Category Archives: Business

Business, Economics, Education, Media Criticism, Political Commentary

What Ended The Depression

5 Comments

Megan McArdle says (correctly) that no one knows, and anyone who tells you that they do is lying or fooling themselves, but that what you were taught in school is almost certainly wrong. She also notes (again correctly) that there was a lot more to the New Deal than simply government spending (which likely didn’t have much stimulative effect), some of it good, much of it disastrous (particularly the artificial propping up of wages and prices by fiat).

One can’t run controlled experiments in economics, so we can never know for sure, but I’m inclined to at least go with economic theories that make sense and for which there is useful empirical evidence. Someone has to tell me what Hayek and von Mises got wrong to persuade me that Keynes is right. And most people who think that Keynes is right haven’t even read them.

[Update a few minutes later]

“Mr. Obama, give back my wallet.”

[Update a while later]

OK, so I’m not as impressed with David Brooks as the intelligentsia want me to be, but he does have some good thoughts occasionally:

The correct position is the one held by self-loathing intellectuals, like Isaiah Berlin, Edmund Burke, James Madison, Michael Oakeshott and others. These were pointy heads who understood the limits of what pointy heads can know. The phrase for this outlook is epistemological modesty, which would make a fine vanity license plate.

The idea is that the world is too complex for us to know, and therefore policies should be designed that take account of our ignorance.

What the world needs now is not love sweet love, but epistemological modesty. Particularly inside the Beltway. Unfortunately, the perverse nature of humanity is that often the less one knows about something, the more certain one is in his knowledge. They have never learned from the ancient Greeks that to admit the limits of your knowledge is the beginning of wisdom.

[Via Manzi, who reads David Brooks so I don’t have to]

[Late morning update]

Are we going to emulate Japan’s lost decade? It seems to be what they want to do, unfortunately.

[Bumped]

[Update a couple minutes later]

Renters are angry. They should be. They’ll probably join the tea party, too.

And here’s a novel concept: let housing prices find their clearing price. Can’t do that — it makes too much sense.

Business, Economics, Media Criticism, Political Commentary

Shameless

Here’s a good round up of the corruption and collusion between Congress and the financial industry:

While Americans were asked to foot the bill—for generations—to bail out Wall Street executives from their sub-prime, mortgage-mad, derivatives driven, un-regulated market—politicians from all parties lined up to feed at the trough—knowing full well that it was these same companies’ bad business practices that placed our financial system at systemic risk.

Sen. Christopher Dodd, who is being paid by taxpayers to oversee these institutions, should return the money on principle or resign from the committee.

Don’t hold your breath.

Business, Economics, Political Commentary

Throwing Good Money After Bad

Iain Murray says the new mortgage plan won’t work. Why would it?

[Update late morning]

More thoughts from Tim Oren:

There’s no way to resolve the rates on offer from the ‘bad money’ with those needed by rational, market driven ‘good money’ investors. The result is the good money will stay home. Home, in this case, mostly being China or the Middle East. The fraction of federally originated loans, already at 35 percent, is going to keep on rising, and it will done with more fiat money cranked out by the Feds.

The politicians are trying to reinflate the housing market. Their irresponsible behavior is instead likely to leave that market deflated by driving out the good money, while debasing the currency and piling up debt for the productive and future generations.

Just as in the thirties, all of these ad hoc, arbitrary panic measures are going to cause a lot more damage than simply letting the market work. Because the “Change” administration is deathly afraid of change.

Business, Economics, Philosophy, Political Commentary

The Liberaltarian Discussion

8 Comments

…continues, with thoughts from Ilya Somin. And this continues to make me crazy:

In a strange way, the Bush record of massive expansions of government has also shifted the goalposts for liberal Democrats. They seem to assume that anything Bush and the Republicans did must have been “laissez faire” (despite overwhelming evidence to the contrary) and that the current Democratic agenda represents a needed course relative to failed free market policies rather than a continuation of Bush-era trends of greatly increased government spending and regulation.

I continue to be both appalled and dismayed at this inability of the Democrats to recognize (or to be honest about their recognition) that the last eight years bore no resemblance to free markets, or laissez-faire. We overspend, and overregulate, and when it goes south, it gets blamed on tax cuts and underregulation. Madness.

[Update a couple minutes later]

Randy Barnett follows up.

Business, Economics, Media Criticism, Political Commentary

Why The New Deal Didn’t Work

22 Comments

This is an important point:

The New Deal prolonged the Great Depression because of not one but a combination of misguided policies that made it harder for employers to create jobs and harder for consumers to buy things. Keynesian commentators talk as if FDR made a single key mistake, like not incurring big enough budget deficits. This ignores the tripling of the tax burden during the New Deal period (1933-1940). Also ignored is the fact that New Deal spending was mainly paid for by the middle class and the poor, because the biggest revenue generator for the federal government was the excise tax on beer, cigarettes, chewing gum, and other cheap pleasures disproportionately enjoyed by the middle class and the poor. Moreover, several New Deal laws made everything — especially food — more expensive when Americans desperately needed bargains.

There’s a lot more.

Notions that the New Deal didn’t work because they didn’t do enough of it (particularly based on the absurd notion that the war was “the New Deal on steroids” which was why it did) are just the kind of rewriting of history that I was talking about.

[Update on Tuesday morning]

There are few things I enjoy more than dealing with history-challenged simpletons who stupidly assume that because one doesn’t accept the gospel that FDR Saved Us From The Breadlines, that one must therefore think that Herbert Hoover was (in the parlance of the times) the cats pajamas, and that if we’d only stuck with his (non-existent) laissez-faire policies, all would have been well with the world. Larry Kudlow had a guest on his show who made this idiotic assumption last week, when he talked about Larry’s “hero,” Herbert Hoover. Kudlow quickly put him in his place (as I did here with my own idiot in comments). It’s the same (or at least related) pigheaded mindlessness and false choice that causes people to foolishly assume that because I’m down on Democrats I must be a Republican.

[Update a couple minutes later]

Michael Barone, on the real lessons of the Great Depression. Of course, those pushing “stimuli” don’t want to learn the real lessons, because it would remove much of the justification for their efforts to grow government and take over more and more of our lives as individuals.

[Bumped to Tuesday morning]

Business, Space

Return Trip

2 Comments

Jeff Foust has an interview with Charles Simonyi, who is about to become the first space tourist (and unlike many, he doesn’t dislike the phrase) to do it again.

There are two interesting points to me. First:

If you look at professional astronauts and cosmonauts, it’s astounding how many of them fly multiple times. It was something I never quite understood: I would see the same names again and again, and I would wonder why this person is flying again when there are others who would probably want to fly too.

The answer is that space agencies see that people with experience do much better. The “start up” time on that first flight takes away so much from the overall performance compared to the second and third flights. The top ten people have 60 flights among themselves, which is a lot of flights. It shows that, with experience, you can do so much better. In my case, I hope to accomplish more, in terms of experiments and amateur radio communications with schools and so on.

To me, while you obviously want to use the best candidates for a mission costing hundreds of millions of dollars, this validates the theory that George Abbey grew the astronaut office to a high surplus in order to maintain control over them, by forcing competition among them for the limited flights available.

As for the frustration of some in the space community with these millionaires who buy rides for themselves, but don’t otherwise help the nascent industry with their millions:

I’m not an investor, I’m a customer of these industries. I recommend it to everyone else to be a customer. Whether it’s a good investment is a completely different question, and one I’m not qualified to talk about.

Well, we do need customers, so he is playing a key role. It’s just a shame that, at least for now, “everyone else” can’t afford it. So we’ll need investors too.

[Monday evening update]

Here’s another interview with Simonyi over at Popular Science.

Business, Economics, Media Criticism, Political Commentary

Will The “Stimulus” Really Stimulate?

5 Comments

Economists say no:

“I think (doing) nothing would have been better,” said Ed Yardeni, an investment analyst who’s usually an optimist, in an interview with McClatchy. He argued that the plan fails to provide the right incentives to spur spending.

“It’s unfocused. That is my problem. It is a lot of money for a lot of nickel-and- dime programs. I would have rather had a lot of money for (promoting purchase of) housing and autos . . . . Most of this plan is really, I think, aimed at stabilizing the situation and helping people get through the recession, rather than getting us out of the recession. They are actually providing less short-term stimulus by cutting back, from what I understand, some of the tax credits.”

It won’t slow them down, of course. Because it’s not really about “stimulus.”

As a commenter over at Instapundit noted a few weeks ago, a government providing stimulus is like an ugly and uncoordinated person performing a lewd dance. Even if the intent is to stimulate, the effect is exactly the opposite.

[Afternoon update]

The shock doctrine:

Last year the US economy was hit with one shock after another: the Bear Stearns bail-out, the Indymac collapse, the implosion of Fannie Mae and Freddie Mac, the AIG nationalisation, the biggest stock market drop ever, the $700bn Wall Street bail-out and more – all accompanied by a steady drumbeat of apocalyptic language from political leaders.

And what happened? Did the Republican administration summon up the spirit of Milton Friedman and cut government spending? Did it deregulate and privatise?

No.

It did what governments actually do in a crisis – it seized new powers over the economy. It dramatically expanded the regulatory powers of the Federal Reserve and injected a trillion dollars of inflationary credit into the banking system. It partially nationalised the biggest banks. It appropriated $700bn with which to intervene in the economy. It made General Motors and Chrysler wards of the federal government. It wrote a bail-out bill giving the secretary of the treasury extraordinary powers that could not be reviewed by courts or other government agencies.

Now the Obama administration is continuing this drive toward centralisation and government domination of the economy. And its key players are explicitly referring to heir own version of the shock doctrine. Rahm Emanuel, the White House chief of staff, said the economic crisis facing the country is “an opportunity for us”. After all, he said: “You never want a serious crisis to go to waste. And this crisis provides the opportunity for us to do things that you could not do before” such as taking control of the financial, energy, information and healthcare industries.

That’s just the sort of thing Naomi Klein would have us believe that free-marketers like Milton Friedman think. “Some people stockpile canned goods and water in preparation for major disasters,” Klein wrote. “Friedmanites stockpile free-market ideas.” But that is exactly what American left-liberals have been doing in anticipation of a Democratic administration coming to power at a time when the public might be frightened into accepting more government than it normally would.

As is often the case when the left accuses the right of something (lying, racism, hate), Naomi Klein’s thesis is simple projection.