To start, we have the supposedly most intelligent economists in the world seriously debating Ricardian Equivalence. This is the proposition that people will respond to government spending increases by scaling back their own spending in anticipation of future taxes (mention this to someone who isn’t interested in economics and prepare to be looked at very strangely indeed). Let’s first note what Ricardo said about his own theory:

But the people who paid the taxes never so estimate them, and therefore do not manage their private affairs accordingly. We are too apt to think that the war is burdensome only in proportion to what we are at the moment called to pay for it in taxes, without reflecting on the probable duration of such taxes. It would be difficult to convince a man possessed of £20,000, or any other sum, that a perpetual payment of £50 per annum was equally burdensome with a single tax of £1000.

Is it any surprises that there is absolutely zero empirical evidence for this effect? Then why is everybody talking about it?

Another meme about deficits/stimulus is defining stimulus as the deficit. Really, this is quite simple and was summed up well by a commenter on MR:

“A slightly more respectable argument is that the current deficit is slightly smaller than in 2010 (when it was 10.1% of GDP.) But that shouldn’t cause a recession.”

This would be a NET CHANGE that is CONTRACTIONARY. Going from a 10% deficit to an 8% deficit is easing off from the accelerator, so to speak. If you ease off on the accelerator while going up a hill… well you slow down.

Looking at net deficits tells us very little about the level of demand being created relative to what it was before the recession and to what would be needed to close the output gap.

As a final note on stimulus, the Obama stimulus is not a major point for anti-Keynesians, as it was largely offset by state and local contractions, too small anyway and pretty poorly constructed. Having vampire squid banks that absorb much of the proceeds of growth surely doesn’t help, either. All in all, not a shining example in the history of fiscal expansion.

Now, none of what I’ve said is new or original – in fact, it’s incredibly old and has been repeated ad nauseum.  But this doesn’t stop everyone from everyday economists to ‘nobel’ prize winners trotting out the same tired lines about the money having to come from somewhere (never mind that applying similar logic an increase in private spending cannot increase employment either), how the New Deal failed (>10% growth is an obvious example of failure) and so forth.

But when your opponents are prepared to believe absolutely anything – from NDGP targeting to Austrian economics to Ricardian equivalence – just so that they can deny a positive role for the state, these things don’t seem to matter.

It is first worth considering the existence of an entity called the ‘free market’. But the fact is that people simply see the ‘free market’ where they want to, ignoring certain rules and regulations. To start, the workings of an economy are massively affected by the definition of property; what types of property are deemed private, as well as the definition of fraud and the workings of the criminal justice system. Secondly, laws like limited liability, immigration restrictions and laws that protect shareholders are often swept under the rug.

I feel the idea of a ‘free market’ greatly skews the views of its proponents, as they see something as complicated as the transition in China as simply them ‘unleashing’ the free market, and also write catch-all sentences like this:

It is worth remembering that the epicentre of the 2008 disaster was American property, hardly a free market undistorted by government.

Which, to me, simply makes no sense. I mean, the crisis was undeniably focused on private institutions, and if you’re going to start blaming government laws then you’ll logically have to end up blaming ones like limited liability laws, laws that define corporations, and possibly even private property itself.

I believe some have tried to argue that the black market represents a type of free market, but I’m not sure how possible that is given the amount of customs and arbitrary rules you often find there, not to mention the considerable amount of force.

Furthermore, the idea that trade springs up wherever man is and money initially arose as a solution to the ‘spot trade’ problem created by mankind’s natural propensity to ‘barter, truck and exchange’  has been falsified spectacularly by the anthropologist David Graeber, who revealed that there are 0 examples of barter arising spontaneously; money first arose primarily as a form of debt, and ultimately was a social relation.

On top of this, the historical origins of capitalism, at least in places, are hardly as magical as its defenders would have you believe. The industrial revolution involved large amounts of collusion between landlords and capitalists, and produced a surge in game laws, designed to limit peasant’s ability to subsist and hence create a workforce dependent on wages. The emergence of capitalism and the wage system was also closely intertwined with slavery and colonialism, and the facilitation of trade has required strong political institutions, rather than simple property rights and contracts.

Not only this, but almost every developed country had to use protectionist policies to get rich. This has been extensively documented by many scholars – the only potential examples of countries that got rich without much protectionism are the Netherlands and Hong Kong (which is effectively the London of a country currently using highly protectionist policies, anyway). I have attempted to offer a theoretical grounding for this here, but whether or not my argument convinces you does not change the historical facts.

My inclination towards capitalism is still ‘the worst system except all others that have been tried’, but the fact is that capitalism is a highly planned system with a questionable history – there is nothing ‘natural’ about it. Now this doesn’t tell us much about whether we should accept it here and now, but it makes statements such as “Capitalism is what people do if you leave them alone” rather questionable.

The first, ‘good’ example is how income is related to consumption.

You are presented with a hypothesis: people do not consume all of their income (Y), which can be denoted the Marginal Propensity to Consume (MPC). You are also told that people have to spend some money to stay alive, which can be denoted autonomous consumption (Ca). So total consumption is equal to:

C = Ca + MPC*Y

You then look at the evidence, which suggests this is roughly accurate, but not entirely. You are told this must be explained somehow, and presented with the Permanent Income Hypothesis, which is incorporated into the equation thusly:

C = Ca +MPC*Yp

Where Yp = Permanent Income or Average Lifetime Income

This appears to explain the data better, but still not completely. So you must then incorporate inflation/money illusion, interest rates, credit availability and so forth. This continues as long as is practically feasible and until the models are satisfactorily accurate.

Contrast this with demand-supply, where the following methodology is used:

“Students, this is a market. When demand does x, y happens and when supply does z, w happens (P.S. Adam Smith).”

“There are some assumptions we have to use to get it, though. Here they are:

Perfect information

Perfect competition

Homogeneous products and preferences

Perfect mobility of goods/services

People are rational utility maximisers

(probably some more I’ve forgotten)”

This isn’t an exaggeration. Economists like to suggest that these assumptions are simplifying but students find it much easier to follow the first example than the second, for understandable reasons. I’m not exactly sure what would replace the demand supply diagram, and I do agree that it captures some obvious truths at its heart. But the above is simply not an acceptable way to teach science.

10. Macroeconomics is not hard (Brad Delong)

Delong reveals that, following the crash of 1829, many of the classical economists often appealed to by the anti-Keynes crowd - including Jean-Baptiste Say and John Stuart Mill – came to a somewhat ‘Keynesian’ conclusion about the role of aggregate demand:

Yet Say changed his mind. By 1829, in his analysis of the British financial panic and recession of 1825-6, Jean-Baptiste Say was writing that there could indeed be such a thing as a general glut of commodities after all: “every type of merchandise had sunk below its costs of production, a multitude of workers were without work. Many bankruptcies were declared…”

Apparently the level of 19th century historical revisionism was pretty high.

9. Blacklisted Economics Professor Found Dead: NC Publishes His Last Letter (naked capitalism)

This is the first example I saw of how selective ‘free market’ proponents are with their logic, and was delivered in excellent satirical form:

Soon after receiving tenure, it occurred to me that we were being profoundly inconsistent. While we had correctly criticized the previous mainstream view that politics involved benevolent efforts to serve the common good, we had failed to apply the same rigor to the community of academic economists. As a result, we were modeling both economic and political actors as self-interested utility-maximizing agents, while continuing to see economics professors as idealistic pursuers of truth. I decided to correct this oversight by developing my theory of Academic Choice, in which economists are theorized as rational agents who continually seek to maximize their future earnings potential.

Economists have continued to ignore this theory, but a quick look at the financial crisis and some of the origins of the libertarian/’think tank‘ movement suggests that it may be worth exploring.

8. It’s the Political Economy, Stupid! (Econospeak)

Peter Dorman sums up how well the ruling class have shifted the intellectual narrative of the crisis, despite losing the battle of ideas:

But Keynes was wrong about the power of “academic scribblers”. Idea-smiths provide language, narratives and tools for those in control, but the broad contours of policy depend on who the controllers happen to be. We are not living through an epoch of intellectual failure, but one in which there is no available mechanism to oust a political-economic elite whose interests have become incompatible with ours.

(This is part of the reason I consider a large amount of public debate to be futile).

7. Canards about economists (Robert Vienneau)

Robert Vienneau notes 3 examples of where the conventional wisdom about ‘what economists said’ is completely off: Keynes & sticky wages/prices, the origin of the phrase ‘the dismal science’, and Adam Smith’s ‘invisible hand’. Short and sharp, but both interesting and important.

6. Ideas behind their time (Marginal Revolution)

We are all familiar with ideas said to be ahead of their time, Babbage’s analytical engine and da Vinci’s helicopter are classic examples.  We are also familiar with ideas “of their time,” ideas that were “in the air” and thus were often simultaneously discovered such as the telephone, calculus, evolution, and color photography.  What is less commented on is the third possibility, ideas that could have been discovered much earlier but which were not, ideas behind their time.

OK, this was late 2010, but let’s ignore that. This is possibly the most interesting question I have ever seen asked on a blog. I’d suggest that Marx was probably ahead of his time, Adam Smith and Keynes were ‘of their time’, but recently economics has seen an intellectual shift to ‘behind its time’.

5. Dude! Where’s My Recovery? (Steve Keen)

Steve Keen sums up exactly why neoclassical economists are wrong about debt, money and banking, and how it affects our current predicament. Enough evidence is provided that I’m not sure how anyone could conclude Keen is wrong.

4. Stephen Williamson gets intellectually pulpified (Noahpinion)

Stephen Williamson gives us a short review of John Quiggin’s Zombie Economics, in which he effectively throws his hands up in the air and declares DSGE and the EMH to be unfalsifiable. John Quiggin has a go, Noahpinion has a more comprehensive go, Paul Krugman notes it, Williamson gets uppity and confused. Later, Williamson writes another, longer review, in which he makes effectively the same mistake, but this time with rationality. The whole debacle is worth looking at, but Noahpinion’s post is the most comprehensive and is all you really need to know.

3. David Graeber’s response to Robert Murphy (naked capitalism)

David Graeber has managed to blow a significant hole in mainstream and Austrian economics by exposing the myth that barter spontaneously arose and that spot exchange is somehow ‘natural’ to man. Murphy, after reading merely two paragraphs of an interview, took exception to this and posted a response. Graeber’s rebuttal contains a paragraph that sums up my experience of many RW bloggers very succinctly:

However, in the blogsphere, the quality or even intention of an argument often doesn’t matter. I have to assume Murphy was aware that all he had to do was to write something—anything really—and claim it rebutted me, and the piece would be instantly snatched up by a right-wing echo chamber, mirrored on half a dozen websites and that followers of those websites would then dutifully begin appearing across the web declaring to everyone willing to listen that my work had been rebutted.

Yep.

2. With Notably Rare Exceptions (Crooked Timber)

If you were reading blogs at the time, this one should need no introduction. A demonstration of the poverty of mainstream thought and the implicit separation of ‘good’ from ‘bad’ or ‘shock’ times in economics. A few of the best:

With notably rare exceptions, Germany remained largely at peace with its neighbors during the 20th century.

With notably rare exceptions, Mrs. Lincoln enjoyed the play.

With notably rare exceptions, Achilles was invincible.

With notably rare exceptions, the Roman Empire’s crucifixion policy was successful in containing subversive religious movements among the hoi polloi.

With notably rare exceptions, all animals are equal.

With notably rare exceptions, when you wake up in the morning, you know for a fact that you will still be alive by the end of the day.

Hooray for CT commenters! One of whom, incidentally, is responsible for number 1:

1. A review of Tim Harford’s Adapt (Tom Slee)

All books are going to have their critics. But there’s criticism and then there’s criticism. Tom Slee’s review of Adapt - a book where Tim Harford praises trial and error as always and everywhere an appropriate method – is the latter. The problem:

Tetlock divided his experts into foxes (good at many things) and hedgehogs (good at one thing) and argued that hedgehogs are over-confident because they “reduce the problem to some core theoretical scheme’… and they used that theme over and over, like a template, to stamp out predictions”. And that’s exactly what Harford does here. He sees evolution as a fox-like strategy (trying many things and selecting a few) but doesn’t notice that at the level of individual species, evolution gives us both foxes and hedgehogs, and both do perfectly fine.

Maybe it’s just me, but the whole review seems to reflect an exceptionally high level of thinking – exactly the kind of thing we need in economics. I haven’t yet read Slee’s book, but based on his blog and the Amazon reviews, I certainly plan to.

Some runners up: Bryan Caplan and Scott Sumner both had thought provoking posts, but they’ve internalised too much of the conventional wisdom for me to put them in. David Malone’s comment on the narrative of the crisis was in close competition with Peter Dorman’s, whilst Chris Dillow is always interesting but it’s hard to find a post that stands head and shoulders above the rest. Mike Kimel’s work on his anti-laffer curve is worth a mention, too. Lastly, the D&D section of the SomethingAwful forums is fantastic for countering the standard, capitalism favouring narrative of history – if you go there, prepare to be pulled leftwards.

From a purely aesthetic perspective, the reason people vote for domestic redistribution is because that is the poverty they are most aware of, and where they can easily see the effects of redistribution. This is due to both availability bias and a general lack of capacity to process the amount of poverty in the world. Launching tirades against voters because of this is, therefore, akin to mocking people for behaving like real people rather than rational economic people.

However, this isn’t the main problem. Redistributing large amounts to developing countries is undesirable for two other reasons.

The first is a laffer-curve style argument: if we were to collect as much as possible in the short term and redistribute it, our economy would be heavily taxed and we wouldn’t even be spending it on public services. In other words, we’d bankrupt the public sector and the economy would grind to a halt, eliminating our capacity for long term redistribution. The long term aid maximising amount of redistribution is probably fairly low as  % of GDP, given that taxes cannot be so excessively high as to slow down growth, and enough of the tax revenue needs to be spent in the domestic economy to keep it going. Add political limitations to this and you’re looking at a level of redistribution not dissimilar to what we have now.

Secondly, and most importantly, is the false equivalence between domestic and international redistribution. This is best phrased as follows:

Economic growth is the cure for absolute poverty.

Redistribution is the cure for relative poverty.

The second statement is almost true by definition, whilst the first is clearly borne out by the facts (and I suspect, would not be opposed by those I am disagreeing with here). After all, is there a single example of a poor country developing due to aid? Sure, individual acts of redistribution may extend some lives in the short term, but in many cases it simply destroys industries and reduces the country’s capacity for development in the long term.

Similarly, there is not an example of a country that has grown its way out of relative poverty – the U.S. is the largest economy in the world, yet inequality is rife. Meanwhile, many Northern/Central European countries – though they do very well on growth too, incidentally – are effectively absent of relative poverty.

Now, we can discuss whether domestic redistribution is desirable or not, and whether relative poverty is ‘actually’ a problem or was just made up by Stalin, but for now, defending inequality on the grounds that people in developing countries are even poorer will not suffice.

To start, I’ll take the liberty of quoting a commenter from Brad Delong’s blog, who summed up my overall impression of Rothbardians (and to a lesser extent, Miseans) pretty nicely:

The weird thing about Austrians, it seems to me, is that they don’t like empiricism, but they don’t seem to really like deriving any conclusions that they didn’t already know from their axioms either. The rejection of empiricism, along with claims like how empirical economists can’t explain people commuting on subways, are part of Mises’s though. Also, though, look at the case of Austrian rejection of modern microeconomics on the grounds that its use of utility functions and such is inconsistent with preference rank-based description of human choice-making. Basically, that’s a rejection of the Von Neumann-Morgenstern theorem as far as I can tell. (Even though Morgenstern may have been something of an Austrian himself.) I’ve never read an Austrian actually explicitly reject the theorem, or explain his view on it in any way, but the rejection seems to be implicit in their discussions of conventional, non-Austrian micro. Why reject Von Neumann-Morgenstern? As far as I can tell, because it doesn’t fit their conception of how economic analysis should be done.

So, if you don’t look at the world empirically, and you don’t want to extend your axioms to their logical implications to conclusions that you didn’t already know, what’s left? The axioms themselves, and some thoughts hanging around their immediate vicinity. Or, to put it another way, your initial prejudices. Your thought starts where it ends, exactly where you wanted it to.

That’s what I take from Austrian economics, at least.

Internet Austrians have declared capitalism to be infallible and as such are unable to blame anything on the private sector – their conclusion is always that it’s the state’s fault. I just can’t align myself with something that seems to come to the same policy conclusions, whatever the question, whatever the situation, whatever the starting point and methodology.

Another reason I find the Austrian school to be unsatisfactory is its failure to predict and explain the 2008 crisis.

As LK has documented, Austrian claims to ‘predict’ the crisis with anything like the accuracy of Michael Hudson or Steve Keen are spurious. At best, the Austrians spotted a housing bubble, no more. Furthermore, their theory doesn’t even appear to explain the crisis particularly well, for the following reasons:

Put simply, ABCT is based on a misallocation of investment in capital goods. The imbalances created by this result in a recession, which is necessary as the capital is liquidated and put to ‘proper’ usage elsewhere. But this isn’t what happened in the financial crisis; in the crisis people were simply buying and selling the same assets to each other – housing, mortgages and their derivatives – and most of the debt taken on went into consumption. Murray Rothbard himself said:

To the extent that the new money is loaned to consumers rather than businesses, the cycle effects discussed in this section do not occur.

Even if you accept that low interest rates caused the boom, the Austrian prescription of liquidation does not follow, as there was very little capital to ‘reallocate’. After all, derivatives are just contracts, an there is currently an undersupply of housing in many Western countries.

And, of course, sectors unrelated to the crisis have slumped at least as much as ones that were central:

On top of this, there is simply too much historical counter evidence against the idea that credit expansion/CBs cause business cycles. The Dutch Tulip Mania occurred under 100% reserve banking. The Melbourne Land Crisis occurred under a private gold standard system. The South Sea Bubble occurred without a Central Bank (The BoE did exist but was the same as the one we know and love only in name). Furthermore, the period of fewest crises was post-WW2, with universal Central Banking. This list is far, far from exhaustive.

Since this is a scattered post, I’ll also add that Austrians have completely failed to rebut Sraffa’s demolition job on Hayeks P&P (no, the response that there is schedule of interest rates does not qualify as it is simply restating the criticism), and also that their use of uncertainty appears not to recognise the term in the Knightian sense.

So, there you go. That’s why I’m not an Austrian.

*For balance, here are some good Austrian blogs: Jonathan Catalan, The Radical Subjectivist and Bob Murphy (though his Krugman obsession does get tiring after a while).

At the centre of arguments for NGDP targeting is the implicit assumption that macroeconomic policy can only have nominal impacts. I believe this to be false.

‘Market Monetarists’ (MMs) hold that macroeconomic policy can only have nominal or ‘cash’ effects, and the effect on the actual production of goods and services is uncertain. To put it intuitively, they are saying (or believe they are saying) that the amount of cash we inject into the economy can only affect the amount of cash flowing around the economy. There are two reasons this is flawed.

Firstly, MMs use a standard AD/AS framework for their analysis. When you respond that fiscal stimulus can be spent on roads and the like, which benefits the economy in more ways than one, they suggest that you are confusing the AD side of the equation with the AS one. However, this is a problem for MMs: fiscal stimulus can simultaneously boost AD and AS (not to mention LRAS), which means that even if the CB offsets the increase in spending, fiscal policy can ensure that a higher percentage of the spending is a real increase in production. In other words, fiscal policy can impact RGDP better than monetary stimulus, at least in certain circumstances.

My second point, however, is more important and applies universally. MMs neglect of the role of the RoI in determining not only the rate but the type of macroeconomic activity that takes place (New Keynesians are also guilty of this; at least, I’ve never seen them mention it).

In a capitalist economy, the rate of interest not only determines the amount of investment, but also the nature of that investment. Here’s Adam Smith, whom I can never resist quoting on the subject:

If the legal rate of interest in Great Britain, for example, was fixed so high as eight or ten per cent, the greater part of the money which was to be lent, would be lent to prodigals and projectors, who alone would be willing to give this high interest. Sober people, who will give for the use of money no more than a part of what they are likely to make by the use of it, would not venture into the competition. A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it, and thrown into the those which were most likely to waste and destroy it.

High interest rates mean that there is less investment and also that the investment that does take place is less sustainable. Speculative investment causes bubbles and price inflation, reducing the CB’s control over both the nominal and real economy. By keeping long term rates low, the CB is hence able to impact the real activity in the economy.

For an example, see this poorly taken photograph of long-term corporate bond yields from Geoff Tily’s excellent book Keynes Betrayed:

High interest rates are correlated with downturns, whilst steady low interest rates are correlated with the ‘Golden Age’. Rates weren’t massive in the recent crisis, though there were plenty of ‘hidden’ sources of funding such as the repo and Eurodollar markets, and expectations were not anchored downwards.

Of course this evidence is far from exhaustive but Tily’s book has much more, and I don’t want to flood this post with too many poorly taken photographs.

If macroeconomic policy can have real effects, that blows a significant hole in the arsenal of NGDP target advocates. For whilst most critiques of NGDP targeting focus on how it isn’t feasible, particularly at the ZLB, this one is compatible with its feasibility, but questions its efficacy.

This leads to a lot of problems, not just because governments and markets are regularly framed as opposed to each other, when in fact they are mutually reinforcing when managed right. No, the problem is that, through their governments versus markets lens, libertarians see states throughout history as roughly equivalent. So when I criticise Commie China in an argument against capitalism, how can that work? I’m criticising capitalism, and hence advocating statism, which is synonymous with ‘communism’, which is the opposite of capitalism. So I’ve refuted myself!

For me, this is where marxist class analysis offers the most rich and appealing methodological starting point. We are able to understand the actions of states in their historical context and as distinct from each other. The Social Democratic Scandinavian states have highly successful high tax, high spend policies. On the contrary, the EZ project is an example of massive unrepresentative bureuacracy failing, spectacularly. Now, if we approach this from a ‘governments versus markets’ perspective we’re sort of stuck. Libertarians resort to insisting that Sweden isn’t really that social democratic and does well because of low corporate tax rates and lack of regulation*. Leftists often find themselves trapped on the ‘governments’ side of the equation and as such find themselves reluctant to criticise the state.

But if we approach it from a class perspective, and see the state – slightly glibly, admittedly – as simply advancing the interests of a particular class at any one time, then things make a lot more sense. In the case of Scandinavia, the lower/middle class are exercising their democratic preferences for the distribution income/goods and services, and in the case of the EZ  the political elite/creditor class are trying to allocate as much income as possible to themselves.

There are plenty more examples of governments and markets failing to analyse situations properly – for example, libertarians often cite the fact that the state is in bed with financial institutions as evidence that the crisis was not caused by true capitalism but by the ‘government’ side of governments and markets. Of course this is incoherent; financial institutions neither represent the state or the market, and the best way to describe them is as the elite class – which can include elected politicians, landlords, financiers, and whoever else – rigging the system in their favour.

Another example is the fact that American peasants were not, AFAIK, forced into factories, whilst British ones were. What libertarians might consider two conflicting pieces of evidence are better understood in terms of class: a legitimate democratic state founded on the idea of capitalism in the case of the former, and collusion between the landlords/merchant class imposing capitalism on an unwilling peasantry in the latter. Governments and markets would have trouble dealing with historical events like this.

Libertarians, naturally, have an objection to class because of its association with marxism, collectivism and ‘envy’. But really class is just a far superior tool for analysis. For whilst class representations are inherently collectivist, they are not incompatible with individualist analysis; they can simply be thought of an emergent property, and we can analyse the economy on two different levels, which Libertarians already do with governments and markets. And governments and markets glosses over the institutions required to sustain them, but class is a straight representation of people and so doesn’t take existing legal structures for granted, leading to a less hamstrung analysis. Furthermore, class analysis quickly highlights unjust hierarchies and structures that have been created by current institutions, things that should be rejected by anyone who purports to be in favour of liberty.

*If you follow those links neither of those claims stand up to much scrutiny.

10. The state is useless at doing anything. We don’t, however, question its ability to define property and enforce contracts effectively.

as well as this:

4. Historical context matters for gold as a medium of exchange. The historical context of capitalism, however, can be swept under the rug.

This got me thinking: public choice theory potentially blows a massive hole in libertarianism, despite being one of the key components in their arsenal.

The history of capitalism offers a natural experiment in how public choice considerations affect the provision of private property and contracts. To put it simply: the private property has been distributed among a select few who have used it to perpetuate wealth inequalities. Contracts have become infallible to the point where ancient laws/traditions such as laws against usury and debt jubilees are currently unthinkable, politically speaking. Private owners of capital used the state to force peasants – who, in the 14th century, worked about a quarter of hours that the average person does now – to work 12 hour days in factories. Landlords have blocked any attempt to tax away their unearned rents.

In fact, the extent of the collusion between the state and capitalist/rentier class in the provision of private property makes overcharging pharmaceutical companies and mortgage lending GSEs look like childsplay in comparison.

Of course, you can argue against public choice theory on the grounds that politicians aren’t rational self-maximising robots, and do have some sense of public duty. You could also argue from a practical perspective – we need to put institutions in place to combat corruption. But this would be opening the door to all sorts of statist policies.

1. Credit expansion causes boom bust cycles, but we shouldn’t use capital controls to prevent this (because liberty).

2. The fact that regulators can be captured means we shouldn’t use them. Similar arguments don’t apply with police and corruption, however.

3. The government should regulate and prevent fraud, but not information asymmetry, which is self-correcting. This is despite the fact that they are the same thing.

4. Historical context matters for gold as a medium of exchange. The historical context of capitalism, however, can be swept under the rug.

5. In a free society, we earn our income. Inheritance? Erm…

6. The best thing for wages and working conditions is full employment, and we can achieve this by getting rid of the minimum wage and regulations. This will increase wages and improve working conditions, but these higher wages and conditions won’t reduce employment in the same way as the regulations did before because free market.

7. There’s no such thing as a free lunch, but perpetual economic growth is a costless path to prosperity.

8. Inflation is caused by too much money chasing too few goods. This doesn’t apply with tax cuts for the rich and positional luxury goods.

9. We must evaluate theories based only on whether they corroborate with empirical evidence. However, I will ignore it when my theories do not.

10. The state is useless at doing anything. We don’t, however, question its ability to define property and enforce contracts effectively.

11. You favour domestic redistribution! You nationalist, look at all the starving people in Africa! What? No, we shouldn’t redistribute to them either.

12. I’m opposed to Keynes. Except I advocate expansionary fiscal and monetary policy, the same as him.

13. The arguments I use in favour of private property do not apply to intellectual property (as well as the inverse).

14. It  matters when the public sector crowds out valuable resources, but not when unproductive parts of the private sector do the same.

15. I’m an anarchist. Except I want corporations to rule the world.

16. Deficit spending on tax cuts for the rich is fine, but not on schools and other bad stuff.

17. I will argue against anti-trust and redistribution, despite advocating them elsewhere.

18. There’s no such thing as a free lunch, but competition always improves market outcomes.

19. Everything is subjective and individualistic. But it doesn’t matter how free people feel, we will use my definition of freedom and impose it on them.

20. Choice, choice, choice. But if a monopoly or cartel arises in the free market, it’s fine.

21. Being made to pay taxes just because you live in a certain territory is unjust. Paying rent is fine, though.

22. We claim the name of Adam Smith, yet neglect to criticise the division of labour, reject worker regulations, banking regulations, active monetary policy and misuse the term ‘the invisible hand‘.

23. We claim the name of Mises, but our views also conflict directly with many of the things he said.

24. I am Mises, and my views also conflict directly with many of the things I’ve said.

Bonus: Many libertarians are also Christians. It is difficult to reconcile these two belief systems.

Happy hunting!