Paul v Krugman

So Ron Paul and Paul Krugman have a "debate" on Bloomberg today.  And I really shouldn't use the quotes because this actually came close to a debate.  No, no, no...neither man paid a bit of attention to the other.  But that's not the point, is it?
But both men made their respective cases and were largely silent while the other spoke.  No one shouted. For cable news, it was sort of refreshing.

You can see the video here:



And then afterwards, Krugman writes the following on his blog:

Don’t Know Much About (Ancient) History

The things I do for book sales. I debated, sort of, Ron Paul on Bloomberg.Video here. I thought we might have a discussion of why the runaway inflation he and his allies keep predicting keeps not happening. But no, he insisted (if I understood him correctly) that currency debasement and price controls destroyed the Roman Empire. I responded that I am not a defender of the economic policies of the Emperor Diocletian.Actually, though, appeals to what supposedly happened somewhere in the distant past are quite common on the goldbug side of economics. And it’s kind of telling.I mean, history is essential to economic analysis. You really do want to know, say, about the failure of Argentina’s convertibility law, of the effects of Chancellor Brüning’s dedication to the gold standard, and many other episodes.Somehow, though, people like Ron Paul don’t like to talk about events of the past century, for which we have reasonably good data; they like to talk about events in the dim mists of history, where we don’t really know what happened. And I think that’s no accident. Partly it’s the attempt of the autodidact to show off his esoteric knowledge; but it’s also the fact that because we don’t really know what happened — what really did go down during the Diocletian era? — you can project what you think should have happened onto the sketchy record, then claim vindication for whatever you want to believe.It’s funny, in a way — except that this sort of thinking dominates one of our two main political parties.

It really is kind of funny that the only thing Krugman remembers (or pretends to) is Paul bringing up instances from ancient history "where we don't really know what happened."  But we sort of do.  As Albert Jay Nock pointed out back in 1932:

I have been thinking of how old some of our brand-new economic nostrums really are. Price-regulation by State authority (through State purchase, like our Farm Board) was tried in China about 350 b.c. It did not work. It was tried again, with State distribution, in the first century a.d., and it did not work. Private trading was suppressed in the second century b.c., and regional planning was tried a little later. They did not work; the costs were too high. In the eleventh century a.d., a plan like the R.F.C. [Reconstruction Finance Corporation] was tried, but again cost too much. State monopolies are very old; there were two in China in the seventh century b.c. I suppose there is not a single item on the modern politician’s agenda that was not tried and found wanting ages ago.

And as Alexander Gray points out over and over (and over and over) again in his book the Socialist Tradition: Moses to Lenin, almost every single thing that politicians come up with to help out "the people" has been tried before.  Usually dozens of times.  And it fails.  So it isn't jaundiced cynicism that fuels libertarian disdain and distrust of government intervention into the market and our livelihoods.  It is our understanding of human nature and knowledge of history.

And as to the criticism that Representative Paul relies solely on the "dim mists" of history to make his point, that is utterly false.  And it is not surprising that Krugman doesn't acknowledge the point.  Krugman says that he wants a return to the good old days of "mild inflation, effective government regulation of the financial system, fiscal stimulus (when it was needed)...I like the America that my parents prospered in."  (c. 1950s & 60s).

Ron Paul points out that right after the war, spending and taxes were cut.  Now if you add to the mix the fact that we had millions of soldiers returning home, you have, according to Keynesian economics, a disaster on your hands.  It was a disaster that never happened.  Why?  For one thing, there is no such thing as "aggregate demand."  There is only demand or lack of it.  Second, there is no way to predict how markets (millions of individuals and firms) will respond to circumstances.  And third, regulations.  Or the lack thereof.  In 1953, the year we humble humans were graced with Paul Krugman, the Federal Register ran 8,912 pages.  In 2006, the last year before the poop met the oscillating blades, it ran 78,724 pages.  Does Paul Krugman, does anyone, think America was more regulated in 1953 than we are today?  Does Paul Krugman think it was easier to start a new business in 1953 or in 2012, three years after Obama took office?

It is also beyond hilarious that the Princeton professor who is the definition of preening smugness dismisses the bringing up of historic facts as a trope of "the autodidact to show off his esoteric knowledge."

The man has no conscience or shame.

Celebrities, Science & Politics

Jason Mraz, a singer/songwriter according to his byline, wrote a piece for the Huffington Post about Global Warming.  Thus demonstrating why celebrities should probably stay away from commenting on things.  It does not rise to the level of Sean Penn awfulness, but it is of a piece and a friendly reminder.

The Government Can!

h/t: Jonah Goldberg

Iran, Oil & Acts of War

The price of oil is rising while supply hasn't changed and domestic demand is flat (if not down a bit) and world demand is stable. Why?

The answer is speculation and futures trading. Traders see developments in oil producing countries and try to predict the effect the events will have on the price of oil in the future and place bets (or hedges) on what the actual price will be.

It is important to remember that for every seller there is a buyer, so for every trader that thinks prices will reach $x by a particular date, there is another who thinks that he is wrong. Perhaps not in the direction of prices, but at least in what he believes the price will be.

The latest spike in the price of light, sweet crude came when Iran said it would stop supplying oil to British and French firms. This is on top of Iranian threats to block the Strait of Hormuz. Iran's actions are in response to global pressure regarding its development of nuclear technology, ostensibly for peaceful, energy-producing reasons but really as a hedge against western/Israeli hegemony in the region.

As to the price of oil, there are a few things to keep in mind. Oil is a fungible commodity. It is wise to note that while Iran is cutting sales to certain European nations and some firms, Iran is not cutting total sales and/or production. Just because they will not sell 620 million barrels of oil to Europe, doesn't mean that they are not going to sell those 620 million barrels. They will get sold to other countries or firms (and, through arbitrage and intermediaries, much of that oil will end up in Europe anyway). Oil that would have been sold to Europe will be sold to other countries and firms. This will mean that Russia or China will get more Iranian oil while Europe will get more oil from other oil-exporting countries.

So aside from some increased transactional costs, resource shifting and minor blips with speculators, world supply and demand will have remained virtually unchanged.

Now, to the matter of Iran threatening to cut off a significant amount of the world oil supply by blockading the Strait of Hormuz... it ain't gonna happen.

This would be an act of war. And not in the George W. Bush neocon sort of act of war. Tankers sail in and out of Hormuz daily, some under the American flag. If Iran put up a blockade, any country would be derelict in simply allowing the blockade to sink their vessels. The US would be well within her rights to send a carrier group in and, to use a Hunter S. Thompson-ism, "soften up the joint a little bit." It would also make the first war with Iraq look like some sort of morass. With the Navy and Marines having fun in the surf, Israel would be only too happy to take care of neutralizing any air support and Iranian communications infrastructure. It could be the shortest comprehensive trade war in human history.

Anyway, the price of oil is up though there is no significant change in either supply or demand. Traders are trying to figure out what exactly will happen (while making money along the way) and the media is breathless, yet again, with stories covering the price of oil without ever entertaining any sort of thought about why prices are what they are and what information they provide us with. Keep up the great work, you Fourth Estate, you.

And Iran will continue to bark but not be so foolish as to bite.

More Stand-Up Economist

Martial-ing the Populace

Jonah Goldberg has a very good article critiquing President Obama's 2012 State of the Union address.

In the address, the president said of the military, “At a time when too many of our institutions have let us down, they exceed all expectations. They’re not consumed with personal ambition. They don’t obsess over their differences. They focus on the mission at hand. They work together. Imagine what we could accomplish if we followed their example. Think about the America within our reach.”

Goldberg responds, “…Obama is upending the very point of a military in a free society. We have a military to keep our society free. We do not have a military to teach us the best way to give up our freedom. Our warriors surrender their liberties and risk their lives to protect ours. The promise of American life for Obama is that if we all try our best and work our hardest, we can be like a military unit striving for a single goal. I’ve seen pictures of that from North Korea. No thank you, Mr. President.”

This is something I see very often, especially on facebook. How great everything would be if we could all agree. But no one really means this. They want agreement without compromise. Because compromise mucks everything up. What they really mean is “how great everything would be if everyone agreed with me.” Obama uses this trope painfully often. And to be fair, conservatives are just as guilty of the same sin but by taking a different tack; if you don’t agree with them, you are simply unpatriotic and hate your country. If you don’t agree with liberals, you are simply a troglodyte who hates humanity.

One can hold the idea that health insurance is a wonderful thing yet also think that state provided or mandated health insurance is an abomination without one’s head exploding.

One can agree that workers are perfectly within their rights to organize and bargain collectively in order to maximize their marginal benefit for their marginal product and yet also think that, say, teachers going on strike because they think contributing anything towards their benefits package is akin to the fabulous images of worker exploitation promulgated by the likes of Upton Sinclair is absurd.

It seems entirely reasonable to me to agree (or disagree) that America was well within her rights to attack Afghanistan after the 9/11 attacks and also believe that we had no right or reason to do anything in Iraq, or Libya for that matter. And believing that no government official, including the president of the United States, has the right to detain, much less kill, any human being (and not merely US citizens, which went out the window anyway) with out due process or a proper declaration of war is not treasonous. Nor is it dangerous.

Nor is it dangerous to consider that the constitution establishes and limits the federal government, not lays out which rights are reserved for American citizens in light of contemporary issues or that if you are not an American citizen, all bets are off.

Believing that the government has the authority to tell you what you must do or buy simply because Congress gave the OK; agreeing that the president has the authority to kill anyone he believes might pose a threat to our “security interests;” abdicating the doctrine that a man is capable of and responsible for his own welfare; rejecting the notion that governments exist to protect one’s wealth and not to redistribute it, this is what is dangerous.

Liars

It appears as though the 2000 election was what "radicalized" Paul Krugman. Because George Bush was lying during his campaign and the "media" wouldn't call him on it.

A presidential candidate making spurious claims during his campaign combined with a pusillanimous (and ignorant) press? This is what drove Krugman over the edge?

We are to believe that he was the Big Kahuna of reasonableness prior to 2000?

This after eight years of Bill Clinton, the physical embodiment of pure and puerile prevarication.

This coming from the same man who endorsed John Edwards for president.

The question becomes, which is greater, Krugman's insolence, his naivete, his disingenuousness, his dishonesty or the depths he will plunge to find any sort of ad hominem?