Sunday, March 23, 2014

Thilo Sarrazin interview and his book on PC

The Axioms of PC Madness
Posted on March 16, 2014 by Baron Bodissey
Thilo Sarrazin #3
Thilo Sarrazin is a best-selling author and former director of the Bundesbank who became controversial a few years ago in Germany due to his politically incorrect views on immigration and Islamization. He has just published a new book that is being relentlessly panned before it is even published, by people who have not even read it.

JLH has translated a brief interview with Mr. Sarrazin that was published earlier this month in Die Preußische Allgemeine Zeitung. The translator includes this note:

Thilo Sarrazin has done it again. This interview is about his third book — like the first, it has a title on which there will be a committee decision on how to render it into English (I just took my best shot) — but essentially it is about the PC-ness of the media, and the [ordure]-storm that is already building up. You may be amused to discover that, like the attacks on Diana West, this altercation too has at least one adamant critic who not only hates the book, but does not intend to read it.

The translated interview:

When the Only Thing That Matters is the Attitude

March 2, 2014

Thilo Sarrazin has recently published his new book on “virtue terrorism”, to which he immediately fell victim

With Germany Abolishes Itself and Europe Doesn’t Need the Euro, the former Berlin finance senator and ex-federal banker has, to be sure, produced two bestsellers, but he has also become an object of hate for the powerful. In the PAZ (Preußische Allgemeine Zeitung), he accounts for how he evaluates the debates about his book and what makes him think. Questions are put by Rebecca Bellano.

PAZ: Before The New Terrorism by Virtue — On Freedom of Expression in Germany has even appeared, journalists are lining up to trash it. The Tagesspiegel internet site, for instance, called it “a drawer-full of dangerous nonsense.” At the end, the author emphasizes that he doesn’t even want to read the book. How do you as an author deal with this attitude and the widespread hostility?

Thilo Sarrazin: Advance critical reviews by writers who admit they have not even read the book are both amusing and characteristic. Amusing because the reviewer is making himself laughable; characteristic because he confirms the media criticism I apply in the book. An attitudinal journalism, strong in its principles, will stop at nothing to discredit and ridicule questions and perspectives it opposes.

PAZ:In your latest publication, you basically take up all the statements you were criticized for, and confront your opponents with numbers and studies. Which of these subjects is especially important, that is, in which cases do you most want to convince the people?

Sarrazin: In my new book, I turn the tables and put myself in my opponents’ shoes. I formulate 14 axioms of the PC madness that is rampant in the media — all of them revolving around the ideology of equality. I first formulate each of these axioms with the greatest consistency from a pro position. This consistency vividly exposes their hollowness. Then I contrast this to the very different reality, and in this way, theories and analyses from the previous two books reappear. But it goes beyond that. Everything in the ideological viewpoint that I am critiquing is interconnected. That was especially enlightening for me.

PAZ: You write that — viewed historically — the collapse of societies because of their internal narrow-mindedness is the rule rather than the exception. What do you believe Germany will most likely founder on?

Sarrazin: We all know that we will die, but not when, how and why. This ignorance is also a blessing. The same is true for states, nations and societies. They are all finite and they will all go under sometime. Then something new will come along; the end of humanity is still far away. If you analyze such downfalls, the causes are seldom only military, but rather those internal blind spots which prevent a measured reaction to the challenges of the present and future. In Germany Abolishes Itself, I show how it could end for our country. I carefully avoid any prognosis. It is a little like medicine. Heavy smokers greatly endanger their health. Nonetheless, one must be cautious with the prognosis of lung cancer. Helmut Schmidt, for example, to whom I wish long life, will not foreseeably die from the effects of his cigarette smoking.

PAZ: You characterize the media as the custodians of a pseudo-reality. How should we understand that?

Sarrazin: I am criticizing a dominant trend, not the media in general. Where ideology and wishful thinking dominate, the processes of the healthy human intellect clog up and out comes a distorted picture of reality. Did you know that, according to the OECD (Organization for Economic Cooperation and Development) definition of poverty, the percentage of poor in Italy is higher than in Romania, and in Germany higher than in the Czech Republic? This results from the concept of relative poverty — a product of the ideology of equality — and all the poverty reports in the German media are constructed on this concept. And in this process, the fact is obscured that a German “poor person,” by worldwide standards, is rich.

PAZ: How can you explain the fact that you write one bestseller after another and yet bring about no change in public opinion or in the voting habits of citizens (cf. the last national elections)?

Sarrazin: I don’t know if my new book will be a bestseller. Hoping for that would presumptuous, and it would also make me queasy to think that it would be possible to somehow affect the course of world history with a book. Marx’s Das Kapital may have altered the world, but certainly not for the better. The influence of a book on public opinion is more or less like a stone thrown into a lake. It is a great accomplishment if it is possible for a few seconds to see the resulting waves circle outward and eventually mix with the other waves. It is possible to speculate endlessly about causality in the real world. Sometimes a book can be like the sweep of a hummingbird’s wing in the Amazon basin, which ultimately causes the eruption of a volcano many thousands of kilometers away.

PAZ: How do you evaluate the public reaction to the referendum in Switzerland?

Sarrazin: The German media are sneering and insulting the majority of the Swiss people, because they failed to heed the higher wisdom of foreign commentators, and have made it clear that they themselves will decide who is allowed to live on Swiss land. Now it is clear to everyone that the participation of the people must be avoided at all costs, if European integration is to be pushed forward. After the rebellion of June 17, 1953, Bertolt Brecht said: “The people have lost the trust of the government. Would it not be simpler for the government to dissolve the people and elect a new one?”* It is wonderful how a great poet can bring things into focus.

* Quote from Günter Grass’s 1966, play depicting Brecht in the theater, working on his production of Shakespeare’s Coriolanus, when the rebellion breaks out in the street and is brutally put down. Truer to Brecht’s character as Grass saw it than to the actual events. So, in a sense, the “great poet” is Grass.

This entry was posted in Books, Culture Wars, Enrichment, Europe, Immigration, News, PC/MC, Politics by Baron Bodissey. Bookmark the permalink.
24 comments also worth reading thru as sort of a good debate and thought fullness and understanding

Monday, March 17, 2014

Green Peace founder, Patrick Moore, refers to UN IPCC

b1gdaddynz (257 comments) says: 

Dr. Patrick Moore, the co-founder of Greenpeace, went before the U.S. Senate to tell his story as it relates to global warming/climate change.
Statement of Patrick Moore, Ph.D. Before the Senate Environment and Public Works Committee, Subcommittee on Oversight
February 25, 2014
“Natural Resource Adaptation: Protecting ecosystems and economies”
Chairman Whitehouse, Ranking Member Inhofe, and members of the Committee. Thank you for the opportunity to testify at today’s hearing.
In 1971, as a PhD student in ecology I joined an activist group in a church basement in Vancouver Canada and sailed on a small boat across the Pacific to protest US Hydrogen bomb testing in Alaska. We became Greenpeace.
After 15 years in the top committee I had to leave as Greenpeace took a sharp turn to the political left, and began to adopt policies that I could not accept from my scientific perspective. Climate change was not an issue when I abandoned Greenpeace, but it certainly is now.
There is no scientific proof that human emissions of carbon dioxide (CO2) are the dominant cause of the minor warming of the Earth’s atmosphere over the past 100 years. If there were such a proof it would be written down for all to see. No actual proof, as it is understood in science, exists.
The Intergovernmental Panel on Climate Change (IPCC) states: “It is extremely likely that human influence has been the dominant cause of the observed warming since the mid-20th century.” (My emphasis)
“Extremely likely” is not a scientific term but rather a judgment, as in a court of law. The IPCC defines “extremely likely” as a “95-100% probability”. But upon further examination it is clear that these numbers are not the result of any mathematical calculation or statistical analysis. They have been “invented” as a construct within the IPCC report to express “expert judgment”, as determined by the IPCC contributors.
These judgments are based, almost entirely, on the results of sophisticated computer models designed to predict the future of global climate. As noted by many observers, including Dr. Freeman Dyson of the Princeton Institute for Advanced Studies, a computer model is not a crystal ball. We may think it sophisticated, but we cannot predict the future with a computer model any more than we can make predictions with crystal balls, throwing bones, or by appealing to the Gods.
Perhaps the simplest way to expose the fallacy of “extreme certainty” is to look at the historical record. With the historical record, we do have some degree of certainty compared to predictions of the future. When modern life evolved over 500 million years ago, CO2 was more than 10 times higher than today, yet life flourished at this time. Then an Ice Age occurred 450 million years ago when CO2 was 10 times higher than today.     and further other comments about the UN  IPCC

Modern Environmental Doomsayers

Environmental Doomsayers Have Been Wrong Many Times Before.
“At the first Earth Day celebration, in 1969, environmentalist Nigel Calder warned, “The threat of a new ice age must now stand alongside nuclear war as a likely source of wholesale death and misery for mankind.” C.C. Wallen of the World Meteorological Organization said, “The cooling since 1940 has been large enough and consistent enough that it will not soon be reversed.” In 1968, Professor Paul Ehrlich, Vice President Gore’s hero and mentor, predicted there would be a major food shortage in the U.S. and “in the 1970s … hundreds of millions of people are going to starve to death.” Ehrlich forecasted that 65 million Americans would die of starvation between 1980 and 1989, and by 1999 the U.S. population would have declined to 22.6 million. Ehrlich’s predictions about England were gloomier: “If I were a gambler, I would take even money that England will not exist in the year 2000.”
In 1972, a report was written for the Club of Rome warning the world would run out of gold by 1981, mercury and silver by 1985, tin by 1987 and petroleum, copper, lead and natural gas by 1992. Gordon Taylor, in his 1970 book “The Doomsday Book,” said Americans were using 50 percent of the world’s resources and “by 2000 they [Americans] will, if permitted, be using all of them.” In 1975, the Environmental Fund took out full-page ads warning, “The World as we know it will likely be ruined by the year 2000.”
Harvard University biologist George Wald in 1970 warned, “… civilization will end within 15 or 30 years unless immediate action is taken against problems facing mankind.” That was the same year that Sen. Gaylord Nelson warned, in Look Magazine, that by 1995 “… somewhere between 75 and 85 percent of all the species of living animals will be extinct.”"

Sunday, March 16, 2014

British Immigration

The British Dream by David Goodhart and The Diversity Illusion by Ed West: review

Two provocative new books on immigration, by David Goodhart and Ed West, raise questions our political masters would prefer to avoid, says Peter Oborne.

A traditional Indian wedding in Britain
A traditional Indian wedding in Britain Photo: Mark Chilvers
Until recently, it has been impossible to have a balanced public discussion about immigration. Anyone who challenged the liberal view that mass immigration was a good thing risked being denounced as racist. Politicians who talked about the subject, such as William Hague in the 2001 general election, or Michael Howard in 2005, were portrayed by the BBC as extremists.
Discussion was closed down, which meant that the field was left open to the genuine bigots from the British National Party. This was unfortunate because this period of official silence coincided with the most significant period of demographic change Britain has ever known.
Only in the last two or three years has it become possible to discuss immigration in a sensible way. Part of the reason for this change is the courageous stand taken by David Goodhart. In 2004, Goodhart wrote an article in Prospect, the Blairite magazine he founded, that challenged the assumption that immigration is always a good thing.
Goodhart posed a troubling question: does immigration threaten the social solidarity that Left-wingers claim to cherish? In a relatively homogenous society, as Britain was during and after the Second World War, people will help each other out because they share values. In a highly diverse society this sense of community – so necessary for the consent the welfare state requires – is undermined. There is therefore (so Goodhart argued) a contradiction between the progressive support for both “diversity” and “community”.
When the article appeared Goodhart was, needless to say, accused of being a racist. But his argument (inspired by the Conservative MP David Willetts) has been impossible to ignore. It has forced the Labour Party to think again about immigration.
Goodhart has now turned his article into a book. Well-written, thoughtful and exhaustively researched, his volume will come to be regarded as one of the most important contributions to political debate in the early 21st century. He demolishes the myths created by the liberal elite about immigration, exposes the lies and contradictions, and suggests a way forward. Though he tells us many shocking things, he expresses himself in a measured and sober way.
First, Goodhart demolishes what he calls the “immigrationist myth”.

Saturday, March 15, 2014

aggregate demand; supply: stimulus ; say's law


Keynesian Economics’ Dangerous Return

There is not an economy anywhere whose long-term prospects can be said to have been improved as a result of the Keynesian policies that were applied in the aftermath of the GFC scuttles. A sober appraisal of the consequences scuttles any and all attempts to argue the contrary
—Steven Kates, “The Dangerous Return of Keynesian Economics”, Quadrant, March 2009
The Global Financial Crisis enveloped the world’s economies at the end of 2008 and the start of 2009 but is now long gone. There is no financial crisis anywhere, although you would not be game to say that another might not be far ahead. But the GFC itself did not last half a year. It left in its wake a subdued world economy and higher unemployment, but the financial crisis was over. The efforts made by central banks to stabilise the financial system had done their job, and while not everything they did might have been done had they had a second chance, these kinds of unique economic events happen at great speed and policy mistakes are inevitable.
And then, from the start of 2009, stimulus packages were introduced one by one almost everywhere. The textbook approach to dealing with a deeply subdued economy is for governments to spend money, lots of money, as quickly as possible. According to the theory, economies are pulled along by demand. Since what was clearly missing, according to economists and policy-makers who had been brought up on this theory, was a sufficiently high level of demand, large increases in public spending were seen as the only answer that would get us out of recession and into recovery more rapidly than any other possible approach.
In the United States, the stimulus package was measured at around $787 billion but in actuality went much higher. In Australia the figure as a percentage of GDP was similar, and in dollar terms came in at around $43 billion. With only a handful of exceptions, a spending binge was put in place in every country of significance. And while even now, though there is talk of “austerity”—as in, “We are cutting spending”—so far the only thing that has been cut is the upwards trend in the rate of growth of expenditure. Public spending is higher by entire percentage points of GDP than it was when the GFC began.
Yet far from the world’s economies having returned to reasonable rates of growth, conditions have remained in the doldrums without much sign of an upwards momentum. Nowhere has there been a return to low rates of unemployment or, more to the point, to faster rates of employment growth. Real incomes are falling and confidence in the future is low and continuing to ebb. No one would say that our economic problems are over. The future looks more uncertain than ever. While the upheavals of the GFC are behind us, there is little confidence that better times are before us.
Keynesian economics
The problem is Keynesian economics, the bedrock element of modern macroeconomic theory. Hardly anyone else sees this as the problem, which from my perspective is of itself a large part of the problem. It is called “Keynesian” because our modern approach to macroeconomic analysis was introduced by the English economist John Maynard Keynes. During the GFC and the early days of the stimulus, it was Keynes: Return of the Master (an actual book title) and other comments of a similar kind one would hear all too often. Such talk has now disappeared and with good reason.
Keynesian economics is built on the notion that what causes economies to grow and businesses to employ are increases in aggregate demand. The more demand there is in total, the faster an economy will grow, and therefore the more people will be employed. Keynes’s theories were an outcrop of the Great Depression, whose dates are traditionally given as 1929 to 1933. Keynes’s response, his General Theory of Employment, Interest and Money, the centrepiece of macroeconomic theory ever since, was published in 1936. Whatever did or didn’t bring the Great Depression to an end, it was not the economics of Keynes.
The one and only place where you could say a “Keynesian” response was applied was in the United States under Roosevelt. There the depression did not end until the USA entered the war in 1941.
So far as understanding the theory goes, it takes about five minutes to turn anyone into a Keynesian. Keynesian economics is extremely easy to follow, combining a superficial understanding of how economies work with a truism that has been made to act as a theory. It is so simple and so beguiling that almost no one in politics can resist it and before they know it they find themselves in the quicksands of a sinking economy that will not behave in the way the theory says it should. Here, then, is the base Keynesian formula, leaving out international trade, which matters not at all in understanding the point:
Total output is the sum of everything spent by consumers on consumption goods, plus everything spent by businesses when investing in capital goods, plus everything spent by governments in buying whatever it is that governments buy.
The standard formula, using “Y” to represent total output, or GDP if you like, is this, taught to economists worldwide with virtually no exception:
Y = C + I + G
“C” represents spending on consumer goods, “I” represents spending on capital investment, and “G” represents government spending on goods and services. Add them up and, and since everything bought must have been produced, total spending must be equal to total output.
If you accept this truism as economics, the policy response to recession is immediately obvious. With the coming of recession, there is a fall in consumption spending and a much larger percentage fall in investment. Therefore, as a matter of arithmetic, the level of output must also fall.
Therefore, again as a matter of arithmetic, the answer to the fall in demand is an increase in demand, which in this case comes as a massive government stimulus. The fall in C and I is replaced with a compensating increase in G. Output is then restored, employment is maintained and the economy returns to the robust level of activity that had existed before the recession had set in.
With that theory in hand, you too could be Prime Minister, or Secretary of the Treasury. While there are more sophisticated and complex ways of explaining Keynesian economic theory, for all practical purposes that is all you need to understand about what has driven our economies into the ground.
The role of government
But if you are to understand the criticisms that follow in the rest of this article, it is also important to understand that none of it is based on a view that governments should do nothing when economies enter difficult times. During the GFC, I strongly supported the actions of central banks to stabilise, as best they could, the troubled economies they were managing. I also think these same central banks had brought on many of the problems we were facing. But when the world’s credit system collapsed as it did at the end of 2008, there was, to my mind, little else that governments and their central banks could do but take deliberate action to retstore stability.
I have, over the years since the GFC, pondered my judgment and still continue to believe that the actions by central banks in the USA, Europe, the UK and elsewhere were necessary and beneficial. This is still an open question, but after five years looking at the alternatives, I can only think things would have been much worse had central banks not intervened.
So in arguing, as I do here, against the stimulus, I am not arguing against the principle of government action to deal with economic problems. There is no principle I can think of that would lead one to the conclusion that economies are best left alone by governments to run themselves. What matters for me is whether some policy will actually provide a net benefit when all things, both short-term and long-term, are taken into account.
The actions by central banks to stabilise a financial crisis were appropriate. The subsequent actions to stimulate our economies after the crisis was past were a mistake we will be paying for over many years to come.
Two expectations
From the start of the stimulus I had two expectations. One has been more than confirmed over the past five years; the other has not.
The one that has been confirmed was that the economic consequences of the stimulus would be dismal. There was something very specific about my own criticisms, which you will find hardly anywhere else. The criticisms were not based on some blanket principle that governments should not intervene in economic affairs. They were not based on the fact that these expenditures would lead to an increase in the deficit and the level of debt. My criticisms were based on the argument that such public spending could not possibly work to bring a recovery about, and that, in fact, they would only cause economic conditions to deteriorate.
Here is an extract from a report in the Sydney Morning Herald following my testimony to the Senate Economic References Committee on September 21, 2009:
The Senate is hearing from a number of academics … to examine the impact of the government’s series of stimulus measures since October 2008 and whether economic circumstances warrant changes to the initiatives.
Professor Steven Kates from the Royal Melbourne Institute of Technology (RMIT) backed the government’s measures to support the banking system, but said interest rates should have been lowered further and taxation lowered.
“But one thing you shouldn’t do, you should not have this blanket expenditure as a stimulus—four per cent of GDP (gross domestic product) is an unbelievable amount of money,” Prof Kates told the Senate Economics References Committee.
“That will not create growth and, in fact, wastes resources so comprehensively. They are destroying our savings, they are going to push up interest rates, they are going to push taxation in the future, and may push up our inflation rate.”
He calculated that unemployment would have been 6.1 per cent now rather than 5.8 per cent, calculating that the government has spent $1.5 million saving each job.
There it is, on the record. I had “backed the government’s measures to support the banking system” but did not support the stimulus. As I noted then, and will return to momentarily, the stimulus had destroyed our savings and even in doing so, would not create growth and jobs.
But it was the response of Senator Cameron, also published by the SMH, which I will also come back to, since this gets to the very core of the questions at hand:
Labor senator Doug Cameron said Prof Kates’ comments had certainly embedded in his mind that you should never let an “academic economist run the economy”.
“Why have the IMF, the OECD, the ILO, the treasuries of every advanced economy, the Treasury in Australia, the business economists around the world, why have they got it so wrong and yet you in your ivory tower at RMIT have got it so right?”
The very question I ask myself.
The expectation not fulfilled
My second expectation, the one that has not been fulfilled, was that with the certain failure of Keynesian economics there would be a major reassessment across the profession over the theoretical accuracy of the macroeconomics that has been dominant since the 1930s. It is one thing to have a hypothesis that is never tested against reality. It is quite another to find when you use a theory and, based on that theory, forecast an outcome that does not occur, that you just get on with things and not have an in-depth review to see where, perhaps, that theory might have gone wrong.
No one can at this stage argue that the stimulus was a success. The increases in public expenditure have not brought recovery. Every economy in which the stimulus was applied with any kind of force is now in the midst of having to deal with subdued economic conditions that show no sign of ending. Economic growth has not returned to levels found before the GFC. There is not an economy anywhere whose long-term prospects can be said to have been improved as a result of the Keynesian policies that were applied.
What I had therefore expected was a reaction of some kind amongst the economics community. It had seemed obvious that economists would ask themselves what had gone wrong and why the policies that had been built on their theories didn’t work out.
Because whether or not economists have such thoughts, there is no doubt policy-makers do. From Greece on up, governments of countries mired in their post-GFC torpor have abandoned any thought of stimulus and, in spite of high unemployment and low rates of growth, have embarked in a new direction, which Keynesians have named “austerity”—austerity, as in wartime, where the resources of the nation are diverted away from domestic consumption goods. That’s the name given by Keynesians to policies designed to save their economies from the obvious dangers of deficits and the rising levels of debt.
Cutting spending levels and the deficit are the policies of choice today. Where, however, are the economic theories that explain, not just why these policies are sensible, but why they are even appearing to work? It’s a slow process to be sure, but governments are getting on top of their debts and are trying to pull down their deficits. And while you would hardly call such policies “popular”, there is general if sullen recognition of the grim necessity that these policies represent. It’s always fun to spend like drunken sailors. It’s not fun having to introduce cuts across a wide swathe of government outlays that have been put in place for some purpose, but there does seem to be at least some appreciation that all of this needs to be done.
The group which has said the least in support of this pulling back of public spending are economists. And the appalling fact is that they just don’t know any better. They have been taught Y = C + I + G with their mother’s milk and they are extremely reluctant to go back on the only macroeconomic organising principle they know. Take away aggregate demand and they are completely lost.
Say’s Law
It was not always thus. Economists and economic theory once knew perfectly well that aggregate demand was of no relevance in understanding the operation of an economy. Certainly for individual products there was supply and demand, but for the economy as a whole there was only supply. If the economy produced what people wished to buy, there was no difficulty in ensuring there would be sufficient demand.
This principle had no name amongst economists until the 1920s. Even then the name given to this principle became known to every economist only when it was included in Keynes’s General Theory as the designated villain within pre-Keynesian economics, which Keynes called “classical economics”, another Keynesian innovation that has stuck. The principle, at least in the garbled version used by Keynes, is referred to as “Say’s Law” and its meaning, also from Keynes, is that “supply creates its own demand”.
So first let me tell you what Say’s Law does not mean and then after that what it does mean. What Say’s Law does not mean is what Keynes said it meant. It does not mean that everything produced is guaranteed to be bought and therefore recessions are impossible.
In the minds of most economists, a return to Say’s Law would be similar to biologists deciding that, come to think of it, evolution by natural selection doesn’t really happen, or for physicists to say that perhaps, after all, e does not equal mc2.
Denying the validity of Say’s Law is as fundamental as you can get. If economists came to the conclusion that this proposition, in spite of generations of vilification, is actually a valid statement of how economies work, just about every macroeconomics textbook in the world would be worthless, since what they have been teaching is not just nonsense but dangerous nonsense.
To come back one last time to that article in the Sydney Morning Herald:
Prof Kates said the response to the crisis had been based on Keynesian economics that backs government intervention to stabilise growth during a downturn in a business cycle.
“The use of Keynesian economics has been one of the great catastrophes for economic theory in the west.”
And a catastrophe not just for economic theory, but for every one of those governments which have followed Keynesian prescriptions to bring their economies out of recession, not to mention those populations who have had to endure the results. Keynesian policies have never worked, not in a single instance. Nevertheless, the theory has remained the guide to policy since it was first introduced. While there was some weakening in acceptance during the great inflation of the 1970s and 1980s, Keynesian macroeconomics remains as entrenched within economic theory as supply and demand.
Say’s Law correctly understood
But here I am made to confront that old economics joke about why there can never be a twenty-dollar bill on the floor, because if there were, someone would already have picked it up.
Because the extraordinary part has been—and you can only imagine how extraordinary I find this—that there has been hardly another economist on the planet who thinks Say’s Law is true. There are probably no more than a handful, and I near enough know every one of them. If there are others, I have never come across anything they have written. This proposition, which seems simplicity itself, accepted by every economist for more than a hundred years up until 1936, is apparently an impassable obstacle in the modern world.
Nor is it as if I and these few others haven’t tried to make the profession see the point. For my own part, I have written books and papers, monographs and articles, but I don’t think I have personally convinced more than a few. So whatever gifts it may take to make this concept understood, I may just not have what’s required. Bear with me anyway, and we will see how we go.
Some history
The issue rose out of a controversy that emerged in England in the midst of the Napoleonic Wars. In 1807, an economist by name of William Spence wrote a book to argue that England, which had been shut out of trade with the continent, had nothing to worry about since to maintain employment, they just had to encourage landowners to stop saving and start spending. Their additional demand would drive the economy along and jobs would be preserved.
The following year, the economist James Mill took it upon himself to respond to Spence and in his reply gave the first unambiguous statement of Say’s Law:
No proposition however in political economy seems to be more certain than this which I am going to announce, how paradoxical soever it may at first sight appear; and if it be true, none undoubtedly can be deemed of more importance. The production of commodities creates, and is the one and universal cause which creates a market for the commodities produced.
The last sentence is strikingly similar to Keynes’s “supply creates its own demand”. But what Mill was arguing was that if there is to be demand at the aggregate level, what must come first is supply. It is production of goods and services, and production alone, which will create a market for other goods and services.
That’s where demand comes from. It comes from supplying what other people want to buy. And if sellers do not supply what others want to buy, that is, if what they produce is not bought, the result is recession. This too is from James Mill in what is more or less a throwaway line since in this discussion the causes of recession were not the issue: “All that here can ever be requisite is that the goods should be adapted to one another.”
Mill is making the point that if purchase and sale are going to increase, each person’s production must be adapted to the wishes of others. It is producing what others want that creates demand. But it was not for another decade before the causes of recession became the central issue.
The General Glut debate
The next staging post in understanding the actual meaning of Say’s Law takes you to what is known in economics as the “General Glut” debate. A glut is excess supply, too much production relative to demand. No one doubts you can have a glut of an individual good or service, too much milk or wheat perhaps, relative to the willingness of buyers to buy everything that had been produced. That is referred to as a “particular” glut, a glut of a particular commodity.
But could you have a “general” glut, that is, too much of everything relative to the willingness of the community to buy the lot at prices that covered their cost of production? A general glut represents demand deficiency across the economy, not enough aggregate demand, as it is described today. The possibility of a general glut was the issue of issues amongst economists for almost thirty years, commencing with the publication of T.R. Malthus’s Principles of Political Economy in 1820.
Malthus had argued that the recessions which followed the end of the Napoleonic Wars had been caused by an absence of demand for output. People had chosen to save rather than spend and, like Spence, he recommended having the landed aristocracy lead the way by supplying the missing demand needed to employ the entire working population. The General Glut debate continued for almost thirty years, at the end of which the entire mainstream of the economics community came to the universal conclusion that demand deficiency was never a valid explanation for recession.
The single most striking and informative statement during the whole of this debate was made by David Ricardo, the greatest economist of his day. In a private letter to Malthus, Ricardo wrote: “Men err in their productions, there is no deficiency of demand.” This is the full, comprehensive and to me anyway, irrefutable evidence that Keynes completely misunderstood what Say’s Law meant. Keynes may have been right about the economics—although by now that’s a very shaky claim—but that he was wrong on what classical economists had believed is undeniable based on what Ricardo wrote as far back as 1820.
What was Ricardo arguing? First, that of course you can have recessions. Second, that the cause of such recessions was errors made by those in business who had been wrong in their decisions on what to produce. Third, whatever else might have caused these recessions, it was not a deficiency of demand.
These are the constituent elements of Say’s Law from a theoretical perspective. It is a refutation of everything found in a modern macro text. For the reasoning you could do worse than to go to James Mill, but the language is more than 200 years old and no longer accessible to an economist today. But if you would like seriously inaccessible, I now turn to John Stuart Mill.
Mill’s Fourth Proposition on Capital
The General Glut debate came to an end with J.S. Mill’s Principles published in 1848. He was writing at the tail end of the debate, so no one at the time was in any doubt about what he was talking about. Right at the beginning of the book, he has what he calls his four “Fundamental Propositions Respecting Capital”, of which the fourth has possibly been the single most difficult statement made in the whole history of economic theory.
At least it’s been difficult since the time of Mill. But what has kept this proposition an evergreen conundrum is a statement made in 1876 by Leslie Stephen. In a two-volume discussion of eighteenth-century thought, out of nowhere Stephen wrote of Mill’s fourth proposition that it is a “doctrine so rarely understood, that its complete apprehension is, perhaps, the best test of a sound economist”. And what was this doctrine? It comes in eight words, although backed by pages of text in Mill: “Demand for commodities is not demand for labour.”
Some of the greatest minds economics has ever produced have had a crack at it but cannot solve what Mill meant. Yet in Mill’s own lifetime there was not a single dissenting voice. Since then, there has been almost total incomprehension. We are talking about discussions that include Alfred Marshall, A.C. Pigou, Friedrich Hayek, Sam Hollander and others. Not one could work out what Mill had meant in a way that didn’t make it seem that he had been prey to some obvious error. Surely, they said, buying shoes creates a demand for shoemakers. But Mill was not discussing an individual market and derived demand. He was discussing the entire economy looked at as a whole.
To others, it seemed Mill had expressed himself badly. Substitute explanations were suggested. You will have to go elsewhere to find Mill’s reasoning. Here we dwell only on his conclusion: the demand for labour cannot be increased by increasing the demand for goods and services. Why Mill thought so has remained a mystery since the 1870s.
But what is not a mystery is that however you might argue the toss, the reality of the world we live in conforms to Mill’s views and not Keynes’s. There have been massive increases in the aggregate demand for commodities that have not translated into an increase in the demand for labour.
Classical economics to a Keynesian has become like another old economics joke: “That’s all right in practice, but will it work in theory?” Well, whatever you want to say, classical theory works in practice, and if you understood the theory, it would work just as well.
Economic theory in practice
There was a time when it looked as if Keynesian economics was finally on its way out. During the 1970s, following the great inflation which ought to have exposed as pure nonsense the idea that spending of itself is good either for employment or economic growth, there was a small-scale retreat from Keynesian economics as a guide to policy. The most famous recantation was provided by Britain’s former Labour Prime Minister, James Callaghan, when he spoke to the Labour Party Conference in 1976:
We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step.
This was wisdom hard won but eventually lost. The textbooks remained as they were, still teaching Y = C + I + G. In spite of the massive failures of demand to lift the level of production and employment in the 1970s and 1980s (and in Japan in the 1990s), there it lay in every text, waiting for the next recession when it would be called upon again.
And so an entire generation went by between the 1970s and the coming of recession in 2009. Thirty years later there was almost no memory of anyone in decision-making roles who had seen the problems created by the expenditure of that earlier time. So when the moment came, so too did the decisions, across almost the whole expanse of the world’s economies, to apply a stimulus to short-circuit recession.
Almost any economy could be chosen to hold up as an example of the failure of policy, but the moribund American economy had the best-known stimulus, which has been followed by its worst recovery since the Great Depression. Rather than the American economy having returned to any kind of robust condition, it has continued to sink. The recession may have officially ended in June 2009, but there has been no improvement in the labour market, while economic activity continues to stagnate.
Evidence is hardly needed, since no one pretends that the US economy has turned the corner. And even with the pumping of money into the economy hand over fist (a disastrous idea that will come back to haunt the American economy, as well as the rest of us, for years to come), the American economy continues to flounder.
Which economy today is not in a similar boat? No economy anywhere can be said to be performing at full throttle. Keynesian economic theory is therefore quietly being set aside.
L’offre crée même la demande
What ought to be, but won’t be the final epitaph for Keynesian economics has been spoken by the French President, François Hollande, in January this year. I will provide the words first in French, because they need to be seen to be believed, and then in translation:
Le temps est venu de régler le principal problème de la France: sa production. Oui, je dis bien sa production. Il nous faut produire plus, il nous faut produire mieux. C’est donc sur l’offre qu’il faut agir. Sur l’offre! Ce n’est pas contradictoire avec la demande. L’offre crée même la demande.
This is the socialist President of France quoting Say’s Law with approval. The words in bold italics are Hollande’s version of Keynes’s version of Say’s Law. This is the passage in my free translation:
The time has come to work through the number one problem in France: which is production. Yes, that’s what I said, production. We must produce more, we must produce better. Hence, it is upon supply that we must concentrate. On supply! This is not in opposition to demand.Supply really does create demand.
Perhaps it is easier for a President of France to speak well of Say’s Law, since Jean-Baptiste Say was the greatest French economist of the early nineteenth century, a contemporary of James Mill and Ricardo, who had opposed Malthus, possibly more strongly than any other economist of his time.
Will Hollande’s declaration, in company with the incredible failures of the stimulus, finally do the trick? I am no longer as optimistic as I once was, although you would think that the failures of the Keynesian stimulus are becoming too obvious to ignore.
Yet the attacks by the mainstream on Hollande for his entirely sensible statement have been astonishing. How it is possible not to understand that demand is created by supply is beyond me. But then I have been saying the same for years, even while this commonsense and logical proposition has been, with some honourable exceptions, denied across the board.
Say’s Law and policy
How, then, is policy different if Say’s Law is true? It starts from recognition that not only is it production alone that creates demand, but that this production must be value-adding. A Keynesian policy starts from the belief that it literally does not matter what the spending is on. Just spend and things will take care of themselves. Since the problem of under-employment and slow growth to a Keynesian is too much saving, the most urgent need, especially during recessions, is to put those savings to use. So if you look at the various stimulus programs found everywhere, you could hardly pretend they were a careful use of money. Money was spent with wild abandon.
The core understanding that comes with Say’s Law is that supply has to be value-adding if it is to create jobs and strong growth. Every dollar of spending draws down on existing resources. Even producing paperclips uses up resources. Paperclip production may create value, but the resources that were used up also had value. The labour, capital and whatever else required was used in this way and not some other way. Only if the value of what was produced was greater than the value of the resources used up could it be said production had been value-adding.
In sharp contrast to the private sector, where firms will go out of business if revenues do not cover costs, government spending is almost never value-adding. Perhaps the most productive 10 to 15 per cent, but not the rest. That is not of itself an argument against public spending. But it is an argument against thinking that when governments spend they are necessarily helping the economy grow. They almost never are.
The belief that public spending is good for growth is the largest fallacy associated with modern macroeconomic theory. Being unable to tell the difference between welfare and wealth creation is possibly Keynes’s most lasting legacy, a legacy which has been poisoning public policy since the 1930s.
Dr Steven Kates is Associate Professor of Economics at RMIT University in Melbourne. The book to read to get a better insight into these issues is his introductory text, Free Market Economics: An Introduction for the General Reader (Edward Elgar, 2011).

Monday, March 10, 2014

Who is my brothers keeper? , in the same boat?

Another thoughtful article written by J. Vanne.

Selfishness and Preparedness

Recently, a small firestorm was ignited by Valerie Lucus-McEwen, a government Emergency Management employee,  who had the temerity to accuse preparedness types of “selfishness.” While your immediate reaction may be – as mine certainly was – “Are people really and truly this thoughtless?” – this question does deserve a proper answer, particularly as those who are easily influenced by the leftist media, or who believe the state really and actually is the omniscient, omnipotent savior of  our personal and corporate lives, are actually asking this question. So, let’s examine the issue:
First, many preparedness types have, as part of their goal, the intent of helping neighbors and family who were unable – or unwilling – to prepare. In my own case, part of what I have in mind is assisting a large group of mentally retarded and Down’s syndrome children that my church has taken under its wing. (A group the state would do no more than “warehouse” if it were under their direction!). Not all preppers feel this way, but I would bet my bottom can of stored tuna fish there is an exceedingly large percentage of preparedness types who feel similarly.
The non-prepper is, in my experience, generally of socialist orientation. The results of this approach was tried – and found wanting - all the way back in the Pilgrim era. Many of you are aware that when the Pilgrims first arrived, they worked out of a communal system. The result was starvation and death. As this approach did not work, they then “privatized” their system – and of course flourished. You can easily research this history yourself, but if one has any experience with human nature, it is immediately apparent why this didn’t – and has never in history – worked. The issue is that human nature is imperfect and selfish, just as Adam Smith wrote about in the Wealth of Nations. A simple recognition of this basic aspect of human nature – and finding a way to work with this reality, rather than against it, provides the most good for the largest number of people – exactly as Smith wrote, and exactly as history has shown for anyone who has eyes to see. And for those of you with Judeo-Christian worldviews, this issue is why Aleksandr Solzhenitsyn called Communism “a Christian heresy.” Long story short, the question is: Is man perfectible (particularly with the best and brightest, such as Hilary, George Soros, Al Gore and Obama telling – nay,forcing – us what to do!), or are all men fallible, and the dictum of Lord Acton correct that absolute power corrupts absolutely correct. There is an unbridgeable divide between these two assumptions, and this divide makes itself manifest in the Hamlet-like “to prep or not to prep” debate.

The Fleet Street Letter put this matter perspicaciously a number of years ago, and is worth quoting at length: “There are two major traditions in Western political thought. The first is Aristotelian, logical, rational, centrist, mechanistic. You concentrate power and truth in the centre and apply it outward, shaping the world according to plan. This was the guiding principle of the Roman Empire. It evolved into the Holy Roman Empire and the Church of Rome. Except for Switzerland, it has dominated politics on the continent ever since. Most recently, it has morphed into the European Union. The principle is simple – smart people can figure out how to run things, and should be allowed to do so. This was the idea behind Hillary Clinton’s health care task force (and now ObamaCare), as well as Japan, Inc. and even Adolph Hitler’s National Socialist Germany. It has animated nearly every politician (each one  of whom, as Garrison Keilor notes about Lake Woebegone children, are above average) in this century. But there is another tradition that is much less well understood. It is the tradition of the Roman Republic… of English common law… of Adam Smith and Emmanuel Kant… of Austrian School economists such as Ludwig von Mises and Friedrich Hayek and of pre-Rooseveltian American. It is organic, rather than mechanistic – the tradition of tradition, based on the recognition that people, no matter how smart, cannot replace thousands of years of accumulated experience. Experience is embodied in the evolved systems of values, customs, rules and traditions that people use to order and give meaning to their lives. A free market and a free society allow people to express these preferences, as well as allowing the process of social and civil evolution to continue. This tradition, in other words, is neither liberal nor conservative in the modern sense, but anti-political. Indeed, it is often seen as “anti-intellectual” because it denies the authority of intellectuals to tell the rest of us what to do (through the political process).

Perhaps you, like I do, remember the “best and the brightest” who led the Vietnam war? How did that one work out? Or, if that news is too stale, perhaps you care to visit present day Detroit – which was the first city to adopt the socialist “Model Cities Program” in under Mayor Coleman Young a number of decades ago. Similarly, Lyndon Johnson’s “War on Poverty” was a quasi- socialist endeavor, which was intended to end poverty. You can judge for yourself what all those $9 trillion dollars spent on this “war” resulted in

Sunday, March 9, 2014

some have it heavy on Chomsky

June 17, 2002
My Very, Very Allergic Reaction to Noam Chomsky: Khmer Rouge, Faurisson, Milosevic
"Never get involved in a land war in Asia." "Never go up against a Sicilian when death is on the line." And now, "Never get involved in an argument over Noam Chomsky."
The Chomsky defenders--and there seem to be a surprisingly large number of them--seem to form a kind of cult. Arguing with them seems to be a lot like trying to teach Plato's Republic to a pig: it wastes your time, and it annoys the pig. But I've spent more than enough time on this over the past three months: time to let it out of the cage:
Consider Chomsky's claim that: "In the early 1990s, primarily for cynical great power reasons, the U.S. selected Bosnian Muslims as their Balkan clients..." On its face this is ludicrous. When the United States selects clients for cynical great power reasons, it selects strong clients--not ones whose unarmed men are rounded up and shot by the thousands. And Bosnian Muslims as a key to U.S. politico-military strategy in Europe? As Bismarck said more than a century ago, "There is nothing in the Balkans that is worth the bones of a single Pomeranian grenadier." It holds true today as well: the U.S. has no strategic or security interest in the Balkans that is worth the death of a single Carolinian fire-control technician. U.S. intervention in the Balkans in the 1990s was "humanitarian" in origin and intention (even if we can argue about its effect). Only a nut-boy loon would argue otherwise.
But whenever I ask the Chomskyites why he would claim that, "In the early 1990s, primarily for cynical great power reasons, the US selected Bosnian Muslims as their Balkan clients..." I get one or more of three responses:
  • It was said in haste in an interview--it's not representative of his thought.
  • Of course the U.S. selected Bosnian Muslims as their Balkan clients for great power reasons! Mineral wealth! Oil pipelines!
  • Yes, he's made some mistakes. And he refuses to back down or make concessions when he is wrong. But it's more than counterbalanced by the stunning quality of his insights!
Insights? Like his writing a preface for a book by Robert Faurisson--a guy whose thesis seems to be that "the alleged massacre in gas chambers and the genocide of the Jews is part of one and the same lie, a gigantic political and financial racket for the benefit of Israel and international Zionism"? Like his claiming in said preface that Faurisson seems to be "a relatively apolitical liberal of some sort"? Like his claims that he "know[s] very little" about Faurisson's work, has "no special knowledge" about the topics Faurisson writes about, and--as Jay Parini notes-- continues to "maintain to this day that he has never read anything by Faurisson that suggests that the man was pro-Nazi"? These are supposed to be high quality insights?
But whenever I ask the Chomskyites why he would claim that Robert Faurisson is a "relatively apolitical liberal," and how he could possibly manage to "never read anything by Faurisson that suggests that the man was pro-Nazi," I get one or more of three responses:
  • What Chomsky wrote and said about Faurisson was written and said in haste, without proper reflection--it's not representative of his thought.
  • Chomsky is quoted out of context: he's defending Faurisson's right to free speech according to the principles of Voltaire, not endorsing or defending Faurisson.
  • Yes, he's made some mistakes. And he refuses to back down or make concessions when he is wrong. But it's more than counterbalanced by the extraordinarily good work he's done uncovering the cynical crimes of power-mad governments like the U.S. and Israel.
Which makes me ask, wouldn't it be better not to misrepresent Faurisson's beliefs? Not to claim that he is a relatively apolitical liberal? Not to say that you have seen no evidence that Faurisson is pro-Nazi? It is, after all, a much stronger defense of free speech to say that you are defending a loathsome Holocaust-denier's right to free speech because free speech is absolute, then to say that poor Faurisson--a relatively apolitical liberal--is being persecuted for no reason other than that some object to his (unspecified) "conclusions."
And uncovering the cynical crimes of mad governments? Take a look at Chomsky's 1979 After the Cataclysm:
If a serious study…is someday undertaken, it may well be discovered…that the Khmer Rouge programs elicited a positive response…because they dealt with fundamental problems rooted in the feudal past and exacerbated by the imperial system.… Such a study, however, has yet to be undertaken.
Reflect that it was published three full years after the Cambodian Holocaust of the Year Zero. Ask yourself whether this is an uncovering or a covering of the crimes of an abominable regime. But it gets worse. Go back to your Nation of 1977, and consider the paragraph:
...there are many other sources on recent events in Cambodia that have not been brought to the attention of the American reading public. Space limitations preclude a comprehensive review, but such journals as the Far Eastern Economic Review, the London Economist, the Melbourne Journal of Politics, and others elsewhere, have provided analyses by highly qualified specialists who have studied the full range of evidence available, and who concluded that executions have numbered at most in the thousands; that these were localized in areas of limited Khmer Rouge influence and unusual peasant discontent, where brutal revenge killings were aggravated by the threat of starvation resulting from the American destruction and killing.
Of this, writes:
Sounds very impressive, does it not?  If... entirely respectable magazines denied the accusations that the Khmer Rouge had committed vast crimes... we cannot take seriously these allegations.... There must be some substantial evidence, presented by these magazines, that shows or strongly suggests that the refugees tales of terror were nonsense, right?... He claims that these are "conflicting reports" that justify disbelief in the alleged crimes of the Khmer Rouge....
In the case of the Economist, there are no [such] articles.... Presumably [Chomsky] refers to a letter to the Economist ... a letter replying to an entirely accurate article.... [T]his letter was indeed... ["provided"] by the Economist, but it is misleading to invoke [its] authority... the Economist opposes Chomsky's claims.
In the case of the Far Eastern Economic review the review did indeed publish an article that said almost, but not quite, what Chomsky represents it as saying.... Nayan Chanda ( Far Eastern Economic Review October 29 1976 ) does indeed doubt the refugees are telling the truth... but he... [presents no] evidence contradicting their stories. He does indeed say "thousands"... he does not say "at most in the thousands"... [he says] "the numbers killed are impossible to calculate."... Chomsky presented the Far Eastern Economic Review as confidently denying the possibility that the killings were vastly higher, but Chanda specifically denies such knowledge and confidence....
Chomsky lies by misdirection.... [H]e said "[provided]" to associate the authority of the Economistwith a letter to the editor... [he said] " at most in the thousands" as if it were a conclusion of an article... [in] the Far Eastern Economic Review....
I've looked through the Economist. If there's anything written by the Economist's staff that has evidence casting doubt on the Cambodian Holocaust, I missed it as well.
So why does Chomsky lie about the "highly qualified specialists"? The claim that it is "space limitations" rather than "nonexistence" that prevents their being named cannot be a claim made in good faith, can it? And why would anyone lie for Pol Pot, unless they were either a nut-boy loon or were being mendacious and malevolent in search of some sinister and secret purpose? But when I ask the Chomskyites why he would falsely claim in 1977 that accusations of Cambodian genocide had been disputed in the pages of the Economist and the Far Eastern Economic Review by "highly qualified specialists"judging "the full range of evidence" and that these highly-qualified specialists put a firm upper bound of "at most in the thousands" on Khmer Rouge executions, I get one or more of three responses:
  • What Chomsky wrote and said about the Khmer Rouge was a mistake, but it's uncharacteristic of his work.
  • Chomsky never said the Khmer Rouge were genocidal butchers, he only said that there wasn't conclusive evidence that they were genocidal butchers.
  • When a serious study of the Khmer Rouge is carried out, we will learn that most of the evidence of their "crimes" was faked by the Vietnamese after their conquest of Cambodia
I can't see how anyone can make the second claim in good faith: Chomsky not only said that there wasn't conclusive evidence that the Khmer Rouge were genocidal butchers, he wrote--falsely--that there was reliable evidence that they weren't genocidal butchers.
And I don't see how anyone can claim that Chomsky's lies are "uncharacteristic" of his work. There are just too damned many of them.
I tried (unsuccessfully) to ascertain the reasons for the appeal of Chomsky--to people who don't believe that the Khmer Rouge are benevolent friends of humanity, that Robert Faurisson is an apolitical liberal, and that U.S. intervention in Bosnia was motivated by metal mines and pipeline routes, that is--once before.