to be ‘quasi-scientific’ (p 20) I thought I could respectively/humbly/comically generally refer to those ‘against’ Say’s Law as:

1. ‘One-side of the ledger Economists’: Aggregate Demand (and full employment) is their God, and ignoring the complexity of the supply side is welcome by their herd. Not sure why some Economists think they can ignore one side of a transaction when professional Accountants get fired for it.
2. ‘Unsustainable-loving Economists’: They are at peace to see government spending on unproductive consumption even if it alters the dynamics of the economy and reduces its viability to stand on its own feet.
3. ‘Second-rate Economists’: It is written “All things are [permissible], but not all things are beneficial” Amplified version. Maybe most complacently see policies in action and gravitate to think that must be the best option. Just because a policy is enacted doesn’t mean it is the most beneficial. Most don’t stand for a strong economic view- so they fall for any.
4. ‘Ignore the opportunity-cost-type of Economists’
5. ‘Short term-ism Economists’
6. ‘I missed school that day they taught ‘the cause-and-effect principle’ Economists’ (or ‘Symptom-is-a-cause Economists’)
7. ‘Blinker Economists’: They focus on only that scope of economic activity which supports their limited explanation.
8. ‘Soft-love loving Economists’… as opposed to hard-love=real love (but you get the idea).

I asked my successful business owner brother-in-law how much he has in idle cash (hoard). He answered it was a lot less than 1% because “you try to put all your money to the best use in every way”. I’m sure if I asked my trader friends what makes them buy and sell a specific trade I am sure they would respond “there is always a reason” rather than Littleboy’s reference of Keynes’ “…people, typically investors, spontaneously change their mind…” (p 160). Ask any banker what they do with savings deposits and they definitely do not lay waste any dime above the ratio reserve law. And I remember asking a wealthy person once as to what keeps him going? The context was why he wants to keep making more and more money. I will never forget his response. “Choices! I can choose to work when I want, or not work when I want” was his reply. Not sure why Keen says capitalists build up money for the sake of it. There is always a reason and it eventually comes back to enriching their lifestyle in some way – whether buying larger home, braces on kids’ teeth, buy another business, securing their wealth/freedom more concretely etc. Lifestyle is the end- not money. Finally, I have been working in the financial sector for the last 4 years. Not sure why this sector is the leakage from the expenditure/circular flow model. We are all charging fees and employed and spending our incomes… maybe we can add ‘Different planet Economists’ to the above list.

Recently I threw a simple question at my demand-worshipping colleagues: “Name one thing you can spend money on that hasn’t been produced?”. They could only resort to the usual retorts: “you have weird economic ideas” preceded by “spending will always be the driver of the economy”.

I am now off to read your 3rd edition Free Market Economics. I only read about half of the 2nd edition nearly a year ago preparing for my anti-Keynesian essay. I have read a quarter of Smith’s Wealth of Nations, but, you are right, these can be difficult to read- I need a break.

All the best Steve and thanks for a wonderful discourse. I am still totally addicted to this issue. Chat soon.

Regards

This was my reply.

That is the most original and possibly insightful non-strictly-economic explanation of Say’s Law I have ever come across. Looking at Say’s Law within the framework of the theory of knowledge is something I do not think I have come across before and may never have been previously done. Also not having come across eisegesis before (and neither has my spell check apparently) I can only emphasise that it is a very useful conceptual distinction that really does help get to the heart of the issue. I, of course, share your frustrations in trying to make others even become aware of the problem. When you ask them to name a product they have bought that had not already been produced (which naturally implies a very lengthy structure of production that must go back a considerable distance in both time and space) the only reaction you are likely to get is that even if they don’t know the answer themselves, someone else does because how could it be possible that you have asked something so penetrating that the entire company of modern economists have no answer for. But they don’t have an answer other than to say that buying something will mean that a replacement item will have to be produced to put on the shelf so it will encourage more production. Except that this new order, if there is a new order, can only be filled if the producer had already made the decision to produce this additional replacement item long before you bought what you bought. But for them to go there would mean they had already seen the problem and understood that it is not demand that causes the supply, but that supply is created in anticipation of some future demand. So you will just have to keep teasing them just for your own satisfaction but do not be surprised if the scales fail to fall from their eyes anytime soon (I hope I have not mis-used the metaphor).

I also found your classification system astonishing and accurate. It is also funny but finding it so on the money, its ironical intent seems more serious than anything. The list truly does begin with the implied words, “Look stupid . . .” but where you go from there I do not know. Well actually, where you go is you write this up in some more polished form and try to get it published. There is no Journal of Irony and Economics but I would not want you to mess with the vision you have shown here or try to diminish your satirical intent. You should just expand what you have written and see what follows.

Anyway, we can discuss when you come to visit which you MUST do if you have the time. I will also pass on a copy of my Economics for Infants discussed here on my blog:

http://catallaxyfiles.com/2017/12/02/the-book-no-child-should-be-without/

As I mention, it is the only children’s book that incorporates Say’s Law, which is indeed an actual feature of the text and the fantastic picture that comes with it.

I do look forward to catching up, but as a kind of cautionary note before we meet I will just say that we had a School retreat the other day where at the dinner we were asked to come as our favourite literary character and I came as the much maligned and mis-understood Edward Casaubon.

With kindest best wishes

Less tax revenue in the hands of government; more money in the hands of business

If you have been in doubt whether PDT is a political genius, doubt no more: Sweeping tax reform PASSES the Senate: GOP scores major victory in 11th-hour vote for $1.5 TRILLION bill after Democrats said they had no time to read the 500-page, ‘scribbled’ small print.

Here’s the big print version: less tax revenue in the hands of government; more money remaining in the hands of business with which to invest and employ. The rest is detail. Here are the subheads on the article:

  • The Senate approved a sweeping tax overhaul in the early hours of Saturday
  • Vote passed by 51-49 as Democrats voted in bloc and one Republican opposed
  • Vice President Mike Pence announced passage at 1.51am to a round of applause
  • Final alterations to the bill were still being made late in the evening on Friday 
  • Democrats claimed they didn’t have time to read bill and tried to adjourn vote
  • Victory moves Donald Trump one step closer to slashing taxes for businesses
  • Democrats say tax overhaul will add $1.5 trillion to national debt over 10 years
  • Republicans insisted changes will be revenue-neutral as tax cuts spur growth

To listen to Democrats complain about the addition to national debt is particularly irritating since that has perennially been the last thing on their minds when adding to America’s massive debt. So let me just say for the record why this will lead to a massive improvement in the American economy.

  • There will be less public spending which invariably slows growth.
  • There will be more spending by private sector firms which adds to growth.
  • Public revenues will rise, all other things being equal, as tax rates fall.
  • Whether Congress will then use the additional revenue to increase spending or to lower taxes is the question, with the likelihood (alas) towards more spending, but at least further spending cuts will become possible.

Meanwhile PDT has his first major legislative win with others sure to follow, once Roy Moore is elected and the Republicans begin to think about the rage within their own constituencies if the Republicans fail to deliver what they had been promised.

The book no child should be without

If you are looking for Christmas ideas, you might consider Economics for Infants, the only book of its kind.

A perfect book to read to your children and grandchildren! How do you explain the complexities of the economic order to a child? This retro-inspired illustrated book attempts this task in storybook form. A basic primer on economics for the youngest of readers.

For myself, what I like best about the book are its pictures which illustrate the points with an astonishing clarity. There is no children’s book anywhere, past or present, that has illustrated Say’s Law so incredibly well along with so much more. In a recent pee’er reviewed study, 97% chose Economics for Infants as their favourite book (astonishingly, the same as the proportion of climate scientists who believe global warming is caused by humans!). The above photo was taken during that study and is conclusive proof that if your child is to succeed in getting into the best kindergartens and play groups, this is the book you will need to ensure they have read and its contents absorbed. You can see how the other books were ignored while Economics for Infants held the attention of this particularly bright child not entirely chosen at random.

And let me also say this. There may be parents of young children whom you may feel need a refresher course in the economics of the market. Give a copy to their children and contemplate the pleasure it will give in reading about how the capitalist system works for the betterment of all, that is, the pleasure it will give you contemplating their parents vetting the book while deciding whether to pass it along.

Here’s where you may order the book and have it still arrive in time for Christmas.

Jordan Peterson discusses Marx

Every so often someone is able to slip the bounds of political correctness and he is one and is near unique since he can say all of what he says and not be pulled to the ground.

A Pareto pattern – a small proportion of people end up with the bulk of the goods. But it’s not the same people, just the same one percent proportion but with different groups at the top.

Macro Follies returns

The only movie that has ever been made from a book I wrote. The movie was put together by that genius, John Papola, producer of the greatest economic video ever, The Keynes-Hayek Rap. And as noted in the credits for Macro Follies, there I am found in truly stellar company:

Special Thanks to Russ Roberts, Steven Kates, Larry White, Steve Horwitz, James Adams and Steve Fritzinger

As for the book, if you are looking for a Christmas present, let me recommend my Free Market Economics which is the book from which the movie was made. It is the only economics book written in approximately the last 150 years that is built on classical economic principles. As it says at the Book Depository website

“In this thoroughly updated third edition of Free Market Economics, Steven Kates assesses economic principles based on classical economic theory. Rejecting mainstream Keynesian and neoclassical approaches even though they are thoroughly covered in the text, Kates instead looks at economics from the perspective of an entrepreneur making decisions in a world where the future is unknown, innovation is a continuous process and the future is being created before it can be understood. Key Features include: * analysis derived from the theories of pre-Keynesian classical economists, as this is the only source available today that explains the classical pre-Keynesian theory of the business cycle * a focus on the entrepreneur as the driving force in economic activity rather than on anonymous `forces’ as found in most economic theory today * introduces a powerful though simplified model to explain the difference between modern theory of recession and classical theory of the business cycle * great emphasis is placed on the consequences of decision making under uncertainty * offers an introductory understanding, accessible to the non-specialist reader. The aim of this book is to redirect the attention of economists and policy makers towards the economic theories that prevailed in earlier times. Their problems were little different from ours but their way of understanding the operation of an economy and dealing with those problems was completely different. Free Market Economics, Third Edition will help students and general readers understand classical economic theory, written by someone who believes that this now-discarded approach to economic thought was superior to what is found in most of our textbooks today.”

You can order a copy here. For anyone who wants to get a sense of how an economy works, and also why government intervention beyond a minimum creates harm, this is the place to go. Of course, you might instead decide to save your money and have an even better Christmas next year, but you might also instead just think of it as helping to build your own human capital, as well as helping you to contain your rage watching Malcolm and Co butcher economic policy before Bill and Co are allowed to take over who will do even worse.

Even the NeverTrumpers are coming around

It’s from Instapundit

IN NATIONAL REVIEW, OF ALL PLACES: This Thanksgiving, Thank Donald Trump:

This Thanksgiving, Americans in general — and free-market conservatives in particular — have plenty for which to be grateful. And much of it would be absent had the White House’s current occupant not become president on November 8, 2016. The day after Donald J. Trump defeated Hillary Clinton, Princeton University economist Paul Krugman called Trump’s victory “the mother of all adverse effects.” He predicted “very probably . . . a global recession, with no end in sight.” • The Dow Jones Industrial Average, NASDAQ, and S&P 500 all hit record highs on Tuesday. The Wilshire 5000 Index calculates that some $3.4 trillion in new wealth has been created since President Trump’s inauguration and $5.4 trillion since his election. Fueled by the reality of deregulation, expectations of lower taxes, and a new tone in Washington that applauds free enterprise rather than excoriate it, the economy is on fire. • Atop the second quarter’s 3.1 percent increase in real GDP, and 3.0 in 3Q, the New York Federal Reserve Bank predicts that 4Q output will expand by 3.8 percent. This far outpaces the feeble average-annual GDP growth rate of 1.5 percent on President Obama’s watch. Meanwhile, the IMF expects global GDP to rise by 3.5 percent this year. So much for a Trump-inspired “global recession.”

Unemployment is at 4.1 percent, a 17-year low. New unemployment claims in September were at their most modest since 1974. Goldman Sachs on November 20 “lowered our unemployment rate forecast to 3.7 percent by end-2018 and 3.5 percent by end-2019.” According to the Wall Street powerhouse’s chief economist Jan Hatzius, “Such a scenario would take the U.S. labor market into territory almost never seen outside of a major wartime mobilization.” . . .

• For every new regulation that Trump has imposed, 16 have been erased.

• The FCC has begun to dismantle Obama’s “Net Neutrality” takeover of the Internet, which functioned marvelously, thank you, before his needless e-power-grab.

• Supreme Court Justice Neil Gorsuch is on the bench, along with 13 constitutionalist lower-court judges. At this stage in Obama’s presidency, the Senate had confirmed just seven of his district- and circuit-court nominees.

Much more at the link, concluding with this: “The Never Trump faction still claims that the president of the United States ‘is no conservative.’ And yet, with rare deviations (such as free trade), he spends nearly every day implementing the conservative agenda. Ideas that center-Right activists have demanded for decades are becoming public policy, one after another — to the pleasant surprise of even some of Donald J. Trump’s most enthusiastic supporters.”

Did I mention this was in National Review, of all places?