Tuesday, June 8, 2010

Assault of Thoughts - 6/8/2010

"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" -JMK

- Jonathan Catalan has a very good post up expressing his concern that so many Austrians seem to have accepted the impossibility of involuntary unemployment. Part of the reason for this may be embedded in his post itself. He quotes Mises claiming the impossibility of involuntary unemployment. Of course I agree with Catalan and Rothbard. It seems to me, though, that the reasons Rothbard and Catalan give are fairly traditional neoclassical reasons for unemployment that you get from guys like Pigou: essentially the residue of labor market adjustment. I think almost all neoclassicals believed this sort of thing, so Catalan may be closer to them than he thinks. Where he is different, as he points out, is that he doesn't approve of the use of long-run equilibrium (which is essentially the source of claims the neoclassicism doesn't accept the idea of involuntary unemployment). But I would caution that this is just a pedagogical starting point for them. They make all the adjustment claims that Rothbard does to account for the unemployment that obviously exists.

- The Danish "Mohammed Cartoonist", Kurt Westergaard, is retiring. You can listen to a really fascinating interview of Westergaard here.

- Economics FAIL. Murphy shouldn't have needed an email from a friend to correct him on this (see the update). He just needs to read the newspaper on a more regular basis and stop assuming his own conclusions. Consumer loans do not jump by 50% in one month - and even if they did we would have heard about it. It's one thing to read a really solid Austrian like Mario Rizzo and say "well, I really don't buy the argument" or to read a really solid Keynesian like Brad DeLong and say "I don't know... I'm really not convinced". Not being convinced by someone that clearly knows what they're talking about is one thing. It happens. But when you see a blog post like this you really need to just stop reading the blog.

- Scott Kuhagen responds to Virginia AG Cuccinelli's crusades. He covers the challenge to the health insurance mandate here. Readers know I'm opposed to the mandate as well, from a policy perspective. I'm not sure quite what to make of the legal case, though. My understanding is that the legal case is solid, but that perhaps the argument for it is somewhat byzantine and unsatisfying. Basically, the mandate is being sold as a tax, which Congress is well within its rights to levy. I'm not sure if that's the full extent of the defense. If Virginia were actually willing to do something with it's fantastic credit rating, instead of selling liquor stores and cutting school budgets I might say "hell - let the AG boost AD and perhaps bring a little clarity to the legality of the mandate in the process". But since we're not going that route I have little patience for Cuccinelli's quixotic pursuits that are draining money from other potentially more useful state functions. Scott also blogged on another Cuccinelli crusade: second guessing academic freedom at the university founded by our country's (the world's?) foremost proponent of academic freedom. Ah the ironies.

- Charles Lane does a great job tempering Paul Krugman on the debt. I get Krugman's concern. It's a huge problem that we're doing essentially no fiscal stimulus for this downturn (remember - we are a federal republic - you can't just count federal increases, you have to also count state and local decreases). But Lane is right to criticize Krugman's "us vs. them" approach. The debt is a major concern. One of the biggest reasons why I'm concerned about state and local inaction is precisely that I'm worried about the federal government's long term ability to shoulder the states' shortcomings. It's not an either/or situation. This is why I get so frustrated when liberals yell about the deficit commission or entitlements. The only thing to yell about is the fact that the commission has no real teeth. We do have a problem with public debt in the United States, even if that problem doesn't threaten our current solvency and even if that problem shouldn't cause us to forget good macroeconomics that Krugman always has to remind us about.


  1. "Basically, the mandate is being sold as a tax, which Congress is well within its rights to levy."

    As I understand it, the Congress (and indeed the President) went out of its way to avoid that characterization though. That is, they did not call it a tax, and they did so mostly for political reasons (remember Obama's sleazy effort to avoid the tax word in his conversation with George Stephanopoulos).

    "...instead of selling liquor stores..."

    If Virginia is privatizing the liquor business that sounds like a very good idea to me.

    "...and cutting school budgets..."

    Another capital idea. Of course it would be helpful if those cuts were tied largely to cuts in school administration.

  2. There are definitely two narratives here. You seem to be arguing that it's really a tax but he sold it as a mandate to the people so that it would pass the vote. I would contend that it's really a mandate, but he's selling it to the court as a tax so that it will pass judicial review. Either way, there are two versions of the story. I think he's being more straightforward with the people than the court, but it's still a bad idea.

    As for liquor store privatization - I think in and of itself that's a great idea. There's no reason for the state to run liquor stores. What you have to understand is that during the governor's campaign McDonnell sold this privatization as a budget fix. That's what I think is nuts. It's not.

  3. For me personally it looks like a tax; and I think that's how average people would look at it. However, I know how supporters in Congress, etc. characterized it, and they didn't call it a tax. And since the legislation did call the tax on "Cadillac health care plans" a tax, it isn't like they were unfamiliar with the term in the context of health care. In that case they could call it a tax because it was a tax on just a portion of the population. Yes, it is a bad idea.

    Liquor: I see. Unless Virginia spends all sorts of money on state owned liquor stores (and hey, that wouldn't be that surprising) then that seems like a silly claim.

  4. The argument was not so much that selling off liquor stores would close the budget gap by eliminating a cash drain. The argument was that the proceeds from the sale would do the trick. Essentially selling assets to close the gap... kind of a silly thing to do when you have a triple-A bond rating, although as we've said privatization has merits of its own.

  5. de Rugy on our structural deficits: http://american.com/archive/2010/june-2010/athens-on-the-potomac

  6. de Rugy is like Murphy - read with caution. I'll take a look.


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