Peter Schiff and American productivity.

[vaduka]

Schiff telling what AMERICA SHOULD do is first of all an appeal for a collectivist action (i.e. does not exist), and second of all is a proposition for an universally preferable behavior, that is if what is implied (by merely making such a proposition) and explicitly said (that not enough stuff is made - i don’t know how much stuff is scientifically enough or enough according to Schiff) is true than we ought to start doing what Schiff prefers. the problem is that this proposition is not scientific, i.e. it is not Austrian economics, because what Austrian economics tell us is that government intervention is bad (lowers productivity) and what it does not tell us is that we should produce more stuff. so what Schiff says is not a scientific claim backed up by Austrian economics, he is just expressing his own desire for how he wants it to be. If he were to say something that actually can count for a scientific claim and not merely his opinion it should be something like this - “government intervention hampers economic productivity, so we can easily deduct that the lower the intervention is - the better economic effect there will be, so we ought to abolish (or at least lower) government interference in private individual’s economic activity.”

also as some other members on the board have written before me - an appeal for such a collectivist action can be interpreted as a call for protectionism (and other mercantilistic policies).

I am sorry for my bad Enlish. I hope that you didn’t have hard time reading my text (if you have even made such an attempt)

[Mises_Pieces]

Schiff telling what AMERICA SHOULD do is first of all an appeal for a collectivist action (i.e. does not exist), and second of all is a proposition for an universally preferable behavior, that is if what is implied (by merely making such a proposition) and explicitly said (that not enough stuff is made - i don’t know how much stuff is scientifically enough or enough according to Schiff) is true than we ought to start doing what Schiff prefers. the problem is that this proposition is not scientific, i.e. it is not Austrian economics, because what Austrian economics tell us is that government intervention is bad (lowers productivity) and what it does not tell us is that we should produce more stuff. so what Schiff says is not a scientific claim backed up by Austrian economics, he is just expressing his own desire for how he wants it to be. If he were to say something that actually can count for a scientific claim and not merely his opinion it should be something like this - “government intervention hampers economic productivity, so we can easily deduct that the lower the intervention is - the better economic effect there will be, so we ought to abolish (or at least lower) government interference in private individual’s economic activity.”

also as some other members on the board have written before me - an appeal for such a collectivist action can be interpreted as a call for protectionism (and other mercantilistic policies).

I am sorry for my bad Enlish. I hope that you didn’t have hard time reading my text (if you have even made such an attempt)

I think it’s more that he’s pointing to the fact that we don’t make as much stuff as a symptom of the government distorting prices and subverting incentives. I do agree, though, that he could do a better job of explaining Austrian theory.

[Smiling_Dave]

@Mises Pieces

Schiff telling what AMERICA SHOULD do is first of all an appeal for a collectivist action

It is identifying a problem. We have a trade imbalance. We are importing 50 billion dollars a month more than we are exporting. And we are importing tangible objects. So he is drawing the obvious conclusion that the solution to this problem is to produce stuff ourselves.

(i.e. does not exist), and second of all is a proposition for an universally preferable behavior,

It is a universally preferable proposition that if you are consuming 50 billion dollars a month more than you are earning, that you should do something about it.

that is if what is implied (by merely making such a proposition) and explicitly said (that not enough stuff is made - i don’t know how much stuff is scientifically enough or enough according to Schiff)

scientifically enough is when your trade deficit is less than 50 billion dollars a month. Ideally it should be zero. Even better is if you are a creditor nation, like China and japan and Germany.

is true than we ought to start doing what Schiff prefers. the problem is that this proposition is not scientific, i.e. it is not Austrian economics, because what Austrian economics tell us is that government intervention is bad (lowers productivity) and what it does not tell us is that we should produce more stuff.

Let me summarize what you are saying:

1. Anything that is not Austrian economics is not scientific. [absurd]

2. The only thing Austrian economics tells us is that govt intervention is bad [absurd]

3. Austrian economics does not say that if you have a trade deficit of 50 billion dollars a month, year after year, that you should do something about it. [absurd]

so what Schiff says is not a scientific claim backed up by Austrian economics,

Since I disagree with all 3 premises, I disagree with this conclusion.

he is just expressing his own desire for how he wants it to be.

I disagree with this conclusion for the same reason.

If he were to say something that actually can count for a scientific claim and not merely his opinion it should be something like this - “government intervention hampers economic productivity, so we can easily deduct that the lower the intervention is - the better economic effect there will be, so we ought to abolish (or at least lower) government interference in private individual’s economic activity.”

Actually he says this almost every single day.

also as some other members on the board have written before me - an appeal for such a collectivist action can be interpreted as a call for protectionism (and other mercantilistic policies).

When taken out of context, maybe. But if you bother to actually listen to what he says at length, you will realize that it is ridiculous to think that.

I am sorry for my bad Enlish. I hope that you didn’t have hard time reading my text (if you have even made such an attempt)

I think you made your points quite well, even though I disagree.

I think it’s more that he’s pointing to the fact that we don’t make as much stuff as a symptom of the government distorting prices and subverting incentives.

What you say is true, but he is saying more than that. He is saying that the trade deficit will bring the country down, because it cannot go on forever, China lending us money, and when it stops the results will be catastrophic.

I do agree, though, that he could do a better job of explaining Austrian theory.
Maybe if he was a professor teaching AE at a University this would be a legitimate concern. But that is not the job he has taken upon himself. He is trying to explain in simple language what our problems are, where we are headed because of them, and what you can do to protect yourself from the disaster that looms ahead.

****

A word about my take on Peter Schiff and AE.

First, he has said that one day it wont be called “Austrian Economics”, but “Economics”, because it is the only true economics.

However, as everyone agrees, the core teachings of AE are theoretical. Ceteris parabis and all that. It is a whole 'nother story to leave the halls of the university armed with a knowledge of AE, and figure out what is going to happen in the real world.

For example, plenty of people here know a lot of AE, but are confused about whether gold is a “bubble”. Some have said it is just like the dot.com and housing bubble, others that there is no comparison, others openly confess ignorance.

Understanding current events and predicting the future requires, [besides a knowledge of AE so that your head is not filled with nonsense about economics], great insight and perception about which of the many things going on in the world really really count. That is Peter’s particular genius, and I for one feel very lucky to have him around to educate me.

[vaduka]

Smiling Dave, thank you for the kind reply. I will try to respond you.

First of all, when I wrote that Schiff telling what America should do I referred to the quote, let me peraphase : “we should produce more stuff”. this saying clearly impies that by “We”, since he is American he means American people, and by stuff he means stuff that is a product of an industrial production - i.e. tangible. This particular peraphase is not indentifying anything. It is a proposition for a collectivist action - what a particular collective (American people as a whole) should do (more). This saying of his is his reaction of a perceived problem - negative current account. The enormous trade deficit is a problem and he clearly refers to it in such a manner. But the question is what caused the problem? And when he says that we should produce more he does not refer to the cause but rather suggest one (his) resolution. The cause of the problem is government intervention and it happens and reveals in the current account and the capital account :

A) the government itself accumulates debt to foreign countries and pays an interest on it. the payment of this interest to foreigners gets a negative sign in the current account (since investment income which includes interest is a part of the whole sum of the CA and USA government is a net debtor on interest payments to foreigners)

B) the government hampers economic activity and makes doing business in America a hard job which causes a negative foreign trade in goods.

C) individuals themselves owning debt to foreigners (all of it cheap dollars created by the fed then exported and then imported back again)

D) the positive capital account is financed by government debt

E) government intervention transforms capital structure and causes misallocation (that is similar to B - i.e. a structural change occurs but in B there is capital outflow and here is misallocation)

As we can see we have got a single central entity that creates the circumstances for the three effects that are the cause for a big trade deficit.

Now I can recall that I have listened to him saying not only “we should make more stuff”, but also “government is too big and is obstructive to business” and “americans are too much levereged, they are indebted” and “the government spends too much and is indebted too”. All these remarks are true and are in one or another way similar to A), B), C) or D). Then I guess I have nothing against him.
But when speaking about the problem and its cause it is preferable that you choose not to make a statement like “we don’t make ENOUGH stuff” because as you have pointed out it can be taken out of context and be used against you because “enough” by its own is subjective and relative, and can be interpreted politically incorrect.

regarding this:

“1. Anything that is not Austrian economics is not scientific. [absurd]”
I did not mean this in any way, but I am sorry for impying it.

“2. The only thing Austrian economics tells us is that govt intervention is bad [absurd]”

I did not mean this and I don’t see to have impied it.

“Austrian economics does not say that if you have a trade deficit of 50 billion dollars a month, year after year, that you should do something about it. [absurd]”

Austrian economics only informs us what will happen when the government distorts the price mechanism (interest rate), regulates like hell, and spends like crazy. It does not tell us whether we should prefer this state of affairs or another.

[Smiling_Dave]

Vaduka,

I think the language barrier was greater than I imagined, because we seem to agree on most of the key points.

[EEmr]

You are entirely wrong.

What Peter Schiff is pointing towards is actually capital consumption(or deaccumulation) and he is saying that the statstics compiled by the Bureau of Labor Statistics are false based on some very correct critiques. Namely, that it overweighs and miscalculates how much productivity is gained by improvements in technology. That there are improvements in technology but that for example calculating peoples productivity as 2x higher simply because the processing power of their CPU are 2x higher is wrong and unscientific.