Murphy Declares Victory Against Me by Attacking Someone Else

Well here's a new trick in beating Mike Tyson in a boxing match. Beat up on someone else and declare victory against Mike Tyson.

In the comments section of the back and forth between Bob Murphy and me, someone  has been having a parallel debate with Murphy. That debater identifies himself as Major_Freedom. This parallel debate has nothing to do with me. ZERO. I don't know Major_Freedom, have not read all his comments (especially those that appears at Murphy's site) and neither approve nor disapprove his arguments. I don't even know what they are.

Yet, this is what Murphy tries to pull off in his latest post:

Checkmate

I lied when I said I was done posting on this topic. But now I’m truly done. If the following doesn’t convince you folks that Wenzel/Major Freedom got off on the wrong footing, I don’t know what else would.

Major Freedom in one thread writes: “Investment and consumption, THOSE are commensurable concepts. They are both stock concepts…”

But then in the other thread he writes:

Income is flow, because it compares (say, yearly) revenues to (say, yearly) expenses over a time period. 

Consumption spending is stock, because it is just the act of spending not for the purposes of making subsequent sales. Sure, you can look at consumption events over time, just like you can look at cash balances over time. But so what.

Investment is flow, because it is spending for the purpose of making subsequent sales.

I think we should all take a breather and collect our thoughts.

This argument has nothing to do with me. I have never said a word about stock versus flow in my argument. To link my argument with Major_Freedom is over the top (to be extremely polite about it).

Now, Murphy is slick because he goes on to discuss Mises and Rothbard with regard to their definition of savings, which I have already pointed out I am fine with the points made by Mises and Rothbard since Mises and Rothbard make a distinction between savings as hoarding and savings as investment. It's fine to use savings as non-consumption, when you further go on to make the distinction bewteen hoarding and investment. Keynes on the other hand mixes the two uses of the words savings as if they were the same thing, which is what is at the heart of Keynes's error on the topic. This is the essence of the debate between Murphy and me. Yet, Murphy has not addressed the Keynes sloppy definition of savings at all, other than to pull in two quotes from Mises and Rothbard, where they make the exact differentiation that Keynes fails to do.

To repeat, here is what Murphy said about Keynes:

Keynes is brilliant in Chapter 13 of the General Theory...on his neutral, scientific assessment of what interest is, I actually agree with him more than Mises.

Here is the Keynes quote he pulls to justify Keynes "brilliance" (I have added the numbers to identify sentences)

It should be obvious that the rate of interest cannot be a return to saving or waiting as such. [1]For if a man hoards his savings in cash, he earns no interest, though he saves just as much as before. [2]On the contrary, the mere definition of the rate of interest tells us in so many words that the rate of interest is the reward for parting with liquidity for a specified period. For the rate of interest is, in itself, nothing more than the inverse proportion between a sum of money and what can be obtained for parting with control over the money in exchange for a debt for a stated period of time.

In sentence 1, Keynes is talking about hoarding, in the first half of the sentnece, but in the second half lumps this together with all savings (including investment) to reach the conclusion that savings doesn't earn interset. He is talking about two different things, which Mises and Rothbard clearly differentiate. No one earns interset via hoarding, and no one invests (or loans out) without at least expecting interest for losing immediate access to money.

In sentence 2, it seems to me that Keynes is simply dicussing time preference but calling it liquidity. What really is the difference between dispalying time preference, i.e., loaning (investing) money for interest, by lending it out for a future payment verus "liquidity" which is giving up current access to money over time for a payment? It's the same thing. Yet by Keynes' initial use of savings to mean two different things at the same time, and reaching the conclusion that you don't earn interest for savings, results in Keynes being forced to seek another reason to explain payments above interest and comes up with "liquidity", which is really the same thing as time preference.

In other words, Keynes's sloppy use of the term savings, with a failure to differentiate between hoarding and loaning money out (investing), causes him to toss over board the idea that one can earn interest when saving, which forces him to come full circle and invent the term liquidity, which is a round robin method to get back to acknowledging that one gets paid because of time preference when giving up immediate access to money.

This is the essence of the debate, which Murphy continues to fail to discuss, while absurdly declaring "checkmate" over some Wenzel-Major_Freedom argument that doesn't exist. Amazing.