27 Oct 2014


Potpourri 29 Comments

==> Bill Kauffman has no love for the U.S. empire.

==> Martin Wolf writes in the FT that we’re trapped in a cycle of credit booms.

==> If you’re into Bitcoin, catch me in the second hour of this show or here again.

==> If you’re into the Mandelbrot Set (the cover image of my website), this tutorial is the best I’ve ever seen. Especially the end where it shows what’s going on when the computer fills it in with different colors.

==> As I said on Twitter, it’s even creepier for some reason when the CIA spies on the U.S. government.

==> Not sure if it’s worth getting into the weeds on this one, but I found Scott Sumner’s comparison of the Fed with classical gold standard to be filled with difficulty.

==> Tom Woods and I talk Ebola.

29 Responses to “Potpourri”

  1. Andrew_FL says:

    Sumner link is wrong, it’s to the CIA thing again.

    For what it’s worth, I felt there were several things wrong with it, too.

  2. Keshav Srinivasan says:

    Bob, what is this referring to? “Look out for his upcoming book where he creates Mises’ “Human Action” in an easy to follow read.” Is that just a reference to your Human Action study guide, or something else?

    • Bob Murphy says:

      No Keshav in May 2015 I have a new book coming out from the Independent Institute that distills *Human Action* down at an undergraduate level.

      • Joseph Fetz says:

        Tapping your inner Rothbard?

        Seriously though, do you present anything new to the literature?

        (BTW, that’s not a slight in the least. I’m genuinely curious.)

        • Bob Murphy says:

          Joe well my purpose in the book isn’t to do anything new, but instead to elaborate on what Mises is doing in Human Action. However, I do think I make some of his points in a way that will click for some readers. I saw stuff in Human Action this time around that I never saw before, so that means Rothbard didn’t dwell on it either.

          • Joseph Fetz says:

            For what it’s worth, Bob, I was only asking that question because that was exactly how Rothbard started his project of writing Man, Economy, and State. I was just curious if your path along that road took some new turns of theory as his did.

            Yeah, I do *get it* when it comes to explaining certain points, it is always helpful to be able to do so from a different perspective, one that caters to the understanding and style of the listener/reader (which is hard to do for many people). I am often told that I’m very good at explaining complex concepts in a very easy to understand manner. However, I’m not an academic or professional in this realm, so my explanations can easily conform to more of a “regular Joe” (so to speak) level than most professional economists can muster; as you well know, I can often throw an F-bomb into a completely theoretical and scientific explanation as if it is normal.

            On the other hand, I have also talked with many professionals in conversation and in other correspondence, and none have ever really doubted that when I speak confidently on a subject, that I am not BSing them: they can sense that I know what I’m talking about. And when I don’t speak in such a way, they automatically sense that I’m asking for explanations and/or answers.

            Obviously, this doesn’t mean that I’m super-smart or anything, it only means that I always seek out the answers to the questions that I have (from my own reading or from my betters), and when I get them, I like to share them when the time arrises. My real talent lies in the fact that once I get something, I can explain it accurately in a multitude of ways (something that I inherited from my father, only he was a true master at it).

            “… Rothbard didn’t dwell on it either.”

            Please excuse my ignorance, but what do you mean here?

            I can certainly see where Rothbard could have derived his monopoly theory and his theory of production from Mises’ HA, but it’s also true that he really did make further theoretical advances in those areas.

            In terms of Mises’ monopoly theory, I think that Rothbard sort of supplanted it in the Austrian literature; whereas in the case of production, he took everything from the Austrian literature and made it whole.

            Anyhow, I just didn’t understand what you meant by that latter sentence. No judgement held; I just don’t understand the meaning.

            • Major.Freedom says:

              Murphy means Rothbard didn’t mention some of the things from Human Action that Murphy mentions in his upcoming book.

              I don’t think Murphy is channeling Rothbard on this. There is an opportunity for Mises’ rather heady stuff to be “translated” into an undergraduate level text. Most economics students don’t move on to graduate economics, so by doing this, Murphy might be able to have more college undergrads have exposure to Austrian economics.

              Let’s be honest, Murphy has an amazing talent in explaining complicated Austrian ideas in a way that the general public can understand. That takes incredible intellectual effort and ability. One has to see the whole forest when most others get lost within the trees.

              Murphy, if you’re reading this, I think what you are doing is awesome. Maybe in the futurr you can also make a philosophy / social sciences undergrad “translation” text of Mises’ “Ultimate Foundation of Economic Science.”

              • Bob Murphy says:

                You know, I always thought you had a solid head on your shoulders, Major Freedom.

            • Bob Murphy says:


              MF is right when he paraphrased what I was saying, if that helps. To give a specific example: I come up with a numerical example of “free banking” in action, where the note issue of one bank is circumscribed by the proportion of its customers to the whole population. Mises just says that breezily in a few sentences, but it’s really cool and I spell it out.

              So Rothbard knew all that, but I’m saying he didn’t really dwell on that aspect in his work, the way, say, he spelled out fractional reserve banking with T-accounts.

              • Joseph Fetz says:

                Okay, thanks. I look forward to the book.

              • Joseph Fetz says:

                Oh, and as you already know, I do think that you’re great at explaining stuff. After all, I’ve thanked you many times for the things that you’ve taught me.

      • Keshav Srinivasan says:

        Is this similar to Letters to a Young Economist, except targeted to a different age group? That was based on Human Action as well, wasn’t it?

        • Bob Murphy says:

          No Keshav LFTYE did not specifically mirror *Human Action*. This new book does.

  3. Andrew_FL says:

    Near as I can tell, Scott is very preoccupied with the short term uncertainty of “the price level” and not the long term uncertainty. In the long term you would be on pretty solid ground thinking prices would be about the same in a hundred years in the pre-Fed period (in fact, from 1774 to 1913 one estimate has consumer prices increasing about 23% in the 139 years between 1774 and 1913-not even half a percent per year on average), but you wouldn’t have such good luck guessing prices in 5 years. Apparently, the situation is now the reverse. Scott implies that short term price fluctuations were worse because of gold, and that the short term price level predictability is more important than the long term, because of sticky prices and business cycles.

    Is it just me, though, or is there a contradiction in emphasizing predictability of short term inflation, while claiming that the fed has on average hit it’s target if you look at the last 24 years?

  4. Bob Roddis says:

    I liked the Ebola podcast very much. We should restate and restate that the answer is always the same.





    • Grane Peer says:

      I can’t move!

      • Major.Freedom says:

        “My genitals are too restrictive in civil society!”

        – Rapist

    • Harold says:

      Are druggies only prohibited from private roads when intoxicated, or all the time by virtue of them being druggies?

      • Bob Roddis says:

        I assume that would be up to the guys with the green eye shades at the insurance company.

      • Bob Roddis says:

        Libertarianism, therefore, is a theory which states that everyone should be free of violent invasion, should be free to do as he sees fit, except invade the person or property of another. What a person does with his or her life is vital and important, but is simply irrelevant to libertarianism. – Murray Rothbard

    • Tel says:

      I liked the Ebola talk as well.

      There’s a few points that it brings out. Ebola of course is dangerous, but the specific danger of Ebola to modern society is exponential growth via our mass transport hubs. As Bob points out, airports are dangerous anyway, and contagious disease is just one more danger brought about by airports.

      Probably fair to point out that there’s a long history of central powers building transport systems… usually for military reasons, and then secondarily for tax reasons. Roman roads in Europe is what gave the legions the ability to impose the will of Rome onto the rest of Europe. The British Empire went about building a great navy in order to project power over the colonies. Same reason the US navy exists, same Reason that Russia is determined to keep a port in the Crimea.

      History shows that trade and military power tend to go together. Not that people are unable to trade peacefully, but wealth attracts someone interested in plunder, which in turn makes people turn to defending themselves, and before too long some military power emerges.

      If we presume there was a workable way to avoid centralised military power and create a peaceful society where people do respect each other’s property, probably such a society would have less emphasis on mass transport to begin with. There would be greater cultural variation from one area to another, without central government imposing a common culture from above. Greater local variation would encourage most people to live and work amongst the people they get along with, and stay in the same area.

      This would automatically impose a type of quarantine. In order to travel you would be crossing a lot more local borders, and thus be subject to many more inspections in a decentralised society. This can be a nuisance, but it also protects the people living in that society. As Bob says, there isn’t an obvious answer to this, so in order to find the right balance, some sort of free market competition is required.

      Modern cities have a mass transit system to compensate for government planners putting all of the office buildings in one place, and all of the residencies in another place. It’s of questionable utility that most of the workers spend two hours a day commuting every working day. I think that a libertarian society would result in people able to live closer to where they work.

      • Tel says:


        Dr. Craig Spencer at first told officials that he isolated himself in his Harlem apartment — and didn’t admit he rode the subways, dined out and went bowling until cops looked at his MetroCard the sources said.

        Two interesting points here, a guy who is reasonably well educated, not in poverty or anything, will on general principle not disclose his private movements.

        Also, yes those cards are for the purpose of tracking you.

    • Tel says:

      Another point, on the Ebola thing and libertarian society… some things are easier under a central power, like spying on everyone, or maintaining a long and unbroken border that isn’t too porous (as an aside, the cental power still suffers from the Agency Problem, although Obama is in a position where he COULD tighten the US borders, seem that he doesn’t want to).

      However, some things are easier without a central power. For example, people were making a point that Ebola vaccine in Canada was developed at a government lab… but the reason they were the only lab working on it, is they were the only lab ALLOWED to be working on it. In a free market, people would quickly see profit motive and start making portable test kits and vaccines… some of which would be utter crap, but with free market competition we would find out the good ones and start trading those.

      Have you heard people say “There’s an app for that” ?

      Have you ever wondered why development can happen so quickly in the software industry, but new ideas take just about forever to permeate other places in society?

      Mainly, because government has not been able to force programmers to be licensed. With less government controls, the biomedical industry would be cranking out new medicines at the same rate as new apps come out.

  5. Major.Freedom says:

    It doesn’t matter to investors whether aggregates like the “price level” follow a random walk.

    Investors do not invest in the present CPI for the purpose of selling CPI in the future.

    Investors take into account specific present prices and specific future expected prices. The Fed does not directly control these prices.

    Sumner and other socialist minded intellectuals who believe in stabilizing aggregates make the mistake of believing that what they believe is important, is what investors actually care about. “See dis comrade? Mighty mother country make 10,000 hectares of farmland per month. If comrade have faith in mother country, then comrade will be sure that in 12 months there will be 120,000 hectares.”

    For whatever reason, the belief is that “a” certainty over a useless statistic manipulated by the state is supposed to “steer” us in the right direction.

  6. Ag Economist says:

    Sumner’s post is just baffling. We can all live in a fantasy land where the Fed targets this or that. However, as Friedman finally admitted, an honest Fed is about as likely as an honest Nancy Pelosi.

    • Enopoletus Harding says:

      I don’t find Sumner’s post to be baffling-the Fed is clearly targeting 2% PCE deflator inflation. I just think that trend 2% PCE deflator inflation (or NGDP trend growth, or whatever) is never going to substitute for sound economic policy in which the markets are not artificially distorted.

  7. Tel says:

    Of course the past 5 years provided a near perfect test—we had a government very worried about unemployment, which faced re-election in 2012. And inflation stayed low.

    Yeah well, employment isn’t exactly soaring either. People (mostly young people) are just dropping out of the economy, probably for the long term. Very bad prospect.

    Look, I don’t think there’s any magic involved saying that the Fed can print money and cause inflation (both pricewise and monetary) so we presume that by controlling the rate at which they print, they can target something or other, especially if you allow them the luxury of a 20 year average to work in. That doesn’t shock me.

    The problem starts with the belief that the Fed can both target inflation and create jobs with “stimulus”, this is pure Keynesian fantasy.

    By the way, I thought the gold standard started somewhere around Agamemnon.

  8. Tel says:

    Speaking of the Fed, are we keeping a book on when QE4 starts? And how they go about spinning it that there is no QE4?

    That’s the core of modern economic science, isn’t it? Playing the double-guess the Fed game?

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