tag:blogger.com,1999:blog-9430835.post2871169409493670277..comments2024-03-19T02:31:02.140-07:00Comments on Steve Sailer: iSteve: I had not realized Nobel Laureate Paul Krugman is this stupidUnknownnoreply@blogger.comBlogger71125tag:blogger.com,1999:blog-9430835.post-78371911030951520902010-08-16T00:01:07.630-07:002010-08-16T00:01:07.630-07:00Here we are in 2010, a couple of years after I pos...Here we are in 2010, a couple of years after I posted this piece, and the Echelon complex is still sitting there with nothing happening on it. The owners announced in 2009 that it would be 3 to 5 years before it opened.Steve Sailerhttps://www.blogger.com/profile/11920109042402850214noreply@blogger.comtag:blogger.com,1999:blog-9430835.post-2316936983494558972008-10-31T16:53:00.000-07:002008-10-31T16:53:00.000-07:00This whole bubble thing reminds me of my hillbilly...This whole bubble thing reminds me of my hillbilly cousins back in Illinois. They raised coon hounds. One of them would trade one of his hounds to the other. The first dog would be valued at $2950. The other dog would be valued at $3000. $50 would actually change hands. At that point, though, one of them had a hound worth $30000 and the other one $2950, established by the market. Some suckers would eventually buy the dogs for between $2000 and $2500, and think they were getting a real deal. The bursting of that bubble didn't cause much of an uproar in the financial market, but my cousins did end up with a lot of rich people's money. Sort of like the whole MBS fiasco. A few people got very, very rich.Buford Goochhttps://www.blogger.com/profile/00483381873637290955noreply@blogger.comtag:blogger.com,1999:blog-9430835.post-52687298008025342822008-10-31T08:08:00.000-07:002008-10-31T08:08:00.000-07:00Should be "...a childless homosexual." Keynes, th...Should be "...<I>a</I> childless homosexual." Keynes, that is, not Krugman.<BR/><BR/>--Senor DougAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-73800999131519175102008-10-31T07:28:00.000-07:002008-10-31T07:28:00.000-07:00The fact is that there is just one source of 'weal...The fact is that there is just one source of 'wealth creation' - namely technological innovation.<BR/>Think about it.At the time the first primitive Homo Sapiens started to knap flints (they probably couldn't even speak at that time), the world population of Homo Sapiens was probably only a few hundred thousand - that was all that could be supported by the hunting/gathering of the time and the injury/mortality toll.<BR/> Of course other breakthroughs followed - the smelting of copper and then iron (woods could now be cleared for farming), the invention of agriculture, domestification of wild beasts, crafting of boats, wheels, ploughs textile weaving etc etc until we get close to the modern period in which the steam engine was inveted (muscle power was no longer, apart from wind and water power, the the main driver), modern iron ships, electricity and artificial fertilizers and pesticides, to name but a few examples.<BR/> The point of that little lecture was to illustrate the point that 'wealth' or the ability of the planet earth to support a whole host of Homo Sapiens surplus that it could in man's 'natural state' was entirely developed by the engineers, technologists, inventors and scientists of the day - economics professors had absolutely nothing whatsoever to do with it then as now.<BR/> In fact most of the big breakthroughs - and a highly stratified, productive cash economy existed before the rudiments of 'academic economics' were ever dreamed up in 18th century France.<BR/> I think the moral is that a free market solution should be given to all academic economic departments.Close them all down and allow the savings accrued be spent by the general consumer on something of real utility to him or her.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-91161915851065954932008-10-31T06:44:00.000-07:002008-10-31T06:44:00.000-07:00What it all boils down to, is that you have to sav...What it all boils down to, is that you have to save before you can produce, and you have to produce before you can consume. This requires frugality and low tax rates, which derails the bold, visionary schemes of liberals like Krugman. Thus, he advocates monkeying around with the supply-demand curve for loanable funds, and printing money to support consumption. This is an unsustainable process, as Keynes himself admitted, but airily dismissed by saying in the long run we are all dead. Thus, modern economics and political theory continues to be warped by the present-centered bias of childless homosexuals.<BR/><BR/>--Senor DougAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-77544345061295746212008-10-30T22:18:00.000-07:002008-10-30T22:18:00.000-07:00Krugman's essentially correct in that Keynesism wo...Krugman's essentially correct in that Keynesism works in the ways others in this thread have explained. <BR/> <BR/>You're also essentially correct that malinvestment is malinvestment, independent of macroeconomic policy. <BR/><BR/>Both of you are correct, per core arguments anyway. <BR/><BR/>Major problem lies with Krugman, though, for arguing his position sloppily and erroneously, leaving it open to attack. (This is one of his weaker articles.)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-32619197223816566492008-10-30T19:57:00.000-07:002008-10-30T19:57:00.000-07:00Yet, for all its simplicity, the insight that a de...<I>Yet, for all its simplicity, the insight that a death is about a heart no longer beating makes nonsense of the whole disease / trauma theory. For if the problem is that the heart isn't beating, why not simply increase the supply of heartbeats? You may tell me that it's not that simple...<BR/><BR/>Yes, Steve, it IS that simple. Or, it can be. We can increase the supply of economic "heartbeats" just by increasing the money supply and getting bad debt off the books. Economic "heartbeats" are social creations, not creations of nature like the human body. So we really can wish them into existence through a political decision, as we can't do with heartbeats.</I><BR/><BR/>Put another way, mq is saying the recession is simply a crisis of perception and psychology. There is no underlying reality to the recession.<BR/><BR/>He is wrong.<BR/><BR/><I>This is not true if there is a *real* resource shock to the economy -- if we no longer have physical access to a real production process we had access to yesterday.</I><BR/><BR/>The problem is that you need a lot of different resources working together in the right way to produce the goods that people want.<BR/><BR/>If you want to start a pizza delivery joint, you need the space (a building or part of a building), an oven, access to electricity (or some other source of cooking power), a means of communication (phones for people to make orders), all of the necessary ingredients to make pizza, a means of delivering the pizza, and people with the relevant skills to take orders, cook pizzas, and deliver them. If one of these things is not available, your business cannot open until it is (I suppose you could open a walk-in pizza joint if you didn't have the delivery vehicle, but that might not work if you have determined that ou cannot sell enough pizza to make a profit without delivery.<BR/><BR/>What causes a recession is the fact that a misallocation of resources has caused shortages of one or more of the necessary factors of production for various businesses. In the case of the pizza business, perhaps too much land where wheat could have been grown was left fallow as the farmer had decided to take a year off and live off the equity value of his house. <BR/><BR/>So there's not enough wheat for you to make dough for your pizza (at least not so that you can make a profit). But you've already bought the property - why does it have to sit idle?<BR/><BR/>Because you've already fitted it for pizza making, and the costs of re-fitting it for something else (and of finding out what you could re-fit it for) or the costs of running a pizza business that will not sell enough pizzas to make a profit are much greater than the costs of the building sitting idle for a year until wheat prices come back down.<BR/><BR/><I>But in the case of a pure financial shock, nothing in the real physical world has changed, the problem is social, and can potentially be solved socially. (Whether we can iron out all the political and social problems in the way of such a solution is another question, of course).</I><BR/><BR/>The financial shock could be the results of the real physical world effects of the previous financial situation. For example, people living off the equity in their homes might have resulted in fewer hours worked and less produced, or in people consumption patterns changing and subsequently in production patterns changing to meet cosumer demand. This change may have to be reversed to get the economy back on track, and this change-back is neither instantaneous nor costless.<BR/><BR/><I>To put things another way: there were no illusory resources or wealth in the current U.S. economy. All the resources to build those houses and hand them out to people really existed...we know that because the houses were actually built. The illusion was the implicit beliefs about *future* wealth growth that underpinned the various committments that were made. But there is no physical or natural reason the economy has to shrink, if we can rearrange those committments then there's no reason we can't absorb the change in beliefs about the future with no reduction in current wealth.</I><BR/><BR/>Translation: The problem isn't that people built houses they an't afford. The problem is that their creditors expect to be paid back. Screw the creditors. Either erasethe loans, or just print money and give it to them [which amounts to screwing both the creditors and anyone else who has dollar-denominated assets].<BR/><BR/>This ignores the fact that the changes in production patterns as a result of the housing boom may have impoverished sectors of the economy that we need to keep our current standard of living going. It also ignores the deleterious effects on future investment that a message of "loan money and don't get it back" will have. It also ignores the fact that we do not have legal leverage over some of our creditors (i.e. we cannot simply command China to forgive our debts), and that if we declare the debts null and void those creditors could lower the boom on us (i.e. stop exporting or export things at much higher prices).<BR/><BR/><I>It's just that the issues here are deep, Krugman gets them and Steve apparently just doesn't.</I><BR/><BR/>Right. Consume and more will magically appear.Glaivesterhttps://www.blogger.com/profile/16867323638154972101noreply@blogger.comtag:blogger.com,1999:blog-9430835.post-49926362960381716712008-10-30T19:38:00.000-07:002008-10-30T19:38:00.000-07:00Some links on Austrian cycle theory-http://www.lew...Some links on Austrian cycle theory-<BR/><BR/>http://www.lewrockwell.com/podcast/index.php?p=episode&name=2008-10-22_053_he_predicted_the_great_depression_ii.mp3<BR/><BR/>http://mises.org/story/3064<BR/><BR/>http://mises.org/story/3151Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-32989694771337434812008-10-30T19:33:00.000-07:002008-10-30T19:33:00.000-07:00pseudoerasmus:This is obviously false, because in ...<B>pseudoerasmus:</B><I>This is obviously false, because in a financial bubble there is always more money -- either through easy monetary policy, or through capital account surpluses (i.e., Chinese money). What changes is perception : there is a sudden EXOGENOUS change in the perception about the sustainability of the bubble. But if people keep believing that real estate prices will keep going up, then the money is there to keep borrowing against the real estate and spending on goods.</I><BR/><BR/>True, as long as the Chinese are willing to trade us goods for money.<BR/><BR/>The point is, though, is that people trade with the concept that you will give them something of value in exchange. If we have nothing to give the Chinese in exchange for their products, i.e. if they can't spend the money we pay them to get stuff from us, then they have no reason to keep providing us with products.<BR/><BR/>You are suggesting that we artificially inflate housing prices to maintain the boom. The problem with that is that it relies on the Chinese (and other countries with whom we have a trade deficit) being willing to give us their products without receiving anything in return.<BR/><BR/>Unless we can enslave China to give us stuff and ask for nothing in return, or unless they are either stupid or overly generous, eventually our perception of what our houses are worth will mean very little.<BR/><BR/><I>You're just assuming what you need to prove : there are fewer resources as the spur to the recession.</I><BR/><BR/>I have explained why there are fewer resources - because the resources that have been saved aside for later use have all been used up due to the malinvestment of the bubble. The point is, the "prosperity" of the bubble is financed by people eating their savings. If people spend more than they save, they do so by consuming previous savings. If this continues, at some point the savings are gone - at this point, no amount of money printing can stimulate more investment, just increase the prices of whatever goods are available.Glaivesterhttps://www.blogger.com/profile/16867323638154972101noreply@blogger.comtag:blogger.com,1999:blog-9430835.post-45562217186238632592008-10-30T14:00:00.000-07:002008-10-30T14:00:00.000-07:00"But overinvestment in capacity in one sector (hou..."But overinvestment in capacity in one sector (housing) should not mean that capacity in other sectors should be left idle."<BR/><BR/>The other sectors suffer during investment bubbles because the easy credit draws human and material resources away from productive (wealth producing) activities and into the unproductive (wealth-consuming) activities of the bubble. It is the misallocation of these real resources which inevitably leads to the "hangover" as people eventually must stop engaging in unprofitable, wealth-consuming activities and go back to working in productive activities and repairing balance sheets (i.e. accumulating capital).<BR/><BR/>The cure for a hangover is to stop drinking and get back to work, not to take the hair of the dog and go back on a bender.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-74653689875680596152008-10-30T13:38:00.000-07:002008-10-30T13:38:00.000-07:00And that's just it. The only determinant of econom...<I>And that's just it. The only determinant of economic success isthetalent and industry of the particular people of a particular nation.All the rest is nonsense.</I><BR/><BR/>Market economy + Human capital. Cool, I'm not the only one who believes this. (Monetary policy's another biggie, but just varies the growth rate.)<BR/><BR/>Growth is created by the production and consumption of increasingly higher value products. An economy's ability to do so is determined by its human capital. <BR/><BR/>We could have had a high tech economy with <I>domestic</I> fruit pickers making $20/hour. Impatient capitalist pigs decided to import cheap labor for the short term gain and now we'll never have the high paying economy.<BR/><BR/>Nothing is so egregious as leftwing economists' failure to scream bloody murder over wage-killing immigration.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-13523472916911301702008-10-30T13:23:00.000-07:002008-10-30T13:23:00.000-07:00ENERGY is the basic input of the economy. People a...<I>ENERGY is the basic input of the economy. People are not going to Vegas because gas and airfare costs too much, and the energy costs hit them in the pocketbook everywhere: going to work, school, food, etc.</I><BR/><BR/>Checked oil prices lately? Problem solved, I gather.<BR/><BR/>mq,<BR/><BR/><I>But there is no physical or natural reason the economy has to shrink, if we can rearrange those committments then there's no reason we can't absorb the change in beliefs about the future with no reduction in current wealth.<BR/></I><BR/><BR/>"Rearrange those commitments" as in borrow more or print money? You plan on doing that indefinitely, do you?<BR/><BR/>john of london,<BR/><BR/><I>Steve, by the basic principle of Stevism you can't call a guy with a very high IQ stupid. I can, because I don't believe there's a thing properly called "intelligence" that IQ tests measure, but you can't.<BR/></I><BR/><BR/>If you don't believe there's any such thing as intelligence, how can calling someone stupid have any meaning at all? (How much longer do you plan on being offended by reality, John?)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-11176858764137732012008-10-30T12:49:00.000-07:002008-10-30T12:49:00.000-07:00"To put things another way: there were no illusory..."To put things another way: there were no illusory resources or wealth in the current U.S. economy. All the resources to build those houses and hand them out to people really existed...we know that because the houses were actually built. The illusion was the implicit beliefs about *future* wealth growth that underpinned the various committments that were made. But there is no physical or natural reason the economy has to shrink, if we can rearrange those committments then there's no reason we can't absorb the change in beliefs about the future with no reduction in current wealth."<BR/><BR/>I haven't seen anything like Krugman's depiction of the Hangover Theory in my brief exposure to the Austrian School. Really, with the libertarian underpinnings, any hellfire and damnation slant on the Austrian explanation is suspect. Their focus is often on the miracle of fractional reserve banking which seems to be operating on the basis that wealth we expect to have in the future is money we have in the here and now. Making unwise investments just further undermines an economy already compromised by operating as if future wealth is already in existence. <BR/><BR/>I think real estate is the most tangible evidence of the problem of malinvestments. For instance, I know of strip malls from the last building boom some 20 years ago, that have sat empty much of the time and/or have rarely been even half occupied. Buildings deteriorate, styles change, a natural disaster might wipe it out in the decade or so before it becomes a profitable endeavor. How is this not evidence of money that could've and should've been invested in a different way. (I've even considered government intervention to insist that these behemoths be bought or leased before more acres of forest are allowed to be levelled for newer behemoths in more desirable locations but that would probably make me a heretic.)<BR/><BR/>Developers mistakenly thought that lowered construction costs - cheap loans, cheap illegal labor, cheap land - equated to a good investment. Feedback in the form of the free market setting the cost of borrowing was distorted due to the FED interfering to encourage the housing boom/minority homeownership. The potential effects of this malinvestment are numerous. Money was spent on homebuilding that could've/should've been spent elsewhere. Creating alternatives to fossil fuels for instance. <BR/><BR/>Many economists had no idea what the unintended consequences would be this time, the last time or the time before. I don't understand why you would hold any of them in such high esteem that you would attack anyone who challenged their theories. And, unlike science, the decisions of economists can directly and negatively impact your life. Stop worshipping Krugman because he gets prizes and learn how to evaluate his advice. It's not out of the question that he is both very smart and very wrong. <BR/><BR/>I mean really are we all supposed to move to those neighborhoods built miles away from shopping malls, hospitals, and jobs like colonists and start civilization anew? Or maybe people can start businesses dismantling the useless structures to be sold for scrap and plant trees to cover the land cleared for streets and foundations decades too soon. Seems to me it would be a lot more efficient and productive to avoid making mistakes on such a grand scale in the first place but we could create a boom cleaning up the mess made by the last one. Sure, why not? : )Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-5475832694905954552008-10-30T12:20:00.000-07:002008-10-30T12:20:00.000-07:00"MQ said...You have to hand it to Steve for callin..."MQ said...<BR/><BR/>You have to hand it to Steve for calling a guy stupid immediately after he wins the Nobel prize."<BR/><BR/>There is NO Nobel prize in economics. We should stop calling it that.<BR/><BR/>"-- he's explained a very deep concept about Says Law that"<BR/><BR/>It is always amusing when economists try to talk about their field as if were a real science.<BR/><BR/>"Anonymous said...<BR/>t99,<BR/>Higher energy prices caused the tech bubble to burst?"<BR/><BR/>You've misread Testing99. He is saying that the tech bubble burst did not cause a general economic downturn because energy was still comparatively cheap at the time.<BR/><BR/>There is a lot of truth in what Testing99 says here (an unusual circumstance for him). Energy is the single most important input into the economy. It is the real source of wealth. When it becomes scarcer, we all become poorer.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-29131852300780531442008-10-30T12:11:00.000-07:002008-10-30T12:11:00.000-07:00The astute Walter Williams in his latest column de...The astute Walter Williams in his latest column delivers a good blow against Krugman also:<BR/><BR/><I>Wackonomics isn't just practiced by the uninitiated. This year's Nobel Laureate, Princeton University Professor Paul Krugman, after the terrorist attack on the World Trade Center, gave one rendition of wackonomics in his column "After the Horror," New York Times (9/14/01). Krugman wrote, "Ghastly as it may seem to say this, the terror attack -- like the original day of infamy, which brought an end to the Great Depression -- could do some economic good." He went on to point out how rebuilding the destruction in New York and Washington, D. C., would stimulate the economy through business investment and job creation. For practitioners of non-wackonomics, this reasoning doesn't even pass the smell test. If Professor Krugman's vision is correct, and extending his logic, the terrorists would have made an even larger contribution to our economic well-being had they been able to fly a plane into the White House and destroyed buildings in other cities.<BR/><BR/>Wackonomics isn't all bad. There's an upside to it. It spares people the bother of having to understand the complexities of the world. <BR/></I>Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-30928916207107341392008-10-30T11:31:00.000-07:002008-10-30T11:31:00.000-07:00Meow.Jealousy is not healthy.Meow.<BR/><BR/>Jealousy is not healthy.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-84960381427617378122008-10-30T05:37:00.000-07:002008-10-30T05:37:00.000-07:00To put things another way: there were no illusory ...<I>To put things another way: there were no illusory resources or wealth in the current U.S. economy. All the resources to build those houses and hand them out to people really existed...we know that because the houses were actually built. The illusion was the implicit beliefs about *future* wealth growth that underpinned the various committments that were made. But there is no physical or natural reason the economy has to shrink, if we can rearrange those committments then there's no reason we can't absorb the change in beliefs about the future with no reduction in current wealth.</I><BR/><BR/>Except that much of our wealth takes resources to maintain. True, if we just forgave a bunch of mortgages, everyone could keep their houses, but we will have to reduce our levels of consumption a great deal, a much larger percentage of our income will go into maintenance of these houses, we may drive older, decrepit cars a lot longer, and when we have problems with our big, fancy TVs, we may have to go without instead of repacing or repairing them.Glaivesterhttps://www.blogger.com/profile/16867323638154972101noreply@blogger.comtag:blogger.com,1999:blog-9430835.post-89897855849250226182008-10-30T05:26:00.000-07:002008-10-30T05:26:00.000-07:00As I've said before all economics (apart from the ...As I've said before all economics (apart from the tautological basics as expounded by the 18th century classicists), is a load of bollocks (to coin a fine English phrase).<BR/> As the great mathematician Stanislaw Ulam once stated, there is no 'true uncontested fact' in economics that is not trivial.<BR/> Case in point is the rise to economic superiority of modern China.Cast your mind back 30 years - China, such an unpromising land, the North Korea of its day, all Mao suits, bicycles and impoverished peasants.The only natural resource the talent and hard-work of its people.<BR/> - And that's just it. The only determinant of economic success isthetalent and industry of the particular people of a particular nation.All the rest is nonsense.<BR/> I do realise that state Marxism did dampen the natural entrepeneurship of the Chinese previous to 1978 - but that'san argument against academic theory rather than for it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-72530686827348185712008-10-30T05:00:00.000-07:002008-10-30T05:00:00.000-07:00John of London said:"Steve, by the basic principle...John of London said:<BR/><BR/>"Steve, by the basic principle of Stevism you can't call a guy with a very high IQ stupid. I can, because I don't believe there's a thing properly called "intelligence" that IQ tests measure, but you can't."<BR/><BR/>How do you know Krugman has a high IQ? Did you guess that he has a high IQ because he writes in complicated sentences, looks smart in photographs and on TV, etc.? But, if you don't believe that the concept of IQ is valid, then shouldn't you stop yourself from equating a complicated writing style, etc. with high IQ? In other words, aren't you being inconsistent WHILE accusing Steve of being inconsistent?<BR/><BR/>Unlike Steve I don't think that Krugman is stupid. Krugman has a political position to push, and, since he has a lot of verbal intelligence and few scruples, is able and willing to demagogue, over-complicate and mislead in support of this position. His reasoning doesn't work, but that's because he's dishonest, not because he's stupid. <BR/><BR/>John, the most authoritative book out there on the science of intelligence is "The g Factor" by Arthur Jensen. I recommend it highly.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-38497522119826157302008-10-30T04:52:00.000-07:002008-10-30T04:52:00.000-07:00Glaivester said :They cut back on spending because...Glaivester said :<BR/><BR/><I>They cut back on spending because they have little left to spend, which corresponds to the fact that there is less to spend it on.....While technically he is just noting that the recession and the cash hoarding are occurring simultaneously, it is clear from the context that the assumption Krugman is making here is that the attempt to hoard is what causes the recession. Steve's point is that the "hoarding" represents the facts on the ground resource-wise. It is not an independent development causing the recession, it is a symptom of the recession."</I> <BR/>This is obviously false, because in a financial bubble there is always more money -- either through easy monetary policy, or through capital account surpluses (i.e., Chinese money). What changes is perception : there is a sudden EXOGENOUS change in the perception about the sustainability of the bubble. But if people keep believing that real estate prices will keep going up, then the money is there to keep borrowing against the real estate and spending on goods.<BR/><BR/>But where are the real resources ?<BR/><BR/>Apparently it has escaped your notice what the US current account deficit represents : it represents both the net value of goods that the rest of the world is selling to the USA AND the net money flows from the same source which are financing those purchases. In other words, both the money and the real resources are there, it's only a matter of investor perception whether these keep flowing.<BR/><BR/><I>Getting them to "feel" wealthier and to spend more will not make more goods and services materialize out of the ehter.</I><BR/><BR/>The wealth effect is Sailor's argument.<BR/> <I>"Rather, they assume that during the boom, that investment and consumption both rise to the point where they exceed the resources available to sustain them. Consumption need not rise when investment falls, because the total resources available have fallen."</I><BR/><BR/>You're just assuming what you need to prove : there are fewer resources as the spur to the recession.<BR/> Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-66905247345968643832008-10-30T02:48:00.000-07:002008-10-30T02:48:00.000-07:00Steve, by the basic principle of Stevism you can't...Steve, by the basic principle of Stevism you can't call a guy with a very high IQ stupid. I can, because I don't believe there's a thing properly called "intelligence" that IQ tests measure, but you can't.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-70390230073537618292008-10-30T01:21:00.000-07:002008-10-30T01:21:00.000-07:00Hi Steve,Seems like you have a lot of angst. If he...Hi Steve,<BR/><BR/>Seems like you have a lot of angst. If he is so stupid an you the opposite, where is your Nobel Prize?<BR/><BR/>PaulAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-30019966832402560992008-10-29T22:48:00.000-07:002008-10-29T22:48:00.000-07:00MQ asserts:"But in the case of a pure financial sh...MQ asserts:<BR/><BR/>"But in the case of a pure financial shock, nothing in the real physical world has changed, the problem is social, and can potentially be solved socially. (Whether we can iron out all the political and social problems in the way of such a solution is another question, of course). To put things another way: there were no illusory resources or wealth in the current U.S. economy. All the resources to build those houses and hand them out to people really existed...we know that because the houses were actually built."<BR/><BR/>These houses were to a large extent built out of manufactured items from China bought, in essence, on credit. (We sent them checks and they turned around and bought Fannie Mae stock and T-bills with the dollars.) The Chinese expect to get their money back from us at some point. If they don't get it back, well, then they won't ship us as many manufactured goods. Moreover, they won't be as wealthy as they thought they were either, so they'll stop going to Las Vegas, too, and the Echelon will just sit there unfinished even longer.Steve Sailerhttps://www.blogger.com/profile/11920109042402850214noreply@blogger.comtag:blogger.com,1999:blog-9430835.post-3563981318406702512008-10-29T20:33:00.000-07:002008-10-29T20:33:00.000-07:00Krugmans problem, beside his obvious arrogant, is ...<I> Krugmans problem, beside his obvious arrogant, is that he is sharper than he is deep. </I><BR/><BR/>No, Krugman is very deep. In fact, he's so good at explaining very deep concepts in a simple and accessible manner that people sometimes miss how deep he is. That's what he's doing here -- he's explained a very deep concept about Says Law that took economists a century to understand, and that Keynes never fully unpacked in non-technical terms, and Krugman does it in a very accessible manner. But Steve just doesn't get it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-9430835.post-59172366322135943852008-10-29T20:30:00.000-07:002008-10-29T20:30:00.000-07:00You have to hand it to Steve for calling a guy stu...You have to hand it to Steve for calling a guy stupid immediately after he wins the Nobel prize. However, in this post Steve is the stupid one and Krugman is the smart one. Actually, this post would flunk you in intro macro. You don't get macroeconomics unless you understand why this analogy is false:<BR/><BR/><I> Yet, for all its simplicity, the insight that a death is about a heart no longer beating makes nonsense of the whole disease / trauma theory. For if the problem is that the heart isn't beating, why not simply increase the supply of heartbeats? You may tell me that it's not that simple...</I><BR/><BR/>Yes, Steve, it IS that simple. Or, it can be. We can increase the supply of economic "heartbeats" just by increasing the money supply and getting bad debt off the books. Economic "heartbeats" are social creations, not creations of nature like the human body. So we really can wish them into existence through a political decision, as we can't do with heartbeats.<BR/><BR/>This is not true if there is a *real* resource shock to the economy -- if we no longer have physical access to a real production process we had access to yesterday. E.g. in testing99s example, if we run out of oil, or can't get access to oil any more. That's real business cycle theory. But in the case of a pure financial shock, nothing in the real physical world has changed, the problem is social, and can potentially be solved socially. (Whether we can iron out all the political and social problems in the way of such a solution is another question, of course).<BR/><BR/>To put things another way: there were no illusory resources or wealth in the current U.S. economy. All the resources to build those houses and hand them out to people really existed...we know that because the houses were actually built. The illusion was the implicit beliefs about *future* wealth growth that underpinned the various committments that were made. But there is no physical or natural reason the economy has to shrink, if we can rearrange those committments then there's no reason we can't absorb the change in beliefs about the future with no reduction in current wealth.<BR/><BR/>That's not to say the Austrians are wrong. They have their arguments as well. It's just that the issues here are deep, Krugman gets them and Steve apparently just doesn't. So he's not engaging with the force of Krugman's arguments at all.Anonymousnoreply@blogger.com