John Maynard Keynes

Two Americans [Anti-Keynesians] Win Nobel Prize for Economics

Published by Papa Giorgio
  • By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.  – John Maynard Keynes

Originally posted in October 2011 ~ Updated the media files

GATEWAY PUNDIT has this:

Two anti-Keynesians won this year’s Nobel Prize for Economics. Investor’s Business Daily reported:

Failed Policy: The Nobel Prize for Economics goes to two Americans who have separately exposed the flaws in government stimulus spending. For a Keynesian president, it’s the Anti-Peace Prize.

When President Obama was awarded the Nobel Peace Prize during his first year in office, detractors said it was for doing nothing.

That can’t be said for Thomas Sargent of New York University and Princeton’s Christopher Sims, whose macroeconomics work has been of invaluable help to central bankers and other economic policymakers, and for which they now share this year’s economics Nobel.

Sargent’s discoveries in particular echo the rationale Republican leaders in Congress have presented in opposing the massive Democratic stimulus spending during the first two years of the Obama administration — that such spending seeks to give the economy nothing more than what House Budget Chairman Rep. Paul Ryan over the weekend aptly called a “sugar high.”

This is an old accumulation of quotes via Bovard, Keynes, and Friedman regarding the “hidden tax”::

John Maynard Keynes hailed the Soviet Union in a 1936 radio interview as,

  • “engaged in a vast administrative task of making a completely new set of social and economic institutions work smoothly and successfully.”

And in a preface he wrote to the 1936 German edition of his General Theory of Employment, Interest, and Money, Keynes stated that his economic theory,

  •  “is much more easily adapted to the conditions of a totalitarian state” than to “conditions of free competition and a large measure of laissez-faire.”

The two above quotes are from James Bovard’s book, Freedom in Chains: The Rise of the State and the Demise of the Citizen, (New York, NY: St. Martin’s Press, 1999), 14, 20-21.

Another Keynes quote lets the individual in on the result of his theories, which most nations use (i.e., central banking; e.g., the Federal Reserve Bank):

“Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth.

Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become “profiteers,” who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

John Maynard Keynes, The Economic Consequences Of The Peace (New York, NY: Harcourt, Brace, and Howe, 1920), 235-236

Milton Friedman quoted this in Money Mischief: Episodes in Monetary History:

  • “By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some . . .. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose.”

This last quote IS what happens with Keynesian economics!  An unseen taxation of citizens, on top of normal taxation.

Here is a good (as good as an economist’s presentation can be) presentation by Thomas Sargent:

Speaker: Professor Thomas J Sargent Chair: Professor Francesco Caselli

This event was recorded on 10 February 2010 in Old Theatre, Old Building

Combining an historical approach with macroeconomic theory, Thomas Sargent will discuss ways of thinking about American fiscal and monetary policies – exploring how contradictions have developed and how they have been resolved. Thomas Sargent is professor of economics at New York University and senior fellow at Hoover Institution at Stanford University.

More via ECONOMIC LIBERTY:

Thomas Sargent was awarded, along with Christopher Sims, the 2011 Nobel Prize in Economic Sciences. The Nobel committee cited their “empirical research on cause and effect in the macroeconomy.” The Swedish economists who spoke at the press conference announcing the award emphasized the importance of Sargent’s and Sims’ thinking about the role of people’s expectations.

Sargent was an early and important contributor to the rational expectations revolution in macroeconomics, an area for which his sometime collaborator, Robert E. Lucas, Jr. won the Nobel Prize in 1995. One of Sargent’s key early contributions, along with University of Minnesota economist Neil Wallace, was the “Policy-ineffectiveness proposition”—the idea that people’s expectations about government fiscal and monetary policy make it difficult for government officials to affect the macroeconomy in the ways they intend to. If, for example, people get used to the Federal Reserve increasing the money supply when unemployment rises, they will expect higher inflation and, thus, will adjust their wage demands higher. Therefore, the lower unemployment rate that the Fed was trying to achieve with looser monetary policy will not occur.

This conclusion was at odds with the Keynesian model, which dominated economic thinking from the late 1930s to the early 1970s. The Keynesian model posited a stable tradeoff between inflation and unemployment. In 1970, major U.S. econometric models, built on Keynesian assumptions, predicted that the government could get the unemployment rate down to 4 percent if it accepted an increase in inflation to 4 percent. In a 1977 article, “Is Keynesian Economics a Dead End?” Sargent wrote: “[I]nstead of 4-4, in the mid-1970s we got 9-9, a very improbable occurrence if econometric models of 1969 had been correct.”

In the 1980s, Sargent explored expectations in other contexts. Sargent and Wallace argue in their highly influential paper, “Some Unpleasant Monetarist Arithmetic,” that good monetary policy requires good fiscal policy. Building on this, Sargent detailed how a government can end high inflation in “The Ends of Four Big Inflations.” Sargent studied four countries that had hyperinflation in the early 1920s: Germany, Austria, Hungary, and Poland. All used inflation to finance high government deficits. They all succeeded in eliminating hyperinflation, but to do so, they had to be credible. They had to affect people’s expectations by committing to substantially lower budget deficits or even balanced budgets. All four governments did so.

Sargent is actually quite ecumenical. In a 2010 interview, Sargent praised articles by left-wing economists Joseph Stiglitz and Jeffrey Sachs. Stiglitz and Sachs, he pointed out, “executed a rational expectations calculation to compute the rewards to prospective buyers” of toxic assets under President Obama’s Public-Private Investment Program of 2009. “Those calculations,” said Sargent, “showed that the administration’s proposal represented a large transfer of taxpayer funds to owners of toxic assets.”

Although the Nobel committee did not cite his work on unemployment insurance, Sargent, with Swedish economist Lars Ljungqvist, found that high, long-lasting unemployment benefits in Europe have caused many European workers who lost their jobs to stay unemployed for years and, thereby, erode their human capital. This makes them less employable in the long run. The fact that the U.S. government extended unemployment benefits in many U.S. states to 99 weeks, said Sargent in the 2010 interview referenced earlier, “fills me with dread.”

One of the main ways that Sargent has had influence is through his many, many students. An image of the students he has influenced, with Sargent in the middle of a flower, is worth a thousand words.

Thomas Sargent earned his B.A. from the University of California, Berkeley in 1964 and his Ph.D. from Harvard in 1968. He taught at the University of Pennsylvania from 1970 to 1971, the University of Minnesota from 1971 to 1987, the University of Chicago from 1991 to 1998, and Stanford University from 1998 to 2002. In 2002, Sargent began teaching at New York University, where he has since remained. Sargent was a Research Associate for the National Bureau of Economic Research From 1970 to 1973, and has been again from 1979 to the present. Between 1971 and 1987, Sargent was an Advisor to the Federal Reserve Bank of Minneapolis. He has been a fellow of the Econometric Society since 1976, a member of the National Academy of Sciences and American Academy of Arts and Sciences since 1983, and a senior fellow at the Hoover Institution since 1987. He was President of the American Economic Association in 2007.

About the Author

David R. Henderson is the editor of The Concise Encyclopedia of Economics. He is also an emeritus professor of economics with the Naval Postgraduate School and a research fellow with the Hoover Institution at Stanford University. He earned his Ph.D. in economics at UCLA.

No Free Lunch

Published by Papa Giorgio

I just will drop this here that the #1 the Foundation for Economic Education (FEE) recommends from their top five books is:

1. Economics in One Lesson (Henry Hazlitt, 1946)

The fact that I recently dedicated an article to this masterpiece shows the special attachment I have to Henry Hazlitt and this work in particular. In Economics in One Lesson, the author debunks a series of widespread economic fallacies using a simple and accessible language. If you wish to learn more about some basic, though important, economic principles, this is your book. One piece of advice before starting to read it: get rid of your prejudices and preconceptions so that you can make the most of it.

Stossel

John Stossel investigates a New York City park bathroom that cost $2 million to build. (This video was made 7-years ago… factor in inflation [printing money].)

  • For that price you might expect gold-plated fixtures—but it’s just a tiny building with four toilets and two sinks. New York City Parks Commissioner Mitchell Silver says $2 million was a good deal because “New York City is the most expensive place to build.” He estimates that future bathrooms will cost more than $3 million. Commissioner Silver argues that this park, on the outskirts of Brooklyn, will get so much use that it must be built to last, and that can be expensive. Yet privately managed Bryant Park, in the middle of Manhattan, gets much more use and its recent bathroom renovation cost just $271,000. Since government spends other people’s money, it doesn’t need to worry about cost or speed. Every decision is bogged down by time-wasting “public engagement,” inflated union wages, and productivity-killing work rules. Two million dollars for a bathroom. That’s your government at work.

Prager-U

Few people have had as profound an impact on modern economics as economist Milton Friedman. His Nobel Prize-winning ideas on free enterprise resonated throughout the world and continue to do so. Johan Norberg, Senior Fellow at the Cato Institute, tells Friedman’s fascinating story.

O.G. No Free Lunch

Milton Friedman gives his thoughts on something called the “free lunch myth”. The idea is that the government can provide stuff for free at nobodies expense. Milton Friedman thinks this is false and he tells us why. Share with Bernie Sanders supporters you know.

NATIONAL REVIEW has a wonderful series on the issue. Longer videos, but well worth your time”

Father Robert Sirico | No Free Lunch with David Bahnsen

David L. Bahnsen and Father Sirico discuss the philosophical and theological foundations of American free enterprise. Father Robert Sirico is a Priest, Author, and the Cofounder and President of the Acton Institute.

Dr. Hunter Baker | No Free Lunch with David Bahnsen

In Episode 2, David and guest Dr. Hunter Baker define human action, defend the dignity of work, and dissect the dangers of collectivism. Hunter Baker, J.D., Ph.D. serves as dean of arts and sciences and professor of political science at Union University in Jackson, Tennessee.

Dennis Prager | No Free Lunch with David Bahnsen

David speaks with guest Dennis Prager, author, host of The Dennis Prager Show and founder of PragerU, about the many ways covetousness and class envy corrode good economics, the nature of inequality, and how the Left’s culture of entitlement destroys the American value system.

Larry Kudlow | No Free Lunch with David Bahnsen

Bahnsen speaks with Larry Kudlow, former director of the National Economic Council and host of Kudlow on Fox Business, about why incentives are the heart of economics. The two discuss the history of supply-side economics, discuss the regulatory policies and problems that disincentivize businesses and households, and address the disease of wokeness in American boardrooms.

Ryan T. Anderson | No Free Lunch with David Bahnsen

Thanks to the Left’s culture of class envy, private property has become a four-letter word in popular culture. In this episode of No Free Lunch, Ryan Anderson, author and president of the Ethics and Public Policy Center, joins host David Bahnsen to examine the theological justification for accumulating private property, discuss how private property creates prosperity and encourages compassion, and debate the State’s role in private-property protection.

Doug Wilson | No Free Lunch with David Bahnsen

David hosts Pastor Doug Wilson to discuss virtue and discipline not simply as desirable moral characteristics in economics, but as the very necessity of free markets.

(BONUS EP.) Sen. Ted Cruz | No Free Lunch with David Bahnsen

David Bahnsen speaks with guest Senator Ted Cruz about the government’s role in free markets and the conservative vision for sound economic policy.

However, the PHRASE “There ain’t no such thing as free lunch,” is made into an acronym (TANSTAAFL). And it is used to great delight in various and sundry ways: here, here, here, here, here, and here, as some examples. It’s origin dates back quite some time. But QUOTE ORIGIN did some bang up work on the matter. LIBERTARIANISM.ORG has the intro to the fable:

“There ain’t no such thing as a free lunch” has been a popular libertarian slogan since the 1960s. The slogan’s meaning is simple: you cannot make something from nothing. In a political context, the state cannot promise fantastical benefits without eventually increasing taxes.

Although Robert Heinlein is responsible for popularizing the slogan, he is not its creator. The phrase might seem a little alien because it is associated with an old business practice that diminished over time following the Great Depression. Between 1870 and 1920, bars and taverns served free lunches with the purchase of a drink to entice new customers. Salty food was served to get customers to drink more beer and spend more money.

The first use of TANSTAAFL in its modern context can be found in an article entitled “Economics in Eight Words” in the El Paso Herald-​Post from 1938, likely written by a man named Walter Morrow, editor-​in-​chief of The Southwestern Group of Scripps-​Howard Newspapers.

“Economics in Eight Words”

Once upon a time a great and wise king ruled a populous and prosperous land. The width and breadth of his kingdom were measured in thousands of leagues.

But a plague of poverty came upon that land, and no man knew its cause. There were mighty and inconclusive arguments in the halls of government, and learned graybeards in the schools advocated this remedy or that.

The king, seeing that his people were starving and distressed in the midst of plenty, called his wisest counsellors from the four quarters of the kingdom.

Seated on his golden throne and arrayed in his royal robes, he commanded them to lend him their wisdom. Then began an argument that lasted all through the night, until the King’s head drooped wearily with the weight of the sapphires and diamonds in his golden crown. As dawn was breaking he arose and said:

“Here is only confusion of tongues. I have heard many of you speak of a science called economics, which may prove the key to my people’s troubles.

“Mark well my words: One month hence let all the economists of my kingdom assemble here, bringing with them a short and simple text on this subject of economics, so that I may find light and my people may be saved.”

A month passed. The economists assembled, and their number was two thousand and ten.

“Where is my short text on economics?” asked the king.

“O, sire,” replied the chief economist, “we have it not. To prepare such a text will require at least a year.”

“That,” said the king, “is a long time, and my people languish. But go, now, and get to work without delay.” A twelvemonth later the economists took their places in the great audience hall, around the crystal walls of which stood the palace guards, armed with spears and crossbows. Then stood forth the gray-​bearded chief economist.

“O, King,” he said, “We have labored with all diligence and have prepared the short text on economics for which you asked. We have it here in 87 volumes of 600 pages each, profusely illustrated with charts and graphs.”

The king, exceedingly wroth, raised his scepter and let it fall with a crash, so that the great sapphire in its tip bit deeply into the table top before him. And the guards, raising their crossbows, shot one thousand and five of the economists.

“Now,” thundered the king, “get you gone, and return not until you have written me a really brief text on economics.”

And the remaining economists fled down the long hall, and the iron doors of the palace clanged behind them.

But, another year having passed, they returned, and the aged spokesman spoke with prideful voice:

“Sire, at last we have just what you want. We have reduced our work on economics to 63 volumes by eliminating the graphs and charts.”

Again the king raised his scepter and brought it down, with such force this time that the great sapphire remained embedded in the walnut and the pearl of the table top. Again the guards shot their crossbows, and again the number of economists was reduced by half. And those left alive fled once more from the king’s wrath.

Year after year they returned to the palace, bringing each time a slightly more condensed version of the text on economics. But never was the king satisfied, and each time the palace guards shot more economists until at last only one remained alive.

He was a man of profound wisdom, but aged and feeble, so that never had he been able to make his voice heard above the disputations of his colleagues.

And a day came when this last economist plodded slowly to the palace and sought audience with the king, himself now a graybeard, sad and bent with pondering the troubles of his people. Trembling, the last economist approached the throne, prostrated himself before the king, and spoke:

“Your majesty, I have reduced the subject of economics to a single sentence, so brief and so easily remembered that it was not necessary to put it on paper. Yet I will wager my head that you will find my text a true one, and not to be disputed.”

“Speak on,” cried the king, and the palace guards leveled their crossbows. But the old economist rose fearlessly to his feet, stood face to face with the king and said:

“Sire, in eight words I will reveal to you all the wisdom that I have distilled through all these years from all the writings of all the economists who once practiced their science in your kingdom. Here is my text:

“There ain’t no such thing as free lunch.”

This also comes by way of LIBERTARIAMS.ORG’S YOUTUBE CHANNEL via CATO! Good stuff.

There’s No Such Thing as a Free Lunch (Milton Friedman) – The Turney Collection

  • Milton Friedman, recipient of the 1976 Nobel Prize for Economic Science, was one of the most recognizable and influential proponents of liberty and markets in the 20th century, and the leader of the Chicago School of economics. In this video from the grand opening of the Cato Institute’s headquarters in Washington, D.C. in 1993, Milton Friedman gives a talk about popular political aphorisms, one of his favorites being the one he helped popularize in the title of his 1975 book, “There’s no such thing as a free lunch.”

Agents At Our Presidents Ear ~ Diana West

Published by Papa Giorgio

Just read an amazing article by Diana West, author of, American Betrayal: The Secret Assault on Our Nation’s Character. The article is the first of 5, and is over at Breitbart, here is just a small snippet:

…According to Soviet intelligence reports, we now know that one of FDR’s top officials, the Treasury Department’s Harry Dexter White, was a Soviet agent, who, among many other deceptions, subverted relations between the US and Japan by inserting “ultimatum” language into the cable flow that actually spurred the Japanese attack. This was language written in Moscow, passed to White by a Soviet handler in Washington, D.C., and dropped into a State Department communiqué sent to Japan.

This brilliantly executed influence operation doesn’t live in infamy – at least not yet.

[….]

For the first 24 hours after Japan attacked, US military officials did reverse the flow of arms, aircraft and ammunition heading for England and the USSR for re-shipment to Hawaii and the Philippines – the patriotic reaction, the natural reaction. This, however, would be overruled from the top, as Lend Lease historian George C. Herring has noted.

Why? Why wasn’t supplying US forces fighting Japanese in the Philippines taking immediate precedent over supplying Soviet forces fighting Germans in the USSR?

[….]

Could the decision to abandon US forces to death or the horrors of Japanese POW camps by giving uninterrupted priority to the Red Army have had anything to do with the influence of the scores of Soviet agents and assets within reach of the levers of power inside the US government? How about the man driving military supply policy, the man behind Lend Lease?

That man was Harry Hopkins and he was without question FDR’s top wartime advisor. As George Marshall would state in 1957 to his official biographer Forrest Pogue: “Hopkins’s job with the president was to represent the Russian interests. My job was to represent the American interests.”

Was Hopkins representing Russian interests at a time of American need?

…read more…

It is of interest to me that Harry Dexter White worked against John Maynard Keynes to soo influence our nations outlook on economics in setting up a false choice between two sets of bad ideas which were not all that different… both allowed for forces to work against the free-market. Remember, Keynes himself said:

John Maynard Keynes hailed the Soviet Union in a 1936 radio interview as,

“engaged in a vast administrative task of making a completely new set of social and economic institutions work smoothly and successfully.”

And in a preface he wrote to the 1936 German edition of his General Theory of Employment, Interest, and Money, Keynes stated that his economic theory,

“is much more easily adapted to the conditions of a totalitarian state” than to “conditions of free competition and a large measure of laissez-faire.”

(This quote and the above is from James Bovard’s book Freedom in Chains: The Rise of the State and the Demise of the Citizen, pp. 14,20,21)

Sick, and to think the Left still loves this economic outlook! One commentator of the book mentioned in the afore mentioned comment points out the economic place America had come to near the end of WWII:

“The Battle of Bretton Woods” was a scholarly work [and] well worth the effort to read. I can’t believe the incredible ego of J.M. Keynes, whose main purpose in life was to “stay relevant” and remain in the limelight. As for Harry Dexter White, on the American side, he was a big fan of a centrally-planned economy as done by the former Soviet Union. He was the quintessential big government tyrant and a perfect example of what the progressives in America really want. That is, they want to govern every aspect of Americans’ lives, be it what we eat, cars we drive, or what lightbulbs we use! Also, White, for decades, secretly worked as a spy for the Stalin’s intelligence services. Too bad White died before he could be prosecuted for his spying! (emphasis added)

Diana West @ Heritage

In “American Betrayal”, Diana West argues that — current policies today notwithstanding — America began to abandon its core ideals and march toward Socialism nearly 75 years ago. Starting in the late 1930s, at the time of FDR, the Soviets were already in a position to take advantage of the many communist sympathizers in the U.S. Not only FDR, but also Presidents Truman and Eisenhower and those in their inner circles played roles in enabling the U.S.S.R. as well as concealing the massive Moscow-directed penetration of American society. West shows that the system of spies designed to denigrate the American way of life was deep and extensive.