Tristan, you stated

And indeed, the qualitative improvement in living standards which might follow with some programs of expenditure, such as Australia’s “National Broadband Network”, is greater than any purely quantitative economic indicator can express.

Could you please explain how this is going to help the plight of Australians. Given that it now takes me 1-5 seconds at the most to get access to my many Internet sites around the world with Primus broadband (with about a 10th of the speed proposed by the new network), and that my video telecommunication and audio quality is already very good, can you explain how the wealth will be generated.

I hope you do not merely refer to faster movie downloads.

Chris;

You hit the 'tip of the iceberg' talking about faster movie downloands - but what I envisage is more involved...

Transfer of data via the internet will speed up immensely - useful where there is a large amount of data to be transferred...

And there will probably be real time streaming in Hi-Res with playback - and all for free... Free because the internet broadcasters could tailor advertising packages depending on accurate consumer profiles...

Again: watch whatever you want, whenever you want, from anywhere - for free.

Furthermore - blurring of the lines between the internet and TV - with hi-res streaming for interactive media... The quality of interactive computer gaming could also 'go through the roof'...

And then there's the one that's been mentioned an awful lot - real-time world-wide video conferencing. I know you say this already exists - but the quality will be vastly improved.

Also: with greatly increased bandwidth - and end to meagre download limits as we know them...

Finally - there will most likely be applications that haven't been thought of yet... Would welcome any commentators with further ideas here...

5 years ago no one had even imagined
Facebook
Myspace
YouTube
Skype
World of Warcraft
Imageshack
GoogleEarth
BitTorrent
iTunes
PartyPoker
Betfair
Get up
EBay
Paypal

Im sure you get the idea. In 5 or 10 years who knows what we will have.

Tristan
Won't the government get the resources that it is to inject into the economy, by taking them from the economy somewhere else?

How do you know that the uses and benefits that must be foregone by withdrawing resources from employment A will not be greater than the uses and benefits to be derived from diverting the same resources to employment B?

Tristan

'Any minor difficulty with inflation later down the track is no reason to axe the economic stimulus, including the expenditure on economic and social infrastructure.'

figures released today show that two thirds of the toxic debt in the USA, you recall the debt that Kevvy reckon caused the collapse of the western capitalist system, is still on the balance sheets of the banks. Now add to that the Fed Res is still printing money hand over fist, don't you think the crisis of hyper-inflation might be more likely than 'a minor difficulty with inflation' in the not too distant future?

If you accept the notion that government borrowings not only add to interest rates but also to inflation ... well you do the maths.

Mate my view is simply that all the already misdirected stimulus spending has only put off the real crunch, adding to it now is pretty much pointless.

The catastrophe cannot now be avoided.

I accept that investment in infrastructure - in this case fibre-optic broadband - must come from somewhere...

On the other hand - it's always best to utilise human resources - rather than accept unemployment.

And investment in broadband now - is an investment in future industries that should bear fruit for decades into the future - and as I argued - will make a qualitative improvement in our material living standards... So - I think on balance it's a worthwhile investment... And so is investment in public housing: Again - providing a public benefit for decades into the future...

re: inflation - I think in the US that unemployment is the greatest danger at almost 10 per cent. As I understand it - Inflation creates uncertainty - and thus a disincentive to invest. But I don't think it's reached the level yet where it is the greater danger - as opposed to unemployment...

And - again as I understand it - investment in social housing stock could actually mitigate against inflation - and the kind of bubbles which precipitated the current global financial disaster...

"If you accept the notion that government borrowings not only add to interest rates but also to inflation ... well you do the maths."

Federal government borrowing has no direct causal link to interest rate movements. Comparing the historical data between the two, we see that interest rates occasionally rise following a rise in government debt but much of the time they move in opposite directions with no discernable sensible relationship between the two. Under Howard, government net debt fell to practially zero yet interest rates rose year after year to around 7.5%, only being brought down by the RBA's response to the onset of the GFC. This failure of the facts to conform to the theory is repeated down through the history of government debt and interest rates.

Why would they fail so very often to track the level of government debt? One reason would be that interest rate movements can have multiple causes. But I also don't think that government borrowing hoovers up funds necessary for lending, causing a shortage of loanable funds and thus driving up the price. Bank lending is not reserve constrained in the modern economy, they will lend to any credit worthy customer, the loan creating the deposit, not the other way around.

Whatever, the facts simply don't accord with the theory that government borrowing must push up interest rates.

Hi Tristan. I completely agree with your political outlook although I think that I may have a somewhat different understanding of how out modern fiat monetary economy operates.

Keep up the good work.

Tristan
"I accept that investment in infrastructure - in this case fibre-optic broadband - must come from somewhere... On the other hand - it's always best to utilise human resources - rather than accept unemployment."

The question is, how do you know that the expenditure on a given thing, such as broadband, won't cause more unemployment in the field of activity it was taken from, than it creates where it's expended in broadband?

"And investment in broadband..."

This assumes that it would be an investment, rather than a consumption expenditure. If taking the money out of whatever it was doing, and putting it into broadband, were to generate more unemployment, then would you still call it an investment? And if the broadband were to operate at a loss, would you still call that an investment? What if it were to run at a profit, wouldn't that mean that the operators of the broadband network were exploiting the workers?

Fozz
As i recall you never did explain how in your theory, some time in history, the function of taxation changed from revenue raising to currency deflation.

Peter,

theories can be beautiful things but are no substitute for actual observation. Unfortunately, the dominant theory is that the dominant theory is the answer to everything.

Are you suggesting that the stimulus has created unemployment by taking finacial assets from one part of the economy and broadly distributing them throughout? If the big casino players decide to use some of their gambling funds to buy government bonds and the government then creates something of concrete benefit, has that created unemployment in the other section?

By the way, did you go and compare the history of federal government debt with the history of interest rate movements? What are we to make of the fact that the facts are so far out of whack with the theory that government borrowing pushes up interest rates?

We question the established dogma, that's what we (should) do.

This is Voodoo economics.We are borrowing money to pay foor present consumption to keep people in jobs? There is no real productivity connected to it.Kevin Rudd is just putting our children in more debt.

Let the bubble economy collapse.There will be a period of short sharp recession and the good assets like cream will rise,but this counterfeit money created by the World Reserve Banks will replicate a worse scenario of Japanese syndrome of no growth and a country in suspended animation.

Let the free market decide what is of true worth and reduce the power of the Global Central Banks.They are the instigators of this collapse and the sooner we break their cartel powers via the creation of inflationary money,the better for us all.

Arjay,

keeping people in jobs is unproductive? As opposed to letting them join the ranks of both the short and long term unemployed which presumably you must regard as productive. Interesting theory - I expect to find it under the heading "Voodoo".

Putting our children in even more debt? However will they bear the burden? After all, the debt post WW2 was between 500% and 600% larger than this one so presumably we are still paying for that one while lumbering little Johhny with the next. Intergenerational debt is a silly notion that requires a hefty dose of unthinking emotion to believe in.

The reserve banks create counterfeit money? As opposed to the "real" money that comes from where? Are you saying that Australian denominated financial assets - Australian dollars - are counterfeit?

You have just created a new definition of the term "voodoo economics". Your arguments here are ludicrous. Did you derive them from this character whose link you posted?

Tell me you didn't actually PAY this bloke for the privellage of listening to such verbal dysentry.

Arjay, God gave you a brain - I suggest you start using it.

Arjay
You need to understand that in Fozz’s theory, government is not revenue-constrained, since they can print all the money they want for any purpose without at the same time diluting the value of the existing monetary unit, by using taxation to deflate the inflation caused by their monopoly printing presses. For Fozz, money in specie, money certificates, and money substitutes, are all conceptually jumbled in together with no economic significance in the distinction. Hence he falls naturally and easily into the superstitious belief that government can make magic pudding by printing pieces of paper without any net cost to anyone.

Fozz
“theories are no substitute for actual observation.”

True, and as there are no constant relations between human values, actual observation requires theory in order to have explaining power.

“Are you suggesting that the stimulus has created unemployment by taking finacial assets from one part of the economy and broadly distributing them throughout?”

I am asking how one knows whether the taking of funds from person or field A to fund “stimulus” activities by person or in field B has not had the effect of occasioning more unemployment than it relieved.

“If the big casino players decide to use some of their gambling funds to buy government bonds and the government then creates something of concrete benefit, has that created unemployment in the other section?”

It depends what employment it would otherwise have created, doesn’t it? So what was it?

All funds that go to buy government bonds divert capital away from whatever else it would otherwise have been used for.

If those in favour of it, are unable to show that the benefit outweighs the benefit from its original disposition, then they are unable to justify their proposal.

If “employment” by itself is the criterion of social benefit, then digging holes and filling them in again would be good policy, wouldn’t it? In fact, the more wasteful we were, the better it would be. Wouldn’t it?

“did you go and compare the history of federal government debt with the history of interest rate movements?”

No. Got a link

“What are we to make of the fact that the facts are so far out of whack with the theory that government borrowing pushes up interest rates?”

It tends to discredit the theory: subject to the influence of all other variables that may affect the supply of, and demand for money. How have you factored them in?

Do you theorise that the effect of government borrowing makes no difference to, or lowers interest rates? If all available funds were to go into government bonds, what effect, if any, do you think this would have on interest rates?

“We question the established dogma, that's what we (should) do.” Good. Do you question the orthodox Keynesian dogma that government can create net real benefits by forcible redistributions and stamping pieces of paper?

So. When did the function of taxation change from revenue raising to currency deflation?

Tristan
How do you know that the expenditure on a given thing, such as broadband, won't cause more unemployment in the field of activity it was taken from, than it creates where it's expended in broadband?

There are a few issues re: stimulus...

The government's stimulus was not meant to support consumption indefinately... It was meant as a 'stop gap' measure to bouy consumer confidence in the short term...

Thereafter - investment in infrastructure builds future capacity - so it is not just 'throwing money around'... It is investment in the future...

Investment here - and in other areas of vital social and economic need - such as social housing - will also provide benefits in the future... Now is the time to make such investments - as it is now that the economy needs support from such expenditure - to counter unemployment and again - to restore confidence...

And when the world economy reverts to stronger growth - then increased revenue - supported by increased capacity - will provide the means of servicing - and ultimately repaying - that debt into the future.,..

”True, and as there are no constant relations between human values, actual observation requires theory in order to have explaining power.”

I’m glad you said that because I can’t actually see any arguments as such in your post. You have simply submitted a series of “what if’s?” A series of rhetorical questions instead of reasoned arguments.

To which I can only respond in kind:

How do you know that the stimulus occasioned more unemployment than it relieved?

What employment would such privately-held funds have otherwise created during a downturn as demand slumped? Who would the private sector be rushing out to employ in such circumstances? Why don’t you tell me?

I would also add that if those opposed are unable to show that stimulus spending during a downturn does more harm than good ie destroys more jobs than it creates etc then they are unable to justify preventing it – especially since those calling for it’s prevention tend to be economically secure.

I don’t know how many people have been put to work digging holes and filling them in again. Perhaps you will tell me? I have however personally seen much needed maintainence work performed on schools. The only holes they have dug were to install upgraded data cabling. Come to think of it, they did fill in the holes again.

“It tends to discredit the theory: subject to the influence of all other variables that may affect the supply of, and demand for money. How have you factored them in?”

I don’t know – how have you factored into your theory why these “variables” which now apparently do exist force interest rates and government debt in opposite directions so frequently and to such an extent that they can move in opposite directions for five years at a stretch or more. Immensely powerful variables wouldn’t you say? Either that or government borrowing does not prevent funds from being loaned.

By the way, do you still want the links to the RBA records and treasury document extracts?

As, I was saying before the computer told me no, speculative questions do not amount to arguments. They merely make it appear as though you have no arguments of your own.

Tristan
That is to re-state the original rationale for the stimulus policies. It appears you might not have understood the question. What I want to know is, if the negative consequences of the policy outweighed the positive consequences, would you know, and if so, how?

If you don’t know, just say so.

The point of investment is to buy assets for purposes of production with a view to making profits and avoiding losses.

By contrast the point of government expenditure on stimulus policies is to employ people to build something, like a broadband network, specifically because in the absence of such government expenditure, private capitalists would not venture to do it, because private capitalists figure that if they did, they would make losses.

Thus the purpose of government expenditure on stimulus policies is to do something specifically loss-making, in the belief that this would be good for the economy.

Moreover the reason why employment is desirable as a social goal, is because it enables the employees to feed their families, participate in the good life etc. But this is a benefit in *consumption*, not in production. The purpose of productive activity, and therefore investments, is to satisfy people’s wants as consumers. To employ producers as some kind of end in itself, regardless of whether it wastes more resources than it gains, is self-defeating. The losses incurred in doing so must, other things being equal, cause greater unemployment elsewhere because the original private owners from whom the money is taken do not have the luxury of running at a loss.

Fozz
I’m not asking rhetorical questions, I’m asking whether those in favour of the stimulus policies know what they would need to know, in order for the policies to be justified in their own terms.

You have the onus of proof back-the-front. It is for those advocating a policy to justify it. Either answer the questions or have the honesty to admit you can’t.

So far all I have had in reply to my reasonable queries are evasions.

BTW, when did the function of taxation change from revenue-raising to currency deflation?

Peter Hume, you seem to have a very narrow view of the purpose and results of the stimulus.

>>...the point of government expenditure on stimulus policies is to employ people to build something, like a broadband network, specifically because in the absence of such government expenditure, private capitalists would not venture to do it, because private capitalists figure that if they did, they would make losses.<<

That might be true. Although an equally likely scenario is that the money simply isn't available to private capitalists - thanks to the tightening of credit, thanks to the GFC - in order for them to finance it.

After all, broadband networks don't come cheap.

But even if it is true, and the entire project "makes a loss", its construction will create jobs that a) pay wages that can be spent on food, cars, holidays etc., that keeps other sectors of the economy humming along, b) keep companies that provide the hardware and services to build the thing in business and c) feed money back into the government's other pocket through taxation on both the companies and the employees.

At the end of the exercise we will have kept quite a few people in gainful employment, and have something (with luck) quite useful at the other end.

Obviously, you don't want to do this too many times, otherwise the future tax burden becomes unsustainable.

But since the discussion has already moved on to how it is wound back, I shouldn't worry too much on that score.

>>The losses incurred in doing so must, other things being equal, cause greater unemployment elsewhere because the original private owners from whom the money is taken do not have the luxury of running at a loss.<<

Given that it taken from "original private owners" through the tax system, which is the same for everyone, how do you arrive at "greater unemployment"?

Pericles made the point I was wanting to make - that the GFC has made the money market very tight anyway... So it's not a surprise that there's not much interest yet in private finance markets for high speed broadband...

Also - assuming that the result of not investing in super-fast broadband would be a) fewer jobs; and b)missing out on the qualitative benefits of the new technology - I believe the investment is defiantely worth our while...

But even if that were not the case - would you want a private monopoly on such critical infrastructure?

I think in the long term the public good provided by the investment will make it worth the public's while.

Finally: I personally would not have a problem with some form of cross-subsidy. I do not want those on low incomes and welfare to be excluded from super-high-speed broadband...

And again - I think the qualitative improvement in the service - will also make it worth our while...

Peter,

The only answer I can give to such a pre-loaded question is “it didn’t”.

I find your concept of “onus of proof” bemusing. I offer a statement of support for policy action that has been in place for quite some time. You insinuate that such policies have (a) had no net benefit at all, but rather (b) have actually damaged the economy and even destroyed net jobs.

Remembering that we are not hypothesising about what might happen if such policies were introduced but that they actually ARE up and running, I find it strange that you have not jumped at the chance I have offered you to prove to everyone the damage and unemployment that has been created by the stimulus. Surely you have such proof in spades, so why are you holding back?

You do understand that you are the one alluding that the existing programme has thus far failed to cushion the economy at all and has in fact caused unemployment that would not have otherwise occurred? You do understand that this places the onus of proof on you, not anyone else? Yes, I’m sure you do too.

So on that note, let’s hear it. Show us where and how the economy has been damaged by the stimulus. Show us which jobs have been destroyed.

I eagerly await the proof that will bring down Swan and the Rudd government.

I guess that's a no then?

Seriously, how have we become so conditioned to despise government - even democratically elected government - to such an extent that it has become almost an article of faith to so many people that government can't do ANYTHING right? Anything at all. Always and everywhere, if government has had a hand in something, it will inevitably fail miserably, deliver inferior results to private enterprise, cause great harm.

Why do so many people actually believe this? That a dollar spent by government will always be wasted or harmful, yet the SAME dollar spent by private enterprise will always be put to productive, prosperity-generating use.

Even after the spectacular collapse that we all recently witnessed, some are still claiming that this was all the result of government interference. Even after decades of privatisation and deregulation.

Until we re-connect with the notion that government can perform a crucial role that private enterprise by itself cannot - advance the public purpose - we are likely destined for more of the same.

>>Why do so many people actually believe this? That a dollar spent by government will always be wasted or harmful, yet the SAME dollar spent by private enterprise will always be put to productive, prosperity-generating use.<<

Of course, this point is well made. The economy doesn't care where the money comes from, it will still get put to use. The difference between government and industry spending is largely psychological.

Many in industry see themselves as cutting edge and, to their tribal viewpoint, that's all that's important. The truth is they wouldn't be as profitable without a stable society and economy underpinning their activities.

When government acts to financially stump up infrastructure, for example, it is really ensuring that the people who can get things moving are given enough time and protection to do so. Industry usually moves in after the foundations have been laid, the bugs eliminated from the system and when it's obvious the activity has long-term growth potential. In such a case, industry is very much taking advantage of the early work that has been done and capitalising on it. But would they lay their own foundations if the public sector didn't start it for them? In many instances no. It is a classic case of the public sector complementing the private sector (this, in fact, was Liberal Party policy before the 1996 election).

But for that to happen, there must be a phase where the public sector is financed to do its bit, followed by a capitalisation phase carried out by industry. The real whinge of industry is that it's not getting exactly what it wants in the way it wants. But, it ought to know that pretty much everyone is in that same queue.

All

“The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.”
Economics in One Lesson:http://jim.com/econ/contents.html

You are reiterating the fallacy of the broken window.

Obviously if we count only the benefits and don’t count the costs, anything will seem beneficial - even if it is more destructive, and generates more hardship for all groups.

I presume, Peter Hume, that we should infer that you are the good economist, and we are the bad.

>>“The bad economist sees only what immediately strikes the eye; the good economist also looks beyond... etc etc<<

While it is good that you hold such a high opinion of yourself, you totally mis-apply the broken window fallacy.

Taken in its original context, the broken window fallacy is entirely valid, and correct in every detail.

However, you have chosen to use it in the context of government borrowing, which was absent from Bastiat's tale.

The broken window in question is clearly a loss to that community's collective economy. In precisely the same way that the current stimulus package represents a loss to the Australian economy as a whole.

The accurate analogy would be where the broken window had been paid for by the government, who then proceeded to recoup fro the community as a whole.

It is the least-pain option. The working people trade off some of their future income for the sake of keeping their brothers in work.

We are fully aware that the current stimulus does not come without its cost. That cost is, quite specifically, the allocation of a portion of our future earnings, in the form of taxation. Anyone who thinks that we are witnessing the first ever implementation of the free lunch is deluding themselves.

But that borrowing does have a purpose. And it is to keep the economy moving, while we sort through the debris of previous over-enthusiastic borrowing and lending.

You are obviously from the school of thought (as is my own dear white-haired old mother) that believes that if it doesn't hurt, it isn't doing you good.

With the corollary - that she invariably invoked as she poured hydrogen peroxide over a grazed knee - that the more it hurts, the greater the good.

Your "good economist", who smugly observes the growing misery of mass unemployment, may well be looking at the longer term from an economic perspective. But in the meantime, there will be a good few millions cursing his insufferable sanctimony.

Pericles
The interventionists never seem to reflect that there are more interventionists upstream of them, with similar beliefs, and similarly heedless of the economic and social dislocation they are causing downstream. The current interventionists are determined to fix these problems with still more interventions. Thus the failure of one intervention becomes the pretext for the next. By the logic of interventionism, it never occurs to the interventionists to abolish the upstream interventions. Instead they call for more, expanding the sphere of government and shrinking the sphere of individual liberty, and thus spreading more of the planned chaos that characterises central planning.

Yet none will defend the logical end of totalitarian government. And none actually do defend each given step on the way, by showing that it will cause less destruction than the alternative of greater freedom. The standard argument is only ever a front line of presumed moral superiority and magic pudding, and a rearguard of personal invective and assuming what is in issue - with Fozz feigning incredulity at the onus of proof for a bit of comic relief. Have Tristan, Fozz or you actually shown how you know the detriments of these measures will be lesser than without them? No.

The broken window refers to the original violation of property rights from which social benefits are expected. You share the interventionists’ assumption that the original problem is somehow a given prior to government policy; and Tristan the assumption that the funds to fix it are to be conceived of as if they were not taken from society, but create a net benefit.

All the Keynesian fallacies - that we can create wealth by redistributions - rest on the underlying Marxian fallacy - that the relation of employment is intrinsically exploitative. Tristan is a socialist and believes in the exploitation theory of capital. Yet he is caught in a self-contradiction. If employment is exploitative, why is he trying to promote it? But if he's trying to promote it, why does he favour illegalising it at the market rate?

The interventionists having bashed voluntary contracts of employment into a shape they think desirable - (on the fictional ground that the workers should have no freedom as they are faced with starvation etc.) – they then look on the resulting institutional unemployment, and decide it must be part of the self-contradiction of capitalism! But obviously if you illegalise employment at the market rate, you will cause unemployment. During the boom workers and unions insist on wage-rises in step with inflation. During the bust, they want government to stop the tide from going out.

Nature imposes physical scarcity and limitations on man, and logical consequences from that must necessarily follow: from which sound economics derives its principles. Governments can no more suspend these principles than they can the law of gravity or thermodynamics. The misery of mass unemployment is to the account of the ‘smug’ ‘insufferable’ ‘sanctimonious’ interventionists who dream of making everyone better off by passing laws outlawing voluntary agreements. Channelling Marx’s view that economics is nothing but an apologia for rugged exploiters, they persist in erroneously thinkingwe can conjure away scarcity and establish a cornucopia by forcibly re-arranging property titles. Tristan seems genuinely at a loss to recognise the magic pudding fallacy that he is operating on: however much he is asked to justify it, he just keeps on re-supplying the original assumption.

The stimulus is not the least-pain option: that’s the whole point. The question is whether the market downside of achieving employment - the workers in loss-making employments moving to employments paying lower wages at the market rate - is worse than the interventionist downside - forcing everyone to accept lower real incomes to pay for the above-market-rate part of the wages of privileged pet workers in loss-making productions; the diversion of capital to relatively loss-making uses; the resulting general relative impoverishment; further inflation generating further bubble effects, crony capitalism, economic dislocation and unemployment further downstream; all of which disproportionately affect the poor. Logically, how can one justify the “wire-brush-and-Dettol” therapy of the interventionists? None of the stimulus advocates has even begun to join issue.

Peter Hume, you are starting to retreat behind a smokescreen of jargon, which is always a bad sign. Instead of making your observations on the content of my last post, and its commentary on your mis-application of the broken window theory, you have resorted to the broadest and most incomprehensible of generalizations.

>>The interventionists never seem to reflect that there are more interventionists upstream of them, with similar beliefs, and similarly heedless of the economic and social dislocation they are causing downstream.<<

What on earth is that supposed to mean, when translated into English?

Who are the "interventionists" here, and who are the "upstream interventionists"? And what is the "economic and social dislocation" that they are supposed to be causing?

Pure verbiage. Insubstantial sloganeering.

>>The standard argument is only ever a front line of presumed moral superiority and magic pudding, and a rearguard of personal invective and assuming what is in issue<<

So, you are competent at name-calling, at least.

>>All the Keynesian fallacies - that we can create wealth by redistributions - rest on the underlying Marxian fallacy - that the relation of employment is intrinsically exploitative.<<

You clearly need to go back to your Keynes.

He advocated the benefits of money circulating within the system, but nowhere suggested that this on its own "created wealth".

But at least it keeps the wolf from the door for a while for the workers, who benefit from earning and spending the money that the government has borrowed from their future taxation.

>>The stimulus is not the least-pain option: that’s the whole point.<<

OK, I'll bite.

What would have been, in your view, even with the luxury of hindsight, a less-pain option?

Be specific. Slogans don't cut it.

‘[Keynes] advocated the benefits of money circulating within the system, but nowhere suggested that this on its own "created wealth".’

"Credit expansion performs the miracle . . . of turning stone into bread":
J.M. Keynes, Paper of the British Experts, 8 April 1943.

Superstition.

It is you, not I, who have failed to grasp the broken window fallacy and the Keynesian embodiment of it.

Four main upstream interventionists are both causing the depression, and preventing the recovery.

1.
FRB and Fiat money. Lowering the price of money below the market rate causes the cycle of boom and depression, by diverting capital into loss-making activities that consume capital, and must eventually collapse.
http://mises.org/story/3353

2.
“But at least it keeps the wolf from the door for a while for the workers ….”

The problem is not with "the workers" in general. It is with specific enterprises that are making losses and cannot pay wages either
a) at all, or
b) above the market rate.

There is no reason for everyone else in society to be forced through taxation to pay for the above-market-rates component of these workers’ wages, nor for produce goods that consumers don’t want at market price.

The solution is for those workers to accept wages at the market rate; and if their employments are not viable, then to move to employments that are viable.

But look at the restrictions facing people trying to do so.

Industrial relations law illegalises mutually beneficial employment at the market rate, on the ground of Marx’s ‘iron law of wages’: the idea refuted both by history and theory that capitalism reduces the wages of the workers to the level of subsistence.

It is the socialists who are causing the unemployment they blame the market for!
If it were true that minimum wage laws don’t cause unemployment, then why not make them $1000 an hour?

3.
Occupational licensing: These days in Australia you need to pay for government permission to get a job pulling beers, holding a stop-go sign, shooting roos, picking fruit, and working as a builder’s labourer – let alone any higher-skilled occupation.

What occupations in Australia do not require compulsory licensing, qualifications, registration, insurance, training, fees, more fees etc.? We have forgotten what it is like to live in a free country.

The ‘consumer protection’ idea underlying occupational licensing is that people are too stupid to know what market transactions to enter into, when they are directly exposed to the costs and benefits and can choose between competing offers and have legal remedies for fraud. But the same people, acting through a once-three-yearly compulsory political vote for unaccounted benefits with no connection to costs, in polices bundled in package deals, with no remedy for fraud, suddenly acquire superior moral and economic acuity. More superstition.

4.
High taxation. When I employ someone to do $100 worth of work, I have to pay $134, and the worker gets $86. The rest is government’s bite: about $50 worth in a contract for about $100.

These interventions have consequences! They especially cause unemployment! The worst affected are the most marginal employees: with least literacy, skills, experience, capital or income – precisely whom the interventionists are trying to help most!

Yet the interventionists never seems to cognize these facts. Every time their social engineeering attempts at price-rigging produce their entirely predictable, and predicted effects, they externalise the blame for the resulting anti-social chaos, and redouble their efforts at more interventions.

There is no future in more socialism. It is a based on a monopoly of violence, and is an economically chaotic anti-social dead-end. It should more appropriately be called anti-socialism. Seeking a ‘least-pain’ option based on expedience, while ignoring the moral and intellectual bankruptcy of these interventions, can only make matters worse.

No-one has justified these interventions nor refuted the arguments against them.

Freedom is the only moral and practical solution. Instead of trying to solve the problem by urging for political action for more interventions, we should be urging for political action to abolish what’s causing the problems: central banking, fiat currency, wage regulation, occupational licensing and taxation.

But if you are in favour of these interventions, then stop feigning concern for those suffering their results.

If we did not have taxation then undoubtedly there will be problems providing infrastructure, the social wage and training/education. Government is the most efficient provider of these.

And in Australia - collective consumption of medicine is far more efficient in providing health care as compared to the US example..

And if we did away with welfare - then there would also be a social cost: indeed, social disintegration. The cost of a 'free labour market' is made clear by the US example: where sub prime has seen skyrocketing unemployment regardless of threadbare protections for workers...

Here - the underclass are reviled and exploited as 'trailer trash': while others are homeless - having 'fallen through the cracks'. This is not the kind of society and economy I want. And economics should never be considered out of the context of its social consequences...

Tristan
It is you who are considering economics out of context of its social consequences, because the policies you are in favour of are causing the problems you are concerned about.

You have been unable to answer the question that would show that the stimulus policies are justified, namely:
How do you know that the uses and benefits that must be foregone by withdrawing resources from employment A will not be greater than the uses and benefits to be derived from diverting the same resources to employment B?

All you do is endlessly recirculate fallacies that were refuted over a hundred years ago.

You are in favour of measures that cause unemployment, poverty and disadvantage, and then you want to solve the problem with more measures that cause unemployment, poverty and disadvantage.

You are adept at changing the subject, Peter Hume.

>>Four main upstream interventionists are both causing the depression, and preventing the recovery.<<

"Preventing the recovery"? Please explain this, in the context of both how a recovery is being prevented, and how removal of the "interventions" will facilitate one.

The four "interventions" you describe are:

"FRB and Fiat money"

This is not an intervention, in the commonly-used sense of the word. It is the system we work with. Your arguments against it have always been, and will remain, philosophical rather than practical, which can easily be proven by describing the manner in which this "intervention" can be removed, and the impact of its removal on our economy.

Give it a try, and let us know how you see it panning out.

"Industrial relations law illegalises mutually beneficial employment at the market rate".

It also protects workers from exploitation. There are arguments on both sides, and what we have is a balancing act. That's the way we like it in our democracy.

"What occupations in Australia do not require compulsory licensing, qualifications, registration, insurance, training, fees, more fees etc.? We have forgotten what it is like to live in a free country."

Yep, that's government for you. They like to try to protect consumers as well as workers. Damn their eyes. But the same rules apply. It's compromise and trade-off all along the line.

"High taxation"

Yep, that's government for you. They just love to take your money, any which way they can. We have a solution to the problem, though. Elect a government that realizes that it serves the people, not itself.

This is all a long way from the broken-window theory, though, in that none of the above "interventions" has any bearing on the case at all.

Because all of them exist as a part of the system in which that community operates; if the government chooses to mend the window, in the form of borrowing from the community's future earnings, the cost is not extracted as a single, painful hit on the economy.

Yet another trade-off.

The sign of an irrational belief is that it is unfalsifiable. I understand Marxist and Keynesian theory, and can refute them multiple different ways. But you do not understand Austrian theory, can’t refute it, and seem to satisfy yourself with misrepresentation, invincible ignorance, or deliberate dishonesty.

Marxism is like a religion in that, no matter how much it keeps on getting refuted, the Marxists just keep popping up like one of those weighted punching clowns. As a means to reducing unemployment, repetition of Hindu mantras, or of the rosary, would be just as irrationally religious, but at least would not do as much damage to the disadvantaged and the working class as your mindless religious Marxism.

You keep on misunderstanding the broken window fallacy to mean a problem prior to governmental intervention, rather than the attempt to obtain social benefits by violating property rights.

Underlying all your defence of government attempts at price-rigging is an assumption that cannot withstand critical scrutiny. There is no reason to think that using a monopoly of violence, whether or not backed by majority opinion, will produce a more ethical, less exploitative, more pragmatic, or more productive outcome than would otherwise obtain from society's voluntary interactions. Nothing you have said has shown that it would.

But perhaps if you keep arguing by personal sneering, begging the same questions, repeating the same fallacies, and state-worshipping abracadabra, they will amount to a rational argument eventually?

Just because the *intent* of governmental interventions is to do good, it is not valid to assume that therefore their *effect* is good. You need to prove it. But you haven't.

I have shown why they have anti-social consequences. You have only replied with more of the original flawed assumption, more superstitious state-worship: a belief we can make bread out of a stone.

I asked how the author knows whether the stimulus policy will be produce lesser rather than greater unemployment or other social detriments. No-one was able to answer except by assuming what is in issue. Hence no-one has rationally defended the stimulus policy.

I said upstream interventions are causing the problems the stimulus advocates are trying to solve. You asked which. I explained which interventions, what economic and social dislocation they cause, and what would be a less-pain option. None of this has changed the subject.

According to you, by definition nothing would be an intervention, since as soon as the government had enacted it, it would be "the system we work with" and therefore not an intervention. Is that the best you can do?

FRB and fiat money are interventions in that they change the price from what it otherwise would be, claiming to create social benefits by rigging prices.

You do not deny that these monetary policies are fraudulent nor that they caused the GFC. The only reason you think it is more “practical” to continue with these is because you think it would require "destroying the world economy", destroying "95 percent" of businesses, and would bomb us back to the agrarian age.

I have explained why this is mistaken, and the cure in plain language. So then you feign ignorance and re-circulate all the fallacious assumptions I have just refuted. Neither accepting nor refuting the argument, and endlessly assuming what is in issue, might satisfy your intellectual standards, but if I may say so, it shouldn't. It is irrational.