Welcome to mainstream politics, Mr. Paul, you will now have to endure a higher level of scrutiny, just like all of your opponents.

Ron Paul has a large body of racist literature in his name. I think it is troubling and a fair point to bring this up. It's also a lot more significant than some of the bad press for the other candidates, like Bachmann's gay husband and Newt and Cain's affairs. Read the volumes of racist literature for yourself here: http://www.mrdestructo.com/2011/12/game-over-scans-of-over-50-ron-paul.html

Did Lew Rockwell write all of this without the editorial consent or attention of Ron Paul? Were they pandering to a racist base? Or is Ron Paul lying? Not good anyway you slice it.

Of much worse concern than old newsletters is Ron Paul's problematic Austrian economic platform, which is a more hardcore version of the free market economics that have bankrupted this country, decimated the middle class and sent our jobs to third world slaves. Ron Paul will not stand up to corporations. On the contrary, he is going to give them the gift of deregulation and tax cuts.

I'm sick of Ron Paul hype. Enough of this blind hero worship. Ron Paul is capable of doing wrong. He is not a deity.

The problem for Paul is that he has such a large volume of racist literature (50+ scans at this site: http://www.mrdestructo.com/2011/12/game-over-scans-of-over-50-ron-paul.html) that his excuse of 'being caught up in the moment' strains credulity. The fact of the matter is that Ron Paul wasn't there, he was off in Texas doing Texas-y things far from south central Los Angeles.

I, on the other hand, was there in middle of south central during the riots, and what I saw did in no way resemble Ron Paul's racist fantasy. I've got the pictures to prove it. I remember the streets being empty, with most people of all races choosing to stay safe in doors. There were no Maoists or Trotskyites, although I do remember seeing some white college students participating in the looting of an AM/PM, stealing beer.

It's OK to like Ron Paul, but when you become unwilling to even entertain the possibility that he could ever be wrong, you've entered the realm of the hero worship. If you look below the surface, Ron Paul is a terrible candidate. His economic policy is a more extreme version of the same free market bullshit that has bankrupted this country and sent our jobs off to 3rd world slaves. He has some admirable foreign policy views and he's not afraid to make them (good for him) but that doesn't make up for the rest of his laughably foolish Austrian economic platform.

If you can read this article and think these are the words of a thoughtful and rational man, then you need to read it again.

No more excuses. No more hype. Ron Paul is not your Lord and savior. He's just another millionaire Republican politician who wants to give himself a tax cut.

Pull yourself together, man.

>> ^oritteropo:

Nein, du Dummkopf, Österreich nicht Australien.
Nicht downunder.
keinkanal
dunkel
angst
feuer
>> ^BoneRemake:
australians eh? not canadian eh.. hrm sayyyy downunder ? say ?
Eh ?



Mulligan on that one. GOtta say I dont know what angle I was coming from.

"rly December, Austrians celebrate the Krampuslauf "

DUHHHHHHHHHHH!!!

To bad you can not downvote your own comment.

Real Free Market Capitalists Demand that Financial Fraud Be Prosecuted
http://www.washingtonsblog.com/2011/11/real-free-market-capitalists-demand-that-financial-fraud-be-prosecuted.html

Adam Smith, Leading Austrian Economists and Other Free Market Advocates Are For the Prosecution of Fraud

There is a widespread myth that free market supporters are against regulation or prosecuting fraud.

In fact, Adam Smith – the father of free market capitalism –
was for regulation of banks, and believed that trust is vital for a healthy economy. Because strong enforcement of laws against fraud is a basic prerequisite for trust, Smith would be disgusted by the lack of prosecution of Wall Street fraudsters today.

@bmacs27 I've been wanting to come back and reply for a couple days now, but didn't have the time. Now I hesitate to messing with the good conversation that followed, so I'll just touch on the points I'm interested in from the whole conversation. If I skip something you really wanted me to answer, let me know!

For one, I do tend to have an odd mix of pro-market and anti-market beliefs. On unemployment, my answer is that in an ideal world, I would want people entitled to some sort of minimum guaranteed income, no matter whether what they do. I like unemployment insurance because it's kinda like that, only with pragmatic real-world strings attached (it's limited in duration, and you've gotta be looking for work and not finding anything, and it stops when you get a new job...).

heropsycho already gave the more economics-minded answer I would've given about unemployment benefits helping prop up demand, and keep the economy from shedding even more jobs. I'd go along with your "you get unemployment, but we're going to make it contingent on you attending free job retraining", but I'd also go along with a WPA-style "we won't pay you unemployment, we'll just directly hire you" sort of arrangement, especially in a jobs market full of laid off construction workers.

heropsycho also gave the succinct answer I was going to give about hoarding labor -- worker salaries and benefits are always on the "cost" side of the company's ledger, and people often get fired long before they become an outright loss to the business. Usually it's because you've become less profitable than what they think they could make by replacing you with someone else (or by just by making other workers work more hours).

And no, I'm not a protectionist who wants to see unions and/or government forcing companies to employ people who're losing them money, I'm in favor of having a social safety net so there's no moral issue with companies laying people off (that's why I like the idea of a minimum guaranteed income).

On the topic of whose economic theories we've followed post-Volcker, for the most part, it's been Monetarist-style monetary policy, coupled with ideological right-wing fiscal policy. Namely, a targeted package of policies aimed at redistributing wealth from the poor and middle classes to the rich. That still leaves things a bit blurry, because the only economic justifications for debt-fueled tax cuts are Keynesian, and modern (New) Keynesians have largely adopted monetarist notions of monetary policy.

But the big disagreement between modern Monetarists and modern Keynesians is about fiscal policy -- Monetarists say it can't work, Keynesians say it can. Part of what confuses people a bit, is that Republicans adopt whatever economic theory justifies what they started out wanting to do. Keynes is right when they want to borrow money to cut taxes, Monetarists are right when Obama wants to pass a stimulus program, and Austrians are right when the Fed tries to help the economy by printing money when a Democrat is in the White House.

A. I don't understand how you're arguing we haven't been practicing Keynesian economics since the Great Depression. We've run deficits almost the entire time, lowered interest rates even further during recessions, and enact stimulus when recessions hit in the form of tax rebate checks, income tax cuts to consumers, gov't programs to provide jobs to increase demand, extended unemployment, etc., although we normally do a poor job of running surpluses when we should. But in a nutshell, that is Keynesian economics. And it has worked pretty well overall. Influence of monetarist policies have tamed the Keynesian interventions, but there's little doubt that all the above actions in the last two recessions were born of Keynesian thought.

B. If a business is making $100,000 off your labor, but is paying you $80,000, resulting in a $20,000 profit, why wouldn't they fire you if they could fire someone to do your job for $50,000, resulting in a 250% increase in profit? It does happen. I was the victim of it in 2004.

C. If the devils in the details could be worked out, and that's a big if, I'd be in favor of having stipulations to unemployment benefits. But you got a lot of issues you'd have to deal with. What if the person on unemployment has kids? You're gonna deny them welfare if the kids would starve? Very complicated issue as just one example.

I do think though we need in this age better education to retrain workers for the new jobs that come into the US as jobs get outsourced to other countries.

D. About the FDIC... First off, you're saying that people could check the banks' ability to make too risky of loans, but it's a whole other thing to say FDIC insurance encourages bad lending. It's simply not true. Again, regardless if deposits are insured or not, banks will go under if they make risky loans regardless of deposit insurance for consumers in most cases. Again, bailouts are a whole other issue. As for people checking the banks for bad lending, that's a pipe dream. The general consumer has no clue what are good or bad loans overall, nor the time to monitor the lending practices of banks. Hell, BANKERS didn't understand the crap they got themselves into in the mortgage crisis until it was too late, and they're professionals in the field. It's not a practical solution. On top of all that, the FDIC does in some ways help to ensure baseline qualities of banks. Not every bank can be FDIC insured, and many of the regulations FDIC insist upon make the banks more solvent, etc. So when consumers insist the bank is FDIC insured, they're insuring their deposits as well as guaranteeing a minimal level of integrity in the bank itself.

Lastly, I'm totally down with reasoned dialogue, even from points of view I completely oppose. I'm not slamming this guy because he's a conservative. I'm slamming him because he made ridiculous claims that are obviously factually inaccurate. Ideology shouldn't blind people from obvious fact that don't fit.

>> ^bmacs27:

@heropsycho
I'd disagree with you on a couple of points.

However, I will say once again, Keynesian economics works. We've practiced it since the Great Depression, and it works without a doubt.
First of all, we haven't really practiced Keynesian economics since stagflation during Carter. The decoupling of inflation and growth was very troubling to economists as the Keynesian theory had no explanation for it. In the period between Carter and Obama, we effectively practiced Monetarist economics, or "supply-side" economics. It's that economic policy everyone is railing against even though it was practiced during one of the periods of greatest growth in our history (obviously there are confounds, e.g. the personal computer). The Austrians just don't think that demand focused interventions will work any better than supply focused interventions. There is always a deadweight loss to taxation.

Profit centers do in fact get outsourced, although granted not as often as cost centers. Why would a company not outsource a profit center if it would increase profits in the long run?
Profit centers are most often NOT outsourced. If there is another profit center abroad, you expand, you don't fire the guy that's making you more money than he's costing you.

And prolonging unemployment has also provided an artificial market for goods and services for those who do have jobs. It's not so simple to suggest that extended unemployment is a disincentive to work. It's also providing those who are collecting it who actually can't find another job with income to spend, which props the entire economy up. It's not an either/or; it's both. And there are far more people right now on unemployment who cannot find another job than those holding out for something that pays what they're used to.
I understand the demand side argument. I'm saying, rather than giving them money for nothing, let's give them money to become hirable. It's similar to saying that the money handed to banks should have had conditions attached. When people are begging for money, they ought to accept some stipulations.

Finally, bear in mind that when it comes to finding common ground, and that kind of thing, you cannot find common ground with people who are fundamentally altering obvious fact to suit their views. Schiff made to completely ludicrous claims (child labor was ended by the market, and the FDIC deposit insurance fuels bank speculation). Both claims are preposterous.
I agree with you about child labor, however I'd disagree with you about the FDIC. People should be paying attention to what banks do with their money, and respond to poor decision making with the withdrawal of their deposits. Instead, they just assume it doesn't matter (in terms of risk) where they keep their money and just shop for the highest interest rate. Those higher interest rates are most often fueled by more than traditional lending (as anyone banking in such a manner would lose deposits to higher yields in the distorted marketplace).
Also, I'm Keynesian. I just don't think free market viewpoint you'd read in the Economist, Financial Times, WSJ, or any other reasonably reputable conservative source is being well represented on this website. If we all cheerlead for one team, we'll never substantially challenge our own groupthink.

@heropsycho

I'd disagree with you on a couple of points.


However, I will say once again, Keynesian economics works. We've practiced it since the Great Depression, and it works without a doubt.

First of all, we haven't really practiced Keynesian economics since stagflation during Carter. The decoupling of inflation and growth was very troubling to economists as the Keynesian theory had no explanation for it. In the period between Carter and Obama, we effectively practiced Monetarist economics, or "supply-side" economics. It's that economic policy everyone is railing against even though it was practiced during one of the periods of greatest growth in our history (obviously there are confounds, e.g. the personal computer). The Austrians just don't think that demand focused interventions will work any better than supply focused interventions. There is always a deadweight loss to taxation.


Profit centers do in fact get outsourced, although granted not as often as cost centers. Why would a company not outsource a profit center if it would increase profits in the long run?

Profit centers are most often NOT outsourced. If there is another profit center abroad, you expand, you don't fire the guy that's making you more money than he's costing you.


And prolonging unemployment has also provided an artificial market for goods and services for those who do have jobs. It's not so simple to suggest that extended unemployment is a disincentive to work. It's also providing those who are collecting it who actually can't find another job with income to spend, which props the entire economy up. It's not an either/or; it's both. And there are far more people right now on unemployment who cannot find another job than those holding out for something that pays what they're used to.

I understand the demand side argument. I'm saying, rather than giving them money for nothing, let's give them money to become hirable. It's similar to saying that the money handed to banks should have had conditions attached. When people are begging for money, they ought to accept some stipulations.


Finally, bear in mind that when it comes to finding common ground, and that kind of thing, you cannot find common ground with people who are fundamentally altering obvious fact to suit their views. Schiff made to completely ludicrous claims (child labor was ended by the market, and the FDIC deposit insurance fuels bank speculation). Both claims are preposterous.

I agree with you about child labor, however I'd disagree with you about the FDIC. People should be paying attention to what banks do with their money, and respond to poor decision making with the withdrawal of their deposits. Instead, they just assume it doesn't matter (in terms of risk) where they keep their money and just shop for the highest interest rate. Those higher interest rates are most often fueled by more than traditional lending (as anyone banking in such a manner would lose deposits to higher yields in the distorted marketplace).

Also, I'm Keynesian. I just don't think free market viewpoint you'd read in the Economist, Financial Times, WSJ, or any other reasonably reputable conservative source is being well represented on this website. If we all cheerlead for one team, we'll never substantially challenge our own groupthink.

>> ^pyloricvalve:

Thanks for the reply. There were things I really didn't understand about Krugman's Hangover Theory article, especially that very point that you quote. In fact I tried to ask in a post above about this but maybe you missed it. To me it seems only natural that there is no unemployment in the boom and there is some in the bust. Both are big reorganisations of labour, it is true. However, to start with the boom is much slower and longer so adaptation is easier. Also the booming industry can afford to pay slightly above average wages so will easily attract unemployed or 'loose' labour. As it is paying above average, there will be little resistance to people changing work to it. The boom is persistent enough that people will train and invest to enter the work created by it. The information for entering the boom industry is clear and the pay rise makes the work change smooth. I see no reason for unemployment.
The bust however is short and sudden. There is no other obvious work to return to. That information of what the worker should do is much less clear. The answer may involve taking a small pay cut or on giving up things in which people have invested time and money. Many people wait and resist doing this. They may well not know what to do or try to wait for opportunities to return. Thus there is plenty of reason for unemployment to be generated by the bust.
If I hire 100 people it can probably be done in a month or two. If I fire 100 people it may be a long time before they are all employed again. For me this difference seems so obvious I have a real trouble to understand Krugman's point. I know he's a very smart guy but I can't make head nor tail of his argument here. Can you explain it to me?


I'm trying to think how to connect what you're saying to the point Krugman's making (at least as I understand it).

At a minimum, he're Caplan making the same point in less space:

The Austrian theory also suffers from serious internal inconsistencies. If, as in the Austrian theory, initial consumption/investment preferences "re-assert themselves," why don't the consumption goods industries enjoy a huge boom during depressions? After all, if the prices of the capital goods factors are too high, are not the prices of the consumption goods factors too low? Wage workers in capital goods industries are unhappy when old time preferences re-assert themselves. But wage workers in consumer goods industries should be overjoyed. The Austrian theory predicts a decline in employment in some sectors, but an increase in others; thus, it does nothing to explain why unemployment is high during the "bust" and low during the "boom."

Krugman saying the same thing in more accessible language:

Here's the problem: As a matter of simple arithmetic, total spending in the economy is necessarily equal to total income (every sale is also a purchase, and vice versa). So if people decide to spend less on investment goods, doesn't that mean that they must be deciding to spend more on consumption goods—implying that an investment slump should always be accompanied by a corresponding consumption boom? And if so why should there be a rise in unemployment?

And as a bonus, here's Brad DeLong making a similar case.

My real handicap here is that I'm not familiar enough with the fine details of the Austrian theory to say with authority what they believe. So if I misrepresent their position, it's out of ignorance.

What I gather is that ultimately the Austrian theory of boom and bust is that central banks are messing with the "natural" balance of investment and consumption goods, with a boom happening when investment is being artificially stimulated (by low interest rates), and a bust happens when interest rates eventually go back up (due to inflation, or expectations thereof).

The response from people like Caplan and Krugman is to point out that since aggregate income has to equal aggregate expenditure (because everyone's income is someone else's expenditure, and vice versa), a fall in investment should mean a rise in consumption, and a rise in investment should mean a fall in consumption. Which means we should never see an overall boom or an overall bust, just periods of transition from a rise in consumer goods and a fall in investment, to a fall in consumer goods and a rise in investment. We should never see a situation where they both fall at the same time.

But we do see a fall in both during the bust. Why?

Keynes's answer was that it happens because people are hoarding cash. Either people are themselves stuffing mattresses with it, or more likely, banks start sitting on reserves and refusing to lend out, either out of a fear of their own solvency (Great Depression), or because a deflationary cycle with high unemployment makes sitting on cash look like a good, safe investment for them (Great Depression, and now). Put simply, depressions are the result of an excess demand for money. And since money is an arbitrary thing, it doesn't have to be a scarce resource, we can always just make more...

>> ^pyloricvalve:

@NetRunner, On reflection I would be interested in your criticism of the Austrian School. Probably to long too go into here but could you recommend any links? (If it's just Bryan Caplan's criticisms I would accept those already)


I had to look up Bryan Caplan's criticisms, I assume you mean this? If so, that's a much more exhaustive dismantling than I was going to link to.

Since this is a Krugmania thread, I was going to dust off Hangover Theory, and add to it Tyler Cowen's thin skull criticism.

But returning to Caplan, he seems to incorporate both of those criticisms, and a raft of others. Let me mine out what I think is essentially the money quote:

What I deny is that the artificially stimulated investments have any tendency to become malinvestments.

To my reckoning, that destroys the keystone that supports the Ron Paul-style assertions that the Fed causes the boom/bust cycle, and undermines much of their case for things like the gold standard or decentralized currencies.

Here he is making Krugman's own point on Austrian theories of unemployment:

The Austrian theory predicts a decline in employment in some sectors, but an increase in others; thus, it does nothing to explain why unemployment is high during the "bust" and low during the "boom."

Which pretty much tells me that Austrians have no business telling anyone what will or won't improve employment, because their their theory doesn't even predict the rise and fall of unemployment we see in every business cycle, much less provide some superior insight into what the right policy response would be.

So to add some nuance back into my blanket statement about Austrian economics and echo Caplan a little. There's work self-identified Austrian economists have done that I think is beneficial to the field of economics. What's not been beneficial is the broken ACBT itself, especially when it's been dug up and injected into 21st Century political conversations as gospel by people who seem unaware how broken it is.

@NetRunner, On reflection I would be interested in your criticism of the Austrian School. Probably to long too go into here but could you recommend any links? (If it's just Bryan Caplan's criticisms I would accept those already)

We may be getting distracted by the name Austrian which may mean different things to different people. I think there are views skeptical of stimulus held by respectable economists. I put forward Russ Roberts as one example. You seemed to say earlier that these kind of views don't constitute a continuing argument against stimulus-type policy. If that's right, could you explain why? They seem very reasonable to me.

I would also be curious if you have a criticism of the Hangover theory of this recession (that it was caused by malinvestment due to artificially low interest rates.) Krugman criticised it by saying that if unemployment results from frictional problems reallocating workers to new industries, "why doesn't the investment boom—which presumably requires a transfer of workers in the opposite direction—also generate mass unemployment?"

Krugman seems to think that's a slam-dunk against the theory but surely there are simple explanations for why friction could happen one way and not the other. When an industry booms it takes place over a long period and is a beacon attracting loose labour to it. When the collapse comes it is much faster than the boom and there are no obvious beacons for where the misplaced labour is to go. It seems normal to me that the reverse process is more difficult and leads to more unemployment. If you've an answer to that I'd be interested to hear it.>> ^NetRunner: Honestly, I'm happy to litigate out the actual reasons why I think Austrian economics is wrong, but I don't really care to get into a contest of who's got the bigger expert parroting their pet theory.

>> ^pyloricvalve:

Like Russ Roberts, I would agree that people's biases tend to drive the economics they believe in. But I think it's as true of the left as the right. Free marketers like Hayek and redistributionists like Keynes. I don't think you or I are free of these bias. In this case, the best thing is to try to argue the actual case rather than just dismissing people's arguments ad hominem style. Can you dismiss Russ Roberts congressional testimony? Do you deny he's an actual trained economist?

Honestly, I'm happy to litigate out the actual reasons why I think Austrian economics is wrong, but I don't really care to get into a contest of who's got the bigger expert parroting their pet theory.

If you'd rather debate my feelings about Austrians, that's fine too, but it's entirely derived from my belief that Austrian macroeconomic theory is demonstrably false. Given that it's demonstrably false, my only theory for why people, even people who should know better, still believe in it is because they're letting their ideological beliefs color their judgement.

To change my mind about self-identified "Austrians", you'd need to either change my opinion about the theory, or you'd need to point me to an indisputably left-wing Austrian economist.

I agree with you, about political views though. I think people arrive at their politics for reasons that have very little to do with objective analysis, and largely just latch on to whatever theory justifies the action they already wanted to take.

Me, I'll happily admit that I wanted stuff like more aid to the poor, better unemployment benefits, more investment in education, more infrastructure investment, etc. all long before I knew anything about economics at all. But I favor those things as a matter of morality. If they also turn out to be economically beneficial, then all the better.

If anything, learning Keynesian economics has moved me to the right. But then again, that should be no surprise, considering there's nothing particularly left wing about Keynesian economic theory. It's only left wing if you're viewing it through the lens of some right-wing ideologue who doesn't think government should have the ability to control monetary policy, or invest in infrastructure.

Like Russ Roberts, I would agree that people's biases tend to drive the economics they believe in. But I think it's as true of the left as the right. Free marketers like Hayek and redistributionists like Keynes. I don't think you or I are free of these bias. In this case, the best thing is to try to argue the actual case rather than just dismissing people's arguments ad hominem style. Can you dismiss Russ Roberts congressional testimony? Do you deny he's an actual trained economist?
.

>> ^NetRunner:
>> ^pyloricvalve: Would this persuade you there is still debate on this? Perhaps not.. Not even the rap video convinced you there was a debate? . I thought this was also an interesting analysis. . My links disappear for some reason.. Anyway there's a long list of economists that don't support stimulus at Cato Fiscal Reality. The other is How economists analyze the stimulus by Arnold Kling. >> ^NetRunner: Actually, it's not really a persisting argument amongst actual trained economists. The Austrian theory of economics has been invalidated time and time again by facts, but it lives on because it's a branch of economics that appeals to the ideological right. My accusation is that Austrian economics is the hobbyhorse of people pushing an ideological agenda, and not dispassionate people looking for objective truth. Anything you might cite from CATO in support of Austrian economics will just add weight to that argument. In any case, one doesn't need to adopt the Austrian view of economics to disagree with the stimulus. There is a segment of the Chicago school economists who have their own theories about why the stimulus would be ineffective. I think they're wrong, but at least there's a real honest-to-god debate going on amongst actual economists happening there.

>> ^pyloricvalve:

Would this persuade you there is still debate on this? Perhaps not.. Not even the rap video convinced you there was a debate?
.
I thought this was also an interesting analysis.
.
My links disappear for some reason.. Anyway there's a long list of economists that don't support stimulus at Cato Fiscal Reality. The other is How economists analyze the stimulus by Arnold Kling.
>> ^NetRunner: Actually, it's not really a persisting argument amongst actual trained economists. The Austrian theory of economics has been invalidated time and time again by facts, but it lives on because it's a branch of economics that appeals to the ideological right.


My accusation is that Austrian economics is the hobbyhorse of people pushing an ideological agenda, and not dispassionate people looking for objective truth. Anything you might cite from CATO in support of Austrian economics will just add weight to that argument.

In any case, one doesn't need to adopt the Austrian view of economics to disagree with the stimulus. There is a segment of the Chicago school economists who have their own theories about why the stimulus would be ineffective. I think they're wrong, but at least there's a real honest-to-god debate going on amongst actual economists happening there.

Would this persuade you there is still debate on this? Perhaps not.. Not even the rap video convinced you there was a debate?
.
I thought this was also an interesting analysis.
.
My links disappear for some reason.. Anyway there's a long list of economists that don't support stimulus at Cato Fiscal Reality. The other is How economists analyze the stimulus by Arnold Kling.

>> ^NetRunner: Actually, it's not really a persisting argument amongst actual trained economists. The Austrian theory of economics has been invalidated time and time again by facts, but it lives on because it's a branch of economics that appeals to the ideological right.