Cafe Hayek: Talk About a Propensity to Truck, Barter, and Exchange! Or "Well Trained."

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February 22, 2008

Talk About a Propensity to Truck, Barter, and Exchange! Or "Well Trained."

Don Boudreaux

Enterprising people .

(HT G.M. Curtis)

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Saw that weeks ago. I think I came across the link on LRC.

Posted by: Sam Grove | Feb 22, 2008 12:11:59 PM

Well, I liked it! This has great parody potential too... Imagine a SWAT team storming in and taking suspect into custody, then the vendors calmly restore their sales venues. Or Randy Moss comes barreling through, catches a pass from Tom Brady and keeps going, then the vendors calmy restore their sales venues.

Posted by: Brad Hutchings | Feb 22, 2008 3:52:48 PM

The big question is, "who was on the train?"
A) Barck Obama, spreading hope with immediate success as he passes
B) Big Brother, riding through to make sure the peasants are producing for the crown
C) Foreign investors, shut out by politicians, leaving poverty as the result

Alas, we'll never know. Maybe we shouldn't care. The merchants don't seem to care, they just keep on selling their wares.

Posted by: REW | Feb 22, 2008 5:08:27 PM

The market in action.

I have a friend, Dean Ahmad, who attended an ISIL conference in Sweden. The lefties appeared outside protesting the 'right wing capitalists' and selling fliers.

Some conference attendees, including Dean started asking for fliers as souvenirs. The lefties conferred and raised the price of the fliers. Dean and friends applauded the protester for demonstrating 'market forces in action'.

Posted by: Sam Grove | Feb 22, 2008 9:11:20 PM

I wonder how many of them our selling sub-prime loans, securities, derivatives, financial gimmickry, hedge funds, and other complex financial products backed by inflationary policies of the Federal reserve?

My journey to understand economics and the inequities I perceive in our system has lead me to the federal reserve system. Now I find myself reading an article on the Ludwig von Mises Institute website and being fairly convinced this is where the inequality is manufactured. So how come the Hayekian economist here keep pushing the factually untrue line the inequality doesn't matter or that it's not that significant all while ignoring or barely ever mentioning the issues with regard to our monetary system.

The talk is all of free-trade, the market system, the power of self emergent properties of the market, the power of divisions of labor and the importance of minimalist government regulation. These things seem all secondary and subsets of how the money system is set up. Why do we not talk about the money system?

I read the Road to Serfdom and remember Hayek only talking generalities of how money was one of the most important aspects of creating a successful economy,.."the greatest instrument of freedom ever invented by man." And I don't disagree but right off in admitting so we've claimed the government is a necessary foundation to a good economy because it has to set up the money supply.

So the next big question is how to set up the money supply and reading Friedman (Milton) and reading this blog and looking to the modern day it appears we have no clear and simple answers.

I'm looking down the categories list to the left here and not seeing one category devoted to money. Which seems strange since all the others are subsets of the monetary system.

So I'd love to here some discussion on money and I assume Hayek addresses it in some of his other writings.

Posted by: muirgeo | Feb 23, 2008 9:55:46 AM

Inequality doesn't matter, Muirgeo, in fact its a good thing. And your people are well aware of this or they would have done away with it long ago.

Posted by: Randy | Feb 23, 2008 12:43:57 PM

Randy:

Inequality is a fact of life. But liberals live in a fog of unreality. It's pretty useless debating with them. It's like talking to a brick wall.

Posted by: FreedomLover | Feb 23, 2008 1:02:31 PM

FreedomLover,

True. What can I say... its a hobby :)

Posted by: Randy | Feb 23, 2008 1:11:28 PM

Money is an important factor in a market economy. It acts as a fluid accounting system and conveys a great deal of information.
When the credit monopoly, (the FED & gov't) use the creation of money to stealthily cover their debts, then the information conveyed by prices is distorted leading to malinvestment.

This manipulation of the currency appears to be a feature of political currency management, mostly because they can print on the front "This note is legal tender for all debts, public and private."

Posted by: Sam Grove | Feb 23, 2008 1:34:32 PM

Remarkably crowded people.

In the U.S., the railroad would have purchased more property on either side of the track, probably using eminent domain. In Bangkok, I suppose authorities decided to lay track along an existing road and owe the proprietors nothing, with this result. Running people down with a train presumably went too far, so the train presumably must wait for proprietors along the track to clear a way, and proprietors must clear it.

So is this arrangement proper? It is property. Are the rules enforced here more rational than eminent domain?

The people are very enterprising.

Posted by: Martin Brock | Feb 23, 2008 1:35:30 PM

When the credit monopoly, (the FED & gov't) use the creation of money to stealthily cover their debts, then the information conveyed by prices is distorted leading to malinvestment.

The misleading signals are not limited to debts of the Federal government. Jefferson famously describes "banks and corporations that will grow up around them".

The Federal government doesn't really have any debt. That's why its bonds are nominally riskless. The potential for unprofitable investment by the Federal government is practically unlimited. It's just that we're all poorer as a consequence. Nominally "private" corporations can make truly unprofitable investments this way as well.

I've posted the following discussion of money before, so if you've seen it or you're not interested, just scroll down. At some point, I'll upload it to web server and start linking it. It's not strictly topical in this thread, but I'm following your lead here. The relevant point is italicized below.

Suppose you and I arrive at a frontier of civilization with nothing but the clothes on our backs. You're a carpenter, and I'm a woodsman, and we need houses. You are only a carpenter, and I am only a woodsman. We want to work simultaneously to build two houses, but neither of us has money to exchange for the services we can't perform ourselves, so I credit you with $1000 worth of lumber, and you credit me with $1000 worth of carpentry services. We create these "dollars" from nothing. We don't even produce notes or coins. The dollars are only accounting entries in a ledger or in our memories.

We also agree on a price for lumber and a price for carpentry services, so $1000 pays for one house worth of lumber and one house worth of carpentry services. As I harvest trees and produce lumber, you pay me for half the lumber I produce. I pay you to build me a house with the other half, and you simultaneously build yourself a house with your half of the lumber. In this scenario, neither of us has anything of value to lend the other before we extend the credit. We have only the expectation of value.

Alternatively, a banker could credit both of us with $1000. I then pay you for carpentry services while you pay me for lumber, and we both repay the banker plus interest for his accounting services. The banker doesn't "lend" anything in the sense of providing something of intrinsic value at the moment he extends the credit. He provides an accounting service by requiring you to build my house in a timely manner (to obtain the money required to repay the loan) and requiring me to provide your lumber in a timely manner. We only outsource our credit accounting to him. We might then build the banker a third house. He pays us for his house by extending himself credit. He pays us for a house, and we pay for his services with this money.

This process begins with three factors of production, three laborers, and no money. I'm not asserting a labor theory of value. The forest is common property for the sake of simplicity. The process ends with three laborers, a smaller forest, three houses and no money. No more money exists at the end than existed at the beginning. We could add a blacksmith and a farmer and a tailor to this illustration as well, all credited at the outset, all providing their goods and services to the organization, all ending the process with a house and no money.

In terms of this illustration, "inflation" occurs when we don't build the houses fast enough to repay the loans. Then we borrow and repay more, so we end up paying $2000 per house instead of $1000 for example.

As long as we all pay each other on time for whatever services we deliver, the accounting works out. We needn't actually produce anything. We could end up with no houses, or we could build the houses more slowly than expected and stretch out the loans at lower interest rates to keep the prices the same. This outcome is "stagnation". This way, a corporative state may report ever higher nominal output without actually producing more.

If we aren't repaying the loans on time and we decide that justice somehow requires everyone to slow down or stop working while we decide who should get what he's nominally owed and who shouldn't, that's recession. I hope we aren't headed in this direction now, but the more leveraged we are, the more likely this outcome seems.

In the episode of EconTalk called "Munger on the Nature of the Firm" (I think it was), Roberts and Munger discuss a group of workers in China who hire an overseer with a whip to keep everyone working steadily. This guy with the whip is equivalent to a banker, and Roberts and Munger apparently understand this equivalence, but they don't acknowledge it explicitly. Listen to the program, and you'll hear it. I'm not saying there's anything wrong with being a banker, and Roberts and Munger aren't saying so either.

Posted by: Martin Brock | Feb 23, 2008 2:15:55 PM

The italicized line works better at the end of the preceding paragraph. So sue me.

Posted by: Martin Brock | Feb 23, 2008 2:18:59 PM

Inequality doesn't matter, Muirgeo, in fact its a good thing. And your people are well aware of this or they would have done away with it long ago.

Posted by: Randy

Right, inequality doesn't matter and is necessary but I'm talking degrees of inequality and I think that does matter. At some point when the degrees of inequality are great you've crossed the line from competitive markets to serfdom and inefficient markets.

Posted by: muirgeo | Feb 23, 2008 2:39:40 PM

Muirgeo,

Okay. Degrees of inequality then. And again, your people are apparently perfectly happy with the degree of inequality that exists, because again, if they really wanted to do anything about it they could have done so long ago. Oh, they complain about it with great flourishes of rhetoric. They use the existance of inequality to manipulate voters. But they don't actually do anything about it. I see no reason to concern myself with empty rhetoric - do you?

Posted by: Randy | Feb 23, 2008 3:14:11 PM

Muirgeo:

Prove to me that Americans are in serfdom.

Posted by: FreedomLover | Feb 23, 2008 3:15:28 PM

Freedomlover,

Why did we fight the revolution? Because the British wanted to control the supply of money. Now is no different. You hate high taxes and government waste but I'd suggest ultimately it exist to shift your labor and earnings into the wealthy class that controls the government and the Fed.

Let me ask you freedomlover are you OK with the current trends in productivity and median wage. Do you even know what the trends are?

Posted by: muirgeo | Feb 23, 2008 4:34:37 PM

Muirgeo,

It was your people who established an environment in which the politicians, the corporations, the military, the politically correct media, and the education system are all comfy cozy in bed together. I recommend you check out Jonah Goldberg's new book, "Liberal Facism". I think you'll find the answer to your question there. Not the answer you think you want - but the answer nonetheless. Who knows, it might even shock you enough to make you want to become a libertarian.

Posted by: Randy | Feb 23, 2008 4:59:19 PM

Open question: Over the last 30 years, women went to work in large numbers, baby boomers went to work in large numbers, and legal and illegal immigrants (I support both kinds) went to work in large numbers.

It certainly sounds like an increase in the supply of labor. Anyone seen any literature that would contradict or support the idea that stagnating median wages might partly be the effect of a faster-than-usual growth in the supply of labor?

I'm familiar with the composition effects (ie, the abstraction shows stagnation because it is different people from year to year), but it would just be nice to have another angle on this question. People hate it when I tell them the median is an abstraction and the "concrete" situation might be different.

Posted by: Eric | Feb 23, 2008 5:19:46 PM

Muirgeo,

Just to get you started, here are a few less well known lines from FDR's Four Freedoms speech;

"A free nation has the right to expect full cooperation from all groups. A free nation has the right to look to the leaders of business, of labor, and of agriculture to take the lead in stimulating effort, not among other groups but within their own group. The best way of dealing with the few slackers or trouble-makers in our midst is, first, to shame them by patriotic example, and if that fails, to use the sovereignty of government to save government."

By "free nation", FDR is of course referring to his vision of a facist nation.

Posted by: Randy | Feb 23, 2008 5:44:38 PM

muirduck,
My boy/girl/it, what is in that head of yours where your brain should be?

"And I don't disagree but right off in admitting so we've claimed the government is a necessary foundation to a good economy because it has to set up the money supply.
//Who has made the claim you assert in this paragraph? No one but yourself. As matter of blunt fact money is anything people accept it to be. I know communities in the USA where chits are printed up and called such things as "Blainville Bucks" or whatever community where people areee to accept them in payments for goods and services. There was an excellent alternative to the FRN going in the USA until the government became incensed at the thought that there was actual money being circulated, and I am talking about the Liberty Dollar. The Liberty Dollar had real value being pure silver and was privately coined and distributed. The Yap islanders consider large doughnut shpaed stones as money and ownership of one means something, of course they are too big to move around conveniently, but it is money and it predates their government.//

So the next big question is how to set up the money supply and reading Friedman (Milton) and reading this blog and looking to the modern day it appears we have no clear and simple answers.
//See my last comment, of course there are many solutions and simple answers, your government guards its self proclaimed exclusive right to issue "money" very well.//

I'm looking down the categories list to the left here and not seeing one category devoted to money. Which seems strange since all the others are subsets of the monetary system.
//Why have you just now awoke to the fact that money can be a problem when you've beat over the head with that fact for as long as I can testify from joining the list of posters. The times you've supported theft of our money are too numerous to count and you've been vilified for it to numberous times to count. The federal reserve as a problem has been mentioned over and over by various individuals. And, this begs another question, if you wanted to talk about money why haven't you broached the subject before?//

So I'd love to here(where?) some discussion on money and I assume Hayek addresses it in some of his other writings.
//How does one "here" some discussion? Don't you understand that your confusion might be in the fact that you don't know what you want to say and that it is obvious that fault holds over to your readiong comprehension?//

Posted by: muirgeo | Feb 23, 2008 9:55:46 AM""

www.youtube.com/watch?v=8YiwxQ8odk4
www.youtube.com/watch?v=vgT-060aTY8

Take a look at the two videos, you'll come away a much better educated man. Watch them all the way to the end.

Posted by: vidyohs | Feb 23, 2008 6:04:09 PM

""In Bangkok, I suppose authorities decided to lay track along an existing road and owe the proprietors nothing, with this result. Running people down with a train presumably went too far, so the train presumably must wait for proprietors along the track to clear a way, and proprietors must clear it.

So is this arrangement proper? It is property. Are the rules enforced here more rational than eminent domain?

The people are very enterprising.
Posted by: Martin Brock | Feb 23, 2008 1:35:30 PM""

Of course it is proper, both the RR and the market people acknowledge it is by their actions.

Are the rules there more rational than eminent domain, I think this a fallacious question as the property in use is already obviously in the public domain (I'd wager a few bucks on this one too) and the merchants claiming no more than squatters rights.

Why not just assume that the RR right of way(?) is the only clear space available for the enterprising people to set up a market? They co-exist with the train service by knowing the schedule and setting up their stalls in the mobile fashion you see so they can quickly and conveniently establish them again when the train has passed.

They cause no interference with the safe passage of the train so there is no incentive for the RR authorities to enforce any kind of distance factor. Plus in that part of the world they haven't had socialist indoctrination that no one can get hurt or take a risk......ever, not even willingly, voluntarily, knowingly, and intentionally.

The people that comprise the market and their customers are, I would sincerely wager on, well aware that if they become injured by the passage of a train they will have no recourse in any court because their risk taking was their responsibility.

We in America would do well to recapture that attitude.

Posted by: vidyohs | Feb 23, 2008 6:24:25 PM

Of course it is proper, both the RR and the market people acknowledge it is by their actions.

People obey rules. That goes without saying. Eminent domain is another rule that people obey.

Are the rules there more rational than eminent domain, I think this a fallacious question as the property in use is already obviously in the public domain (I'd wager a few bucks on this one too) and the merchants claiming no more than squatters rights.

There seem to be houses behind the merchants. I doubt that they're simply squatting. Questions aren't fallacious. Suppositions can be fallacious, and mine certainly could be. That's why I state it as a supposition.

Why not just assume that the RR right of way(?) is the only clear space available for the enterprising people to set up a market?

Why assume it? It clearly is a space for people to set up a market, but it's not just some space beside a train track. It's a space between buildings that apparently are housing.

They co-exist with the train service by knowing the schedule and setting up their stalls in the mobile fashion you see so they can quickly and conveniently establish them again when the train has passed.

There is some formal arrangement with the train service; otherwise, the train service wouldn't tolerate it. I'll wager money on it. I have no way of knowing, but I also suppose that the market preceded the track. I suppose there are countless alleys in Bangkok without trains running through them. I have a hard time imagining all these people just deciding to set up a market beside a train track this way, given other options. I don't know about the track, but the train is obviously young.

Posted by: Martin Brock | Feb 23, 2008 6:58:29 PM

martinduck,

One thing is obvious, you've never been overseas and actually visited the ancient crowded cities of Europe or Asia.

Of course there are houses visible behind the Merchants and the walls of those houses and/or their walled courtyards are what define the parameters of the public road. The public road is what the merchants are squatting in. The public road has train tracks running down the middle of it. Can't tell you how many cities overseas I have seen the identical arrangement, Asia, Africa, and Europe.

Any old hand at world travel can verify what I just said.

So the train is young, wow! Now that is such a solid fact that overwhelms any other possible conclusion about the age of the railroad, the public road, and the arrangement of the merchant squatters. Did the purchase of your last new automobile alter the age of the street that runs in front of your house or the laws and regulations (arrangements) for its use?

Well of course it did, eh?

Your lack of world travel and first hand experience shows in this, "I have a hard time imagining all these people just deciding to set up a market beside a train track this way, given other options." And, that is the point, martinduck, they don't have any other options. Space is clearly at a premium as I have personally witnessed countless times.

That market was no spontaneously created, martinduck. It grew over time.

One day a merchant wise in the way of the public road and the passage of the train, set up a private stall and did business because he was convenient to customers. other prospective merchants observed and set up near him (the first guy became the attraction Walmart serves as now), and in a period of time the market grew to present size and along the way developed "best practice methods" of dealing with the train.

There I have chased you to the mulberry bush and I go no farther.

Posted by: vidyohs | Feb 23, 2008 7:24:03 PM

One thing is obvious, you've never been overseas and actually visited the ancient crowded cities of Europe or Asia.

I was in the U.K. for five months last year and in Italy for two. In the U.K., I mostly meandered through the tiny streets of Worcester, where my fiancee lives. I walked through markets like this one every day on my way to work in Kaohsiung on Taiwan when I worked there a few years ago.

You don't have a clue how this market by the tracks developed either.

Posted by: Martin Brock | Feb 23, 2008 8:22:49 PM

this article at the Economist is spot on:

http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=6899464&story_id=10311293

It's a must read if this video got your attention

Posted by: jpm | Feb 23, 2008 9:09:35 PM

The Federal government doesn't really have any debt.

That's one way to look at it. The debt is claimed in the name of the people, so it must be our debt.
Future production must support future consumption.

You comment went with my brain when called to the kitchen, I ended up doing some dishes and cogitating.
It occurred to me that the Monopoly Game can be very instructive. The Monopoly Bank can never run out of money, it simply prints more as required.

The game is limited, nonetheless, for the duration of a game, we observe a kind of virtual reality. The properties, for the purpose of the game, have a virtual value. If you play this game with anyone at all competitive, you quickly see how valuable these properties can become to the players.
The money has no value at all except as a means of keeping account.

So what is the problem of monetary inflation?

For one, I think, is that it enables government to present the illusion that it is producing value, when what it is actually doing is transferring value from some people to other people in the arbitrary fashion of politics.

One thing missing from Monopoly is a player for the government. In fact, there is no player for the bank either.

Posted by: Sam Grove | Feb 23, 2008 9:17:38 PM

""You don't have a clue how this market by the tracks developed either.
Posted by: Martin Brock | Feb 23, 2008 8:22:49 PM""
-----

Sure I do, common sense dictates what happens, when you have common sense deduction is frequently possible if not outright easy. I have common sense,plus anthropology, archeaology, history, and geography studies in my resume.

Entire sceintific fields of study are based on just that process. Anthropology, archeaology, encryption, palentology, Al Goreology, muirduckeology, martinduckeology, hey it is endless. One looks, one sees, one thinks, and one draws conclusions based upon common sense interpretations of the data.

If you have been to Italy, Taiwan, and some English villages, why did you not observe?And, why learn nothing? Wow, what an poortunity you passed up! What were you wandering for, to find a McDonalds or a KFC? Next time try wandering with the objective of observing and learning.

What happened in Bangkok was what Adam Smith meant when he spoke of the invisible hand, it wasn't directed, it developed in random fashion but a fashion that works for the people, the place, and the time.

Why complicate it? It happened without votes, or negotiations; it simply developed.

Now write me your usual 100,000 word essay explaining why I am wrong and don't have a clue. Now now that's okay martinduck, don't let me off easy hit me with the your usual big one.

Goooooooooo for it big guy! Charge that mulberry bush!

Posted by: vidyohs | Feb 23, 2008 9:18:11 PM

this article at the Economist is spot on:

http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=6899464&story_id=10311293

It's a must read if this video got your attention

Posted by: jpm | Feb 23, 2008 9:09:35 PM
-------

jpm, Spot on what?

Posted by: vidyohs | Feb 23, 2008 9:35:59 PM

It proves you are an idiot

Posted by: jpm | Feb 23, 2008 9:58:06 PM

http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=6899464&story_id=10311293

It's a must read

It would be a 'could read' if only your link was complete.

Posted by: Sam Grove | Feb 23, 2008 10:07:18 PM

Eric:

They will not give up on the "median wage" meme. They will fight like mad to the end to defend that statistic to justify anything they want to do.

Posted by: FreedomLover | Feb 23, 2008 10:11:42 PM

Sam:

I don't pretend to understand anything about money supply, I just know that the money in my bank account is there and that when I go to the store and swipe the credit card, they hand over the goods.

Posted by: FreedomLover | Feb 23, 2008 10:14:15 PM

Sam the link works if you cut and paste it into your browser. If not, It is an article entitled "A Flourishing slum" if you click on "Asia" under the sub-catagory "world" on the Economist's home page, then click on India at the top right.

I don't see the problem with cut and pasting the link I gave, but, then again, technology doesn't always work in the world of the hanging chad democratic voters.

Posted by: jpm | Feb 23, 2008 10:15:23 PM

jpm,

LOL, Ooooooooh I see! It was an interesting read. But, enlighten me oh glorious one, spot on what? I didn't see any dirt biting poverty in the video about the market in Bangkok, I didn't see any evidence of the market or the area being a slum. Other than crowded conditions, there is no visible parallel between the two. The Bangkok scenes show clean organized prosperous markets (by their standards), and the story and scenes from India shows gross unsanitary conditions and dirt biting poverty (by anyone's standards).

This idiot thinks you assumed much and drew unwarranted conclusions about the Bangkok markets and the conditions there without clearly looking at what you saw.

You can assume that (spot on) if you like, and obviously you like; but now produce some common sense evidence of it or maybe some documentation, because this idiot didn't see it. LOL!

Posted by: vidyohs | Feb 23, 2008 10:27:54 PM

I don't expect you to see any similarity Vidyohs, even though both economies exit in crowded spaces where "title" to land is largely "pedio Possesso" and every square inch available is utilized to its fullest productive return. Here in Obama land, where all production and utility from invested capital ceases when we hit the magic government age of 65, the idea of productive commerce under the most marginal circumstances of available resources is a fog.

Posted by: jpm | Feb 23, 2008 10:37:09 PM

jpm,

Ahhhh, my idiocy increases. If there are no similarities to be seen, how then is it spot on?

Perhaps a less vague original post with a little more input from you in explaining your thought would allow idiots such as myself to see more clearly what you are getting at. Then a less dogmatic reponse to a genuine query might allow me to climb to imbecile status rather than just plain idiot.

Being a man of limited idiotic experience and of course limited knowledge, I expect to see extensive similarities and exact parallels when some one tells me a thing is spot on to another thing.

No it is not just semantics, or nit picky.

BTW I am 67 and not retired, I work as often as I can find a customer who needs my services. I make a nice income from my fifth career. Being an idiot, I have as little understanding of WTF you meant in the last half of your post as I did with your "spot on".

How did my production and utility from invested capital cease two years ago?

You want some real time today examples of successful marketing from under the most marginal circumstances of available resources, right here in Houston, I can do that.

Com'on now, fess up jpm, you're really Lou Dobbs slumming on this blog, right?

Posted by: vidyohs | Feb 23, 2008 11:02:30 PM

vidyohs, largely, the reference was from the last post, comments mostly by Martin Brock (not you) responding to board trolls from Feb 21, 2008 on "Wealth, Savings and Debt" but the jest of the discussion was that the country is a guaranteed soup line 2 years from now when the "baby boomers" retire and start eating away at the savings they have burried in their back yard (none of that saved money is invested earning a return or producing rent according to the doom and gloomer there) and so once that portion of the buldging population retires (a tiny spike in population size, relatively to the US as a whole) the country is guaranteed instant poverty, yet in India, Burma, and the like, where there is REAL poverty and a lack of capital and opportunity, no health savings accounts, no SS payments, you have thriving trade and enterprise. Life goes on there, and they aren't even aware just how dire it is going to be for them when they retire!

Posted by: jpm | Feb 23, 2008 11:39:47 PM

That's one way to look at it. The debt is claimed in the name of the people, so it must be our debt.

It's just not "debt" at all as most of us understand the word, because the Federal government is a monetary authority and can create money to repay it. Congress does raise taxes to service some of its "debt", but that's just a formality. Servicing this debt is just a transfer payment, like Social Security benefits. A statutory formula relates Social Security benefits to payroll taxes in the past, but that's just a formality too.

Future production must support future consumption.

Yes. If the Congress really does increase productivity somehow with the money it raises by selling Treasury notes, the expenditures are reasonably called "investments", but I don't really believe that. A few Federal expenditures presumably have this effect, but many of these expenditures have their own funding stream, like gasoline tax funding highways. Congress sells its entitlement to raise future taxes to raise current revenue, because it can. That's all. Buyers and sellers benefit. Often, the buyers accumulate this entitlement rather than paying current taxes themselves. Who wouldn't sign up for this deal?

The money has no value at all except as a means of keeping account.

Right.

For one, I think, is that it enables government to present the illusion that it is producing value, when what it is actually doing is transferring value from some people to other people in the arbitrary fashion of politics.

It also empowers the state to impose a hidden tax practically at will, to finance wars or whatever it wants to finance. Some authority must create money, essentially from nothing, to extend credit, and this authority can be perilous to an economy if it's inflationary, but the perils of inflation bother me less than an unbridled warfare state.

Posted by: Martin Brock | Feb 23, 2008 11:40:42 PM

http://cafehayek.typepad.com/hayek/2008/02/wealth-savings.html#comments

Here, that is the link to the discussion on how horrible the US is going to be in 2 years LOL!

Posted by: jpm | Feb 23, 2008 11:42:43 PM

Now write me your usual 100,000 word essay explaining why I am wrong and don't have a clue.

You're wrong and don't have a clue, because you stated that I haven't been overseas when in fact I'm often overseas for long periods.

I only needed 24 words, and if I had your gift for brevity, I might have said it with fewer.

Posted by: Martin Brock | Feb 23, 2008 11:48:44 PM

the jest of the discussion was that the country is a guaranteed soup line 2 years from now when the "baby boomers" retire and start eating away at the savings they have burried in their back yard (none of that saved money is invested earning a return or producing rent according to the doom and gloomer there) and so once that portion of the buldging population retires (a tiny spike in population size, relatively to the US as a whole) the country is guaranteed instant poverty, ...

No, that's just your moronic bullshit. Your straw man's statements are your statements. Mine are on the record when you want to quote them.

Posted by: Martin Brock | Feb 24, 2008 12:00:14 AM

Here, that is the link to the discussion on how horrible the US is going to be in 2 years LOL!

There's not a word about how horrible the U.S. is going to be in years. LOL!

Posted by: Martin Brock | Feb 24, 2008 12:02:24 AM

muirduck, economics has nothing to do with money, and everything to do with value. You know what they say: A non-economist is someone who quacks the price of everything and the value of nothing.

Posted by: Russell Nelson | Feb 24, 2008 12:14:06 AM

A few notes from a railfan:

1) I doubt that schedule has anything to do with it. The train has a horn, they blow the horn when they're coming close to the market, most everybody hears it and gets out of the way. The ones that don't hear it see everybody else shifting.

2) This works because passenger trains always fit within a certain size, to get through tunnels and such. Everybody knows that the train fits through a certain size envelope, and they're perfectly safe as long as they stay outside that envelope.

That doesn't work for freight trains, which might be dragging cables or chains.

3) Also, I'm sure that the train has a policy of not stopping (trains can't stop anyway) even if they see something. Otherwise people would take their sweet time getting off the tracks. Here in the U.S. trucks have been known to deliberately park in the way of trains delivering goods to competitors in a market.

Posted by: Russell Nelson | Feb 24, 2008 12:47:20 AM

A few notes from a railfan:

That makes sense to me.

If the train precedes the market, some first proprietor decides to build his sliding table beside the track, so he can move it when he hears the whistle, and he invites customers to walk along the track to patronize him. Other proprietors then follow this lead. These proprietors don't set up more conventional, stationary tables away from a train, and customers don't find the market beside a train peculiar or prefer a competitive market away from the train.

This theory of the market's development makes less sense to me, so I suppose the market preceded the train, and proprietors and customers adjusted to the train rather than all of them collectively moving the market.

Posted by: Martin Brock | Feb 24, 2008 1:41:03 AM

Wow even muirgeo's complaining about the Fed! I'm waiting for the part where the answer is 'let's go back to gold coins', though vidyohs did mention silver coins.

Posted by: Gil | Feb 24, 2008 3:58:57 AM

How in the heck did the topic of median wages arise from a video of a Thailand market?

Oh yeah, Muirgeo lives on planet Earth, that's how.

Posted by: Python | Feb 24, 2008 4:16:49 AM

""vidyohs, largely, the reference was from the last post, comments mostly by Martin Brock (not you) responding
Posted by: jpm | Feb 23, 2008 11:39:47 PM""

Well sir jpm, I apologize for my part in any/or if ill feelings were created twixt us in our exchange. I did not catch your satire and I rarely read martinduck's posts because they just chase around the mulberry bush not only with me, but everyone who does not immediately bow down to his vast writing volume.

BTW, the link was an interesting read, though I did not see the parallel, and I have saved it for source material in supporting my manuscript that I am struggling with. Such things are a testiment to my claim that capitalism, the drive for profit on a day's labor, is a natural instinct in humans and can not be controlled or killed

Posted by: vidyohs | Feb 24, 2008 10:12:54 AM

both economies exit in crowded spaces where "title" to land is largely "pedio Possesso" and every square inch available is utilized to its fullest productive return.

In terms of population density, Thailand is 85th among nations, behind China, Switzerland, Italy, Germany, the U.K. and Japan and far behind Taiwan, where vegetable markets along neighborhood streets are commonplace. Bangkok is densely populated, but the idea that trains cross the only space left for a market is absurd.

Posted by: Martin Brock | Feb 24, 2008 10:17:21 AM