[jdeegan]

onoway, on 2011-November-26, 01:33, said:

My impression is that the easier borrowing has had a rather severe consequence for several countries who share the Euro, Greece... Italy... Ireland.... and now they are borrowing even more because they couldnt pay back what they already owed..which is a form of logic which escapes me entirely. Maybe all the countries being held hostage by the IMF should just form their OWN group and tell the IMF (and the politicians who got them into the mess) to get lost. Shared economic specialty of being broke.

The problem lies in the qualification. Greece and Germany, for example, don't share the same set of economic specialties. No Greek automobiles or machine tools. Not much German tourism.

[mike777]

onoway, on 2011-November-26, 13:57, said:

Productivity is a word I dont understand, in economic terms. It appears that the same value in terms of economic worth is given to the production of plastic toys for a McDonald's Happy Meal as the production of the wheat or potatoes used to make the meal. Also, present day robots could likely do pretty much anything most workers can do, German, American, Italian or whatever, as well as likely do it faster and cheaper, so what does it really mean?

Also, the whole business of trade between countries appears often to be simple (or not so simple) shenanigans. It is beyond belief that it can possibly be valid to pay less for apples imported from halfway around the world than for the ones grown next door. But that seems to be what much international trade is all about.

The confusion comes in the definition of your use of the phrase "pay less". I hope this helps.


?In economics, the law of comparative advantage says that two countries (or other kinds of parties, such as individuals or firms thereas) will both gain from trade if, in the absence of trade, they have different relative costs for producing the same goods. Even if one country is more efficient in the production of all goods (absolute advantage) than the other, both countries will still gain by trading with each other, as long as they have different relative efficiencies.[1][2][3]

For example, if, using machinery, a worker in one country can produce both shoes and shirts at 6 per hour, and a worker in a country with less machinery can produce either 2 shoes or 4 shirts in an hour, each country can gain from trade because their internal trade-offs between shoes and shirts are different. The less-efficient country has a comparative advantage in shirts, so it finds it more efficient to produce shirts and trade them to the more-efficient country for shoes. Without trade, its opportunity cost per shoe was 2 shirts; by trading, its cost per shoe can reduce to as low as 1 shirt depending on how much trade occurs (since the more-efficient country has a 1:1 trade-off). The more-efficient country has a comparative advantage in shoes, so it can gain in efficiency by moving some workers from shirt-production to shoe-production and trading some shoes for shirts. Without trade, its cost to make a shirt was 1 shoe; by trading, its cost per shirt can go as low as 1/2 shoe depending on how much trade occurs.

The net benefits to each country are called the gains from trade."


http://en.wikipedia....ative_advantage
---


Keep in mind if you are growing and selling a huge amount of apples you need more than apples...you need land, water, stock seed, fertilizer, insect protection, transportation, etc etc....not just apples, you need to look at all of your costs and add them all up.... The point being all of the above may be put to better comparitive use, more productive use, growing something else than apples. As a farmer I assume you want to maximize your long term profit for all the hard work you put in. Growing apples may not be the most productive use of your land, time and skill set.

[onoway]

mike777, on 2011-November-26, 14:54, said:

The confusion comes in the definition of your use of the phrase "pay less". I hope this helps.


?In economics, the law of comparative advantage says that two countries (or other kinds of parties, such as individuals or firms thereas) will both gain from trade if, in the absence of trade, they have different relative costs for producing the same goods. Even if one country is more efficient in the production of all goods (absolute advantage) than the other, both countries will still gain by trading with each other, as long as they have different relative efficiencies.[1][2][3]

For example, if, using machinery, a worker in one country can produce both shoes and shirts at 6 per hour, and a worker in a country with less machinery can produce either 2 shoes or 4 shirts in an hour, each country can gain from trade because their internal trade-offs between shoes and shirts are different. The less-efficient country has a comparative advantage in shirts, so it finds it more efficient to produce shirts and trade them to the more-efficient country for shoes. Without trade, its opportunity cost per shoe was 2 shirts; by trading, its cost per shoe can reduce to as low as 1 shirt depending on how much trade occurs (since the more-efficient country has a 1:1 trade-off). The more-efficient country has a comparative advantage in shoes, so it can gain in efficiency by moving some workers from shirt-production to shoe-production and trading some shoes for shirts. Without trade, its cost to make a shirt was 1 shoe; by trading, its cost per shirt can go as low as 1/2 shoe depending on how much trade occurs.

The net benefits to each country are called the gains from trade."


http://en.wikipedia....ative_advantage
---


Keep in mind if you are growing and selling a huge amount of apples you need more than apples...you need land, water, stock seed, fertilizer, insect protection, transportation, etc etc....not just apples, you need to look at all of your costs and add them all up.... The point being all of the above may be put to better comparitive use, more productive use, growing something else than apples. As a farmer I assume you want to maximize your long term profit for all the hard work you put in. Growing apples may not be the most productive use of your land, time and skill set.

You know what? To me this is smoke and mirrors.

If you want to get into a discussion of what things should be grown where then you are getting into a very dicey area indeed. I don't know much about economics but I DO know quite a bit about growing food.

You might be interested in the Melbourne Peace Prize acceptance speech by Dr Vandana Shiva as to where your sort of thinking ended up getting farmers in India who were convinced that they would be better off listening to that sort of stuff. At least the farmers who didn't join the hundreds who comitted suicide when they couldn't sustain the farms doing what they had been convinced to do instead of what they had been doing.

You might read One Straw revolution by Fukuoka who watched as people abandoned their traditional crops in favor of what they were promised would be more profitable for them, and their subsequent struggles.

You might want to consider the Dust Bowl of the 30s which largely was a result of people farming the way business people (banks)told them to so they could make lots of money. The banks ended up with lots of farms out of that one.

And as far as that goes, you are wrong as far as needing fertilizers and pesticides etc; learn something about permaculture. I will point you in one direction..check out Joel Salatin of Polyface Farms. He was written about in Michael Pollan's book The Omnivore's Dilemma. He will not send anything further than 400 miles from farm to consumer and he is very successful no matter what terms you choose to use to define success. Or watch some of the videos on You Tube about Sepp Holtzer of Austria.

You could look up some of the projects being done by Geoff Lawton with desert being brought back to fertility without chemicals. Or Growing Power in the US founded and run by Will Allen. He claims something like a million pounds of food grown on 3 acres. Without chemical fertilizers or pesticides.

Of course, before the companies such as Monsanto managed to get patents on seed, farmers used to save a portion of their harvest to use as seed the following year; this has become illegal in many instances. Farmers have lost their farms for having such plants show up on their land even though the plants are proven to escape from planted fields and show up where they haven't been planted. So seed can be a cost.

Pesticides and fetilizers are most certainly required by such seeds, although both are becoming less effective.One of the costs not usually considered is the cost to the environment of using such things; in terms of the pollution of waterways from runoff in paticular.

Pesticides are now starting to give rise to superbugs in the same way that overuse of antibiotics has. You can check the growing concern about the corn borer in the States.

I am told that in the European Union it is now ILLEGAL to sell any seeds not on an approved list, most of which consists of seeds which must be bought each year. Freedom is a wonderful thing when it becomes illegal to sell celery and bean seeds unless they have officially been approved.

The other thing not mentioned is time. Some people claim that people in the first world countries are now working much harder and longer hours than was generally the case 80 or 100 years ago. that is..if they are working at all I suppose.

Fukuoka grew barley, rice and citrus trees and he had no machinery, no chemicals. He and the stores which carried his product could have got a premium for his produce but he refused to allow that, going so far as to boycott one store which he caught doing so. He also had the resources and free time to observe, to think, to teach, to write, to travel.

He had no debt. Very very few farmers could say that today.

[phil_20686]

Gerben42, on 2011-November-26, 13:12, said:

Well, then the question is, why do Italian workers not become more productive? Is Germany (and most other N-European Euro countries) doing something special? Inflation is a terrible thing (as it is a hidden tax on assets, a pay cut and a pension cut at the same time) and it has been Germany's policy to have none of it. After all, they have seen what it can do more than once in the last 100 years.

Germany is very special, for lots of reasons, the problem is that becoming more productive is not easy. To make an economy more productive,you need to do one of the following things

(1) Better infrastructure - transport is basically always a dead weight loss to the economy, if you can reduce the price by building better roads rail and shipping ports everyone is a winner.
(2) Better healthcare - If you can save one sick day from a given illness you have significantly improved productivity.
(3) Better human capital - if your workforce is more highly skilled or educated, they will tend to be more productive.
(4) Better government - if your government is fair and efficient and has minimal bureaucracy, everyone's a winner. If taxes are levied in a transparent and non discretionary manner, everyone wins. Etc Etc Etc
(5) Better law enforcement - Not only is crime a dead weight loss to the economy, but co-orporations want to know that if a party defaults on its contractual obligations they have a far and efficient system to reclaim some losses.
(6) Better city planning - Strong management of cities, including transport and housing and education, can significantly improve productivity.
(7) Better savings rate - For a variety of reasons domestic savings tend to be made available to domestic companies for capital improvements, its no coincidence that the two countries with the highest savings rates, Japan and Germany, are world leaders in manufacturing technology. Increasing the capital available for businesses to invest leads to greater productivity.

I could go on, but here are seven things that Germany (currently) does much better than Italy, fixing them takes time, and some things are likely to be beyond the power of the Italian government. By my count the UK is on a roughly par with Germany on 4 of these categories. The real problem is that reform takes time. Italy does not have that time. It has stood still for a decade.

[phil_20686]

onoway, on 2011-November-26, 13:57, said:

Productivity is a word I dont understand, in economic terms. It appears that the same value in terms of economic worth is given to the production of plastic toys for a McDonald's Happy Meal as the production of the wheat or potatoes used to make the meal. Also, present day robots could likely do pretty much anything most workers can do, German, American, Italian or whatever, as well as likely do it faster and cheaper, so what does it really mean?

Also, the whole business of trade between countries appears often to be simple (or not so simple) shenanigans. It is beyond belief that it can possibly be valid to pay less for apples imported from halfway around the world than for the ones grown next door. But that seems to be what much international trade is all about. Then you get the sort of tragic nonsense of a few years ago when the Canadian government paid farmers millions of dollars to slaughter healthy pigs so as to drive the price of pork back up and NONE of the meat was allowed to be used or sent to starving people because that would have violated trade agreements. Absolutely heartbreakingly disgraceful that hundreds of thousands of pounds of food just destroyed.

Productivity is best thought of as Value added. If I take steak and bread and salad, and turn it into a burger, people will pay more for the burger than for the ingredients - they are paying you for your time/work essentially, and that difference in price is your value added. If I make (and sell) ten burgers per hour I am more productive than if I make/sell only 8 burgers per hour. Automation lets one person make 100 burgers per hour. When henry ford got into manufacturing, thousands of workers were producing hundreds of cars in a given factory. Now dozens, or fewer works overseeing automated production lines make thousands of cars - their productivity is hugely increased.

The reason produce from far away is cheaper, is that labour is cheaper. Because an industry must attract its workers, salaries across all jobs* in the economy tend to have similar wages, however, productivity across industries are not similar. For example, Orchestra's have not experienced any productivity increase, and hence become relatively more expensive, because of increases in productivity in other parts of the economy. This is why Orchestra's are now seen as a rich man's game, when they were once the entertainment of choice for the poor.

Regulation has often resulted in absurd outcomes. In this case it was obviously the case that oversupply had led the price to become uneconomic. At that point, one way or another, the meat is going to be wasted. Oversupply is normally combated by driving the farmers out of business. For a variety of (good) reasons, governments protect their farmers, even at a cost to society. Partly because if they stop the farming it will drive food higher in the third world and lead to mass starvation. Partly because if there was a war being relatively self sufficient is a good thing, and partly because the inequality of labour costs across the world is temporary. In a hundred years wages will be broadly comparable across the world, but farming knowledge is largely local and you might not be able to get your efficient farming models back.

*This might not be true if a job requires an extremely restrictive set of skills, and as a result is open to only a few people, then demand for these few people can send wages very high

[mike777]

Of course there becomes the whole debate over quality of life vs productivity or standard of living.

For decades many argue in Europe they have a better quality of life even if their standard of living has not kept pace with other places. As long as you are willing to move you can choose.

I note that in a recent wsj article roughly 50% of the rich chinese said they may move out of the country.

[mike777]

[quote name='onoway' timestamp='1322343122' post='591918']
You know what? To me this is smoke and mirrors.

If you want to get into a discussion of what things should be grown where then you are getting into a very dicey area indeed. I don't know much about economic but I DO know quite a bit about growing food.

You might be interested in the Melbourne Peace Prize acceptance speech by Dr Vandana Shiva as to where your sort of thinking ended up getting farmers in India who were convinced that they would be better off listening to that sort of stuff. At least the farmers who didn't join the group of 6000 or so who comitted suicide when they couldn't sustain the farms doing what they had been convinced to do instead of what they had been doing.

You might read One Straw revolution by Fukuoka who watched as people abandoned their traditional crops in favor of what they were promised would be more profitable for them, and their subsequent struggles.

You might want to consider the Dust Bowl of the 30s which largely was a result of people farming the way business people (banks)told them to so they could make lots of money. The banks ended up with lots of farms out of that one.

And as far as that goes, you are wrong as far as needing fertilizers and pesticides etc; learn something about permaculture. I will point you in one direction..check out Joel Salatin of Polyface Farms. He will not send anything further than 400 miles from farm to consumer and he is very successful no matter what terms you choose to use to define success. Or watch some of the videos on You Tube about Sepp Holtzer of Austria.

You could look up some of the projects being done by Geoff Lawton with desert being brought back to fertility without chemicals. Or Growing Power in the US founded and run by Will Allen. He claims something like a million pounds of food grown on 3 acres. Without chemical fertilizers or pesticides.

Of course, before the companies such as Monsanto managed to get patents on seed, farmers used to save a portion of their harvest to use as seed the following year; this has become illegal in many instances. Farmers have lost their farms for having such plants show up on their land even though the plants are proven to escape from planted fields and show up where they haven't been planted. So seed can be a cost. Pesticides and fetilizers are most certainly required by such seeds, although both beooming less effective. Pesticides are now starting to give rise to superbugs in the same way that overuse of antibiotics has. You can check the growing concern about the corn borer in the States.

The other thing not mentioned is time. Some people claim that people in the first world countries are now working much harder and longer hours than was generally the case 80 or 100 years ago. that is..if they are working at all I suppose.

Fukuoka grew barley, rice and citrus trees and he had no machinery, no chemicals. He and the stores which carried his product could have got a premium for his produce but he refused to allow that, going so far as to boycott one store which did. He also had the resources and free time to think, to teach, to write, to travel.

/quote]


India is a perfect example of how they changed the way they grow food. They increased productivity in food production by giving up the old ways. India is real life proof of comparative advantages between nations.

You seem to think it is proof of smoke and mirrors?

[phil_20686]

mike777, on 2011-November-26, 16:23, said:

Of course there becomes the whole debate over quality of life vs productivity or standard of living.

For decades many argue in Europe they have a better quality of life even if their standard of living has not kept pace with other places. As long as you are willing to move you can choose.

I note that in a recent wsj article roughly 50% of the rich chinese said they may move out of the country.

I have always assumed that this was largely a case of "inherited wealth", even if our income is less than, say, america, we have a large amount of inherited capital in terms of the high quality of our infrastructure, government institutions, trade agreements, housing stock, hospitals etc etc. America's train network is close to third world levels....

Moreover, its notoriously high to do apples to apples comparisons for GDP per capita. How do you value an institution like the National Health Service? It clearly adds relative value, since it has much better outcomes per unit cost than the insurance based service in america, on the other hands it is supported by higher taxes which tend to drive down per capita wealth. This is just one particularly difficult example.

[mike777]

As far as your nat health care, my main worry is the lack of incentives for innovation. It appears from afar, that this is a big issue but you may have studied this issue from a better viewpoint. Does Britian tend to import most of its healthcare innovation?

[phil_20686]

mike777, on 2011-November-26, 16:42, said:

As far as your nat health care, my main worry is the lack of incentives for innovation. It appears from afar, that this is a big issue but you may have studied this issue from a better viewpoint. Does Britian tend to import most of its healthcare innovation?

I don't really understand this point. Its not that we pay less for a given treatment, we simply do fewer treatments. For example, whenever an insured american approaches a doctor with a complaint there is every financial incentive for the doctor to over treat, and give out many unnecessary tests. In the UK there is not such an incentive.

Since we are still paying the drug companies, they still have incentives to innovate. In fact one might say we have better incentives since they can be assured their treatments will undergo a rigourous cost benefit analysis, in america since doctors are basically private entitites it is harder for the FDA to collect large scale results. I dont really see that not paying for expensive treatments of doubtful benefit will mis-align incentives. Surely american incentives encourage pharmaceutics to concentrate on expensive end of life treatments even if they have marginal gains?

[mike777]

phil_20686, on 2011-November-26, 16:48, said:

I don't really understand this point. Its not that we pay less for a given treatment, we simply do fewer treatments. For example, whenever an insured american approaches a doctor with a complaint there is every financial incentive for the doctor to over treat, and give out many unnecessary tests. In the UK there is not such an incentive.

Since we are still paying the drug companies, they still have incentives to innovate. In fact one might say we have better incentives since they can be assured their treatments will undergo a rigourous cost benefit analysis, in america since doctors are basically private entitites it is harder for the FDA to collect large scale results. I dont really see that not paying for expensive treatments of doubtful benefit will mis-align incentives. Surely american incentives encourage pharmaceutics to concentrate on expensive end of life treatments even if they have marginal gains?

My point is I dont see alot of innovation in healthcare coming out of UK compared to the USA.

I worry about the quality of healthcare in Britain over the next 20 years..not today.

---


btw as for railroads as far as I can tell the USA has been much more productive compared to Europe or UK.

As far as passenger trains we replaced them with buses, cars and planes,


In the 1950s, the U.S. and Europe moved roughly the same percentage of freight by rail; but, by 2000, the share of U.S. rail freight was 38% while in Europe only 8% of freight traveled by rail.[3] In 1997, while U.S. trains moved 2,165 billion ton-kilometers of freight, the 15-nation European Union moved only 238 billion ton-kilometers of freight.[4]

http://en.wikipedia....e_United_States

[RMB1]

blackshoe, on 2011-November-26, 10:16, said:

Speaking of checks, a few days ago I bought a new TV. $1100 (currently about 0.6 oz of gold). At the checkout, I said "I think I'll write a check". Clerk said "okay". I wrote the check. Clerk called a supervisor. She asked for my driver's license. In shuffling through the crap in my wallet, I first found my old expired license, then the current one, which I gave her. She went to her station, and played around with the computer for about five minutes. Came back and asked for my old license! Went away with it and played around for another five minutes or more. Called over somebody else and talked for more minutes. Then she came back and told me "we have a limit of $400 for check purchases". "So why didn't somebody tell me that fifteen minutes ago?" No answer. "What's your limit on credit card purchases?" "As far as I know, we don't have one". So I took back my check, tore it up, stuck the pieces in my pocket, and handed over my credit (actually debit — on the same checking account I'd written the check against) card, and finally got out of there with the TV. Left a bad taste in my mouth. ...

Most retail outlets in Britain no longer accept cheques.

[onoway]

[/quote]MIKE'S comment!


India is a perfect example of how they changed the way they grow food. They increased productivity in food production by giving up the old ways. India is real life proof of comparative advantages between nations.

You seem to think it is proof of smoke and mirrors?
[/quote]
Absolutely yes it IS smoke and mirrors. Admittedly Dr. Shiva's speech is long. This is a shorter version of what is going on with food production in India. As well, there are now several areas which have declared themselves to be GMO free zones and which are using non chemical and non industrial methods to retain water and improve soil fertility.
http://www.npr.org/t...oryId=102893816

[phil_20686]

mike777, on 2011-November-26, 16:53, said:

My point is I dont see alot of innovation in healthcare coming out of UK compared to the USA.

I worry about the quality of healthcare in Britain over the next 20 years..not today.

---


btw as for railroads as far as I can tell the USA has been much more productive compared to Europe or UK.

As far as passenger trains we replaced them with buses, cars and planes,


In the 1950s, the U.S. and Europe moved roughly the same percentage of freight by rail; but, by 2000, the share of U.S. rail freight was 38% while in Europe only 8% of freight traveled by rail.[3] In 1997, while U.S. trains moved 2,165 billion ton-kilometers of freight, the 15-nation European Union moved only 238 billion ton-kilometers of freight.[4]

http://en.wikipedia....e_United_States

I think you are making an error in application here. Britain buys its medicine from american pharmaceuticals mostly, i.e. we are partly paying for the next generations of innovations. If you are talking about research into surgical procedures, that stuff is mainly carried out by government research grants at universities, and britian and america spend about the same fraction of GDP on government research so i guess its similar. Obviously, america is a bigger market, and should pay for medical research in proportion to its population size. Many pharmacueticals face "patent cliffs" in the future, but its not clear what will happen then. Low hanging fruit is mostly gone, but the number pr customers is going up and up, so I think it will be fine. Think of the money india and china will be spending on medicine in ten or fifteen years as percapita income approaches western levels for at least some fraction of the population.

When it comes to trains, remember that europe has a lot more coast line. We move a lot more freight by ship than is feasible in america, but agree that we should do more with our railways. The UK is particularly bad. Germany is much better I think.

[mike777]

phil_20686, on 2011-November-26, 17:44, said:

I think you are making an error in application here. Britain buys its medicine from american pharmaceuticals mostly, i.e. we are partly paying for the next generations of innovations. If you are talking about research into surgical procedures, that stuff is mainly carried out by government research grants at universities, and britian and america spend about the same fraction of GDP on government research so i guess its similar. Obviously, america is a bigger market, and should pay for medical research in proportion to its population size. Many pharmacueticals face "patent cliffs" in the future, but its not clear what will happen then. Low hanging fruit is mostly gone, but the number pr customers is going up and up, so I think it will be fine. Think of the money india and china will be spending on medicine in ten or fifteen years as percapita income approaches western levels for at least some fraction of the population.

When it comes to trains, remember that europe has a lot more coast line. We move a lot more freight by ship than is feasible in america, but agree that we should do more with our railways. The UK is particularly bad. Germany is much better I think.

1) Ok so the UK will have to import innovation in healthcare for the most part or you will fall far behind. This is a huge negative for nat health care service. As a side note I always wonder just how this service works in the UK. I mean who pays for what and controls what at your local hospitals and doctor offices, etc? For example who owns the building and takes care of the upkeep? Who pays the staff and who is their boss? Who pays for the taxes, utilities, water, sewer etc? Who pays for the lab techs at the local doctor office and medical equipment at the local office? Who decides on raises and what equipment what office will have ...etc etc etc?

2) It sounds like USA railroads are far from third world quality.

[phil_20686]

mike777, on 2011-November-26, 18:41, said:

1) Ok so the UK will have to import innovation in healthcare for the most part or you will fall far behind. This is a huge negative for nat health care service. As a side note I always wonder just how this service works in the UK. I mean who pays for what and controls what at your local hospitals and doctor offices, etc? For example who owns the building and takes care of the upkeep? Who pays the staff and who is their boss? Who pays for the taxes, utilities, water, sewer etc? Who pays for the lab techs at the local doctor office and medical equipment at the local office? Who decides on raises and what equipment what office will have ...etc etc etc?

2) It sounds like USA railroads are far from third world quality.

(1) I really don't understand you here. Why is importing innovation in medicine any different from importing innovation in technology, which I do every time I buy an apple computer? All else being equal innovation should be proportional to population. The only reason the UK would be responsible for less innovation is because we treat less, so less money for drugs companies. OTOH, it does align incentives better. As I understand it the UK has one truly global pharma: GSK. Medicine is not defense technology, there really seems to be no reason at all why I would wish to favour home grown companies over foreign ones when it comes to buying drugs?

(2) I was really thinking of passenger rail. A modern railway system should be competitive with flying for journeys of 2 hours or less by plane. The good bits of continental Europe manage that, Japan manages that easily. America doesnt even seem to have passenger rail, except for a little in the north east which is considered slow and unreliable. To put it in perspectives, the total number of passenger kilometres travelled per year in the US is less than swizterland, a country around 1% your size. Per head of population your rail usage is the lowest of any industrialised country. Your freight does seem to be quite good though, from a global standpoint.

[blackshoe]

Phil, as I've said before, I"m no economist. I had two semesters of econ as an undergraduate (Samuelson's text), learned enough to pass the tests, didn't really understand most of it, and in those days didn't much care. Now I'm trying to understand things, and I started with the Austrians because it seems to me they got dumped (instead of being legitimately disproved) and because, as a libertarian, I want to understand the basis of other libertarians' (and Libertarians') economic arguments.

You say that "history has repeatedly shown that a gold standard does not work". My problem with that is that back when we had a gold standard of sorts (even back in the days when kings were minting gold coins) "government" was still screwing with it in ways that the Austrians (and some others, I'm sure) deprecate, to say the least. IOW, I'm not so sure the "gold standard" was the problem. You mentioned fractional reserve banking. One of the things that Rothbard wanted to change in his "return to the gold standard" writings was to drop fractional reserve banking altogether — if a bank issues currency, it needs to have enough gold reserves to back all that currency. This may or may not (I haven't got that far yet in my studies) have or create other problems, but Rothbard's arguments on the subject certainly seem reasonable to me, at least at the moment.

Anyway, it seems to me its a very difficult subject, and I'm not convinced at this point that anyone has the right answers.

[hrothgar]

blackshoe, on 2011-November-26, 21:32, said:

You say that "history has repeatedly shown that a gold standard does not work". My problem with that is that back when we had a gold standard of sorts (even back in the days when kings were minting gold coins) "government" was still screwing with it in ways that the Austrians (and some others, I'm sure) deprecate, to say the least. IOW, I'm not so sure the "gold standard" was the problem. You mentioned fractional reserve banking. One of the things that Rothbard wanted to change in his "return to the gold standard" writings was to drop fractional reserve banking altogether — if a bank issues currency, it needs to have enough gold reserves to back all that currency.

This sounds suspiciously like the government interfering in the economy.
I thought this was anathema to Libertarians...

[hrothgar]

hrothgar, on 2011-November-26, 22:04, said:

This sounds suspiciously like the government interfering in the economy.
I thought this was anathema to Libertarians...

Still waiting for a followup from Blackshoes...

Why should the regulatory state step in and prevent banks from engaging in fractional reserve lending?

Surely you, as an independent investor, have the ability to discern between banks that engage in fractional reserve lending and those who don't. Moreover, you can certainly choose not to invest your hard earned dollars in banks that engage in this type of risky behavior.

In what way does this type of government interference in the free market further liberty?

Or, alternatively, perhaps there isn't anything wrong with government intervention so long as you're intervening in the "right" sort of way.

• Intervening to deal with externalities like pollution = bad
  
• Intervening in favor of crank Austrian theories about business cycles = good

[jdeegan]

blackshoe, on 2011-November-26, 21:32, said:

Phil, as I've said before, I"m no economist. I had two semesters of econ as an undergraduate (Samuelson's text), learned enough to pass the tests, didn't really understand most of it, and in those days didn't much care. Now I'm trying to understand things, and I started with the Austrians because it seems to me they got dumped (instead of being legitimately disproved) and because, as a libertarian, I want to understand the basis of other libertarians' (and Libertarians') economic arguments.

Austrian School economists can be wonderful, but poor Murray Rothbard is to economics as Gee is to bridge. Don't learn bridge from Gee. Don't learn economics from Murray Rothbard.