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Saturday, August 9, 2014 - 3:45amSanction this postReply
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Arrrgh. Please delete the other posting that had a similar title (now "deleted").

 

(Edited by Merlin Jetton on 8/09, 7:01am)



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Saturday, August 9, 2014 - 9:41amSanction this postReply
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Is there any merit to the complaint that Austrian economists fail to induce from empirical reality and instead rely too heavily on rationalism divorced from reality?



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Saturday, August 9, 2014 - 10:34amSanction this postReply
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Empirical evidence matters only if you think that facts settle arguments.  Von Mises said that socialists and whatever-he-was usually agree on the facts, that at a certain time and place, a certain commodity had a price.  What they disagree on is what the facts mean.  Note that famously, Rothbard claimed that in a perfect capitalist society, only 100% gold-backed banking would be allowed; anything else would be prosecuted (in a free market court) as fraud.  However, Hayek disagreed, theorizing that a bank could openly and profitably do business in notes of its own that were backed by a market-basket of notes of other banks. They were both theorizing without evidence.  As I have repeatedly pointed out time and time again over and over, numismatics offers a scientific history of monetary media.  That history falsifies Rothbard (who was poor scholar) just as it warns against government-issued fiat currency.  

 

The National Currency Act of February 25, 1863, and the National Banking Act, of June 3, 1864, established a 100% gold-backed independent and competitive banking system.  Signatories deposited at least $25,000 in gold with the U.S. Treasury. The Treasury gave the banks interest-bearing bonds.  Against the principle value of the bonds, the banks could issue notes of their own up to 90% of the value.  Thus, the banks were guaranteed success.  Some failed. In some moments at some places, many failed.  It was a fact that Rothbard seemed not to notice.

 

At the same time, American railroads were pretty much run by robber barons who used influence with state governments to get huge grants of land (one acre or one section) along their rights-of-way. Failure was the norm. Receiverships were declared by courts, often giving control to some or some others who were responsible (or denied being involved) in the failures.  The result was the world's greatest transcontinental railroad system, floated entirely on speculative paper whose value was determined fluidly by the stock markets of the western world.  Even today, Union Pacific common stock has a par value of $2.50, but you cannot get a share for less than $98 at this moment.  (The gang of looters and moochers has paid dividends every year for 109 years.  The price of their stock today reflects a 2-for-1 split in 2008 which was distributed as an extra dividend... without an ounce of gold to their names... )

 

 

(Edited by Michael E. Marotta on 8/09, 10:45am)



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Sunday, August 10, 2014 - 4:02amSanction this postReply
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Is there any merit to the complaint that Austrian economists fail to induce from empirical reality and instead rely too heavily on rationalism divorced from reality?

 

Yes, I think there is. Ludwig von Mises declared that economics is a deductive science and made anti-empirical arguments. On the other hand, the complainers often rely heavily on rationalism divorced from reality by starting with floating abstractions in mathematical form.



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Sunday, August 10, 2014 - 7:33amSanction this postReply
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All I know from Piketty is the introductory paragraph in the Wikipedia biography.  Jean Dixon, Sidney Omarr, ... these people come and go; and like Kim Kardashian or Baby Boo, if you recognize the name as a cultural reference, you know most of what matters.  I once worked a project with a bunch of Indians (who has not?) and it was interestling listening to them talk about their favorites lines by their favorite actors and actresses from their favorite films.  Thomas Piketty seems to be one of the millions who apparently believe that rich people have vaults of cash in which they porpoise around like Scrooge McDuck.  A CEO who earns $10 million per year puts about $9 million back to work, albeit, she sees it as "savings".  I spent some time with T. J. Rodgers of Cypress Semiconductor. He had just come back from Europe.  He was forced to take a stock option. He was then forced to spend the money on consumption.  Anything else would have led to another tax penalty.  So, that money was lost to Cypress or another firm.  Rodgers has a pet solar project.  (Cypress declares energy independence here.)  Even getting a pedicure for your poodle does nothing much for the dog, but does a whole lot of good for the would-be vet working her way through vet school at the petcare boutique. It even goes to pay off the loan that paid the construction workers to build the place.  Follow the money...

 

Now, as for wasting money that could be helping people...



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Tuesday, August 26, 2014 - 6:18amSanction this postReply
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I put my own review of Piketty's book on Amazon. It's in the one-star category dated August 26, 2014.

If you find it helpful, please click the Yes button immediately below it.



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Tuesday, August 26, 2014 - 9:33amSanction this postReply
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"Is there any merit to the complaint that Austrian economists fail to induce from empirical reality and instead rely too heavily on rationalism divorced from reality?"  -- Luke Setzer

 

"Yes, I think there is. Ludwig von Mises declared that economics is a deductive science and made anti-empirical arguments. On the other hand, the complainers often rely heavily on rationalism divorced from reality by starting with floating abstractions in mathematical form." -- Merlin Jetton."

 

Here's how the Austrians would defend their epistemology:  They would say that economics is a deductive science in the same way that mathematics is.  Obviously, both sciences rest on a foundation that is ultimately empirical, because you have to begin by looking at reality, but once you've grasped the foundations of your science, you can proceed deductively.

 

Take, for example, the manner in which liberals argue for increases in the minimum-wage law.  They do so "empirically" by pointing to examples in which increases in the minimum-wage are followed by increases in employment.  Austrians would reply that what the liberals are ignoring is the deductive implications of the law of demand, which holds that, all else being equal, the quantity demanded of a commodity varies inversely with the price. 

 

It's as if a math student were to "test" the Pythagorean theorem -- which states that the sum of the squares of the legs of a right triangle ('a' and 'b' in the triangle shown below) is equal to the square of the hypotenuse ('c') --

 

 

by taking a ruler and measuring an individual right triangle in order to verify that the sum of the squares of the legs actually do equal the square of the hypotenuse, and then having discovered that there is not a precise equality, were to reject the theorem's validity on "empirical" grounds.  

 

It is in this respect that the Austrians see the science of economics as deductive.



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Thursday, November 13, 2014 - 5:54amSanction this postReply
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How to Distort Income Inequality

 

If you are not an on-line WSJ subscriber, the link may only show the start of the op-ed.

 

I'd like to know why Gramm and Solon say Piketty excluded Social Security benefits, but not enough to buy the article from the Southern Economic Journal. Piketty's book only says his data is based on income tax returns and doesn't mention Social Security. I guess he meant adjusted gross income (AGI) for the USA.  AGI includes Social Security benefits to the extent they are taxable. Of course, they aren't taxable to very low income people.



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Thursday, November 13, 2014 - 12:03pmSanction this postReply
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More on Piketty



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Friday, November 14, 2014 - 3:59amSanction this postReply
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Thanks for the link, Reidy.

 

This is the gist of the entire article: Wealthy rentiers and salaried corporate executives may be vaguely unsympathetic groups, but they do not constitute the bulk of rich Americans. In particular, Piketty underestimates the importance of entrepreneurs and business owners.

 

Ayn Rand is mentioned on the last page: Ayn Rand had her protagonists invent amazing sci-fi technology that no one else can replace in order to justify no moral boundaries to the wealth share “creators” claim. That’s all well and good in her stories, but how should we think of distributional issues if the rich don’t invent super-steel and perpetual-motion machines?



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Friday, November 14, 2014 - 11:01amSanction this postReply
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That last sentence that Merlin quoted, leaves me convinced that Piketty is evil to the bone.  He recognizes Ayn Rand's ideas as the real danger to him immoral schemes, and it is clear that his aim is to destroy individual rights so that "theft" is keeping what you earned, and "justice" is taking it away from those who earned it.

 

I listened to one of the Don Watkins videos (from ARI) on Social Security and he took the Progressive scheme back to a yearning for the Garden of Eden - that it was a rebellion against the need to expend energy, against any requirement of personal responsibility, or having to know something and having to take risks.  In this Garden of Eden no effort is required, no knowledge needed, and no risk need be taken... all is provided for you.  But, to get from here to there they need to take from those who have the wealth - these progressives know that the wealth is created by the "creators" and they know that they won't look that moral if they just point a gun and demand the wealth be redistributed. So they create theories of "Social Justice."

 

I imagined these progressives dreaming that they will be carried into their magical Garden of Eden on the backs of magical horses. Not unicorns, but rather a herd of Trojan Horses - each one crafted to look like a deeply 'moral' and caring plan to help the poor, or the old, or the infirm, but on the inside they are just forced redistribution plans.

 

An evil bunch of liars riding dishonest plans to get to a place that doesn't exist because they are frightened of reality, want to be taken care of and resent those who aren't frightened.  Of course the plan can't succeed, except in one way: getting there would destroy those who can create and produce.  And that tells us what we need to know about the dark and ugly inner heart of progressivism.



Post 11

Friday, November 14, 2014 - 12:31pmSanction this postReply
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Binswanger on Piketty



Post 12

Saturday, November 15, 2014 - 7:06amSanction this postReply
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demand curve

 

William:   

 

That most very basic premise of economics -- the sense of that curve above, the fact that it is sloped 'downhill' from left to right, and not 'uphill' (and that supply would have the opposite sense and not only a different slope, but a different sense to that slope -- 'uphill'  --  is -exactly- what Krugman got away with -inverting- in his widely touted liquidity trap paper.     In it, he voodoo'd an uncalibrated  model, the result of which is the claim that in -aggregate-  (not for a specific industry or commodity, mind you, but for 'the economy as a whole' -- both supply and demand have the same sense (or 'slope') and only differ in the magnitudes of their slope.   In his paper, he labels that curve 'Topsey Turvey Economics' because indeed, it is complete nonsense.    Yet, the sense of both of those slopes being the same sign was -critical- to the conclusions he made in that paper, and it was those -conclusions- that he toured the Husting with, beating folks over the head with.   He used it to come up with a self serving political explanation of 'liquidity trap' as well as a self serving political conclusion:  lowering business taxes would contract 'the economy' and raising business taxes would expand 'the economy.'

 

Realize, he wasn't just asserting one of the extremes, like 'a flat slope'  (purely inelastic or purely elastic), but a slope that had actually inverted.   And he claimed this not for a single odd commodity over some narrow range of prices (like 'the cadillac effect', where some theorize, demand might increase with price because there is 'value' purely in the magnitiude of the price paid for something, like conspicuos consumption, 100$ bills as toiler paper)-- but rather,  in aggregate for his entire modeled economy.     And he claimed -- the very opening paragraph of the paper -- that this model and this gibberish represented present day conditions in something these politico voodoo priests like to refer to as 'the' economy,

 

And he totally got away with it.    Nobody questioned the Nobel Prize Winning Princeton Professor (they finally canned him and he's somewhere else hissing his lefty nonsense).  The look on his face as he pulled this off said it all; it was his complete and utter contempt for America.   In his mind, it deserved to be led around by the nose if it could be this stupid in aggregate.     It smacks of an Ivy Leager's idea of a cruel joke.

 

And, here it is:

https://www.princeton.edu/~pkrugman/debt_deleveraging_ge_pk.pdf

 

 

Look at Fig 1. on p 26.

 

 

Read his model assumptions:   "Imagine a pure endowment economy in which no aggregate saving or investment is possible, but in which individuals can lend to or borrow from each other. Suppose, also, that while individuals all receive the same endowments, they differ in their rates of time preference." .... "a pure consumption model without any investment."

 

Translated:  we are all Trust Fund babies who wake up every morning, receive our equal allotment checks in the mail and differ only in our aversion to 'risk' in such an economy as we figure out how to sprint only downhill...

 

What is this 'modeling?'   A lost episode of Star Trek?

 

And yet, here is an assertion at the very opening of this paper:  "We argue that this approach sheds considerable light both on current economic difficulties and on historical
episodes, including Japan’s lost decade (now in its 18th year) and the Great Depression itself."

 

 

This paper is the very epitome of what Feynman warned us all about; it is an example of Cargo Cult Science.     It has equations.  There is math.    There are derivatives.  And it is not only all and totally not calibrated, but not understood or criticised.   It is accepted as proof of some political assertion, borrowing the veneer and look of mathematics, as if tribesmen had stumbled into a crashed Space Shuttle and built a cockpit by copying its appearance from vines and grass and sticks.   And all of that is nonsense, smoke and mirrors to glaze over the few who would ever brave a look at it -- exactly the source of Krugman's contempt.    He is contemptuous of America's on average inability to read or comprehend his borrowed voodoo math and understand the plain English of his model assumptions.   He knows 99% of AMerica will blow by and just concede to the Nobel Prize Winning Aparatchik.

 

And he was totally right.  He got away with it.    His two cents became a widely publicized part of modern political debate.   And it is complete gibberish.

 

Google "krugman minksy liquidity trap"

 

Now consider; how did he get away with this?   It is a failure not primarily of Joe SIxpack American just living his life with better things to do, but of an entire field that yet claims itself to be a 'soft science' and a celebraty adulation reward system that makes Voodoo High Priests out of Fellow Travelers.

 

regards,

Fred



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Post 13

Saturday, November 15, 2014 - 7:21amSanction this postReply
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Steve:

 

Well said.

 

Like children of that imagined once Garden of Eden, now groping for "S"ociety as the parents that no longer feed them in their effortless childhood.   Or worse; children driven by a kind of existential terror at the Universe:

 

'God, don't make me or anyone except the greedy have to take on risk, go to sea(not when there are so many fish already on the dock!), do the math,  or in any way need to run uphill etc., in order to survive in this Universe!'

 

Existentially terrified children who view themselves as waking up on a swamped lifeboat, scrambling over whoever necessary in order to simply to survive, but have their existentially terrified worldview prevail uber alles-- not via free association, but by forced association if necessary-- and in so doing, swamping the lifeboat.

 

When you take every individual out of "S"ociety, what exactly is it that is left?   And, that is what their snickering war on 'individuals' is about.   Because some get to speak for 'the needs' of whatever that residue is, and other's get to provide those needs.  Not by being asked, but by being told...by existentially terrified children.

 

Not via free association, but by forced association.  Based on what authority?   Based on what higher power?   

 

regards,

Fred



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Saturday, November 15, 2014 - 7:30amSanction this postReply
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William:

 

If you take the time to look through his paper, notice how he hand-wavingly 'explains' his 'Topsey-Turvey' results;   by inartfully mixing dynamic with static analysis-- something that would get any sophomore engineer berated.     It is pure Cargo Cult handwaving, complete nonsense.

 

Those curves are conceptually static curves (ceterus paribus) ; shifts in those curves are dynamic shifts(ceteris decidedly not paribus.)    And to explain the 'slope' of the static curve, he handwavingly refers to dynamic explanations.    

 

Nobel Prize winners can get away with that kind of handwaving nonsense in state of the art economics papers, interpsersed as it is with all the borrowed yet uncalibrated math equations.. 

 

Sophomores in engineering would get an 'F'.

 

Nobel Prize Winning Paul Krugman.   "It is possible for more than one nation to manufacture automobiles."    Carve that one in marble.    

 

Yeah, we live in that world.

 

regards,

Fred



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Saturday, November 15, 2014 - 7:57amSanction this postReply
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Fred,

 

Yes, exactly!

 

You asked (rhetorically), "Based on what higher power? "

 

Progressives want to steal from others, they want the control, and one of the things they are after is what they have seen people giving to religion: a sense of duty to make a sacrifice.  They want people to feel that way about their control and redistribution scheme - that it is a duty to go along with having your stuff taken and being told what to do.  Progressivism is about the strange contradiction of not letting anyone know what they are doing, while at the same time making a religion out of going along with it.  It is no accident that religion and totalitarianism are both calls for sacrifice.  The job of taking is much easier if the victim goes along with being a victim.

 

Like you've said, society with a capital S.  Dress up a mish-mash collectivist nonsense as psuedo-science and make it into a religion.  With enough college-level brain-washing and political correctness, Progressivism will become both scripture and 'science'.

 

They've stolen the concept of a con-man's religious scheme and dressed it up as a psuedo-scientific set of beliefs whose real purpose is to be in total charge of all things - not a tiddle of free association to be left.  Things like ObamaCare are Trojan Horses inside of a giant Trojan Horse called Progressivism.

 

When someone spots something on the outside of that horse that is wrong, Progressives just change it to some other poll-tested bit of nonsense, or remove that bit, ignore the criticism, deny any problems and point at the other decorations.... the gig continues as long as no one exposes what is hidden inside the horse.  All of the rest can be adjusted as needed.



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Sunday, November 16, 2014 - 7:59amSanction this postReply
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In the aerospace industry, when there is an inevitable failure, experts in the field rush in and examine the wreckage in detail, with the goal of that same accident never happening again.   The development testing and post failure analysis and attention to detail in aerospace is at a very high self-critical level.

 

The proof of that assertion is, as a result of all that, flying is safer than driving an automobile.

 

Imagine if the aerospace industry behaved like economists;  in the aftermath of a failure, teams of spin doctors would come in and cherry pick the wreckage to spin an excuse favorable to their politics.

 

... and that is exactly what Krugman was doing.

 

regards,

Fred



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Sunday, November 16, 2014 - 9:36amSanction this postReply
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If you schematically represented aspects of our path through life, it could be done with a line connecting possible branch points - points where we went down the path we went down, and the other lines branching out are just short indications of where we could have gone - the other choices we examined before chosing the path segment we chose.  Like a long, crooked vine where all the branches but the main one are broken off leaving just little indicative stubs.

 

What becomes interesting here, at each choice point, are two things: What are the hierarchy of values that would inform the choice made, and/or what are the psychological drives that would push for one or the other paths. (The psychological drive usually lines up with the hierarchy of values in a person that has a degree of self-awareness and isn't in the grip of some degree of neurosis.  And it usually lines up with a person who has chosen their values to suit their neurotic defense mechanisms.)

 

All of that is just as prelim to seeing what happens if lies, as a desireable means to an end, are fairly fundamental in a progressive's hierarchy.

 

Given that, the end of the branching path of a Progressive for political decisions is intended to be the achievement of some form of socialism or another, and each of those choice points that relates to politics will have been made where lies were the early contenders, calling out, "Pick me! Pick me!"  Loud clear calls without any inner moral objections.

 

Imagine Obama and his key advisors during their ObamaCare planning sessions. One of them says, "When people find out they'll have to change doctors, we'll catch a whole ration of shit." Another says, "Look, we need to hide that." And yet another says, "Hey, let's say, 'You can keep your doctor if you want, and you can keep your health plan if you like it. That makes it solid!'" Everyone smiles, recognizing how they have crafted a talking point that sells the plan while using the big-lie tactic to hide a key negative. Choice made.

 

Contrast that with engineers who seek to find and then explain the actual facts.  No wonder our air travel is safe and our governments isn't.



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Monday, November 17, 2014 - 6:57amSanction this postReply
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And if not bad enough, who was Krugman's co-author on this bit of gibberish?

 

Debt, Deleveraging, and the Liquidity Trap:
A Fisher-Minsky-Koo approach

11/16/2010


Gauti B. Eggertsson (NY Fed) Paul Krugman (Princeton)

 

Seriously?   

 

None of us has any real cause to look back on the people in the USSR or Nazi Germany when all the state street theater prpaganda was being played out and wonder, 'How could a nation let them get away with it?  How could they not see it for what it was?'

 

We are the same raw material; we are the same on-average, we are average stuff.   We just need to look at ourselves to understand how that happened.

 

regards,

Fred



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Post 19

Monday, November 17, 2014 - 7:49amSanction this postReply
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"a pure consumption model without any investment."

 

To me, that bit of Barney The Dinosaur worldview so front and center in this serious economic model is a remarkable insight into the cloudy brain of the Left.   

 


"If Only Rain Drops Were Candy Canes and Gum Drops, Oh What A Rain That Would Be!"

 

Economies modeled as 'pure consumption models', where consumption was possible 'without any investment.'

 

 

Whhhhoooooooooooops, There It Is.       The very foundation of the political divide in this nation.     

 

 Krugman's paper was virtually unquestioned, and yet, his conclusions became a part of the media presentation of 'experts' in the field of economics.     

 

Presented by Fellow Travelers with exactly that worldview driving their modern liberal arts addled brains:  Economies modeled as 'pure consumption models', where consumption was possible 'without any investment.'

 

That is some view of the Universe we live in.

 

regards,

Fred



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