...Bastiat's alleged broken windows fallacy involves simply assuming that there's no such thing as genuinely idle resources or an "output gap." In that context, yes, it's a vibrant intuitive depiction of crowding out. But this doesn't counter any Keynesian or monetarist points about the viability of stimulus during a recession induced by nominal shocks, it involves assuming that no such recessions can occur even though they plainly do. In defense of Bastiat, at the time he was writing the modern industrial business cycle was a very new thing and the vast majority of economic ups and downs were caused by things like bad weather which—as you can see in the corn futures market today—is indeed a decisive consideration in an agricultural economy. But that's no excuse for people sitting around in 2012 to be pounding the table with an old book that's non-responsive to modern issues professing to be baffled why people don't find it more persuasive.In other words, Yglesias completely misses the point of Bastiat's argument. Further, and let me make this simple, if you understand supply and demand economics, prices clear always and everywhere, except when government interferes in the markets and prohibits them from clearing. There is no such thing as an "output gap."
In a free market, if "a resource" has no value, it is not a resource, it is, something close to an Yglesias commentary, waste.
"In a free market, if "a resource" has no value, it is not a resource, it is, something close to an Yglesias commentary, waste."
ReplyDeleteSlow clap
Indeed. With a slow headshake and a sh!t-eating grin!
DeleteOur opponents have nothing. They are desperate. For future reference, several of us made the final take down on the loathsome and vulgar "Lord Keynes" and his relentless and preposterous insistence that economic calculation has nothing to do with the ABCT or the Austrian critique of Keynesian policies.
ReplyDeletehttp://consultingbyrpm.com/blog/2012/10/money-is-a-spontaneous-order-not-a-social-contrivance.html
Keynes' and Fisher's theories were designed to prop up the assets of the connected elites. It is as simple as that. They both lost almost everything in the 1929 crash.
ReplyDeleteLiquidity trap is another word for: 'I can't sell my Long Island beach home for the same price as before the crash.'
Output gap is another word for: 'My bank levered up 20 to 1 and is now insolvent. Start the printing-presses and make-believe projects.'
It is the biggest scam theories this planet has ever seen.
Yes, but it is what the government wants to be true.
DeleteTherefore, it's in the textbooks.
It's really ironic, too, because the broken window fallacy is so easy to understand, yet Yglesias's post made no sense at all to me.
ReplyDeleteIf you ever endeavor to read the General Theory, you'll think Matt Yglesias makes mounds of sense comparatively.
DeleteI knew Yglesias a little when I lived in DC. He's an expert in nothing but expounds loudly and at length on everything.
ReplyDeleteIn temperament then, a perfect PR man for the kleptostate, aka a "journalist."
From what I've read, wasn't Keynes the same? In Obama's words, "A Bullsh!tter"?
DeleteLove his thinking...its different this time! Oh brother. Is there any wonder why history repeats itself?
ReplyDeleteyep...Its always too old. Its always women can vote and the internet is great. You must not like those things if you are talking about how great other things are from back then.
DeleteWhat the hell does women voting have to do with the article or economics in general?
DeleteYou missed the point David.
DeletePhathead, we're talking about economics. After you follow these clowns for a while you begin to see the pattern of where they tell you "its different this time around", so that's why what has failed before will work today. Like Keynesian economics. LOL
DeleteI have re-read that paragraph 5 times and still cannot make "hide nor hair" or it. Nonsense. Pure solipsistic poppycock. Bullshit of the lowest cows.
ReplyDeleteAt least cowpies are good fertilizer...
DeleteIn a world of counterfeit fiat money, he is correct.
ReplyDeleteJust keep adding "0"s on the notes and you're good to go!
Yes, he misses the point. More importantly, the better part of 7 billion people miss the point.
ReplyDeleteAnd?
The little fool Yglesias has been attacking Austrian theory for years without displaying the slightest understanding of it. My comments to this particular post below spawned about 180 other comments back in 2009, but most Yglesias comments on all of his posts have since been deleted. Yglesias has always meticulously ignored all comments referencing his ignorance of Austrian theory:
ReplyDeletehttp://thinkprogress.org/yglesias/2009/05/05/192820/the-right-and-austrian-business-cycle-theory/?mobile=nc
Tom Woods responded here:
Now comes a shot from left-wing blogger Matthew Yglesias, who is honest enough not to pretend to have read the book. His attack on it comes in the context of a discussion of conservatives' increasing interest in something called Austrian business cycle theory. (He notes that staffers for Rep. Michele Bachmann, R-MN, confirm that she has been reading the book, which contains a foreword by another congressman, Rep. Ron Paul.) Woods, Yglesias declares, is "pushing a fringe economic doctrine that tells the right what it wants to hear so he's gaining popularity."
Um, Matthew, what right-wing circles have you traveled in over the years that have "wanted to hear" scathing criticism of the Federal Reserve? How many "right-wing" politicians can you name that have even mentioned the Fed as a political issue over the past, oh, ninety-six years?
But that's a small point. Much more interesting is Yglesias' dismissal of Austrian business cycle theory (ABCT) as a "fringe economic doctrine." Well, according to James Galbraith, maybe 10 or 12 of the country's roughly 15,000 professional economists predicted the current crisis. (Ol' Jimmy wasn't counting hundreds of Austrian economists, natch.) Matt, you sure you want to use the consensus of these geniuses as your bellwether of respectability? Good luck with that.
http://lewrockwell.com/woods/woods113.html
http://www.lewrockwell.com/woods/woods166.html
The Caplan quote that so offends Little Matty said this:
ReplyDeleteAre they going to dispassionately put aside the worldview that inspired them to become intellectuals in the first place, then calmly weigh the intellectually serious arguments for and against every feel-good policy on the books? Or are they going to act like defense attorneys - to use their powerful intellects to zealously defend the populist policies they've always loved?
Can’t we all agreed that the universal response of statists everywhere to the newfound popularity of Austrian and libertarian thought has been either silence or the most pathetic examples of them acting like defense attorneys for an obviously guilty party? And I really really mean the term "universal".
The gist of Ygesias argument is the following:
Similarly, Bastiat's alleged broken windows fallacy involves simply assuming that there's no such thing as genuinely idle resources or an "output gap." In that context, yes, it's a vibrant intuitive depiction of crowding out. But this doesn't counter any Keynesian or monetarist points about the viability of stimulus during a recession induced by nominal shocks, it involves assuming that no such recessions can occur even though they plainly do.
Note the rhetorical trick. Contrary to Yglesias, we do not mindless “assume” that there are no “idle resources” or an “output gap”. We emphatically insist that the market does not fail on its own accord and that those concepts themselves are nothing but nonsense. The Keynesians have the burden of proof to demonstrate that the market actually fails on its own accord producing “idle resources” and an “output gap”. They cannot do this and they never even try. Instead, all we get is them is acting out like defense attorneys in a way that suggests even they that know their client is guilty and does not have the slightest hope of redemption.
Robert, you forgot one thing.
ReplyDeleteFirst you should have applauded Yglesias, as he equates Keynesians and Monetarists (Friedmanites) here.
Yglesias is clearly in favor of the "throw money at the problem" schools. Either via the pumping money into the system via the central bank (Friedman, Bernanke) or pumping money via the government (Keynes).
Other economic schools exists that have a different response. They want to clean up the monetary system and market (removing disfunctional players/institutions/laws) that are revealed after a major financial crash and then recognized as Ponzi-schemes in disguise (e.g. Austrians, Post-Keynesians and various Schumpetarian/Evolutionary schools).
Why, exactly, should anybody be paying attention to a Harvard Philosophy major who has done nothing after graduating except write blog posts?
ReplyDeleteI think that it is important for us to rigorously smack down (rhetorically) our opponents at every opportunity to demonstrate, at the very least, that they are nothing but dishonorable liars, frauds and cowards and that they have absolutely nothing to offer in the way of a substantive response to our proposals and/or analysis.
DeleteWhat old-fashioned nonsense is being written here.
ReplyDeleteWhat you all fail to appreciate is that the laws of economics are quite different now compared to the time of Bastiat. As Yglesias points out, Bastiat was writing in:
"an old book that's non-responsive to modern issues".
It may be that in the 19th century, breaking windows was a bad thing. But that is no longer true. It is now clear and has been since Keynes that at least a reasonable number of windows need to be broken in order to maintain aggregate demand.
Of course the correct quantity of window breaking requires advanced econometric analysis by experts, but the basic theory is accepted by all mainstream economists.
Regards
Di O'Cletian
Q.E.D.
DeleteNice.
DeleteSure Matty Y's a idiot but watching Murphy and Woods beat up on him is like watching Pitt and Clooney beat up on Chris Burke.
ReplyDeleteWho the hell is Yglesias anyway? I only know of him from seeing Woods, Wenzel, etc destroy him in responses to his articles. Has this guy ever responded, or does he act like Krugman and just pretend it never happened?
ReplyDeleteWhat are his qualifications to even be writing articles? He clearly has zero econ background, yet seems to get writing positions. Does he know some establishment people?
His qualifications are 1) degree from Harvard in philosophy 2) he moved to DC after graduating with the intent of becoming a political writer 3) he writes *with authority* on virtually any topic imaginable, truly believing himself to have something worth saying on said topic.
ReplyDeleteThis last point is crucial, the delusional visions of grandeur of the DC mind. Two memorable cases from early on: he once mocked a waitress who had served him the night before for pronouncing "bruschetta" as "broo-SKET-ta," and had to be corrected in comments that that is indeed the correct pronunciation; and he once in a post let slip that he had never traveled south of northern Virginia in his life, yet had been feeling free to expound in great detail on many aspects of southern life.
Extrapolate that to any subject under the sun and you have this fat, ugly, smart-but-not-smart-enough-to-know-how-little-he-knows blogger who, in the standard way DC promotes those PR men who will promote it, is being moved up the greasy DC pole into apace.
He wouldn't know America outside the DC-Boston corridor if it kicked him in his fat ass.
So, you're saying he is just as qualified as the ignorant F^<*ers that run DC? That explains it!
DeleteI cannot wait until people can look back (via the Internet) in 20 years and see how stupid these people were. They won't be able to get a job as a dog catcher!