Posts Tagged stimulus
“The only one with the power to create presents out of thin air is Santa himself.”
Or, if you prefer an even more sobering realization, there’s always the Creator himself.
Check out this new video from the brilliant folks at EconStories.tv:
From the EconStories.tv website:
Recovery and growth in the classical and Austrian view is driven by restructuring production so that entrepreneurs discover again the best — i.e. the most valuable and sustainable — ways to serve customers. That process is lead by new entrepreneurs and driven by savers who make capital available to fund new investments and new ventures. Sustainable saving and investment means creating more value for others while using fewer resources. This process lies at the core of healthy economic growth, including better job opportunities and Read the rest of this entry »
In a previous post examining the scientific pretentions of many atheists, I briefly mentioned that “in economic science, we are constantly confronted with theories and policies based around a denial, dismissal or subversion of the spiritual side of man and nature.”
F.A. Hayek would call it “scientism,” which, in The Counter-Revolution of Science, he describes as a “slavish imitation of the method and language of science” — one that improperly conflates the physical and the nonphysical. (Hayek would be unlikely to use the word “spiritual,” as I most often do.)
This week at The American, Arnold Kling explores the approach as it relates to your typical economist’s faith in macroeconomic models (and the media’s lemming-like trail behind him).
How many jobs will the latest stimulus package create? What will it do to GDP?
For answers to questions like these, the press always turns to the usual suspects: the proprietors of macroeconometric models, which are maintained by some economic consulting firms and by the Congressional Budget Office (The Federal Reserve Board also maintains a model, but the Fed tries to refrain from injecting its model into fiscal policy debates.)
I think that if the press were aware of the intellectual history and lack of scientific standing of the models, it would cease rounding up these usual suspects. Macroeconometrics stands discredited among mainstream academic economists. Applying macroeconometric models to questions of fiscal policy is the equivalent of using pre-Copernican astronomy to launch a satellite or using bleeding to treat an infection.
If you aren’t aware of the “intellectual history and scientific standing” of the models, Kling is glad to inform you, and does so with precision. His conclusion: “economists must be more forthcoming about what they can and cannot estimate.”
This means no more guarantees of “X number of jobs by year Y-thousand.” This means no more predictions of “gas at $Z per gallon” if you choose candidate W. This means no more manufactured certainty (gasp!).
Kling closes with this handle:
Imagine if somehow we knew how to launch satellites but still believed in pre-Copernican astronomy. We would have no choice but to send satellites into space using Read the rest of this entry »
Today at Ethika Politika I talk about the difference between artificial security and authentic struggle. As individuals, families, and communities, what is at stake?
Here’s a tidbit from the article:
We all want security and we want it now. It doesn’t matter if real value is being produced or if efficiency is being maximized. It doesn’t matter if a price floor is set, a dying industry is being propped up, or our neighbors are being forced to pay for it. “Just stop the bleeding,” they say.
We all want some kind of assurance – some tangible, visible, immediate sign – that everything will be okay. Thus, we are usually content if getting that assurance means settling for the artificial.
Bastiat talks about “man’s necessarily painful evolution” from ignorance to foresight — a struggle that eventually leads to authentic prosperity. Economics aside, what do we sacrifice when we cower from such a struggle?
To read my answer, check out the full article.
Wealth [not earned but] won in haste or unjustly or from the production of things for vain or detrimental use [such riches] will dwindle away, but he who gathers little by little will increase [his riches].
This would apply to plenty of other get-rich-quick-schemes, but our country seems to have bought into the faulty Keynesian notion that the government can cure bad decision-making by centralizing it.
In short, the government’s attempts to “create” wealth amount to what Solomon calls “wealth won in haste.” Governments are certainly capable of using some funds wisely, but this is rarely the case. Plenty of Keynesians would say this is primarily about stabilization, but even if that’s true, what are we trying to stabilize?
In the end, ours is a system that is overspent and spoiled.
Basically, there isn’t much point to “stopping the bleeding” when the body has too much blood in the first place. (Yes, it’s a problematic metaphor to begin with, but that’s my point.)
What I want to get across is that most long-term economic improvement takes time. There will be economic booms and times of rapid expansion, but that usually has to do with incremental (read: “little by little”) improvements made among free individuals.
Bolstering trade and innovation may not be as Read the rest of this entry »