George Mason University economist Tyler Cowen is up with his comments on the Ron Paul-Paul Krugman debate. It's viciously one-sided against Ron Paul. Among other points about the debate, Cowen makes the following (My comments are in italics):
1. RP: I don’t understand RP’s claim “I want a natural rate of interest.” Even gold standards allow for monetary influences (distortions? …depends on your point of view) on interest rates. RP has not fully absorbed Myrdal (1930) and Sraffa (1932).
Well, it depends upon what you mean by a gold standard. If a central bank is still allowed to print money then that will distort the economy, but Dr. Paul is not in favor of such a gold standard. TC has not fully absorbed Paul (2009)
3. RP: The transcript may be garbled here. In any case, the Fisher effect is imperfect and so inflation does to some extent tax savings, also through interaction effects with the tax system. That said, I don’t see that two to four percent inflation has unacceptable costs, especially when AD is otherwise weak. On Diocletian, via Matt, here is a good recent paper.
Aggregate demand? Cowen has gone totally Keynesian. He has gone from a guy that once understood methodological individualism to an individual calling for inflation because of aggregate demand, please allow me to puke. Like, I said during my speech at the NY Fed, does Cowen believe in supply and demand adjusting prices or not?
7. RP’s response: The decline in the value of the dollar since 1913, or whenever, has not been a major economic cost. No one has had such a long planning horizon, for one thing. We don’t see much indexation, for another.
Duh, maybe people don't have such long planning horizons because of the inflation!
8. RP on the Fed: If we had “real monetary competition,” dollars still would reign supreme. Who now is opening up U.S. bank accounts in other currencies? Or using gold indexing? It is allowed.
Dr. Paul made the clear point that there are various sales taxes and capital gains taxes on gold that may it difficult to use in daily transactions.
10. RP: Equating inflation with “fraud” is an excessive moralization of the issue. The point remains that gentle inflation is usually a good thing, and that the money supply under free banking, or a gold standard, would be excessively pro-cyclical. The best shot is to hope that a natural monopoly private clearinghouse would institute nominal gdp targeting in terms of levels and perhaps “targeting the forecast” too.
Quick, somebody grab Cowen's wallet. If he bitches, we'll just call it "excessive moralization of the issue." And please stroke him while the wallet is in his pants so that we can then say that "gentle wallet theft is usually a good thing."
In sum: There were too many times when RP simply piled polemic points on top of each other and stopped making a sequential argument. He overrates the costs of inflation, including in the long term, and for a believer in the market finds it remarkably non-robust in response to bad monetary policy. Still, given that Krugman is a Nobel Laureate in economics, and Paul a gynecologist, the score could have been more lopsided than in fact it was.
Does Cowen have any idea how many regulations exist which make it impossible to start a gold bank or a full reserve bank? And he thinks it's because the market is simply "non-robust."
In conclusion, I would trust Dr. Paul in both his economic wisdom and his gynecological wisdom over Cowen.
Their house of cards is collapsing. They have foisted this claptrap on the American people for generations. Anyone surprised they are now squealing like stuck pigs? Anyone???
ReplyDeleteDr. Paul HAD to be an OB/GYN to deal with all these pu... Nah, nevermind.
ReplyDelete+1
DeleteI laughed =)
Tyler Cowen is obviously playing dumb. I went and searched for his references on Myrdal and Sraffa and in my opinion he is missing the point.
ReplyDeleteI wonder why we has decided to play dumb.
Cowen doesn't read anything all the way through. He skims the first couple of pages, loosely at that, and then a) formulates the gist of the whole work in his mind and b) decides whether or not he likes what he thinks the work is about.
DeleteThat you think he doesn't get the point of Myrdal and Sraffa is probably really the case because he really doesn't get it.
The response to the moral issue of inflation-as-theft always seems to be "but . . . but it's GOOD for you." Isn't this the argument for intervention in a nutshell? "I won't deny you're a slave, I'll just glorify slavery," says the interventionist.
ReplyDelete"Still, given that Krugman is a Nobel Laureate in economics, and Paul a gynecologist, the score could have been more lopsided than in fact it was."
ReplyDeleteThis is the comment that gets me. Who bashes the underdog when he performs well above expectations? You have to really love orthodoxy to think that way.
The fact that anyone is arguing over who did better is a testament to how much a lightweight Krugman is, and how formidable Paul is, in this field.
DeleteAnon@ 11:55 AM,
DeleteBingo!
They've all kissed their minds a final farewell, imo...
And the really funny part as others have pointed out is that Krugman's prize had ZERO to do with monetary econ.
DeleteThere is definitely a difference when it comes to PhDs in ob/gyn and econ. No ob/gyn would try to mandate that all women give birth to 7.2 lb babies on the 300th day of their pregnancy. They at least recognize that every individual has preferences and unique traits that can only be determined on an individual basis. Econ PhDs seem to think they can formulate an algorithm for the cost of money that will work perfectly when applied universally. Hey, maybe we need an ob/gyn running monetary policy ;-)
DeleteGo Dr. Paul!
I disliked Paul's use of the phrase "natural rate of interest" although it may be an existent term in Austrian economics that I am unaware of. But when I think of "natural" rates, I think of non-Austrian jargon, such as the natural rate of unemployment, natural rate of inflation, etc., that are not phenomena with any basis in reality.
ReplyDeleteTo clarify, I would have preferred if he used the phrase "free-market rate of interest" instead.
"I would have preferred if he used the phrase "free-market rate of interest" instead."
DeleteWhen I read "natural", I take it to mean absent of intervention, i.e., by the Fed. Natural just means where the rate would be under free-market conditions.
I know what he meant, I just didn't like the way he said it ^^
DeleteDr. Tyler Cowen is a quack.
ReplyDeleteMe, I say 'Thank you' that there are such economic dummies as him in this world. It is how I made, and make, my money.
Tyler, I will be very happy to sell you some gold and silver from my bullion stash when you join the mad rush in in a few years.
"In conclusion, I would trust Dr. Paul in both his economic wisdom and his gynecological wisdom over Cowen." LOL!
ReplyDeleteI've never really understood why people think Cowen is so clever. He's always struck me as someone that confuses mannered quirkiness for intellectual depth.
ReplyDeleteThanks for owning Cowen yet again. That guy is a moron and single handedly discredits george mason. Glad to see the establishment mouthpiece exposed yet again.
ReplyDeleteI always get a kick out of establishment hacks like Cowen repeating the 'nobel prize winner' while leaving out the fact that the area he won it in had zero to do with monetary econ theory and history, which is what they were debating.
ReplyDeleteI hope y'all are correcting Cowen on his blog. I especially liked anon 12:18PM comment that Krugman's Noble prize had nothing to do with monetary economics. This destroys Cowen's attempt to base his argument on an appeal to authority.
ReplyDeleteIncredibly bad reasoning skills on display by TC in those quotes. Was he having a stroke while writing them down? At best, the Paul quote, 'natural rate of inflation', needed a small, sensible correction that would have strengthened Paul's point. TC went far out his way to avoid doing that to the point of embarrassing himself. Paul's point being that interest rates have a real and necessary market function and treating their primary purpose as being a lever for Top Men to manipulate the economy according to their whims is utter madness. I know that scares a lot of statist economist out there, but the rest of us have had to be afraid of whatever bad ideas you were ready to pull out of your collective asses for far too long now.
ReplyDeleteOh yeah, and your mother wears army boots!
ReplyDeleteAs a high school teacher, I will never recommend a student go to George Mason. In fact, I will recommend they attend Walter Block's school: Loyola in New Orleans. Here is one Block sent me today, in response to this article.
ReplyDeletehttp://pcpe.libinst.cz/nppe/2_2/nppe2_2_2.pdf
Tom Trosko
Libertarian High School Teachers on Facebook
I think some people benefiting from new money is immoral and I think these Keynesians try to rationalize it.
ReplyDeleteThe manipulative,greedy and self centered creeps are deceiving themselves they can rule the world by controlling its mediums of exchange.No human engineering had ever succeeded in history.Overpaid lackeys-Krugman/Cowen/Roubini/Stieglitz et al are the canaries in the coal mine of its demise.
ReplyDeleteTyler Cowen's responses are frankly pathetic and his counter-arguments are just unreasonable.
ReplyDeleteIf Ron Paul "overmoralises" inflation, please tell us what is the correct level of moralisation? If a conservative economist said a debating rival's concern for unemployment was 'overmoralising' he would be tarred and feathered in the press.
What strikes me about the rationalisations from elite economists like Cowan is how weak they are. Weak arguments do not reflect intellectual subtlety or technical sophistication. They are just weak arguments. To play up one's alleged intellectual subtlety whilst peddling weak arguments is an insider elite speak tactic to imply that they know more than you ...and just don't need to prove it.
Another example of pathetic weak argument is from former Fed Chairman Alan Greenspan's book 'The Age of Turbulence'. His 'defense' of intellectual property is weak, he even acknowledges that the defense is weak and then argues for keeping the status quo for, well, no reason whatsoever. He didn't need to endorse Kinsella style abolitionism, or even a return to the pre-Reagan status quo ante, but surely if he felt the system was as weakly justified as he acknowledged, the minimal response is to render an open verdict or to flag the issue for further study. But no, to do so would upset fellow insiders. Maybe he should have called his book 'The Age of Flatulence.'
I usually like Cowen and read his blog every day. But this post was NOT up to par. I understand Cowen is not an Austrian...but come on. Since when was Cowen so enamored by Krugman?!
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