Category Archives: Law of Markets

Susie Kates

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IMG_1472

I thought this was exactly right:

The secret — and don’t worry, I’m not disclosing anything the feminists haven’t already figured out — is monogamous pair-bonding. Each man has to find exactly one woman and close the deal. Happily ever after, ’til death do you part, the whole package.

You don’t know it when you are young, specially in the way the world is now structured, where the sexual wilderness looks like a continuous adventure. But that is the true happiness, if you can find it.

Susie Kates, my one true love.

AND NOW LET ME ADD THIS: Written by a woman so don’t blame me: What Women Really Want Is The Patriarchy. Lots to choose from so you should read it all, but I will restrict myself to this:

As much as stuff is nice, many women still crave a stable, mutual, satiating romantic relationship with an assertive, authentic, direct man. This is normal. . . .

Women can have careers, be independent, strong, and happy, but if they want to do all this and attract the kind of man they really crave, they need to throw out the hallmarks of feminism that claim their male peers are domineering, stupid, misogynist authoritarians who will make their lives miserable. If anything, the opposite is true. The direct, honest, responsible, hard-working man many a woman desires can be just the type she’ll find, once she ditches the ideology that told her she didn’t need that to be happy in the first place.

Just remember, she wrote this and not me. I am merely an innocent bystander reporting while you decide. Found at Instapundit if you are looking for who to blame where, so it says in the comments, that this article has been banned on Facebook. I wonder why and who did it?

Charting our Keynesian disaster

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aust living standards fallen

Quite an amazing story, Living standards at a standstill for five years: report. The peak was reached in 2009, at which moment those Keynesian incompetents decided that what was needed was a Keynesian stimulus, and the results are now there for anyone to see. They won’t believe that they caused it, of course. Economists across the world will be united in the belief that things would have been even worse had they not taken the actions they took. Nothing can be proven, but there was, of course, my own forecast from February 2009.

Just as the causes of this downturn cannot be charted through a Keynesian demand-deficiency model, neither can the solution. The world’s economies are not suffering from a lack of demand, and the right policy response is not a demand stimulus. Increased public sector spending will only add to the market confusions that already exist.

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.

Every classical economist understood this. Now only a handful do. But if you won’t take my word for it, how about listening to Sir Winston Churchill in his budget speech from 1929.

“Churchill pointed to recent government expenditure on public works such as housing, roads, telephones, electricity supply, and agricultural development, and concluded that, although expenditure for these purposes had been justified:

‘For the purposes of curing unemployment the results have certainly been disappointing. They are, in fact, so meagre as to lend considerable colour to the orthodox Treasury doctrine which has been steadfastly held that, whatever might be the political or social advantages, very little additional employment and no permanent additional employment can in fact and as a general rule be created by State borrowing and State expenditure.’”

And I emphasise that this was in 1929 before the Great Depression had even begun. The world is heading towards a disastrous downturn, and in spite of everything, we still only have Keynesian clowns stationed in every major economic post across the globe. Yet I am encouraged by our Treasurer, who gets this exactly right:

Mr Morrison said the key to raising household incomes was to improve productivity and this required business investment.

“You don’t get that from taxing and spending as Labor proposes; you get it from encouraging enterprises to innovate,” he said.

You also don’t get it by building massively loss-making very fast trains, which are really very fast drains on our productive capabilities. It should be no mystery why the Treasurer doesn’t get on with his PM, who still thinks the NBN was a great success.

You can’t break the law of markets without being punished

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Consider this a joint post by myself and Spartacus. He came across the article but for obvious reasons passed it on to me. And the article is Another Volcker Moment? Guessing The Future Without Say’s Law which was posted at Zero Hedge in March. What I find so interesting is not that the phrase “Say’s Law” comes up, which it often has in the past as an anti-Keynesian meme, but this is actually an accurate use of the concept (even though they call it “laws of the markets”). So what did they write?

The explanation for most of the failures behind modern macroeconomic thinking is the substitution of market-based economics by economic planning.

The fact that today’s macroeconomics dismisses the laws of the markets, commonly referred to by economists as Say’s law, explains all. Subsequent errors confirm. The many errors are a vast subject, but they boil down to that one fateful step, and that is denying the universal truth of Say’s law.

Say’s law is about the division of labour. People earn money and make profits from deploying their individual skills in the production of goods and services for the benefit of others. Despite the best attempts of Marxism and Keynesianism along with all the other isms, attempts to override this reality have always failed. The failure is not adequately reflected in government statistics, which have evolved to the point where they actually conceal it. So when an economist talks of economic growth being above or below trend, he is talking about a measure that has no place in sound economic reasoning, and that is gross domestic product.

You would almost think they had been reading my text, since in it you will find not only quite a bit on the vandalism behind low interest rates which is what the article is about, but also quite a bit on the nonsense intrinsic to using the national accounts. More realistically, once people start to wonder what went wrong with the stimulus, they wander back into the economic archives to see if there are any clues to the present that are available from the past – which is why economics remains the only science in which its own history is an important part of the subject itself.

FURTHER NEWS ALONG THE SAME LINES: This, too, has been forwarded to me which fits into the same story. ECB will do ‘whatever is needed’ to raise inflation. These central planners who will make their mates very rich but put the rest of us into serious bother are not about to stop. Really, there is no “theory” for any of this; they just make it up as they go along.

Pushing back against critics who argue he has backed too much stimulus, European Central Bank head Mario Draghi says the top monetary authority for the eurozone will do “whatever is needed” to lift dangerously low inflation.

Draghi’s remark Thursday underlines the bank’s willingness to step up its stimulus efforts — even though they were increased as recently as its last meeting on March 10.

His speech indicated a readiness to rebut criticism from some media and politicians in Germany, the eurozone’s biggest member, who say the ECB’s stimulus is excessive, hurts savers and risks destabilizing the financial system.

Draghi coupled that statement with a call for national governments to take steps to make their economies grow faster, producing more demand for goods and services and raising inflation and employment.

Other than that everything along these lines has already massively failed, what’s the problem?

Were the Classical Economists Right After All?

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This is the first draft of an abstract I have put together which relates to my previous post on production versus consumption. I would be interested in any thoughts you might have.

Political Economy in Crisis:

Were the Classical Economists Right After All?

There are, generally speaking, five streams of macroeconomic thought that compete for allegiance in the modern world.

• Keynesian which comes in many varieties all of which argue recessions are due to failure of aggregate demand and which deny the validity of Say’s Law

• New Classical based on rational expectations but with no embedded theory of recession

• Austrian which typically ignores aggregations, where activity is driven by marginal utility and which builds a theory of recession based on structural imbalances caused by financial dislocation

• Marxist and other forms of socialist theory whose aim is to centralise economic decisions and whose main focus of analysis are exploitation of the working class and concern with inequality

• Classical which emphasises the supply-side of the economy, focuses on the role of the entrepreneur and sees recessions as due to structural imbalances which may come from a variety of causes.

The aim of the paper is to argue that economic theory reached its deepest and most profound level in the writings of the late classical economists which flourished over the period from the publication of John Stuart Mill’s Principles in 1848 through until the publication of John Maynard Keynes’s General Theory in 1936. The paper will discuss the classical framework and contrast this approach with the alternatives that today compete for the allegiance of economists.

“What a country wants to make it richer, is never consumption, but production”

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I have an aversion to virtually every form of modern economic theory. Whether it is based on aggregate demand or marginal utility, they all seem to think economies are driven from the demand side. And no level of failure built on such policies ever gets the profession to recognise that an economy is driven by value adding production and nothing else. If you want to understand how things work, you must return to classical economic theory. It is what drove Reagan’s revolution which was described as supply-side economics but was explicitly based on a return to classical economic theory and Say’s Law. Which brings me to this, an article Mill Power, which has as its sub-head, “‘Trumponomics’ from a classical perspective”. This is by Stephen MacLean writing in the Quarterly Review of Canada’s Disraeli-Macdonald Institute.

Foregoing the legitimate question about the efficacy of U.S. fiscal dictates that induce home industries to take advantage of tax structures in foreign lands — and penalise them when they try to patriate capital — what policy should a possible Trump administration advocate for congressional legislation?

The answer lies in entrepreneurship and innovation. As Mill explained, ‘What a country wants to make it richer, is never consumption, but production.’

What can you find in all of your modern texts that makes as much sense as that? And oddly, just today, this showed up: What has Trump Wrought by Pat Buchanan. And there, right in the middle, we find exactly the same argument:

Economists who swoon over figures on consumption forget what America’s 19th-century meteoric rise to self-sufficiency teaches, and what all four presidents on Mount Rushmore understood.

Production comes before consumption. Who owns the orchard is more essential than who eats the apples. We have exported the economic independence Hamilton taught was indispensable to our political independence. We have forgotten what made us great.

In dwelling on all this, you might contemplate which side of this issue those crony capitalists are lining up on, the ones who would find their massive lashings of government money shorn away as a more economically literate business-like administration took over.

And just in case you are wondering where you can find a modern version of Mill’s Principles, might I suggest this, now in its second edition.

Henry Clay, economist

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Adapted from Henry Clay’s entry in the Oxford Dictionary of National Biography (Jewkes and Jewkes: 2004) for an article I have written on Clay’s incomparable introductory text, Economics: an Introduction for the General Reader, which I have described as the best introductory text ever written. Only those sections related to his work as an economist have been included. The text while truncated is exactly as found. It is the Clay whom I well know from his text, and it is interesting to find that, given how similar we are, I may be properly categorised as a Gladstonian Liberal. Strangely, that very much makes me a conservative in modern times.

Clay, Sir Henry (1883–1954), economist, was born on 9 May 1883. He went as a scholar to University College, Oxford, [graduating] in 1902. Between 1909 and 1917 he lectured for the Workers’ Educational Association under the university extension scheme, an experience that led to the writing of Economics: an Introduction for the General Reader (1916; 2nd edn, 1942). The book had great success, especially in Great Britain and the United States, and, by reason of its clarity and real-world examples, broadened public interest in economic matters.

In 1922 Clay became the Stanley Jevons professor of political economy at Manchester. In 1927 Clay asked to exchange his chair for the new professorship of social economics. He perceived that applied economics could be strengthened by closer regular contacts between economists and business people.

Clay was not a foremost economic theorist. Indeed, he often expressed doubts about the value of much of the theorizing then in fashion. As he told Edwin Cannan, another leading economist who shared his structural diagnosis of Britain’s industrial problems, he always felt that as a Professor of Economics I was a fraud … My reading of English economics has been scrappy … I don’t know enough mathematics to follow our Cambridge friends, however suspicious I may be of their results; and I cannot suppress my interest in current political and social questions sufficiently to stick to any one part of the field of economics and so do some serious work on it.

In 1930 Clay resigned his chair to join the Bank of England. Clay’s shrewd advice and his knack of getting on with people, especially with Montagu Norman, led to his appointment in 1933 [at the very trough of the Great Depression] as economic adviser to the governor of the Bank of England. Clay and Norman shared the opinion that, necessary as was a proper budgetary and monetary framework, financial ingenuity by governments in the form of large-scale loan-financed public works did not offer a long-term solution to the problems of British industry. They believed that the solution lay more on the supply side, where widespread inefficiencies in the use of capital and labour resulted in high costs and low productivity, problems that were being addressed by the bank in its promotion of industrial rationalization.

Clay’s writings from his first and famous book in 1916 to the papers unfinished at his death show the main lines of his thinking unbroken. He was in many ways a Gladstonian Liberal, believing that private enterprise was the most efficient form of organizing production, that the liberty of the individual would be endangered by the continued growth of government, and that Britain should maintain its historic internationalism in its economic policies. His views diverged from the main stream of contemporary Liberal economic thought in at least two ways: in his doubts about the practical results of the Keynesian solution to unemployment or more especially of the views of some of Keynes’s disciples; secondly, concerning industrial monopoly. Clay was not prepared to agree that a competitive system would inevitably degenerate into monopoly unless safeguarded by the state: anti-monopoly legislation in his view was unnecessary, inexpedient, and inequitable.

Although in later years he became something of a man of affairs, he retained the habits and enthusiasms of the scholar; nor might he be mistaken for anything else. He could never resist a second-hand bookshelf and he collected a large library, which included many bargains.

Six years of depressed employment and counting

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On the twenty year lost decade in Japan, from my Dangerous Return of Keynesian Economics:

It ought to be the textbook case now for why all such forms of economic stimulus should be avoided at all costs. Because, say what you will about the causes of the Japanese downturn and the failure to recover, all major economies experienced the same deep recession at the start of the 1990s, but only the Japanese economy has never fully recovered its previous strength.

That is, only the Japanese tried a public sector stimulus to end their recession in the 1990s and their economy has never recovered. So we take you now to the United States: Half of U.S. May Endure ‘Lost Decade’ of Depressed Employment

Economic recovery has been unusually sluggish and uneven across regional U.S. job markets, with employment set to stay low for years to come in areas that endured the recession’s worst, according to new research.

At the current pace of improvement, employment rates across the U.S. won’t return to normal levels until the 2020s, “amounting to more than a relative ‘lost decade’ of depressed employment for…half of the country.”. . .

Based on the current trend, employment rates won’t converge to their normal levels until sometime in the 2020s. . . .

“We’re at six years of depressed employment and counting.”

Only about a dozen years to go to catch up with the Japanese, who by then may be in the 30th year of their lost decade.

The Making of Modern Economics third edition

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Economists barely understand the history of their own subject today, in large part because most economists no longer even understand what role it could play in making an economist a better economist. I wrote my own book on this very subject, Defending the History of Economic Thought, when many historians of economics were themselves conspiring to remove HET from within economic theory. Strangely, many still are, and it is a battle for the soul of economics that continues. If you would like to have some idea of what would be lost to economists by ridding themselves of their own history, and to learn how economics became what it is, the hands down best history of economics ever written is by Mark Skousen who has just brought out the third edition of his exemplary text. Aside from everything else, it has the astonishing additional feature of being readable and entertaining. You cannot genuinely understand economic theory without understanding its history, and there is no better place I know for learning this history than from this book. Below is the notice put out on the release of the third edition.

March 9, 2016 was the 240th anniversary of the publication of “The Wealth of Nations,” by Adam Smith. On this day Dr. Mark Skousen announced the publication of the new third edition of his bestselling history, “The Making of Modern Economics.”

skousen making of modern economics

As you can see from the cover, the heroic figure in Skousen’s book is Adam Smith and his “system of natural liberty.” (Interestingly, the official pub date of the first edition of Skousen’s history was March 9, 2001.) All of the “worldly philosophers” – Ricardo, Say, Mill, Marshall, Menger, Marx, Fisher, Keynes, Schumpeter, Friedman, Krugman — are judged as defenders or critics of the great Scottish philosopher, and whether they advanced or attacked the House that Adam Smith Built.

Routledge, the top British academic publisher (famous for publishing the works of Hayek, another hero in Skousen’s work), is now the publisher of this bold history of the great economic thinkers.

What’s new in the third edition?

What’s the new edition all about?

First, Skousen expands his chapter on Adam Smith, including a new discussion and quotations from Smith’s “Theory of Moral Sentiments.” He also comments on the startling new discovery that Smith’s singular reference to the famous “invisible hand” metaphor is located in the mid-point of both “The Wealth of Nations” and “The Theory of Moral Sentiments.” Purposeful or coincident? Find out in chapter 1, “It All Started with Adam.”

Second, the third edition updates the chapter on Karl Marx, particularly the resurrection of the Marxist-inspired “liberation theology” in Latin America, with comments about Pope Francis and his severe criticism of capitalism. The growth of socialism and corruption in Latin America is discussed.

Third, the final chapter, “Dr. Smith Goes to Washington: Market Economies Face New Challenges,” has been completely revised. Here Skousen focuses on the West’s decline in economic freedom in consequence of higher deficits, taxes and regulations, and the growing debate over inequality, austerity, and the need for a new brand of capitalism following the financial crisis of 2008. The chapter ends on a positive note, with discussions on the advances in game theory, auction design, experimental economics, behavioral finance, and other aspects of the new “imperial” science.

How to Buy a Copy

The third edition (500 pages) of “The Making of Modern Economics” is available in hardback, paperback, Kindle, or audio. You can order on Amazon here.

The new edition is also available directly from the author at a discount. Amazon charges $47.95 for the paperback, but you can buy directly from the author by calling toll-free 1-866-254-2057. You pay only $30 plus $5 P&H. (Orders from outside the US, please add $15 extra for airmail–$45 total.) Or order online at http://www.miracleofamerica.com.

Awards and Translations

In 2009, “The Making of Modern Economics” (the 2nd edition) won the Choice Book Award for Excellence in Academia. It was recently ranked #2 in the Ayn Rand Institute’s Top Ten List of “Must Read Books in Economics.” It has been translated into five languages — Spanish, Chinese, Turkish, Mongolian and Polish.

What’s Different about “The Making of Modern Economics”?

Skousen’s history is a bold, new account of the lives and ideas of the great economists–Adam Smith, Karl Marx, John Maynard Keynes, Ludwig von Mises, Milton Friedman, and many others–all written by a top free-market economist. Presented in an entertaining and persuasive style, Professor Mark Skousen tells a powerful story of economics, with dozens of anecdotes, illustrations and photographs of the great economic thinkers.

First and foremost, Skousen tells the remarkable untold story of free-market capitalism’s long-running battle against Keynesianism, Marxism, socialism and other isms. It is an account of high drama with a singular heroic figure, Adam Smith and his celebrated “system of natural liberty.” The running plot involves many unexpected twists and turns; sometimes our hero is left for dead, only to be resuscitated by his free-market friends; the story even has a surprise ending.

A Full-Scale Critique of All Major Doctrines

All previous histories tend to give a dry, disjointed, and helter-skelter account of economists and their contradictory theories. But Skousen unifies the story of economics by ranking all major economic thinkers either for or against the invisible hand doctrine of Adam Smith. Thus, Marx, Veblen and Keynes are viewed as critics of Smith’s doctrine, while Marshall, Hayek and Friedman are seen as supporters.

Using this ranking system, The Making of Modern Economics offers a full-scale review and critique of every major school and their theories, including classical, Keynesian, monetary, Austrian, institutionalist and Marxist.

A Complete History

Skousen’s history is comprehensive. He makes a point of discussing all schools of economics and not just the ones he agrees with. Too many economists have omitted major characters from the history of economics, a practice bordering on intellectual dishonesty. Robert Heilbroner’s popular book, The Worldly Philosophers, for example, virtually ignores the laissez-faire French, Austrian and Chicago traditions. (His latest edition does not even mention Milton Friedman by name!)

Think of The Making of Modern Economics as a contra-Heilbroner history.

It’s a perfect antidote to all those biased, inaccurate attacks on the free market and its proponents.

Skousen records the lives and ideas of important economists often ignored in other histories, such as Montesquieu, Ben Franklin, J. B. Say, Frederic Bastiat, Friedrich List, Herbert Spencer, Ludwig von Mises, Knut Wicksell, Philip Wicksteed, Max Weber, Irving Fisher, Roger Babson, Frederick Taylor, A. C. Pigou, Joan Robinson, Murray Rothbard, and the three Paul’s: Paul Sweezy, Paul Samuelson and Paul Krugman.

Skousen’s book also restores the vital role of the Austrian and Swedish schools in the marginalist revolution and the development of monetary economics. It emphasizes the impact of other disciplines on economics, such as evolution, sociology, and religion.

“Tell All” Biographies

Skousen’s book brings history alive with exciting new insights into the lives of the great economists through in-depth biographies and the author’s own research, revealing an amazing tale of idle dreamers, academic scribblers, occasional quacks and madmen in authority.

The Making of Modern Economics does its best to entertain, with provocative sidebars, humorous anecdotes, even music selections reflecting the spirit of each major economist. Samples:

–Why Adam Smith burned his clothes…and then burned his papers.
–The “satanic verses” of the poet Karl Marx.
–Were Malthus, Ricardo, Marshall and Keynes anti-female?
–The infamous grading technique of Chicago’s Jacob Viner (he regularly flunked a third of his class).
–The sexual scandals of Karl Marx, Carl Menger, Joseph Schumpeter and Friedrich Hayek.
–The story behind Marx the phrenologist, Jevons the astrologer, –Keynes the palm reader, and Friedman the amateur hand-writing analyst.
–Which famous economist is buried next to rock star Jim Morrison in Paris?
–How Darwin and Wallace discover their theory of evolution after reading Malthus.
–Why Malthus and the doomsdayers have been proven wrong about overpopulation and environmental crises.
–The strange case of David Ricardo: Why Schumpeter, Keynes, and Samuelson admired him–and deplored him.
–Why Malthus refused to have his portrait made until age 67.
–Why Hayek blames John Stuart Mill, a hero of classical liberalism, for popularizing socialism among intellectuals in the 19th century.
–The real origin of the epithet “dismal science,” and why critics are now calling economics the “imperial” science, with ever-increasing applications in law, finance, history, and politics.
–How John Stuart Mill and the disciples of David Ricardo became hostage to the Marxists, and how Carl Menger and the Austrians revived the laissez faire model of Adam Smith from oblivion.
–The inside story of three multi-millionaire economists–David Ricardo, Irving Fisher and John Maynard Keynes.
–The bizarre story of Jeremy Bentham: from democratic reformist to utilitarian fascist.
–The socialist origins of the American Economic Association and the London School of Economics.
–Veblen’s incredible prophecies about World War I and II.
–Thorstein Veblen versus Max Weber: Who had a better vision of capitalism?
–How Irving Fisher became an advisor to the fascist Mussolini.
–The little-known story of how the economics establishment in the West (including economists at Cambridge, Harvard and Yale) failed to forecast the 1929-32 economic collapse.
–How Austrian economists Ludwig von Mises and Friedrich Hayek were able to predict the 1929-33 crisis, yet failed to convince the world of their theories.
–How the 1929 crash served as a catalyst for Keynes’s “general theory.”
–How Keynes saved the world from Marxism in the 1930s.
–The truth about Keynes’s homosexuality and the rumor that his Cambridge colleague, A. C. Pigou, was a Soviet spy.
–Gross Domestic Product (GDP)–how a Keynesian statistic was invented by a Russian.
–How Irving Fisher’s misinterpretation of his quantity theory of money led to his losing a fortune on Wall Street, and how Milton Friedman avoided repeating Fisher’s blunder.
–Why Friedman and the Chicago school triumphed over Mises and the Austrian school in discrediting Keynesianism and restoring the Adam Smith model of market capitalism.

Fully Illustrated with Over 100 Photos, Portraits and Graphs

Finally, The Making of Modern Economics is the first fully-illustrated history of economics, with over 100 charts, portraits, and photographs, including a picture of….
…Keynes in bed (where he made his millions),
…Eugen Boehm-Bawerk in official regalia as finance minister of Austria,
…Alfred Marshall trying to hide his oversized left hand,
…the preserved body of Jeremy Benthem in London,
…the only known photograph of Irving Fisher smiling (before he lost millions in the stock market), and
…over 75 rare and unusual photos and portraits of famous economists.

Provocative Chapter Titles

Here are the titles of each chapter of The Making of Modern Economics:

1. It All Started with Adam (Adam Smith, that is)
2. The French Revolution: Laissez Faire Avance!
3. The Irreverent Malthus Challenges the New Model of Prosperity
4. Tricky Ricardo Takes Economics Down a Dangerous Road
5. Milling Around: John Stuart Mill and the Socialists Search for Utopia
6. Marx Madness Plunges Economics into a New Dark Age
7. Out of the Blue Danube: Menger and the Austrians Reverse the Tide
8. Marshalling the Troops: Scientific Economics Comes of Age
9. Go West, Young Man: Americans Solve the Distribution Problem in Economics
10. The Conspicuous Veblen Versus the Protesting Weber: Two Critics Debate the Meaning of Capitalism
11. The Fisher King Tries to Catch the Missing Link in Macroeconomics
12. The Missing Mises: Mises (and Wicksell) Make a Major Breakthrough
13. The Keynes Mutiny: Capitalism Faces its Greatest Challenge
14. Paul Raises the Keynesian Cross: Samuelson and Modern Economics
15. Milton’s Paradise: Friedman Leads a Monetary Counterrevolution
16. The Creative Destruction of Socialism: The Dark Vision of Joseph Schumpeter
17. Dr. Smith Goes to Washington: Free-Market Economies Face New Challenges

What Others Are Saying

“A story rarely told….It’s unputdownable!”
–Mark Blaug (University of Amsterdam), author of Economic Theory in Retrospect

“I champion Skousen’s book to everyone. I keep it by my bedside and refer to it often. An absolutely ideal gift for college students.” –William F. Buckley, Jr., founder, National Review

“One of the most original books ever published in economics.”
–Richard Swedberg (University of Stockholm), author of Schumpeter: A Biography

“Provocative, engaging, anything but dismal!”
–N. Gregory Mankiw (Harvard University)

“Lively and accurate, a sure bestseller. Skousen is an able, imaginative and energetic economist.” – Milton Friedman

“Mark Skousen has emerged as one of the clearest writers on all matters economic today, the next Milton Friedman.” – Michael Shermer, Scientific American

“Irreverent, passionate, entertaining, sometimes mischievous, like the author himself!”
–David Colander (Middlebury College), coauthor of The Making of an Economist

“I have read Mark’s book three times. It’s fun to read on every page. I have recommended it to dozens of my friends.” – John Mackey, CEO, Whole Foods Market

“I loved the book–spectacular!”
–Arthur B. Laffer

“I couldn’t put it down! The musical accompaniments for each chapter are a wonderful touch. Humor permeates the book and makes it accessible like no other history. It will set the standard.” –Steven Kates, RMIT University, Australia

“Skousen gets the story ‘right’ and does it in an entertaining fashion, without dogmatic rantings.” – Peter Boettke, George Mason University

“Both fascinating and infuriating…engaging, readable, colorful.” – Foreign Affairs

“Lively….amazing….good quotations!” – Journal of Economic Perspectives

About the Author

Mark Skousen (Ph. D., economics, George Washington University) is a Presidential Fellow at Chapman University in California. He has taught economics, finance and business at Columbia Business School, Barnard, Mercy and Rollins colleges, and Chapman University. Since 1980, Skousen has been editor in chief of Forecasts & Strategies, a popular award-winning investment newsletter (www.markskousen.com). He was analyst for the CIA, a columnist to Forbes magazine, chairman of Investment U, and past president of the Foundation for Economic Education (FEE) in New York. He is the editor of his own website, http://www.mskousen.com, and is the producer of FreedomFest, “the world’s largest gathering of free minds,” which meets every July in Las Vegas (www.freedomfest.com). His economics works include The Structure of Production (NYU Press), The Big Three in Economics (ME Sharpe), The Making of Modern Economics (Routledge) and Economic Logic (Capital Press). His investment books include Investing in One Lesson (Capital Press), and The Maxims of Wall Street (Eagle Publishing). In honor of his work in economics, finance and management, Grantham University renamed its business school, “The Mark Skousen School of Business.” Based on his work The Structure of Production (NYU Press, 1990), the federal government now publishes Gross Output (GO) every quarter along with GDP.

If only J.M. Keynes had understood Say’s Law

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I’ve just come across this button you see on the right while looking on the net for something else. It accompanies an article I wrote three years ago on The Errors of Keynes’s Critics. The sentiment was mine and when I saw the words I had to track it down. It was, of course, quite pleasing to see that it had originated with me, but all the same it would also have been even more pleasing if someone else had said it, just to give me company.

says law button

Alas, I think the optimism I had when I wrote the post is rapidly evaporating. It had begun, “an important understanding is taking hold, that the road to unwind Keynesian economics travels through Say’s Law”, but whatever inkling of a hope for a more enlightened economics that I held then is now gone. The truth of the statement remains as valid in my mind now as it was when I wrote it.

It is quite straightforwardly impossible to make an economy work without understanding that growth can only occur if across the wide expanse of the economy, the value added by economic activity must be greater than the value that has been drawn down. Governments can subsidise what they like, but unless what is added on is more than what is taken away, growth cannot occur. In fact, that is exactly what economic growth means, and nothing else.

The OECD and IMF are economic cranks

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In February 2009 Quadrant published my article on The Dangerous Return to Keynesian Economics. There you will find the following:

Just as the causes of this downturn cannot be charted through a Keynesian demand-deficiency model, neither can the solution. The world’s economies are not suffering from a lack of demand, and the right policy response is not a demand stimulus. Increased public sector spending will only add to the market confusions that already exist.

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.

I also immediately began work on my Free Market Economics which I am now about to complete its third edition. Here is how the second edition is described:

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, Second Edition will help students and general readers understand the economics of that earlier time, 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.

Nothing that has occurred in the seven years since the GFC has been anything other than what I expected. As certain as I was then that Y=C+I+G is the road to economic disaster, nothing I have seen since has done anything other than strengthen my belief that Keynesian theory is wrong in every particular. All of which is brought to mind by this article dealing with those crackpots at the IMF and OECD: As jobs go, global economy falters, says G20 report. How is this for evidence that no one learns from history:

Scott Morrison will come under pressure at his first G20 meeting in Shanghai this weekend to use the budget to launch a new round of stimulus spending — the first since the global financial crisis — as the IMF warns finance ministers that the world is at risk of a new downturn.

In a bleak report prepared for the meeting — and against the backdrop of thousands of new job losses in Australia after the closure of the Dick Smith retail chain — the International Monetary Fund says the global economy is faltering and governments have done too little to boost demand.

“The global economy needs bold multilateral actions to boost growth and contain risk,” it says. “The G20 must plan now for co-ordinated demand support using available fiscal space to boost public investment and complement structural reform.”

Idiotic and ignorant. Impervious to the lessons of our recent past. Uncomprehending of what happened during the Costello years when budget deficits disappeared and Australia had zero debt – the absence of debt being unique across every country during the entire Post-War world. The economics profession seems incapable of learning a thing.