When Reactionary Goldbug Austrian Plumber-Economists Attack!!
Matthew Yglesias asks why oh why can't we have a better press corps--why are the gentlebeings of the press so eager to be played by Republican spinmasters?
Matthew Yglesias: Strange Swing: Joe The Plumber has a list of recommended books and the only non-plumbing volume is written by Ludwig von Mises? How is it, exactly, that we were supposed to believe this guy was a swing voter?
Tyler Cowen speculates that perhaps the Ron Paul Conspiracy has gotten to Joe Wuerzelbacher:
Marginal Revolution: Joe the Plumber and his favorite books: Joe reads economics:
The Theory of Money and Credit (Ludwig von Mises): "It brought monetary theory into the mainstream of economic analysis. It is important reading for these troubled times."
My theory is that someone in Ron Paul's camp told him to say that...
And Tyler goes on to (weakly) defend von Mises:
Scrolling through it a bit, it is more readable than my recollection and it remains one of the better 20th century books on monetary theory...
It is hard to read Tyler here.
What does "more readable than my recollection" mean? Is that a statement about the book, or about his recollection? Similary, what does "one of the better 20th century books on monetary theory" mean? Is that a statement about von Mises's Money and Credit, or about 20th century monetary theory?
My view is that Money and Credit is very readable--compulsively readable, in fact: I have just spent two and a half hours telling myself "it's OK; I will just read one more page...". But it is only readable in a rhetorical-excess-train-wreck mode, for it is also totally bats--- insane.
I recommend starting at page 416: read through the defenses of the gold standard as the only monetary system consistent with representative government, the attacks on Keynes, the attacks on the New Deal, the attacks on the United Nations, the blaming of all unemployment on labor unions--or on governments--the attacks on private-sector fractional-reserve banking, and stop with the attacks on all other believers in the gold standard not named "von Mises", not dedicated to the root-and-branch elimination of all forms of private fractional-reserve banking, and infected by the errors of the nineteenth-century British Banking School:
Ludwig von Mises, Money and Credit: p. 416 ff: [T]he gold standard appears as an indispensible element of the body of constitutional guarantees that make the system of representative government function.... What the foes of the gold standard are asking for is... to intensify very considerably the already-prevailing upward trend of prices and wages.... Such a policy of radical inflationism is, of course, extremely popular.... How pale is the art of sorcerers, witches, and conjurors when compared with that of the government's treasury department! The government, professors tell us, 'can raise all the money it needs by printing it'[1]. Taxes for revenue, announced a chairman of the Federal Reserve Bank of New York, are 'obsolete'[2]. How wonderful!... Eventually... the cleverly-concocted plans of inflation collapse. Whatever compliant government economists may have said, inflationism is not a monetary policy that can be considered as an alternative to a sound-money policy....
[T]he gold standard did not collapse. Governments abolished it in order to pave the way for inflation. The whole grim apparatus of oppression and coercion--policemen, customs guards, penal courts, prisons, in some countries even executioners--had to put into action in order to destroy the gold standard. Solemn pledges were broken, retroactive laws were promulgated, provisions of constitutions and bills of rights were openly defied. And hosts of servile writers praised what the governments had done.... The most remarkable thing about this allegedly new monetary policy, however, is its complete failure.... [I]t substituted fiat money in the domestic markets.... It contributed considerably to the disintegration of the international division of labor.... but the position of gold as the world's [monetary] standard is impregnable....
The expansionist doctrine does not realize that interest... is an originary category of human valuation, actual in any kind of human action and independent of any social institutions. The expansionists do not grasp the fact that there never were and there never can be human beings who attach to an apple available in a year or in a hundred years the same value they attach to an apple available now.... These absurd doctrines greatly impressed ignorant politicians and demagogues.... The inevitable eventual failure of any attempt at credit expansion... impossible to substitute fiat money and a bank's circulation credit for non-existing capital goods. Credit expansion initially can produce a boom... bound to end in a slump, in a depression... the recurrence of periods of economic crises... [caused by] the reiterated attempts of governments and banks supervised by them to expand credit....
This spurious grocer philosophy was once and for all exploded by Adam Smith and Jean-Baptist Say. In our day it has been revived by Lord Keynes.... Keynes was at a loss to advance a tenable argument against Say's law. Nor have his disciples or the hosts of economists, pseudo and otherwise, in the offices of the various governments, the United Nations, and divers other national or international bureaux done any better....
Wage rates are a market phenomenon.... If the government or labour unions fix wage rates at a higher point than the potential rate of the unhampered labour market and if they enforce their minimum-price decree by compulsion and coercion, a part of those who want to find jobs remain unemployed. Such institutional unemployment is the inevitable result of the methods applied by present-day self-styled progressive governments. It is the real outcome of measures falsely labeled as pro-labour.... [T]he reputation and prestige of the men now ruling the countries... and of their professional and journalistic allies are so inseparably tied up with the 'progressive' doctrine that they must cling to it. If they do not want to forsake their political ambitions, they must stubbornly deny that their own policy tends to make mass unemployment a permanent phenomenon....
[...]
Sound money still means today what it meant in the nineteenth century: the gold standard.... The main thing is that the government should no longer be in a position to increase the quantity of money in circulation and the amount of [private bank-provided] cheque-book money not fully--i.e. 100 per cent--covered by deposits paid in by the public. No backdoor must be left open where inflation can slip in.... It merely helps the rulers whose policies brought about the catastrophe to exculpate themselves....
[M]ost supporters of sound money do not want to go beyond the elimination of inflation for fiscal purposes.... [T]hey do not want to prevent... [private-sector] credit expansion for the sake of lending to business.... Their idea of sound money is... with all the errors of the British Banking School.... They still cling to the schemes whose application brought about the collapse of the European banking systems... discredited the market economy by generating the almost regular recurrence of periods of economic depression. There is no need to add anything to the treatment of these problems as provided in Part Three of this volume and also in my book Human Action.... [T]he characteristic duplicity of the [central] bank policy.... [Private-sector] credit expansion... obscure[s] the fact that there prevails a nature-given scarcity of the material things on which the satisfaction of human wants depends...
Two further notes:
[1] This citation to Abba Lerner's Economics of Control omits the second half of Lerner's sentence, which reads: "if the raising of the money is the only consideration." Since the raising of the money is never the only consideration in designing a tax system, the meaning of Lerner's sentence is not the meaning that von Mises wants his readers to ascribe to it.
[2] Again, this citation to Beardsley Ruml's "Taxes for Revenue Are Obsolete" is a gross and illegitimate distortion.
Ruml writes that while state and local governments must ultimately raise all the money to finance their spending through taxation, the federal government has extra freedom of action because of "the elimination, for domestic purposes, of the convertibility of the currency into gold." How should the government use this freedom of action? The first of the policy considerations it should have in mind, Beardsley Ruml says, is: "Do we want a dollar with reasonably stable purchasing power over the years?... [T]he most important single purpose ot be served by the imposition of federal taxes is the maintenance of a dollar which has stable purchasing power.... [W]ithout the use of federal taxation all other means of [price] stabilization... monetary policy... price controls... subsidies, are unavailing..." That is the opposite of what von Mises wants his readers to think Ruml's meaning is.
