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There's more to unpack about welfare being "paying not to work" - 82 year olds, absence of employment in mining towns - but you've put the argument for small go

by psd1 3y ago

There's more to unpack about welfare being "paying not to work" - 82 year olds, absence of employment in mining towns - but you've put the argument for small government well. You made me imagine a monkey driving a bulldozer. Keynes' error was to pretend that the monkey is a qualified operator who follows the drawings. But the more democratic a nation becomes, the more its leadership resembles a cork bobbing on the tide. Furthermore, economics does not have perfect insight, so even a benevolent dictator will certainly fuck it up if she meddles. Then, in a recession, you can take action to alleviate the pain somewhat, but you will inevitably just store up future pain for yourself. You could mitigate that future pain once the crisis has passed, but you won't, because the mitigation will alienate the voters. The pretence that you'll accept even a tiny amount of pain in the good times is the self-deception of an addict. How am I doing? This then reduces to the trolley problem. Where the one person on the side track is only presumed to be there, but might actually be further down the main track, and might get rescued anyway. Here's my problem with von Mises. The cause of 2008 was a period of deregulation, basically Jamie Dimon going "trust me, bro" and kicking his lips. It's not an economic cause, it's a political one; but if we examine economists' contribution to the issue, we see decades of free-market-fundamentalism which, I put it to you, created massive overconfidence. The neolibs got exactly what they wanted and created a peculiarly neolib crisis. So the Austrian school is just as fingers-in-ears deaf to political folly as Keynes.

nvm0n2 3y ago
Right, 82 year olds can't usually work anyway so state pensions are indeed not holding back the economy. It gets blurrier in the somewhat common case where state pensions can be awarded at, e.g. 55 (see Greece, US air traffic controllers...). I was mostly thinking of minimum wages, out-of-work credits, long term disability benefits in the case where working is actually possible, etc. I think your description of Keynesian monetary policy in terms of addiction is interesting! You can view 2008 as either caused by regulation or deregulation, it's a fascinating event in that way, and is why different parties were at loggerheads over it. The view that it was caused by deregulation is as you say: banks were allowed to do risky things that leveraged up their risk until they were going to fail, and this provoked the crisis. The view that it was caused by regulation is to observe that the only reason banks aren't allowed to collapse in the first place is the odd way in which they are regulated. A banking license is a regulatory permission to tell people they have $1000 on deposit whilst not actually being able to service such a withdrawal. In the case of a normal company like FTX, that's fraud. With the right license, it's not. If retail banks weren't allowed to do anything with deposits except keep them safe, they could not have become endangered by bad aggregated mortgage debt, and then could have just been allowed to fail. It would have hurt investors a ton but bubbles always do - the ATMs would have kept working though and that's what politicians really respond to, the crisis of the innocent working guy. To fix this situation you don't pass a law, you repeal a law, hence, caused by regulation.

by psd1 3y ago

nvm0n2 3y ago

Right, 82 year olds can't usually work anyway so state pensions are indeed not holding back the economy. It gets blurrier in the somewhat common case where state pensions can be awarded at, e.g. 55 (see Greece, US air traffic controllers...). I was mostly thinking of minimum wages, out-of-work credits, long term disability benefits in the case where working is actually possible, etc. I think your description of Keynesian monetary policy in terms of addiction is interesting! You can view 2008 as either caused by regulation or deregulation, it's a fascinating event in that way, and is why different parties were at loggerheads over it. The view that it was caused by deregulation is as you say: banks were allowed to do risky things that leveraged up their risk until they were going to fail, and this provoked the crisis. The view that it was caused by regulation is to observe that the only reason banks aren't allowed to collapse in the first place is the odd way in which they are regulated. A banking license is a regulatory permission to tell people they have $1000 on deposit whilst not actually being able to service such a withdrawal. In the case of a normal company like FTX, that's fraud. With the right license, it's not. If retail banks weren't allowed to do anything with deposits except keep them safe, they could not have become endangered by bad aggregated mortgage debt, and then could have just been allowed to fail. It would have hurt investors a ton but bubbles always do - the ATMs would have kept working though and that's what politicians really respond to, the crisis of the innocent working guy. To fix this situation you don't pass a law, you repeal a law, hence, caused by regulation.