Tuesday, August 17, 2010

Assault of Thoughts - 8/17/2010

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

- Jonathan Catalan responds to my critique of him and Mario Rizzo on unemployment. I don't think he quite addresses my concern. My initial point was: "yes, if you intervene to boost employment it could distort the capital structure, which would have negative consequences, but distortions of the capital structure are not exhaustive of the unemployment problems you can have and indeed distortions of the capital structure may be small beans compared to other problems facing the economy." Jonathan's response seems to be "distortions of the capital structure and reduced demand are not mutually exclusive." Well of course they're not Jonathan - that's why we care about distortions of the capital structure! That's why I had said it is a problem in my original post. But my point was not that they are mutually exclusive (a point that nobody made but which you ably refuted). My point was that malinvestments do not exhaust the possible causes of deficient demand, and no airtight theory of malinvestments can demonstrate that they do. ABCT hits on one important process. It offers no reason to think its the only important process and if it is a relatively minor process in a specific downturn, then intervention is much more plausible.

- Tyler Cowen quotes Robert Sloss from 1910, making predictions about the "wireless telegraphs" we'll all have in 2010. He really nails a lot of these points - sounds very familiar!

- Arnold Kling is still reviewing the Leamer textbook, and he has a post on a couple interesting ways in which Leamer suggests that price discrimination can explain macroeconomic phenomena. It's pretty interesting, if not entirely conclusive. At the end it dawns on him that his "labor as investment" theory has a Keynesian flavor to it, which is something that I've mentioned in the comment section there before.

- Chris Perridas at the blog H.P. Lovecraft and His Legacy pins down the date that a young Lovecraft met one of his heros, Teddy Roosevelt.

- The 1920-21 depression article is resubmitted! Does anyone know the turnaround time at the Review of Austrian Economics? This is why I need to write more... I'm very impatient. If I had several irons in the fire then they'd come out at regular enough intervals I wouldn't be antsy.


  1. But for the regulatory framework of the U.S. and other countries, we would have had personal, every day wireless technology much sooner than we got it (possibly by the 1960s).

  2. What did Lovecraft think of TR the "war lover?" http://www.amazon.com/War-Lovers-Roosevelt-Hearst-Empire/dp/031600409X

  3. The problem is Daniel that you continue to say there are other reasons behind high unemployment, but you still fail to provide a case for any of these reasons. So, you can say whatever you'd like to say, but it doesn't make it true.

  4. "but you still fail to provide a case for any of these reasons"

    Do you read this blog?!?!?!

    Framing the current downturn in a Keynesian way is practically all I talk about (although in recent weeks I've varied it up a bit).

    One step towards convincing people that ABCT has something to say about this crisis might be identifying distortions in the capital structure and tying changes in unemployment to the readjustment of those distortions. Instead, we get restatement after restatement of ABCT.

  5. Daniel,

    If you were willing to put in the effort for the research, then I think you'd find that your suggestion was already taken a long time ago.

    And, I'm sorry, "deficient aggregate demand" by itself is not a good explanation for unemployment. My criticism to this is similar to your criticism of the ABCT.

  6. You give no reason as to why there is (or ever might be) deficient aggregate demand? Why? What causes it?

    Deficient demand sounds just ridiculous when you break it down.

    Demand is defined as:
    1) Ability to pay
    2) Willingness to pay

    Seeing as how Number 2 is infinite, the only constraint on our "aggregate demand" is our ability to pay, which is to say our income. So, from an aggregate perspective, you are saying that "deficit demand" is that our incomes aren't high enough? That's your reason for this enormous downturn?

  7. Willingness to pay is infinite?

    In. what. universe?

  8. In this universe. If we had the money, we'd be willing to pay for everything because our wants are insatiable. Our actual demand is tempered because of the limits imposed by income but if we had infinite income, we would buy anything and everything.

    Your "deficit demand" argument still boils down to you claiming depressions are the result of low income.

  9. Mattheus, what you're describing is something like a monetary disequilibrium, for one thing. It's not entirely crazy to say that depressions are the result of low income. It's not what I claim, but I do agree low income can exascerbate it. And there are more than a few Austrians that think highly of that sort of monetary disequilibrium approach to.

    Now, "infinite income"? Maybe we would react differently in a world with no scarcity but that seems like an odd thing to throw at me. As an economist I don't think much about worlds without scarcity. In this world there are most definitely upper limits to the output we demand, precisely because we also put value on planning for uncertainty, saving, and liquidity.

    Now, if we were to step into your universe where these were not concerns - maybe demand would not be a problem. That sounds plausible to me. But I don't know why it makes sense to think about such a universe.


All anonymous comments will be deleted. Consistent pseudonyms are fine.