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Clowns and Commerce

As often happens in these things, we are told that this election is about the economy. That's no surprise, people often vote by how they feel about their jobs and homes and savings, and wrap the candidate they support in expectations that he will somehow make a difference for the better. The problem with that, is that very few elected officials have any effective idea how the economy works, much less how their actions will influence its behavior. The United States' economy is a multi-trillion dollar economy, with thousands of job categories and descriptions in industries spanning historical classics to new types created within the past decade. The historical record shows that the government can damage the economy through excessive taxation or neglect of strategic needs, but as a rule government cannot help the economy except by reducing, as much as possible, its footprint upon it. The candidate, therefore, who promises to create jobs or revive the economy through government programs is a liar and a fool, and a poison to the nation he wants to control.


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Comments (43)

Agreed.... (Below threshold)


Didn't FDR make the country... (Below threshold)

Didn't FDR make the country better?

LOL, the Canadian chimes in... (Below threshold)

LOL, the Canadian chimes in. Yep, a quick fix we're still trying to recover from. Res ipsa loquitor.

Oooops. Loquitur.... (Below threshold)

Oooops. Loquitur.

Hyper: "Didn't FDR make ... (Below threshold)
DJ Drummond:

Hyper: "Didn't FDR make the country better?"

Glad you asked, sir. I recommend the following works on that question:

Powell, J. "FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression"

Bernstein, M. "The Great Depression: Delayed Recovery and Economic Change in America"

Smith, J.S. "Building New Deal Liberalism: The Political Economy of Public Works, 1933-1956"

The short answer is no, FDR delayed the recovery from the depression.

DJ, the problem is that mos... (Below threshold)

DJ, the problem is that most of the voters do not take the time to realize they are being lied to. ww

For the sake of having a co... (Below threshold)

For the sake of having a conversation in the here and now, can somebody with the time and inclination give me a one paragraph-or-so version of the theory regarding the New Deal prolonging the Depression?

Because I know we're not just believing it because we're conservatives and we think government is icky. That sort of thing is far below anybody on this forum.

It may be a case of "expect... (Below threshold)

It may be a case of "expectation inflation". The public expects to be told that the candidate will create new jobs. That is the "average" answer the public expects. If they are given a less than average answer, like "employment will remain steady", they take it as a negative -- "Oh my God, he really means that we are going to lose jobs." Then they get beat up by the opposition.

If a candidate dares speak a hard truth, like McCain did in Michigan, when he said that some of the jobs that left the state wouldn't be back, the s**t really hits the fan.

Maybe candidates should all recite The Serenity Prayer every day before they go on the stump.

The free market is the best... (Below threshold)
Mac Lorry:

The free market is the best means of creating and keeping a strong economy. Some will point out that U.S. markets are not really free, but they are often comparing a free market to a free-for-all market ruled only by jungle law. In the U.S. the Sherman Antitrust Act and other seminal legislation like the Securities Act set up a number of rules that ensure the maximum fair competition between business entities.

Beyond the laws needed to maximize fair completion, legislation tends to restrict the market and that's why most government actions have a negative effect on the economy just as DDJ stated.

The more government gets into regulating the economy the more it becomes like communist central planning and we all know what a failure that was. Ok, comrade Obama may not know that, but he's the exception. Well maybe there are a few others who post here a lot who don't know that either. Come to think of it, it seems most Democrats don't get it either. Dang, no wonder the economy has been going into the toilet since we put so many of them in office in 2006.

It's simple enough as a con... (Below threshold)
DJ Drummond:

It's simple enough as a concept, Parthenon. Let's start with the big three facts of real-world economics:

1. Everything has to be paid for.

2. Government is inefficient.

3. People will work harder for a reward they can understand and expect.

With me so far?

Mac, DJ, I'm with you under... (Below threshold)

Mac, DJ, I'm with you under many (if not most) circumstances. I appreciate you both taking a stab at it. It seems to me that the great depression - a severe situation by any stretch, perhaps not a good example by which to generate a general rule - defied the normal principles of Smithian economics and necessitated a flirtation with Keynesian economics. If the free market was the answer, why didn't Hoover's more hands-off approach solve the problem?

My position is that the government ought to be mostly hands-off in most situations but is obligated to 'prime the pump' under certain circumstances, like when economic inequality is stretching beyond what could rationally be called a wealth distribution conducive to a healthy economy.

"If the free market *were* ... (Below threshold)

"If the free market *were* the answer." Been studying so much Spanish subjunctive; can't forget about English subjunctive...

Your country has smaller go... (Below threshold)

Your country has smaller government per capita than most other developed nations but relatively high rates of illiteracy, poverty, infant mortality, homicide...

How is the free market meant to correct these statistics?

An excellent primer on the ... (Below threshold)

An excellent primer on the causes of The Great Depression and the consequences of Rosevelt's policies can be found in the wonderfully titlted book The Way the World Works by Jude Wanniski.

In short The Depression was the result of a confluence of events: expanding US trade in a contrcting global market, bad central bank policy, the Smoot Hawley tarriff bill then in front of Congress and an overpriced domestic equity market.

Rosevelt's policies did more than flirt with Keynesian economic theory...it was more like an irreversible marriage. His classic mistake was to focus on fiscal policy (the wrong one by the way) and not monetary policy.

Parthenon, you're right tha... (Below threshold)
DJ Drummond:

Parthenon, you're right that Hoover's policies were not helpful. But you should understand that we are talking about two environments, 1929-1932, and 1932-1944.

A lot of folks are under the impression that the 'Great Depression' was unique, but looking back that is not really so. 1837, for example, was far worse in scale of effect, as was the crash under Grant. In both cases, those depressions were more severe in their imemdiate effects, caused by more significant root causes (the National Bank and Silver Standard questions, as opposed to simply correcting the Stock Market practices and regulating banks). In all probability, no one could have fixed the crash before 1932, because the US crash caused the European depression to affect our economy (viz a viz gold and oil prices, and international trade).

What FDR got right, was that the primary means to restoring the economy was restoring Americans' confidence in it, but the programs instituted were far more expensive than beneficial. This is because of the inefficient nature of government - the market, for example, sets labor prices at a balance between what labor is willing to work for, and what companies can afford to pay. By government declaring a wage and deferring its cost to later terms (I wonder how many Americans realize that their 'war bonds' paid off the CCC debt?), and doing such things as artificially reducing supply in order to raise prices (something Keynes argued against, by the way, but on this one FDR did not listen) and rationing work through union deals and heavy-handed government oversight created many places where growth and innovation were not only difficult, but actually illegal for a time.

"Economic inequality"</b... (Below threshold)
Mac Lorry:

"Economic inequality" and "economic justice" are code words for wealth redistribution. The U.S. already has some of that going on continually thought our income tax code. Besides the progressive rate, we have something called earned income credit where the lowest paid workers pay nothing into the system, yet get tax refunds. Well their refund comes from someone else's taxes, which can only be raised so high before people quit working or drop into the black market.

The only thing that makes this system work is deficit spending and that can't go on forever. At some point the shit will hit the fan and everyone's bank account will be worth zero, social security will collapse, and China will be demanding payment in gold and real-estate.

It's been pointed out that three things predict someone will be poor in America. Dropping out of school, having a kid before you have an education, or getting addicted to drugs. Well we have entire populations who do all three and seem to be proud of it. For the most part, these are choices people make, but because society holds them blameless we provide them with the necessities of life. Incredibly, such people feel they have a right to that support and there are enough liberals who buy that argument that society can't hold them accountable.

The change Obama is talking about is to get off the current slow path to economic catastrophe and onto the super highway to economic catastrophe. But of course it will feel good during the free fall, so liberals are all for it. When we all have nothing, then we'll have economic equality.

Wrong topic, hyper. Do try ... (Below threshold)
DJ Drummond:

Wrong topic, hyper. Do try to stay focused..

Well you gents have given m... (Below threshold)

Well you gents have given me much to ponder. Again, the replies are appreciated.

"Economic inequality" and "economic justice" are code words for wealth redistribution.

No they're not. Well maybe partially, but not in the socialistic sense; only in the sense of keeping the economy healthy, since, as I'm sure the commenters here already know, steep economic inequality causes depressions.

Pathenon, 'economic ineq... (Below threshold)
DJ Drummond:

Pathenon, 'economic inequality' is one of those things that lets you know you are in Reality. As the early economist Jesus Christ said, 'the poor will be with you always'. Look at the Socialists and Communists, and all the times and places where they got to put their theories into practice. Yet inequality always continued, it's really unavoidable.

What gets rewarded, gets repeated, after all.

"steep economic inequali... (Below threshold)
DJ Drummond:

"steep economic inequality causes depressions."

Not according to any of my Economics professors.

steep economic ine... (Below threshold)
Mac Lorry:
steep economic inequality causes depressions.

I believe it's the other way around. That depression causes steep economic inequality. Most of the economic inequality seen in the U.S. is the result of bad choices people make. They make them in large numbers because society shelters them from the worst consequences. As for the ultra rich, that's a sign of a free market. The rich are able to better educate their children, who then make more money. The rich also make money through a nasty thing called profit. As long as the ultra rich are investing their money in the U.S. economy there's no downside. In fact, they create jobs and opportunity for those willing to participate in the free market.

I'm not arguing for equalit... (Below threshold)

I'm not arguing for equality, gents. Just less-steep inequality.

Not according to any of my Economics professors.

I suppose mine disagree with yours. Like so much else, it's a debate.

Agh, hit submit before I me... (Below threshold)

Agh, hit submit before I meant to. Anyway, didn't mean to suggest that I wanted us all to make the same money. But there are ways a country can see to it that income is less steeply-divided. Japan, for instance, mandates that CEOs won't make more than 40-50 times the salary of the company's lowest paid worker. I'm not advocating that law for the U.S., for which that ratio is more like 500-600 to one.

Most of the economic inequality seen in the U.S. is the result of bad choices people make.

That may or may not be a good point. Hard to tell without some hard data in front of me.

I trust the market for that... (Below threshold)
DJ Drummond:

I trust the market for that a lot more than I would ever trust Congress, Parthenon. As I noted, no attempt to mandate has ever worked. At least three forces work against it:

1. No human plan is perfect

2. Most rich people become rich because they are smart enough to figure out the rules. Changing the rules does not keep them from winning.

3. Most poor people in the US do not stay poor, unless they have given up. It's well established that welfare programs and other hand-outs from government inevitably result in failed growth in individual productivity.

Point #2 would be true, DJ,... (Below threshold)

Point #2 would be true, DJ, if you removed every person born into wealth from the mean. As such, it's false.

Economic inequality is a good thing, especially insofar as it benefits the worst off among us. No serious economist (not even your nemesis Paul Krugman) thinks leveling down everybody to the same income threshold will make people better off in general. There is a much higher chance of having a good life in the United States than in, say, Poland, where the gap between rich and poor is more narrow than in America. However, the chances of having a good life in Sweden or Norway or Switzerland are higher than in the U.S. and the gap between rich and poor is lower. You might broadly apply the adjective "socialist" to these nations, but in fairness you also have to grant that they're "successful" and "great places to live with robust welfare states".

Smaller government does not necessarily equal better economy, and more importantly it certainly does not guarantee a higher overall standard of living. The worst parts of India (in terms of crime and health statistics) have some of the lowest business taxation rates in the country, while the provinces with the highest rates of literacy and life expectancy have relatively high tax and low crime rates, and robust social spending. See: Sen, Amartya: Development As Freedom.

Economics is harder than picking your favourite ideology and imposing it on our complex world. The success of the free market is undeniable, though reducing economics to "less is more" does injustice to the work of those who have dedicated their careers to making people's lives better on the most macro of scales. You should allow for at least a modicum of empirical sensitivity and normative flexibililty when referring to facts in the world and not merely values inherited via your politics.

Ask yourself this: you have the option of living in Country A or B. In Country A, you have a higher percent chance of becoming a millionaire (say, 2%), and a higher percent chance of living in poverty (say, 25%). In Country B, you have a lower percent chance of becoming a millionaire (say, 0.5%), but also a lower percent chance of living in poverty (say, 5%). What does the rational actor choose, all things being equal?

As DJ has already implicitly discounted the whole of the social sciences with the first sentence of his third point above, I can guess which he'd pick and why.

Wow, hyper must have a PhD.... (Below threshold)
DJ Drummond:

Wow, hyper must have a PhD. As in, that last comment of his was piled higher and deeper than any other crappy post from anyone else today!

"2. Most rich people become... (Below threshold)
retired military:

"2. Most rich people become rich because they are smart enough to figure out the rules. Changing the rules does not keep them from winning"

"Point #2 would be true, DJ, if you removed every person born into wealth from the mean. As such, it's false."

Hyper your conclusion is invalid.

Look at the people who have money, regardless of the source, and who are not smart with it. Shall we say folks like Mike Tyson, Ed McMan, some child actors, quite a few lottery winners, etc

They have or had millions, yet if the blow it or or not smart with what they have they lose it. It doesnt matter if they are born with it or not.

Generally people who are born into money receive some education about it from an early age and therefore generally make more informed decisions. They do generally have a leg up on those not born into wealth. But that doesnt mean they can be stupid with it.

It doesnt matter if they... (Below threshold)

It doesnt matter if they are born with it or not.

You're not saying that the socioeconomic circumstances you inherit at birth have no bearing on your future; i.e., on whether or not you will have the opportunity to piss away a lot of money--whereas most people will never have a lot of money to piss away. Your next paragraph actually disavows that claim, so you must have typed that sentence by accident.

There is no greater factor in determining one's future prospects in a competitive society than the lifestyle in which they are raised. For every rags to riches American dream fairy tale, there's far more spoiled kids with trust funds. That's so obviously true as to be trivial, so I'm not sure what you're disagreeing with.

DJ, comment #26 was an atte... (Below threshold)

DJ, comment #26 was an attempt at humour but it fails and just makes you look ignorant. People who criticize others for having a formal education and using concepts and arguments with which they are not familiar make our discourse stupider.

Ask yourself this:... (Below threshold)
Mac Lorry:
Ask yourself this: you have the option of living in Country A or B. In Country A, you have a higher percent chance of becoming a millionaire (say, 2%), and a higher percent chance of living in poverty (say, 25%). In Country B, you have a lower percent chance of becoming a millionaire (say, 0.5%), but also a lower percent chance of living in poverty (say, 5%). What does the rational actor choose, all things being equal?

The person wanting to be an entrepreneur or willing to take risk to get ahead would likely pick country A. The person who's risk adverse and likes a big safety net would go to country B. After a while country A will have a far more vibrant economy than country B. That's what we see when you compare the U.S. with Sweden or Norway or Switzerland. Also, Norway's socialist economy is only possible because of North sea oil.

Hyper, my dad was a project... (Below threshold)
DJ Drummond:

Hyper, my dad was a project engineer with three Masters degrees. I learned early on that he held a deep contempt, in general, for people who knew a lot of theory but no practical experience. Your post 25 was, to my mind, well off the topic at hand, pulling hypothetical situations with no real-world applicability. The countries you did mention were interesting, except that I am sure you realize that the scale of the relative economies makes comparison unreasonable, like matching a Mack Truck against a Lamborghini - they are designed for different jobs and cannot properly be used in a head-to-head comparison. Same here, the US is a huge, modern, global economny on a bigger scale than all of Europe put together. I think you are smart enough to know that the comparison is not valid, so I smacked you down for what we both know was a cheap stunt.

Hyperbullshitter:"Pe... (Below threshold)

"People who criticize others for having a formal education and using concepts and arguments with which they are not familiar make our discourse stupider."

Wrong, people who post off topic, strawmen, lies, and insults make our discourse stupider.

It would be nice if, for once, you could post on topic without insults. But having your continuous off-topic posts, I ain't holding my breath.

HyperTRY READING W... (Below threshold)
retired military:



You said

"Point #2 would be true, DJ, if you removed every person born into wealth from the mean. As such, it's false.""

I stated if you are born rich but that doesnt nesecarily = you stay rich or you do the smart things. Yes it gives you a leg up but it doesnt gaurentee success. Are you saying you have never heard of a rich person losing all their money? Or a smart person becoming rich?

I didnt go on to mention that the rest of your statement after your invalid conclusion was just so much hogwash either.

It is extremely hard to go accurately compare countries like " Sweden or Norway or Switzerland " to the US due mainly to population.

Hell it is said that communism is the perfect form of government. IF the population is under 50 people.

If you are going to compare something try looking at the whole picture instead of your rose colored piece.

Well, DJ, I have deep conte... (Below threshold)

Well, DJ, I have deep contempt for people who think that theory is something to be sneered at as 'mere learning' with no connection to reality--as though understanding the ideas that drive our civilization forward in competition and conjunction with one another is something to be mocked or somehow discounted.

Your theory--that keeping the government out of the economy is necessarily better--is false based on actual counterfactuals in the world. You made a theoretical assertion, but my rejection of that is empirical, as it's regarding your misunderstanding of how facts fail to support your overly simplistic economic theory.

RM, why don't you read what I wrote? Nothing I said implied that rich people will necessarily be more successful, but only that they probably will be, and that is supported by facts and common sense. That's what I said in the first place. I never said a rich person can't gamble away a fortune; in fact, I was very careful not to say anything that stupid. Quit yelling at scare crows, you're scaring the neighbours.

Mac--you misunderstand the thought experiment. You don't live in a country full of entrepreneurs, there is no such place. The point is, put yourself in the shoes of some extraterrestrial with no money and a completely average intellect and work ethic--where do you choose to live?

What more than one of you are saying is that it's unfair to compare the United States to smaller countries. Why? Which countries, then, is it fair to compare it to? Brazil? Is your argument then that the larger the country (in terms of population and/or physical size--I'm not sure, you tell me), the less the government must intervene in the economy? Because that's false, as is proven with the regional case study of India in the book I mentioned that none of you will ever read.

"Quit yelling at scare crow... (Below threshold)
retired military:

"Quit yelling at scare crows,"

Stop talking about all the strawmen that you bring up.

" Because that's false, as is proven with the regional case study of India in the book "

So lets compare India to the US.

"Of its nearly 1 billion inhabitants, an estimated 350-400 million are below the poverty line, 75 per cent of them in the rural areas.
40% below poverty level

"More than 40 per cent of the population is illiterate, with women, tribal and scheduled castes particularly affected."
40% illiteracy rate

" Every year, nearly 4,000 people die in the Mumbai commuter train system, most because they fall out of overcrowded cars in the cheap standing-room carriages"

Rank Country GNP (PPP
1 United States $8,351
2 China $4,114
3 Japan $3,043
4 India $2,144
5 Germany $1,838

I would go on but am limited to number of links.

Yep India. A veritable paradise that I want to move to. Do us a favor Hyper, go there and tell us how much you like it.

Well hyper, I tried treatin... (Below threshold)
DJ Drummond:

Well hyper, I tried treating your argument with some respect. Your last two tantrums do nothing, really, but prove your own immaturity. It's wasted effort I am sure, but I must remind you that you have 'proven' nothing. I explained the context and you instead demand we accept what is clearly irrelevant support for your position. You fairly screamed "theory", but ignored how much of your own claims depended on hypotheticals and non-salient examples.

Shrill emotion does not help your case, hyper. But it seems to be all you have.

RM, the case study was comp... (Below threshold)

RM, the case study was comparing regions within India and showing that those with higher levels of government intervention in the economy are better places to live. Nobody was comparing India to the U.S. except you, so again, quit barking at scare crows, the neighbours are seriously getting worried.

DJ, as you're unwilling or unable to examine factual data that undermines your shoddy ideological argument (the title and author of the book are right there), I'm not going to waste any more time on someone as willfully ignorant as yourself. When most people realize that they don't know what they're talking about, they go read up on it or stop pretending to be knowledgeable, but somehow it serves (paradoxically) to inflate your opinion of your own argument. It's like arguing with a creationist.

The point is, put yourse... (Below threshold)
Les Nessman:

The point is, put yourself in the shoes of some extraterrestrial with no money and a completely average intellect and work ethic--where do you choose to live?

I guess they would want to live in Lake Woebegone, where all the children are above average?

But really, if you aim to stay only 'average' in intellect and work ethic (and therefore to only have an 'average' life), then I guess Socialism/Communism is your goal. Even then, mediocrity is no guarantee of success. You can (will?) all be equally unhappy.

In America and free market societies, you can strive to be more. Don't you want to aim higher?

As expected, hyper-spew ins... (Below threshold)
DJ Drummond:

As expected, hyper-spew instead of a reasoned debate.

hyperbolist,<blockquo... (Below threshold)
Mac Lorry:


Mac--you misunderstand the thought experiment. You don't live in a country full of entrepreneurs, there is no such place. The point is, put yourself in the shoes of some extraterrestrial with no money and a completely average intellect and work ethic--where do you choose to live?

Well I gave you examples of the type of people who would choose Country A, and who would choose Country B. Now you want to limit me to just an extraterrestrial of your choosing. Is that allowed under the rules of this experiment? It seems kind of one sided.

Intellect is not a good indicator of a person's chances of success or failure in business. Actually, really smart people often do poorly running a business. What it really comes down to is how much a person wants to be successful and how much risk they are willing to take to achieve that success. There are always exceptions, but I'm at least talking in general terms. If the extraterrestrial is creative, has the desire to be very successful and is not afraid of failure, then it chooses country A. However, if the extraterrestrial has a herding instinct and is adverse to risk, then it chooses country B.

I know that's not the answer you want, because you think everyone is risk adverse and will take the safe bet. It's just not so and all you have to do is look around at all the small businesses people have mortgaged their homes to start. Two out of thee of those small startups will fail, yet millions start up every year, well at least in the U.S. The ones that succeed form the backbone of the U.S. economy. An economy that reinvents itself over and over as conditions change.

I know I'm not going to convince you that beyond the foundational laws that establish the infrastructure, national defense, personal freedom, the court system, the monetary system, property rights, and fair competition that the less government involvement the better the economy tends to be. It's like arguing with an evolutionist.

What, you can't strive to d... (Below threshold)

What, you can't strive to do well in places like Sweden? They haven't got rich businesspeople, successful artists, and pro athletes? Like America is the only place where you can get a flat screen TV or your name in the newspaper! Honestly, Les, "aiming higher" is a non-sequitur.

DJ--how does one debate with somebody who refuses to avail himself of the facts to which he has been directed? I don't expect you to run out to the library or Barnes & Noble and pick it up, but you could at least acknowledge the possibility of empirical counterfactuals that would require you to at least weaken your absurdly strong hypothesis--namely, that the less government intervenes in the economy, the better the economy will do, with no exception. (That is your hypothesis, right?)

Oh, and Mac, I apologize fo... (Below threshold)

Oh, and Mac, I apologize for the anti-creationist slur. It's off-topic and cheap.

Hyperbolist, I didn't take ... (Below threshold)
Mac Lorry:

Hyperbolist, I didn't take it as a slur nor was my anti-evolutionist comment intended to be a slur. As I have touched on before, the creationist and evolutionist points of view flow from the two possible answers to the same question. Logic shows that neither answer can be ascertained through evidence and so fundamentally, both views are matters of faith. Similarly, views about the proper role of government in free markets are based to some degree on faith. When the faith level is reached in a discussion, there's no point arguing any more. That's how I took your comment and that's how I intended my comment. Peace!






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