Monthly Archives: May 2013

Some Responses to Robert Murphy

Austrian Economist Robert Murphy, author of the books “The Politically Incorrect Guide to Capitalism” and “Lessons for the Young Economist” wrote a piece for The American Conservative entitled, “Heads Krugman Wins, Tails Austerity Loses”. Personally, I think it’s a brilliant piece that exposes the intellectual sleight-of-hand that Krugman has been pulling on the public, but others haven’t taken too kindly to Robert Murphy’s piece. I’m going to show you some of the comments from Robert Murphy’s detractors, and I’m going to show why they’re way off base. All comments shall be from different people, one comment per person. I’m not going to give their names.

Quote No.1 from the comment section: “When you are an economist that doesn’t understand economics, it is best to spend your energies devising how someone who does understand economics could be wrong too.

Mr. Murphy is lucky there is a market for this kind of spoiled thinking. That market is brought to you by a set of people that have gained windfalls while economies were raided. Now that they have theirs everyone must bite the bullet to get through these hard times. Except the times aren’t hard on them, they just fear that the big scary government will demand more money from them, which apparently would destroy everything good and decent in the world, even if it did feed some hungry children and pay for someone’s life saving surgery.

The reason their fear of the government apparatus is so out of proportion is the way they have been willing to use it on their fellow man. They only see their fellow man as something to profit off of or protect themselves from. Much of Christianity has been co-opted to justify and promote their harmful behavior in an Ayn Rand mash up of who is deserving and who is not. The results of our actions no longer matter except to how much currency we have in the end.

There is currently so much money in an unbalanced system that it is being artificially suppressed. Much of this is to please the monied interest and the money handlers but it also has a very sad political element. Those that continue to follow the “more for me the better for everyone” economic philosophy have not taken it well that their economic prowess has taken a hit.
Their solution has been to muddy the waters with false information and do everything they can to suppress the economy so when they get back in power they can show how it is really done. If Mitt Romney had won the election we would be now experiencing unprecedented government spending, just like when we had the last republican president. Again, we would get very little for it as that would make it look like government did work, and besides there is more profit in just stealing it.

The most obvious mistake here is that the person who posted this comment thinks that Ayn Rand’s philosophy is compatible with Christianity. On the contrary, Ayn Rand was a staunch atheist who believed that man’s sole purpose in this life is to live for his own satisfaction and not for the satisfaction of others. While I think it is presumptuous to say with definite certainty what man’s purpose in this life is, Ayn Rand’s materialistic, atheist philosophy is completely and totally incompatible with the doctrines preached by Christianity.

The reason he’s made this mistake is because Ayn Rand has in popular culture become synonymous with Conservative, and Conservative (these days) is synonymous with Christian. He’s heard these things linked together so many times that for him it has become set in stone that these things are in fact linked together. If you are a Christian, you will not agree with Ayn Rand’s atheist, materialist philosophy. Period.

The second mistake contained in the quotation above is that the word profit is used in a way to mean exploit. To profit off of someone is to exploit them. This is the tone the person who wrote this comment is taking. But in fact, his tone is entirely unjustified since he himself profits off of other people at least once in his daily routine. If he goes to the store to buy a can of Coke, and he pays the $1 (or whatever the price for a can of Coke is), it must be because he valued the can of Coke more than he valued the dollar, and the shopkeeper must have valued the dollar more than the can of Coke. Thus, both parties make a profit off of the difference of the items exchanged. This isn’t to say that you can’t exploit someone else for profit, but this is to say that to believe profit is synonymous with exploit (or to ever speak in this tone) is a very severe error in thinking.  

The third mistake he’s made (and the last one for this comment that I’m going to address) is the idea that Robert Murphy and other economists of his sort are part of a tenured, elite propaganda squad who flood the public with false information so that the big corporations can steal from everyone. This conspiracy tone is entirely unjustified, especially since the person putting this nonsense forth doesn’t even understand his own material. If Robert Murphy and the other Austrian economists were indeed part of some elite, tenured propaganda machine, why have so few people heard the name Ludwig von Mises, or Murray N. Rothbard? How many people have heard of the Austrian Theory of the Business-Cycle? Why do we have Central Banks and the IMF? Food for thought.

Quote No.2 from the comment section: “Murphy tries to perform a peculiar hocus-pocus with the notion of falsifiability, originally Karl Popper’s sine qua non for rationality, claiming that since something Krugman wrote was not falsified, therefore it was false. It was falsifiable, see, but the conditions which would have falsified the prediction were in fact unlikely, so I, Murphy, am right and Krugman is wrong.

This seems silly when written out so baldly. That is because Murphy’s argumentis silly.”

This criticism is way off base, since the entire point of the article wasn’t really to argue that Robert Murphy was right and Krugman was wrong, but to show how it is that Krugman shields himself brilliantly from criticism, so that no matter what happens, Krugman is right and everyone is wrong. The person who posted this comment either didn’t read the article, or didn’t understand what he read.

This next comment is going to be the last comment I address.

Quote No.3 from the comment section: “The author is being somewhat dishonest. It’s far too soon to see what the effects of the sequester would be, and one thing is for certain: it’s not helping. The fact is Krugman is right on this, and despite the respect I have for AmCon for building a sensible narrative for American Conservatism, let’s face it: whatever the GOP or “fiscal conservatives” have advocated, all it did is lead this nation to disaster. We’ll be running in the mud with incrementally small gains for years to come.

Notice the blatant self-contradiction in the first sentence. On the one hand, he argues that it is too soon to see what effects will be, and then he says that one thing is for certain: it’s not helping. Then he proceeds to argue that Krugman is right, which I won’t get into here. It is enough however, in response to his contention that “whatever the GOP" have advocated, all it did is lead this nation to disaster”, it will be sufficient I think to quote Murray N. Rothbard.

“American, or at least the American Establishment, may be the most gullible people on earth. When Gorbachev tried to sell his timid reforms as ‘market socialism’, only the American Establishment cheered. The Soviet public immediately spotted the phoniness and would have none of it. When the Polish Stalinist Oskar Lange touted ‘market socialism’ for Poland, only American economists shouted huzzahs. The Polish public knew the score all too well. For some people, it seems all you have to do to convince them of the free enterprise nature of something is to label it ‘market,’ and so we have the spawning of such grotesque creatures as ‘market socialists’ or ‘market liberals.’”

~ Murray N. Rothbard

These are a few of the negative responses to Robert Murphy’s piece, and I’m sorry to say that they don’t stand up to reason.


Paul Krugman and the Liquidity Trap Fallacy

There are literally countless texts on the necessity of government intervention into the economy. Paul Krugman, nobel-prize winning economist has been advocating that the Federal Reserve adapt a higher inflation target than what he refers to as the 2% orthodoxy, referring of course to the central bank’s inflation target of 2%. Paul Krugman writes:

“The point is that the conventional 2 percent target is a prejudice, nothing more; it once rested to some extent on studies suggesting that 2 percent was enough to make the zero lower bound a non-problem, but we now know how utterly wrong that view was; so we’re left with a target that’s considered respectable because it’s what all the respectable people say, and is what all the respectable people say because it’s considered respectable.

What do we want? Four percent! When do we want it? Now!”

Forgetting the obvious problems with the CPI not reflecting the actual rate of inflation for a moment, there is also a serious risk for the Keynesian Liquidity Trap.

As Keynes himself wrote;

There is the possibility … that, after the rate of interest has fallen to a certain level, liquidity-preference may become virtually absolute in the sense that almost everyone prefers cash to holding a debt which yields so low a rate of interest. In this event the monetary authority would have lost effective control over the rate of interest.

The sheer irony regarding the above quote from Keynes is that, assuming it is completely true as stated, it utterly disproves Keynesian aggregate demand theory, and it completely destroys the basis by which Paul Krugman and other Keynesian economists have to justify government stimulus programs. For starters, Keynesian macroeconomics requires the general public to hold bonds of debt at some point or another. If lowering the interest rate too low creates a situation (as Keynes himself conceded) whereby people prefer cash to bonds, and thus doesn’t create any new (or sufficient enough) spending, then the obvious deduction to be drawn from this is that the lowering of the interest rate in order to stimulate aggregate demand was a bad idea to begin with.

This is just one more inconsistency with the Keynesian position.