‘Free Market’ Double Standards 4.0

Welcome to the newest edition of my ‘free market double standards’ series! Strap yourselves in and enjoy the ride – this one actually contains a couple of contradictions in economic theory, but since I consider the free market  a neoclassical construct, and it’s my blog, it’s OK.

1. Dimishing Marginal Utility is an important cornerstone of economics. But increases in production and consumption are always desirable, no matter the stage of development.

2. Cantillion effects are an argument against government spending, but not capital controls or large firms.

3. Keynesianism is stupid and wrong! Wait, no it isn’t. I didn’t say it was.

4. We need monetary stimulus, but no capital controls to keep it in the domestic economy.

5. Capitalism is too complex and fraught with insider information to regulate. This is why we need more capitalism.

6. Aggregates are meaningless. But not the aggregates I constructed. They are better.

7. I champion individual responsibility. But when banks exploit government guarantees/policies by blowing up the economy, it’s the latter that’s to blame.

8. We need to encourage businesses to invest by reducing taxes and regulations. But let’s also increase their costs by raising interest rates.

9. Consumer sovereignty! But consumption taxes are the best (presumably because they are regressive).

10. The government should enforce property rights, and should pay for it with taxation. Taxation is theft.

11. The government is sufficient to punish/prevent things as pervasive and complex as force, fraud and theft. A single regulation? They don’t have the capacity or insight!

12. High tax rates punish success, but we should increase tuition fees.

13. As Austrian economists, we will side with market monetarism, but not Keynesians saying similar things.

14. Economics is the study of how we allocate scarce resources, but the fact that the economy is ultimately constrained by scarce resources does not factor into it.

15. The division of labour is a phenomenon that allows people to work together to produce far more than any one person could. But it’s all my income, I earned it!

16. All people have their own, valuable and useful local knowledge. But allowing experts to evaluate products like drugs for poisonous characteristics undermines this process.

17. Intellectuals are unaccountable, imperious, have big egos and value verbal beauty over logic or evidence. As such, they shouldn’t be allowed to comment so much on society. Except me. (HT to Daniel Kuehn)

18. Initiating force is bad. But allowing some to claim ownership of land and deny it to others by force, despite not having produced it, is fine.

19. The historical context of money matters. Well, not if history conflicts with my theories…

20. The market is the best judge of risk. But ignore what it’s saying about government debt levels, we need austerity NOW!

21. Justice is historical and depends on what actually happened. Capitalism is just. (Admittedly, probably borne more of ignorance than contradiction).

22. Perfect competition is defined as a state where everybody is a price taker. But there is still a price, despite the fact that nobody made it.

23. Raising taxes on the rich will achieve nothing because they will avoid it. But it will simultaneously destroy the economy, don’t do it!

24.

We can safely abandon the doctrine of the eighties, namely that the rich were not working because they had too little money, the poor because they had much.

- John Kenneth Galbraith

Or maybe not.

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  1. #1 by Blue Aurora on March 23, 2012 - 6:56 pm

    Once again, another good post, Unlearningecon. I liked the pointing out of cognitive dissonance at Austrians regarding market monetarism and Keynesianism.

    Sorry to go off-topic, though – did you get my last e-mail? If so, can you please respond to it? And just for the record my guest post on econophysics is up at Facts and Other Stubborn Things.

    http://factsandotherstubbornthings.blogspot.com/2012/03/guest-post-blue-aurora-on-econophysics.html

  2. #5 by John77 on March 24, 2012 - 5:30 pm

    A brilliant piece of caricature. But you’ve been reading the Guardian more than listening to real-life exponents of free markets.
    OK, I agree with the first sentences of 1 and 15, and if you want to eat you have to allow farmers to defend the ownership/tenancy (as appropriate) of the land they farm. But:
    i) “Keynesianism” has as many meanings as you choose but I have yet to see an example of “Keynesianism” that actually involved following the actual teachings of Keynes (any more than “Friedmanism” follows the actual teachings of Friedman)
    ii) 7 should say “I ACCEPT MY personal responsibility” – the word “responsibility” means that it can only be personally accepted not imposed by a third party. Totalitarian states can punish those who ignore what the state considers their responsibilities but an advocate of free markets just hopes that the side-effects will work
    iii) 17 should say “Pseudo-intellectuals”. Genuine intellectuals are rarely like that – I have had the good fortune to meet quite a few – but pseudo-intellectuals (such as a certain blogger who attended a third-class university studying something which was deemed unfit for a degree course in my day and thinks that gives him the right to talk down to me – I am grateful that you don’t except when displaying your ignorance of history – FYI, I am married to a historian, so some of that is comical).
    I would take too long why the rest is mostly (a) wrong and (b) not what genuine free market advocates are saying. The distortions in the gilt-edged market would take three paragraphs and the rest even more

    • #6 by Unlearningecon on March 24, 2012 - 10:57 pm

      What is it with you lot and the Guardian? FWIW I don’t even read it. As for them being caricatures, the links I provided to people saying what I accused them of saying falsify that claim.

      i) I agree but how is that relevant?

      ii) You might notice that I didn’t necessarily advocate state intervention. I’m just commenting on the unwillingness of (some of) those who champion individual responsibility to blame key players in the crisis. I’m aware you probably aren’t in that group.

      iii) Sowell comments on all intellectuals, not just pseudo-intellectuals

  3. #7 by Bentley Strange on March 24, 2012 - 9:30 pm

    Could one suggest that you try learning a little about economics first ? Free floating caricatures of what you think you oppose are rather better received if you actually have a modicum of intellectual understanding of what they represent.

    Perhaps you could revise this entry in a few years when you have a better understanding.

    • #8 by Unlearningecon on March 24, 2012 - 10:52 pm

      You’re completely right. These obvious straw men – for which I provided links to free marketeers explicitly saying what I accused them of saying – are based on the fact that I am obviously ignorant of economics and also unable to comprehend it.

      P.S. Some substance in your comment might be good. The unbearable level of smugness doesn’t help either.

    • #9 by John77 on March 25, 2012 - 2:12 pm

      What it is is that we are continually bombarded with quotes from “The Guardian” and told “Oh, it must be right because The Guardian is a “Quality Nerwpaper”, not a tabloid” even when it’s “proving” the “gender gap” by comparing the weekly wage of a woman working part-time with that of a man working full-time and overtime so we end up expecting a piece of selectively reporting that gives a misleading impression to be Guardian-based.
      Re ii) I wasn’t discussing state intervention – I was limiting myself to the first sentence. Discussing the moral hazard created by FDIC vis-a-vis short-sighted greed and the failure of shareholders to control management is too big a debate for a post on someone else’s blog
      iii) “All generalisations are wrong including this one”.
      That some (not all) of the statements are contradictory does not prove that free-market supporters have double standards as many supporters of “free markets” are in favour of them in limited circumstances (e.g. I support government regulation to prohibit adulteration of food) and their views can differ (and even change). “Double standards” means, to me, that one person has two sets of criteria that he/she applies to a favoured and a less-favoured group of people as in Dr Block’s specious argument or in Vince Cable’s proposal for a graduate tax, in lieu of tuition fees, that would not apply to to himself or myself..

      gs

  4. #10 by Will on March 25, 2012 - 3:14 am

    Thanks for sending me to that Murray Rothbard paper. It’s a shockingly poorly-reasoned argument that just goes on and on.

    This Joan Robinson quotation gets at the same thing that you’re pointing to in the entry:

    “Not only that, the doctrine of diminishing marginal utility applied to income itself… This points to egalitarian principles, justifies Trade Unions, progressive taxation and the Welfare State, if not more radical means to interfere with an economic system that allows so much of the good juice of utility to evaporate out of commodities by distributing them unequally.

    “But on the other hand the whole point of utility was to justify laisser faire. Everyone must be free to spend his income as he likes, and he will gain the greatest benefit when he equalizes the marginal utility of a shilling spent on each kind of good…

    “This is an ideology to end ideologies, for it has abolished the moral problem. It is only necessary for each individual to act egoistically for the good of all to be attained.” (from Economic Philosophy)

    • #11 by Unlearningecon on March 25, 2012 - 1:16 pm

      Rothbard was an incredibly poor scholar. Half of his arguments are from personal incredulity and other are ad homs, or, at the very least, somewhat spiteful.

      And that is an excellent quote – EP has been on my wishlist for some time, and it looks like I should buy it.

      See here for a takedown of Rothbard’s blather (OK it’s by a 9/11 truther but it’s a good piece. Ctrl+F Rothbard).

      • #12 by Will on March 25, 2012 - 11:01 pm

        I know some people who would be very upset with your characterization of Rothbard’s work. I agree that he was not competent as an economist, and his work in this area is riddled with errors and contradictions. His book on the history of economics is actually fairly interesting, though: it is not reliable in its economic interpretations, but it includes information on many obscure figures. And he actually makes a point about Malthus that I had never thought of before.

        EP will probably be familiar territory for you, but it’s a quick and enjoyable read. There are some points in it that I would enjoy discussing.

  5. #13 by LORENZMAILFRANCE on March 26, 2012 - 5:39 pm

    Unlearningecon what do you think about the anarchist critiques of mainstream economics?

    http://infoshop.org/page/AnarchistFAQSectionC

    • #14 by Unlearningecon on March 26, 2012 - 5:51 pm

      I really like that FAQ, although it’s a bit wordy. His section on the Austrians is particularly good.

  6. #15 by James on April 9, 2012 - 8:46 pm

    Some of these are not double standards.

    E.g. 23 may be wrong but there is no double standard in the claim that higher taxes on the rich will reduce economic activity and simultaneously fail to achieve the intended goal of increasing total taxes collected. Same for 20; One might believe that the public debt will be paid back in full (so no risk) and also believe that the interest on public debt will exceed economic growth so that the menu is limited to austerity now or even more severe austerity later.

    Such positions might be just wrong, but they are not, as you claim, double standards.

    16 would be a double standard as you write it, but the writer you cite doesn’t actually oppose “allowing experts to evaluate products like drugs for poisonous characteristics.” There are people that recommend eliminating the FDA but I know of none that also believe experts ought to be forbidden to even evaluate drug safety. I can’t help but wonder if this one isn’t a deliberate misrepresentation.

    • #16 by Unlearningecon on April 9, 2012 - 9:07 pm

      23: If the rich can avoid the tax, surely it will have a negligible impact on their other economic behaviour, barring accounting costs (which, presumably, go into the economy anyway)?

      20: but surely, for free market proponents, if the those were the only possibilities bond yields would have been higher before austerity programs were announced?

      16: The FDA was introduced because clearly, not all companies do use experts to evaluate their products (hence thalidomide, etc.) It ensures that the process happens, which, according to local knowledge considerations, is a good thing.

      e: in fairness I should have used the word ‘having’, not ‘allowing’

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