Everything You Need To Know About Keynes And Hayek
Written by Brian Garst, Posted in Economics & the Economy
In a rap video…really:
Malo periculosam, libertatem quam quietam servitutem.
Monday
January 2010
COMMENTS
Written by Brian Garst, Posted in Economics & the Economy
In a rap video…really:
Monday
January 2010
COMMENTS
Written by Brian Garst, Posted in Economics & the Economy, Energy and the Environment
This is a couple months old, but it’s remarkable enough to be worth the belated mention. In a letter to the President promoting “green technology,” six liberal Senators brag about how inefficient their pet project of solar technology is. No lie.
They say that solar power “creates more jobs per megawatt of energy produced than any other form of energy.” And they consider that a good thing!
Apparently this needs reiterating. Creating jobs is not the goal of economic activity, it’s a byproduct, albeit an important one. Labor, properly understood, is a cost. If jobs were all that mattered we could pay people to dig holes and fill them up again, or outlaw all machines that enhance productivity at the expense of a particular job once done by human labor. Of course, the result would be less overall productivity and a lower standard of living for all.
Hat-tip: Planet Gore on NRO
Tuesday
December 2009
COMMENTS
Written by Brian Garst, Posted in Economics & the Economy, Taxes
We need to “pitch in” more:
House Speaker Nancy Pelosi (D-Calif.) endorsed the idea of a “global” tax on stock trades and other financial transactions, saying the estimated $150 billion in annual revenue from such a tax could be used to help fund more stimulus spending.
At her weekly press briefing on Thursday, Pelosi said the financial transactions tax (HR4191) currently before Congress would have to be made “global” to keep U.S. investors from taking their business overseas and out of taxable reach.
…Pelosi said she thought the idea might have currency among a public eager to see Wall Street firms “pitching in” to help the government grow the economy.
“I think there would be a market for it among the American people to say that we are all participating in the economic prosperity of our country, and we are all pitching in to continue that prosperity,” said Pelosi.
Nancy Pelosi’s view of society and the economy is gloriously and unabashedly foolish.
Let me get this straight: we need to tax productive financial transactions and give that money to a cadre of bureaucrats and politicos, who will then waste it various and sundry ways, in order to be prosperous. No.
Taxes are not how we contribute to prosperity. We contribute to prosperity by producing, and taxes are a burden on production. Nancy Pelosi has it exactly backwards.
Monday
December 2009
COMMENTS
Written by Brian Garst, Posted in Economics & the Economy, Government Meddling
This won’t be the first time the subject has been discussed on this blog, but the determination of many to paint last year’s financial implosion as a failure of capitalism requires diligence and constant restatement of the truth. The truth is exactly what Steven Horwitz and Peter Boettke bring in their new report, “The House that Uncle Same Built: The Untold Story of the Great Recession of 2008,” published by the Foundation for Economic Education.
From the introduction:
The theme of “The House that Uncle Sam Built: The Untold Story of the Great Recession of 2008” is that government policy, not a failure of free markets, caused the economic trauma we have been experiencing. We do not live in a free market. We live in a mixed economy. The mixture varies by industry. Technology is primarily free. Financial Services is primarily government. It is not surprising that the most government regulated and controlled segment of the economy, financial services, experienced the biggest problems. These problems were created by actions by the Federal Reserve combined with government housing policy (especially the government-sponsored enterprises – Freddie Mac and Fannie Mae). Misguided government interference in the market is the real culprit in laying the foundation for the Great Recession.
The entire essay is available as a pdf here.
Hat-tip: The Locker Room
Saturday
December 2009
COMMENTS
Written by Brian Garst, Posted in Economics & the Economy
The jobless rate is currently at 10% (or higher if you count the discouraged), so clearly we need a little government job promotion, right? Barack Obama thinks so, and is set to unveil his latest “plan.” But not so fast! Haven’t we done this before?
This will be the third time government has acted to “create jobs” since the beginning of 2008. Why should we believe it will be any more successful now than it has been in the past?
In early 2008, President Bush teamed up with Nancy Pelosi to pass a $150 billion (then considered a lot of money) stimulus package. This “booster shot” to the economy, consisting primarily of rebates to individual taxpayers, was supposed to head off recession. At the time, the unemployment rate was under 5%.
A year later, Pelosi found herself with a new dancing partner in Barack Obama. President Obama’s subsequent stimulus package dwarfed that of President Bush. Passed when the unemployment rate was not yet 8%, it was promised that the $800 billion stimulus would hold joblessness below a peak of 9%. This package also failed, and today the unemployment rate is in double digits.
Leave it to government to insist we continue down a path with such a sterling record of failure. It is time to abandon the Krugman-championed policies of Keynesian economics. Government cannot create jobs by taking money out of the economy, funneling it through a wasteful bureaucracy, then directing it to the most politically connected and favored industries. No economy has ever been successfully powered by such a model.
The best thing Democrats can do is to stop threatening to destroy so many industries via regulation and government control. This would reduce the uncertainty hampering investment. If they combined that by lowering the rates of the most destructive taxes, such as the corporate and capital gains taxes, an improved job market would follow. Otherwise, we can continue banging our collective heads against the wall while insanely expecting an outcome other than pain.
Friday
October 2009
COMMENTS
Written by Brian Garst, Posted in Economics & the Economy
I recently fired off this email to the insufferable Chris Matthews.
Mr. Matthews,
In talking about how government should respond to economic turmoil in your recent broadcast, you asked Phillip Dennis, “What did Hoover do?” You then claimed that he did “nothing.” This is simply false.
Herbert Hoover was an interventionist president who paved the way for many of the programs later seen and loudly trumpeted under FDR. Federal spending increased 57 percent in Hoover’s four-year term, according to the OMB. In fact, FDR campaigned against Hoover’s big spending, much in the way that Obama did against Bush’s, only to commit to far more himself, again as Obama has done.
The idea that Hoover was a laissez-faire president is a popular myth in liberal circles, but it has no basis in reality. Recessions came and went fairly quickly prior to Hoover, back when laissez-faire actually was the accepted policy. It was only when government began interfering that a recession became a depression. It was Hoover’s meddling that created the Great Depression, and FDR’s that made it last so long. In addition to his disastrous tariffs, Hoover implemented price controls and drastically increased government spending. UCLA professor Lee E. Ohanian recently concluded that “By keeping industrial wages too high, Hoover sharply depressed employment beyond where it otherwise would have been… His policy was the single most important event in precipitating the Great Depression.”
Here’s how Herbert Hoover described his own policies while running for reelection:
“We might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic.”
And here he is again in his memoirs:
“We developed cooperation between the federal, state, and municipal governments to increase public works. We persuaded employers to “divide” time among their employees so that as many as possible would have some incomes. We organized the industries to undertake renovation, repair, and, where possible, expand construction.”
Does that sound laissez-faire to you? Or does it more closely resemble the Keynesian claptrap advocated by Barack Obama and yourself? The facts are simply not on your side. I challenge you to educate yourself, or to have on someone knowledgeable about Herbert Hoover, such as professor Ohanian, instead of ambushing people with your factually deficient accounts of history.
Regards,
Brian Garst
Monday
October 2009
COMMENTS
Written by Brian Garst, Posted in Economics & the Economy, Energy and the Environment, Free Markets
The administration is spending big bucks subsidizing favored business models. In particular, they are pushing a “green auto industry:”
The Obama Administration is eager to establish a green auto industry and is willing to spend money to make it happen. So far the U.S. Energy Dept. has agreed to lend $8.5 billion to help companies large and small retool plants to make more fuel-efficient cars and develop new technologies. On Sept. 22, the Energy Dept. announced the latest such loan: $528 million for a Silicon Valley startup called Fisker Automotive that vows to produce 130,000 plug-in hybrids by 2013.
The U.S. government believes in funding companies outside the established industry because it’s important to nurture new ideas. “We’re trying to create competition among technologies in the marketplace,” says Matt Rogers, an Energy Dept. adviser. Fisker and Tesla Motors, another startup that has received $465 million in federal money, both say their cars are high-tech and have spurred plenty of consumer interest.
Why do we need government to “create competition?” Markets do that best when the government footprint is as small as possible. Bigger government stifles competition because policy makers cannot possibly predict what innovations will eventually take off. Relying on politicians to fund the next big technology is a fools game. When politicians funnel money to favored groups it is an inherently political process, and it also takes away funds otherwise available for private investment.
It is also impossible to foresee what innovations will eventually lead to technological revolutions. What if there’s some completely new model on the horizon, the discovery of which could be significantly delayed because government distorted the market with heavy subsidizes to interest group approved industries? We don’t need bureaucrats in Washington pretending that their special interest handouts will “create competition,” we need them getting out of the way so private investors can create real competition and innovations.
Sunday
October 2009
COMMENTS
Written by Brian Garst, Posted in Free Markets
Not for the first time, Pope Benedict has proven, when it comes to economics, the old adage that it’s better to be thought a fool than to open your mouth and remove all doubt.
The Pope compared the world’s poorest continent, which he visited earlier this year, to a spiritual “lung” at risk of being attacked by what he called the viruses of materialism and religious fundamentalism, as he opened a synod of Roman Catholic bishops on Africa.
“There is absolutely no doubt that the so-called ‘First’ World has exported up to now and continues to export its spiritual toxic waste that contaminates the peoples of other continents, particularly those of Africa,” he said.
“In this sense colonialism, which is over at a political level, has never really entirely come to an end.”
Lamenting the exploitation of Africa’s vast resources, the Pope also spoke out against religious fundamentalism, which he said was mixed with political and economic interests.
The “virus of materialism” the Pope refers to is exactly what Africa lacks. It has allowed the “First World” to experience a level of peace and prosperity unheard of in human history. We know what works at lifting people out of poverty, but the Pope’s backward economic views would condemn Africa to continuing and unnecessary suffering.
Saturday
September 2009
COMMENTS
Monday
August 2009
COMMENTS
Written by Brian Garst, Posted in Economics & the Economy, Legislation
The cash for clunkers program, which created an incentive (via handouts) for people to destroy perfectly usable cars, is being hailed as a giant success after blowing through its initial allocation of $1 billion. Of course it’s a success if the measure of success is no more sophisticated than the government’s ability to get people to take money in exchange for doing something they were likely going to do in the near future anyway. Congratulations, you’ve proved people like money.
Nothing about this “success” provides support for the claim made by the program’s proponents that it helps the economy. That is, and always has been, pure nonsense.
This is an example of the classic broken window fallacy. The economically illiterate would see a broken window as doing some good by providing business for window makers, glass suppliers, etc. What these people ignore are the opportunity costs. Money spent replacing a broken window can’t be spent on anything else, such as new clothes. All that’s happened economically is that the business that would have gone to a clothing store instead went to a window maker. Meanwhile, total wealth has been reduced by one window.
Cash for clunkers is just like the broken window. Government has shifted business away from some sectors and toward new car dealers. Meanwhile, every working car destroyed is a net loss for the economy. To those who continue to insist that there are economic benefits to destroying perfectly useful (and thus valuable) goods, I offer to come over and burn your house down tonight so we can help the economy a little bit more. Think of the new construction work we’ll be creating!
The reality is that every dollar spent destroying and replacing working cars is a dollar that can’t be spent buying other new products. People are more than welcome to argue that there are environmental gains that make it worth the cost (personally I don’t buy that), but when politicians claim that it benefits the economy they are either ignorant or lying.
I serve as Vice President of the Center for Freedom and Prosperity, a non-profit think tank dedicated to preserving tax competition and free markets. This site features my personal views, which are not reflective of CF&P.