Wednesday, July 28, 2010

Another Empty Slap at Ayn Rand

In an otherwise interesting analysis of the evolving Tea Party Movement, Doyle McManus throws out this cheap shot:

"Tea party candidates Sharron Angle in Nevada and Rand Paul in Kentucky have both derided the unemployed as victims of their own laziness, a position that doesn't play well beyond the Ayn Rand right."

The utter disregard for the truth readily on display by the Anti-Ayn Rand Cult is tiresome, but I fired off this rebuttal anyway:

MikeZemack wrote on 07/28/2010 07:54:45 PM:

Where is the evidence that Ayn Rand ever endorsed a shallow, generalized viewpoint that “derided the unemployed as victims of their own laziness”? As a committed Objectivist, I could tell you that there isn’t any. It looks like a bit of guilt by association going on here. While laziness might be true of some of today’s unemployed, including the idle rich whom she disdained, Ayn Rand would have rightly viewed most as victims of disastrous government policies, although she would not hold them totally blameless if they supported the policies that led to their unemployment. She was a true champion of the middle class, which she viewed as “a country’s motor and lifeblood”.

As to “the Ayn Rand right”, there isn’t any. Today’s American right is dominated by the Christian conservatives and to a lessor extent the libertarians, both of whom stand philosophically opposed to Objectivism’s most important metaphysical, epistemological, and ethical essentials. It’s true that many on the right will wave the Ayn Rand banner when it suits them, cherry picking isolated out-of-context bits and pieces of her idea system. But you will learn little about her thinking by paying attention to Angle or Paul.

As to Mr. McManus and his ilk, ad hominem and straw man tactics are common methods of attacking Ayn Rand, because they dare not confront her ideas openly and honestly. This sort of empty, backhand slap at Ayn Rand is typical of those who simply can’t refute her ideas.

Tuesday, July 20, 2010

Economists Call for More Demand Stimulus

In an open letter entitled, GET AMERICA BACK TO WORK, 16 prominent economists called on the federal government to enact yet another "stimulus" package to spur "demand". This is supposed to make up for the lost purchasing power of the unemployed.

"The urgent need is for government to replace the lost purchasing power of the unemployed and their families and to employ other tax-cut and spending programs to boost demand. Making deficit reduction the first target, without addressing the chronic underlying deficiency of demand, is exactly the error of the 1930", they said, forgetting the lessons of the Great Depression - the crippling activist policies of the Hoover and FDR Administrations.

I've left the following comments:

4:32 pm, Jul 20, 2010


I have a better idea. Instead of another government stimulus package, why not just legalize theft. Everyone can then be free to rob his neighbors, as long as he spends the loot. That would create plenty of "demand", be more efficient because it would cut out the bureaucratic middleman, and be more honest and straightforward than having our politicians do it for us.

Of course, that wouldn't work any better than government spending, for the same reason. Legitimate, private sector demand has a fundamentally different origin than "public demand".

As any honest consumer knows, you need to earn some money before you go to the store. Money must be made, before it can be spent. "Consumer spending" is really a trade between two producers - the buyer who earned the money, and the seller of goods and services. Private consumers add to the pie, before they take a slice.

Politicians who promote stimulus programs ignore or evade the first part of the trade that makes consumer spending possible - the earning part. This fact exposes the crucial difference between consumer spending and government (or government-induced) spending.

Every time the federal government creates another program to stimulate demand (or consumption), it does so - like a thief - by seizing the earnings and savings of the nation's productive citizens through taxation, deficit spending, or inflationary printing press money. Posturing politicians seek to make us more prosperous, through policies paid for out of our own money and financial nest eggs. Unlike private consumers, the government doesn't "earn" its money.

Stimulus always fails, for this very reason. Private consumers work for the money they spend, thus producing their own demand. Stimulus politicians - from liberals like Obama to psuedo-conservatives like Bush - do not create demand. They simply steal it.

The source of consumer spending is productive work. The source of government demand-side stimulus policies is economic plunder.

Of course, understanding this requires logic, or at least basic common sense. Keynes ignored both under his creation - macroeconomics, the field that studies economic activity without focussing on actual human beings - because he was fundamentally a statist. Politicians ignore both, and follow Keynes, because it satisfies their powerlust and craving for a pat on the back for "doing something". The economy gets damaged long term, but Keynes had the famous answer, the height of immoral irresponsibility: "In the long run, we are all dead."

Thursday, July 1, 2010

"Consumer" Spending vs. Government Spending

Dublin's economy could teach U.S.

That's the Title of the NJ Star-Ledger's July 1, 2010 editorial imploring us to learn the lessons of the Irish government's attempt to pull that nation out of a recession. The Editorial Board writes:

"The Irish didn’t hesitate. In a let’s-get-this-over-with-quickly move, they slashed public spending and raised taxes, the standard recovery recipe of deficit hawks at the International Monetary Fund. The result? Even worse economic shrinkage."

Who knows what the complexities of the Irish economy are. Since the SL is in agreement with the Irish that taxes should go up, they've narrowed down the differences between the two countries to one of government spending. Now, there is no doubt that, when government spending consumes a quarter to a third (or more) of the nations economic output, changes in its budget expendatures are bound to have an effect on the economy. The Editors believe more government spending is the answer, because:

"[S]timulating the economy is the immediate problem and, inevitably, a key to dealing with the debt and deficits. Macroeconomists can lecture learnedly on the depressed housing and industrial real estate markets as a drag on the economy, but the heart of the economy is consumer spending — two-thirds of the economy in fact."

But, whatever the short-term economic effects of government spending cuts vs. juiced-up "stimulus" spending, the fact remains that human beings must produce the things they consume. Look around your house, or the local department of grocery store, and ask yourself if those thousands upon thousands of shelf items just materialize out of nothing. No, they didn't. Human beings produced them. Another fact is that government, by its very nature, produces nothing.

So-called government "stimulus packages" have never worked, and in fact hurt the economy. I've left the following comments, to briefly explain why that is and necessarily has to be the case.

zemack July 01, 2010 at 4:20PM

Rather than the Editors of the Star-Ledger, who believe you can spend and consume your way to prosperity, I’d rather turn to some true economic experts to understand what’s needed to generate economic growth.

Gilligan … the Skipper too … the millionaire, and his wife … the movie star … the professor and Mary Ann: Remember them? They all knew better. When the SS Minnow ship-wrecked on that uninhabited island off of Hawaii in 1964, I don’t recall the hapless crew’s first thoughts being: Let’s see, how can we create food and shelter out of nothing, without any effort on our part?

I don’t recall the wealthy passenger Thurston B. Howell, III passing out stimulus checks to his fellow travelers so that they could rush out and spend their way to a vibrant Gilligan’s Island economy.

They understood that before consumption, you must have production. They understood that to have production, you need real people doing real thinking and real labor. And, that’s what they did. That silly little 1960s sitcom that as a teenager I loved so much was way to serious a show to allow the writers to run an episode that portrayed Mr. Howell assuming the role of banker, and telling everyone: “Stand still, and watch my millions shower you with prosperity!” It would have failed after one episode.

They did pretty well on that island, that rag tag group of economic experts. They worked. They had to. But suppose, in one episode, a looting gang of primitive savages invaded the island and began seizing their clothes, food, building materials, hunting weapons, etc., as well as their seed corn (their savings) that was set aside to plant the next harvest? Suppose those savages simply began consuming the stuff created by the ingenuity and hard work of the Gilligan Islanders? Would that have left the shipwrecked crew and passengers more prosperous, or poorer? Now you know why all attempts to stimulate “demand” through government spending always must fail, if prosperity rather than central planning is the goal. Those savages would have created plenty of “demand”, just like our president wants to do with government money.

What the stimulus champions ignore is the crucial difference between private and government “demand”. They stare blankly at statistics that allegedly show that “the heart of the economy is consumer spending”. But all they see is spending – money changing hands at the cash register. They gape at mid-stream, and miss the linkage between money and work. Consumer spending is not a transaction between a consumer and a producer. It is a trade between two producers.

As any honest “consumer” knows, you need to earn some money before you go to the store. Money must be made, before it can be spent. Every time the federal government creates another program to stimulate demand, it does so – like the savage - by seizing the earnings and savings of the nation’s productive through taxation, deficit spending, or printing press money. Private consumers work for the money they spend, thus creating their own demand. Politicians – from liberals like Obama and to conservatives like Bush – simply steal it. The source of consumer spending is productive work. The source of government spending is economic plunder.

Gilligan’s Island is a monument to economic common sense compared with much of what comes out of Washington and the academic ivory towers today. The best advice I can give to the Editors is, watch some Gilligan’s Island reruns. What’s needed is production, if “consumer demand” is the goal. Rein in the imperial bureaucracy (cut regulations), and liberate producers with massive spending and tax cuts. In other words, get the looting savages off of the island!

Oh, and one more thing. That looting band of savages that invaded Gilligan’s Island? Their leader had a name. You might recognize it. His name was Chief John Maynard Keynes.

There's more to it that I could go into. For a more in depth study of this subject, see George Reisman, Economic Recovery Requires Capital Accumulation, Not Government "Stimulus Packages" and Production versus Consumption