Believe it or not: Karl Marx is making a comeback

[boneyard bill]

If Marx is making a comeback, it isn't because anyone's suddenly convinced of the 'historic inevitability' of a classless, stateless society.

Rather, circumstances are forcing people to ask why, despite nearly doubled productivity, they're worse or no better off than their parents were. And being told that even that is living beyond their means. Marginal revenue product my arse, something doesn't stack up. This is not the capitalism we were sold.

Marxism, if there is such a thing, is a description of capitalism (not a blueprint for socialism). Whether or not people buy the Marxist explanation wholesale, it at least bears some resemblance to reality and gives people tools to analyse what's going on.

Also, any Marxist comeback is a largely American phenomenon. The idea that Marx was somehow fatally discredited by the horseshit that now passes for economics has been largely American.

Aside from Piketty's book, I don't see where Marxism is making a comeback in US or anywhere else. Yet, from what I understand, Piketty is not actually trying to sell Marxism in its entirety although that might be implied from the book's title. But what Piketty seems to be trying to do is simply to justify more redistribution of wealth by the state. At a time when income disparities are increasing this would appear to be a relevant project. But since there was greater equality in the past without income re-distributions advocated by Piketty, it seems to me that the more relevant project would be to focus on those policies which have destroyed that relatively greater equality that we previously enjoyed. More income redistribution would seem to be an admission of the failure of current economic theory, not an alternative to it.

 

[bilby]

If Marx is making a comeback, it isn't because anyone's suddenly convinced of the 'historic inevitability' of a classless, stateless society.

Rather, circumstances are forcing people to ask why, despite nearly doubled productivity, they're worse or no better off than their parents were. And being told that even that is living beyond their means. Marginal revenue product my arse, something doesn't stack up. This is not the capitalism we were sold.

Marxism, if there is such a thing, is a description of capitalism (not a blueprint for socialism). Whether or not people buy the Marxist explanation wholesale, it at least bears some resemblance to reality and gives people tools to analyse what's going on.

Also, any Marxist comeback is a largely American phenomenon. The idea that Marx was somehow fatally discredited by the horseshit that now passes for economics has been largely American.

Aside from Piketty's book, I don't see where Marxism is making a comeback in US or anywhere else. Yet, from what I understand, Piketty is not actually trying to sell Marxism in its entirety although that might be implied from the book's title. But what Piketty seems to be trying to do is simply to justify more redistribution of wealth by the state. At a time when income disparities are increasing this would appear to be a relevant project. But since there was greater equality in the past without income re-distributions advocated by Piketty, it seems to me that the more relevant project would be to focus on those policies which have destroyed that relatively greater equality that we previously enjoyed. More income redistribution would seem to be an admission of the failure of current economic theory, not an alternative to it.

The policies in question generally consisted of going to war with powers of sufficient strength to present an existential threat to your nation.

Even if you wanted to focus on such policies today, the cure would likely be worse than the disease. Income equality in the US was dramatically improved by the War of Independence, the Civil War, and particularly by WWII. A full on, no holds barred WWIII with China or perhaps Russia would likely reduce income inequality once again; but it might be less damaging to simply raise taxes to fund benefits and services for the poor.

 

[lpetrich]

bilby, do you have any numbers for that? How much have people researched that issue? That's certainly true of WWII; it was the time of the  Great Compression. But the US Civil War or the American Revolution?

I've found Thomas Piketty - capital21cen; it links to graphs and spreadsheets for his data. It covers several nations, and in Europe, there was also a decline in inequality in the Great Depression and World War II.

But overall, I agree. Military necessity has a way of shutting up the professional pennypinchers and justifying extreme Keynesian strategies. It's like what happened to the America Firsters after Japan's attack of Pearl harbor.

 

[Canard DuJour]

If Marx is making a comeback, it isn't because anyone's suddenly convinced of the 'historic inevitability' of a classless, stateless society.

Rather, circumstances are forcing people to ask why, despite nearly doubled productivity, they're worse or no better off than their parents were. And being told that even that is living beyond their means. Marginal revenue product my arse, something doesn't stack up. This is not the capitalism we were sold.

Marxism, if there is such a thing, is a description of capitalism (not a blueprint for socialism). Whether or not people buy the Marxist explanation wholesale, it at least bears some resemblance to reality and gives people tools to analyse what's going on.

Also, any Marxist comeback is a largely American phenomenon. The idea that Marx was somehow fatally discredited by the horseshit that now passes for economics has been largely American.

Aside from Piketty's book, I don't see where Marxism is making a comeback in US or anywhere else. Yet, from what I understand, Piketty is not actually trying to sell Marxism in its entirety although that might be implied from the book's title. But what Piketty seems to be trying to do is simply to justify more redistribution of wealth by the state. At a time when income disparities are increasing this would appear to be a relevant project. But since there was greater equality in the past without income re-distributions advocated by Piketty, it seems to me that the more relevant project would be to focus on those policies which have destroyed that relatively greater equality that we previously enjoyed. More income redistribution would seem to be an admission of the failure of current economic theory, not an alternative to it.

I don't really know whether Marxism is making a comeback - I did say "if". But I've seen a fair few Marxist accounts of the current mess in US mainstream media lately. That and ordinary folks arriving at similar in different language. Both would have been astonishing (from the US at least) until recently.

I said nothing about Piketty.

Re "greater equality in the past," I agree with bilby - and indeed Piketty from what I've read (though I suspect you're actually referring to some revisionist tripe you've read on libertard websites about the 19th century. Not interested) .

 

[AthenaAwakened]

For Marx to come back, he would have had to leave.

People everyday express marxian ideas, they just don't know that Marx thought them first.

 

[Canard DuJour]

For Marx to come back, he would have had to leave.

People everyday express marxian ideas, they just don't know that Marx thought them first.

Yep ..including quite a few who think they're rightwing free-marketeers.

 

[boneyard bill]

Aside from Piketty's book, I don't see where Marxism is making a comeback in US or anywhere else. Yet, from what I understand, Piketty is not actually trying to sell Marxism in its entirety although that might be implied from the book's title. But what Piketty seems to be trying to do is simply to justify more redistribution of wealth by the state. At a time when income disparities are increasing this would appear to be a relevant project. But since there was greater equality in the past without income re-distributions advocated by Piketty, it seems to me that the more relevant project would be to focus on those policies which have destroyed that relatively greater equality that we previously enjoyed. More income redistribution would seem to be an admission of the failure of current economic theory, not an alternative to it.

The policies in question generally consisted of going to war with powers of sufficient strength to present an existential threat to your nation.

Even if you wanted to focus on such policies today, the cure would likely be worse than the disease. Income equality in the US was dramatically improved by the War of Independence, the Civil War, and particularly by WWII. A full on, no holds barred WWIII with China or perhaps Russia would likely reduce income inequality once again; but it might be less damaging to simply raise taxes to fund benefits and services for the poor.

We could just build aircraft carriers and sink them ourselves since the Japanese won't do it for us. What evidence do we have that war produces greater income equality other than the fact that it makes most people worse off? But even then, is this increased equality sufficient to counteract the greater inequality that accrues to wartime profiteers?

Raising taxes and giving proceeds to the poor would probably not reduce income inequality since the damage to the economy would simply make that many more people poor. Income equality is achieved by making people more productive. That requires education and/or training. Since the huge increases in education that we have enacted over the last half century have produced less educated people than in the past, that would suggest that there is something seriously wrong with public education. Nor does it speak well for the 150 or so jobs programs that we have on the books.

 

[boneyard bill]

bilby, do you have any numbers for that? How much have people researched that issue? That's certainly true of WWII; it was the time of the  Great Compression. But the US Civil War or the American Revolution?

I've found Thomas Piketty - capital21cen; it links to graphs and spreadsheets for his data. It covers several nations, and in Europe, there was also a decline in inequality in the Great Depression and World War II.

But overall, I agree. Military necessity has a way of shutting up the professional pennypinchers and justifying extreme Keynesian strategies. It's like what happened to the America Firsters after Japan's attack of Pearl harbor.

But wartime economic measures are not sustainable. We were a rich country and probably contributed the least of the major powers to the war effort. But Britain was virtually bankrupted by the war, and Soviet Russia wasn't a whole lot better off.

 

[boneyard bill]

For Marx to come back, he would have had to leave.

People everyday express marxian ideas, they just don't know that Marx thought them first.

Yep ..including quite a few who think they're rightwing free-marketeers.

Perhaps you can enlighten us on just what those ideas are that free-marketeers believe and that Marx taught before anyone else did. In fact, I suspect that not very many people on this thread have read ANYTHING that Marx wrote.

 

[bilby]

The policies in question generally consisted of going to war with powers of sufficient strength to present an existential threat to your nation.

Even if you wanted to focus on such policies today, the cure would likely be worse than the disease. Income equality in the US was dramatically improved by the War of Independence, the Civil War, and particularly by WWII. A full on, no holds barred WWIII with China or perhaps Russia would likely reduce income inequality once again; but it might be less damaging to simply raise taxes to fund benefits and services for the poor.

We could just build aircraft carriers and sink them ourselves since the Japanese won't do it for us. What evidence do we have that war produces greater income equality other than the fact that it makes most people worse off?

Well for a start, it generally creates full employment, with the government employing vast numbers of people both directly, in the armed forces; and indirectly, in the manufacturing sector. Typically this spending is funded by issuing war bonds, which are effectively calls for charitable lending by wealthy citizens at low interest rates - a 'stealth tax' if you like.

But even then, is this increased equality sufficient to counteract the greater inequality that accrues to wartime profiteers?

Yes. Easily.

Raising taxes and giving proceeds to the poor would probably not reduce income inequality since the damage to the economy would simply make that many more people poor.

I am staggered that anyone could seriously believe such tripe. Was the world made in seven days by a guy who had a spat with a talking snake too?

Income equality is achieved by making people more productive. That requires education and/or training.

Both of which are provided by the armed forces, in spades.

Since the huge increases in education that we have enacted over the last half century have produced less educated people than in the past, that would suggest that there is something seriously wrong with public education. Nor does it speak well for the 150 or so jobs programs that we have on the books.

Showing that the US education system is FUBAR is easy to do; showing that this indicates that income redistribution is a bad idea is rather harder.

 

[bilby]

bilby, do you have any numbers for that? How much have people researched that issue? That's certainly true of WWII; it was the time of the  Great Compression. But the US Civil War or the American Revolution?

I've found Thomas Piketty - capital21cen; it links to graphs and spreadsheets for his data. It covers several nations, and in Europe, there was also a decline in inequality in the Great Depression and World War II.

But overall, I agree. Military necessity has a way of shutting up the professional pennypinchers and justifying extreme Keynesian strategies. It's like what happened to the America Firsters after Japan's attack of Pearl harbor.

But wartime economic measures are not sustainable. We were a rich country and probably contributed the least of the major powers to the war effort. But Britain was virtually bankrupted by the war, and Soviet Russia wasn't a whole lot better off.

And yet, even though rationing was in place well into the 1950s in Britain, that decade is fondly remembered as a boom time, with full employment and mass consumption of manufactured goods such as cars and consumer white goods. If that is what happens when a country is virtually bankrupt, then virtual bankruptcy doesn't seem like a particularly bad thing.

The myth that high levels of government debt are always bad is not supported by history; and yet it remains widely accepted by ideologues on the right.

 

[ksen]

Raising taxes and giving proceeds to the poor would probably not reduce income inequality

Says who? "Probably" is not that convincing.

since the damage to the economy would simply make that many more people poor.

Why don't you trust individuals to spend money?

How could millions more people having more disposable income hurt the economy?

Income equality is achieved by making people more productive. That requires education and/or training.

Yeah, that's what we were promised. But the ones with the money broke that deal at least 30 years ago.

Sent from my SM-G900T using Tapatalk

 

[ksen]

Since the huge increases in education that we have enacted over the last half century have produced less educated people than in the past, that would suggest that there is something seriously wrong with public education.

What huge increases in education over the last half century?

Maybe you're not aware that education funding in the US has been declining over the past 30+ years?

Your argument is damning of the privatization movement in American education. But you probably don't see it that way.

 

[Togo]

Marx never went away over here. We still have Marxist historians, Marxist political ideas, and so on, and there are squabbles over competing Marxist ideas just like the free marketeers do. It occupies roughly the same space as the long polemics on the terrible threat of government and the evils of fiat currency do in the US, except that it's more intellectual and more respected as a tradition (but no more heeded).

 

[mopc]

edit

 

[SimpleDon]

I don't normally resurrect zombie threads but I have worked on this response for a week in between the world cup, my daughter moving into her new home and moving my parents into assisted living.

Trausti, that individualism argument does not explain big businesses. ...

Big business is a highly centralized model. ...

Marxism is an anarchist system, the government would wither away after the communes were set up. ...
And neither has established any firm benefit to adopting their systems other than getting rid of government, a rather dubious and counter intuitive one.

I might go along with the last point, but all of the others are completely wrong. Capitalism is not, and never claimed to be, an anarchist system. Yes, you have Murray Rothbard and his so-called anarcho-capitalism, but Rothbard was nuts when it came to political theory, and anyway, capitalism preceded Rothbard by at least several centuries.

Nor is capitalism an ideology. The free market is simply a description of how people behave when they are free to do so and when private property is an accepted part of the social system. If you deprive them of some of that freedom, they will behave differently, and how they will behave differently is often unpredictable which makes it impossible to "fine tune" the economy as some modern day economists have failed to understand so they keep digging us in deeper and deeper.

Yes, Rothbard and the anarcho-capitalists are nuts. They try to extend an economic system to the political sphere.

Read my post to Neo. This thread is about Marxism and economic theory. Capitalism is not what I was comparing to Marxism. Capitalism is the broad theory in which the means of production is largely in private hands. It is the basis of our current mixed market system that has evolved over two hundred years and has grown up with the industrial revolution.

What I was talking about is the free market theory of capitalism that the market mechanism can take over most of the functions in the economy that fall to the government in our current system. Your theory of economics.

It is an ideology, it depends on belief, faith. It has no historical support. There has never been an economy run independently from a government. In fact it is the demands that the economy puts on government that has largely shaped government and which defines about 70% what governments do today.

The theoretical basis of the theory of the free market is rather fragile too. Say's law, loanable funds, general equilibrium theory, the quantity theory of money, rational expectations, efficient market hypothesis, microfoundations, DSGE models, marginal productivity, the natural rate of unemployment, comparative advantage and a lot more that I can't think of right now, none of these stand up to close examination. And all are needed in varying degrees for the theory to operate, for the simple mechanism of supply and demand setting prices to be able to regulate the complex and quickly changing economies of today and to suppress the bad behavior of the few.

Lacking support the theory becomes a article of faith, a self-reinforcing tautology.

And predictably attempts to impose the tenets of the theory on the economy have been disastrous, the failure to regulate the financial markets by free marketers caused the pain of the Great Recession of 2008 and the near collapse of the banking sector.

Capitalism is not the same as the free market. Capitalism not only doesn't require a free market it has markedly freely chosen the mixed market capitalism that we have today. We don't have a free market, prices are generally set as administrated prices, not by supply and demand. The mixed market system has freely chosen stability over the instability of the free market.

It would help if you distinguished more clearly what you mean by capitalism as you sometimes claim it as an ideology and sometimes claim that it as the prevailing system of economics as it is practiced today. However, I really can't make much sense of the latter as the "capitalism" of Japan is certainly very different from what is practiced in the US and not terribly different from the "socialism" of China. Likewise, Britain and Sweden both have what you would call "mixed" systems, but they are very different.

I would question your claim that the quantity theory of money or marginal productivity are much in dispute but most of the remaining points that you raise are in dispute even among people who call themselves free market economists. This doesn't support your claim, it refutes it. Free market economics is not an ideology. It is a description. To what what extent and in what ways should the free market be understood as a self-regulating mechanism and to what preconditions are necessary for a free market to exist? Virtually all free market economists, except for Rothbard, would agree that the state is necessary for free markets to exist. You need legal protection for private property. You need enforcement of contracts. You need bankruptcy laws, etc. These are the necessary ground rules. But there is no universal agreement on proper ground rules even among free market economists.

What violates free markets? Does social security violate free market economics? Friedmanites say yes. Randians say yes. But Austrians (except for Rothbard) say no. Austrians favor a gold standard, but Friedmanites oppose it. The law of supply and demand, the subjective theory of value, and the quantity theory of money are accepted by all free market schools, but they are accepted by most other schools as well. The quantity theory of money can be violated in the short term, but the long term is nothing but a series of short terms so this ability to violate it can not be sustained and therefore has very little usefulness.

Yet the non-free market schools insist on violating these basic principles time and time again and it has failed every time they have tried it. This is especially true of the quantity theory of money whose violation has ruined the economies of Britain, Argentina, Brazil, Zimbabwe, and the US itself in recent times and of Wiemar Germany, Hungary and various banana republics in the past. Excessive credit always leads to far worse problems that it was intended to solve.

Capitalism is not an ideology, I never said that it was. You are conflating capitalism with the free market theory. As I said they are not the same. The free market is not the basis of capitalism as we see it today in its many forms.

Capitalism is an economic system where the means of production is in private hands, the aim of which is to make a profit. The free market theory presents a proposed market system in which prices are set by buyers and sellers establishing prices through barter governed by supply and demand, the transaction independent of any intervention by government or any other authority such as a price setting cabal or monopoly. Free market theory is every bit as idealistic as Marxism and is equally as impossible to implement.

Capitalism is very successful in the current mixed market model of government and the private sector working together. It is very adaptable and robust as evidenced by the many different forms that it takes around the world. The free market is an idealistic view of how mixed market capitalism could be changed, in the view of the theory's proponents, to possibly work better.

Our current economic system of mixed market capitalism as it has evolved passed through periods in which it was less involved with the government, when there were fewer regulations. But the bad behavior of certain economic actors required regulation by an authority, the government, in order for capitalism to continue to grow and to develop. The free market theory requires that the intervention of the government in the economy to have been spontaneous, uninvited and unneeded, and not as a result of bad behavior in the unregulated economy.

Our mixed market capitalism doesn't set prices by barter based transactions governed by supply and demand. For the most part prices in our economy are administered prices set by the producer based on his average costs of production plus a portion of his fixed costs plus a profit sufficient to justify his investment.

Contrary to the free market theory investors in the real economy don't need a market set by supply and demand price to decide to invest, they are aware of the pricing levels and are able to decide if the costs of additional production can be justified at that pricing level. That the investment decision making process would be harmed by the fluctuating prices set by supply and demand because of the uncertainty of them.

Once again, the free market enthusiasts want to change the current economy to fit their ideology. They want to remove the government from its current role of policing the economy and stabilizing the economy. They believe that the self-regulating mechanism of supply and demand setting a price arrived at by barter like transactions are capable of taking over many if not most of the function that the government now does.

They can't point to another advanced, complex economy that is operated relying on this simplistic mechanism for policing and stabilizing the economy. The baby steps that we have taken have been a mixed bag. Some, like airline deregulation have resulted in lower fares for people who fly between major cities but also have resulted in much higher fares to and from smaller airports. Now instead of the passengers who fly between larger cities paying higher fares to subsidize the smaller airports the government and the tax payers have to subsidize them. Some here consider this a win for deregulation, in fact the biggest win. However, the deregulation of the banks and the financial markets was an unmitigated disaster, with the bad behavior of the effectively unregulated markets nearly destroying the nation's banking system to gain short term profits for no more than a few thousands of people.

The only support that they have for their position is theory, the theory of the free market. And as you readily admit the theory is based on shaky principles, most of which, as you said, even the free market enthusiasts themselves question the validity of. And you believe that only marginal productivity and the quantity theory of money are unquestioned, rock solid principles. I will let you prove it. I question them.

Continued below....

 

[SimpleDon]

Continued from above ...

Boneyard Bill has agreed that most of the principles and theories that support the idea of the free market are in question. But he has asserted that the quantity theory of money and the theory of marginal productivity are not in dispute. Here ...

I would question your claim that the quantity theory of money or marginal productivity are much in dispute but most of the remaining points that you raise are in dispute even among people who call themselves free market economists. ...

They are very much in question. Since you didn't provide any discussion of your assertion I don't have much to work with beyond your declarative sentence. It leaves me having to start from scratch.

Marginal productivity is at the very core of the free market theory. Among other things it is what determines the costs of goods and services in the market. According the theory supply and demand will force prices down until the price equals the marginal cost of the last item produced, the so-called market clearing price. This is what guarantees the maximum utilization of the production facilities that is the sole promise of free market theory, the efficiency that the proponents claim will guarantee the greatest measure of social justice.

There is a minor flaw in this in that the marginal cost of the last item produced doesn't allow for any profits in industrial production. Marginal product theory requires that the law of diminishing returns kicks in to overtake the economies of scale. That the marginal product costs of production is higher than the average costs of producing all of the products. But this not true of modern industrial production.

The aim of the current mixed market capitalism is to make a profit, not to fully utilize the existing production facilities. The free market theory's lack of the ability to make a profit is a real problem with the theory, obviously, no profits, no investment.

The marginal product theory and the law of diminishing returns that is so important to it were developed by the classical economists looking at agriculture, not industrial production. In agriculture the means of production is limited, it is the amount of available arable land. But in modern industrial production an extra shift can be added, an extra production line can be added, a new factory can be built. As a practical matter there is no limit to the means of production and the idea of forcing the full utilization of the existing production is silly.

Without diminishing returns there is not only no profit, there is nothing to set the price. It will continue to fall bankrupting the less efficient producers and transferring more of the business to the more efficient producers, concentrating more of the business in fewer hands. This conflicts with one of the basic requirements of the free market theory, that producers have to be so numerous and small enough that they can't individually effect the price. Eventually only a few producers would be left and they will be able to control the price and be able to evade market discipline, the only controlling mechanism in the free market theory.

The quantity theory of money failed dramatically as a target for controlling the economy, reference Volcher and 20% interest rates. Google the following quote. “The use of quantity of money as a target has not been a success. I’m not sure I would as of today push it as hard as I once did."

As for Weimar Republic/Zambia/hyperinflation/Oh Nooose! we have covered this many times before. There are two explanations of the causes of the hyperinflation. One is the quantity theory of money, that the governments' printed excessive amounts of money to cover their massive deficit spending. This caused hyperinflation which resulted in destruction of the currency and its eventual abandonment. Since this happened twice in the twentieth century in two of the 200+ countries of the world it is proof positive that no government can be trusted ever again with the control of the money supply.

The other explanation, the balance of payments theory, is that the while the nations involved certainly ran large budget deficits it wasn't excessive money printing that caused the hyperinflation. Certainly in the case of Germany the high deficits weren't due to profligate government spending but to a sudden drop in tax revenue. People stopped paying their taxes so that they could buy food.

That the inflation was caused by other factors, both countries were recovering from a recent war and both countries owed huge foreign debts in gold or another country's currency. That these started the inflation and it spiraled out of control when wages had to be raised to keep people fed and alive. Which has to be considered one of the most basic functions of the economy.

It is surprisingly easy to decide which one is correct. The quantity of money theory requires that money creation is exogenous, that is separate from the economy. It requires a direct proportionality between the money supply and inflation. It requires an economy that is at equilibrium, full employment and at a high capacity utilization, that is relatively closed to trade and has a stable velocity of money circulation. The path of causality would be first the creation of massive amounts of money, then price inflation follows and finally the currency is devalued against foreign currencies.

The balance of payments explanation requires a money supply that is largely endogenous, that is that money creation is integral to the economy. There is no requirement for direct proportionality between the money supply and inflation. And it doesn't require the conditions of the economy being at equilibrium, it depends on an economy opened to trade and doesn't require a stable velocity of money, which no modern capitalistic economy has. The path of causality is the devaluing of the currency, the creation of inflation from the currency devaluation triggering wage inflation and the inflation causing the explosion of the money supply.

To decide which explanation is most likely correct we only have to look at the timeline of events. In the case of the Wiemar Republic there seems to be little question that the sequence of events was kicked off by the depreciation of the German mark due to the war and the imposition of the reparations on Germany. This lead to the inflation and then to the explosion of money creation. It was the renegotiation of the reparation payments in 1922 and the series of loans, largely from the US, that allowed the stabilization of the new currency, the rentemark.

Also we now understand that the creation of money is largely, greater than 90%, endogenous. That the money supply changes with the demand for money because it is largely created by banks loaning money. That we don't have a fiat money system, that we have a credit money system with only a very small part of it truly being government fiat money.

And repeated studies have shown no direct proportionality between the money supply and inflation. In fact they show no relationship between inflation in economies with a history of low inflation, say less than 10%, and the level of the money supply. In economies with high inflation the inflation outstrips the growth in the money supply. Both deal a death blow to the quantity theory of money.

Also the velocity of money is required by the quantity theory of money to be stable. We know that this not the case, with the velocity decreasing in a recession and accelerating in good times. It means that inflation and deflation owe more to velocity shocks than to changes in the money supply.

Also we see that in periods of high inflation the velocity of money increases as people spend their newly acquired money rather than suffer the loss in value that would come if they held on to the money. This behavior and the increased velocity of money from it is seen in all cases of high inflation and is exactly opposite to the requirements of the quantity theory of money.

Also you play loose and free associating support of your rather simplistic view of the quantity theory of money and what you define inflation to be, an increase in the money supply, and the views of Austrians and the monetarism of Milton Friedman.

Many Austrian economists have a rather skeptical view of the quantity theory of money that Friedman's monetarism is based on.

Ludwig von Mises,

"agreed with the classical 'quantity theory' that an increase in the supply of dollars or gold ounces will lead to a fall in its value or 'price' (i.e., a rise in the prices of other goods and services); but he enormously refined this crude approach and integrated it with general economic analysis. For one thing, he showed that this movement is scarcely proportional; an increase in the supply of money will tend to lower its value, but how much it does, or even if it does at all, depends on what happens to the marginal utility of money and hence the demand of the public to keep its money in cash balances. Furthermore, Mises showed that the 'quantity of money' does not increase in a lump sum: the increase is injected at one point in the economic system and prices will only rise as the new money spreads in ripples throughout the economy. If the government prints new money and spends it, say, on paper clips, what happens is not a simple increase in the 'price level,' as non-Austrian economists would say; what happens is that first the incomes of paperclip producers and prices of paper clips increase, and then the prices of the suppliers of the paper clip industry, and so on. So that an increase in the supply of money changes relative prices at least temporarily, and may result in a permanent change in relative incomes as well." (Murray Rothbard, 2009, page 15, The Essential von Mises, von Mises Institute, Auburn, Alabama)​

Mises in other words denied that a increase in the money supply world result in a direct proportional increase in the inflation rate. Friedman, his monetarists and apparently you believe that there is a single causal explanation of inflation, that only an increase in the money supply causes a direct, immediate and proportional increase in inflation. So much so that there is no problem in your mind with simply redefining the word 'inflation' from meaning a general rise in the level of prices to any increase in the money supply.

Hayek believed that the quantity theory of money was in his words a "helpful guide" but was a critic of the theory. He criticized Friedman for concentrating on the statistical relationship between the quantity of money and inflation claiming like von Mises that things were not quite as simple. (Garrison, R., 2007, Hayek and Friedman: Head to Head, http://www.auburn.edu/~garriro/hayek and friedman.pdf)

See also Arena, R., 2002, Monetary Policy and Business Cycles: Hayek as an Opponent to the Quantity Theory Tradition, in J. Birner, P. Garrouste, T. Aimar (eds), F. A. Hayek as a Political Economist: Economic Analysis and Values, Rutledge, London

See also Huerta de Soto, 2009, A Critique of the Mechanistic Monetarist Version of the Quantity Theory of Money, Economicthought.net http://www.economicthought.net/200...rist-version-of-the-quantity-theory-of-money/ and Shostak, 2002, Defining Inflation, in Mises Daily, March 6, http://mises.org/daily/908 for other modern Austrians who disagree with you and with your Milton Friedman.

I understand your devotion to all things Ron Paul. But Ron Paul has an almost manic need to prove that the Federal Reserve Bank is the source of all that is evil in the economy. He and his brand of libertarians have latched on to this ridiculous idea of inflation caused by the Fed printing worthless money not because it has any support in either in empirical studies or in any coherent logical sense but because it seems to them to support their vision of the evil Fed. And it, in their mind, supports the worse thing that we could ever do to the economy, return to the gold standard.

Certainly Milton Friedman went over to this view not because he found compelling economics there but because he discovered the wealth and fame along with the support for research that comes from economics used to support the conservative political memes that justify making the rich richer at the expense of everyone else. His monetarism is half Keynesian, admitting that the government must intervene in the economy but maintaining that it should be done in the manner that offends the rich the least, by restricting the intervention to largely ineffective monetary policies and never, ever using the much more effective fiscal policies that might involve taxing the rich.

I can do much more on the silly and unfortunately quite dangerous quantity theory of money if this hasn't convinced you. Just keep repeating your mantra that it is true damn it just because you know that it is with no further explanation. And spouting authority that exists only in your imagination.

 

[ksen]

tl;dr

just kidding buddy! I read both huge posts!

nicely said

Sent from my SM-G900T using Tapatalk

 

[boneyard bill]

We could just build aircraft carriers and sink them ourselves since the Japanese won't do it for us. What evidence do we have that war produces greater income equality other than the fact that it makes most people worse off?

Well for a start, it generally creates full employment, with the government employing vast numbers of people both directly, in the armed forces; and indirectly, in the manufacturing sector. Typically this spending is funded by issuing war bonds, which are effectively calls for charitable lending by wealthy citizens at low interest rates - a 'stealth tax' if you like.

But even then, is this increased equality sufficient to counteract the greater inequality that accrues to wartime profiteers?

Yes. Easily.

Raising taxes and giving proceeds to the poor would probably not reduce income inequality since the damage to the economy would simply make that many more people poor.

I am staggered that anyone could seriously believe such tripe. Was the world made in seven days by a guy who had a spat with a talking snake too?

Income equality is achieved by making people more productive. That requires education and/or training.

Both of which are provided by the armed forces, in spades.

Since the huge increases in education that we have enacted over the last half century have produced less educated people than in the past, that would suggest that there is something seriously wrong with public education. Nor does it speak well for the 150 or so jobs programs that we have on the books.

Showing that the US education system is FUBAR is easy to do; showing that this indicates that income redistribution is a bad idea is rather harder.

Conscripting people into the military to work for dirt wages and sleep in fox holes is in no way an advance toward income equality. Our failing educational system is the reason we have as much income inequality as we do, and therefore the reason people are calling for income redistribution. Since our schools suck we need to redistribute income more equally, that way we won't have to do any thing about our suck-ass educational system.

Meanwhile, Obama and his Fed are redistributing trillions to the Wall Street banks, and European banks as well.

 

[boneyard bill]

But wartime economic measures are not sustainable. We were a rich country and probably contributed the least of the major powers to the war effort. But Britain was virtually bankrupted by the war, and Soviet Russia wasn't a whole lot better off.

And yet, even though rationing was in place well into the 1950s in Britain, that decade is fondly remembered as a boom time, with full employment and mass consumption of manufactured goods such as cars and consumer white goods. If that is what happens when a country is virtually bankrupt, then virtual bankruptcy doesn't seem like a particularly bad thing.

The myth that high levels of government debt are always bad is not supported by history; and yet it remains widely accepted by ideologues on the right.

If rationing worked so well, why did Britain give it up? Yes, there was a recovery from the war, and it was a recovery because Britain wasn't at all prosperous during the war and neither was the US. Britain had the third highest GDP at the end of WW II. Now she is behind at least Germany, France, Japan, and China and probably Brazil and India and maybe even some others.

Where, in all of history, has a government incurred high levels of indebtedness that did not require a severe austerity to recover from or simply a failure to recover at all? I think your last statement is utterly unsupportable by the evidence.