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An Article That Explains Neither Boom Nor Bust

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Anyone who’s interested in failings of empiricism should read the article “Bad Distribution of Income Led to Great Depression: History Repeats in 2008“. It refers to John Kenneth Galbraith’s claims that maldistribution of incomes led to the Great Depression, and was a contributing factor to the Great Recession.

Simply becuase the income share of the rich increases during a boom doesn’t mean that it is a trigger for the economic collapse. In fact, they are more likely to be a consequence of the manic boom than anything else. Without a sound economic theory to underpin discussion of real events, we’re simply going to be stabbing in the dark for cause and consequence.

Written by 20000miles

June 22, 2009 at 4:59 am

Posted in economics, history

Refuting The Irrifutable: A Note On mr1001nights

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I’ve been a long time follower of mr1001nights’ youtube channel, however I never considered discussing his videos at length before. However, his latest piece “Can I wash your car for $10″ warrents a decent response, as it claims to refute several capitalist defences of the market system. For me, mr1001nights’ videos often present more questions than answers and this piece is no exception.

Here, even if I fall short of a complete refutation, I will at least attempt to ask those questions.

Obviously a capitalist at the top of a corporate hierarchy – a corporate empire – with thousands of wage slaves does not compare with John paying Peter to wash his car.

As mr1001nights recognises, individual examples do serve a larger purpose. Robinson Crusoe narratives are particularly useful in stripping down economic ideas into their bare essentials. However it is important to ask: in what sense do corporate hierarchies not compare with John paying Peter to wash his car? Both John and the “wage slave” are being paid a sum of money to perform a particular function on someone elses property using only their labour. Are these both exploitative acts? Is one exploitative and the other non-exploitative? Is one more coercive than the other?

As I have said many times, the objection has to do with subordination to a boss under threat of starvation, poverty and social stigma, which arises out of a class situation.

The above quotation is the crux of most of mr1001nights’ videos. However it is fundamentally flawed as a criticism of market economics. But before I get to this, a short note on coercion.

I contend that the manner in which non-capitalists use the words “force” and “coercion” are fundamentally flawed. As such it is important to challenge them. Force simply pertains to violence against person or property. Nothing more, nothing less. Although many other definitions of “coercion” have been put forward (see F.A. Hayek’s dubious definition), it is the only one that does not devolve into absurdities. Try this on for size: “Women who are single are faced with the fear of being alone, as well as social stigma. Therefore, although entered into “voluntarily” by participants, marriage is actually a coercive institution.”

Secondly, even if we were to acknowledge that “the threat of starvation, poverty and social stigma” do indeed constitute “coercion”, this criticism still fails as a challenge of market economies. Starvation and poverty are not a threat specific to capitalist economies. Humans still have to produce to consume. And despite mr1001nights’ insistence on separating “subjugation of man by man” and “subjugation of man to nature”, he constantly insists that economic scarcity is a strike against market economies. Similarly, in a non-capitalist society – presumably one where consumer goods are available to all who want them – the threat of social stigma still remains as well. In fact, it may well be one of the driving factors in ensuring compliance with social goals.

In short, “starvation, poverty and social stigma” do not disappear in a the non-capitalist society, and mr1001nights, through slight of hand, makes it seem that they are created through class conflict to boot.

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Written by 20000miles

June 17, 2009 at 3:16 pm

Posted in economics

Happy Birthday F. A. Hayek!

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I’ve been looking for an excuse to post this picure of Hayek for weeks now. Hayek’s birthday (May 8th) will do.

The full story of how Hayek had “inflation by the balls” here.

Written by 20000miles

May 8, 2009 at 3:37 am

Posted in economics, news

The [Myth of the] Standard Oil Monopoly

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In an excellent video, Lawrence Reed debunks the case of Standard Oil as monopoly.

The monopoly concept is seriously misunderstood. Rather than sticking to the classical definition; “an exclusive grant to sell given by government”, some believe that it’s something to do with market share.

In the video, Reed cites the recent example of the US FTC, which decided to take on five evil cereal manufacturers on charges of “shared monopoly”. What the hell is a “shared monopoly”? Who knows, but anyway, it’s apparently not cool if five competitors have 80% of the market share of ready-to-eat cereal. But isn’t cereal in competition with fruit, toast, pancakes and bacon?

Also, it was apparently not cool that Standard Oil once fleetingly held 90% of market share, despite having 66 other competitors ready to pounce when Standard slipped up.

The lesson: monopoly has nothing to do with market share as the definition of “market” can be whatever the hell you want it to be.

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Written by 20000miles

April 29, 2009 at 11:22 pm

Posted in economics

Imagining the Unimaginable: Walter Block on Roads

with 4 comments

I have almost finished reading Walter Block’s epic treatise The Privatisation of Roads and Highways. It has been a fascinating read that has answered many of the questions I had about how a free society would deal with the insurmountable challenge of private road ownership. Here I will do my best at channelling David Gordon, and summarise the book.


The central pillar of the book is extremely straightforward:

What reasons are there for advocating the free-market approach for the highway industry? First and foremost is the fact that the present government ownership and management has failed. The death toll, the suffocation during urban rush hours, and the poor state of repair of the highway stock are all eloquent testimony to the lack of success which has marked the reign of government control. [p. 12]

Block argues correctly that the government, lacking the profit and loss mechanism, can never be fully motivated to alleviate the problems on our roads. The government will never be financially punished for poor management decisions. It cannot go bankrupt like a private business owner can. Therefore, the chief cause of all misery on our roads is due to government ownership of roads. Block goes on:

Now consider the case where a restaurant goes out of business. The proximate causes are badly cooked and cold food, surly service, dirty conditions, lack of personal safety, poor decor, etc. But the ultimate responsibility, surely, lies with management. It and it alone failed to hire good cooks, to ensure that the waitresses, busboys, cleaners, bouncers, interior decorators, exterior architects, etc., did their assigned tasks in a satisfactory way. [p. 186]

The restaurant analogy is one of the recurring motifs of Block’s book. It is an excellent illustration of Block’s secondary point: proximate vs. ultimate causes. Block argues that instead of focussing on the ultimate cause of road fatalities – government manangement of roads – economists have been too concerned with the proximate causes – drink driving, speed and driver error. The solution to the road problem is the to allow the same market system that provides us with computers, cars and houses to provide our roads.

Read the rest of this entry »

Written by 20000miles

April 29, 2009 at 7:03 am

When Textbook Macro Fails

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Writes Dani Rodrik:

The surpluses accumulated during the good years has given the Chilean government unusual latitude in responding to the crisis.  As a result, the economy is doing much better than its peers.  As Bloomberg reports, “the country’s economy is expected to grow 0.1 percent in 2009, as the region contracts 1.5 percent, according to the International Monetary Fund.”

And does good economics pay off politically?  Eventually, yes.  Five months after being burned in effigy, Velasco is currently President Bachelet’s most popular minister.

Perhaps “macroeconomics” only applies to South American countries. But elsewhere…

Saving for a rainy day...

Saving for a rainy day...



Spending like there's no tomorrow


…and I’m sure there are plenty of other examples.

Seriously, I’m getting tired of all this. If our biggest economic problem is governments not spending enough money, then I think we have it pretty good.

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Written by 20000miles

April 24, 2009 at 7:16 pm

Posted in economics

More about Ireland

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Two more articles on the state of the Irish economy.

First up is Paul Krugman’s “Erin Go Broke“. Nothing really surprising; he laments that the Irish government isn’t able to destroy stimulate the economy. Writes Krugman:

But there’s more to it than that: to satisfy nervous lenders, Ireland is being forced to raise taxes and slash government spending in the face of an economic slump — policies that will further deepen the slump.

Next up is John Engle’s “Celtic Kitten: The Failure of Intervention in Ireland“.

Apparently the cure to the social ills brought on by insatiable public spending is simply more public spending. Only now, the money being frivolously dithered away is not from a surplus but borrowing from the future….The government’s only remedy seems to be even further government involvement in the economy. Already it is on the way to nationalizing its major banks and the aforementioned artificial propping up of the housing market.

Good to see an Austrian presence at Trinity College!

I’d also like to remind anyone interested in discussing classical liberal, libertarian and conservative views that our Forumotion message board is the place to do it. All welcome.

Written by 20000miles

April 21, 2009 at 11:13 pm

Posted in economics, Ireland

All About Ireland

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CNBC has a spectacular powerpoint of the world’s top 15 debtor nations. External debt is measured as a proportion of GDP. Guess who’s number one?


With an external debt 811% of GDP, Ireland is head and shoulders above second place the UK (336%) and third place Belgium (327%).

I want to feel irrationally exuberant again.

Written by 20000miles

April 21, 2009 at 5:34 am

Posted in economics, Ireland

Pot Pourri

with 2 comments

Here is Thomas E. Woods’ speech on the 1920-21 recession. I can’t stop raving about it.

I’ve recently discovered the wonders of Scribd, which allows users the freedom to view, upload and download entire books online. Make sure you have the copyright holder’s permission though!

I uploaded Doug French’s Speculative Bubbles and Increases in the Money Supply, and Walter Block’s condemnation of road socialism The Privitisation of Roads and Highways.

Speculative Bubbles and Increases in the Money Supply – Douglas E. French

The Privatization of Roads and Highways – Walter Block

I hope to tackle Block’s book in the next few days.

Written by 20000miles

April 12, 2009 at 7:27 pm

Posted in economics

Test Post

with 6 comments

Hey Graham & Brian, I’m gonna try and attatch a script that will add various buttons to the bottom of this post. Here goes:

On further reflection it appears I’m incompetent at adding links and codes that link to the post in question.

Ok, now I appear to get the gist of this. I have managed to get the “Share and Save” button to link back to one particular post. As far as i know, Wordpress does not allow automatic share button additions to blogs. So we have to do it manually each time.

Here’s what to do if you want to add the button to your posts…
1. publish your newly written post
1.1 highlight and copy the button in this post
2. click “Edit” in your newly written post
2.1 paste the button at the bottom of newly written post
3. go to HTML view
4. in place of POSTTITLE, write the title of your post eg. “It’s Just Harmless Counterfeiting”
5. in the place of, paste the link of your post eg.

Then you will have a button that will allow people to share the post on 2 dozen sharing sites. I don’t an easier way to do it though.

What do we think of this?

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Written by 20000miles

April 8, 2009 at 11:41 pm

Posted in Uncategorized


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