the experience of the 1930’s suggests that exchange-rate disputes can be even more dangerous than deep slumps in terms of generating protectionist pressures.
the experience of the 1930’s suggests that exchange-rate disputes can be even more dangerous than deep slumps in terms of generating protectionist pressures.
Over the years, the sledgehammer style of central planning has fallen out of favor. Nevertheless, Hayek’s case for decentralization remains relevant.
via hbr.org
If you know me reasonably well, you know I like to plan. Correction: I like the mental clarity that comes when planning. Behaviour gap have a wonderful article on the distinction between the two:
Think of this as the difference between a flight plan and the actual flight. Flight plans are really just the pilot’s best guess about things like the weather. No matter how much time the pilot spend planning, things don’t always go according to the plan.
In fact, I bet they rarely go just the way the pilot planned. There are just too many variables. So while the plan is important, the key to arriving safely is the pilot’s ability to make the small and consistent course corrections. It is about the course corrections, not the plan.
I try to spend as much time planning my financial security as I would spend planning a summer holiday. Do you?
As Tom Clougherty reports, I have written a think piece for the Adam Smith Institute on QE2. I wrote the article quite quickly, and was not being false modest when I say:
I don’t intend to settle this debate – declaring it ‘right’ or ‘wrong’ oversimplifies what is a complex issue.
I've read a host of articles on QE2 and I do think that there's too much knee-jerking and reliance on priors. To be sure the use of QE to boost aggregate demand (rather than prevent a liquidity meltdown) is a precedent, and precedents require theological arguments*, but let's not be glib here.
I call to task economists that have continually warned of hyperinflation since the first round of QE (myself included), but I also try to make a distinction between the monetary disequilibrium approach and monetary accomodation:
There is a plausible free market argument to say that under certain institutional conditions (such as competitive banks and no moral hazard), increases in the money supply to offset changes in the demand for money would avoid adjustments having to take place through the notoriously ‘sticky’ real economy. In the same way that inflation creates real effects, so does a monetary deflation, and these effects are neither desirable nor necessary. However, whether this theoretical possibility can be acted upon is another matter. Even if central bankers had the benevolence to try to replicate markets, they most certainly do not possess the omniscience. Expecting such economists to comment on the ‘appropriate’ level of monetary expansion misunderstands the whole point.
In other words - Pete Boettke are you listening (!) - there is a very clear dividing line between Austrian "free bankers" and Scott Sumner-type monetarists (see comments sections here and here).
* 2006 “ The Spread of Economic Theology: The Flat Tax” Romanian Economic and Business Review Vol. 1 No. 1 pp.41-53
Update: Chris Dillow discussed my article:
Anthony is bang right to say that you cannot buy confidence.
I quibble on just one point. Anthony says that QE increases regime uncertainty. He’s probably right. But I’m not sure it increases overall uncertainty. In the absence of QE, we’d still be uncertain about whether confidence will return and how fast the real adjustments (away from debt and construction) in the economy will take place. QE doesn’t add to this uncertainty, so much as displace a little of it; there‘s more uncertainty about policy, but less about the real economy, to the extent that the risk of a catastrophe is diminished.
If I suggested that QE increases overall uncertainty then I take it back. I consider myself one of the very few economists that takes notions of uncertainty seriously, and I simply do not believe that uncertainty exists in an aggregate form. In the same was that there's no such thing as "risk aversion" (merely "aversion to certain types of risk"), you cannot "reduce" risk - you can only move it about. And if statements such as "banks decided to take on too much risk" are meaningless, the idea that certain policies increase or reduce uncertainty in an aggregate sense are nonsense. As Chris makes clear - policies can only alter types of risk and uncertainty, and policies can only displace it.
Brian Micklethwait continues his ongoing mission ... by speaking to one of its foremost practitioners in England, Anthony J. Evans, who is Assistant Professor of Economics at ESCP Europe, co-author of The Neoliberal Revolution in Eastern Europe: Economic Ideas in the Transition from Communism, and a founding fellow of the Cobden Centre.
Further to my recent talk on the rise of Austrian economics (I believe we can label it "the second revival"), see above for a recent interview with Brian MIcklethwaite. This one was more biographical, and if memory serves the key points I was trying to get across was the importance of an Austrian PhD program for the UK.
Update: I've just listened to the interview and there's a part where I say "post-Keynesian" when I really mean "New Keynesian". I'd been reading Dave Prycitko's article on the train in, but the error should be obvious. Also, the audio cut out when I mentioned "The Capitalist Alternative". Here's a link.
They can’t have it both ways. They pick up otherwise ignored articles, fulminate against them and in doing so accuse me of pushing myself forward! If the mainstream media ignored the frankly insignificant articles in which I appear almost no one would hear of them. All they have to do is ignore me, instead of which they big up everything they can find which involves me and then follow up their irritation with outraged expressions of annoyance at how prevalent I am. Well they are the ones who make me prevalent. It’s all rather potty and in the end all one can do is giggle at such farcical nonsense
I note the UK PA responds with:
Stephen Fry has compared agreeing to being interviewed by journalists to consenting to "being mugged, raped or burgled" after a row broke out over remarks he made to a magazine.
"To Austrians inflation never stabilises, it is always destabilising"
Mark Skousen, speaking at the IEA
Another example of regime uncertainty:
Trading is somewhat subdued across financial centres as investors appear a bit reluctant to take fresh positions ahead of this weekend’s conclusion of the G20 finance ministers meeting in Seoul at which forex policy will be centre stage.
via www.ft.com
The decision, which brings to an end six years of government attempts to avoid the issue, opens the possibility that even those facing life sentences for very serious crimes could in future shape Britain’s elections.
In the past I've advocated a restriction of the franchise, and the reason I like to raise it is that people tend to act as though universal suffrage is both desirable and the norm. It's clearly not though - and this article possibly reflects a popular view that certain prisoner's shouldn't vote. But which prisoners?
I'm with P.J. O'Rourke - don't vote, it just encourages the bastards!
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