Is economic literacy directly correlated to direct experience with the free market?

[JWBooth]

Is economic literacy directly correlated to direct experience with the free market?

One is economically illiterate until they have read one absorbed Von Mises, Rothbard, Hazlet, et al.

 

[william the wie]

Is economic literacy directly correlated to direct experience with the free market?

One is economically illiterate until they have read one absorbed Von Mises, Rothbard, Hazlet, et al.

Also Marx and Trotsky are needed and many works outside of strict economics to understand why human action does not necessarily lead to free markets.

 

[oldfart]

You never read Arrian or Plutarch? How about Machiavelli

Yes. Let me know when you have also read Bosworth and Erasmus on the three you mentioned, and explain the relevance of Plutarch's explanation of his title "Lives" to your argument. And try to find something more recent, like in the last half-millennia. Any relationship of their work to the theme of this thread seems tangential, unless you prefer to start a new discussion of the relationship of Classical antiquity to modern political economy; in which case I suggest you start again by stating some proposition.

There is nothing in your posts indicating you have any familiarity with these authors, other than they seemed to be good names to throw out to impress. I am not impressed.

You have succeeded in making yourself look sophomoric. Don't take that as an insult, look up it's meaning.

 

[HelenaHandbag]

...Who are these people and what did they do to pervert the marketplace?

Asking for real life names, places, & dates in conversations with the tinfoil crowd seems to be a real conversation stopper. This whole thread had the appearance of beginning with the idea that participation in the market came with an understanding of economics (imho a no-brainer) but our anti-business colleagues here seem to need to resort to mindless attacks on either some vague enemy or on anyone here personally questioning their logic.

The fact they've chucked reason brings to mind a quote from Thomas Paine-- "Arguing with those who have renounced reason is like giving medicine to the dead."

I have read Toro's posts. He doesn't appear to play that game.

Though I do recognize that behavior from the anti-business progressives, both here and elsewhere.

 

[Bombur]

I understand all the stuff about ideological purity. I get that such purity only works until the moment you introduce a bunch of imperfect emotional humans into the equation.

But I'm not necessarily making an argument for perfection or purity, only that absent political meddling (like the CRA and bailouts), the market will reward the thrifty and cautious (US Bank) and punish the excessively greedy risk takers, often enough that the overall marketplace retains some significant amount of order.

To carry the water metaphor forward, blaming capitalism for the subprime and default swap meltdown is sort of like trying to blame water for flooding the valleys, when political engineers have built dams and aqueducts to try and make it run uphill. Indeed, this is more an argument as to how centrally planned economies fail, more so than an indictment of free capitalist markets.

Mine is not so much an argument for ideological purity or perfection, but a recognition that we have so much regulatory contamination of and political anarchy in the American marketplace, that blaming capitalism for all this mess is laughable. It also goes a long way to explaining why there are trillions of private dollars sitting on the sidelines.

Hope that clears up the point I was trying to make.

There were a lot of problems that led to the crash but the single biggest one was bad information. Something that has always plagued markets and made them inefficient. It is not even remotely controversial to suggest markets need to have good information to operate.

Even many libertarians would agree that one of the roles of government is to ensure good information in the marketplace.

Ultimately it wasn't the known risk that crashed the market but the unknown risk.

 

[Truthseeker420]

It's fairly obvious that someone like Paul "Wrong in the trillions column" Krugman never worked a day in the private sector and has only lyrical knowledge of how capital markets and economies function.

When people say things like "profits are stolen wages" it's glaringly obvious they never worked at a real business. Maybe they're in a Union, or maybe they're still in high school, but you can't possibly have worked anywhere in the marketplace where adults put their money into their businesses and come up with anything as removed from reality as that.

Is economic literacy directly correlated to direct experience with the free market?

Did Paul Krugman say "profits are stolen wages"? And Krugman works for the New York Times which is the private sector.

 

[HelenaHandbag]

There were a lot of problems that led to the crash but the single biggest one was bad information. Something that has always plagued markets and made them inefficient. It is not even remotely controversial to suggest markets need to have good information to operate.

Even many libertarians would agree that one of the roles of government is to ensure good information in the marketplace.

Ultimately it wasn't the known risk that crashed the market but the unknown risk.

Part of the bad information were the overinflated housing prices, driven up by bad political policies by the feds and easy money from the Federal Reserve.

How can government ensure reliable information, when their own people are making bank with the bad information of distorted markets?

 

[Bombur]

There were a lot of problems that led to the crash but the single biggest one was bad information. Something that has always plagued markets and made them inefficient. It is not even remotely controversial to suggest markets need to have good information to operate.

Even many libertarians would agree that one of the roles of government is to ensure good information in the marketplace.

Ultimately it wasn't the known risk that crashed the market but the unknown risk.

Part of the bad information were the overinflated housing prices, driven up by bad political policies by the feds and easy money from the Federal Reserve.

How can government ensure reliable information, when their own people are making bank with the bad information of distorted markets?

The bad information fed the price bubble. Bad information was a major factor in the liquidity crisis.

Like I said there is a lot of blame to go around but CRA has a purpose as does the Fed lowering interest rates. Bad information has no purpose, it is simply destructive.

 

[HelenaHandbag]

There were a lot of problems that led to the crash but the single biggest one was bad information. Something that has always plagued markets and made them inefficient. It is not even remotely controversial to suggest markets need to have good information to operate.

Even many libertarians would agree that one of the roles of government is to ensure good information in the marketplace.

Ultimately it wasn't the known risk that crashed the market but the unknown risk.

Part of the bad information were the overinflated housing prices, driven up by bad political policies by the feds and easy money from the Federal Reserve.

How can government ensure reliable information, when their own people are making bank with the bad information of distorted markets?

The bad information fed the price bubble. Bad information was a major factor in the liquidity crisis.

Like I said there is a lot of blame to go around but CRA has a purpose as does the Fed lowering interest rates. Bad information has no purpose, it is simply destructive.

Prices are information. Artificially inflated prices are bad information.

Government and Fed policy both heavily contributed to that bad information.

 

[Bombur]

Part of the bad information were the overinflated housing prices, driven up by bad political policies by the feds and easy money from the Federal Reserve.

How can government ensure reliable information, when their own people are making bank with the bad information of distorted markets?

The bad information fed the price bubble. Bad information was a major factor in the liquidity crisis.

Like I said there is a lot of blame to go around but CRA has a purpose as does the Fed lowering interest rates. Bad information has no purpose, it is simply destructive.

Prices are information. Artificially inflated prices are bad information.

Government and Fed policy both heavily contributed to that bad information.

Only to the degree in which those making decisions in the market don't have the information.

When a home buyer buys a home based on what they can pay a month they will be willing to pay more for that home when the interest rates are low. This will impact the ability of the buyer to liquidate the asset down the road which they are probably not aware of but that isn't what caused the crash.

When some people see other making a lot of money selling homes they will enter the market and drive up prices. I am not sure how many of them properly calculated the long term risks of such a venture, and I tend to doubt they acted with perfect information.

When financial institutions started making decisions they were not just making decisions about a single house. They were making decisions about hundreds of billions of dollars worth of homes based off of bad information.

I think you can blame the Federal Reserve to a degree but when hundreds of billions of dollars are on the line I think it is reasonable to expect the decision makers to ensure they are making decisions with the right information. I have a hard time believing that the government is responsible for regulating the market to this degree.

 

[bripat9643]

I understand all the stuff about ideological purity. I get that such purity only works until the moment you introduce a bunch of imperfect emotional humans into the equation.

But I'm not necessarily making an argument for perfection or purity, only that absent political meddling (like the CRA and bailouts), the market will reward the thrifty and cautious (US Bank) and punish the excessively greedy risk takers, often enough that the overall marketplace retains some significant amount of order.

To carry the water metaphor forward, blaming capitalism for the subprime and default swap meltdown is sort of like trying to blame water for flooding the valleys, when political engineers have built dams and aqueducts to try and make it run uphill. Indeed, this is more an argument as to how centrally planned economies fail, more so than an indictment of free capitalist markets.

Mine is not so much an argument for ideological purity or perfection, but a recognition that we have so much regulatory contamination of and political anarchy in the American marketplace, that blaming capitalism for all this mess is laughable. It also goes a long way to explaining why there are trillions of private dollars sitting on the sidelines.

Hope that clears up the point I was trying to make.

There were a lot of problems that led to the crash but the single biggest one was bad information. Something that has always plagued markets and made them inefficient. It is not even remotely controversial to suggest markets need to have good information to operate.

Even many libertarians would agree that one of the roles of government is to ensure good information in the marketplace.

Ultimately it wasn't the known risk that crashed the market but the unknown risk.

The single biggest source of bad information is the federal government. Manipulation of interest rates by the Federal government leads investors and borrowers to make bad decisions. When these decisions come home to roost, the result is a financial panic.

It's ridiculous to expect the biggest swindler in the universe to provide you with good financial information, especially when it has a vested interest in providing you with the wrong information.

 

[bripat9643]

There were a lot of problems that led to the crash but the single biggest one was bad information. Something that has always plagued markets and made them inefficient. It is not even remotely controversial to suggest markets need to have good information to operate.

Even many libertarians would agree that one of the roles of government is to ensure good information in the marketplace.

Ultimately it wasn't the known risk that crashed the market but the unknown risk.

Part of the bad information were the overinflated housing prices, driven up by bad political policies by the feds and easy money from the Federal Reserve.

How can government ensure reliable information, when their own people are making bank with the bad information of distorted markets?

The bad information fed the price bubble. Bad information was a major factor in the liquidity crisis.

Like I said there is a lot of blame to go around but CRA has a purpose as does the Fed lowering interest rates. Bad information has no purpose, it is simply destructive.

Lowering interest rates is producing bad information. It gives investors and borrowers incorrect cues about the state of the economy. The only purpose of the CRA was to loot banks for the benefit of Democrat constituencies. Artificially low interest rates are also a form of looting. What could be more destructive than that?

 

[Bombur]

Part of the bad information were the overinflated housing prices, driven up by bad political policies by the feds and easy money from the Federal Reserve.

How can government ensure reliable information, when their own people are making bank with the bad information of distorted markets?

The bad information fed the price bubble. Bad information was a major factor in the liquidity crisis.

Like I said there is a lot of blame to go around but CRA has a purpose as does the Fed lowering interest rates. Bad information has no purpose, it is simply destructive.

Lowering interest rates is producing bad information. It gives investors and borrowers incorrect cues about the state of the economy. The only purpose of the CRA was to loot banks for the benefit of Democrat constituencies. Artificially low interest rates are also a form of looting. What could be more destructive than that?

Actually lowering interest rates is meant to give very specific cues about the state of the economy and future prices. If it doesn't then it won't work.

The CRA was meant to benefit people based on income. Are you suggesting only Democrats represent those people?

Artificially low interest rates are not a form of looting but feel free to explain your argument.

 

[HelenaHandbag]

The bad information fed the price bubble. Bad information was a major factor in the liquidity crisis.

Like I said there is a lot of blame to go around but CRA has a purpose as does the Fed lowering interest rates. Bad information has no purpose, it is simply destructive.

Lowering interest rates is producing bad information. It gives investors and borrowers incorrect cues about the state of the economy. The only purpose of the CRA was to loot banks for the benefit of Democrat constituencies. Artificially low interest rates are also a form of looting. What could be more destructive than that?

Actually lowering interest rates is meant to give very specific cues about the state of the economy and future prices. If it doesn't then it won't work.

The CRA was meant to benefit people based on income. Are you suggesting only Democrats represent those people?

Artificially low interest rates are not a form of looting but feel free to explain your argument.

Not germane to the fact that it caused a market distortion and the subsequent bad information.

Good intents don't overtake bad results.

 

[william the wie]

Actually lower than market interest rates are a form of looting and that is not an exclusively Austrian position. Keynes pushed for inflation to loot the rentier class who he blamed for Britain experiencing 10% or more UE 1921-39. The Schumpeter/Popper/Hayek Austrians and neo-liberals such as Friedman use a different approach than say Krugman or Bernancke but using interest rates to create a use it or lose it situation is standard economics. Whether the term extortion or looting is more accurate is subject to debate but the result of increasing mis and malinvestment through lower interest rates is pretty standard Econ101.

 

[HelenaHandbag]

Asking for real life names, places, & dates in conversations with the tinfoil crowd seems to be a real conversation stopper. This whole thread had the appearance of beginning with the idea that participation in the market came with an understanding of economics (imho a no-brainer) but our anti-business colleagues here seem to need to resort to mindless attacks on either some vague enemy or on anyone here personally questioning their logic.

The fact they've chucked reason brings to mind a quote from Thomas Paine-- "Arguing with those who have renounced reason is like giving medicine to the dead."

I have read Toro's posts. He doesn't appear to play that game.

Though I do recognize that behavior from the anti-business progressives, both here and elsewhere.

FTR I'm pretty pro-business. What I am not pro- is the idea that the market is always a self-regulating mechanism that always rationally pushes prices back to equilibrium. Sometimes the market goes batshit crazy because people are human and are susceptible to emotion and greed. People aren't robotic automatrons, everywhere and always coldly and correctly calculating volatilities and discounted cash flows 20 years into the future. Instead, they become euphoric and suspend disbelief in the hopes of becoming rich quick.

That doesn't mean government is any better. Government is worse at allocating capital than the market and should stay out as much as possible. But sometimes, rules and regulations make the market work better.

No argument here about a minimum of regulations.

I recently read a piece about Dr. Vernon Smith. Didn't his experimental economics show that prices eventually reach an equilibrium, despite unequal information? If that happens with prices, why wouldn't that occur with other aspects of the marketplace, no matter how many irrational people inhabit it?

Admittedly, I'm a bit of a novice at this economic stuff. But I'm a quick study and am smart enough to recognize when someone is peeing on my foot and telling me that it's raining, which describes about 95% of the republicans and about 99 1/2% of democrats.

I also recognize that if we are in a boat and you bust out a hole in the starboard side, me busting a hole in the port side may even out the list, but it won't keep it afloat any better. Now, I don't know what that has to do with any of this, but I just thought it up and figured to toss it out there.

 

[william the wie]

Asking for real life names, places, & dates in conversations with the tinfoil crowd seems to be a real conversation stopper. This whole thread had the appearance of beginning with the idea that participation in the market came with an understanding of economics (imho a no-brainer) but our anti-business colleagues here seem to need to resort to mindless attacks on either some vague enemy or on anyone here personally questioning their logic.

The fact they've chucked reason brings to mind a quote from Thomas Paine-- "Arguing with those who have renounced reason is like giving medicine to the dead."

I have read Toro's posts. He doesn't appear to play that game.

Though I do recognize that behavior from the anti-business progressives, both here and elsewhere.

FTR I'm pretty pro-business. What I am not pro- is the idea that the market is always a self-regulating mechanism that always rationally pushes prices back to equilibrium. Sometimes the market goes batshit crazy because people are human and are susceptible to emotion and greed. People aren't robotic automatrons, everywhere and always coldly and correctly calculating volatilities and discounted cash flows 20 years into the future. Instead, they become euphoric and suspend disbelief in the hopes of becoming rich quick.

That doesn't mean government is any better. Government is worse at allocating capital than the market and should stay out as much as possible. But sometimes, rules and regulations make the market work better.

Almost all economic assumptions ignore the supremacy of the Lizard brain in a crisis, much less activation of the hormone system. While use of Choline Chloride and other nootropics can reduce damage and speed recovery of the brain the hormone activation does make you stupid to some degree and market highs and lows do trigger such activation.

 

[Bombur]

Lowering interest rates is producing bad information. It gives investors and borrowers incorrect cues about the state of the economy. The only purpose of the CRA was to loot banks for the benefit of Democrat constituencies. Artificially low interest rates are also a form of looting. What could be more destructive than that?

Actually lowering interest rates is meant to give very specific cues about the state of the economy and future prices. If it doesn't then it won't work.

The CRA was meant to benefit people based on income. Are you suggesting only Democrats represent those people?

Artificially low interest rates are not a form of looting but feel free to explain your argument.

Not germane to the fact that it caused a market distortion and the subsequent bad information.

Good intents don't overtake bad results.

Of course it is germane as proving cost doesn't prove that the cost is greater than the benefit. Also there is no reason why the risks can't be known. There is nothing inherent in a program that is meant to increase loans to "low" income individuals that would result in bad information and the total disconnect the market had with regards to risk.

 

[bripat9643]

I have read Toro's posts. He doesn't appear to play that game.

Though I do recognize that behavior from the anti-business progressives, both here and elsewhere.

FTR I'm pretty pro-business. What I am not pro- is the idea that the market is always a self-regulating mechanism that always rationally pushes prices back to equilibrium. Sometimes the market goes batshit crazy because people are human and are susceptible to emotion and greed. People aren't robotic automatrons, everywhere and always coldly and correctly calculating volatilities and discounted cash flows 20 years into the future. Instead, they become euphoric and suspend disbelief in the hopes of becoming rich quick.

That doesn't mean government is any better. Government is worse at allocating capital than the market and should stay out as much as possible. But sometimes, rules and regulations make the market work better.

Almost all economic assumptions ignore the supremacy of the Lizard brain in a crisis, much less activation of the hormone system. While use of Choline Chloride and other nootropics can reduce damage and speed recovery of the brain the hormone activation does make you stupid to some degree and market highs and lows do trigger such activation.

Economics doesn't make assumptions. It ignores nothing.

 

[bripat9643]

Actually lowering interest rates is meant to give very specific cues about the state of the economy and future prices. If it doesn't then it won't work.

The CRA was meant to benefit people based on income. Are you suggesting only Democrats represent those people?

Artificially low interest rates are not a form of looting but feel free to explain your argument.

Not germane to the fact that it caused a market distortion and the subsequent bad information.

Good intents don't overtake bad results.

Of course it is germane as proving cost doesn't prove that the cost is greater than the benefit. Also there is no reason why the risks can't be known. There is nothing inherent in a program that is meant to increase loans to "low" income individuals that would result in bad information and the total disconnect the market had with regards to risk.

Risk isn't known when government deliberately deceives the purchasers of mortgages. Borrowers only know the interest rate they are asked to pay. They don't have any idea about their ability to pay the mortgage or sell the house in a market downturn.