Economist Walter E. Williams explains the causes of the housing crisis. Then, why would we let these same people who caused the housing crisis take charge of health care? Short and worthwhile viewing.
Tag: Austrian economics
Articles of Interest
Obama’s volunteer corps, Kansas cigarette taxes, U.S. Auto industry, Austrian economics
The Rise of ObamaCorps (Americans for Limited Government) “Unless the Blue Dogs can muster enough support to halt Speaker Pelosi’s march to madness, the American taxpayer will have to pony up another $5 billion for paid ‘volunteers’ (an oxymoron if there ever was one) to politically-oriented organizations, the aims of many of which they will invariably oppose.”
Study documents historic trend of decreased state tax revenues following cigarette tax increases “This study clearly shows that raising cigarette taxes simply drives Kansas consumers to other states to purchase tobacco products,” said AFP-Kansas state director Derrick Sontag. “It clearly results in lower cigarette tax revenues, not because more people are quitting, but because people go elsewhere to avoid paying those higher per-pack taxes. … We hope this document will show to lawmakers that raising cigarette taxes is an ineffective deterrent to smoking and that it is simply unwise to fund government programs with revenue that is likely to dwindle once the new tax takes effect.”
Detroit’s Fate Sealed in West Wing (Wall Street Journal) Describes President Obama and his team’s involvement in the remaking of General Motors. “Mr. Rattner broke the news to [General Motors CEO] Mr. Wagoner at his office at the Treasury, according to an administration official. Afterward, Mr. Rattner met with Mr. Henderson, and told him he would take over as GM’s CEO.” The president plans to put some of his own staff into the auto companies. We can be sure that as the president and his team assert more control over GM and Chrysler, Congress will want to get in on the act too.
The Obama Autoworks: At GM and Chrysler, politics is now Job One (Wall Street Journal) More analysis of just how bad things are likely to get now that the American automobile industry — at least GM and Chrysler — is on the road to nationalization. “Bankruptcy or not, the larger problem here is Washington’s industrial policy. Even if Chrysler merges and GM restructures, Mr. Obama wants the companies to make the kind of cars the political class favors, whether or not consumers want to buy them. ‘The United States of America will lead the world in building the next generation of clean cars,’ the President said yesterday. He didn’t mention a goal of profitability. … Mr. Obama’s industrial policy vision runs directly counter to a strategy that would get the companies back to profitability as soon as possible. … All of which is to say that the taxpayer commitment to the Obama autoworks is only getting started.”
Austrians Can Explain the Boom and the Bust (Robert P. Murphy at the Ludwig von Mises Institute) An Austrian explanation of the recent boom and bust cycle, including the Austrian model of the structure of capital. Interest rates, as it turns out, are very important.
Articles of Interest
25 random things about covering a capital murder trial. Wichita Eagle reporter Ron Sylvester offers surprising insights into covering a capital murder trial in a small Kansas city.
The Misdirection of Resources and the Current Recession. From a talk given by Mario J. Rizzo. “I believe that recent experience supports the claim that the economist and political philosopher Friedrich Hayek made in The Road to Serfdom in 1944. Democracy and central planning are incompatible or, at least, in deep tension.” Also some good explanation of the cause of the crisis from an Austrian perspective.
Evidence against the multiplier (Russell Roberts at Cafe Hayek). The multiplier is what’s supposed to make the stimulus work. It’s also a favorite argument of interventionism by local governments and their boosters in the field of economic development. But does it work? “The large and growing peer-reviewed economics literature on the economic impacts of stadiums, arenas, sports franchises, and sport mega-events has consistently found no substantial evidence of increased jobs, incomes, or tax revenues for a community associated with any of these things. Focusing our attention on research done by economists, as opposed to that of scholars from public policy or urban development and planning departments, we find near unanimity in the conclusion that stadiums, arenas and sports franchises have no consistent, positive impact on jobs, income, and tax revenues.” I wish we’d known of this before we built the downtown Wichita arena. Wait … we did know it. See Economic Justification of Arenas and the Downtown Wichita Arena, one of my first blog posts from October 2004.
Economic Miracle (Walter E. Williams) “The idea that even the brightest person or group of bright people, much less the U.S. Congress, can wisely manage an economy has to be the height of arrogance and conceit. Why? It is impossible for anyone to possess the knowledge that would be necessary for such an undertaking.” A fine explanation of how our economy is so complicated that it can’t be managed centrally. It’s the price system and self-interest that do the work.
Fed Up: The popular uprising against central banking (Thomas E. Woods Jr.) “It’s not surprising that arguments against the Fed are finally resonating. Since the crisis began in 2007, Fed Chair Ben Bernanke has engaged in all manner of emergency activity, much of it unprecedented and of such dubious legality that even some of those who may reject or be unfamiliar with arguments against the Fed have begun to wonder about the unaccountable power this institution wields over the economy.”
Obama Takes On Auto Crisis Without a ‘Czar’ (New York Times) “President Obama’s decision to act as his own ‘car czar’ means that in the next few months he faces decisions no American president has made since the invention of the automobile. … Even for an administration that is becoming the de facto decision maker for many of the nation’s financial institutions, it is a huge step. … In the meantime, the auto industry — like the financial industry — will essentially be run from inside the Treasury.” More nationalization of American industry. Will you buy a car designed and built by the President and Congress?
An Invitation to Debate the New Deal (Amity Shlaes). The author of The Forgotten Man: A New History of the Great Depression responds to criticism of her book. “The gist of ‘The Forgotten Man,’ which has been out for nearly two years, is that neither Herbert Hoover nor Franklin D. Roosevelt promulgated policies that worked, especially not in the sense that we use the word ‘work’ today.”
An Austrian Recommendation for President Obama
Robert P. Murphy, author of the fine book The Politically Incorrect Guide to Capitalism lays out what President Obama and Congress can do to really fix our economy.
In this article, Murphy addresses the critics of those who oppose the proposed stimulus plan. That’s important, because many critics of the stimulus say that the government should do nothing. But doing nothing doesn’t satisfy the feeling that something has to be done. So Murphy has a list of things to do.
Also, Murphy explains, in one paragraph, the Austrian diagnosis of why there’s a problem. It’s an excellent article, available at the Ludwig von Mises Institute at Do You Austrians Have a Better Idea?
The bailout reader
The events taking place in the financial market offer an illustration of the soundness of the Austrian theory of money, banking, and credit cycles, and Mises.org, which has long warned of precisely the scenario playing itself out today, is your source not only for analysis of these events but also the economic theory that helps explain what is happening and what to do about it. There are many thousands of articles available, and also the full text of thousands of books as well as journal articles.
The Bailout Reader at the Ludwig von Mises Institute continues to be the best place to learn about the economics behind the current crisis.
I Tested My Politics
I came across a test designed to place you and your political thoughts on a map of political ideologies. The test I took is here.
These tests can be fun, but in the case of this particular example, I wondered how some questions had any relevance to politics. In these tests I also find that some questions are leading and seem to be designed to get people to answer a certain way.
On this test, here are the results reported for me: “You are a Social Liberal (76% permissive) and an Economic Conservative (93% permissive). You are best described as a Libertarian.”
When my results were compared to those of famous people, I’m right alongside Thomas Jefferson, which is pretty good company. Plotted on a map of political ideologies, I’m in the libertarian area, but right near the border of anarchist.
Interestingly, whose photo do you suppose appears squarely in the socialist region? Barack Obama.
Advocates for Self-Government has a short quiz that has been cited as reliable. A quiz I would encourage everyone to take is the Are You an Austrian quiz (really an examination) at the Ludwig von Mises Institute.
The New Deal in Retrospect
Many people refer to incoming president Barack Obama as the next FDR. The myth of Franklin Roosevelt — primarily that he cured the Great Depression through his extreme interventionism — is starting to be exposed. In this review (The Disaster Called the New Deal) of Burton Folsom’s book New Deal or Raw Deal? How FDR’s Economic Legacy Has Damaged America, David Gordon of the Ludwig von Mises Institute shows us the good and bad.
Did the New Deal cure unemployment? “In May 1939, Treasury Secretary Henry J. Morgenthau Jr., one of Franklin Roosevelt’s best friends, testified before the House Ways and Means Committee: ‘I say after eight years of this Administration we have just as much unemployment as when we started… And an enormous debt to boot.’”
Some today say that Roosevelt didn’t spend enough, that the stimulus was not powerful enough. Folsom refers to Henry Hazlitt: “Every dollar of government spending must be raised through a dollar of taxation,” Hazlitt emphasized. If the WPA builds a $10 million dollar bridge, for example, ‘the bridge has to be paid out of taxes… Therefore,’ Hazlitt observed, “for every public job created by the bridge project a private job has been destroyed somewhere else… All that has happened, at best, is that there has been a diversion of jobs because of the project.”
Reviewer Gordon has a problem with this book in that Folsom ignores Austrian economic theory, including its theory of the business cycle. Still, I believe Gordon thinks this is a book worth reading.
Ron Paul says “The Austrians were right”
In a statement Ron Paul delivered to the United States House of Representatives on November 20, 2008, he made these points:
- Our government is “totally influenced by Keynesian economics.”
- “At least 90% of the cause for the financial crisis can be laid at the doorstep of the Federal Reserve. It is the manipulation of credit, the money supply, and interest rates that caused the various bubbles to form. ”
- The Federal Reserve created this problem. Why do we rely on it to fix the mess it created?
- “… the stage is now set for massive nationalization of the financial system and quite likely the means of production.”
- “Raising taxes would reveal the true cost of big government, and the people would revolt.”
- So the government creates money from thin air to pay for all this.
Read the entire statement at The Austrians Were Right.
Walter Block on Economics in One Lesson
Walter Block talks about Economics in One Lesson, perhaps the most approachable book about economics. And, it’s a free-market, liberty-friendly, Austrian approach. What could be better?
In this video, Professor Block is interviewed by Jeffrey Tucker at the Ludwig von Mises Institute.