From the Comments: Money, Currency, and Bitcoins

Dr Gibson chimes in on Chhay Lin‘s most recent post about bitcoins (I hope there will be more):

“Unspent dollars means reduced sales, and as sales decline, profits drop, layoffs increase, and the total social income decreases, making less money available for consumption. Hoarding induces more hoarding as the economy sinks into a downward spiral.” (Smith, 2009)

That’s a lot of nonsense in just two sentences. (Note this is Smith’s paraphrase of the anti-hoarding argument, which he ably disputes.)

First, there is no distinction between “spent” and “unspent” dollars. Money jumps instantly from one pocket to another whenever it is used in a transaction. All money is “idle” between jumps. This could refer to the demand to hold money which is the inverse of the velocity of money. We hold money for convenience, safety, and occasionally as a hedge against deflation.

Second, decreased velocity means price deflation, other things being equal, and if a fall in velocity happens suddenly and unexpectedly, it can be a temporary boon to buyers and a detriment to sellers. But the idea of a deflationary spiral feeding on itself is silly, if only because we all have to eat. Low prices are the cure for low prices, as bargain-hunters move in and prices stabilize.

Then there’s this “social income” phrase. Real social income is not enhanced by faster spending. It is enhanced by greater productivity which depends on private saving, which in turn depends largely on property-friendly institutions. We cannot spend our way to prosperity.

I’ll also comment on Kaminska’s claim that bitcoins “do not benefit the economy” because they do not bear interest. Along with currency and (in their time) gold and silver coins, bitcoins are what economists call “outside money” meaning they are an asset that is no one’s liability. Checking account balances are a form of “inside money” because they are at once an asset of the account holder and a liability of the bank. When outside money is deposited in a fractional-reserve bank where it becomes inside money, some is kept in reserve and some is loaned out. This apparently what is meant by “benefit to the economy” but in fact it’s a benefit to the bank which can earn profits on the new loans and to the borrower, if all goes well. It’s a detriment to the rest of us because there is an increase in the money supply which causes price inflation.

There is nothing anti-social about holding outside money. Some of us see marginal benefits in holding outside money (security, convenience) that exceed the cost in foregone interest. So what?

My own two cents on this (get it?) is merely that Dr Gibson needs to spend more time at NOL fixing the mistakes of financial journalists and keeping his fellow economists honest. (Notereaders and Notewriters, holla at me and Warren in the ‘comments’ threads if you agree!)

From the Comments: Do Mexicans make good immigrants (to the US)?

Jacques (re-read his updated bioresponds to a thought by longtime reader John:

John: If I did not know better, I would think you are patronizing me. God will make you fall off your bikes if you do. Don’t say you were not warned.

The policies in existence for the past thirty years have gotten this country the worst of several immigration worlds: A large population that sinks into illegality because it or its parents committed a small misdemeanor. (A population that is illegal will quickly start competing with others in ways that cannot be resisted, among other things.) And it’s growing and it’s forbidden to have a stake in this country’s future, or in any country’s future. The current conservative alternative is to “close the border.” That’s a useless blowhard dream. Most illegals now just get a tourist visa, come by plane and stay. (It’s not a legend, I know some.) Do you really want a police state with no tourism at all? There used to be one. It was called the Soviet Union.

I am arguing that few Mexicans want to live in the US, first. Second, the few who do make good immigrant as compared to almost (almost) everyone else. Look into your heart: Is it the case that you really want to stop all immigration? That’s another discussion we could have, just not today and not until you declare yourself.

I repeat that the European Union has been operating for at least twenty years on the model I propose for Mexicans and for Americans only: Free movement, no path to citizenship. The EU suffers from many ills but , remarkably, that is not one of them. The strong anti-immigrant sentiment there that you read about is directed almost entirely at illegal immigrants and at refugees who are not natural neighbors of the EU, and against people who have no intention of going home ever.

No one in France is bitter about the English couple who came to open a pub. No one is disturbed by the so-called Polish plumbers in England who stay long enough to save for a down payment on a house in Poland.

I really hate to use the word (OMG, I do!) but many native-born Americans who are afraid of immigration seem to lack a basic form of sensitivity: Pulling up roots, leaving many relatives behind, learning a new language, being routinely patronized, is both very difficult and emotionally costly. Very few people want to endure this if they can avoid it. (The privilege of living say, in Detroit, does not always make up for it.) If you let them go back and forth, Mexicans will mostly not stay and will return to Mexico where, for one thing, they already know the language.

Fences don’t always make good neighbors. Fences are often so bad they make you lose control of what you wish to control. Bad fences are worth than no fences.

OK, John I have now chastised you much beyond what your own sins required. It’s just that you gave me an opportunity and I took it. Almost everything I hear in the US today about immigration is error-ridden, uninformed and downright childish.

This comes from Jacques’ post on Mexican immigration from a few months back, and is worth highlighting given all of the demagoguery to be found in the US presidential election (on both sides of the aisle).

PS: Michelangelo also provided this link in the thread. It’s well worth the read.

From the Comments: Asylum Seekers and the Canadian Experience

Dr Amburgey takes some precious time out of his schedule to rebut Dr J:


I can understand your reluctance to yet again engage with Professor Pinocchio’s fact-resistant Islamophobia. However you must give him credit for actually using some real data. Granted the choice of country and time period are idiosyncratic [id est cherrypicked] but anything not pulled straight from his anus is a dramatic change. Should you feel like responding in kind, use this: Canada for the period 2004 – 2013. Top 8 countries of origin for refugees landing in Canada

Columbia – 17381
China – 15344
Sri Lanka – 12326
Pakistan – 10641
Haiti – 7872
Mexico – 6512
India – 4988
USA – 4451

Based on this data Catholicism and Hinduism far outstrip Islam as religions producing sick societies.There is currently no other view that is even modestly supported by anything but ideological intransigence.

Indeed. Only the most ideological of ideologues continue to pretend that Islam is responsible for the problem in the Middle East.

When the Austro-Hungarian empire collapsed, the Holocaust happened. One could argue that, because the state is less efficient on the post-Ottoman world, what we’re witnessing is a process similar to the one we witnessed in the Occident, only in a much more haphazard way.

From the Comments: Trying to Make Sense of Left and Right (Again)

This one is from yours truly, in a delightful back-and-forth with Dr Amburgey:

Ok. Clearly we need to be using terms that mean the same things to both of us. It’s your thread so tell me what constitutes ‘The American Right’ and what constitutes ‘The American Left’. Once we have a common understanding of terminology we can resume the discussion.

I have been working on a post about this very topic, and this conversation is helping me immensely. Thanks.

First, I think there is a distinction that has to be made between the ‘ideological’ and the ‘political’. The ideological rests atop a higher tier than does the political, like a pyramid. The ideological tier houses philosophical and moral insights, which are produced through the academy and in think tanks. The political tier houses organizations dedicated to parties (I think that factions and parties are two different components of a society, and that factions represent a tier below the ideological and above the political).

The American Right is ideological. The GOP is political. (Factions would consist of actors like bureaucracies, trade unions, industrialists, banks, medical doctors, etc., but can also be used to describe intra-party, or coalitional, differences) The American Right is currently home to three broad ideologies: neo-conservatism (elite and moderate), libertarianism (elite and radical), and traditionalism (populist and radical). I emphasize ‘currently’ because neoconservatives and libertarians were at one point Leftist factions in US history, and could easily end up there again in the near future. In many post-colonial and post-socialist societies, for example, both of these ideologies are considered to be on the Left.

The American Left is currently home to three broad ideologies: fascism, communism, and racism. Just kidding! The three ideologies are, I would argue: New Deal liberalism (elite and moderate), technocratic liberalism (elite and radical), and progressivism (populist and radical).

New Deal liberals and neo-conservatives are only moderate because they are dominated by Baby Boomers and Baby Boomers dominate the population at the moment. Libertarians and the technocrats are broadly younger and more cerebral (hence the radicalism). Traditionalism and progressivism are ideologies for the vulgar mob, of course.

Ideology, using the pyramid analogy, trickles down from the top tier into the factional and political tiers. This is just how it works in societies governed by laws rather than by men. Libertarians have been dominating the ideological discussion for the last 30 years or so, and the technocrats have been playing defense, largely because they are politically aligned – wrongly, of course – with socialism’s failure, but also because technocrats are just libertarians who don’t have the chutzpah to become non-conformists.

Successful politicians from the Democrat Party have been trying to balance their New Deal liberalism with the insights of their technocratic betters, but have been calling themselves ‘progressives’ because of the populist narrative and the fact that they need the votes of the vulgar mob to be successful.

I already don’t like this because I don’t think the Left deserves to be considered ‘liberal’ at all, and there is also the shortcoming of being strictly American in scope. We have got to think in internationalist terms when we discuss power and liberty. NOL has tried to hash this whole issue out before, by the way, and numerous times.

From the Comments: The Contribution of American Allies to Pax Americana

Dr Stocker answers my concerns about free-riding and rent seeking with this gem:

Good points Brandon. On the rent seeking, I think you are broadly correct, but I would offer two qualifications. European nations/the EU often foot a lot of the bill/take on associated civilian tasks where America has taken military action, so that the US is not subsidising the defence and security needs of Europe quite as much as it might seem. So for example, in the Yugoslav breakup led to US military operations and a comparatively passive role for Europe, but a lot of the afterwork was taken on by Europe and there is no point in military intervention without work on building civil society to create long term security and stability. Going back a bit further to the first Gulf War/expulsion of Saddam from Kuwait, Germany and Japan did pay a lot towards the cost in return for not participating. Despite [this] they got a lot of abuse in the US Congress from politicians who don’t appear to understand that their non-intervention in the Gulf owed a lot to constitutions and attitudes which the US encouraged/imposed during post-World War II occupation. Recently, though European govts have been cautious in what they say in public about the Ukraine crisis and containing Putin, there is a growth in military spending and co-operation done in fairly quiet ways largely with the aim of deterring Putin from adventurism in the Baltic states. Just one example, Germany has recently taken 100 Leopard II tanks out of retirement and work is underway for the Leopard III. Moving to the Pacific, Japan is enhancing its military and weakening constitutional restrictions on the deployment of the military (imposed by the US in the post-war Constitution) in reaction to Chinese assertiveness.

While I think it is broadly correct that the US has been paying for a military burden which should be born by Europe and Japan, the situation is not as extreme as it often assumed in the US and as far as I can see is moving in a more balanced direction. In general while it is true that the US has a very impressive military machine with some impressive technology and officers, I think some Americans are a bit over confident about this. A lot of Americans, at least amongst those who take an interest in military kit, appear very convinced that the Abrams 2 is the best tank anywhere, I would suggest that in military capacity, for cost, the Leopard II is probably better (it certainly does much better in export markets) and even in absolute terms ignoring cost, the French Leclerc (which is extremely expensive) has a good claim to be the best tank around, and the Korean K2 is another strong but very expensive candidate. The Abrams is expensive, heavy, difficult to transport and difficult to keep in sufficient fuel, though it can certainly do a very good job. A lot of Americans appear to be incapable of thinking of France as anything other than a surrender monkey joke in military terms, which is really very far from the reality, as can be seen by the very strong role that France is now taking in northwest Africa against violent Islamist fundamentalists. The US military may well be able to have the same military capacity for lower cost if it moves away from the Abrams II model of a tank that is expensive to run and transport as well as build.

So broadly a correct point Brandon, but I think the situation is a bit better than is often understood in America and is moving in the right direction as Japan and Europe are getting used to the idea of taking responsibility for dealing with new threats from China, Putinist Russia and the hydra of Islamist fundamentalists.

A very good point, and an even better angle with which to view the world.

My only quibble is that the right direction American allies are moving can easily be changed without a more fundamental shift in institutional arrangements between us. Some sort of federal or confederal arrangement would go a long way toward addressing this issue, and would further deepen the economic and cultural ties between constitutional democracies.

Or am I just looking for problems where there are none, in order for my arguments to gain ground?

From the Comments: The Troubling Philistinism of American Libertarians

Dr Khawaja, back from his summer escapades in the West Bank, the Pine Ridge Reservation, and Ohio, takes some time to riff off of my complaints about libertarian criticism of the arts and humanities:

I think you’re being much, much too kind to Caplan. The connection between the Morson essay and the Caplan post is actually pretty clear: Caplan is explicitly defending the sort of philistinism that Morson is worried about. I know that Caplan comes out and insists that he’s not a philistine. But he’s actually the walking paradigm of one.

“The fact that most of the books failed to minimally pique even my interest reflects poorly on them.” Uh, not really. Maybe he should walk over to the psychology section and read up on “projection” and “attribution error.” It doesn’t even occur to him to ask whether his reaction is just an idiosyncratic response to this particular library.

“Could the problem be my lack of expertise?” Gee, there’s a toughie. I looked up the Fenwick collection. Here’s one item at random from their electronic databases:

Kotobarabia Arabic eLibrary Campus Faculty, Staff and Students only Some full text available
This Arabic-only database contains a wide range of Arabic content ranging from contemporary novels to national heritage scientific treatises.
[East View Information Services]

What are the chances that Bryan Caplan could read even the first sentence of the first ten items of any search of this database? Are Tayeb Salih, Ghassan Kanafani, Neguib Mahfouz, or Abderahman Munif embarrassing? Is the secondary literature on them embarrassing (whether in Arabic, English, French, or any other langauge)? Or is Caplan’s ignorant, off-hand dismissal of the contents of his university library what’s really embarrassing?

I looked up the works of Charles Issawi, Albert Hourani, George Hourani, Clifford Geertz, Edward Said, Annemarie Schimmel, Michael Cook, Patricia Crone, Fouad Ajami, and for that matter, Mansour Ajami–all there. These are just random names I remembered off the top of my head from my undergraduate study of Near East Studies. (Mansour Ajami was my Arabic teacher. His name came up randomly because I searched for Fouad Ajami. I had no idea he’s written three books, but he has. Should I be embarrassed by that discovery?) My degrees are in Politics and Philosophy, so NES is way outside of my official areas of expertise. But you’d have to be a moron to be embarrassed by the presence of such work in a library, and it’s all there. You’d also have to be a moron to be embarrassed by the presence of more contemporary work in NES (or Geography, or Anthropology….), especially if, like Caplan, you knew nothing about it.

Just for fun, I did a search on my own last name, not because I expected anything of mine to show up, but just because that’s as random a search as you can imagine. The first hit is a guy named Mahboub Khawaja who’s written a book “Muslims and the West.” I don’t have the book here, but wouldn’t a person of average curiosity be tempted to take a look?

I did a search on my first name, too. Suroosh Irfani’s book on the Iranian revolution looked interesting.

I then clicked one of the Subject Headings underneath, “Europe-Relations-Islamic Countries.” You’d have to be brain dead not to be intrigued by half of what comes up. You could spend a lifetime reading that stuff. Oh wait. That’s kind of what scholars of the field do.

That’s just one casual set of micro-searches of one sub-field by one amateur follower of that field. Imagine multiplying searches of this kind simply for comparative politics and area studies. As you did, you’d multiply counter-examples to Caplan’s ridiculous claims. Then imagine you branched out to other fields. Same result.

Doing all that would be a waste of time, but don’t assume that because I’ve restricted my searches to one field or sub-field, my results are idiosyncratic. I probably could have done the same for Romantic poetry, the history of Reconstruction after the Civil War, Beethoven, Hannah Arendt’s views on Zionism, the luminist school of American landscape painting, American Indian law, Thomism, or literary studies of the works of the Bronte sisters–to name a totally random set of topics. My ex-wife Carrie-Ann Biondi is an indexer (actually the French language indexer) for The Philosopher’s Index. Every month or so, TPI would ship a box of philosophy journal articles to our house for her to index, and I’d spend part of an hour looking through them. Some of it was crap, but most of it was not. I NEVER had Caplan’s response to it. I was awestruck at how much good stuff was being produced. I’ve organized the Felician Ethics Conference for seven years in a row, and have probably read over 200 papers for it. I’ve mostly had the same reaction–curiosity, gratification, sometimes admiration, sometimes even awe.

The bottom line is that Caplan has no idea WTF he’s talking about. The interesting questions are not the ones he ignorantly poses, but rather: Why have libertarians so adamantly and resolutely come to valorize the all-out philistinism and ignorance of people with views like his? Why are we expected to take views like his seriously? If there is a “waste of paper” involved here, why doesn’t that phrase apply to what he’s written on this subject?

Back to prepping for class. The semester begins tomorrow.

I can only add that Irfan is right when he says I am “much, much too kind.” If only more people would come to realize this…

Also, I don’t think this philistinism is limited to Dr Caplan. There is a troubling trend within American libertarianism that is leading towards a kind of cultural chauvinism. Luckily, we live in a polycentric community here in the States and thus have lots of access to other ways of thinking about the world. I want my federal government to be much more libertarian, and I want more polities participating in my more libertarian federal government, and I want Washington to be more like my type of libertarianism. But that doesn’t mean I think those that disagree with me in matters of taste are a waste (of paper, of space, or of anything else).

If anything, those that disagree with me make my life that much more fulfilling, as I am an argumentative son of a bitch. My tolerance is not an endorsement of the status quo, either; any money going from Washington to the arts and humanities (and the sciences) should stop flowing immediately. I still think, despite Dr Khawaja’s excellent point, that libertarians like Caplan and Brennan are subtly attacking this latter notion, that government funding of the arts and sciences is not that bad. They’re just doing a bad job.

Or maybe they’re just philistines.

From the Comments: Greece, the Euro zone, and Russian prowess

Dr Amburgey writes:

I just returned yesterday from a week in Athens for an academic conference. There seemed to be a big socio-economic divide in voting intentions. The unemployed and menial workers were definite No votes. The Yes votes were physicians and a few academics. Personally I think they should bag the euro and go back to the drachma.

Brandon: how long do you think it will be before Putin is making deals in Athens? Might be nice to have a friend in the EU when sanctions come up again. Port privileges for the Russian navy would be very conveniently located as well.

Jacques has a good, thoughtful response (“Leaving the Euro zone does not require leaving the European Union”) that I wholeheartedly agree with (and that I’ve blogged about here and here), and it appears Dr Amburgey is in agreement with us (though does he think Greece should stay in the EU?). Contra Dr Foldvary, I do not think there is any need for Greece to leave the EU. If anything, the EU should be adding more states, though not expanding its geographic space.

Regarding Russia, I simply don’t know. Russia – along with Turkey, Iran, and China – is a society that is very hard to understand let alone predict (I would add India/Pakistan to this list, but the states of the Indian subcontinent are traditional post-colonial states and are therefore much easier to predict; the other four were never conquered or carved up by imperial cartographers). The whole Crimea debacle still has me smarting. Nevertheless I’ll add my thoughts to the conversation.

I don’t think Athens will grow closer to Moscow. There are two major reasons:

  1. Greece fears Russia, which is why Athens has remained in NATO for so long.
  2. Most Greeks – even the ‘No’ voters in this recent referendum – don’t want to leave the EU; Greeks overwhelmingly want to be a part of ‘Europe’.

There are couple of minor reasons, too, though I don’t know how minor they are. 1) Greece is not Ukraine. 2) Russia’s economy is in shambles. Greeks have a higher standard of living than do Russians.

On the flip side, the Greeks are always thinking about the Turks. If an opportunity presents itself (though I cannot think of any arising), Athens may start to edge closer to Russia (a traditional enemy of Turkey) if it thinks Ankara is getting antsy about its former province. This is pretty extreme, though. Also, Russia’s economy may be in shambles, but it seems like Moscow always has plenty of money for military expenditures, and rent stemming from a Russian port in the Mediterranean Sea might be too tasty to resist for a country saddled with so much debt.

At this point I don’t think Greece has much clout in European politics, so I don’t see Moscow viewing Athens as a reliable friend in Brussels.