Paul Krugman makes a point that many of you have regarded as obvious for months if not years:
A further thought inspired by the meditations that led me to today’s column: I think I now understand the otherwise weird resurgence of paleomonetarism in the midst of a prolonged liquidity trap. It’s not really about analysis, it’s about morality.
You see, if you’re the kind of person who views being taxed to pay for social insurance programs as tyranny, you’re also going to be the kind of person who sees the printing of fiat money by a government-sponsored central bank as confiscation. You may try to produce evidence about the terrible things that happen under fiat currencies; you may insist that hyperinflation is just around the corner; but ultimately the facts don’t matter, it’s the immorality of activist monetary policy that you hate.
Modern conservatives like to proceed from first principles. Printing money is bad, therefore it causes hyperinflation, taxing the wealthy is bad, therefore it hurts the economy, free markets are good, therefore health care reform is bad. Evidence has no place in this discussion, though it can be fabricated if necessary.
Comrade Javamanphil
And every hill is one they are willing to die on (metaphorically, of course).
Suffern ACE
Also, it helps build the hysteria when one can repeat that we are living in Weimar Germany and just don’t know it yet.
Laura Clawson
Totally OT, but I have to say that every time I see “DougJarvus Green-Ellis” I start laughing. Cheers me up every morning.
agrippa
An effective argument requires the combination of fact and logic.
Without any fact, and the premiss is rejected as false, the argument fails.
ericblair
It’s also about morality because your garden variety modern conservative doesn’t understand any of this shit and doesn’t want to. Macroeconomics is difficult to understand and really counterintuitive.
It’s easier to understand shiny metal that you personally want, rather than monetary policy and velocity of money and the actual use of money as a method of exchange and as an implicit claim on the society’s future goods and services. And if you think gold has implicit value, maybe we can dump you on a deserted island with a million dollars’ worth of Kruegerrands and see how you do.
And personally, no wealthy person has ever given me or anyone I know a job. Everyone I know has been hired by limited liability corporations with multiple owners and middle class decision makers, or middle class clients. And they didn’t hire me out of the goodness of their hearts; they hired me because they needed work done and I could do it for a mutually acceptable price. The servile attitude towards the rich is really disgusting.
jwb
The economy as a grand stage for melodrama. One further issue is that most of popular culture narratives, however apparently liberal the actual theme of the story, follow precisely the same terms of melodramatic morality, which makes it really hard to break the habit of (mis)reading real events and actions as portents of an underlying moral universe. Then, too, the alternative that we live in a more or less random and indifferent universe can be very scary, and many prefer a universe ruled by a malevolent god (hence the appeal of conspiracy theories) to a godforsaken one.
jrg
I don’t know about that, Doug… Most investments that can track inflation come with a degree of risk (except, arguably TIPS). I think concern over fiat currency may stem from the frustration that some people have about that – either you subsidize the fat cats on Wall Street by purchasing risky securities that hedge against inflation, or you expose yourself to the dangers of inflation.
Although I think their concerns are overblown, it’s entirely possible that people are frustrated because there is no place “safe” to keep your money. Even if you hide it under a mattress, it’s still going to lose value.
I’m not endorsing a gold standard here, I think that’s a dumb idea – I just think that people may be endorsing it for what they see as “pragmatic” reasons.
Zifnab
Modern conservative thought might proceed from first principles, but the end game is always in the interest of the landed, networked, tribal elite. I’ve never seen a modern conservative support anti-trust initiatives, even though monopolies are clearly anti-free market. Likewise, Medicare Advantage kickbacks to private insurers or Medicare Plan D non-negotiation provisions that jack up the cost of pharmaceuticals are never questioned and often lauded. Subsidies for oil and gas companies are praised and promoted as “necessary”. No-bid contracts are waved off.
The “free market” fetishism promoted by modern conservatives is an illusion at it’s best and a con game at it’s worst.
Conservatives want what they want and they’ll build their arguments up around it. But even their so-called “first principles” are really just a wish list written out by the multi-millionaires pulling the strings.
PurpleGirl
They (the non-liberals) don’t think about all they get (or have gotten) from the current system, but I’d love to have a simulator (or a holodeck) we could put them into so they could experience what it would be like if we didn’t have the systems we do have. They are sure they would be among the winners in any alternate system, that they would still be on top. Myself? My father was a electrician and I’d probably be the candlestick maker’s daughter in the Middle Ages. And since I’m something of an agnostic heretic, I’d be hiding my witchcraft tendencies. At least for now I don’t have to hide.
handy
@jrg:
But there’s nothing inherently more pragmatic about a standard of currency based on a precious metal. That’s the frustrating thing about this whole topic.
Chemist
Post title for teh win!
matoko_chan
first culture intellectuals are a dying breed.
they are anti-empirical.
anti-empirical philosophies lead to the death of empires.
a return to the gold standard is just another ghost dance shirt.
actually, the whole tea party movement is a ghost dance shirt.
it is a fantasy constructed on magical thinking– the traditional reaction of primitives to technology and modernity.
that is why Kos’ book American Taliban is so apt.
the teabaggers are ghost dancers…seeking a return to pre-modern times like the revolutionary war when they ruled the earth– or america at least.
:)
Waldo
I know if i wait long enough, their ideas will start to make sense.
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Hmm…
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Still.
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Nothing
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Dave
Modern Know-Nothings. Fitting that some of the original ones helped form the Republican Party.
Chris
@matoko_chan:
Question, since I’ve seen this in earlier thread. What do the terms “first culture,” “third culture” and all that refer to?
Zifnab
@jrg:
Well, they said the same thing about real estate back in ’03 and ’04. Buy land, it will NEVER GO DOWN IN VALUE! And we all saw how that worked out.
People are trying to be “pragmatic” using common wisdom and horse sense, when they aren’t buying the snake oil sold by the corporate media drones. It’s just Jim Cramer and Jon Stossel leading retail investors around by the nose.
Belafon (formerly anonevent)
As it was put on TV last night: Illinois raised sales tax from 3-5%, and wait for it…nope, the world did not end.
Chris
And I’ve read Krugman’s article, but disagree with him on the basic premise. They think taxes for social insurances are theft? Really? Then what’s with all the people supporting the Tea Party’s line on UHC because they were afraid the government would cut Medicare?
It’s identity politics, not political disagreements, that’s turned the divide into an unbreachable chasm. Disagreements over economic policy are a pretext not a cause.
Dave
If we went back to the gold standard…Europe almost broke the US financial system because they demanded to cash in their dollars for gold. France withdrew something like 175-200M worth of gold. Can you imagine that vulnerability today? Goldman-Sachs would set up some fancy-ass arbitrage computer program and wipe the US out.
Elizabelle
It’s our generation’s** challenge to beat back the ideology that really took root with Ronald Reagan’s ascendance.
It’s rooted in mythology, not fact, and it’s killing any opportunity to deal with really big, really complicated problems facing modern economies and modern government.
We need to somehow engage with our neighbors and relatives and gently get them to discuss honestly — if they will — the evidence and factual underpinnings of what they believe to be true. But which isn’t or is no longer.
And we need to honestly explore and discuss our personal”facts and beliefs” too.
** “Generation Balloon Juice” — 20 to 70+ somethings, armed with pet pictures and snark (optional).
guster
@Belafon (formerly anonevent): That’s my new pet peeve. I haven’t heard a single commentator saying they raised the sales tax two percent, from 3 to 5. Every single time, it’s ‘they raised the sales tax 66%.’
DecidedFenceSitter
OT: And in the theme of things we’ve argued about for years/years ago – the pharmacists who wouldn’t prescribe abortifacients or birth control, now are beginning to not prescribe the drugs that prevent the bleeding that can be associated with having an abortion.
Trinity
DougJ…your post titles are so FTW!
Belafon (formerly anonevent)
@Zifnab:
Q: Why do people think gold is valuable?
A: Because people think gold is valuable.
Lot’s of people like to think that its because its rare and cannot be created so it holds some intrinsic value, but that’s only because they think it does. Having a chunk of gold for the most part, though, is like having a $20 bill and standing in front of a vending machine.
Captain Goto
@Chris: another convenient dodge: it’s not “theft”, in their view of things, if “someone” owed it to them anyway, because they are the Right Kind of Americans. The ones who were
whitesmart enough to have jobs that only they deserved because theywere whitehad basic common sense, andnever took welfare except when they had no choicea strong work ethic.elm
@Zifnab: Your explanation is more compelling than any notion of meaningful “conservative first principles”.
They may argue in the forwards direction (from first principles to conclusions) but within that explanation it’s suspicious that they only ever reach a few conclusions.
It’s more reasonable to posit that they begin with their conclusions and the notion of “principles” is a rhetorical tar-pit. They can waste an infinite amount of your time arguing about interpretations, thought experiments, and what-if scenarios.
The simpler explanation is that they only allow themselves to reach certain pre-ordained conclusions.
lovable liberal
@Comrade Javamanphil:
But they’re willing to send others to die on their hills…
matoko_chan
@Chris: a book.
American libertarians are universally first culture intellectuals. like EDK they proceed from first principles and ignore empirical data……like the fact that conservative ideology doesnt WORK, and actually CAUSED the Econopalypse.
that why any conversation with EDK ends up with him fapping over the markets.
kindness
Jesus, all you have to do is look at the patron saint of conservative/libertarian economists, Ludwig von Mises. He conjures up all sorts of economic theories and brushes off all the empirical evidence that contradicts his theories because, literally, because the empirical evidence doesn’t match up to his theories so the empirical evidence is therefore no good.
Wrap that around your head wrt supposubly educated adults.
Belafon (formerly anonevent)
@guster: Yeah, the first time I heard about the increase, I saw it as 66% as well. My actual first thought was who was realistically taking on their budget problems. Then I saw it was only 2%.
Chris
@Captain Goto:
The nice thing is they can now turn it around and abdicate all personal responsibility by blaming society – the very thing they accuse liberals of. All of them believe that in a fair society, they’d be sitting on top of the world, and the only reason they’re not is because liberals
gave the same opportunity to black peoplemessed with society in a way that denied themtheir birthrightTrue Fairness(TM).All their failings in life, therefore, (not being in the top ten percent of society defined here as a “failing”), are someone else’s fault. It’s the government, it’s too big and powerful. It’s the immigrants and the affirmative action, they’re giving my job to other people. It’s the Muslims, the government’s unfairly biased towards them. It’s the unions, their members shouldn’t get any benefits that I don’t get. Etc, etc, etc.
As Churchill once said of socialism, movement conservatism has become “the philosophy of failure, the creed of ignorance and the gospel of envy.”
Chris
Latest comment in response to Capt. Goto placed in moderation limbo. In a nutshell, it’s hysterical that this view allows them to blame the liberals for messing with society in a way that denies them their birthright. Because today, everything wrong with their lives is someone else’s fault.
@matoko_chan:
Thanks for the explanation.
Sarcastro
You’re being unfair to ED Kain.
DougJarvus Green-Ellis
@Sarcastro:
He’s not a conservative.
ericblair
@Belafon (formerly anonevent):
I’m not an expert in monetary history (although it’s a fascinating subject), but gold as a medium of exchange worked well because it is relatively rare (and the supply is mostly stable); portable; you could detect fraud or adulturation through touchstones; and it was fairly useless for most everyday activities. The last part is relatively important, because if people consistently used it for something it would vanish and stop being a medium of exchange and just be a commodity like wheat or chickens.
It’s not like you’re impervious to inflation with gold or gold-backed currency, either; it just depends whether the supply of gold tracks the size of the economy as a whole. Prices in Spain quadrupled between 1500 and 1600 when they were importing/stealing shitloads of gold from the New World but not really producing other goods and services.
cleek
@Chris:
yes.
liberal
@Zifnab:
Very close, though you’re dancing around the central point.
The central point is rents. Most of the rich got that way by parasitic rent extraction—aka legalized theft.
Monopoly rent is one of the biggies, but not the only one. The biggest is of course land rent (as you allude to).
The fact that non-conservatives overlook or misunderstand (or even reject these points—surely Grandma is deserving of the cap gain when her house appreciates in value!!) these points weakens our stance. If the wealthy really earned their riches, vague arguments pointing to a social contract wouldn’t be all that convincing. The real issue is that the wealthy, for the most part, are that way because of government-granted privileges. And that conclusion follows even without the stupid Proudhon principle of “property is theft”. (The fair principle is rent-producing property is theft, in the absence of high taxes.)
liberty60
This is why there are no “reasonable” conservatives or Republicans left;
The sort of mind that is cautious, skeptical and demanding empirical evidence of ideas is out of place at a Tea Party rally;
This is religious fundamentalism, with Atlas Shrugged as its foundational document.
liberal
@Chris:
Be careful…you might get baseganked.
Zifnab
@Belafon (formerly anonevent):
I saw FOX News blaring about a 66% increase. Sitting in Texas and paying out 8.25% extra on every purchase, I can’t help reach for an Illinois mail order catalogue.
Dave
@Belafon (formerly anonevent): Thank you. This is what drives me crazy about gold bugs. They say gold is valuable because…well, people think it is! How is that any different than saying I believe my $20 is valuable because I believe in its worth due to the faith and credit of the US government? Gold is just a rock when it comes right down to it. A pretty rock, but a rock all the same.
liberal
@liberty60:
AFAICT there haven’t been any reasonable Republicans since around 1994; and the steep decline really began in about 1980.
Zifnab
@liberal:
:-p I don’t think I will ever get that extreme. Yes, on paper you can make the argument that renting out property is inherently unfair. Why should I have to pay a premium for you to do nothing?
But then you have to get into exactly what the value of management is. After all, if I lend you my screw driver for a dollar and you go do a job that earns you $5, it may seem like I’m “stealing” $1 for no labor. But that neglects the labor of the renter – purchasing/creating the screwdriver, storing and managing the condition of the screwdriver, collecting the rent for use of the screwdriver. You’re basically paying me as an accountant, with my job being the stocking, distribution, maintenance, and collection of screwdrivers.
Now, due to local supply and demand, I can certainly price gouge you – charge $4 for use of screwdriver on a $5 job. And if your options are limited or the work must be performed immediately you might be obligated to take the deal. But that doesn’t make the process of rent inherently a theft. It just demonstrates inefficiencies the a real world free market system and the opportunity for exploitation.
chopper
@ericblair:
this is exactly it. the US economy has become so big and complex that it’s near impossible for even an expert to really grasp even a part of it, much less a layman. it’s become like modern physics – it used to be, waaay back in the day, the true geniuses in science were more visionary than anything else, and someone with a good math and science background could understand what they were getting at and how they ground out their results. these days physics is so crazy and hard that you need a phD just to start grasping a lot of the stuff.
when it comes to sciences most people don’t really care too much. but the economy affects our daily lives much more and it’s frustrating to not understand much of any of it. so you try instead to couch it in terms of simple morality.
Chris
@cleek:
Like I said right afterward… then let’s see how many of them would be willing to give up Medicare.
elm
@Zifnab: I would read @liberal‘s use of the term rent as economic rent which is (by definition) non-productive.
Renting out a screwdriver when the supply of screwdrivers-for-rent isn’t constrained doesn’t fall into that category. In contrast, if you had a monopoly on screwdrivers you could charge a higher price which would be considered economic rent.
Mark S.
I remember when Republicans used to like Friedman, but I guess he was too liberal compared to the Austrian school. I only became aware of the Austrian school in the last year or two; they sure as hell never came up in any economics class I ever took. Here’s why:
They’re doing theology, not science. It would be comical if they weren’t heavily influential with one of the two political parties.
Chris
@Mark S.:
Sounds like they’re basically making a theory that’s so vague and broad that they can always claim to be right, which also makes it essentially useless as a tool to navigate economics.
Sort of reminds me of constructivism in IR theory.
Captain C
@ericblair:
It’s impossible to have any sort of reasonable conversation about economics with someone who can’t (or will not) understand the difference between a chemical element and a man-made social technology.
And that’s even before you get into trying to explain that declaring gold to be legal tender is just as arbitrary doing so with federal reserve notes, or monopoly money, or seashells, or even baseball cards.
Judas Escargot
@Dave:
Goldbugs are also just plain wrong/naive: There’s not enough gold on the planet to back all the currency out there.
Hell, there’s probably not even enough gold in the solar system to back all the currency out there.
tractor
I’m not sure whether this post is meant to support the Fed policy, including quantitative easing 2, but certainly a legitimate argument can be made that printing excessive currency can cause a currency crisis (hyperinflation), and it doesn’t help when the government is carrying an oversized debt load. Bear in mind that hyperinflation is a different animal than normal inflation, since the former generally results from a crisis in confidence (suddenly nobody wants to hold the currency), whereas the latter results from too much money chasing too few goods and services.
Whether the CPI or other measure shows inflation currently may not be relevant (today the data did not show inflation).
There are plenty of respectable economic thinkers who think the QE2 was unnecessary and will simply add to inflationary pressures down the line. It is certainly a gift to the financial sector, and you can just look at the stock market to see what they are doing with the money, inflating another bubble.
I don’t know that quantitative easing will cause hyperinflation, but I think it is a legitimate debate. Not everyone who has a problem with the debt or with printing money is a sloppy thinker or an idealogue. Personally, I do think it’s pretty clear we’re going to have a budgetary problem in coming years simply due to Medicare. This is a legitimate problem, but you don’t see much balanced discussion on this blog, because it appears the orthodoxy here is that more spending is good.
Also, this blog seems to put too much confidence in Krugman, who, incidentally, was wrong about keeping interest rates low during the Greenspan years.
The_University_Of_I-da-ho
@Mark S.:
You know who else was from Austria?
I swear, can’t you just imagine what Jonah Goldberg would say if a bunch of liberal economists called themselves the “Austrian School.”
Captain C
@Mark S.:
There, fixed it.
Can we just transfer said economists to the Theology department and be done with it?
TheF79
@Captain C:
The presence of Austrian economists in academic departments is close to nil, I’d say they’re about as rare as Marxist economists. I’ve found it interesting that discussion of “Austrian” economics is several orders of magnitude more prevalent online than in academic journals and academic departments. A casual reader of the interwebs would come to the conclusion that Austrian economics is some huge, prevalent force in the economics world.
Davis X. Machina
@Zifnab:
See, the toilet paper shortages have started already. It’s just like the end-stage Soviet Union.
I blame Obama.
brewmn
FYI, it’s not an increase in the sales tax, but an increase in the income tax in Illinois, so of much greater import (and, in my opinion, a heroic act on the part of our Dem-controlled legislature that may turn Illinois red in two years).
But, yes, it is now a 67%, not a 2.25%, increase every single time it is mentioned, including on our local NPR affiliates. The bias inherent in using the 67% figure makes me want to scream.
Mnemosyne
@TheF79:
So has the University of Chicago lost its pre-eminent place among economists? That would be a relief, because they’re pretty much Patient Zero for the Austrian school.
TheF79
@Mnemosyne:
The University of Chicago is patient zero for the Chicago school.
PTirebiter
And it’s not their own morality that concerns them. It’s yours and mine. Bitter is good.
Turgidson
@DougJarvus Green-Ellis:
Indeed. He’s basically a moderate-to-liberal and even somewhat doctrinaire Democrat who can’t bring himself to say so, based on the “what I’d like to see is…” musings I’ve seen him write. But that’s ok. I’m not a registered D either, despite voting straight ticket in statewide and federal elections. (I’m comfortably to the left of the national party)
El Cid
I agree that their lofty arguments are typically worded and crafted so as to be derived from first principles, but their actions follow pretty much whatever repressive and rapacious and punitive patterns they desire.
Uncle Clarence Thomas
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I prefer to listen to balloonbaggers drone on and on as they proceed from their first principle, ie, that President Obama is a deeply moral man and leader. “Evidence has no place in this discussion, though it can be fabricated if necessary.”
Oops, did I say “drone” out loud?
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Brad
Frankly, taking these “first principles” at face value gives Republicans too much credit. The goal is always to redistribute income upward and the “principles” are just red meat to throw to the teabaggers.
gerry
It’s interesting that it took Krugman so long to figure out that free market economics (and Libertarianism) is nothing but moral philosophy. There is no science in it.