Ideas Matter

Now You Know Why it's Milton Friedman's Century

I once heard Sec. George Shultz say "people liked to argue with Milton Friedman when he's not around." In this video you can see why. Unfortunately, you have a guy who wants to ask a "three-part" question. Fortunately, you have a man who can answer each part -- masterfully. Allow me to riff on a couple of Friedman's points that are particularly brilliant.

Ron Paul's Victory

Okay, leading off with the (Ron) Paul vs. Paul (Krugman) debate is pretty cheap. But please read on now that I've (hopefully) sucked you in. 

Keynes's Magic Dipping Ladel

John Maynard Keynes probably didn't mean to supply justification for any road to serfdom. But he did. We're left with a mythology of job creation that only creates phantom jobs -- namely visible jobs contrived from the largess (but corresponding invisible job losses somewhere else). This is what happens when you divert resources from productive uses to less productive uses -- all in the name of "stimulating" the economy.

Engines of Analysis: Gary Becker on Milton Friedman's Impact

Beware of economists on TV and in the paper. Most of them are soothsayers. Most of them don't practice economic science with humility. And most of them rely too heavily on theory, as Gary Becker says that his teacher, Milton Friedman, warned against. Why should we believe Friedman and Becker?

2012: The Keynes v. Hayek Election

Nicholas Wapshott says this is a "Keynes versus Hayek" election. It's hard to argue with this assessment. And yet I don't think the median voter fully appreciates this conflict of fundamental economic worldviews. Of course, we've spilled a lot of pixels on this blog about this intellectual war -- and who's right. But what about the framing? What will the spin doctors be up to? 

Michael Munger: the Multipier, Debt and "Jumping the Krugman"

In the latest of desperate moves by the Obama administration, we get a merely semantic shift from "stimulus" to "job creation." Jobs. That's what voters want to hear. And yet there is effectively no difference between the first failed stimulus and what President Obama is now proposing (and may just do -- unconstitutionally -- by executive order). What Obama currently has on the table is a very cynical proposal indeed. Let me explain:

Dorian Electra: Roll With The Flow

Hopefully you've seen this by now. But if you haven't, consider your day brightened.

Dorian Electra has done a fantastic job of communicating the basic lessons of Austrian Economics in, well, a single song. She covers:

• Subjective value - One person's trash is another's treasure.
• Human action (in circumstances of time and place) - Your economic behavior is unique and perspectival.
• Knowledge problem, as well as problems of quantification and measurement - Macroeconomic models are pretty much useless.
• Unseen costs - Big digs and boondoggles mean foregone opportunities for growth.
• Bottom up versus Top Down - The collective behaviors of individual actors on the ground make up the economy (not aggregate demand).

A few crazy libertarians are going to topple Paul Krugman and expose his idiocy -- one video at a time. 

It's official: Krugmania now in the DSM V

You've probably already seen this space alien diatribe. But it's worth reposting -- not just because of the errant Keynesianism it implies -- but because it shows what lengths someone will go to justify his ideology.

I think Krugmania of this sort is a factor not of intellectual honesty, but of being adored by a group that needs you to justify their commitments. You write for The New York Times. Your readers are eager for you to help them figure out how to explain why the abject worship of the state is good; why government spending is good. You have to make the counterintuitive case. And sometimes economics is counterintuitive. If Keynes and Krugman were right, the space alien example would be a harmless thought experiment.

But it's not. Fareed Zakaria inadvertently explains why. Digging ditches only to fill them up again (or mobilizing for space aliens) is not "productive." That that is the simple, critical difference between Keynesians and others: common sense is correct in this case. When you divert resources from more productive uses to less productive uses, you are not likely to see growth.

The Battle of Ideas

Interventionism versus free markets. It's a battle that never seems to end. It appeared in 1989 as if we could all celebrate the death of communism and go home. But interventionism -- which invariably leads to corporatism -- is in many ways more insidious. After all, it's less obvious than communism, so infects the system much more easily.

Recall U.S. President George W. Bush, during the financial crisis of 2008, saying something like: We have to abandon capitalism in order to save it. To my ear, that had such a dissonant ring. First, it assumed we'd long been in a state of laissez faire -- which conceded way too much to the progressive talking points. Second, it assumed that mopping of the mistakes of interventionism with more intervention was somehow a good thing.

It shows you how readily people are willing to accept the doctrine. It's not ideological really. It's apparently pragmatic. It's a means of "fixing" something in the economic system that, to central engineers and economic tweakers, gets broken. People accept it as a means of "getting the economy back on track." Unfortunately, it leads to crony capitalism -- that blurring of big business and big government in which the world is truly controlled by elites.

I am not sanguine about the next twenty years. I'm not one for catastrophism. But I certainly worry that interventionism has won the day. If the U.S. is in any way the locus of power in turning the tide away from the grip of Keynesianism, I see no evidence that there is leadership capable of changing a system that is now designed for business and government to collude. I see the state blowing up more bubbles. I see leaders making politically expedient choices, not tough choices. The longer run looks like one in which Hayek described in his more pessimistic moments.

Michael Munger: A Politically Convenient Fiction

Transferring resources and people from the productive sector to the less-or-non-productive sector destroys prosperity. So sayeth Michael Munger. He's right of course. But what's so sad about this fact is that political incentives drive politicians into accepting what Munger calls "a politically convenient fiction."