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Economists fiddle with theory as world burns

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Andy Mukherjee (The Straits Times)
The Asia News Network
Thu, 10/06/2011 10:46 AM

Civility has been one of the less-mourned casualties of this financial crisis.

Radically different viewpoints on what will put the world economy back on a stable growth path have split the profession of economics into two warring tribes.

You are either with Mr Paul Krugman, the Princeton University professor who won the 2008 Nobel Memorial Prize in economic sciences for his seminal work on trade theory, and a few like-minded economists of deep Keynesian persuasion. Or you are their enemy. There is no middle ground.

Most people equate Keynesian thinking with government control of the economy. The more modern variant of the economics profession that seeks its inspiration in Adam Smith’s invisible hand is equated with private enterprise and free markets.

That is a caricature.

The real difference is that Keynesianism, with its roots in the Great Depression of the 1930s, is concerned with the here-and-now of an economy: When Keynesians see a fire, they want to put it out first and ask questions later.

The non-Keynesians believe that the present is inexorably connected with the future, and unless one can permanently change expectations about the future, tinkering with the present makes no sense. Putting out a flame in one corner of a burning building merely brings the blaze back in another.

It is one thing for physical sciences to live with sharp differences in opinion. Whether light is particle or wave was hotly debated for four centuries. But Mr Thomas Edison’s light bulb did not have to wait for that debate to end.

By contrast, economics is a social science that allocates resources between members of a society and between today’s citizens and future generations. In the absence of a theory that justifies why Peter must be robbed to pay Paul, elected politicians have no basis to enact policy.

Say, United States President Barack Obama, desperate to stimulate the economy, faces a choice. He can spend US$1 million to build a road by taxing Mr Warren Buffett, or he can give Mr Buffett a US$1 million tax break. Mr Obama should select the course of action that gives a bigger boost to the economy. But do tax cuts have a bigger multiplier effect than government spending?

Sadly, economists cannot agree. Indeed, prominent economists like Mr John Taylor, who worked in the George W. Bush administration, did not even buy the claim in 2009 by the Obama economics team that a 1 per cent increase in government spending would increase inflation-adjusted US gross domestic product by 1.6 per cent from what it otherwise would be. The effect would be much smaller, he said.

When Mr Obama recently presented a proposal for cutting payroll taxes, Mr Taylor expressed doubts about Moody’s Analytics chief economist Mark Zandi’s claim that it will create 1.9 million jobs.

“This is the same type of model simulation that predicted the very similar 2009 stimulus package would create millions of jobs, and the same type of simulation that claimed that that package worked,” Mr Taylor noted on his blog last month.

Mr Krugman agrees that the Obama stimulus did not do the job. But in his opinion, it was too small to work.

Nowadays, Mr Krugman, who writes an op-ed column in The New York Times, uses his blog to rain punches on anybody who dares to disagree with Keynesian prescriptions for fighting the economic inferno. As the crisis has deepened, the list of his enemies has grown.

Those at the receiving end of his blows include former Fed chairman Paul Volcker, who recently wrote that the US Federal Reserve was sowing the seeds of future inflation. “Volcker, I am sorry to say, is worrying about refighting the 1970s when we are actually refighting the 1930s,” Mr Krugman responded.

In the 1970s, the US experienced economic stagnation along with galloping prices. Mr Volcker raised interest rates all the way to 20 per cent to kill inflation.

The other side – the non-Keynesians – is not taking Mr Krugman’s assault lying down. “Paul isn’t doing his job. He is supposed to read, explain and criticize things economists write, and preferably real professional writing, not interviews, op-eds and blog posts,” said University of Chicago economist John Cochrane.

The US is hurtling towards another recession, Europe is flirting with a sovereign-debt meltdown, China is slowing and the rest of the world is looking to economists to show the way. And here is what Mr Krugman and Mr Kenneth Rogoff, a former chief economist at the International Monetary Fund, were debating around mid-August on the CNN show Fareed Zakaria GPS:

Mr Krugman: “If we discovered space aliens were planning to attack and we needed a massive build-up to counter the space alien threat, and inflation and budget deficits took secondary place to that, this slump would be over in 18 months.”

Mr Rogoff: “And we need Orson Welles, is what you are saying.”

Mr Krugman: No, there was a Twilight Zone episode like this…”

Now, The War Of The Worlds, the radio drama about an alien threat that Welles directed and narrated, spooked Americans by its realism. Equally startling is this war of words between economists. It is turning sillier by the day. The debate is now so caught up with settling scores that men with practical ideas stand no chance of being heard. That is dangerous for policy.

The global economy is seriously ill, and the doctors are debating whether John Maynard Keynes was right to assume that consumption was a function of current income or whether Milton Friedman’s intuition that consumption depends on a consumer’s sense of her “permanent income” is a better theory.

The society at large has to express its disappointment: The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, which is due to be announced on Monday, must be axed. It will not be, but it should.

Anti-intellectualism is an ugly trait. But with their bloodletting, economists have left us with little choice.

Original Article

Washington Declares War on Texas!

4/26/2011, 10:31 pm

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It is time for great rejoicing. Washington has at last declared war on Texas. It is not a war of guns but of regulations, which is war by other means.

Some Esteemed Comrades may not realize that I live in Texas. There. I feel better. I came out. This Bruno bit is nothing, but I’ve been hiding my red soul under a potato basket from some of the people here at the Karl Marx Reeducation Center.

Our glorious environmental friends have discovered the sand hills lizard, which is 3” of sheer bliss. It is thought to exist in about five West Texas counties and three New Mexico ones, and being a lizard, it is more important than any of the citizens there, or the economies of Texas and New Mexico. Which is as it should be. Ten million acres and billions of wealth held hostage to a lizard. Wipe your eyes, comrades: it gets better. Better yet, get a fresh cup of borscht, and yes, it’s worth the splurge.

We are in the process of holding meetings to see if the lizard is endangered. I am confident that it will be found to be endangered: it has no use whatsoever; everyone has seen thousands of them; and so they are perfect. Their complete and total unimportance is the perfect excuse for war.

If we are lucky in our hearings, the lizard will be considered an endangered species, and that will occasion a two-year study on the impact of, well, work and living, in West Texas and New Mexico. For two years there will no farming or ranching. That’s one excellent way to make people quit eating the beef that they like: let the cattle starve in a pen for the rancher can’t buy food for them, or have a forced sale at giveaway prices. This is sure to ruin the rancher.

Ranchers and farmers are being cursed by Gaia now, in the worst drought in fifty years. That’s why we have these wildfires. Many ranchers and farmers have taken mortgages on their land, often underwritten by the government, that they will not be able to repay. Often the government, very wisely in my view, let them borrow much more money than the collateral would bear. It’s not about being a prudent lender. It’s about taking OPM by force and lending it under circumstances which can succeed only if nothing goes wrong.

Fortunately for us, things always go wrong, and if they don’t, we’ll see to it. Misery for all, all for misery! When the land is foreclosed, it will be worth virtually nothing because of the prohibition on ranching and farming. Not only will the government have managed to waste the money it lent, it will acquire property whose value it destroyed. This is brilliant collectivization. The counties’ tax bases will be corrupted, as the property will be exempt from taxation, and since the other property values will plummet, see below, this will further harm the local governments’ abilities to extract as much money as possible under circumstances as unpleasant as possible while they still stay in office. By whatever means. No tapeworm ever feels overpaid or unwelcome.

The laying of pipelines across the property will be banned. Any hydrocarbons will have to detour around the lizard’s putative range. This will add to the cost of gasoline, which is just what President Obama wants. If the winter is cold in the northeast, gas might be scarce, and there is little need for those gas-fired power plants when we can have wind turbines which turn when it is still, and they will after the CBO decrees it after we wave our Prog Wizard’s wand. You know, the one that Paul Krugman sells on late-night infomercials.

There will be no seismic work to prospect for minerals. It might hurt the lizard. But this is fine because all drilling operations shall be curtailed. Two of the Texas counties alone provide 20% of the oil and gas that Texas produces. I wish it were more, to hurt people more. There. I’ll come out again. I’m a made prog and I love to hurt people. That’s why I’m a made prog. Oh, that and self-righteousness and unlimited self-entitlement. That’s why I’m Father Prog Theocritus. If I weren’t I, I’d shoot me.

The value of the mineral owners will be destroyed. And most of them are just people who inherited them. Blameless people. They have to go. Seize their wealth—for they’re oil barons.

The economies of those counties will be destroyed, forcing house foreclosures and vehicle repossessions. Property values of houses will go into free-fall. I have seen houses sell for half the mortgage, and that was in times which will seem good to the ones we can have here. There will be no takers of the foreclosed homes. The lender will sue the borrowers for a deficiency judgment, which they will have to declare bankruptcy to avoid, and this is wonderful because they’re sued and it’s not their fault. They were making payments before they lost their jobs. The jobs they sedulously went to in a vital industry, but then again: working people, vital industry. What is that compared to a lizard and my self-righteousness? See how good it is? It’s like shocking the dog at random times. Soon the dog gives up and doesn’t even try to avoid the shocks. But these are bitter-clingers and so must be made to pay as Lord Obama flies overhead on another vacation. Perhaps he can arrange for the sewage of Air Force One to fall onto a Texas county. How lucky the county would be. And a presidential turd! Be still my beating heart. To think that he shit on us in fly-over country while his government was ruining the bitter clingers who are making money and not consuming it. Yet. It is pure manna from heaven.

More work for attorneys, our party’s biggest contributors. At times I think that maggots could go to law school and learn things.

The roughnecks working on the rigs will be fired. They’ve just bought new pickups to replace the old ones that they had, since the chance of employment, and overtime, and Sunday work, was so high. Also roughnecks tend to live life immediately. They often spend money when they get it, not knowing where they’ll go. Not only will this get them, but then the people who put money away will be destroyed by the inflation coming from the printing presses. See? We’ve got it all. Destroying the impetuous and destroying the prudent. The only safe existence will be, are you ready? Working for government, which is of course all that matters. Government = slavery in the Perfect Prog World. All for the Democrat Party, nothing outside the Democrat party. With this logic alone you can plan re-education camps.

These pathetic red-staters will not be able to service that debt and the pickups will be repossessed. This will cause a glut of pickups on the Texas market, causing even Government Motors to have to cut back on production, although I must say that in the last year I have been seeing more Ford pickups. I don’t know why these roughnecks prefer the only auto company that didn’t take money from them by force. That’s reasonable and oriented toward their survival, meaning that of course it’s wrong. De facto wrong, but de jure right. After all, isn’t the First Church of Gaia all about de jure right? How else could we make people do things that make no sense whatsoever? De facto? It is to laugh. De jure? Bend over, baby, and get used to it. You’ll have a Ford F-250 there next. That’s the only way you can keep it. De jure right = de facto might.

I do worry though about those roughnecks who love guns. I don’t know why: the Second Amendment is obviously misread, and ought to read that the citizenry must be unarmed at all times, and only the government militia can have arms. The Bureau of Land Management has taken to wearing side arms. [ This is true. ]

The bitter-clingers must be disarmed before anyone can play them the Sierra Club commercial asking terminally ill people to take out a dam as they die. Because that sort of speech is so very reasonable coming from our sort, and pardon me while I sniff, but it’s fascist when coming from anyone who is not quite our sort. Bear in mind, we don’t like guns unless they’re guns our goons are holding on evil people. For which read anyone who is responsible, works, and loves this country. Because that self-sufficiency won’t do.

And in counties where the lizard is thought to be, we can use the lack of a lizard as proof that it is endangered. On this logic we can look for penguins or lantern fish in any county in Texas and do it again. After the second time, it’s easy. Remember dear Karl’s dictum that history repeats itself the first time as tragedy, the second time as farce. We can play this Washington farce county by county until the entire state, the red state, I remind you, is immiserated and immerded. Which Texas ought to be, because it didn’t see the greatness of Lord Obama, and may his feet never touch the ground. He could even shit on us without being in Air Force One. Well, his government is trying to. Such heaven.

There we have it. The destruction of a huge chunk of the Texas and New Mexico economy. Foreclosed ranches and farms. Foreclosed houses. Repossessed vehicles. Plummeting property values. Legally acquired assets which cannot be used. Complete and total human misery for a state which did not vote for Lord Obama and which has taken the entirely mistaken view that Washington is where the Sons of the Boys from Brazil came to live. A Texas which ignored Washington as much as possible—that’s the crime of course—and was doing better for it. A low-tax and low-service state. Kill it. Take it behind the barn and kill it with an ax. Can’t let them get uppity; more Californians might want to move there, but they won’t, when the economy tanks.

Then when the government has bankrupted the agriculture and oil businesses, it can declare the lizard to be at sustainable levels. Lenin forfend that we not have an adequate supply of sand hill lizards; might need to put them in say Utah to steal the property there. The government can either keep the property or sell it, with restrictions on drilling rights, further alienating the owners of the minerals from their property. A private citizen can’t do that. But what’s with private property? This is the first step toward its elimination. Oh. The tenth step. Do I hear thousandth?

The crippling of the counties producing 20% of Texas’ oil, and the best oil counties in New Mexico and just as the oil companies had discovered the technology for producing whole new fields to lower the price of gas.

Anticipate the skyrocketing gas prices. Could we get to $8 a gallon? I surely hope so. After all, Lord Obama’s Secretary of Energy wants European gas prices, but then the entire cabinet wants European stagnation and collectivism, as a pit stop on the road to serfdom because nothing will serve until each of has has its own STASI agent.

Pardon me, comrades. This is such a heady draught that I’m squirming in my seat at the utter and complete fulfillment of the progressive fantasy: the ruination of other people’s lives under banner of saving something entirely useless. Was there ever greater power? But I get to feel good about being the meanest person in America, next to Lord Obama.

There. You have it. A lizard will bring down the most vibrant economy of all the states. A lizard will make gas prices jump. A lizard will derail the economy. A lizard will pull Texas’ teeth.
A lizard. A 3” lizard. A completely unremarkable lizard will destroy the usage of ten million acres of desert land sitting on top of oceans of oil and gas. A lizard.

All hail the lizard king! It wins over the bitter clingers every single time. As long as it has the Washington thugs in its corner.

Sorry. This is too much prog happiness. I’ll see you later after I clean up and bite the heads off kittens. Such a wonderful snack. I love deep-fried kitten heads, wrapped up in copies of the Constitution, which I then use to take care of the remains of the last batch of deep-fried kitten heads.

Original Article

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