Supply, Demand, Unemployment, and Nonsense

Time to examine some stuff written by a guy whom some people apparently call an economist:

I hear through the grapevine that the usual suspects at the WSJ have put out something along the lines of “Krugman says that unemployment benefits won’t raise unemployment, but in his textbook he says they will, neener neener.” Are they really that stupid? Probably not — but they you think that you, the reader, are that stupid.

My comment:
I think last part was supposed to be a sentence. I must assume that the guy who wrote this was in quite a rage over some unspeakably mean and cunning accusations pointing out inconsistencies in his “philosophy”. Thus he should be exculpated for such minor typos. This, however, does not in the slightest exculpate him for the actual crapload of “content” he fired off thereafter. I will for the most part not attempt to refute any statements made. For this would necessitate the existence of statements. The author obviously tries to avoid making any. For the most part he neither utters truths, nor falsehoods, but instead indulges is “un-truths”. (An un-truth is a claim that in itself defies the existence of truth. One can accomplish making such statements by using undefined terms. Example. If I say dooory and glooory makes fooory, then I have uttered an un-truth. I was asked by a reader to clarify which terms I consider undefined in this piece.)

But anyway, maybe this is a good time to explain the difference between determinants of the NAIRU — the minimum rate of unemployment consistent with a stable inflation rate — and the determinants of the unemployment rate at a point in time.

MY comment:
OK, since the author uses the term inflation without any further elaboration, I must assume that he has dealt quite a big deal with the phenomenon of inflation and is well aware of the only useful definition of inflation, meaning an increase in the supply of money and credit. I must thus assume that he does not fall prey to the completely arbitrary definition of inflation, namely the average price increase composition of some goods that some bureaucrat decided to consider.

That being said I am not sure what he means by “the minimum rate of unemployment consistent with a stable inflation rate”. He seems to be asserting there is some logical inverse linkage between inflation and unemployment, at least that’s my guess. I hope he doesn’t consider such constructs as the Philips curve in any way supportive of this claim, given that its validity has been long refuted. However, he doesn’t elaborate on it further so this statement of his remains, for now, unexplained and arbitrary.

So: there are limits to how hot you can run the economy without inflationary problems. This is usually expressed in terms of a non-accelerating-inflation unemployment rate; yes, there are some questions about whether the concept is quite right, especially at very low inflation, but that’s another issue.

My comment:
What is he taking about here? Again, I have to resort to guesswork.
What does he mean by “there are limits to how hot you can run the economy without inflationary problems” ?
What are those limits? What, in fact, is the unit in which I measure those limits?
What is “hot”?
Who is “you”?
What does “to run” the economy mean? In fact, what is the economy? Is it the market? But then who is that “you” who “runs” the market? The market is, by definition, not run by anybody, but is a system of multiple elements interacting as an organism, not an organization! So it is not “run” by anybody.
And then he says “there are some questions whether the concept is quite right”. If that is so, wouldn’t it make sense to resolve those questions first and establish the truth of a hypothesis you are applying to fundamentally support your reasoning?
And still I see him use the term inflation quite a lot without ever having told me what precisely it is, what it’s caused by, and what its valid relevance is when talking about unemployment.

Everyone agrees that really generous unemployment benefits, by reducing the incentive to seek jobs, can raise the NAIRU; that is, set limits to how far down you can push unemployment without running into inflation problems.

My comment:
What? Again, who is “you”? Is it the President? The central bank chairman? God? Who “pushes” unemployment. In fact, what does it mean in the first place?

But in case you haven’t noticed, that’s not the problem constraining job growth in America right now. Wage growth is declining, not rising, and so is overall inflation. A wage-price spiral looks like a distant dream.

My comment:
The author is right on one thing: Inflation is declining and has been for a while. In fact there is no inflation, there is deflation. And it is the only thing that can bring about a true and sustainable recovery. The only problem is, those who produce money and to some extent credit are trying to slow down or even stop deflation.
Now, I am unsure as to what this has to do in any way with his assertion that unemployment benefits reduce unemployment.

What’s limiting employment now is lack of demand for the things workers produce.

My comment: This is quite a strong statement to make. I wish this ivy league professor could deign to explain to us what he means by “lack of demand for the things workers produce”. Could he give me some real life examples? Does he actually understand what the purpose of prices is?

If a “lack of demand”, meaning the deliberate desire of some individuals to consume less and thus a perfectly valid choice, were the cause of unemployment, then the solution to this problem would be for those who produce those “things” to drop the prices of the goods offered so as to entice marginal consumers to purchase the goods in question.

If the author refers to the lack of profitability of such measures then it would indeed be better for those workers to stop what they are doing and find occupations that are more useful from the consumers’ points of view. This is the whole purpose of the mechanism of entrepreneurial profit and loss. Unfortunately the author nowhere delves into such annoying questions and thus leaves us nothing but a giant hole of nothingness.

Their incentives to seek work are, for now, irrelevant. That’s why comments by the likes of Sen. Kyl are so boneheaded — anyone who thinks that high unemployment in the first quarter of 2010 has anything to do with workers getting excessively generous benefits must not get out much.

My comment:
And so as a conclusion the author declares that the whole disincentive rooted in the provision of money taken from one person at gunpoint and supplied to another person for not working is simply irrelevant. I’m sorry, but this does not convince me in any way. Are you convinced??

And the truth is that unemployment benefits are a good, quick, administratively easy way to increase demand, which is what we really need. So right now they have the effect of reducing unemployment.

My comment:
How exactly do unemployment benefits “increase demand”. Wouldn’t it be helpful to try and explain the supposed mechanism at work when trying to advance such an argument? How precisely does it increase demand if I tell someone to give me $50 or else I will shoot him and then I hand it over to someone else who needs to prove to me that he is not working? And please don’t you tell me you think that the unemployed person spending the money will increase demand. That money has been taken from another person whose demands will be reduced by just that same amount! What it does indeed do is reduce the output of goods, which is the worst thing you can do for the well being of the people!!

I’m sorry to appear so nitpicky. I was asked to comment on this piece of crap and point out what I consider undefined terms so that’s what I did.

If we want to debate concepts clearly, I could simply sum up Krugman’s main point in one or two sentences and refute it with ease. But that is not how he rolls. He tries to obfuscate his concepts and claims with as many scary and unclear terms as possible and sometimes even just resorts to references to entire papers written by others, so as to make a reasonable debate over real issues virtually impossible.

That’s why I would, in my humble opinion, ask anybody who is genuinely interested in economics and human action to not take his stuff serious. Again, just tune out. There are so many more useful things you can do in your life than wasting your time with articles written by Paul Krugman.

Talk to a friend about truth and epistemology, talk to your mom and dad about your childhood, question people in your life about ethics, concepts, the state, and God, heck … sit in a room and stare at a wall. All these things would be a thousand times more useful than reading one paragraph from this deranged crackpot.




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19 thoughts on “Supply, Demand, Unemployment, and Nonsense”

  1. I appreciate such a lengthy and somewhat in-depth rebuttal. I am surprised that in the many words you typed you never actually addressed my initial and main concern. Honestly that was somewhat my fault, as I did begin my last comment by engaging in a side topic, which you attempted to thoroughly explore in this post.

    If you recall my main argument was concerning your original post titled “Krugman Disagrees With Krugman.”

    In that blog, as the title and others have suggested, Krugman is implied to be disingenuous by disagreeing with HIS OWN philosophy. Thus, it is implied, knowingly fibbing or telling a lie.

    I tried to point out, that while you might disagree with his economic philosophy, I can find no evidence that he intentionally lied or contradicted other things he said.

    Even after the many words we have exchanged I have found nothing that verifies this, which after all was the original claim of your blog and others.

    I might try to comment further on the other points you made at a later time. I would hope, however, that considering your obfuscation you are willing to admit that your original post is dishonest. If not I would appreciate you addressing my particular concerns regarding its content.

  2. Ok, here is my further critique of you critique of Krugman’s critique of his detracts critique… well you get the idea. I apologize for the length.

    “For this would necessitate the existence of statements. The author obviously tries to avoid making any. For the most part he neither utters truths, nor falsehoods, but instead indulges is ‘untruths’. For this would necessitate the existence of statements. The author obviously tries to avoid making any. For the most part he neither utters truths, nor falsehoods, but instead indulges is ‘untruths’.”

    I am curious. If his blog consisted of statements completely devoid of cognitive content, then there should really be nothing to debate. Let’s see how this turns out.

    “One can accomplish making such statements by using undefined terms.”

    “Example. If I say dooory and glooory makes fooory, then I have uttered an untruth.”

    So you are implying that he pulls out nonsensical words that have never entered the vernacular and been defined before, I am assuming. Dooory, glooory, and fooory are such words. Much like a Lewis Carol book,

    “Twas brillig, and the slithy toves
    Did gyre and gimble in the wabe:
    All mimsy were the borogoves,
    And the mome raths outgrabe.”

    What can I say? I’m a fan.

    Back to Krugman, apparently he engages in this undefinable mush. I would just like to point out that often specialties have their own language, for example I could not distinguish a sacrum from a coccyx, that does not mean they are undefined.

    “since the author uses the term inflation without any further elaboration, I must assume that he has dealt quite a big deal with the phenomenon of inflation and is well aware of the only useful definition of inflation, meaning an increase in the supply of money and credit.”

    You make comments like this about his use of inflation on a couple of occasions, and I find your technique dishonest. Do you really expect every economist to define inflation every time they use it? What if I was to criticize every time you did not clarify what you mean by the word “aware” in a sentence. These are different, but only to a degree. We could have a grand philosophical debate over the nature of awareness, and in certain circumstances it might be justified, but in this instance you could simply state your non-mainstream view of inflation (Inflation IS considered by the overwhelming majority of economists to be the rise in general level of prices), and move on, instead you seem to be upset that he doesn’t conform to “your” rules. Rules on which the majority of economists do not work. MOST economists DEFINE inflation as a rise in the gnarl price level, although there are disagreements on how to measure it. They also agree that this is CAUSED by the expansion of money and credit. Just because one is caused by the other does not make them the same.

    Again, that is not to say they are wrong, just not mainstream. Similarly if you are having a debate on awareness in which your interpretation is vastly different from mainstream epistemology, you would be the one burdened with explaining ourself, not the mainstream. I know it’s unfair, but life is not fair.

    I (meaning the collective physical elements which the neurochemistry of my brain identify with) know (a state of understanding in which my mental states resemble other similar mental states that are shared in a general sense by me and others when we feel our mental state matches an external objective reality) it’s (contraction for “it is,” the it referring to the previously mentioned proposition that the burden of proof must lie on the out-group individual when attempting to present a novel, or not entirely accepted alternate definitional structure, and is referring to a soon to be mentioned state of being) unfair (reference to a state of inequity in which systems create an arbitrary order or structure which benefits some and penalizes others)… and so on.

    I think you can see that this becomes laborious and largely unproductive, and or redundant, in most cases. I want to be clear. This does not mean I would discount you arguing with my conception of the verb “to know,” or the noun “I.” In certain situations I would be glad to debate such things. Similarly I think Krugman, as well as most people, should present the epistemological framework they work off of and explore its implications. That being said he does not need to engage in that within each and every editorial or blog.

    Similar to the fact that you do not feel the need to explain praxeology, the theory of money and credit, or inflation in each and every economics post YOU make, why would you expect him not to do the same in his? You, after all and quite helpfully, have a side “primer” on these topics. Krugman, being a textbook writer and PHD economist has probably adopted the standard view of inflation as a general rise in prices. Inflation is the “experience” and result of the state of credit and money supply. People use to buy penny candies, and now it is probably at least 25 cents for the cheapest of candies. That is inflation.

    “Arbitrary definition of inflation,” another way you could put this is the “generally accepted” definition of inflation. I might call a 747 a truck, but if no one agrees with me it doesn’t matter much, and the burden of proof falls on me :)

    “Some bureaucrat decided to consider,” you mean a complex system developed over a long period of time. If this form of inflation was invented by just one bureaucrat, who was it?

    “That being said I am not sure what he means by ‘the minimum rate of unemployment consistent with a stable inflation rate’.”

    This concerns me because it is obviously related to his central point and (unless you are feigning ignorance) it is easy to look up. There are plenty of resources on the internet that talk about NAIRU, and if you really are ignorant of it you really should attempt to do a minute degree of investigation before even attempting to argue against it.

    For instance, if I was to declare that “I don’t believe black holes have blackbody radiation,” and in the same blog stated “I don’t even know what they are talking about when they say blackbody radiation.” That does not mean I am wrong, but I am failing to construct a compelling argument, and am discounting out of hand possible explanations and evidence I haven’t even taken the time to consider.

    The reason is not just to win me over in support of a concept, but to allow me to be critical of it in an intelligent way. For example, if black holes really do not radiate, then understanding the concepts/reasonings of others will HELP me to discount them.

    Similarly, if you really are ignorant of NAIRU (not that you are, but that is how you present it), than coming to understand it better (right off the bat I was able to find people making critical assessments) strengthens your argument. As it is your argument seems to be from ignorance. I don’t understand it, so it must be false.

    “I hope he doesn’t consider such constructs as the Philips curve in any way supportive of this claim, given that its validity has been long refuted.”

    If you simply Googled, used Wikipedia, or mises.org you would be be able to find a basic description (and probably articles with a more in-depth description) of NAIRU’s relationship to the Philips curve. From what I can tell it grew out of the faults and dissatisfaction with the Philips Curve and its ability to predict short run affects, but not long run effects such as stagflation.

    “However, he doesn’t elaborate on it further so this statement of his remains, for now, unexplained and arbitrary.”

    Only arbitrary to you because you never attempted to understand its meaning. Using Ursus americanus might seem unexplained and arbitrary, but if you bother to look it up you find that it is the American black bear.

    “What does he mean by ‘there are limits to how hot you can run the economy without inflationary problems’ ?”

    Again, Google, Mises.org, Econlib.org, almost ANY economic resource would turn up results. Google, 153,000 results, as far as I can tell almost all actually about the term, even on the 54th page of results there were Spanish and German articles talking about NAIRU. In other words, it was not something Krugman just made up! If you are ignorant of its definition, history, implications, and evidence, that is ENTIRELY your fault.

    “What are those limits? What, in fact, is the unit in which I measure those limits?”

    Considering you don’t even know what the NAIRU is, I would suggest looking into it first, as it would probable elucidate the matter. If you actually attempted to know what it means I would take your critique more seriously.

    “Who is ‘you’?”

    I am almost certain that this is in reference to those who direct fiscal and monetary policy.

    “What does ‘to run’ the economy mean? In fact, what is the economy? Is it the market? But then who is that ‘you’ who ‘runs’ the market? The market is, by definition, not run by anybody, but is a system of multiple elements interacting as an organism, not an organization! So it is not ‘run’ by anybody.”

    What is art? Is something art just because I hang it on the wall? Don’t get me started. (Kids in the Hall reference).

    Seriously though, you want Krugman to deconstruct his whole economic outlook, his (most likely) decades of schooling and thought, in this one out of hundreds of blog articles? If you really want to know what HE means by economy, inflation, etc., read his textbooks, books, editorials, blogs, journal publications, etc. and don’t waste peoples time with your speculations about his meanings that are created by your self imposed ignorance of his ideas. Find out what he means THEN criticize it, that is how it is suppose to work, not the other way around.

    What if I declared Mises, Rothbard, and Hayek all idiots without having read more than a chapter in their books. Openly declared I did not know what they meant by “money” and “credit,” yet I knew they were wrong. You would laugh me out of this blog, I would assume.

    By running the economy I am assuming he is referring to monetary and fiscal policy. Do you think that these policies have no affect on the entire US economy? If you do I would be surprised. If you think that the actions of the Fed and treasury are completely independent of the state of the US economy as a whole you should say so. If you think they in fact DO have an affect on the economy as a whole (as almost anyone I have ever read, heard, or talked to realizes) then they can be said to direct the economy as a whole, at least in a limited sense. They do not regulate the individual transactions per se, but they do have a broad impact on the cumulative effect of the economy as a whole. If you want to deny that, fine, then it doesn’t matter what the treasury or fed do, there is no overall effect.

    “If that is so, wouldn’t it make sense to resolve those questions first and establish the truth of a hypothesis you are applying to fundamentally support your reasoning?”

    Again, you have not even bothered to even explore the theory to which he is referring. Talk about the pot calling the kettle black. He admits there is questionability in this theory, and your advise (apparently having no knowledge of the theoretical or empirical underpinnings) is to throw it out. He is basically just admitting that it is debatable, and that debating that is beyond the scope of his current blog entry.

    “And still I see him use the term inflation quite a lot without ever having told me what precisely it is,” I think I addressed this, and you insist on bringing up this mundane topic multiple times.

    “what its valid relevance is when talking about unemployment.”

    I actually do agree with you here. He could explain this better. Then again, as I have pointed out there are TONS of other people that discuss NAIRU, and thus it is up to you to look into the theoretical underpinning before completely disparaging it. I would have liked him to elucidate this further though.

    “In fact, what does it mean in the first place?”

    What does what mean in the first place? What is it? What is meaning? What is first place?

    “Now, I am unsure as to what this has to do in any way with his assertion that unemployment benefits reduce unemployment.”

    Again this is because you failed to do even the most basic research. I’m not talking about JSTOR and Lexis Nexus and other hardcore measures as if attempting to write a dissertation on the subject, I just mean you apparently didn’t even Google, Wikipedia, check Mises.org regarding the topics involved, the BARE MINIMUM in order to establish intelligent debate.

    “Does he actually understand what the purpose of prices is?”

    I like how every link is to your own blog. No outside sources?

    “I wish this ivy league professor could deign to explain to us what he means by ‘lack of demand for the things workers produce’.”

    Again, I am sure you are aware of the immense amount of literature on Keynes, aggregate demand, etc. This “play ignorance” (I hope in this instance it is feigned) does not further your case. If you have a problem with the concept why don’t YOU go about deconstructing it, instead of piling ridicule on Krugman for not doing your work for you. Oh wait, you probably have elsewhere on this site, which I would discover if I even bothered to look into it at your website. Just like you would discover what HE means if you bothered to look into HIS views.

    “How exactly do unemployment benefits ‘increase demand’. Wouldn’t it be helpful to try and explain the supposed mechanism at work when trying to advance such an argument?”

    It is explained in the very textbook you claim Krugman contradicts himself. You are perfectly willing to cherry pick items from the textbook in an attempt to discredit Krugman, but if you want to understand his viewpoint you won’t even lift a finger (literally, much of the textbook is on Google books).

    “One person at gunpoint and supplied to another person,” I don’t know about you, but I could relatively easily move to another country with less taxes, and I am not even all that well off. It is hardly at gunpoint when you are free to leave at any time.

    This is ridiculous and I’m tired of anarcho-capitalists using it. It is just for emotional and dramatic effect and has no basis in reality. In reality you MIGHT get audited, and MIGHT have your salary garnished. NO ONE GETS SHOT for not paying their taxes… at least in this country.

    “That money has been taken from another person whose demands will be reduced by just that same amount!”

    Or it is borrowed on the open market or printed.

    “What it does indeed do is reduce the output of goods” if it IS borrowed or printed, how exactly does it reduce the output of goods in the short term?

    You manage to write a lengthy blog without even lifting a finger, or making ANY attempt to understand the subject you are critiquing before hand. Because of that alone I am tempted to ignore your review on the face of it. Despite that I do not, and I admit there are some things you bring up which would be interesting to look into. You, however, have brought very little to the table. Instead you spout semantical critiques which are based solely on your self imposed ignorance.

    I think there are many critiques that could be made against NAIRU and Krugman’s view. In fact I have found some interesting ones while researching the topic. THEY manage to mount valid attacks on the topic, because THEY actually know something about its meaning. That is why they are able to credibly attack it, as apposed to you, who simply attack it out of ignorance.

    So once again, even if I don’t believe a single word Krugman says, I would still find this review unpersuasive. You have not refuted anything but your own straw man. This neither supports nor denounces Krugman’s blog, it simply expounds relatively meaninglessly about it.

    Sorry for the long comment. I wanted to make sure I was clear. And thanks for your time.

  3. Hey, come on now. You asked me to specify which terms I consider insufficiently defined. I set out to do just that and I did that.

    Now you are coming down on me for not refuting what Krugman probably intended to say.

    I said I’d have no problems doing that, but this was not the purpose of this effort I made for you exclusively.

    I also saw that you noted that I am “wasting people’s time” with what I wrote above. If I wasted your time, I sincerely apologize. Had I delved into every single item you are requesting in your follow up I would have wasted even more of your time.

    I assure you, I will not make that mistake again.

  4. “I also saw that you noted that I am ‘wasting people’s time’ with what I wrote above. If I wasted your time, I sincerely apologize. Had I delved into every single item you are requesting in your follow up I would have wasted even more of your time.”

    I sincerely apologize. Saying you wasted my time when you obviously put the time in to compose an explanation was unfair. I am sorry and if I had thought about it longer I hopefully would have removed that comment. Sometimes while writing a response of this type I forget to not get too worked up and on occasion say something I don’t really mean.

    I do appreciate the discussion. I honestly hope you can forgive my comment, I understand if you think this was too aggressive and a difficult style with which to communicate. I hope if we continue that I can demonstrate that was not my intention.

    In response to your comment:

    1) “You asked me to specify which terms I consider insufficiently defined.”

    They are insufficiently defined to you because you are unfamiliar with the concept. I think I thoroughly addressed this in my comment.

    2) “Now you are coming down on me for not refuting what Krugman probably intended to say.”

    Again, like I pointed out, any confusion could have been easily resolved. You cannot attack Krugman for not presenting an entire course on macroeconomics in each blog posting. If I encounter the term praxeology, by your reasoning it is undefined. In actuality it IS defined, correct? Prior to reading about it I was ignorant of its definition. By your logic every word I am not familiar with is undefined. So it has nothing to do with “probably intended,” it has to do with the fact you didn’t pick up an economics dictionary, do a web search, or otherwise look up the definition. Usually I check a dictionary before I accuse someone of making stuff up, being wishy-washy, or lacking definition with a particular word. If you use “will-o’-the-wisp” in a sentence, and I don’t know what it means, I look in the dictionary, I don’t blame you for using the word.

    3) “I said I’d have no problems doing that, but this was not the purpose of this effort I made for you exclusively.”

    I really do appreciate it and apologize for my previous tone. Although, like I said, it contained interesting ideas and I appreciate your effort, it didn’t really do anything to answer any of the points I have specifically made.

    Such as:

    a) You never explained how Krugman contradicted his own philosophy.

    b) You never explained why terms and ideas that can be found on virtually ANY economics site, and elsewhere, should be considered “undefined” and not just “unknown to you.” I feel I thoroughly explained this. As I mentioned in the ORIGINAL comment to which you were ostensibly replying to, “just because you do not recognize or understand a term does not make it undefined.” I think that is rather obvious and was never addressed.

    Those are the two questions that I asked, and you did not address either other than to state things I had already shown to be flawed prior to you even stating them.

    Again, I have been enjoying reading your many blog entries, and hope there are areas in which we can come to an agreement in the future. I apologize again for my previous tone and I hope we can have more constructive conversations in the future. Have a nice day.

  5. Thanks I understand. I think it has turned into a rather escalated and unhealthy debate at this point.

    My main point about Krugman’s dishonesty is this:

    He said that it is a bizarre point of view from a different universe to say that unemployment benefits discourage employment. He did not say something like this:

    “Mr. Kyl may have a point, but according to the theory about the NAIRU, on which I myself admit that there are some valid point against it which I haven’t fully dealt with yet, there are actually some indications that unemployment benefits stimulate employment and that …”

    or

    “Mr. Kyl’s point may sound intuitive, however I would submit that there is an, albeit contested, alternative viewpoint which suggests that …”

    No, he didn’t do any of that. He called that viewpoint bizarre and from a different universe.

    I’m sorry, I can’t help but call that dishonest, bigoted, incurious, and obviously partisan and passive-aggressive on top of that.

    That being said, I am happy to debate concepts and reality rather than how we feel about whether some guy named Paul was being honest or dishonest in his blog.

    On another note:

    One of my most important points remains and I think you and I have a fundamental disagreement there: Yes, I absolutely think that when someone writes a post on economics and on crucial matters of political philosophy and morality in particular, he better make damn sure that what he writes is fool- and bulletproof and yes, he better have short definitions available for every single relevant and potentially ambiguous term he uses.

    For there is no more dangerous tube to hold in your hands and to pass on to other interested junior scientists than the one that contains fundamental moral and political concepts. In the hands of people who misunderstand its contents such theories can cause great damage for the rest of society.

    I’d be a complete fool not to understand the necessity of terms in order to keep your content concise. I mean, why do you think I made this entire effort to set up this whole list of interrelated terms that I refer to all the time? It’s because I believe that if we truly want to understand phenomena in a satisfactory manner, the conceptual house we build needs to be built from the ground up, and every single element in the structure needs to be well known and understood if we want it to be a sound and sturdy structure.

    This was, in fact, the reason why I started this blog in the first place. I wanted to open up the realm of economics to the common people. Those who never thought of economics as something that can be communicated and debated in very clear terms. Those who have been discouraged, confused, bullied, and whipped into conformity by a fog of fuzziness, arbitrariness, and by an army of bullies, parents, teachers, bureaucrats, and, yes, economists like our dear friend above.

    You call them “my definitions”. Yes, of course they are my definitions. But definitions are nothing but labels applied to stuff in the universe. Society is nothing but people doing stuff. This is very important. Every term I use is but a mere label applied to phenomena observed in the universe, in the case of economics its humans interacting. And those phenomena are not “my phenomena”. They are phenomena of objective reality that I attempt to observe.

    If you find a flaw in any single one of my observations and logical concepts, be my guest, let me know where I went wrong and I will correct it. But do know that I don’t care about your opinions. Nor do I care about my opinions. Nor do I care about Krugman’s or anyone else’s opinions. Opinions don’t matter. I submit all beliefs to the criteria of logical consistency and empirical proof, that’s what matters to me. I reject the arrogant notion that opinions have any relevance in the realm of discussing phenomena of objective reality.

  6. Now let me discuss some interesting points that you brought up in your rebuttals:

    First this one regarding taxation:

    I don’t know about you, but I could relatively easily move to another country with less taxes, and I am not even all that well off. It is hardly at gunpoint when you are free to leave at any time.

    This is ridiculous and I’m tired of anarcho-capitalists using it. It is just for emotional and dramatic effect and has no basis in reality. In reality you MIGHT get audited, and MIGHT have your salary garnished. NO ONE GETS SHOT for not paying their taxes… at least in this country.

    Yes, you can always move, but I’m not sure what this has to do with what I said. Did I say anywhere that you can’t move? It’s the same when the mafia rules your neighborhood and extorts money against protection from you every week. You can move, no doubt. Does this make the act a moral one? Does this justify the act? Nor does this change the fact that it happens at gunpoint, just because you can run away.

    You say “NO ONE GETS SHOT for not paying their taxes”. That, again, is an interesting and pretty assertive statement that you are making. Please note that my point is that you can either pay your taxes or get shot, and yes, unfortunately even in this great country of yours. There simply is no middle ground between the two. Just because most people do the former it doesn’t change the nature of the choice.

    Let me take you to what will happen to you sooner or later when you consistently and effectively refuse to pay your taxes:

    You will get a letter.

    Then you will get another letter.

    Then a court date.

    If you don’t show up to court, armed people in blue costumes will visit you at your house.

    They show up with the intention of dragging you to jail and seizing your property, thus forcefully collecting their tax loot from you, making you pay your taxes.

    If you raise a gun to defend your property and yourself against the armed intruders and thus effectively resist paying your taxes … you will be shot down.

    … let me know if I’m missing something here.

  7. “If you raise a gun to defend your property and yourself against the armed intruders and thus effectively resist paying your taxes … you will be shot down.”

    That is kind of silly. If you pull a gun on ANYONE who also has a gun they will shoot you. Regardless of whether you are protecting your property or not. So to clarify yes, nobody without a death wish gets shot for not paying their taxes.

  8. No, it’s actually more simple: If you don’t pay your taxes you will get shot.

    If you are saying what I said above is silly, then surely there must be a logical flaw in the sequence I outlined, and a pretty severe one at that.

    Please … do point it out to me, because I’d hate to say things that are wrong.

  9. “No, it’s actually more simple: If you don’t pay your taxes you will get shot.”

    The logical flaw is that it is not true, you don’t get shot for not paying your taxes.

    If you pull a gun on a police officer while walking down the street you’ll get shot. So you could say you got shot for walking down the street. In actuality you got shot for pulling a gun on a police officer. If you get pulled over for speeding and you decide that the speed limit doesn’t apply to you because the police are a coercive governmental institution so you pull a gone on them to prevent them giving you a ticket, you will get shot. Thousands upon thousands of people get tickets and many try not to pay them. Unless they are extremely clever they eventually have to or lose their license and other consequences, but not shot. The ONLY WAY you get shot is if you pull out a gun. That is the common denominator, not avoiding taxes, not avoiding paying your seeding ticket, not walking down the street, pulling out a gun.

    Similarly, if you don’t pay your taxes and DON’T pull a gun on a police officer you WON’T get shot. The REASON you get shot is because you pulled a gone on a police officer, NOT that you didn’t pay your taxes. You can easily go your whole life without paying taxes and not get shot, you would just lose your possessions and freedom, which is about as bad. Despite that, NO ONE gets shot JUST for failing to pay their taxes. NO ONE, NADA, ZERO.

    That’s what I mean by it being silly to say you’ll get shot for not paying your taxes.

  10. I have earned income that I did not declared and not paid taxes on, and just to break the suspense… I have never been shot.

  11. Please stick to my scenario above. Go through it step by step and tell me how in the USA you can effectively refuse paying your taxes without being shot.

  12. Ok, fine. Your scenario.

    “Let me take you to what will happen to you sooner or later when you consistently and effectively refuse to pay your taxes.”

    I know people who consistently and effectively do not paid taxes (they don’t pay them so it must be effective :), even payroll, although they do pay sales tax on goods in our state, but I suppose if they were in a state without sales tax they wouldn’t pay any sales tax. They make no money as far as the government is concerned. So at this point if you exclude sales and other hidden taxes they do not pay taxes, I know people who consistently and effectively do not pay taxes. There are even movie stars and famous people who have avoided paying taxes for many years before getting caught. I would assume that is rich movie stars can get away with it for so long some people probably slip through the cracks. I guess I have no “proof,” but then again I doubt many people want to “prove” that they illegally avoid taxes. Also there are people who live lives mostly detached from modern society and economic systems who can avoid taxes, as they earn no official income. I might be missing something, but that seems like I might have found a logical inconsistency, however, I will continue. Maybe you mean active members in modern economic society who are not trying to hide from the law.

    “You will get a letter.” Ok… if you have an address or means of being contacted.

    “Then you will get another letter.” Ok.”.

    “Then a court date.” Ok.

    “If you don’t show up to court, armed people in blue costumes will visit you at your house.” Ok. Unless you do not have a residence.

    “They show up with the intention of dragging you to jail and seizing your property, thus forcefully collecting their tax loot from you, making you pay your taxes.”

    Actually this doesn’t make one pay their taxes, they just steal it from them. If a burglar steals my stuff it is not the same as making me give it to them. Someone taking my wallet and money is different than me paying them.

    “If you raise a gun to defend your property and yourself against the armed intruders and thus effectively resist paying your taxes … you will be shot down.”

    I don’t own a gun so they would take me to jail and steal my money and property.

    In this scenario I never stop refusing to pay my taxes, they just steal my things, which is not the same as giving it to them voluntarily. Besides, as I pointed out earlier, there are other options as to this scenario. I hope hat maybe clarifies my reasoning a little more. Sorry for calling it a silly idea, I just happen to think it is too overly simplistic I guess.

  13. “Actually this doesn’t make one pay their taxes, they just steal it from them. If a burglar steals my stuff it is not the same as making me give it to them. Someone taking my wallet and money is different than me paying them.”

    … it would only be different if ‘you paying them’ was voluntary. But it is not. If you only pay them because effectively resisting to pay them would get you shot, then it is of quite a different character.

    To be clear, by “paying taxes” I only mean what actually occurs in reality, the succumbing to theft, viz. the appropriation of property by means of aggression or threat thereof. Taxation is nothing but a subcategory of theft, namely periodical theft over an entire territory.

    But if you would like me to phrase it differently, OK here it goes: Either the government takes your money or you’ll get shot. But then … I think you must be getting my point by now, no?

    “I don’t own a gun so they would take me to jail and steal my money and property.”

    … thus you have paid your taxes. You were not shot, but you paid your taxes. There is no way to not pay taxes without getting shot

  14. For one, you ignored completely at least half the points I made, especially the ones about people not paying taxes and not getting shot for some reason (coincidence?). For another thing you seem to be trying to confuse the issue.

    “it would only be different if ‘you paying them’ was voluntary. But it is not. If you only pay them because effectively resisting to pay them would get you shot, then it is of quite a different character.”

    I am not exactly sure what you are getting at, let’s try looking at the definition of to pay.

    Meriam-Webster dictionary:

    Pay

    Etymology: Middle English, from Anglo-French paier, from Latin pacare to pacify, from pac-, pax peace

    1 a : to make due return to for services rendered or property delivered b : to engage for money :hire
    2 a : to give in return for goods or service b : to discharge indebtedness for : settle c : to make a disposal or transfer of (money)
    3 : to give or forfeit in expiation or retribution
    4 a : to make compensation for b : to requite according to what is deserved

    The only definition of payment that REMOTELY resembles what you are talking about is 3 : to give or forfeit in expiation or retribution . However expiation means atonement and retribution means to give in recompense (in other words in payment for services). Not to mention they are all actions taken by the subject, not things done TO him.

    I doubt from your philosophy that you believe forcible payment of taxes is atonement or retribution for anything (I could be wrong).

    So unless you have a different definition of payment, how is it payment?

    “the succumbing to theft,” again this is not a part of the definition of payment as far as I know.

    “Either the government takes your money or you’ll get shot.”

    This is partly true. In actuality though, either the government takes your money, or you get shot and they STILL take your money. I think that is my main problem with your diagnosis. Getting shot has little to do with taking your money, it gets taken either way. Whether you are alive or not has little consequence in regard to it being taken.

    And again, you completely ignored my argument that there are people who consistently and effectively resist paying taxes and don’t get shot as far as I can tell. That seems like the crux of your argument and an odd part to ignore.

  15. If you effectively resist the government’s taking of your tax money, you will be shot. There are different ways to put it and maybe unusual, albeit helpful, applications of the word “pay” in this case. But it doesn’t change the nature of the act in any way, most definitely not for analyses that are concerned with human action and economics.

    I do have reason to believe you are rather prone to splitting words and trust you get my point by now.

  16. I do get your point, I disagree with it and feel your language is more deceptive that clarifying.

    However, I do not think that is going to change. I appreciate the discussion.

  17. If you disagree with the notion that you get shot if you effectively resist the process of tax collections, then you would need to tell me what you think happens. Chaining yourself to your house and yelling at the armed intruders is obviously not an effective resistance to armed brute force.

    I have seen actual footage and testimonies of armed IRS and FBI, and special ops agents intruding the homes of tax protesters and shooting at even UNARMED people. Not that this surprises me in any way, for it is completely predictable, but it is of support in my quest for truth and evidence. What are you basing your assertions on?

    If you concede at the very least that you will be kidnapped and locked up in a cell if you resist paying your taxes (albeit ineffectively), then I don’t know why we are debating the matter.

    For the praxeological character of the action doesn’t change in any way, shape or form. It is an aggression against your property, period.

  18. “you would need to tell me what you think happens.”

    I ALREADY told you. Hide your income or do not involve yourself in government recognized economic activity. I already said this. I already pointed this out and you never responded. Do you want me to go step by step through tax evasion?

    “What are you basing your assertions on?”

    I know people who do it. People involved in organized crime and street people.

    Let me give another stab a this.

    Let’s say we are in your perfect anarcho-capitalist world. You voluntarily sign a contract to join a homeowner’s association, which collects fees for road repair, garbage collection, fire protection, and private security.

    Part of this contract is that your community has to collectively decide on any fee changes through a majority vote. You have agreed to this through the contract and it is all fine.

    Now let’s say at some point that for some reason you believe that a recent fee (tax) hike was not done according to the contract and therefore invalid. You launch your protest but alas, you are in the vast minority. Eventually the private security comes to forcibly collect those fees (that you think are being collected illegitimately) and you blockade yourself inside with a gun. They enter and shoot you.

    This anarchist world does not prevent you from being shot for what you believe is property theft. I doubt any world does.

    The main difference is states have implicit contracts that you will abide by their rules, if you want to break that contract in exchange for another one you have to leave the country. Do you think it is possible in an anarchist world to NOT sign a contract?

    Also, if you wan me to answer new questions please respond to the previous answers I’ve given first, vis-a-vis tax evasion and such.

  19. But in my example the person doesn’t do any such complicated and impairing things as hiding transactions from the government. He is trying to live a normal life and gets bullied by the mother of all mafias to cough up the money they want to extort from him. You are trying to change my scenario to suit your desired outcomes.

    I will not comment on all the tangents you are trying to take this to because you are already refusing to accept the most simple of all facts.

    Thanks for the example with the homeowner’s association. I have heard that one many times. The analogy has such grave and obvious flaws that I hope you don’t really think it applies even remotely.

    I assume you are, for the sake of your argument, ignoring the fact that such an association would go out of business rather quickly in a voluntary society. Fine, the good thing with consistent logic is that it holds up no matter how many hurdles you throw in its way.

    When I sign a contract to live on the property of the company I voluntarily agree to pay a certain sum that it determined in a certain manner in exchange, we have ourselves a voluntary transaction. If I fail to deliver my part of the contract I am an aggressor against the owner’s property and he has every right to drag me off or even shoot me if I effectively resist.

    (Again, for the sake of your argument I will not delve into all the problems, the public relations fiasco, and the rising DRO charges that would inevitably ensue and cripple the association financially, in which case its reps would most definitely think twice about such acts, heck it’ll be more lucrative to work out a special deal with the guy!!)

    Show me the contract that you or I or the unborn whose future is being pillaged have signed or even verbally agreed to in which we commit to paying the government an arbitrarily flexible some for … uhm … for something that is sort of unspecified I guess? Are you renting your apartment from the government? Did you buy your house from the government? Does the federal government own the roads you drive on and the sidewalks you walk on every day? Do they own the office you work at or the places you go toe meet your friends and family? Certainly not!

    Then by what right should they be justified in making you leave all that!? If they want me off their property, fine! Don’t let me enter the damn Post Office. Don’t allow me into the IRS and INS buildings. (Not sure why I would ever want in there anyway, and once again, for the sake of your argument I am ignoring the fact that even those smoky and boring premises have been paid for with looted money anyway.) Don’t allow me to use the interstate highways if you insist!

    You have to try really really hard to look past such simple facts …

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