Tuesday, July 10, 2012

- The Most Persistent Fallacy

I've been told that sometimes when people need to read a little sanity to convince themselves that they aren't the one who is crazy after all, one of the places they go is here. I find that very flattering. The thing I do when I'm feeling that way is I go to Youtube and rattle through the clips of Milton Friedman.

Dr. Friedman was at the top of his game when I was in school, and my view of the world was largely shaped by him - as it was for virtually everyone my age who had an interest in economics. But he was more than just a brilliant thinker. He had something special.

He had a way of phrasing things that I think of as a kind of magic key. He could say things in a way that opened liberals minds to the arguments he was making and made them forget about all their insecurity, and defensiveness. He was able to reach them in a cogent way and make them see how ridiculous they're being without actually making them feel threatened. It was a truly special talent that I think about a lot, and hope to be able to emulate one day. If I manage that in my life, then whatever else may happen I would call it a life well spent.

So this evening, since Obama is once again proposing a 'temporary' change to that tax code, I thought I'd go out and find a clip of Dr. Friedman explaining why that doesn't actually do anything to improve consumption. It's something called the "Permanent Income Hypothesis" which he published in 1957. Hardly cutting edge thinking, and much of the Economic work done today now takes it for granted to one degree or another.

But I couldn't find a video of him explaining it. All I found was this guy from the looney bin criticizing it, as if it weren't the basis for years of economic research that followed it, or had thousands of Economic thesis which built upon it. It was kind of like a junior high school history teacher criticizing standard model physics. There may be criticisms you can make about the Permanent Income Hypothesis or the standard model, but this guy certainly didn't know what they are.

Anyway if you're interested you can look it up. But the short form is that temporary tax changes don't change people's expectations about their permanent income, so they don't usually spend more because of it.

And since I couldn't find the other video, and so much of what Obama hopes for these days has to do with swelling the roles of government employees, I thought you all might enjoy this clip instead.

What a land of intentional obfuscation America has become since Dr. Friedman went and left us. It's a heartbreaking thing to have been so close to the light, only to be cast back into the murky shadows.

Also there's this one titled:

Why Tax Reform Is Impossible

5 comments:

ikaika said...

The first clip is simple and says it all.

Chess said...

"If people are getting their money's worth" government is ok...
Friedman.... simple straightforward...
We arent getting our money's worth nor the 42 cents we borrow on every dollars worth.

ikaika said...

ZeroHedge directed me to this glimmer of idiocy:
http://www.bloomberg.com/news/2012-07-06/who-needs-posner-when-you-have-mises-and-hayek-.html

read the comments at the bottom - a Mish contributor "Pater Tenebrarum" (great handle!) schools Barro

ikaika said...

another note: Romney's complete speech to the NAACP.
He received a standing ovation and the "Me Too" Media is reporting he was "booed".

I wager Mitt made a dent.

http://www.nationalreview.com/campaign-spot/308480/mitt-romneys-surprisingly-strong-appearance-naacp

ikaika said...

Required viewing and a pleasure to se Krugman get intellectually KO'd

http://www.zerohedge.com/news/ultimate-krugman-take-down