Archive for ‘economics’

August 7, 2009

The Future of the Conservative Movement

Just brought me lunch:

This is Trey Easton, Sarah T. Herman Intern Scholar for the Young America’s Foundation, and a junior majoring in economics at George Mason University.

You may ask yourself, “Why is such a promising young fellow bringing Stacy McCain a cheeseburger, fries and a large sweet iced tea from Wendy’s?”

As famed George Mason economist Walter Williams would explain, the secret of capitalism is how “the Invisible Hand” redirects resources to their most valuable use. In this example, the resource involved was time.

There was a line at Wendy’s downstairs here at GWU’s Marvin Center, site of the YAF National Conservative Student Conference. Would my time be best spent standing in that line, rather than getting my laptop set up and logged in?

So I decided to come up here and was getting set up when — as if by magic — the “Invisible Hand” brought me into contact with young Mr. Easton.

“An intern?” I said. “Listen, I’ve got a job for you . . .”

Never let it be said that I haven’t done my share to train the future leaders of the conservative movement in the glories of capitalism!

UPDATE 3:42 p.m.: “Mom?” young Mr. Easton said into his cell phone just now, after I showed him this post. “Mom, go to Google. . . . OK, now type in ‘The Other McCain’ . . . That’s right. The first link at the top of the page. . . . OK, Mom, I gotta run now. Kind of busy. Love you. Bye.”

He forgot to add, “Hit the tip jar, Mom.” Never let it be said that I haven’t done my share to train the future leaders of the conservative movement in the glories of capitalism!

July 31, 2009

‘Get your clunkers for nothing,and your cash for free . . .’

In one of those fiendishly stupid examples of liberal logic that will be cited in Econ 201 texts for decades to come — typing is difficult when I’m laughing so hard — “Cash for Clunkers” is broke:

The program . . . was supposed to expire at the end of October. But in the one week since it took effect, it appears to have run dry of the $1 billion allocated to it . . .

Lots more at, including a post from the Cato Institute’s Chris Moody, reminding us that Cato senior fellow Alan Reynolds figured out six weeks ago how to game the system: Trade clunker for crappy new econobox, collect fed bonus, sell econobox, add that to your bonus — congratulations, you’ve got the purchase price for a classic V-8 ’67 Impala or a second-hand SUV!

I’m reminded of something P.J. O’Rourke once said, in regard to “affordable housing”: Every time the government promises to give you something for nothing, imagine the result if you tried this yourself. You’d quickly find yourself with a severe shortage of something and a whole lot of nothing.

Given that the fundamental flaw in this legislation was so obvious that any clever sixth-grader could spot it, what sort of geniuses dreamed it up?

Sponsors of the [Senate] bill [are] Sens. Dianne Feinstein (D-Calif.), Susan Collins (R-Maine) and Charles Schumer (D-N.Y.) . . . In the House, the same bill was introduced [Jan. 14] by Reps. Steve Israel (D-N.Y.), Jay Inslee (D-Wash.), Barbara Lee (D-Calif.) and Dennis Moore (D-Kansas) . . .
Writing in the Detroit Free Press [Jan. 6], Brookings Institution economist Jason Bordoff laid out both the economic and environmental advantages of such a program . . .

Ah, yes, the “advantages of such a program”! Clever libertarians now hot-rodding around in their ’65 Mustangs and ’71 Camaros are no doubt very grateful to Bordoff, Congress and the taxpayers who paid the tab.

(Via Memeorandum.)

UPDATE: Jimmie Bise wonders if ObamaCare will work better than “Cash for Clunkers.”

July 30, 2009

Bulls, Bears and Erin Burnett

Trying to focus on the objective facts:

Sitting here watching CNBC’s Erin Burnett raving about today’s Wall Street surge — DJIA up by more than 150 points as of 3 p.m. — my natural pessimism looks for the cloud behind the silver lining. . . .
Well, good news for those who bought low (in March) and are now in a position to sell high. But does this mean that the market “bottom” is behind us and recovery awaits around the proverbial corner? I’m not persuaded. Today’s rally is chiefly being attributed to good news from China, an independent variable. If I were playing the market, I’d be watching bonds very closely. The bond market is the canary in this fiscal coal mine. . . .

Read the whole objective thing.

July 30, 2009

Human beings are not numbers

Ten years ago, I interviewed Wendy Shalit, who had just then published A Return to Modesty. Now a married mom who blogs at Modestly Yours, Ms. Shalit was then a recent graduate of Williams University, where her protest against co-ed dorm bathrooms had led to an article in Commentary, and then to her book.

My interview with Ms. Shalit occurred in the lobby of a Washington hotel where, when the interview was concluded, she was to meet her parents for dinner. So it happened that I was introduced to her father, who is an economist.

Although I was not then recognized as a “top Hayekian public intellectual,” my devotion to the Austrian School of economics was already passionate, which fact I mentioned to Ms. Shalit’s father. This remark prompted Ms. Shalit to declare that she was herself an Austrian because — as opposed to other approaches to economics — it required less math.

This was evidently something of a running joke between Ms. Shalit and her father, a devotee of Milton Friedman (i.e., “Chicago School” economics), and her father responded by chiding Wendy about the importance of mathematics to proper understanding of the discipline.

Ms. Shalit’s remark about mathematics and Austrian economics recurred to my mind this morning, when I encountered an article by the Acton Institute’s Samuel Gregg:

[T]here appears to be little inclination on the part of some contemporary economists to ask some searching questions about their heavy reliance on mathematical logic and argumentation. This may well be because doing so would raise some rather profound questions about the very nature of post-Keynesian economic science.
One who posed precisely these questions was the German economist Wilhelm Röpke (1899-1966). Röpke is well-known as an intellectual architect of post-war West Germany’s path from collectivist economic oblivion to market-driven economic miracle in the ten years following its economic liberalization in 1948.
Less attention, however, has been given to Röpke’s fierce critiques of the post-war Keynesian consensus. . . .
In Röpke’s view, [John Maynard] Keynes was “a representative of the geometric spirit of the 20th century” and “an exponent of positivistic scientism,” for whom “economics was part of a mathematical-mechanical universe.” . . .
According to Röpke, the neo-Keynesian new economics was inclined to reduce economics to mathematical and statistical formulas and analyses. Röpke may have been thinking of Paul Samuelson’s 1947 effort to reconfigure economics on the basis of mathematical language. For Röpke, such efforts conflated the object of economics with one tool of economic analysis. Opening a post-Keynes economic textbook, Röpke suggested, made readers wonder if they had stumbled upon a chemistry curriculum. . . .

Read the rest at the Witherspoon Institute’s Public Discourse site. (Hat-tip: The New Ledger.)

As I noted earlier this month at The American Spectator, Fed Chairman Ben Bernanke has ignored Friedman’s Chicago School monetarist teachings, but it is the Austrian critique — and Ropke was a disciple of Ludwig von Mises — that most clearly exposes the misconceptions which now warp public opinion about economics.

Let’s start with Wendy Shalit’s jest about mathematics. Too many people think that understanding economics requires a genius IQ and mastery of elaborate algebraic formulae. This is false.

Mathematics is certainly necessary to the specialized business of trying to predict the results of various economic inputs: What will be the impact on the price of X if variable Y increases by factor Z? This is the what the economist is trained and paid to do. But the fundamental concepts of economics, the general principles of market operations, are really very simple.

Furthermore, what most people think of when they say “economics” is what is properly called political economy — that is to say, the study of what impact government policy has on economic life. The specialized training of the economist is useful to this endeavor, in order to measure and analyze the connection between policy and result. Yet no math at all is necessary to study the history of economics and draw conclusions about the wisdom or folly of various policies.

Therefore, I am qualified as a “top Hayekian intellectual” even though (a) I did not major in economics and (b) I suck at math.

This is especially true when it comes down to the most important question now facing us: Should our nation pursue an economic policy that seeks to expand liberty or should we side with Obama, Pelosi, Krugman, et al., in pursuing greater government control of economic matters?

Are we too free? That’s really the question, and algebra cannot answer it. A neo-Keynesian like Paul Krugman claims to know how much deficit-funded “stimulus” the American economy needs (in a word, more) and Treasury Secretary Timothy Geithner claims to know exactly how that “stimulus” should be spent (in two words, Goldman Sachs), and anyone who disputes the claims of Krugman and Geithner is met with a highly nuanced argument: “Shut up.”

What the neo-Keynesians wish to do is to centralize and increase economic control, on the basis of their implicit argument that the ordinary American is unfit to exercise economic liberty.

Yet it is a fairly simple matter to demonestrate that this elitist, control-oriented approach to economics — Expertocracy, as it were — is the source of the very problems that the experts now propose to solve by further expansion of their own power.

The fundamental question is not whether the experts who run the economy should pursue policy X or Y or Z. Rather, the question is whether experts should be running the economy at all. To be an Austrian is to say that the government experts already exercise too much economic power, and that this power should be reduced, not expanded.

The individual’s desire for economic liberty is a moral choice. But the minions of the Expertocracy, who wish to deprive us of our liberty, are also making a moral choice, and they ought to be required to admit it.

Why is our desire for liberty morally inferior to the expert’s desire to control us? To summarize the experts’ answer: Because they’re better than us.

If you believe that, if you think that Timothy Geithner is so much your superior that he is better qualified to run your life than you are, then I will politely agree.

Yes, indeed! If you do not love freedom, if you would rather have some bureaucrat in Washington making every important economic decision in your life, then you are certainly a very inferior human being. The lover of liberty is infinitely your superior.

Yesterday, my 16-year-old son walked in to show me the chainsaw he’d just bought second-hand for $175. Why the chainsaw, I asked? He and his buddy Nick had contracted with a lady to do some yard work (trees felled by a storm), my son explained. The job would take them about two days, and would pay them $500 each.

If my 16-year-old son can find such lucrative employment in this economy, let Paul Krugman find the formula which disproves my contention that the amount of “stimulus” we need is exactly zero.

“Experts,”my Hayekian ass.


July 29, 2009

Hayek vs. Obama

Ralph Reiland at The American Spectator:

On his overall handling of the economy, President Obama’s disapproval rating of 49 percent to 47 percent represents a swift turnaround from his 55 percent to 42 percent positive rating just two months ago.
Rather than re-thinking any of his key proposals in the face of this growing public disapproval, Obama’s answer was to try to ram a health care bill through Congress, as well as a global warming bill, before the August recess — even if no one had the time to even speed-read what’s in the legislation.
In his book The Fatal Conceit, Nobel laureate Friedrich A. Hayek provided some insight into this lethal combination of arrogance and stupidity.
“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design,” advised Hayek. . . .

Read the whole thing, because there is no such thing as “too much Hayek” or “too much American Spectator.”

July 27, 2009

Confession of Confident Cluelessness

“This is the most over-bought market I’ve seen in ages.”
Jim Cramer, “Mad Money,” CNBC

After a slow start today, the report that new housing sales increased 11% in June pushed the stock markets up — but not much. (Memeorandum has blog reaction from Don Surber, Calculated Risk and more.)

What does it mean? Short answer: I don’t have a freaking clue. And that’s a good thing.

Compiling this afternoon’s “Wall Street P.M.” report at, I had to sift through a lot of financial news, and I sifted it with the curiosity of a guy who honestly doesn’t know any more about Wall Street than you do (and probably less than some of you).

My office TV was on CNBC today, and there is certainly no shortage of people out there willing to say what it all means. The fact that these people disagree with each other all the time . . . well, where is the truth?

Basic economics, however, I understand. And basic economics — combined with all that sifting through the news — told me that this morning’s housing report wasn’t all that hot. Check out what these analysts told the Wall Street Journal:

“[T]he dismal state of the U.S. labor market will continue to cast a long shadow over the prospects for a meaningful recovery in the sector in the near term . . .”
“[T]he report showed a sharp 6% sequential decline in June suggesting that much of the sales activity was concentrated at the lower end of the market . . .”
“The news sounds better than it looks . . . despite the jump in sales in June, new home sales remain at very low levels, and the not seasonally adjusted data show a total of 36,000 homes sold nationwide in June, the lowest sales total for June since 1982.”

Also, 31% of June home sales were “distressed” sales, involving foreclosures, etc. Does that sound like “recovery” to you? Apparently, Wall Street wasn’t thrilled, either, and so the market only recorded a minor gain. Meanwhile, the Treasury Department is flooding more than $200 billion of new debt into the market this week, which has people worried about “overwhelming supply.” Oh, yeah, and there was a Monday spike in the CBOE Volatility Index.

What does that mean? I don’t even claim to know, in the sense of whether you should buy or sell or flee to a cabin full of freeze-dried food in Montana and wait for Armageddon. Rebecca Jarvis of CNBC is now chattering away in my left ear about “vector rotation,” and Larry Kudlow is pimping the “big summer rally” — and all this chatter might be very important.

Or not. But I don’t have to know what it means to do a market report at — I just look for interesting facts and pile ’em up. My favorite fact of the day? This quote:

“Last week was dubbed as a good earnings week, but good compared to what?” asked David Hefty, CEO of Cornerstone Wealth Management in Auburn, Ind. “It doesn’t take a lot to get the market excited these days.”

Right. But just don’t ask me what it means. You can figure that out for yourself.

July 27, 2009

Is the rally a psych-job?

Alan Abelson is profoundly skeptical of recovery talk:

The melancholy fact is that our ink, online and TV colleagues can be too easily snookered by Washington, Wall Street and Corporate America, all of whom are desperately peddling recovery rather than reality.
Take the big play given to the 3.6% rise in sales of existing homes last month, which helped power a nearly 200-point rally in the Dow that lifted that venerable index over 9000 for the first time since January. Adding to the excited stock market response was the refrain in virtually every story, whether recounted in print or on the Internet and the tube, that this was the third month in a row of higher sales, signaling that the long-awaited but frustratingly elusive bottom in housing had been reached. Really?
As Mark Hanson of the eponymous real-estate advisory points out, it’s a seasonal phenomenon that until recent years has happened every year.
Indeed, the wonder of it is that, with prices soft and mortgage rates down, sentiment better and supply restrained by foreclosure moratoriums, sales weren’t higher than a year ago. Some of those benign factors are changing, and not for the better: Rates are creeping up, moratoriums are ending and foreclosures are on the rise. . . .

Lots more analysis there. And, really, there’s no shortage of bad news, including the possibility of another wave of bank failures caused by exposure on bad commercial real-estate loans. Also, there’s this:

Of course, the mood could shift in a hurry. . . . The growing herd of bulls is itself a warning to some investors that the current surge is about to run its course. Plus, the longer-term outlook for economic growth and corporate profits still is uninspiring.
Plus, the longer-term outlook for economic growth and corporate profits still is uninspiring.

Which is to say: The market will either go up, or down, or stay flat. Man, I’m starting to think I missed my big chance — become a financial writer and gain a reputation for genius with carefully hedged analysis that never actually amounts to prediction. Like being a weatherman who never gets around to saying firmly, “It’s gonna rain tomorrow,” you’re always 100% accurate.

July 26, 2009

Geithner and the Scapegoat Sweepstakes

Thanks to Smitty for watchdogging the latest headlines about SIGTARP Neil Barofsky while I was on the road to Richmond yesterday. It’s important to see the big picture in this battle between Barofsky and Treasury Secretary Timothy Geithner:

The Wall Street bailout has been unpopular from its inception. . . . Now, we see unemployment soaring (more than 15% in Michigan, near 12% in California) and consumer confidence falling, while the stock market surges upward. You can’t blame people for suspecting that massive taxpayer-funded assistance to financial giants like AIG, Goldman Sachs and Bank of America might have something to do with this widening chasm between prosperity on Wall Street and misery on Main Street. . . .
Polls indicate a growing perception that the Obama administration is mismanaging the economy, with special favors for politically connected Wall Street fat cats at the expense of ordinary American taxpayers. . . .
With another approaching crisis in banking and forecasts that unemployment will continue rising for months to come, Obama will eventually start looking for a scapegoat. Though once hailed as an economic savior, the nominee who was “too big to fail,” Geithner is now odds-on favorite to win the Scapegoat Sweepstakes. SIGTARP Barofsky’s watchdogging of the bailout “black hole” may be enough to push Geithner across the finish line.

Read the whole thing, which includes a “document dump” with Barofsky’s quarterly IG report and other important documents on this important aspect of IG-Gate.

July 25, 2009

From the Dept. of It Won’t Work

Microsoft reports losses, the Dow is overvalued, Nouriel Roubini sees a “perfect storm” ahead, consumer confidence is down, double-digit unemployment in Michigan, Florida and Atlanta, the FDIC seized six banks Friday, and major banks are bracing for a wave of defaults on commercial real-estate loans . . .

Hey, how come nobody’s blogging about this stuff? Well, somebody is: NOT TUCKER CARLSON.

July 19, 2009

Going Postal? U.S. Postal Service SeeksBailout; Could Miss October Payroll

Via NewsAlert, this shocker:

Four unions representing the nation’s postal workers are pleading for a meeting with the White House to address possible funding shortfalls for workers’ payroll and retiree health benefits, according to a letter obtained by CongressDaily.
The presidents of the American Postal Workers Union, National Rural Letter Carriers’ Association, National Association of Letter Carriers and National Postal Mailhandlers Union co-signed the Tuesday letter to White House Deputy Chief of Staff Jim Messina, warning that the U.S. Postal Service is at risk of defaulting on a $5.4 billion payment to prefund retiree health benefits at the end of September.
The letter alleges that USPS “may not be able to make payroll in October and will be forced to issue IOUs instead.” . . .

Read the whole thing. Imagine that: A taxpayer-subsidized, union-dominated, government-regulated monopoly having financial problems . . .

It’s a crisis! Wonder if the president has those cardigans ready?