Governmentium

Although not mentioned, this stuff reacts extremely well with Keynesium.

The heaviest chemical element yet known to science. Governmentium (Gv) has 1 neutron, 12 assistant neutrons, 75 deputy neutrons, and 224 assistant deputy neutrons, giving it an atomic mass of 312.

These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lepton-like particles called peons. Since Governmentium has no electrons, it is inert. However, it can be detected as it impedes every reaction with which it comes into contact. A minute amount of Governmentium causes one reaction to take over four days to complete when it would normally take less than a second. Governmentium has a normal half-life of three years; it does not decay, but instead undergoes a reorganization in which a portion of the assistant neutrons and deputy neutrons exchange places.

In fact, Governmentium mass will actually increase over time, since each reorganization will cause some morons to become neutrons, forming isodopes.

When catalyzed with money, Governmentium becomes Administratium–an element which radiates just as much energy as Governmentium since it has half as many peons but twice as many morons.

What happens to I when there is an increase in C etc?

I was sitting with a bunch of economists the other day when I mentioned something that had occurred to me in writing my Defending the History of Economic Thought. I said that one of the main differences between the way we teach economics “today” (since about the 1930s) in comparison with previous eras is that we today depend on diagrams rather than logic and reasoning. We therefore manipulate these diagrams up and down, back and forth without every learning the economic logic that lies behind. It is therefore easier but superficial and usually indefensible if someone tried to explain the actual economic logic and relationships, which no one does. Micro, macro – all the same. Everything of importance is explained using some kind of diagram. Keynesian economics was to me the most obvious case in point. It is impossible to tell a coherent story about how the goods and services materialise from an increase in the mere spending of more money. The Y=C+I+G+(X-M) diagram did not even attempt to explain the economics. It just showed the result in a kind of before and after way without really explaining what went on underneath.

So, I was asked, don’t you think that those chaps who did all the work on the national accounts were right? Yes, of course, the national accounts are exactly right since the equation is then an identity, Y≡C+I+G+X-M, true by definition. But with Keynesian economics you cannot simply raise C and assume that Y goes up by the same amount since the elements, C,I,G,X and M are not independent of each other. If you raise C there may well be an increase in M so then where are you, same with the increase in any of these? And you know what, the conversation died right then and there, instantly. My point proved in two different directions, that using diagrams stops people from understanding the logic of the economics and that Keynesian economics cannot be defended and explained in words.

Giving thanks for the invisible hand

This is the conclusion:

It is commonplace to speak of seeing God’s signature in the intricacy of a spider’s web or the animation of a beehive. But they pale in comparison to the kaleidoscopic energy and productivity of the free market. If it is a blessing from Heaven when seeds are transformed into grain, how much more of a blessing is it when our private, voluntary exchanges are transformed – without our ever intending it – into prosperity, innovation, and growth?

The social order of freedom, like the wealth and the progress it makes possible, is an extraordinary gift from above. On this Thanksgiving Day and every day, may we be grateful.

Now read the rest.

FME 2nd ed

I am very happy to report that I have received the following from the RMIT College of Business:

Research Excellence Award for Best Book by an Academic

The book is, of course, my Free Market Economics: an Introduction for the General Reader. It’s not the new Samuelson though it should be since it’s a tonne better and will teach you a lot more of what’s useful about how economies work than any of his 21-and-counting editions ever did. I wrote my book to show how useless any economics text built around a Keynesian frame of reference actually is. And as I point out, since there is nothing else like it when I thought the financial crisis would lead to a glut of such books, I really do have this terrain to myself. The sad thing, though, is that I do have this terrain to myself since no one else seems to want to invade this space. How this can be I will never understand.

But please do let me also note that I received this award on the same day I signed the contract for a second edition which I hope to have at the publisher by the middle of next year. There is some demand, at least, so there is a niche for what I have to say. Not a lot I feel I need to add or change but there will be some things. For any of you who have read the first edition – which has sold a similar number of copies as the first edition of The Wealth of Nations – if you have any suggestions about how the book might be improved or extended, please email me at this address:

sayslaw@hotmail.com

And please use the subject line: FME 2nd ed. Let me thank in advance anyone who is able to help for their kind assistance.

From Each According to his Ability, To Each According to his Vote

Let’s go right to the source, Karl Marx writing in 1875:

In a higher phase of communist society, after the enslaving subordination of the individual to the division of labor, and therewith also the antithesis between mental and physical labor, has vanished; after labor has become not only a means of life but life’s prime want; after the productive forces have also increased with the all-around development of the individual, and all the springs of co-operative wealth flow more abundantly—only then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe on its banners: From each according to his ability, to each according to his needs!

Which really reads:

In a higher phase of communist society – blah blah blah – From each according to his ability, to each according to his needs!

The United States has taken a mighty step towards turning this principle into practice. There are people over on one side who have all this income, and there are people on the other side who have all these needs. And while there is an overlap between the people with income and the people with needs – pretty well most of the reason for earning an income is to satisfy those needs – not all the people with needs have incomes, or at least not incomes high enough to suit them. But every one of those people with needs but not enough income does have something else, a vote.

So there is to be a new principle, call it the Obama Principle, which is the practical incarnation of Marx’s original principle. Now we have: From each according to his ability, to each according to his vote.

Majority rules, right? That “narrow horizon of bourgeois right” can now be crossed in its entirety. This “abundant co-operative flow of wealth” that you anyway didn’t build has now indeed come into existence, but irrespective of how it got here, it is Obama’s to distribute as he sees fit.

This democracy stuff is your principle, not his. You devised the system that has made him the president, not him. Obama, as a good follower of the blesséd Saul Alinsky, merely makes others live up to their own principles. Too bad if you don’t like it because there’s not a thing you can do to change it.

This post now at Quadrant Online.

Some ideas are so stupid only an economist could believe them

It’s hard to tell whether this opinion piece by Robert Shiller was put up by the Financial Review to remind us of just how stupid some people are or whether it is there because the editors think Shiller gets it exactly right. This is the bit they put on their editorial page:

During the US election campaign, opinion polls consistently showed the economy, especially unemployment, was voters’ No. 1 concern. The Republican challenger, Mitt Romney, sought to capitalise on the issue, asserting: ‘The President’s plans haven’t worked – he doesn’t have a plan to get the economy going.’

Nonetheless, Barack Obama was re-elected. The outcome may reflect the economy’s slight improvement at election time (as happened when Franklin Roosevelt defeated the Republican Alf Landon in 1936, despite the continuing Great Depression). But Obama’s victory might also be a testament to most US voters’ basic sense of economic reality.

It’s depressing, just depressing.

Good bankers are great benefactors

I am writing a book on why economists need to study the history of economics which is due at the publisher on New Year’s Eve. It has certainly kept me busy, but it has also kept me vastly entertained. Whenever I listen to the shallow maunderings of economists educated from some Samuelson clone, I can only laugh. But to the point at hand. In doing this research, I have been reading Arthur Latham Perry’s Political Economy, the 19th edition (!) published in 1887. He has a section on money and banking that is as long as some entire texts. Chapter XI deals with credit and there, in the summary (p 460), is this:

Good bankers are great benefactors

As it happens this is something I believe myself but the likelihood of such a sentiment appearing in an economics book today must be vanishingly low. I’m not even entirely sure that someone taking a course in economics that bypassed monetary theory would end up being guided through much in the way of a discussion of credit markets, their operation and their value. There is also this from that same chapter, which I am certain is not taught any more. And with this we have an overlap between economics and morals.

Here the vexed question arises, how far has one generation the right to throw upon succeeding ones the burdens of national debt? The true answer is, that it has a very limited right indeed. The opposite doctrine tacitly implies succeeding generations will have no occasion for extraordinary expenses of their own, and therefore may rightfully be made to contribute to the extraordinary expenses of this generation. But it is pure assumption to take for granted that the next generation will not have, of some kind or other, as much occasion for an extrordinary effort in the way of defence or of improvement as the present generation has had. It is an illusion to estimate what has now to be done as of much more importance than what will have to be done. Therefore to throw our burden forward on another generation that may have its own peculiar effort to make, just as great and just as imperatively called for, is an unwarranted procedure. (Perry 1887: 458-59)

If he could only see us now, bankrupting the future and laying waste to our potential. Economics was once part of the moral sciences. It is now for the most part a handbook for bureaucratic control and socialist predation.

Crony capitalism = Keynesian economics

If it’s not value adding it cannot add to jobs or make an economy grow. Giving money to your mates might help your mates, it just won’t help anyone else. It will, in fact, make most people worse off.

If you still think Y=C+I+G is the answer to our economic problems even after the past four years I’m afraid I don’t have a cure for insanity.

The video is of Andrew Klavan which I picked up from Powerline.