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Happy Birthday, Hayek!

May 8, 2014 in Economics

By Peter G. Klein

Today is F. A. Hayek’s birthday (and, incidentally, mine). Hayek, the eminent economist and social theorist who was Mises’s younger colleague, Keynes’s great opponent, and 1974 Nobel Laureate, would have been 115 today.

Here is my entry on Hayek for the 1999 volume Fifteen Great Austrian Economists. Below is a short tribute video. And check out the Hayek items in the Mises Store.

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Source: MISES INSTITUTE

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Another Student Remembers Gary Becker

May 8, 2014 in Economics

By Mark Thornton

becker

Dr. Tracy Miller, an economist at Grove City College was a graduate student of Gary Becker at the University of Chicago. Dr. Miller provides a sketch of Becker’s contributions as well as some personal reminiscences of Becker as a professor:

Unlike some other professors I had in graduate school, I never recall Becker using offensive language in the classroom or in private conversation. Although he never said anything to indicate that he was a Christian, some of his students did research on the economics of religion and he appreciated their work and respected their convictions.

I had great respect for Dr. Becker as a teacher and scholar. In the classroom, he would frequently pick a student and call on him to answer a challenging question. The questions he asked often required the student to apply theory in a new way, not just recall something from the reading. His approach was intense and intimidating, but his former students appreciate the way he challenged them.

His passion for applying economics to a wide variety of contemporary issues was contagious. He influenced hundreds of graduate students at the University of Chicago and took a continuing interest in the work of his former students.

- See more at: http://www.visionandvalues.org/2014/05/remembering-gary-becker-a-great-economist/#sthash.WJuLXbSO.dpuf

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Source: MISES INSTITUTE

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Investor's Business Daily Op-Ed: Middle-Income Wage, Not The Minimum, Needs To Be Raised

May 8, 2014 in Politics & Elections

There was more bad news for workers’ paychecks in last week’s April jobs report: Wages and salaries were flat. No raise at all – not even to keep pace with inflation. Yet President Obama continues to obsess over raising the minimum wage – as if he holds a magic wand to make American workers better off.
He says it is time working people ‘got a raise,’ and he’s right. But we’d argue that a higher minimum wage to $10.10 is a clever diversion from the real crisis: falling middle-class incomes.
For the vast majority of workers, the problem isn’t a flat minimum wage, it’s a declining middle-class paycheck. The minimum wage affects only, at most, 5% of workers – and almost half of them are in starter jobs or are teenagers. What about the other 95% – especially those working parents with children?
These are the people who desperately need a raise. According to statistics from Sentier Research, based on monthly Census Bureau data, the median household income is still some $4,000 lower today than it was before the recession began in 2008, and about $2,000 lower than it was since the recovery began in June of 2009.
Usually periods of recovery from a financial meltdown are years when workers rapidly make up the lost ground in income and job opportunities surrendered during recession. In this case, average workers have continued to lose ground. This explains why more than half of workers think the recession never ended. For them, it hasn’t.
This bitter pocketbook reality speaks loudly to the utter failure of Obama’s economic policies – bailouts, stimulus plans, $5 trillion more in debt-financed spending, ObamaCare, green-energy failed investments and tax hikes. This president has thrown everything he has from the liberal playbook at this stagnant economy and, alas, none of it has worked.
To be fair, the wage meltdown really began at the end of the Clinton years, when the technology and dot-com bubble burst. A major reason for the disturbing lack of progress in middle-class earnings in the 2000s was a weak dollar that shrank in real purchasing power. The price of gold has quadrupled from 2000 to 2014, from $300 to $1,300 an ounce.
Even if a raise in the minimum wage didn’t destroy jobs – which …read more

Source: RAND PAUL

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My Book on the Austrian School of Economics

May 8, 2014 in Economics

By Randall Holcombe

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I’ve just published a short book, Advanced Introduction to the Austrian School of Economics, which is designed to give people with some knowledge of economics an explanation of what ideas distinguish the Austrian school from mainstream economic thought. The paperback is relatively affordable ($22.36 if ordered on-line). The book is much slimmer in person (144 pages) than it appears in the graphic on the web site.

The book is written for readers who have some knowledge of economics, but are curious about the ideas that distinguish the Austrian school from mainstream economics.  It is not an introduction to economics from the point of view of the Austrian school.

The publisher is hoping that the book will be used as a textbook for courses in Austrian economics.  I don’t think there are many.  If you are at a university that subscribes to Elgaronline, you should be able to read the e-version of the book for free.

Readers on this website are probably already familiar with the ideas of the Austrian school, but it may be handy to see them presented as an overview this way, and also may be a way to introduce your acquaintances to the school’s ideas.  Should they ask you, “What are the distinguishing ideas of the Austrian school?” this book is intended to answer that question.

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Source: MISES INSTITUTE

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GenOpp Google Hangout with Sen. Paul- May 7, 2014

May 8, 2014 in Politics & Elections

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Source: RAND PAUL

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Two Monetary Policies in One

May 8, 2014 in Economics

By John P. Cochran

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Two Monetary Policies in One

A summary from The Denver Post  of  Federal Reserve Chairwoman Janet Yellen’s report Wednesday May 7 to Congress:

  1. The U.S. economy is improving but the job market remains “far from satisfactory” and inflation is still below the Fed’s target rate.
  2. Yellen said that as a result, she expects low borrowing rates will continue to be needed for a “considerable time.”
  3. Yellen’s comments echo signals that the Fed has no intention of acting soon to raise its key target for short-term interest rates even though the job market has strengthened and growth is poised to rebound.

See no evil, hear no evil, speak no evil.

A more realistic assessment of policy since the initial deer in the headlight response by the Bernanke Fed was provided yesterday in the Wall Street Journal by Allan H. Meltzer; How the Fed Fuels the Coming Inflation.

Some highlights:

The U.S. Department of Agriculture forecasts that food prices will rise as much as 3.5% this year, the biggest annual increase in three years. Over the past 12 months from March, the consumer-price index increased 1.5% before seasonal adjustment. These are warnings. Never in history has a country that financed big budget deficits with large amounts of central-bank money avoided inflation. Yet the U.S. has been printing money—and in a reckless fashion—for years.

Of the 6.7 trillion in Bush-Obama deficits:

The Federal Reserve financed almost $3 trillion of these deficits by purchasing Treasury bonds and notes. The Fed has also purchased massive amounts of mortgage-backed securities. Today, with more than $2.5 trillion of idle reserves on bank balance sheets, there is enormous fuel for greater inflation once lending and money growth rises.

On the result of QE and the continuing low interest rate environment:

The Fed’s unprecedented quantitative easing since 2008 failed to lead to a robust recovery. The unemployment rate has gradually declined, but the main reason is that workers have withdrawn from the labor force. The stock market boomed, bringing support from traders, but the rise in asset prices of equities didn’t stimulate growth by inducing investment in new capital. Investment continues to be sluggish.

Echoing but not mentioning Robert Higgs’s rational for the slow recovery; Regime Uncertainty:

Most of all the Fed years ago should have recognized that the country’s economic problems weren’t arising from monetary factors. Instead of keeping interest rates low to finance deficits, the Fed should have explained that costly regulation, increased health-care costs, wasteful spending …read more

Source: MISES INSTITUTE

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Health Care and the Candy Store Called Socialism

May 8, 2014 in Economics

By Mises Updates

6746

Jim Fedako writes in today’s Mises Daily:

But the folks championing socialized medicine are always repeating tales of visits for simple cases of the flu or other travel-related illnesses. What is seen is the overflowing abundance of care at that level. This is the sugar, so to speak. Unseen are other types of care. The meat, eggs, etc. And this is where the failures of socialized medicine are as obvious as the lack of nutritious food in a Yugoslavian store.[1]

The stories from travelers paint a different picture from those told by people living in countries with socialized medicine. Many of these folks — those looking for meat — complain about either the unavailability of care or wait times that exceed the life expectancy of those suffering from the disease.

So we end up hearing contrasting stories: ones from visitors who are amazed by the candy, and others from residents who complain about no meat. And both are right.

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Source: MISES INSTITUTE

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Immigration Laws Have It All Backward

May 8, 2014 in Economics

By Ilya Shapiro

Ilya Shapiro

You have to move heaven and earth to get a Green Card, but becoming a citizen of the U.S. is comparatively easy. Shouldn’t it be the other way around?

I’ve wanted to be an American ever since I can remember. I was born in Moscow and escaped to Canada with my family when I was 4. Like most Russian-Jewish immigrants, I was a fervent anti-communist and naturally looked to the United States as a beacon for the free world, the place where rule of law flourished.

In middle school, I pledged allegiance to the Star-Spangled Banner every morning at my locker, and, to this day, my childhood bedroom sports framed copies of the founding documents (and two American flags I picked up on a school trip at Bill Clinton’s first inaugural parade). I soon decided that I prefer “life, liberty, and the pursuit of happiness” to Canada’s “peace, order, and, good government.”

You have to move heaven and earth to get a Green Card, but becoming a citizen of the U.S. is comparatively easy. Shouldn’t it be the other way around?”

After attending college in the United States, then law school, interning for a senator, working on a presidential campaign, and clerking for a federal judge, I practiced law at two major firms in Washington. Still, I was no closer to a green card—the right to permanent residence—because I had not yet worked for an employer who could establish that no American had the “minimal qualifications” for my job. (And there was no way to simply “apply” for a green card because I didn’t have a U.S.-citizen relative, wasn’t a refugee, and didn’t qualify for the “diversity lottery.”)

I finally got my green card—through my current employer and after having volunteered to go to Iraq as a rule-of-law adviser—in 2009 after spending nearly 15 years (my entire adult life) in this country. It was easier for my family to leave the Soviet Union and immigrate to Canada! Indeed, earning a law degree and joining the Supreme Court bar was more straightforward than getting a green card!

With five years about to pass—it’s three for those who get green cards through marriage—I put in my naturalization papers. In February I was fingerprinted for a criminal-background check, and last week went in for my naturalization interview.

At this interview, the examiner first verifies your identity and confirms what you submitted in …read more

Source: OP-EDS

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115 Years after His Birth, Hayek's Ideas Remain Relevant

May 8, 2014 in Economics

By Gerald P. O'Driscoll Jr.

Gerald P. O'Driscoll Jr.

Thursday is the 115th anniversary of the birth of F.A. Hayek, the great Austrian economist and political philosopher. Hayek had a huge impact on intellectual thought in his time, but his ideas are as relevant today as then.

Hayek’s work, whether on economics, politics or law, focused on the ineluctable problems of uncertainty and incomplete information.

In economics articles going back to the 1930s, he analyzed the price system as a mechanism for communicating information to buyers and sellers about the intensity of preferences for goods and their relative scarcity. He concluded that the information does not exist anywhere in its entirety and could not be centralized.

Free markets and free trade must be seen as the economic core of an opportunity society that provides hope for all.”

Many of his arguments were developed in the socialist calculation debate. Socialist (really communist) societies relying on centralized planning would be characterized by gross economic inefficiencies. Hayek was vindicated by subsequent events.

The power of this argument is lost today on policymakers engaged in “planning lite,” attempts to allocate credit to favored industries and pick winners. The Great Recession was in large part the consequence of such a policy. The Fed’s balance sheet is loaded up with housing finance paper.

In “Ben Bernanke Versus Milton Friedman,” historian Jeffrey Rogers Hummel argues that the Fed has evolved from monetary authority to a credit allocator.

Hayek first began evolving his information argument in his monetary analysis. In 1932, he questioned whether deliberate monetary management could avoid economic fluctuations.

Friedman later developed the argument against discretionary monetary policy in a series of articles that detailed the information problems confronting a central bank.

His argument later became encapsulated as the “lags” in monetary policy — i.e., the unpredictability of when the effects of monetary policy actions will be felt. Monetary policymakers give lip service to Friedman’s arguments, but ignore them in practice.

Hayek deftly summed up his argument on information in his 1988 book, “The Fatal Conceit”: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” A market economy is a complex order, the outcome of societal evolution that confounds efforts to redesign it.

The central tenet of classical liberalism was summed up by George Smith in his brilliant book, “The System of Liberty”: “Laissez faire in all spheres, personal, social and economic, was the …read more

Source: OP-EDS

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Why a North Korean Spring Will Never Happen

May 8, 2014 in Economics

By Doug Bandow

Doug Bandow

It doesn’t pay to be number two in North Korea. In December, the young dictator Kim Jong-un executed his uncle, Jang Song-taek, supposedly Kim’s top advisor. Now Vice Marshal Choe Ryong-hae, who climbed atop Jang’s corpse, has been relieved of his important positions. At least Choe is still alive, apparently left about where he started, as a functionary running labor groups.

Choe’s fall is particularly important, because though he was an aide to Kim’s father, Kim Jong-il, he rose rapidly under the younger Kim. In contrast, Jang was installed by Kim pere as a mentor or guardian for the “Great Successor.” So was Jang’s wife and the older Kim’s sister, Kim Kyong-hui, who remains alive but apparently has lost her authority. The third “mentor” appointed by the older Kim, Army chief of staff Ri Yong-ho, was removed in July 2012.

By defenestrating his father’s appointees Kim Jong-un eliminated constraints imposed on him. Dumping Choe reshapes the political environment of Kim’s making. Vice Marshal Hwang Pyong-so has taken over Choe’s army post, but he may be drinking from a poisoned chalice.

Going home should be the foundation of U.S. policy toward the Koreas.”

Choe’s ouster appears to answer the question: who is in charge? Jang’s fate was striking because it was so out of character for the regime—a public execution of a top official and family member which required admitting factionalism under the faultless leader. Thus, some observers theorized that killing Jang was a desperate step to rebuff a serious bid for power or a forced step to pacify influential political forces, such as the military.

However, there is no evidence of further internal strife since December. Now the next powerful figure, who seemingly gained the most from Jang’s removal, has fallen. Looking back, Jang’s execution may have been Kim’s way of demonstrating that even family ties offered no protection for insufficient loyalty to Number One. Choe’s removal may be a coda, that there will be no more Jangs with enough power to consider challenging Number One.

While Kim’s dominance in Pyongyang does not guarantee the regime’s survival, it dampens hope for any change outside of Kim. Today’s Korean Winter isn’t likely to give way to a Korean Spring. No one who values his life is likely to question the status quo.

Moreover, nothing suggests that the amazing resilience of the North’s communist monarchy is about to give way. Indeed, the elite, at least, is …read more

Source: OP-EDS