While I have no patience whatsoever for those libertarians who advocate for unrestricted immigration into the United States of the present day, I want to be clear that I am not opposed to freedom of human movement in general. In fact I quite support it. Communist China in the present and the Soviet Union in the not to distant past are countries that would have benefited greatly-if not their governments-from open borders. Indeed, any country which does not have some form of democratic government-whether a representative republic or a direct democracy-never has any good reason for not permitting essentially totally free migration across its national boundaries. And my patriotism is not nationalism, I am instead fundamentally loyal to a set of philosophical ideas-the closest to the platonic ideal of which ever extant in this world is more or less embodied in the Constitution of the United States of America. I call this “Conservatism”-but not because I am a Status Quoist. The most direct cause for my insistence on using “Conservative” to describe a set of ideals which at their earliest articulation in the English Language would have been called “Liberal” is that is what my mother taught me to call them. Who taught her? Ronald Reagan. There’s a chain of such usage I could probably trace back through many people, among them Barry Goldwater and William F. Buckley. But I think only my mother uses “Conservative” in precisely the sense I mean it. But I strongly identify with many libertarians or libertarian leaning individuals who prefer to call themselves “liberal” or “classical liberal,” harkening back to an older use of the term. And I believe that sound economic reasoning has proved for centuries that the restrain of trade in the name of National Wealth improvishes both the nation exercising it and the people of the world as a whole. More than that, I agree with the libertarians in their economic cosmopolitanism-their moral critique of economic nationalism; attempting to gain as a nation at the expense of the people of the rest of the world is morally wrong. The economic well-being of all human beings has equal claim on our attention, morally and as a matter of thoughtful analysis. So can only respond to Mr. Dinerman’s call for a little less internationalism, a little more “pro-America” interventionism, on the part of “Conservatives” with open contempt. Protectionism, f**k no.
I tried to read this article, I really did, but I couldn’t make it past this huge non sequitur:
Why do Republicans have so many candidates and Democrats so few? That’s directly contrary to the conventional wisdom that Republicans nominate the next guy in line, while Democrats tend to have multi-candidate brawls.
The Economic Freedom (weighted average based on 2014 population) of the Core Anglosphere countries compared to the world’s Spanish speaking countries:
(But just in case it doesn’t speak for itself, the core Anglosphere countries have population weighted average freedom score of about 76.7 and the Spanish speaking countries have an average score of 60.5, a difference of over 16 points)
Strictly speaking, the word “Patriot” cannot apply to modern American progressives because the word “Patriot” actually means someone of Whig persuasion. To say that Progressives are not Patriots is merely to affirm the obvious fact that Progressivism is an Anti-Liberal political philosophy, and is obviously not meaningful. I do not “question the Patriotism” of American leftists, as that would be akin to questioning the Christian Faith of a Hindu. The American Patriots that fought for their rights as Englishmen were not Patriots because they “loved their country.” That would be nonsense: America was not yet a country, and most people would question whether you love a country you try to separate from. No, the Patriots loved an idea. To be sure, a fairly uniquely English idea, but certainly not one the British Government believed in, since the denied it to those in their colonial dominions. That idea was freedom, but in particular it was freedom in what Schumpeter called “the bourgeois sense.”
But the recent controversy over Rudy Giuliani’s remarks is not, contrary to the abuse of the term, over him “questioning Obama’s Patriotism.” In reality, Giuliani questioned whether Obama has the same kind of love of America, or whether he has the love of America, that people like Giuliani do.
I mean really, how dare he! You Republicans, you’d probably question Lenin’s love of Russia, or Robespierre’s love of France. Outrageous! Everyone’s Nationalism is beyond reproach: who would want to lead a country he did not love? Surely no one.
Do you see the rhetorical point I’m trying to make here? I think it’s actually obvious that American progressives cannot love American-at least, not as America is or has been. Democrat Nationalism-not Patriotism, that would be an oxymoron-is love of America as it could be, if only they could make it so. But a love of what the country could be if only you were in charge, implies a hatred of the country as it has been, if how that country has been, has been in a recalcitrant state, standing athwart your march toward Utopia. This is I believe what Giuliani has rightly observed appears to be a feature of Obama’s worldview in particular. And in some sense, if you love America you ought perhaps look askance at those who would see her transformed into something very different before they could truly be proud to call her home. I know that I would-that I do.
But far more important, I think, than whether one loves the country as it is or has been, is the question of whether what one wants for the country, for the people that inhabit our polity, is truly good for them. And this, not whether Democrats are Nationalists or not, is the truly damning indictment of their entire ideology. Robespierre loved France: he loved to see it terrorized. Lenin loved Russia: he loved to see it suffer. Of course, there are also those who love their country, in that they love to see the boot of their country on everyone else’s throat-think Mussolini or Hitler-but the left in America is relatively uninterested in directly oppressing foreigners. Contrast all of those with Patriotism, a love for what is actually good for the people of our country, love of things that would be good for everyone. The love of the American idea as such, neither a love for a people, a geographic location, or a government, but a love of American freedom.
I have absolutely no doubt that Obama has no such love for the American idea. No one should really be surprised by that. And I suspect most people criticizing Giuliani would understand that if only they wanted to. But they don’t want to.
I have often wondered at the fact that Libertarians are so prone to smug finger-wagging at Conservatives who allegedly fail to consistently apply skepticism about government, who moreover consider the American Conservative a strange alien creature they do not recognize. For my own part I recognize my cousins, most of the time, and merely feel they fail to grasp some important aspects of the Right-Radical world view. But every now and then I see that Libertarians allow antipathy to the State, even when justified, to distract them from reality. And at no time in my recent memory has this been clearer than reading a recent reaction to the now infamous cause celebre in Ferguson, Missouri. As usual when this happens, out of respect for the commentator in question, someone whose opinion I usually regard as quite worthwhile, I will not say who they are nor will I quote them directly. And in fairness to this individual, they primarily quoted someone else, rather than giving in depth analysis of their own. In even greater fairness, I believe we would agree on the substance of all their concerns, about police violence and the police state in general. I only disagree with the desire to tie a worthy cause to a case to which it bears no relation: Michael Brown was not killed by a police officer in a tank provided by the US Federal Government. Nor was he killed by Asset Forfeiture. Nor drug laws. This was not a result of over-empowered Police authority at all-though such a thing surely exists. An anarcho-capitalist Private Security Firm worker would have done the same thing Darren Wilson did. Brown was killed by his own foolishness. About the only thing that could have saved his life would have been to disarm the Police entirely, and the result would have been that Darren Wilson would be dead, rather than Brown.
For the record I endorse wholeheartedly the idea of agents of the state having to have their activities in that capacity monitored by surveillance. Therefore I have no objection to requiring Police Officers to wear cameras, apart from questioning how those suggesting it intend to pay for this expense. But let’s face reality, here: if Darren Wilson had been wearing a camera, all that would have resulted would be that he would have been exonerated of any wrong doing immediately. The reality challenged protestors in the streets of Ferguson with their violent thuggery, and the peaceful, free speech exercising, lie promulgating Football players and Congressmen and women, to say nothing of the President of the United States or the Attorney General, would still have forced him out of his job and ruined his life through their “protest” against the facts. It is embarrassing to see Libertarians I respect participate in this, and of all things to wag their fingers at Conservatives for believing in the Police! More than that they do themselves and their beliefs a disservice by associating their cause with a hoax.
Libertarians like to speak of why they are not conservative. This sort of foolishness is why I am not a libertarian.
Here is my elaboration on the work I mentioned here.
Let’s begin by downloading historical monthly official unemployment rates according to the St Louis Fed website. We’ll be using the series UNRATE, M0892AUSM156SNBR, M0892BUSM156SNBR, and M0892CUSM156NNBR. The first thing we want to do is turn these into a single, monthly series. To begin with, we will take M0892AUSM156SNBR for granted in the early part of the data. Subsequently, when it overlaps with M0892BUSM156SNBR, we will favor that latter series. During the first month of the latter, the two series agree, but they diverge thereafter. It’s not clear why, but M0892BUSM156SNBR seems more realistic. Finally, we have the issue that no seasonally adjusted series covers the year 1947. M0892CUSM156NNBR covers that year, but is full of seasonal noise. Fortunately, M0892CUSM156NNBR overlaps with UNRATE, so it is possible to estimate a seasonal cycle in M0892CUSM156NNBR and remove it. By removing the estimated average monthly differences, I can bridge the gap between the series. Now, using the series GPDIA and GDP data, I can find out what portion of spending in each year, back to 1929, was investment. This is significant because during normal times, there seems to be an inverse relationship between changes in the unemployment rate, and changes in the “investment rate.” As it turns out, this works fairly well through the entire period, except for one glaring discrepancy:
Four years, from 1942-1945 inclusive, fall off the general pattern of this relationship. Why? Simple. During World War II, the forcible removal by conscription of ten million able bodied young men (I assume they would have been young men?) from the labor force into the armed forces, the volunteering of many more who wished to avoid the high likelihood of assignment to infantry associated with the draft, the movement of people into draft exempt war production industries, all naturally led to a reduction in the official unemployment rate. To quote Robert Higgs:
Between 1940 and 1944 unemployment fell by either 7.45 million (official measure) or 4.62 million (Darby measure), while the armed forces increased by 10.87 million. Even if one views eliminating civilian unemployment as tantamount to producing prosperity, one must recognize that placing either 146 or 235 persons (depending on the unemployment concept used) in the armed forces to gain a reduction of 100 persons in civilian unemployment was a grotesque way to achieve prosperity, even if a job were a job.
The Conservative and Libertarian movements in the United States today seem to be experiencing something a bit like the Democratic party did in the late 19th Century, when, bafflingly, they went from one election running the sound money Goldbug, small government candidate Grover Cleveland to, a mere four years later, nominating William Jennings Bryan, who advocated for the inflationary insanity of Bimetalism, which was just the beginning of his out and out Socialism. The key word here is seem, because the way I’ve just stated it is a bit of an unjustifiable overstatement. Sure enough, beneath the notice of most of the public I imagine, there is an at times vitriolic dispute over the basic question of whether we should have more or less inflation, and many questions which amount to this exact same question phrased in a different way. Sure, it’s disturbing as hell to me to see guys like James Pethokoukis wage jihad against the gold standard, repeat Hoover’s libel of his own Treasury Secretary, falsely insinuating there is an ounce of daylight between “pre war” and “post war” Austrian thinking, and complaining that inflation isn’t high enough…actually, holy shit does reading the things he writes lately scare the crap out of me. Reading the comment sections (to say nothing of the posts) on blogs of certain Monetarists (who shall remain nameless) is guaranteed to give one a strong sense of dyspepsia. The only thing that makes it better, in a perverse sort of way, is the counterbalancing effect of the Rothbardian Internet Neckbeard Troll. For these guys, banking is fraudulent, an embezzlement scheme masquerading as warehousing. And one strongly suspects that much of the unpleasantness coming from the likes of the inflationist right is, in part, the result of pushing too hard back against these types, albeit on the wrong points. That being said, I think both sides are missing one another’s points to a significant extant. Let me see if I can summarize, in briefest possible terms, what I think the strongest arguments seem to be for “we need more inflation” and “we don’t.”
First, the pro-inflation side: People’s current plans for future economic activity are based on an expectation of a certain level of inflation. To the extent that actual inflation falls short of that, people will make errors in their decisions about allocation of resources: in short, it hurts the economy.
Second, the anti-inflation side: There is no long term benefit to increasing the supply of money above and beyond the quantity demanded. There are, in fact, significant long term costs.
As I see it, there is no obvious inconsistency between these two points. In the short term, demand to hold money may be such that maintaining real growth requires that the Central Bank err, at least temporarily, on the side of inflation-it’s at least possible that we may have little choice, in the short term, to accommodate people’s already formed expectations. But in the long term, economic stability is best fostered by eliminating the authority that is required to so err in the first place. Ceterum censeo Subsidium Foederati esse delendam. Let’s be clear on one thing though: the argument for growing NGDP back to it’s prior long term growth path, is not that Monetary Equilibrium requires this. It’s the view that labor market discoordination is more important at this stage than the coordination of savings and investment. What’s required for the former is keeping long term labor contracts (to a lesser extent, extant long term debt contracts) for fixed nominal wages (fixed nominal interest rates) consistent with market clearing real wage rates (or, in the case of debt contracts, consistent in the sense that, if they’d known how prices were going to behave, people would still have agreed to the debt contracts). What’s required for the latter, on the other hand, is fixed nominal spending-that is all. These two goals cannot be simultaneously achieved, not at the moment. Economics is like that, though: it’s about choosing between options, not having everything you want. Outcomes are scarce, just as resources are (while writing this, I discovered someone (A guy at George Mason who I haven’t heard of before) in fact uses the term “policy possibilities frontier!”). But some scarcities are artificial, and others are natural. It’s my view that the downward rigidity of wages largely reflects the rational belief of typical workers that inflation that has been going on for many decades now almost uninterrupted, and that, essentially, there is no reason to think it won’t continue in perpetuity. This rational belief is essentially equivalent to the the knowledge that one lives under a Central Bank that manages fiat currency. Note that the rate of average nominal hourly earnings growth is almost exactly the same as the rate of price inflation the Fed claims to be aiming for-2%. Of course, the Fed aims for 2% in a particular index, and thus 2% weighted average of a certain subset of prices-the “Personal Consumption Expenditures” index. There are other measures of inflation, for example the index published by MIT’s “billion prices project” which tracks online prices in real time. By that measure, the inflation rate is already above 2%, but then, it’s measuring prices, evidently, that the Fed implicitly wants a greater than 2% inflation rate in. Which should given one pause about the whole idea of targeting a rate of inflation, frankly: the fact that different indices show inflation at different rates means that the phenomenon of price inflation is not something for which an objective measure exists.
But, having said that there might be a basis for thinking there may be continued, short term grounds for more inflation, I’m still inclined to think otherwise. But, you may ask, isn’t it true that unemployment is still higher than a frictional, natural level? Isn’t it true that the official unemployment rate actually understates this? And, couldn’t a little bit of inflation help that? I’d answer maybe, yes, and no to those questions. For the second question: it’s true that since 2008, whereas the working age population (16-64) increased by 3.4%, the labor force grew a mere 0.8%-effectively, more people retired early, remained in school, left the work force for the welfare rolls, and so forth, than the actual increase in people below the retirement age and above the age of 16. An aging population cannot explain that. If the labor force had grown as it had between 2000 and 2008 after 2008, but as many people were working today as are, the unemployment rate would be 11.3%, not 5.9%-not much of an improvement over an adjusted peak of 12.8% versus an unadjusted peak of 10.0%, and worse than any official rate since the great depression. So aren’t we clearly somewhere on the short run Phillips curve where a higher rate of inflation could, at least temporarily, decrease the unemployment rate? Well, that depends on whether the issue of the remaining unemployment is one of labor demand or labor supply. And I don’t think that that extra 5.4% can be considered a demand problem per se (there are problems that primarily impact labor demand, but they don’t really relate to insufficient spending: for example, strictly speaking, labor is demanded in hours, not persons, and Obamacare has disincentivized hiring people for full time work. Of course, that doesn’t actually impact the unemployment rate, adjusted or not.) rather, the problem, for people who have given up on finding work entirely, seems more likely to be for one, that even if they would be willing to work for lower wages, they lack the skills that employers now want-during the boom, people were drawn into certain industries, and became specialized to those particular lines of work, and now the composition of labor demand has shifted, employers now want workers with different sets of skills…but the skill sets of people have a significant inertia to them. In short, the problem is not that there is insufficient labor demand period, but rather that the kinds of labor demanded don’t match the kinds of labor that could presently be supplied. Another labor supply end issue is the fact that, labor being onerous, increased government benefits, including extended unemployment insurance, among other things, raise the level of compensation that would be necessary to make labor more attractive than leisure for many individuals. If one has to choose between working for a check, or a check of equal or greater value without having to do any work, there are people, I think it should be obvious, who would choose the latter. Saying this usually elicits cries of outrage at the mere suggestion that anyone, anyone prefers leisure to labor, no matter how unpleasant the labor and how unsatisfying the compensation is. But if you’ve ever met anyone who has complained about their job, I suggest you shut up: that’s who I’m talking about. If that person is at all sincere in being dissatisfied with the amount of work they do and how much they are compensated for it, then all it would take to get them to quit would be to offer them a more favorable trade off between effort and reward-which, if the effort on on offer is zero, merely requires you to find the minimum compensation for doing nothing they would accept to quit. If they’re sincere in not liking their job, the level of compensation they would accept to quit will be less than what they presently receive. To say that some people will take various forms of welfare instead of working is not even to say that much, because benefits may potentially exceed, for some individuals, what they could get for the labor they are able to offer. I can’t believe I have to defend such an obvious notion, but people have a knee jerk reaction to this issue. Okay, but coming back to the question, to which I answered maybe, isn’t the (portion of remaining unemployment that is not a structural supply issue) above the long run rate of frictional unemployment? My answer is “maybe” because it’s hard to say what that level actually is, and whether it has perhaps shifted higher as a result of the poor performance of the economy. This is important because one could hypothetically move on the short run Phillips curve to a lower level of unemployment, without merely causing a shift to a higher short run Phillips Curve, if one managed to hit the long run Phillips curve. Remember that the lesson of the 1970’s was that the long run Phillips curve is a vertical or nearly vertical positively sloped curve-there was no permanent tradeoff between the rate of inflation and the rate of unemployment. The average (official) unemployment rate in the last 20 years has been about 6%. If that represents where the long run Phillips curve currently lies, we are already as low as we can go-lower, in fact-in terms of unemployment, without simply causing the Phillips curve to begin to shift upwards. And this is why I’m inclined to answer in the negative to the question, “couldn’t a little bit of inflation help with the unemployment situation?” In fact, in some work I will probably elaborate on further later, I find that in the history of the United States, the period of the best economic performance, in terms of growth, estimate unemployment, and price stability, was during the “classical gold standard”-during which, in fact, there was in fact very little long term change in the price level, and alternately a low deflation rate and a low inflation rate in the first and second halves of the period, respectively. The average employment rate I estimate over the entire period? 3.3%. That’s better than we see during peaks of housing bubbles these days. This was the Long Boom-except that’s not quite right, as that implies this was an inherently unsustainable level of growth. The point is that at one point in our history, we were able to do a lot better than presently with, first of all, better policy on the supply side (no income tax, among other things), a small, limited Federal Government, and monetary policy effectively set automatically by the Gold Standard. Which brings me back to what I was talking about at the start of this post: In the late 19th century, the Democrat party went from supporting all of those things, to opposing all of them, in the span of one Presidency. And most especially, they came to oppose the monetary policy that insured the stability of the economy of the time-in spite, I would add, of destabilizing banking regulations being responsible for most of the actual problems, what little there actually were.
So is the Republican Party in danger of undergoing a similar transformation? Hardly, I think. Oh, to be sure, I worry about the inflationists, especially in the long run. And sure, you could say, the Republicans today are not exactly as pro Laissez Faire as their rhetoric might lead you to sometimes believe. But what else is new? Remember that a couple of generations ago, Newt Gingrich was considered radically right wing, just because he was not content to wake up in the morning and repeat the Bob Michel mantra “You’re going to be a loser” in front of the mirror. A few generations ago, Nixon and Ford attempted to fight inflation by “breaking the thermometer”-instituting wage and price controls! The Mitch McConnells and John Boehners of the modern day are a far cry from that. But that’s no reason to be complacent. There are also the Jeb Bushes, the Mitt Romneys, and the Crass Crustys out there. And I begin to understand what Hayek meant by rejecting the label “conservative” (in favor of “Old Whig“) and seeing “conservatives” as averse to change, when I think of the Paul Ryans of the world, who don’t want to dismantle the welfare state, regardless of what the left says, but to preserve it from itself. I’m not a conservative of that sort, either. This, I must say, is why I am 100% behind Rand Paul as my #1 choice for the Republican Presidential nominee. If any of the Republicans would be open to a principled case for monetary Laissez Faire, it’s unlikely to be anyone else.
EDIT: I was quite remiss in failing to point out, having started a post about Monetary Policy discussing the battle over that issue in the late 19th Century, and in particular William Jennings Bryan’s role in that battle, to neglect to mention his role in the creation of the Federal Reserve. Please forgive this, I think, or hope, uncharacteristic oversight.