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Keynesians Failures

John Cochrane writes in the Wall Street Journal An Autopsy for the Keynesians


Keynesians told us that once interest rates got stuck at or near zero, economies would fall into a deflationary spiral. Deflation would lower demand, causing more deflation, and so on.

It never happened. Zero interest rates and low inflation turn out to be quite a stable state, even in Japan. Yes, Japan is growing more slowly than one might wish, but with 3.5% unemployment and no deflationary spiral, it’s hard to blame slow growth on lack of “demand.”

Our first big stimulus fell flat, leaving Keynesians to argue that the recession would have been worse otherwise. George Washington’s doctors probably argued that if they hadn’t bled him, he would have died faster.

With the 2013 sequester, Keynesians warned that reduced spending and the end of 99-week unemployment benefits would drive the economy back to recession. Instead, unemployment came down faster than expected, and growth returned, albeit modestly. The story is similar in the U.K.

These are only the latest failures. Keynesians forecast depression with the end of World War II spending. The U.S. got a boom. The Phillips curve failed to understand inflation in the 1970s and its quick end in the 1980s, and disappeared in our recession as unemployment soared with steady inflation.

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A Prescription for Unrest


Scott Grannis writes in his blog, Calafia Beach Pundit, Too much poverty, or too much aid?

In 1970, the population of the U.S. was just over 200 million. Today it is approaching 320 million. When the food stamp program (SNAP) started in 1970, it covered about 1.5% of the population. Today it covers about 14.5% of the population—a ginormous increase by any standard. An increase of this magnitude could only be driven by a reduction in eligibility standards, because we are all richer today than ever before.

Real household net worth today is over $80 trillion, up over 400%—more than $66 trillion—from what it was in 1964. Living standards, as defined by how much you can buy with a given amount of work, have risen by an extraordinary amount over the years. Yet the government is handing out more money to more people than ever before.
The huge increase in income redistribution is almost entirely driven by a political agenda that refuses to recognize that the average person today is better off than kings were yesterday, and instead focuses on the “problem” that some of the rich have gotten more richer than everyone else has gotten richer. 
If there is a real problem today, it is the redistribution of wealth. It has grown to such an extent that two-thirds of our children are being taught to believe that they can only enjoy a modern standard of living with the help of government handouts. A few generations ago, America was proud to teach its children that anyone could become rich if he or she were willing to study and work hard. Today’s children are being taught to believe that they are entitled to be rich, no matter how little or how hard they work. That is a prescription for decline and servitude and ultimately, great social unrest.
The answer to the question is obvious: we suffer from too much aid, not too much poverty.
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Catalysts for Violence


Victor Davis Hanson writes Lying for the Cause in The National Review.  I was considering a piece on the recent accumulation of lies befalling the progressive movement, but there is nothing I could write than could touch Hanson’s piece.

Excerpts: (but do read the whole article)

Two, in the most reductionist sense, there is no downside to lying, if the lie is considered useful for a noble liberal cause. It was the Duke lacrosse players whose lives were ruined, not the professors who wrote public letters condemning them as likely racist rapists. We should expect that if there is something like a Duke baseball scandal at some future date, the same professors would write the same false indictments for the same reasons as they did in the lacrosse case — because there is no liability in weaving a particular sort of tale.

Al Sharpton did not have his business burned down in Ferguson, so why should he worry that he simply turns myths into catalysts for violence? I doubt whether the president of the University of Virginia will be censured for all but equating campus fraternities with endemic rape. It is not as if she said something of the sort that cost Larry Summers his job.

Who is going to indict Dorian Johnson for offering false testimony about the death of Michael Brown, or dare tell the Black Caucus that their “Hands up, don’t shoot” theatrics were based on lies? Massaging helpful facts pays; demanding proof for fantasies does not. We live in an age where plagiarism — ask Fareed Zakaria or Doris Kearns Goodwin — is of two sorts: the traditional deliberate theft of someone else’s work for one’s own aggrandizement, and the “problematic” sort, when progressives overwhelmed with data as they strive to give voice to the liberal cause make an inadvertent slip.


At the heart of modern progressivism is an “ends justify the means” mentality.  Lies are merely myths to serve a greater purpose.  Facts only have value to the extent that they serve the preferred narrative.



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The Prosecutocracy


Conrad Black writes Eric Garner’s America in The National Review.


The Supreme Court has sat like a shelf of suet puddings while the criminal-justice system has become a conveyor belt to the country’s bloated and corrupt prison system, and lawyers have become an immense industry, hiding its avarice behind a fog of insipid pieties about the rule of law (which, as the phrase was meant by the authors of the Bill of Rights, can scarcely be said to exist in the U.S.). New York federal judge Jed S. Rakoff wrote in the New York Review of Books on November 20 that the traditional American notion of the day in court is “a mirage” because of the corruption of the plea-bargain system, in which inculpatory evidence is extorted from witnesses in exchange for immunity from prosecution, including for perjury. Every week there is some new exposé of horror stories of prosecutorial abuse, yet prosecutors enjoy an absolute immunity, even when it is revealed that they have committed crimes of obstruction of justice, as in the infamous Connick v. Thompson decision of 2011: An innocent man spent 14 years on death row because prosecutors willfully withheld DNA evidence they knew would, and ultimately did, acquit him; the U.S. Supreme Court narrowly overruled the damage award to the wrongfully convicted Mr. Thompson on a spurious technicality. Less exalted courts are not more condign. Richard Posner in the Circuit Court of Appeals in Chicago and Leo Strine, now gamboling in his new office as chief justice of Delaware, are, to this writer’s perfect and indelible recollection, among the most famous (and publicity-seeking) judges who have little discernible interest at all in coming up with a correct verdict or even in developing a reasonable knowledge of the cases before them. They are the zeitgeist in robes, Nancy Grace with a gavel and a sex change, and they boisterously consider themselves inexhaustible reservoirs of raucously insightful witticisms and aperçus.

The greatest problem is not racist police; the police generally follow orders, especially under a distinguished commissioner such as New York’s WilliamBratton. It is complacent judicial and media tolerance of a morally bankrupt prosecutocracy. There are scores of millions of Americans of every ethnic, economic, sociological, and age group and every region who are victims of the system as it has mutated; and this is the time for all those shocked at the Garnerchokehold tragedy, and other recent police excesses, to link arms and seek comprehensive reform. The principally aggrieved individuals in the current controversies and their advisers should demand equal treatment for defense and prosecution at trial, independently funded and accountable public defenders, a restoration of judges’ discretion in sentencing instead of mandated draconiansentences, appropriate community service in place of severe custodial sentences for non-violent offenses, a requirement that most judges not be ex-prosecutors, the last word before the jury for the defense (as in every other civilized country), and an absolute end to the plea-bargain system as a form of irresistible extortion ofinculpatory perjury. They would have the support of much of the media and there would be peaceful demonstrations in every community in America that could probably snowball to involve 100 million people. No one except the bloodstained fraternity of the prosecutors and associations of loopy police chiefs support the status quo, and a demonstration of public righteousness would bring every member of Congress, including the most witless and stentorian parrots of the law-and-order mantra, to their knees, miraculously cured of their policy infirmities.


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A Code Word for Tyranny


University of Chicago economist John Cochrane has written one of the most unique and insightful perspectives on inequality in his blog, The Grumpy Economist.  Read Why and how we care about inequality in its entirety.  It is about 6 pages long.


But let’s go with their argument. At least now the argument makes sense, in a way that limiting envy-induced spendthrifery does not. But looked at in the light of day, the argument is truly scary. They are saying that the government must confiscate individual wealth so that individual wealth cannot influence politics in directions they don’t like. Koch brothers, no. Public employee unions, yes.

We finally agree on a cause-and-effect proposition. Yes, expanding the power of the state to direct economic activity and strip people of wealth is well-proven way to cement the power of the state and quash dissent. 

So now you see why I rebel at the presumption that “inequality” is a problem, and why I rebel at the task of articulating an alternative “solution.” “Inequality” has become a meaningless buzzword, or code word for “on our team,” like “sustainability,” or “social justice.” Should we discuss “free-market solutions” to address “social justice?” 

“Inequality” has become a code word for endless, thoughtless, and counterproductive intrusions into economic activity. Minimum wages, stronger teachers unions, even prison guard unions, are all advocated on the grounds of “providing middle class jobs” to “reduce inequality,” though they do the opposite. Mayor Bill de Blasio has already reduced it to farce: As reported in the New York times, the latest energy efficiency standards for fancy New York high rises are being put in place. Why? To cool the planet by a billionth of a degree? To stem the rise of the oceans by a nanometer? No, first on the list… to reduce inequality. Poor people pay more of their incomes in heating bills, you see.


We are much better having wealth influence power than having power influencing wealth.