Tuesday, April 9, 2013

Provisioning for a remoter future

Bob Murphy shares this nice passage from Mises:
"We are the lucky heirs of our father and forefathers whose saving has accumulated the capital goods with the aid of which we are working today. We favorite children of the age of electricity still derive advantage from the original saving of the primitive fishermen who, in producing the first nets and canoes, devoted a part of their working time to provision for a remoter future"
Reminds me very much of Keynes talking in Economic Possibilities for our Grandchildren about how you can trace England's industrial might back to surpluses of the Elizabethan period.


  1. Except that Mises (and Murphy) are completely wrong, due to a little observation known as the paradox of thrift. They are thinking, if at all, about a barter economy and certainly not one based on information (information clearly being a substitute for savings).


    Further, if you think like Mises, but who would call such thinking, then you will never understand this sentence from Karl Smith (HT Cowen: "With apologies to the less wonkish, China is using physical capital as a loss leader in order to grow cities that will produce network effects will in turn foster the human capital that really makes a country rich."

    China is, contrary to Mises, spending its savings and creating prosperity because information is so much more powerful as a factor of production than capital.

    1. You really badly misunderstood the idea of profit-led and wage-led growth. You should take a look at the Bhaduri and Marglin article. I think you'd actually find it interesting.

    2. We ended 2012 with record corporate profits and no growth, so it is self-evident that anyone who thinks that profits have anything to do with growth is mad.


      My POV is that there is only one path to growth and prosperity and that is, at whatever cost, to achieve and current account surplus for it is a competitive, bugger you neighbor world.

      If a country has a trade surplus, then it could offer its people a positive vision of the future, they can be begin to have confidence, and you can build prosperity on its key driver, information, and the sub-drivers, network effects and location theory. (And example of location theory is that people with skills and talents will want to move here). Said differently, we should import people, not products or services.

      There are two economies in the World somewhat working now, China and Germany. They are following this model. We have been making their world for them, running massive stupid deficits to buy things from them, giving them information, and making them stronger and richer every day, at our expense, through network effects.

      If you think I am wrong, then explain how the massive deficits we are running will ever work. If they would work, they would have by now. They cannot, due to leakage. To continue is madness.

      We have been over this ground before. These are not my thoughts. They are what Keynes thought and wrote. If you are smarter than him, explain such.

      We have run massive deficits for the last 6 years and proved the man right and yet you remain in a fantasy land of Mises (who is wrong as rain, as just explained).

    3. Daniel,

      If you have read the paper you asked me to read, you will see that at page 388 it says I am right and that an export surplus is the only way to create jobs.

      We know of no other way to do such is the implicit conclusion of the writers.

      The authors, being really stupid, lament the obvious, "it is impossible for all countries to achieve a trade surplus, simultaneously."

      Sorry guys, but that's life.

      What is really really interesting is that what is absolutely clear is that free trade, based on their work, destroys jobs.

    4. re: "If you have read the paper you asked me to read, you will see that at page 388 it says I am right and that an export surplus is the only way to create jobs."

      Why do you think I've been repeatedly telling you you have the wrong idea of what the authors mean by "profit-led" economies? Why do you think I referenced the importance of Blecker's work on how these things change when you look at open economy factors?

  2. It seems like we are the unlucky heirs of those who failed to maintain our infrastructure. (Other complaints have ideological aspects, but infrastructure? That's negligence.)

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