Tuesday, July 13, 2010
My Hypothesis is this: Creating the Federal Reserve, contrary to its initial purposes, has created more monetary instability and inflation than would otherwise be the case if it were never established. Now then, if I were to take an empirical approach in demonstrating my case, I would make use of the facts and inflation statistics since its establishment in 1913, which show tremendous inflation and several boom-bust cycles, then I would juxtapose that data with what happened at a time where there was no central bank. If the observable facts show that there was more inflation with a central bank than there was with a gold standard, for example, then my argument is sound from an empirical approach.
But if I were to try to prove my hypothesis through logical means, then I would say that that is exactly what a central bank does, it prints money, and that if money is not connected to gold or silver or whatever, then inflation is bound to happen.
As it happens, both approaches lead to the same conclusion. But sometimes it is not always that simple. To give a recent example, conservatives rightly concluded the Obama stimulus package failed because it didn't bring unemployment down to its intended levels. Paul Krugman, however, has not let the observable facts get in the way with his philosophical pre-conceptions, as he has invariably stated that the stimulus package was "too small" and wasn't "applied properly," which is why it didn't work. This is why Murray Rothbard has argued that only logic can reliably test an economic theory, which explains the Austrian distaste for empiricism and emphasis on arguing by first principles and fundamental axioms (more on that later).
But sometimes just relying on philosophical reasoning can also lead to wrong conclusions. This is especially true with regards to human behavior. Because human action is seldom rational, and thus not easily predictable, taking a logical approach is bound to produce wildly inaccurate results.
For these reasons, it is shaky to solely base an argument on one or the other. And that the most effective argument is the one that utilizes both methods.
A perfect example is the case against Socialism. In 1922, Ludwig von Mises published a paper in which he argued that Socialism precluded rational economic calculation. Capitalism solves this through a price point, which is determined by supply and demand. But where the government owns the means of production, there can be no price point, and thus no room for economic calculation. This was a sound philosophical thesis, but it was only when the mass of observable failures in the countries where Socialism was enacted was the theory largely abandoned.
So while it is true that the proper balance between philosophical reasoning and empiricism differs from field to field, it is almost surely wise to be makes of both methods; to cite the relevant facts and then explain logically why this should be the case.
Monday, July 12, 2010
First, Hayek was as bad on the Depression as I thought. The claim that “many of the troubles of the world at the present time are due to imprudent borrowing and spending on the part of the public authorities” — in 1932! — is bizarre.
Mr. Krugman, you desperately need to find a better word than *bad*. There are two possible explanations for why he is unable to come up with a better term.
1. His vocabulary just doesn't stretch that far. He uses the word *bad* because there is no other word contained in his cranium. Kind of like that 4th grader that I ran into yesterday.
2. Krugman uses the word *bad* because he wants to convey the weakness of Hayek's theory about the Great Depression, but doesn't know WHY or HOW it is weak, so he unspecifically says that it is bad.
Now then, for all the flack that I would like to give Krugman for how willfully obtuse he is , there is plenty of evidence that he has a vocabulary that surpasses a fourth grader. So the second explanation seems to be the likely one, and that he really has no idea how to correctly describe the flaws in Hayek's argument because he doesn't he can't identify them.
Let me elaborate further; if I were to describe an opponents argument, I wouldn't simply say it is *bad*, I would use terms that specifically relate to why exactly the argument is wrong. For example, I would describe the secular argument that the founding fathers were mostly influenced by the enlightenment as demonstrably false that relies on many factual inaccuracies, because that is why argument is bad. Additionally, I would describe the Euthyphro dilemma as logically invalid, Keynesian economics to be intrinsically flawed, and Marx's labor theory of value as outdated.
All of these terms have different meanings; they are not different words to describe the same thing. It is readily apparent that the reason Krugman says that Hayek's hypothesis is bad is because he doesn't know why it is bad. Is it empirically false? Contradictory? Specious? Outdated? Circular?
In the same vein, P.Z Myers, in a recent email exchange I had with him, calls Vox Day's book The Irrational Atheist *awful*. So P.Z, in what way is the book awful? To this P.Z has nothing to say because he doesn't know. The problem is not that he can't back up his assertions, it is that he cannot even properly characterize an argument beyond simply calling it *awful*. Dear Paul and P.Z, you guys truly need to step up your lexicon and intellectual rigor if you really want to be taken seriously; because dismissing an argument as *bad* or *awful* simply will not fly. The only purpose that that serves is to demonstrate your complete inability to discern the mistakes of you opponents as well as discrediting your intellectual honesty because it shows how you dismiss arguments that you don't like out of hand.
I ask you, dear skeptical reader, would you really takes theses writers' poorly constructed cliches at face value? I cannot say that this is a universal law, but it has proven to be a rather useful B.S filter when examining an authors writing ability.
Thursday, July 1, 2010
1. Always share with others your personal stories and preferences, they don't even have to relate to the specific case you are making, because everyone is so interested in what you happen to think about the matter. You define reality, not observe it.
2. To add on to that, do make sure that you provide personal anecdotes in lieu of actual statistical data. Because a micro exception always trumps the macro rule.
3. Once you have demonstrated that a certain authority is in accordance with your views, openly declare the debate to be settled because the authorities are never, ever, wrong. Their pratfall performance regarding the issues of global warming, Socialism, Keynesianism, and String theory notwithstanding.
4. When examining the arguments of your opponent, the best way to refute him is by looking at his motives. If there are any signs that he may have any biases, promptly proclaim that his arguments don't merit discussion because he is [insert derogatory term here]
5. Openly declare that you will present a rebuttal to a certain book/article/speech before you actually dive into it and know what it actually says. You know, because you're so open-minded that regardless of what happens to be in those articles of information, you won't change your mind.
6. Regard any accusation of racism or sexism as an immediate victory on your part. Because any view conflicting with the egalitarian aspects of mankind is evil of the worst sort.
7. If somebody makes a factual inaccuracy that is only tangentially related to the argument and not the foundation of it, concentrate solely on that inaccuracy while completely ignoring the larger and more important part of the argument that is actually relevant to its validity. Example: "Our national debt is 12 trillion, we need to stop government spending." Rebuttal: "No! Our national debt is 11 trillion, therefore we need to keep spending!"
There you go. With those precious gems of wisdom, you will forever be an unbeatable debate champion.
Lest you have any doubts about the total economic ignorance that pervades the internet, this should remove any doubts. Consider the following comments that were made by several brilliant men on a certain internet thread.
Still, it's pretty hard to argue with the fact that a wartime command economy putting people back to work like crazy was one of the most instructive case for keynesianism.
I'm a liberal and I'm fairly certain WWII is what got us out of the Depression. Because a whole bunch of jobs opened up all of a sudden, and the unemployed and the technically-not-unemployed ( or did labor stats back then include 'sick of expending effort looking for jobs that either aren't out there or won't hire me'?) became the employed. If we could duplicate that without putting a bunch of people in uniform to go shoot people, we might be getting somewhere.
"The war" was massive government spending, public employment, and even industrial control boards, hardly an indictment of government interventionism.
There you have it, words of wisdom from the intellectually super powered. Now all we have to do is get everyone to dig holes and then fill them up again and we'll get ourselves out of our present economic predicament! I don't have a PHD in economics or anything, but something tells me that that is not how a real economy actually functions.
What these illiterate morons have trouble grasping is that employment is not synonymous with wealth. The two are not totally unrelated, but they are far from the same. Employing millions of people to fire darts at a target purposelessly doesn't improve the economy, it impoverishes it. Government stimulus -- war is a so called stimulus -- is a parasite that diverts resources and human capital away from productive sectors to useless ones. War is an extreme form of parasitism, it only builds to destroy.
Ironically, however, is that even though their reasoning is laughably baseless, their conclusion regarding the historical remedy of the Great Depression is nevertheless sound.
WW2 really did get the U.s economy going, though for an entirely different reason than these clowns would have it. It wasn't the fact that the government employed millions of people during the war time that stimulated the U.S economy, it was the fact that we wiped out the industrial base of Europe and Japan. Our manufacturing industry grew exponentially during the post-war years because we rebuilt Europe's infrastructure for them.
Now that wasn't so hard, was it?