Beauty and Brains

Which doesn't mean I embrace Keynesianism (I hesitate to say I embrace anything I don't understand - cf. Marxism, post-modernism, and quantum theory) - just that it seems odd to boast that nobody's agreed with you for the last seventy-five years.

It had to come

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Say what?

In the age a few days ago

"Government spending spree has no real-world benefit
Steven Kates
February 20, 2009

....
A few days ago, I found the following in the latest issue of the Claremont Review of Books. This is a quote from George Gilder as part of a symposium on government and economic crisis. In it he wrote something that should be kept in mind as governments go about spending on their favourite projects. He, of course, was speaking of the United States. His point is just as valid here.

"Meanwhile, the profession upholds the phantasmagorical models of demand-side economics. Because these models find no confirmation in reality — as Jean-Baptiste Say proved centuries ago, demand is always and only a side effect of real supply — established economic theories are extremely difficult to learn and remember. You get Nobel prizes for minor and obvious insights in economic geography. Thus the exponents of the standard model are deeply threatened by any reality-based economics."

What Gilder is discussing is something called Say's Law, the very cornerstone of pre-Keynesian economics. A properly educated economist before Keynes published his General Theory in 1936 would have understood that only goods buy goods, with money as a mere intermediary. When all was finally said and done, each person could only buy with the value added they had created, which had then been converted into money.

I work and help in the production of some good or service. I am paid money for what I have produced. Others do the same and we each buy from each other using the money we have received for actually having created some value. Money makes the exchange more efficient, but beneath it all, the actual purchase is made with each person's own productions.

So the fictitious invention of demand through handing out deficit-financed tax cuts cannot stimulate demand unless it stimulates supply first, which it won't.

The great disaster of Keynesian economics was the introduction of the aggregate demand curve that had not existed prior to 1936 and was specifically rejected by economists before Keynes. That was what Say's Law meant.

And I am not talking about economists in 1803, when Say wrote his first book, but economists throughout the entire period from the mid-18th century right through to the publication of the General Theory.

Any policy dependent on shifting the aggregate demand curve will fail precisely because there is nothing in reality that corresponds to what the aggregate demand curve is supposed to represent.

.....

Dr Steven Kates teaches economics at RMIT University in Melbourne."

Without knowing anything about either Say's law or Kates it does seem extremely odd in twenty-first century western secular culture, to the point of being difficult to comprehend, that it should be put forward as an argument for a position that everybody believed it from 1803 up to about 1934.

And one does, of course, know a little about George Gilder. Here, I'll generously google him for you. George Gilder.

Being scrupulously honest, I have to say that what I thought I knew about Gilder wasn't correct - from memory, I thought he was one of the Dow 36,000 boys, disproved on checking Amazon (and I see that there's still a market for this stuff - Dow 100,000; and Dow 30,000 by 2008 - Why It's Different This Time - Second Printing; and Why the Real Estate Boom Will Not Bust - And How You Can Profit from It - keepers, all). No, Gilder was a different bubble. Point still stands, though: not really a cite carrying heavy credibility.

The Fires

I man, I love a sunburned country as much as the next Dorothea McKellar, but this is ridiculous.

Age bin

Actually, that's three rules, which I suppose casts some doubt on my arithmetic in this letter to the Age.

Costello and Turnbull are complaining that if we go into deficit our grandchildren will still be paying off the debt. And what exactly is wrong with that, pray?
Let’s look back a little. In 1932 Australian governments were running a collective deficit of nineteen million quid. The bankers of the day objected to this profligacy, pulled the government into line, and by 1937 the governments were a million quid in surplus (pity about the depression, though).
If instead of cutting costs the governments had quadrupled the deficit in order to put more people in work, and paid for it by issuing 100-year bonds at 10%, Australians would now be groaning under the burden of paying back 99 million dollars a year, five dollars a year per head, or a swingeing 0.04% of the federal budget – except that that’s probably an overestimate, as the economy would actually be larger than it is now because of the higher growth on a larger base.
I don’t know about you, but I wouldn’t begrudge paying my grandfather ten cents a week. I suppose that’s why I’m not a banker.

The Spirit

Why do I do these things to myself? I'm over sixty, I have a limited number of evenings left, why do I waste them on things that are not simply worthless but represent an actual subtraction from my capacity to enjoy the world?
I went to Miller's Spirit. I'll spare you the torrent of point-by-point no no nos, and cut it back to two rules.
1) When a comic book movie won't let you look at one frame of the original comic over the titles, they're so ashamed of the comparison that you should take their word for it.
2) When a comic book movie shows the face of someone who in the original has their face hidden (Stallone as Judge Dredd: Samuel Jackson as The Octopus) they show they don't understand what was going on in the comic and won't be able to draw on it effectively.
3) Frank Miller can't handle any movie that doesn't have rollerskating japanese ninja whores in it.

Acland Street

One of the folk over at Yglesias is talking about civility in political debate, and says, inter alia,

"After several generations of negotiations and concessions, I may not think there’s much room for further reconciliation between pro-lifers and pro-choicers in the United States. That I don’t necessarily feel the same way about Israelis and Palestinians, though, doesn’t betray an inconsistency at all. Frankly, if that conflict began to resemble the culture wars in America, and the political debate cooled along with it, it would be the most promising development in the Middle East since the creation of modern Israel."

Sorry, that I really don't get. We're dealing with facts on the ground, yes, we can't wish ourselves back to a point where we had better options, sure, but surely if we were back in 1945 or 46 with the wisdom of hindsight we can see now that it would have been better not to do this at all? If somebody had cleared their throat and said "Yes, moving millions of Europe's jews into a part of the world where they're surrounded by and infiltrated with people who hate them and are going to go on hating them as, among other things, usurpers and displacers is a good idea exactly how?" then that, surely, would have been a very promising development. Then all the jews could have come to Australia and we wouldn't be in the situation we are now where Cafe Scheherazade in Acland Street is having to close for lack of custom.