Archive for the ‘USA’ Category
With thanks to Wicklowwolf over at Freedom Ireland.
Ever taken a statistics course? Most stats lecturers devote a special moment to highlight how statistics can be misused. For instance my tutor once showed us a graph like this:
We can clearly see that there’s a correlation between ice-cream consumption and deaths by drowning. But what can we infer from this? It’s possible that eating ice-cream causes drowning (due to stomach cramps while swimming). It’s also vaguely possible that drowning deaths cause increased ice-cream consumption (mourning relatives might go for an ice-cream to cheer themselves up). However the most sensible explanation is that both ice-cream consumption and drowning deaths increase is due to another factor: the weather. People eat more ice-cream and go swimming more often in summer.
However, such a straightforward explanation is hardly ever seen in economics. The empirical approach often remains unquestioned. Consider this syllogism: in the past, taxes were low. Today, taxes are high. We were poor in the past but now we are rich. Therefore, increasing taxes causes prosperity. Such a view is completely ridiculous, yet almost completely unquestioned.
Or take the suggestion in the graph below. Income inequality sharply increased before two major recessions. Therefore it’s fair to assume that one causes the other.
Milton Friedman’s Free to Choose was one of the first books on libertarian political philosophy and market economics that I ever read. It’s an excellent chronicling of the economic and social decline of the United States (which has unsurprisingly run parallel to its embracing of ever more socialist policies). Here are two videos doing the rounds at the moment that go into some basic Friedmanite concepts.
One of the main arguments that stimulus proponents have been making is that there are “idle resources” in the economy right now. Our productive capacity has not changed and our labour force has not lost its skills – yet these factors of production are laying idle. Thus, the government must “stimulate” these factors back into productive use. Any government spending cannot possibly “crowd out” private spending, as there is literally nothing to crowd out. Unfortunately, there is little explanation of why idle resources have piled up in the first place.
Here I will cite Peter Schiff, Tom Woods and Robert Murphy as to why resources are suddenly idle, why stimulating these resources is undesirable, and why targetting idle resources can’t possibly work.
I’ve discovered a fantastic new website called KhanAcademy.org. It’s an awesome organisation that aims to provide “a high quality education to anyone, anywhere”. It’s has video lessons on everything you want to know about maths and physics, as well as a mean finance and banking section. Sadly there’s no pure economics section…yet.
Here are the Khan Academy’s concerns about the Geithner plan (Hat-tip to Karl Deeter)
Here is Jill Kirby on Morning Ireland discussing the Austrian approach to handling business cycles.
Here is Karl Whelan of irisheconomy.ie on the matter. It appears he posted the link so everyone could get “some entertainment” from the clip. I’ve made a few comments below Whelan’s piece.
Note: RTE requires RealPlayer.
*Edit: Ok, after listening to the clip a couple of times I noticed a couple of things. First off, I noticed that the presenter placed a large amount of emphasis on “suffering” through the recession. This is sneaking in morality tales in by the back door. It’s not unusual to criticise the Austrian response to recessions this way. For instance see Krugman: Read the rest of this entry »