Murphy In Retreat

He writes in his partial withdrawal statement:

OK first of all, let me say I was impressed. Like Darth Vader when he says,"All too easy," I thought I blew up Wenzel with my last post. But then he jumped 30 foot out of my trap, leading me to now say, "Impressive." (And no I'm not claiming to be Wenzel's dad.) In particular, the distinction I made between "saving" and "investment" is one that Rothbard might not agree with, though a Hayekian surely would. So in the interest of brevity I withdraw my objection to Wenzel on that front.

Now, as far as Hayek is concerned, it really doesn't sound like the ever roundabout Hayek would miss the difference between saving and the holding of cash balances. Murphy, where exactly does Hayek make this error?

Murphy then goes into an argument that makes him again sound Keynesian when he writes:

OK, the person then has to decide how much of that $1000 to consume or to save.

Rothbard argues on this exact point:

The Keynesians assume, most contrivedly, that he first decides how much to consume or not, calling this "not-consumption" saving, and then decides how much to invest and how much to "leak" into hoards.

I think Murphy later realizes the problem with his argument since he adds an "Update" which is really a correction:

Actually, I realized the above isn't quite right. It's not that the saving/consumption decision happens first (in chronological time), it's rather that we can evaluate the guy's actions with that lens, and we can also evaluate his actions by asking what happened to cash balances.

Murphy makes one other point:

Last point: I'm just trying to show the absurdity of (what I take to be) Wenzel's view so far. Suppose I put $10 a week into my jar, and then after 10 weeks I go to Vegas and blow the $1000 on the tables. I come home and say, "Well, I saved up for 10 weeks to enjoy one hour of amazing consumption. I postponed all of the potential consumption I could have had, in order to consume it all in one fell swoop at the tables. Eight weeks ago, I was trading away $10 in potential present goods, for what at that time was an additional $10 in future goods--i.e. enjoyment at Vegas."

Putting money in the jar, which Murphy is calling saving, is what Rothbard is calling thew non-consumption keynesian view in that it is a demand to hold cash. I repeat what I send in my initial argument.

The demand to hold cash can be for many reasons, to accumulate to then put into a savings bank, to accumulate to go to Vegas. But at the accumulation stage is nothing but increasing a cash balance. Notice how goofy it gets to call holding a cash balance for going to Vegas "saving". Wow, if every just "saved" money to go to Vegas this country would really boom! As Rothbard points out, there are there three things you can do with income, consume it, save it (by spending it on capital goods) or increase the cash you hold. It is easy to see how the layman can can get confused and call increasing cash levels "savings", but for an economist to do so leads to all types of confusion, misleading theory and misleading policy recommendations.