Ok, you had me curious there for the economic part until I saw the link to the nuts of the debt problem and fiat currency solution.
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Even the slander stuff made some pretty good points about the scare tactics that many libertarians use decrying every act of government intervention as “socialism”.
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No, he proved it by showing that:
“Or, paraphrasing of Jay Leno, go ahead and buy up the land. We’ll make more. The difference between land and capital is huge, and explains why the cost of silicon chips goes down as demand goes up, while the cost of Silicon Valley goes up as demand goes up”. There is no natural monopolization of capital, but, with state sanction, there is monopolization of land."
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The tragedy of the commons does not necessarily occur if their are rules guiding the usage of common resources. It only occurs in cases where everyone pursues their self-interest with regards to commons property. Of course any mainstream economist might easily fall into this trap simply by assuming the validity of the hedonistic calculus. I would expect any austrian economist to know that people’s preferences are actually very varied and often motivated by cultural and institutional factors.
Land, like money, can be subdivided. More land can always be produced this way. Unfortunately zoning controls prevent this process from taking place, and drives up the cost of land, but this is a pure state-imposed phenomenon.
I’m sorry, but you do know the reason that the cost of silicon chips has been decreasing is because it has become increasingly cheaper to make them, shifting the supply curve to the right. Demand is not the only factor in costs. It has nothing at all to do with “monopolization” of land.
OK , on to Part Two of the article. After more of the same marxist debating, the author rolls up his sleeves and gives AE a knockout blow.
Those sly AE guys deliberately give the totally wrong reason for the current recession. It had nothing to do with the poor lil scapegoat the AEs pick on, those numerically insignificant sub prime mortgages. The real cause was something AE guys sweep under the rug and ignore, the quadrillion dollar dealing in derivatives.
He points us to another article of his which explains how derivatives did it. Sadly, there is no link to the article, and all I know about derivatives is that they are essentially the same thing as rolling the dice in Vegas. You make a bet with some willing partner on some event. If it happens, you get some moolah from him, if it doesn’t he gets your money.
OK, I confess an inability to answer this, from ignorance. Can someone enlighten me, please? Has Peter Schiff totally missed the boat, since all the ‘Peter Schiff was Right’ videos never breathe a word about derivatives. The villian according to him is absolutely sub prime mortgages.
Sub-prime mortgages were bought and sold through derivatives. Derivatives themselves are entirely legitimate and useful in a market economy, it just happened that the credit bubble manifested itself in the derivatives / sub-prime market
A derivative is a riskier form of credit. It will grow in a credit bubble and burst with it.
Way to discredit yourself. Marx’s polemic was infamous.
Derivatives are essentailly just an assortment of different contracts to buy/sell an underlying asset at a certain point in time or under certain conditions. A Mortgage Backed Security is a derivative.
Derivatives didn’t set off the recession, they amplified it for the financial sector due to the nature of leverage. Banks used derivatives and other assets against which they would create loans (the asset v. liability sides of the bank’s balance sheet) but because, for whatever reason (the ABCT knows why), the values on the asset side of the balance sheet imploded the banks wound up underwater. This was used to justify the bailout. Problems were further excacerbated by the various proprietary trading departments of those same banks which were heavily leveraged in derivatives markets - upwards of $64 in liabilities for every $1 in assets held. It doesn’t take a genius to understand why this is bad news if the economy shifts in such a way as to put you on the wrong side of the bet.
It’s basically the same old story, government intervention inflated asset prices, corruption further obfuscated the values of assets, Mr. Market inevitably figures out valuations are out of whack, the inevitable correction ensues and the inverted debt pyramid and all financial innovations that were built up atop false pretenses and moral hazard imploded threatening to wipe out the Too Big To Fails. Classic malinvestment liquidation that was delayed by the bailout.
“On issue after issue, the adherents of this cult have a self-discrediting tendency to mold reality so that it conforms to their half-baked theories (e.g., their backwards theory on money) instead of the other way around, and then, in their usual arrogant fashion, hypocritically project this irrational tendency onto any informed critic who dares to call them on it.”
This is the first paragraph. Why would any Austrian waste his time with such an arrogant fool? Also, opaque and overly complicated derivatives emerged after the first Basel accord which placed extreme regulations on banks. Thus, the real cause of overly complicated derivatives was regulation (rational banks avoiding irrational ad hoc regulations). Derivatives are only dangerous in an inflationary atmosphere with extremely low yields on loans. This forces individuals towards speculation (in order to protect their wealth from government created inflation), making derivative values extremely volatile (and everything else, really).
The whole paper is one giant non sequitur.
The first point is true. The second point is such a massively sweeping statement it boggles the mind. Just one example off the top of my head: http://en.wikipedia.org/wiki/Great_Famine_(Ireland)#Landlords_and_tenants
Wether it was actually voluntary or wether the poor and marginalised were forced into applying their labour in that way through threat of starvation is a matter still up for debate. Nothing I have read on the industrial revolution from commenters at the time in regards to the condition of the workforce has been particularly favourable though.
In the UK at least it was certainly not voluntary. The peasantry was doing just fine living off the commons land until someone decided that the commons where “innefficient” and allowed the state to privatise the land buy driving the peasants off then selling it in portions bigger than any peasant could afford.
I’m not railing against the technological advancement, I’m railing against the conditions of the labourers. The two are not inseperable and it would have been possible to have the same technological advancement without the starvation conditions and the workhouses.
The land can only be subdivided for use if it is not yet owned.
It is when the spade is actually a power drill.
Alright fair enough. What about the other georgist claims about land i.e that absentee land ownership prevents land from being put to its most productive use and that speculation in land can cause recessions?
T’was a reference to Thorstein Veblen’s “The Limitations of Marginal Utility”:
“Both the classical school is general and its specialized variant, the marginal utility school, in particular, take as their common point of departure the traditional psychology of the early nineteenth century hedonists, which is accepted as a matter of course or of common notoriety and is held quite uncritically. The central and well defined tenet so held is that of the hedonistic calculus. Under the guidance of this tenet and of the other psychological conceptions associated and consonant with it, human conduct is conceived of and interpreted as a rational response to the exigencies of the situation in which mankind is placed;”
It means that people won’t automatically act in acordance with some innate need for instant gratification. Institutional and cultural factors will affect people’s conduct and these can be altered so as to prevent the tragedy of the commons.
Which does not mean he didn’t make various logical critiques of his opponents as well as advancing new useful hypothesis and methods.
At the time of the great famine Catholics in Ireland were forbidden from living in or near cities. This meant that they couldn’t participate in the industrial revolution and were condemned to subsistence farming.
I have 1,000 acres in South central Florida. I’d love to sell you 10 acres of it really cheap.
With a power drill?
Useful for those with the power drill I suppose?
Obviously the objection is dead wrong, it can only be subdivided if it is owned. Otherwise it is simply appropriated.
My point was that not every single act of state intervention is socialism. The bit about power drills was just to show the absurdity of the spade analogy.
Yes, but every single act of state intervention is a form of theft and coercion. Theft and coercion go hand in hand with socialism, but you’re right–it’s only a necessary condition.
From the first paragraph:
Huh?
What about the other georgist claims about land i.e that absentee land ownership prevents land from being put to its most productive use
People who own land usually try to make as much money as they can from it. So it will be put to the most productive use they can think of. If we let someone else decide what is the most productive use, how do we know that the other fellow, who stands to lose nothing, is right?
After all, history teaches us otherwise. Many a nation has nationalized this industry or that, never turned a profit, and handed it back to the private sector, who then did very well.
and that speculation in land can cause recessions?
1. What is the evidence for this?
2. Plenty of things can cause a recession. If we agree with most economists that the housing bubble caused this one, should we nationalize all housing? The dot com bubble cause a recession. Should we nationalize stocks? Tulip mania caused a recession back in the day. Should we nationlaize the flower industry? While we are at it, why not nationalize everything? Oops, they tried that for 70 years in Russia and starved millions to death.
3. AE shows that there is a completely different underlying condition that causes recessions. You can read up on it here. I’m still trying to hold my nose and read a bit of his refutations. Nothing holds up so far.
The course of commercial/industrial development is marked by a steady increase in the working conditions of labourers. We’re talking about crude machines the likes of which were being used on unprecedented scale in a world where no individual had any notion of safety standards the way we do today. New technologies are invariably associated with risks because humans learn from error. Predictably Unions arose to counteract the self-interest of the capitalists; the bargaining power of labourers upon whom production is dependant is larger when they form a group with common goals, allowing them to bargain for increased safety considerations. Government intervention was unnecessary.
You mean doing just fine as little more than tennants on land of hereditary land owners? Again,t hat the land was apportioned off in sections larger than a peasant could afford is irrelevant to the advancement of the industrial revolution. For one land had always been out of the pricerange of British peasants. Moreover, regardless of whether or not they were herded off the commons by force (I have thusfar been unable to corraborate your claim) or simply chose to leave there is an extremely good argument to be made that it would be totally voluntary. Working in the factories most certainly improved average life expectancy, “wealth” in the original sense of the term, was being improved.
I know, I was illustrating the mootness of your argument. Anyway, the industrial revolution is what did away with starvation conditions. I’ve established that the decision to work in the cities was voluntary, the workhouses were an unfortunate (by our standards) condition but progress has done away with them as would be expected.
Most productive use as determined by who? Are nature conservancies not a valid end? If an absentee land owner hasn’t seen fit to use his land more productively or sell it means demand for it isn’t strong enough. Which means that there are enough alternatives currently available to satisfy said demand and that the price hasn’t risen high enough yet to convince the absentee landowner to part with his parcel.
Destabilizing speculation, or increased volatility in prices (the seen) doesn’t cause recessions. It’s a consequence of credit/monetary expansion (the unseen) and the inevitability of the deflationary collapse that must follow.
This is absurd. Hedonistic Calculus? If you don’t admit that you don’t try and make the best out of any situation you are lying. Human beings are inheritly self-interested. Perhaps behaving altruistically gives you the psychological payoff you desire, an extremely subjective and selfish motivation.