Krugman: The Right's problem with fiat money is that it does work.

[foolsguinea.livejournal.com]

http://krugman.blogs.nytimes.com/2012/08/24/gop-intellectual-decline-monetary-edition/

I think Yglesias has this right:

Commodity-backed money is basically a solution to a non-problem. Or at least it’s not a problem you have if you don’t accept a Randian deeply moralized view of market outcomes. The existince of fiat money is embarassing to that kind of ideology, so it inspires quests for alternatives to modern central banking even when the alternatives don’t make sense.

In this sense fiat money is like, oh, Social Security. The problem it creates for conservatives is not that it doesn’t work, but that it does — which is a challenge to their philosophy. And so it must die.

I wonder if this is fair to say. It does seem to fit with the Religious Right's fear of science. I see a fear of science and hatred of logical results, and a preference for economic fantasies. I suspect it traces in part to the concerns about human overpopulation and unsustainable consumption in the 1970's. If your instincts don't like science, don't like the truth, just turn against those things. Oppose sex ed, oppose contraception, oppose climate science, blah blah blah.

From choosing creationism over evolution, and ignoring environmental problems, it's a short step to endorsing Austrian economics, and ignoring the failures of the free market.

But I don't want to get too bogged down in a tangent about evolution and global warming.

I don't know. Is this really the what's happening? Why is "free-market economics," with all its fallacies and failures, still believed? Is it a religion? An attractive preconception? Why hold onto it?

I think it's not just because people don't know any better, but that they've gotten used to both ignoring reality themselves, and ignoring the scientific conclusions of those who study reality in depth and reveal to us what is not obvious.

Comments

[mahnmut.livejournal.com]

Please expand on your point within the next 1 hour as per requirement #8 (http://community.livejournal.com/talk_politics/261191.html), thank you in advance.

[foolsguinea.livejournal.com]

I added some paragraphs of me musing.

[mahnmut.livejournal.com]

Much appreciated!

[kayjayuu.livejournal.com]

It works for who? And for how long?

It works until it doesn't work anymore?

[the-rukh.livejournal.com]

Any day now! Just you wait!

[a-new-machine.livejournal.com]

The creatonist/anti-science wing of the party and the Austrian wing are bedfellows of necessity, not of inherent compatibility.

[underlankers.livejournal.com]

I disagree with that, and I also think that anti-AGW ideologists and Creationists are the same people, not least because there's actual evidence showing that this is the case. The contemporary Republican Party is the great stronghold of that ancient American tradition, anti-intellectualism.

[badlydrawnjeff.livejournal.com]

While I do believe that the whole gold standard/fiat money debate is ultimately a solution in search of a problem...

. Is this really the what's happening? Why is "free-market economics," with all its fallacies and failures, still believed? Is it a religion? An attractive preconception? Why hold onto it?

Many of us have been saying the same thing about Keynesianism, especially regarding stimulative schemes, for some time now. Until we stop working with theories and start working with history, the debates will continue.

[foolsguinea.livejournal.com]

Do you believe that real economic growth is possible, or a delusion?

[badlydrawnjeff.livejournal.com]

It's clearly possible, it just doesn't mean that there's necessarily historical evidence to support either position fully (or at all).

[underlankers.livejournal.com]

There's plenty of such evidence if you bother to read it. To use one example, the Tsarist regime in Russia fell from a poorly-timed and worse-handled crisis of growth, while the British economy growing to bypass that of say, the Qing Empire is also observable in terms of the history of the 18th and 19th Century UK and Chinese economies.

[rowsdowerisms.livejournal.com]

You have to have a theoretical basis before using empirical/historical data. Otherwise its meaningless. The fact that you idealogically have a problem with neo-Keynesianism speaks nothing to its scientific basis.

[telemann.livejournal.com]

The fact that you idealogically have a problem with neo-Keynesianism speaks nothing to its scientific basis.

And well, reality!

[badlydrawnjeff.livejournal.com]

Yes, I understand the scientific method, thanks. At some point we need to admit that the hypothesis was invalid.

[rowsdowerisms.livejournal.com]

I have yet to see you prove as to why that might be. You'd definitely be up for a Nobel prize, I look forward to seeing your thesis.

[meus-ovatio.livejournal.com]

No economic theories have a scientific basis. They are all of them ad-hoc theory building. Since they lack any actual scientific basis, they are free to change as needed, explaining and re-explaining things with charts and graphs, and generally protecting their own turf out of intellectual vanity more than intellectual integrity.

[a-new-machine.livejournal.com]

Er... no. I don't think that social science produces the most reliable or comprehensive models of human behavior, but you can't really deny that what they do create, they do under the guidance of the scientific method.

[meus-ovatio.livejournal.com]

Er... yes. It isn't a social science or any kind of science. It's a method of story-telling or a philosophy of history, and that's about it.

[a-new-machine.livejournal.com]

It's a system that tests a falsifiable hypothesis by exposure to empirical data to determine whether the hypothesis is reliable. That is science, period. There is a lot of model-building that goes no further than its assumptions, but to toss the entire field out the window because of a few bad operators is like saying that physics isn't a science because those string theory whackadoos never look up from their formula-riddled chalk boards.

[meus-ovatio.livejournal.com]

No, it really isn't. There isn't any falsifying of any sort going on.

That is science, period.
There's a lot about science, and whole history of the philosophy of science that seems to belie your simplistic fiats here.

There is a lot of model-building that goes no further than its assumptions, but to toss the entire field out the window because of a few bad operators is like saying that physics isn't a science because those string theory whackadoos never look up from their formula-riddled chalk boards.
I haven't said anything about bad operators. They're fine and wonderful people, I'm sure. I'm sure they're all very serious and earnest. But this is largely irrelevant to whether or not it is viable, and it isn't, because economics lacks any sort of cohesive paradigm at all.

For instance, hand-waving about the serious institutional "consensus" about Keynesian economics simply points out that it's a hopelessly political institution, while ignoring all the other non-Keynesian operators who have also won Nobel prizes. So at once it is both a misrepresentation of the field, and a flat-out bald appeal to popularity.

I, on the other hand, understand that billions of dollars and man-hours can be poured into very "respectable" pursuits while still being a whole bunch of hogwash.

[rowsdowerisms.livejournal.com]

I wasn't trying to make the point that there was institutional consensus on neo-Keynesianism. I was trying to make the point that jeff has not once ever even made an argument about it. He just takes it for granted that he is right.

[underlankers.livejournal.com]

Yes, and as Keynesianism is obsolete it's a completely and utterly irrelevant point that tilts at a windmill, in short typifying the mixture of charlatanism and humbuggery required to be a devout libertarian.

[dwer.livejournal.com]

it's funny because, well, it's how we got out of the Great Depression, it's been explained to you dozens of times, and you still refuse to admit it.

[badlydrawnjeff.livejournal.com]

Explaining isn't justifying, and no amount of explaining can change your position from being wrong to being right.

[dwer.livejournal.com]

I refer you to my previous statement.

[yes-justice.livejournal.com]

Really? Instead of wasting time explaining and clarifying positions we should consult that grand oracle BadlydrawnJeff for a ruling about what is right and wrong? Saves lots of energy.

But seriously, why are you shutting it down like that?

[badlydrawnjeff.livejournal.com]

Mainly because it's a lost cause with a handful of folks. I'm happy discussing it with nearly everyone.

[yes-justice.livejournal.com]

Okay, so its personal. That makes sense.

[badlydrawnjeff.livejournal.com]

In this specific case, absolutely. If you want to dig further on the issue, though, I'd be happy to do so.

[underlankers.livejournal.com]

With the paradox that the state that came the fastest out of the Depression was Nazi Germany, which did indulge in Keynesianism on a scale nobody else at the time did, but on a basis that was unsustainable without the very war they initiated historically. However a question that could be raised here was if this is really a fault in Keynesianism or Hitler deliberately rigging the system so his pet war was predestined and irresistible, a view the Hossbach Memorandum would justify. More interestingly Soviet re-armament and the Great Depression's effect on the Soviet economy tend to be more or less overlooked. And in both cases there is far more direct Keynesianism than was the case with the USA.

[existentme.livejournal.com]

I've not read enough, I don't suppose, but that was it, that got us out of the great depression, Keynesianism? That's the broad consensus view?

[foolsguinea.livejournal.com]

More or less. Massive government hiring, anyway.

[dwer.livejournal.com]

Yes. It was Roosevelt's massive government spending that brought us out of the Great Depression. Late in the 30s, he was convinced to drop the spending, and the economy immediately headed downwards again, only to be finally brought out of it by even larger government spending on that public program called WWII.

[underlankers.livejournal.com]

And of course the Nazis came out of the Depression the fastest of anyone.....by arming for said public program called WWII. Of course they did this a little too fast and put themselves in a ticking time bomb, economically, but it's still what worked for them.....

[kylinrouge.livejournal.com]

Eh, a few too many correlations for me to take you seriously. Trying to weave everything together into the Religious Right is a bit of a stretch. They are perfectly content with a big fiat government as long as they're the ones in charge.

The only problem with these theories is for us to test them requires a massive overhaul of our entire economic process, which is completely unfeasible especially since we're in no immediate crisis to try something new. The debates of efficiency are endless, but the debate of practicality and timeliness is very short.

The best solution is to just ignore them. There will always be a segment of the population who believe in an ideal but have no real way of achieving it. The thing about people who believe in the gold standard is that they think the global money system is going to collapse 'at any moment'. It's basically a conspiracy theory.

[policraticus.livejournal.com]

Can you point me to a economic system that doesn't contain fallacies and failures? Do we have evidence that serious thinkers on free markets and capitalism (which are not synonymous with the commodity backed currency, btw) who think that there are never market failures?

[underlankers.livejournal.com]

Honestly, I think this is overthinking their hatred of fiat money. Most of these people are for reasons of ideology and self-interest invested in things like say, gold, and so the success of fiat money is a financial threat. Psychology isn't necessary where self-interest will suffice.

[allhatnocattle.livejournal.com]

The embodiment of those who crashed the U.S. and world economies are seriously vying for the presidency. And they have a chance of winning. That in itself is astonishing. There must be considerable confidence that the mega-millions they've raised from their corporate sponsors will overcome what, in any other country, would automatically be a fatal flaw. You can't make this stuff up.

[mahnmut.livejournal.com]

The people have stopped controlling politics a long way ago. If they controlled it at any time, when you think about it. Money controls politics.

[the-rukh.livejournal.com]

In the US, ignorance controls politics. Its just easy to guide ignorance.

Our founding fathers knew that the average citizen wasn't going to be a constitutional scholar, historian, political analyst, economist etc. It wasn't because they were dumb, but they had their own lives to deal with. They needed to be farmers and hunters and things, and didn't have time nor often education. Hence they made a representative democracy specifically so the average citizen didn't do those things.

In fact, because they so didn't want the average citizen to be making poorly informed choices on such matters, they implemented this backwards electoral system where the citizens don't even vote for president, instead they vote for delegates who are supposed to be the best and brightest to go make that decision.

But when is the last time you heard of an electoral delegate campaigning on their decision making abilities, or even campaigning for themselves at all?

We broke this system almost immediately. Instead we have the presidential candidates marketing themselves straight towards the population and saying all sorts of really stupid "common sense" stuff. Now the system is nothing more than a direct vote system with a disproportional representation.



And then of course, this make politics the world of propaganda, because whomever can control what "common sense" means, controls politics. It's all money marketing appealing catchy messages to ignorant people, not smart delegates getting together to make an informed decision.

[mahnmut.livejournal.com]

You sound (http://talk-politics.livejournal.com/85917.html?thread=4355229#t4355229) like someone (http://talk-politics.livejournal.com/85917.html?thread=4355485#t4355485) I know.

[sandwichwarrior.livejournal.com]

Some thoughts of my own on the subject...

First of, you're correct in that, fiat money does work (after fashion).

This is because ALL money is fiat money to some degree or another. After all it's not like you can eat gold or use it to produce energy, yet people still talk about the "gold standard". The reason fiat money works is because everyone BELIEVES that it has value. As long as people believe that a currency has value they wil be willing to trade it for things of actual value, and ta-da! we have economics.

The problem is that if enough people in enough places start acting like money does not have value, people's belief in it's value will be reduced and they will be less inclined to use it in trade, opening the door to economic collapse.

The problem isn't so much fiat currency itself so much as the crisis of legitimacy, it is becoming increasingly obvious that the US has niether the intention or the ability to pay off it's debts and as such there is a push to get one's hands on actual stuff while you still can rather than get stuck holding an IOUs.

[sandwichwarrior.livejournal.com]

I don't know. Is this really the what's happening? Why is "free-market economics," with all its fallacies and failures, still believed? Is it a religion? An attractive preconception? Why hold onto it?

I don't know, but I I had to hazard a guess I'd say that it's because so far nobody's figured out anything that works better.

Inequality will arise regardless so might as well make it a feature of the system rather than a bug.

Personlally I don't understand how people can possibly believe that communism and other redistributive schemes can be viable when even small children and animals display a tendancy to fight over property and territory.

[underlankers.livejournal.com]

Where did Communism come into any of this? And are you using Communism in its real-world sense referring to Soviet and Maoist-style systems or in the joke sense which treats the millions these regimes slew as mere abstractions?