Gittins goes feral about libertarians

Grrrr... Gittins on the prowl

Grrrr... Gittins on the prowl

Left-wing economic journalist Ross Gittins has just discovered the word “libertarian” and he’s not happy. Of course, he hasn’t yet discovered what it means, but he’s fairly sure it means something scary and bad.

As is standard for a paleo-Keynesian, Gittins is sure that regulation and activist fiscal policy are good things. He simply asserts that the recent recession proves his case. He doesn’t rebut the overwhelming evidence for partial ricardian equivalence… he doesn’t rebut the undeniable fact that internationally financed debt must be 100% crowded out through lower net exports (indeed, like most Keynesians, he probably doesn’t understand this point)… and he doesn’t rebut the likelihood that domestically financed debt will also involve some crowding out.

For thinking people, it is basically a fact that activist fiscal policy has little impact on the size of the economy, and is likely to be a net negative. But Gittins sees no need for rational discussion of the facts. Instead, he has written a grossly dishonest string of insults against ideas that he doesn’t understand.

He describes the libertarian position as “extreme … nonsense … delusions … discredited … naive nonsense … based on faith [not] empirical evidence …  impervious to the destruction they helped to cause … prejudice”, and goes on to suggest that libertarians are in the pay of evil rich men. Strong words for a guy scared of intellectual debate.

Strangely, Gittins complains about the financial bail-outs, then endorses the bail-outs (bringing us back from the “edge of the abyss”), then blames libertarians for the bail-outs despite the fact that libertarians were nearly the only group that opposed them.

In a comment that reveals him either to be hopelessly ignorant or an irredeemable liar, he describes the libertarian position as “markets are without fault”. Of course, he can’t show any libertarian ever saying that, because it is simply not true. Libertarians do think that markets work relatively well, but there is no such thing as a perfect market because we don’t have perfect people with perfect information. Likewise, there is no such thing as perfect government because we don’t have perfect politicians with perfect information. Indeed, central planners face a bigger information problem and worse incentives.

Gittins then tries to attack the “government failure” meme for the recent recession. Of course, he doesn’t provide an argument. That would be too stressful. He waves his hands, and suddenly the regulation that encouraged excessive home ownership & high-risk loans, and the low interest rates following the dot-com bust, just disappear as issues. I wanted to write a rebuttal, but he actually made no coherent points.

Amusingly, Gittins is proud that he doesn’t understand how speculation works. The point is simple… if a speculators generally “buy high, sell low” then they wouldn’t be in business for long. It is the “buy low, sell high” strategy that generally works better… and that is counter-cyclical by definition. Gittins doesn’t understand this, and is proud of his ignorance. Of course, he offers no argument on this point either.

After insisting that libertarians have mostly been ignored, he then insists that we have “browbeaten too many” into our evil plot for world domination and caused the crisis, and then he insists that we have been ignored after all. If you’re confused, don’t worry, so is Gittins.

35 thoughts on “Gittins goes feral about libertarians

  1. The whole idea that the stimulus was beneficial crumbles under a proper economic examination.
    I don’t know why people would be surprised that you can achieve modestly positive short term results by re-distributing a large portion of money from one area of the economy into another (and then narrowly looking for results in the area stimulated).

    But I don’t understand why no one in the mainstream media has asked Rudd questions like:
    If our stimulus worked in Australia? Why did stimulises fail everywhere else in the world?
    Or this. Australia’s stimulus was far smaller than that of other countries.
    Therefore, the smaller the stimulus the better? (That would imply stimuluses are not beneficial at all).
    Or if the stimulus worked, then shouldn’t we have bigger and more stimuluses?

    Dirty dishonest politics at it’s best.

    I have a totally unrelated comment.
    Yesterday Stewart Glass posted some comments on “Documentary on environmental alarmism”.
    I’d never heard of him, but he is a candidate for the Sth Australian upper house.
    Why not invite him to do a guest post at the ALS?
    (and then sit back and watch the fallout)

  2. TimR — Stewart is a libertarian. He has so far refused to join the LDP because he doesn’t believe in legalised abortion or gay rights, due to his Mormon religion. He ran as an independent in the last federal election, and got a handful of votes.

    Of course, he’s always welcome to contribute to this blog. As are you.

  3. Mr. Bogart, try to be a bit less scathing.
    I understand that some rampant jealous may be prevalent in your feelings towards the highly regarded Mr. Gittins, but this shouldn’t result in the public posting of such a slanderous article as yours.
    Through the use of such overwhelmingly negative language, not only do you dismiss most of his key points, you do so without even considering the basis for them, you merely label him a quack.
    Instead of your unfortunate readers having to peruse his and your articles, how about you merely read his properly, from perhaps a less biased view point.
    Or you can sit there and continue throwing faeces at people.
    It’s entirely up to you.

  4. Good point Trevor. I will now address each of Gittins’ “key points”

    Done. I hope you enjoyed it. 🙂

    Seriously, if anybody can find an actual coherent argument anywhere in Gittins’ article, please reveal it.

  5. Trevor,

    re Gittin’s article: What is the empirically derived value for k, the Keynesian multiplier?

    Truly highly regarded economist Robert Barro says that it is zero. (Here: http://online.wsj.com/article/SB123258618204604599.html *Government Spending Is No Free Lunch – Now the Democrats are peddling voodoo economics.* ) If this is true, quite a lot of Gittin’s articles are pointless and based solely on personal abuse of philosophies he is unfamiliar with, mischaracterises and does not try to understand.

  6. BTW, this is what I believe to be the root cause of the US housing crisis, and ergo, sub prime and the credit crunch and then GFC/GEC:

    http://en.wikipedia.org/wiki/FHA_loan

    *FHA loan is a federal assistance mortgage loan in the United States insured by the Federal Housing Administration. The loan may be issued by federally qualified lenders.

    FHA loans have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford. The program originated during the Great Depression of the 1930s, when the rates of foreclosures and defaults rose sharply, and the program was intended to provide lenders with sufficient insurance. Some FHA programs were subsidized by the government, but the goal was to make it self-supporting, based on insurance premiums paid by borrowers.

    Over time, private mortgage insurance (PMI) companies came into play, and now FHA primarily serves people who cannot afford a conventional down payment or otherwise do not qualify for PMI.*

  7. Is Ross coming due for retirement soon? Anyone know? He seems to have had a really good run at being ignorant/unread for all these years so perhaps it’s time he gave someone else a shot as they couldn’t do worse.

  8. At least the word ‘libertarian’ is getting a bit more mainstream. The word didn’t exist in this country 15 years ago; if you used it people asked if it meant ‘like, orgies and stuff’!

    Gittens writes like a man making his last stand upon realising his loss of the theoretical argument is now a fait accompli. Someone like John H, Sinclair Davidson or Jason Soon should respond in the MSM putting forward the real reasons why the banking regulations were structured the way they were prior to the GFC, and generally give Gittens a bit of a coup de grâce as a credible economist.

  9. The problem is we’re busy, it isn’t sensationalist and it requires a lot more work than flinging shit at people you don’t agree with.

    Naughty bloody monkey he is.

  10. Gittins is one a the biggest dingbats in the mainstream media. I would take a great deal of time to summarise some of the garbage he’s written in his career.

    Who could ever forget his classic comment that competition was bad because it “forces people to make a choice between an apple and an orange”.

    Or the time he decided that markets didn’t work because they were responsible for his weight problem (you know, they made food so cheap and plentiful he couldn’t stop eating like a pig).

    Or the time he admitted that public funding of the healthcare system encourages waste and inefficiency, but concluded that spending even more money solve the problem.

    My cat understands more about economics than that goddamned idiot.

  11. Or the time he decided that markets didn’t work because they were responsible for his weight problem (you know, they made food so cheap and plentiful he couldn’t stop eating like a pig).

    And exercising was obviously too difficult a task. It’s amazing the overweight and under-exercised dolt didn’t ask that the gubinmunt raise a special tax on food to stop his propensity to over-eat.

    Isn’t a wealthy country a good thing? It gives people like Gittins a job to retirement and no one give a shit.

    I honestly don’t know how you guys could read him.

  12. Mark,

    I’m familiar with Barro, what I’m not aware of is any other academics who have supported his view point. His research barely stood on it’s own two legs. D
    ismissing one of they key premises of Keynesianism based on one unsupported viewpoint, is… well… wrong.

  13. “I’m not aware of is any other academics who have supported his view point.”

    I’m not aware of academics supporting Gittins.

    “His research barely stood on it’s own two legs.”

    How?

    Keynesianism can be dismissed because the Keynesian multiplier, k tends towards zero. It does and always will do so in an open economy. Accepting these fact is not “wrong”. Particularly when your assertions about Barro etc. are unfounded rubbish.

  14. I wonder if gittins is being ironic, or something? Maybe he’s a libertarian parodying communoids! Some of those ‘apples and oranges’ comments seem like a libertarian skit.

  15. I wonder if gittins is being ironic, or something?

    About his weight problem and eating habits? Don’t thinks so. I think he really believes it’s market failure that markets have been able to produce cheap food that he over-consumes. Rather than exhibit a little self control he wants the gobinment to raise the price so he can’t afford what he shouldn’t be scoffing down in the first place.

    Elegant thinking huh?

  16. Where is the evidence that the fiscal multiplier is zero (or even close to it), as a number of commentators have asserted?

    Regarding comment 1 Australia had one of the largest fiscal packages as a share of GDP in the OECD.

  17. JC – Australia had the largest package in the OECD after Korea and the US. See page 63: http://www.oecd.org/dataoecd/36/57/43117724.pdf

    Estimating the multiplier is hard and it’s likely to move up and down and depend a lot on the nature of the stimulus (see for example http://www.imf.org/external/np/seminars/eng/2009/fispol/pdf/laxton.pdf). Assuming the multiplier is always zero seems like an extreme leap of faith, just like assuming it’s one (or higher). Believe what you will.

  18. The IMF has ranked Australia as the fifth highest among the G-20.

    See Table 3.4:
    http://www.imf.org/external/pubs/ft/spn/2009/spn0913.pdf

    The OECD list excludes Saudi Arabia, South Africa and China. These all implemented larger stimulus measures than Australia.

    BTW, not only do the IMF and OECD use different lists of countries, they also use different estimation methods.

    Nonetheless, they both indicate that Australia had one of the largest stimulus packages, relative to its GDP.

    If you run a regression of the IMF data (size of stimulus x GDP) the result yields a tiny r2, i.e. statistically insignicant. Thus, on those figures, size of stimulus is irrelevant to projected economic growth. I should quickly add, however, that its probably too early to draw strong conclusions, yet I think it reasonable to be sceptical of claims that fiscal stimuli ‘work.’

  19. wino – Barro (for the US) found (i.e from historical data, not forecast) that it was statistically insignificant from zero except in the second world war where it was 0.8.

    Are you sure you’re not believing what you like to? You’re taking the ex ante results as being more instructive than the ex post results. I think this is a mistake.

    Factor in the costs and distortions of deficit financing, and the viability of such policies seem totally pointless, if not deleterious.

  20. wino — I didn’t say the multiplier must always be zero. In the short term, it may well be a small positive or small negative (though the average is around zero) and in the long run it’s almost certainly a negative.

    Barro has pulled together the empirical evidence… but this is a strange debate from the start because we know using simply logic that fiscal policy generally can’t have much of an impact. We know that partial RE does exist, and we know that foreign-debt-financed stimulus must be crowded out. These aren’t issues of opinion, any more than gravity is an issue of opinion.

  21. Crowding out and how does it happen?

    The aussie at 92 cents today (and the TWI) is partially a consequence of all the distortions happening through our capital structure and the net effect will be even further marginal, but efficiently run businesses transferring to offshore sourcing and later the unions hacks supporting ALP referring to the CEO’s of these firms as unconscionably greedy. And around goes the merri-go-round of ignorance.

  22. jc,
    Everybody knows that inflation expectations will adjust after the hike and leave the real rate unchanged and no pressure on marginal businesses to do anything.

    But seriously any large business is free to finance in whatever currency they like. And if they’re worried about domestic inflation there’s a market for that too.

  23. Joseph:

    that’s true, but I really don’t expect say the small manufacture to know how to inflation hedge himself and hedging is finite in a sense.

    You can hedge the currency… but how do you exactly hedge domestically produced goods against cheaper imports.

    You can take an economic hedge of course, but you also need to be pretty skilled in treasury matters and have lots of cashflow in case the hedge goes wrong. And what happens beyond the hedge period?

  24. jc,

    You’re right — I was just being a dickhead 😀

    Still, there is no need for a business to do any hedging themselves. That’s what investment banks are for.

    In a more perfect world we would have liquid futures on all assets, fairly priced inflation, liquid and fairly priced options at every strike, private currencies to satisfy every possible liquidity preference, and everybody would get their own pony.

  25. Gittens has been wrong for so long it must be some type of record. I remember him back in the late 90s or early 00s writing about the problems of the interest rate reductions then coming through at last. Plus, every third column in good times is about how money really isn’t making people happy. He’s a virtual Hamilton.

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