The American school is of course, correct. Only a sufficiently commanding, authoritarian, and unitary state can command the loyalty of monied elites, who otherwise consider themselves free agents, without loyalties to a state or a people. Only a state capable of punishing treason and disloyalty by throwing a rich, powerful man in jail, or even killing him and taking his wealth, is capable of resisting a conspiracy of money grubbers who wish to take over the state and loot the treasury and oppress the people with usurious lending.
Which of course is what is missing from this reading list. An understanding of the particular evils of usury, apart from rents.
I suggest Barren Metal by Dr. E. Michael Jones as the missing piece.
Authoritarianism leads to its own conspiracies of money grubbers. Greed is not easily cowed, unfortunately. And any economic theory that ignores that reality is doomed.
I was deep into Austrian Economics for a long time. My time as a "libertarian" was long, and I enjoyed the intellectual underpinnings of the Austrian school. It took me a while, as well, to see how 'free trade' was such a negative. You couldn't have convinced me years ago. I guess we all spend time in some doctrinaire box - perhaps it's a required part of the journey.
I am curious about Keen's books. I enjoy his interviews, except when he froths at the mouth about "climate change". If you ask him, the world is doomed by climate change. I suggested in a comment that if that's the case, all the debates should end, and we should all sit and have a beer together.
I'd never heard of the American School. Thanks for the links.
It sounds like our journey was remarkably similar!
Keen et al tend to be irritating when they start to give lectures about climate change and so on. But I don't listen to them for their climate expertise, just their economic insights, so it's easy to sort the wheat and chaff. Cheers!
A recovering free trader as well. I think one of the primary issues is making economics/market efficiency the sole goal of policy. I still favor the more natural law/rights perspective found in Austrian Econ, because I believe that to be the rightful role of the state - aka a matter of justice. Of course, reading Neo reactionary thought, I have come to believe a Jubilee is necessary and Usury needs to be illegal again.
On Tariffs, I have a pet belief that moving to funding the federal government ONLY through tariffs would be ideal. Too high and it becomes protective and drops revenues, and the too low and the government revenues also suffer. Seems like a more natural limiter of the State, than turning every business into tax collectors (via income, sales, etc.) which leads to huge opportunities for graft and corruption.
This channel's content is top-notch! Just not sure if the economy can be saved. Once the incentive of growth and capitalism is gone, like we see now in woke Europe, there will be a transformation towards kings, lords, and emperors, genetic nobility, and mind control, e. g. magic and propaganda. Computers will help to create utopian serfdom and economic unreality, no problem. It is possible to imagine flying cars while riding a bike. Unreality can be monetized. Just like unreal money, unreal stocks, unreal market shares and the arts. Just hit the subscribe button and can't wait for more contemplations on the American school of economics. Also, let's combine efforts in spirit to stay ahead of the censorship! The censors are coming to Substack for sure. Best! T
A challenging list! I think I may have read...one of these books.
I did, however, go back to your article on George Reisman. You wrote:
"Wage-laborers aren’t the only consumers. Capitalists are also consumers. The money they use to consume is the profit they receive from their ownership of businesses, paid to them in dividends, royalties, profit shares, and so on. The “missing” $3000 of food and clothing is paid for out of the profits. The capitalists eat a lot of expensive food and wear a lot of fancy clothes."
From this it's clear that profits are made--and who makes them. But I cannot for the life of me figure out on this basis alone *from where* the profits *derive*. Isn't it at least plausible that they are partially derived from wages, in addition to dividends etc?
For purposes of Reisman's analysis, the profits could appear as:
- Salary paid to entrepreneurs
- Dividends paid to shareholders
- Profit distributions paid to sole proprietors, partners, or LLC members
So for instance, imagine I own and run a small tabletop role-playing game company. Each month I pay myself a salary of $5000 and at the end of the year I distribute profits of $10,000 to myself. For tax purposes, the "salary" is treated as an expense of the business while the profit distribution is treated as "profit", but in Reisman's economic analysis, both are effectively profit accruing to the entrepreneur.
Yes I see. But I interpret what you've said as showing where profits are hidden in the 'accounting' (as it were). What I meant to ask--I did so hurriedly and poorly, by the use of 'wages', which is the wrong term--was to do with the labour theory of value: Is it plausible to you that some of the profit, even that accruing to an entrepeneur, derives from the extraction of (surplus) value from labour? I find it difficult to imagine how classical economists are wrong--or, perhaps better, not partially right--in this respect.
Frankly, the labor theory of value is false. Suppose there are two thousand workers producing widgets, and then an entrepreneur invents a way to make the widgets with half the work. That entrepreneur just produced the same amount of value as a thousand workers.
I wish I could be so dispositive. Doesn't this example rather demonstrate that extraction of labour value is a factor in the production of commodities? Otherwise how can the introduction of innovations be accounted for? Raw efficiency is one, of course, but reduction of prices in order to gain a competitive advantage is surely another.
I have not but I will investigate him on the basis of your recommendation - thank you! The best part of running this blog is all the new reading I get to do.
I did not know that they figured the rent equivalent of home prices in GDP! That's wacky! Oh, for the time to read your list!
For those with less time, I'd recommend the works of Mark Skousen for understanding the Austrian School. Also Skousen is considerably less dogmatic; he is capable of conceding points to those he opposes, even Marx. He's also not allergic to numbers.
And my big gripe with the dogmatic Austrians I have read and encountered: no ability to consider transitions from a broken fractional reserve economy to a more sustainable arrangement. The prescriptions I have read consists of just letting the malinvestments rot. This is bothersome.
The best alternative I've found to transition off our broken fractional reserve system is the Chicago Plan, which I shared previously. Austrian economists were, not surprisingly, opposed to it, but it seems to me far better than what we have now and a good step towards real hard money.
No hard money without doing something about the national debt. Decades of Santa Claus Economics has committed us to either nominal economic growth or brutal levels of taxation.
The problem grows even worse if we move back to more traditional living arrangements. Going from junk food and daycare to home cooking and stay at home motherhood reduces GDP. As I pointed out in my latest post, Supply Side Economics is at odds with both traditional values and nationalism.
Here's something to contemplate: I got pushback on my assertions above, that reduction in money activity in one sector of the economy frees it up for another. (Or, the economy can grow without triggering overall inflation since some sectors got cheaper/less monetized.) That got me thinking. If taxes are on moving money, the tax burden shifts from those sectors that get cheaper due to technological improvements or outsourcing to those sectors which don't.
I'm trying to decide if this means that taxation magnifies Baumol's Cost Disease. Or conversely, should we have a higher tax rate on sectors with falling prices in order to dampen the cost disease? I know this sounds very interventionist, but much of what we call bigger government is simply the fact that government buys a lot of domestic human labor. Policing and paving roads have not seen the price drops of clothing, television sets, etc. Ditto for sectors where the government needs to assist the poor: education, medical care, legal help, etc.
The idea of adjusting tax rates to manage Baumol's Cost Disease is honestly brilliant. I would very much like to read a full length article on that. BCD is a very large problem for industrial society.
We really need to redefine our measure of economic growth. GDP has way too many flawed assumptions, which create perverse incentives. It's another example of economists today (i.e. the Fed) trying to distill it all down to one variable. The one input - interest rates. The one output - GDP.
The BCD that you described in the examples seems due to a monopolistic government more incentivized to provide jobs than to increase productivity. In a managerial bureaucracy, cost efficiency is the enemy.
Governments have tried to throw tech at the problem of education going back to the 16mm movie projectors issued in the 1950s. Education is just not that amenable to high tech solutions.
Back when I was in elementary school, they did have low tech solutions that allowed classrooms of 30+ students to work: corporal punishment and adequate recess time.
And if you go WAY back, there were the one room schoolhouses where older kids tutored younger kids. Also, woman labor was cheap thanks to the magic of overt discrimination.
So yes, government inefficiency is part of the problem, but only part.
There was an interesting experiment done by Georgia Tech. They offered a full online bachelor's degree program in computer science. It cost $7000 for the 4-year degree, as opposed to around $70,000 for the on-campus equivalent. Of course, after four years they shelved it. Government inefficiency is only part, but it's a very big part. If you can't imagine being able to effectively use tech to reduce the cost of education, it's because you not actually using your imagination. But why should imaginative, smart people focus on creating solutions for a problem that the establishment doesn't really want to solve.
Computer programming is a skill that lends itself to self-teaching more than most fields. The feedback loop is incredibly tight and there are dopamine hits of success to be had very early on. Many find this to be addictive fun.
Math heavy subjects have a large hump to get over before the results become interesting. Having the social pressure that comes from in-person instruction is very handy for getting in the necessary reps.
It seems he was correct in his prediction that "capitalism" would collapse and be replaced with socialism.
Today, every country operates using a huge dose of socialist doctrines and practices. Propaganda and subversion are not uncommon, I'm afraid.
In my opinion, part of the reason why Europe produces less than it should and consumes so much is because of the mental damage caused on people by socialist practice: public health, public education, public works.
Pure capitalism more or less forces people to remain mentally sane if they want to prosper economically. Same for companies. But in socialism, it is actually better to be crazy. Sometimes psychotically violent. Look at big companies. They act like a crazy person. And they don't suffer sanctions from the regime.
But was Schumpeter a free trader, or did he see in his prophetic work that it was actually better to run everything on nationalist-socialist principles?
Doubtless you are correct, I could not in good conscious include Schumpeter because I haven't read him. I've read *of* him, but of his actual works, not a word. This blog is all about encountering the limits of my knowledge horizon...
The American school is of course, correct. Only a sufficiently commanding, authoritarian, and unitary state can command the loyalty of monied elites, who otherwise consider themselves free agents, without loyalties to a state or a people. Only a state capable of punishing treason and disloyalty by throwing a rich, powerful man in jail, or even killing him and taking his wealth, is capable of resisting a conspiracy of money grubbers who wish to take over the state and loot the treasury and oppress the people with usurious lending.
Which of course is what is missing from this reading list. An understanding of the particular evils of usury, apart from rents.
I suggest Barren Metal by Dr. E. Michael Jones as the missing piece.
https://www.amazon.com/Barren-Metal-History-Capitalism-Conflict/dp/0929891147
Great addition - thank you!
Authoritarianism leads to its own conspiracies of money grubbers. Greed is not easily cowed, unfortunately. And any economic theory that ignores that reality is doomed.
https://aoav.org.uk/2023/the-corrosion-of-corruption-the-state-of-the-russian-military/
https://www.wilsoncenter.org/blog-post/putin-destroying-russian-state
https://www.jstor.org/stable/j.ctv24trdg8 - China’s Crony Capitalism: The Dynamics of Regime Decay
https://telex.hu/english/2023/01/31/transparency-international-hungary-is-the-most-corrupt-country-in-the-eu
The Scholastic Analysis of Usury by John Noonan
Usury in Christendom: The Mortal Sin that Was and Now is Not
by Michael Hudson
This FAQ compiled by Zippy Catholic on his blog before his untimely death (RIP)
https://zippycatholic.wordpress.com/2014/11/10/usury-faq-or-money-on-the-pill/
I was deep into Austrian Economics for a long time. My time as a "libertarian" was long, and I enjoyed the intellectual underpinnings of the Austrian school. It took me a while, as well, to see how 'free trade' was such a negative. You couldn't have convinced me years ago. I guess we all spend time in some doctrinaire box - perhaps it's a required part of the journey.
I am curious about Keen's books. I enjoy his interviews, except when he froths at the mouth about "climate change". If you ask him, the world is doomed by climate change. I suggested in a comment that if that's the case, all the debates should end, and we should all sit and have a beer together.
I'd never heard of the American School. Thanks for the links.
It sounds like our journey was remarkably similar!
Keen et al tend to be irritating when they start to give lectures about climate change and so on. But I don't listen to them for their climate expertise, just their economic insights, so it's easy to sort the wheat and chaff. Cheers!
A recovering free trader as well. I think one of the primary issues is making economics/market efficiency the sole goal of policy. I still favor the more natural law/rights perspective found in Austrian Econ, because I believe that to be the rightful role of the state - aka a matter of justice. Of course, reading Neo reactionary thought, I have come to believe a Jubilee is necessary and Usury needs to be illegal again.
On Tariffs, I have a pet belief that moving to funding the federal government ONLY through tariffs would be ideal. Too high and it becomes protective and drops revenues, and the too low and the government revenues also suffer. Seems like a more natural limiter of the State, than turning every business into tax collectors (via income, sales, etc.) which leads to huge opportunities for graft and corruption.
Yes! I am in agreement. Outlaw usury. Have the Federal government funded by tariffs. These are real steps we could take to make our society better.
> Outlaw usury.
The age of exploration, the industrial revolution, and modern society more generally were only possible due to "usury".
https://unenumerated.blogspot.com/2006/10/genoa.html
By "usury" is it meant as excessive interest or any interest at all? Also, as for excessive interest, that is already illegal.
I read Steve Keen's Debunking Economics and realized I'm an idiot and shouldn't be reading about economics.
Freetrader isn’t such an embarrassing sobriquet: it’s another name for smuggler.
That makes me feel better tbh
This channel's content is top-notch! Just not sure if the economy can be saved. Once the incentive of growth and capitalism is gone, like we see now in woke Europe, there will be a transformation towards kings, lords, and emperors, genetic nobility, and mind control, e. g. magic and propaganda. Computers will help to create utopian serfdom and economic unreality, no problem. It is possible to imagine flying cars while riding a bike. Unreality can be monetized. Just like unreal money, unreal stocks, unreal market shares and the arts. Just hit the subscribe button and can't wait for more contemplations on the American school of economics. Also, let's combine efforts in spirit to stay ahead of the censorship! The censors are coming to Substack for sure. Best! T
You very much could be right - I wish I had strong arguments to say you aren't but I don't :-\
A challenging list! I think I may have read...one of these books.
I did, however, go back to your article on George Reisman. You wrote:
"Wage-laborers aren’t the only consumers. Capitalists are also consumers. The money they use to consume is the profit they receive from their ownership of businesses, paid to them in dividends, royalties, profit shares, and so on. The “missing” $3000 of food and clothing is paid for out of the profits. The capitalists eat a lot of expensive food and wear a lot of fancy clothes."
From this it's clear that profits are made--and who makes them. But I cannot for the life of me figure out on this basis alone *from where* the profits *derive*. Isn't it at least plausible that they are partially derived from wages, in addition to dividends etc?
For purposes of Reisman's analysis, the profits could appear as:
- Salary paid to entrepreneurs
- Dividends paid to shareholders
- Profit distributions paid to sole proprietors, partners, or LLC members
So for instance, imagine I own and run a small tabletop role-playing game company. Each month I pay myself a salary of $5000 and at the end of the year I distribute profits of $10,000 to myself. For tax purposes, the "salary" is treated as an expense of the business while the profit distribution is treated as "profit", but in Reisman's economic analysis, both are effectively profit accruing to the entrepreneur.
Yes I see. But I interpret what you've said as showing where profits are hidden in the 'accounting' (as it were). What I meant to ask--I did so hurriedly and poorly, by the use of 'wages', which is the wrong term--was to do with the labour theory of value: Is it plausible to you that some of the profit, even that accruing to an entrepeneur, derives from the extraction of (surplus) value from labour? I find it difficult to imagine how classical economists are wrong--or, perhaps better, not partially right--in this respect.
Frankly, the labor theory of value is false. Suppose there are two thousand workers producing widgets, and then an entrepreneur invents a way to make the widgets with half the work. That entrepreneur just produced the same amount of value as a thousand workers.
I wish I could be so dispositive. Doesn't this example rather demonstrate that extraction of labour value is a factor in the production of commodities? Otherwise how can the introduction of innovations be accounted for? Raw efficiency is one, of course, but reduction of prices in order to gain a competitive advantage is surely another.
> Doesn't this example rather demonstrate that extraction of labour value is a factor in the production of commodities?
*A* factor, not the only one.
> Raw efficiency is one, of course, but reduction of prices in order to gain a competitive advantage is surely another.
Yes, some of the extra value generated by the innovation will go to the customers in the form of lower prices.
"> Doesn't this example rather demonstrate that extraction of labour value is a factor in the production of commodities?
*A* factor, not the only one."
What, would you say, are some others?
Also, have you looked into the writings of Fred Foldvary? He attempted to merge the Georgist and Austrian schools of economics.
https://www.progress.org/authors/fred-foldvary
I have not but I will investigate him on the basis of your recommendation - thank you! The best part of running this blog is all the new reading I get to do.
I did not know that they figured the rent equivalent of home prices in GDP! That's wacky! Oh, for the time to read your list!
For those with less time, I'd recommend the works of Mark Skousen for understanding the Austrian School. Also Skousen is considerably less dogmatic; he is capable of conceding points to those he opposes, even Marx. He's also not allergic to numbers.
And my big gripe with the dogmatic Austrians I have read and encountered: no ability to consider transitions from a broken fractional reserve economy to a more sustainable arrangement. The prescriptions I have read consists of just letting the malinvestments rot. This is bothersome.
For those with a REALLY short time to read, here is an ultra simple macroeconomic thought experiment, which is semi-Austrian, but actually looks for graceful means out of a depression: https://greenandfree.org/SustainableEconomics/BusinessCycle.php
Great recommendations.
The best alternative I've found to transition off our broken fractional reserve system is the Chicago Plan, which I shared previously. Austrian economists were, not surprisingly, opposed to it, but it seems to me far better than what we have now and a good step towards real hard money.
No hard money without doing something about the national debt. Decades of Santa Claus Economics has committed us to either nominal economic growth or brutal levels of taxation.
The problem grows even worse if we move back to more traditional living arrangements. Going from junk food and daycare to home cooking and stay at home motherhood reduces GDP. As I pointed out in my latest post, Supply Side Economics is at odds with both traditional values and nationalism.
Here's something to contemplate: I got pushback on my assertions above, that reduction in money activity in one sector of the economy frees it up for another. (Or, the economy can grow without triggering overall inflation since some sectors got cheaper/less monetized.) That got me thinking. If taxes are on moving money, the tax burden shifts from those sectors that get cheaper due to technological improvements or outsourcing to those sectors which don't.
I'm trying to decide if this means that taxation magnifies Baumol's Cost Disease. Or conversely, should we have a higher tax rate on sectors with falling prices in order to dampen the cost disease? I know this sounds very interventionist, but much of what we call bigger government is simply the fact that government buys a lot of domestic human labor. Policing and paving roads have not seen the price drops of clothing, television sets, etc. Ditto for sectors where the government needs to assist the poor: education, medical care, legal help, etc.
The idea of adjusting tax rates to manage Baumol's Cost Disease is honestly brilliant. I would very much like to read a full length article on that. BCD is a very large problem for industrial society.
I will write it then.
We really need to redefine our measure of economic growth. GDP has way too many flawed assumptions, which create perverse incentives. It's another example of economists today (i.e. the Fed) trying to distill it all down to one variable. The one input - interest rates. The one output - GDP.
The BCD that you described in the examples seems due to a monopolistic government more incentivized to provide jobs than to increase productivity. In a managerial bureaucracy, cost efficiency is the enemy.
Governments have tried to throw tech at the problem of education going back to the 16mm movie projectors issued in the 1950s. Education is just not that amenable to high tech solutions.
Back when I was in elementary school, they did have low tech solutions that allowed classrooms of 30+ students to work: corporal punishment and adequate recess time.
And if you go WAY back, there were the one room schoolhouses where older kids tutored younger kids. Also, woman labor was cheap thanks to the magic of overt discrimination.
So yes, government inefficiency is part of the problem, but only part.
There was an interesting experiment done by Georgia Tech. They offered a full online bachelor's degree program in computer science. It cost $7000 for the 4-year degree, as opposed to around $70,000 for the on-campus equivalent. Of course, after four years they shelved it. Government inefficiency is only part, but it's a very big part. If you can't imagine being able to effectively use tech to reduce the cost of education, it's because you not actually using your imagination. But why should imaginative, smart people focus on creating solutions for a problem that the establishment doesn't really want to solve.
Computer programming is a skill that lends itself to self-teaching more than most fields. The feedback loop is incredibly tight and there are dopamine hits of success to be had very early on. Many find this to be addictive fun.
Math heavy subjects have a large hump to get over before the results become interesting. Having the social pressure that comes from in-person instruction is very handy for getting in the necessary reps.
I'm surprised you don't mention Schumpeter.
It seems he was correct in his prediction that "capitalism" would collapse and be replaced with socialism.
Today, every country operates using a huge dose of socialist doctrines and practices. Propaganda and subversion are not uncommon, I'm afraid.
In my opinion, part of the reason why Europe produces less than it should and consumes so much is because of the mental damage caused on people by socialist practice: public health, public education, public works.
Pure capitalism more or less forces people to remain mentally sane if they want to prosper economically. Same for companies. But in socialism, it is actually better to be crazy. Sometimes psychotically violent. Look at big companies. They act like a crazy person. And they don't suffer sanctions from the regime.
But was Schumpeter a free trader, or did he see in his prophetic work that it was actually better to run everything on nationalist-socialist principles?
Doubtless you are correct, I could not in good conscious include Schumpeter because I haven't read him. I've read *of* him, but of his actual works, not a word. This blog is all about encountering the limits of my knowledge horizon...
Makes sense.