Thursday, July 28, 2011

George Selgin Logic

Oh dear, thank heavens George Selgin is defending Milton Friedman and not Murray Rothbard. First Selgin has this to say about Rothbard monetary theory (A monetary theory, I must add I have used to warn of business cycle moves here and globally, for years)
As a monetary economist (I don't pretend to judge Rothbard's other economic contributions) Rothbard was mediocre to bad. His version of the Austrian business cycle theory was naive--in essence it equated behavior of M consistent with keeping interest rates at their "natural" levels with the elimination of fractional-reserve banking, an equation that holds only with the help of about a dozen auxilliary assumptions, all of which are patently false. He then went on to conjure up an equally false history of banking and of bank contracts designed to square his theory of the cycle, with its implied condemnation of fractional reserve banking, with his libertarian ethics.
 But, he goes on to defend Friedman this way:
Milton long regretted the part he played as a young economist in the move to tax withholding; and by the 80s he had come around to advocating a frozen monetary base, which is an approach to shutting down the Fed that I myself favor. So even with respect to these matters there's no reason at all why even the most uncompromising libertarian shouldn't want to regard Milton as a comrade in arms. If he took longer to become almost as radically libertarian as Rothbard, the fact was merely a measure of his desire to form his own ideas gradually rather than receive them en bloc from someone else.
Got that?

Friedman is great becasue in his 80's he came along to Murray's supposed terrible monetary views.


  1. Another clown. We're at the circus after all!

  2. Wrong, Mr. Wenzel: Friedman's frozen monetary base proposal was (1) not a call for a gold standard or (2) a call to abolish fractional reserve banking or (3) a call for a constant "money" stock, in the usual sense meaning a constant stock of public money holdings. So it seems to be your own logic rather than mine that's faulty.

  3. I think Selgin meant by the 1980s (when Friedman would have been in his 60s and 70s).

  4. @George Selgin

    Hey, you are the one that said Friedman moved towards Rothbard's thinking, not me. And you do say you are only discussing Rothbard as a "monetary economist", so now I am more confused than ever.

  5. So Friedman went from being in favor of a central bank in his early years to being against it in his later years, right? At least on that issue, it would appear Friedman disagreed with Rothbard for a great deal of time and then later admitted that view had been correct.

    By the way, is Lew Rockwell also a "cultist" like Rothbard?

  6. Although I am unfamiliar with Mr (Dr?) Selgin, I'm glad he has chimed in.

    I would love to see the logic of the argument made clearer by reasonable debate with Wenzel.

    BTW- George, we are a pretty savvy and intelligent bunch here, and don't always agree with Wenzel (sometimes we attack him like rabid dogs- one of the drawbacks to anonymous postings on the internet) so if you have a coherent and logical argument, don't expect blind fealty to him.

    We will give you a (mostly) fair hearing, although I must say that Rothbard is considered almost sacrosanct in these here parts!

  7. OK, Wenzel is really mixed up in his thinking. Selgin is absolutely correct on all counts. Rothbard began what is today the Lew Rockwell Cult (LRC) and continued to play victim his whole life. George is not arguing against any radical libertarian view on money but rather Rothbard's views. He is praising Friedman for coming around to a more sensible but at the same time radical libertarian view on money.

  8. I most be a "cultist" then because Man, Economy, and State is the greatest treatise on economics I have ever read.

  9. Calling somebody "a cultist" without bothering to substantiate the accusation by pointing out WHERE EXACTLY the ideas held by the supposed cult are wrong is simple demagoguery.

    Why should anybody wish to entertain demagogues by trying to refute their claims? It is enough to point out that they are the ones avoiding reasonable arguments.

  10. Look at my post, Mr. Wenzel: I said that Friedman moved toward libertarianism (and free banking), not toward Rothbard's particular ideas. Your argument supposes that Rothbard=libertarianism. Now that's surely a fallacy.

    Thanks to the rest of you for some moral support!

  11. Chris Branco, as one who has seen his share of genuine Rothbard cultists, I can assure you that the condition you describe is neither necessary nor sufficient. It isn't sufficient or I too must quality (a plain absurdity); and it isn't necessary because I know many Rothbard cult members who show clear indications of not being able to read anything that long.

  12. Let me see if I have this straight- Friedman supported fractional reserve banking, and consequently fiat money, while Rothbard did not.

    In order for FRB to meet anarcho-libertarian tenets, the depositor and bank would have to agree that the money would be lent out for specified lengths of time, with longer and riskier loans paid comparably higher interest rates. Correct?

    It also appears that Friedman did not require that gold (or some other hard commodity) be used as the basis for currency creation. Correct?

    If the above statements are correct, then Rothbard's analysis of money supply isn't "naive", but justified by the caveats he acknowledged. As such, Friedman's monetary theory isn't more nuanced, complex, or sophisticated, but simply wrong because it fails to provide any basis for honest money and a free banking system.

    As for Rothbard/Rockwell being a cult, why are Misean/Austrian economic theories gaining such traction amongst a population that has little understanding of economic theory? LRC has done more to bring liberty minded political thought to the forefront than any other organization extant.

    Could it be because the core theories and tenets are so intuitive and easy to comprehend, and jibe so neatly with such universal beliefs as "thou shalt not kill/steal/lie" that even people mal-educated in government schools can easily grasp the basic concepts with just a few hours of study? There is plenty of dissent within the Austro-libertarian school, and isn't some Randian "believe as I believe or be exiled" closed circle.

    Just my (fiat) 2cents.

  13. Do these University Econ Twits actually believe what they say? Are they stupid or just psychotic liars like Paul Krugman and Bill Clinton?

  14. @George Selgin

    Do you even read what you write?

    You wrote Freidman moved toward Rothabard libertarainism:

    "If he [Friedman] took longer to become almost as radically libertarian as Rothbard, the fact was merely a measure of his desire to form his own ideas gradually rather than receive them en bloc from someone else."

  15. Wenzel,

    Friedman moved closer to radical libertarianism, but not Rothbardianism. One can be a radical libertarian without being an acolyte of Rothbard.

  16. @RD Fitzgerald:
    1. From George Selgin: "For robread: I more-or-less concur with Hayek's view that a "neutral" monetary system will stabilize MV/N, where M is the money stock, V is money's income velocity of circulation, and N is the growth rate of the labor force. Under a gold standard this is equivalent to GmV/N, where G is the monetary base and m is the "money multiplier." Murray in contrast favored a pure gold standard. So, for his ideal to be valid it must be the case that GV/N will be stable. In fact there's no reason why this should ever tend to be so, since in a pure gold system G, V, and N all vary independently to at least some degree.

    In some of his writings Rothbard seems to equate a pure G system with a constant M system. Were that special assumption itself valid (which of course it isn't), Murray's ideal conforms with Hayek's only in the special case in which the ratio V/N is constant."
    2. LRC has just reaffirmed the beliefs of ignorant members of the populace. As an example, note how there is virtually never an article on free trade prominently featured on the homepage or blog. That would get the traffic stats down. Are you naive enough to believe that most readers have even read Hazlitt, let alone Mises?

    Not a convincing argument. If your conclusion is legit, then David Friedman is a Rothbardian libertarian. He is just as radical. But Rothbard (blessed be his name) actually condemned David Friedman as too libertarian. Sorry, but being as libertarian as somebody does not imply an acceptance of their VERSION of libertarianism.

  17. @Anonymous 11:59

    My point is not where Friedman moved, but that Selgin says: "[Friedman] took longer to become almost as radically libertarian as Rothbard".

  18. @Anonymous - July 29, 2011 12:06 AM

    ["If your conclusion is legit, then David Friedman is a Rothbardian libertarian."]

    What "conclusion" are you talking about? I've read this post 3 times and all of Wenzel's comments and I see no "conclusion" (or even a statement) that, if true, would mean that David Friedman is a Rothbardian. If you're referring to "as radically libertarian as Rothbard", those are Selgin's words, not Wenzel's.

  19. Oh, one more thing. While there are many different types of libertarians and many different types of statists, you're either a libertarian or a statist. If you're either one, you're not the other. There is no in between.

  20. @Anonymous - July 29, 2011 2:04 AM

    Being a card-carrying member of the cult, I think it was Chairman Lew (:-) who recently said, the essential distinction is on whether or not you hate the state, or something to that effect.

  21. Wenzel is dense, or playing dense. He knows there is a significant difference between becoming more radically libertarian and coming closer to Rothbard's views. He's committing a logical fallacy of the highest order.

  22. @ Anonymous (July 29, 2011 2:04 AM)
    @ Shimshon (July 29, 2011 3:38 AM)

    Saying government is a necessary evil that we need at least a little of, is like saying the mafia is a necessary evil we need at least a little of. Or slavery. Or cancer.

    Government violence is government violence. The point is not that government does too much, but that it does anything at all, because the very nature of it is aggressive force and thus in any legitimate libertarian's view immoral. And this is something minarchists will never understand.

  23. @Tony
    Minarchists do understand that. What free market radicals fail to mention is that human beings apart from the state also use fraud and force, both individually and in their non-state voluntary groups.
    Sometimes those non-state groups are larger and more coercive than one part of the state system and can do a great deal of damage to individuals. Thus, when, say a federal judge (part of the state system) intervenes on behalf of an individual in defense against a fraudulent act by a corporations, the minarchist DOES indeed regard this as a good thing.

  24. @Tony

    Less libertarian is often more libertarian, if you don't confuse theory with reality.

  25. Is that really George Selgin in the comments or Gene Callahan?

  26. Lila Rajiva: "What free market radicals fail to mention is that human beings apart from the state also use fraud and force, both individually and in their non-state voluntary groups."

    We do not fail to mention this at all. We are extremely explicit that we oppose all forms of aggression, private and public/institutional; that we oppose private criminality, as well as the state. This claim is utterly unfounded. The anarchist libertarians are consistent. It is the "minarchists" who are not: they say they oppose private crime and aggression, but they tolerate institutionalized crime in the guise of an (allegedly "minimal"-ha!) state.

  27. @Stephan Kinsella.

    Talk is one thing.

    In practice, it was not ancaps who have done the heavy and dangerous work of exposing the highest level of financial crime.

    It was minarchists and leftists.

    Ancaps have been busy emphasizing the genius of financiers (as though that makes a difference, even if one were to concede it).

    Ridiculing postal workers and school teachers is hardly "truth to power," you know.

    They may well deserve ridicule, but let's see equal guts denouncing bigger targets.


    And don't point to Bernanke. Government figures are usually stoogers. Why not denounce the money power behind the stooges?

    Nope - with the exception of Wenzel, and a few others.

    Then we'll get hosannas to various speculators, Google, BP and the rest, as though intelligence, or creativity (even if one concedes those traits), absolves the possessors of every other failing.