This page has been archived and commenting is disabled.
Forty Centuries Of Wage & Price Controls
Submitted by Tim Price via SovereignMan.com,
Léon Walras is the patron saint of modern economics.
In other words, he was a clueless failure who hijacked immutable principles from the world of physics and misapplied them to the economic realm.
The result, predictably enough, is that modern economics doesn’t work.
It doesn’t work because it masquerades as a science when it is really just a combination of dogma and very crude modelling. The modelling doesn’t work because garbage in equals garbage out.
Sadly, this doesn’t stop the governor of the Bank of England from advocating overly simplistic policies in a highly complex world.
What is alarming today is that almost nobody dares challenge the mandate or even ongoing existence of central banks as prime fixers of prices in the financial markets. (Spoiler warning: price fixing doesn’t work.)
“Attempts to control and fix prices and wages span most of recorded history,” writes David Meiselman in the foreword to the definitive history of economic hubris, ‘Forty centuries of wage and price controls’ (Robert Schuettinger and Eamonn Butler).
“Price and wage controls cover the times from Hammurabi and ancient Egypt 4,000 years ago to this morning..
“The experience under price controls is as vast as essentially all of recorded history, which gives us an unparalleled opportunity to explore what price controls do and do not accomplish.
“I know of no other economic and public policy measure whose effects have been tested over such diverse historical experience in different times, places, peoples, modes of government and systems of economic organization..
“The results of this investigation would merit attention for the light it sheds on economic and political phenomena even if wage and price controls were no longer seriously considered as tools of economic policy.
“The fact that wage and price controls exist in many countries and markets and are being seriously considered by others, including the United States, compels attention to the historical record of wage and price controls this book presents.
“What, then, have price controls achieved in the recurrent struggle to restrain inflation and overcome shortages? The historical record is a grimly uniform sequence of repeated failure. Indeed, there is not a single episode where price controls have worked to stop inflation or cure shortages.
“Instead of curbing inflation, price controls add other complications to the inflation disease, such as black markets and shortages that reflect the waste and misallocation of resources caused by the price controls themselves. Instead of eliminating shortages, price controls cause or worsen shortages.
“Despite the clear lessons of history, many governments and public officials still hold the erroneous belief that price controls can and do control inflation. They thereby pursue monetary and fiscal policies that cause inflation, convinced that the inevitable cannot happen.
“When the inevitable does happen, public policy fails and hopes are dashed. Blunders mount, and faith in governments and government officials whose policies caused the mess declines. Political and economic freedoms are impaired and general civility suffers.”
Interest rates across the developed markets have been kept at emergency levels (and all time historical lows) for seven years. Do we think that allowing banks to access essentially free money is more or less likely to give rise to the sort of malinvestments that caused the financial crisis in the first place?
If you believe that the answer is ‘less likely’, there is a job at your local central bank with your name on it. (It will help secure the position if you have previously worked at Goldman Sachs.)
David Meiselman again:
“[D]espite all the evidence and analyses, many of us still look to price controls to solve or to temper the problem of inflation.
“Repeated public opinion polls show that a majority of U.S. citizens would prefer to have mandatory controls. If the polls are correct, and I have no reason to doubt them, it must mean that many of us have not yet found out what forty centuries of history tell us about wage and price controls.
“Alternatively, it raises the unpleasant question, not why price controls do not work, but why, in spite of repeated failures, governments, with the apparent support of many of their citizens, keep trying.”
In the aftermath of this weekend’s horrible events in Paris, religious dogmatism is rightly condemned. If only dangerous economic dogmatism could be similarly repudiated.
»
- 152 reads
- Printer-friendly version
- Send to friend
- advertisements -
40 centuries of slavery.
And then some.
Get the gubmint out of all of this. Allow free markets to function. Anyone who wants to prosper, and works to prosper, will prosper.
That's like telling a fifty year old fat dude to stop eating potato chips and get up off the couch and exercise.
Not. Ever. Happening.
Everyone seems go along willingly enough to me......
Nothing will ever change. We will have another 40 centuries of the same.
Chaotic systems cannot be modelled.
The wings of the butterfly...
I beg to differ. Truly chaotic systems are easy to model using statistical techniques. Semi-chaotic systems, like economies, are impossible to model. Economies with arbitrary government interference are semi-chaotic.
Huh? Let me guess, you read "When Genius Failed"... It's done. All time time. With surprising levels of accuracy and sophistication.
And the author would be keen to observe that much of the maths used in such models was expressly developed to explain economic phenomena, only later to be employed by the natural sciences.
In order of magnitude, 'extend and pretend' deserves the Gold Medal for most dangerous economic dogma. And don't forget 6 years of 'mark-to-unicorn' accounting for the Silver.
They know Zuckerberg click-jacking is over. Poor Goldman Sachs.
http://www.darkreading.com/attacks-breaches/kaminsky-creates-clickjackin...
Clickjack Update 2015, Working 100% - YouTube
If wages would be in line with the average salary in the 60's, the average salary would be about 280 to 300.000 dollars a year.
I don't think this is the case these days.
That salary was a middle class income. Now that would be a rich man's income.
My father was one of the first programmers who worked for IBM in the 80's, he made back then what I make 35 years later. He actually made more then what I make now.
And inflation distorted my amount pretty much so he made about 4 to 5 times what I make now.
In the late 60s, shortly after George W. Bush graduated from Phillips Academy, my dad owned two houses in walking distance of the place, on an engineer's salary. You'd need about three engineer's salaries to afford a house in that town today!
Edit- because Im stupid.
The thing is, the initial steps on the slope make the others inevitable. We have designed our modern institutions, not evolved them, and, to a large extent, the designs are controlled by the people who inhabit the institutions. They favor the people running them, the people on the power side, not the people on the other side of the institutions.
And note that they are top-down, center-out flow of commands, information, control and money. That is the problem, there is a limit to the complexity of a system that can be successfully managed top-down, yet every failure is used as a reason for another round of reform, another centralization of power.
That is the reason to read CH Smith's new book, btw, "Radicially Beneficial". He provides ways to think your way out of the trap we are all in.
http://www.amazon.com/gp/product/B0178MQI1M?ref_=cm_cr_pr_product_top
Charles and I exchange emails once in a while, so full disclosure, a) I have been impressed with his stuff for years, and b) this is me bragging. CHSmith is very very productive, consistently insightful and thinks better than I do and continues to gain on me. (But my wife consoles me that I am better looking.)
https://thinkpatriot.wordpress.com/2015/11/11/dynamics-of-national-colla...
This is the kind of things we need to do to move our communities back to local control, to cut the center's power.
https://thinkpatriot.wordpress.com/2015/11/13/why-not-presidential-debat...
H1B Visa Cap / Quota for FY 2016. Next filing date is April 1, 2015
It's a good thing Zuckerberg told us Facefuck will be extinct in less than a year.
Picked up the wrong link in above post. Take a look.
Quickjack - Hacking Facebook likes with Clickjacking - YouTube
Clitjacking?