Tuesday, April 1, 2014

Having a Difficult Time Trying to Follow the Logic in This Paragraph

Tyler Cowen writes:
We should always be willing to learn from the past, and I do count Marx, for all his flaws, among the great economists. But we should not forget that he was in fact wrong about most things, not just about the totally impractical nature of his communist alternative.


  1. Perhaps he means great as in great evil.

  2. You don't have to be correct to affect the world in a significant way. He may equate significance in shaping world development with greatness.

  3. Off topic: Is Mises' Memoirs the same as his Notes and Recollections or are they two separate works? I just purchased his Notes and Recollections from Liberty Fund and was thinking of buying his Memoirs from the Mises Institute, but obviously won't if they are basically the same.

    1. @ Anonymous - 2:09 PM

      Yes, the body of Mises' Notes and Recollections and his Memoirs are the same.
      The two books were translated by different people and each has different introduction or preface. Notes also has a postscript from Hans Sennholz.

      If you are looking for better understanding of Mises, I suggest the biography Mises by Jorg Guido Hulsmann. It really adds to one's understanding of Mises' writings.

  4. Can a 'great' economist be wrong about most things?

  5. Ergo, Jerry Wolfgang is a great economist

  6. Cowen was recently bashing the ABCT implying it was inferior to Minskyite analysis. Hmmm. I responded:

    Cowen’s point is misleading at best. Banks within the central banking system are allowed to make loans with money created out of nothing. This distorts not only interest rates but the prices of assets that are purchased with the new money. Further, those spending the new money first are stealing purchasing power from those holding the existing money. Consumers are given credit cards to buy finished goods which they otherwise could not afford. The entire price structure is thus distorted by a process which amounts to an unsustainable and temporary subsidy derived from other people’s purchasing power. The Minskyites (like all of the other statist and funny money “schools”) completely ignore and suppress the nature of this process and dishonestly label the whole thing “capitalism”.

    Review the first paragraph of Minsky’s paper “The Financial Instability Crisis” which completely ignores the aforementioned price distortions:

    The financial instability hypothesis has both empirical and theoretical aspects. The readily observed empirical aspect is that, from time to time, capitalist economies exhibit inflations and debt deflations which seem to have the potential to spin out of control. In such processes the economic system’s reactions to a movement of the economy amplify the movement–inflation feeds upon inflation and debt-deflation feeds upon debt-deflation. Government interventions aimed to contain the deterioration seem to have been inept in some of the historical crises. These historical episodes are evidence supporting the view that the economy does not always conform to the classic precepts of Smith and Walras: they implied that the economy can best be understood by assuming that it is constantly an equilibrium seeking and sustaining system.


    Of course, private citizens are fools to be continuously misled by distorted and unsustainable prices induced by the central banking system. But how does that help the Minskyites who join in with suppressing any discussion of the true cause of the problem in the first place? In fact, the Keynesians and other statist schools have been relentless in pursuing the same suppression of any notion of central bank induced price distortions.

    I fail to see how the Austrians have been refuted because their analysis has been so effectively suppressed and obscured from public understanding. I fail to see how the Minskyites are vindicated since their vision is based upon their continuous suppression of Austrian analysis.


  7. Yeah, he's not a great economist if he was mostly wrong. He might have been effective at convincing a lot of people to trash their economies, starve a bunch of people to death, and generally act like a bunch of wankers; that's not great economics.

    He's great in the same way that Hitler was great after he submitted Mein Kampf for publishing.

  8. PJ O'Rourke, in Eat the Rich, recalled a similar quote from Samuelson about Marx. Paraphrasing from memory, Samuelson said, Marx was wrong about many things, but this in no way diminishes his stature as a great economist. PJ wondered, what would he have to do to diminish his stature as a great economist, be wrong about many things AND screw the babysitter?

  9. It's real simple. It's the same logic that says record cold is caused by global warming.

  10. maybe in the same way that Freud could be a great psychologist in spite of being total wrong or many early church fathers could be turn out to be heretics, i guess

  11. By Cowen's definition, I flushed a large, great economist a few minutes ago.

  12. It seems pretty simple to me. Marx was clueless, but he was incredibly influential and had a large impact on the field (directly or indirectly).

    Therefore, he was "great" (in scope). Great has multiple definitions.

  13. Marx was a useless parasite that sponged off everyone he met...Obviously so is Cowen.

  14. Economic facts can not disprove economic theory - Murray Rothbard

    Can you explain how you can even evaluate Marx if you are a Rothbard follower? Does not seem possible.

    Tenured Austrian Economists vs. Murray Rothbard

    "He did not believe that you could use economic facts to refute theory"

    1. It's your question. What economic theory do you want to disprove with economic facts?

    2. Re: Jerry Wolfgang,

      -- Economic facts can not disprove economic theory - Murray Rothbard --

      Rothbard didn't say that. He only said that you could not use economic facts to disprove economic theory that is based on aprioristic methodology because economic facts are already obsolete by the time they are discovered (as humans, the subject of study, are fickle); for instance like using a single nude photo to disprove the idea that people use clothes. However, you can use economic facts to show economic theory in action, like using a sequence of photos to show that people do grow old. But you can use economic facts to disprove those equilibrium models on which neoclassical economics are based.

      -- Can you explain how you can even evaluate Marx if you are a Rothbard follower? Does not seem possible. --

      It is perfectly possible to evaluate Marx using an aprioristic approach. Marx stipulated that the capitalist profits from the work performed by the workers by paying them less (the wage) that the value of their work (the sale price of the product they're making). Using the aprioristic approach, one can show why Marx was wrong:

      * People prefer a reward in the short term over a reward in the long term (which is the Law of Time Preference.)
      * People will prefer a smaller reward now than a bigger reward later in time.
      * People will prefer an assured reward now rather than a non-assured reward later in time even if it meant a greater reward.

      From this truth one can derive the following corollary: People will prefer a wage paid now than wait until the product they're creating actually sells later. This means that the worker is enjoying a sure reward now rather than a potentially bigger (albeit not assured) reward later. It is the capitalist who is taking all the risk of the product not selling. The workers can perfectly wait until the product sells (whenever that happens) and share with the capitalist the total trade value of the product, but they prefer and will take a wage now at a discount rate (or interest rate) - this is before the item is sold. There's no guarantee that this will ever happen.

      So the law of Time Preference shows that Marx's theory of profits was completely wrong. The capitalist does not obtain his profits from paying the workers less than what the product is worth because the product has not been sold yet. The wage earners are thus not participating in the risk-taking, thus are actually better-off.

  15. Murray Rothbard writes that Marx was really an end times religious nut:


  16. "great economist" ... "wrong about most things". My sides ache!