The great Milton Friedman on 'spread the wealth mentality'

[DSGE]

No.... do you remember how much we were in the crapper then too?

I do... the 80's SUCKED!

I never made as much money as I did under Clinton and taxes were much higher. If the Bush tax cuts were so great, why did we get 10% unemployment and a recession?

We didnt.... unemployment went up under Obama because of Obama. He made it a toxic environment for business to flourish.
My life has been a living Hell ever since that bastard got elected.

Nope. Unemployment went up under bush.

What do you mean he's made it a toxic environment for business to flourish?

 

[expat_panama]

...If the Bush tax cuts were so great, why did we get 10% unemployment and a recession?

We didnt.... unemployment went up under Obama because of Obama. He made it a toxic environment for business to flourish. My life has been a living Hell ever since that bastard got elected.

Nope. Unemployment went up under bush.

What do you mean he's made it a toxic environment for business to flourish?

With the 2012 election we'll be hearing more and more about the unemployment % of a shrinking workforce as politics masks economics --it's a distraction. The reason is politics is the result of public attitudes and not the cause and vilifying businesses makes owners lay people off--

Those 'tax-cuts for the rich' were followed by ten million people getting hired and that 10% unemployment was during Obama's 'recovery'. We can't expect anyone to hire from a mob that's out to 'occupy' and get even.

 

[DSGE]

We didnt.... unemployment went up under Obama because of Obama. He made it a toxic environment for business to flourish. My life has been a living Hell ever since that bastard got elected.

Nope. Unemployment went up under bush.

What do you mean he's made it a toxic environment for business to flourish?

With the 2012 election we'll be hearing more and more about the unemployment % of a shrinking workforce as politics masks economics --it's a distraction. The reason is politics is the result of public attitudes and not the cause and vilifying businesses makes owners lay people off--

Those 'tax-cuts for the rich' were followed by ten million people getting hired and that 10% unemployment was during Obama's 'recovery'. We can't expect anyone to hire from a mob that's out to 'occupy' and get even.

It's extremely misleading to look strictly at the quantity of employment because the population grows, and as the population grows more people become employed. Similar to how it's misleading to look at just the unemployment rate, because it'll go down following people leaving the labour force. So let's take a look at the employment to population ratio. Do we see the tax cuts allow for a larger proportion of the population to be employed?

No. Not only do we see that the total employment increase under Bush was from population growth and the labour market finally bouncing back after the dot com bubble, we also see that Bush's tax rates resulted in Bush's maximum employment to population ratio being around 1.5% lower than Clinton's.

This whole idea that "political uncertainty" or high tax rates or any of that is causing the shitty levels of employment is just garbage. It's extremely obvious that most of this downturn isn't structural, it's cyclical. It's a demand problem. I understand why the Republicans are trying to blame it on tax rates and regulations and that they have a stake in keeping the economy as shitty as possible for the next election; what I don't understand is why regular people can't see through it.

PS: Forgot to point out that E-t-P also tanked during Bush, not Obama.

 

[expat_panama]

No. Not only do we see that the total employment increase under Bush was from population growth and the labour market finally bouncing back after the dot com bubble...

Huh, I don't see that at all...

...we also see that Bush's tax rates resulted in Bush's maximum employment to population ratio being around 1.5% lower than Clinton's...

Actually, what we see is--

-- the ratio peaking to 64.9 at the same time Clinton goes to war with Gates. Then we see the ratio at 61.6 when the '03 cuts go into effect, and finally we see the plunge with Obama's election.

The stuff about which causes which is not what we're seeing, it's what we're proposing.

 

[iamwhatiseem]

Friedman was a sound economist but leaned too far on the market-side.
A "libertarian for capitalism" - Friedman had no patience for even the smallest of regulations on the free markets. Indeed, Friedman was no small influence on Greenspan and the rest of the Reagan administration and is clearly one of the architects of the 80's deregulation era.
The fault of Friedman was he did not fully appreciate the corruption that will always result when greed is unchecked.

 

[DSGE]

No. Not only do we see that the total employment increase under Bush was from population growth and the labour market finally bouncing back after the dot com bubble...

Huh, I don't see that at all...

... Are you looking at the picture? Alright I'll make it easier for you. Take logs of both series:

See it now? Taking logs makes it so that the slopes of the lines are growth rates. You see under clinton total employment rising at the same rate as the rate of population growth (since their slopes are the same). Then the dot com bubble happens. There's a drop in the level of employment, then under Bush it returns to growing at only slightly faster than the rate of population growth until the GFC. The level under Bush remained below trend!

...we also see that Bush's tax rates resulted in Bush's maximum employment to population ratio being around 1.5% lower than Clinton's...

Actually, what we see is--

-- the ratio peaking to 64.9 at the same time Clinton goes to war with Gates. Then we see the ratio at 61.6 when the '03 cuts go into effect, and finally we see the plunge with Obama's election.

If the Bush tax cuts caused the increase in the EtP ratio then A) it should have very least returned employment to trend, and B) it should have shown a faster than normal growth rate. All that happened was EtP returned to growing at the same rate it did during the Clinton years (slightly faster). It's more likely that monetary policy allowing nominal income to return to near trend at the time caused it.

Not sure why you think the US vs Microsoft case was so important. You know the downturn was caused by a tech bubble, right? Obviously not the results of a case determining one firm was a monopoly, something everybody knew anyway.

Yeah Obama assumed office

I'm surprised how many people think he caused this given that he started his fucking term in 2009.

The stuff about which causes which is not what we're seeing, it's what we're proposing.

I know. I'm saying if it were causal, we would see it in the data. The fact that we don't see it tells us its not causal.

 

[DSGE]

Friedman was a sound economist but leaned too far on the market-side.
A "libertarian for capitalism" - Friedman had no patience for even the smallest of regulations on the free markets. Indeed, Friedman was no small influence on Greenspan and the rest of the Reagan administration and is clearly one of the architects of the 80's deregulation era.
The fault of Friedman was he did not fully appreciate the corruption that will always result when greed is unchecked.

well he did. That's why he wanted courts. He was a libertarian, not an anarchist. You constantly hear him saying in those videos "I am not an anarchist". He wanted governments to provide courts of law. The thing he fully appreciated was the corruption that occurs in government. He didn't like that regulations were being captured by special interest groups to serve the interests of a few at the expense of the many.

 

[expat_panama]

...we see that the total employment increase under Bush was from population growth...

Huh, I don't see that at all...

...Take logs of both series:

See it now?

What's there is the population increased by 2-1/2 million every year for twenty years with Clinton, Bush, and Obama. That means affects by population growth on employment were equal for all three administrations. E/P changed when policy changed. It began falling with Clinton's war on Gates, increasing after the tax cuts, and falling with "spread the wealth" mentality taking over.

...Not sure why you think the US vs Microsoft case was so important...

It's the thread's topic, class warfare and the "spread the wealth mentality". War on Microsoft was followed by the '00 crash and Obama's 'spread the wealth' statement to Joe the Plumber was followed by the '08 crash.

 

[iamwhatiseem]

Friedman was a sound economist but leaned too far on the market-side.
A "libertarian for capitalism" - Friedman had no patience for even the smallest of regulations on the free markets. Indeed, Friedman was no small influence on Greenspan and the rest of the Reagan administration and is clearly one of the architects of the 80's deregulation era.
The fault of Friedman was he did not fully appreciate the corruption that will always result when greed is unchecked.

well he did. That's why he wanted courts. He was a libertarian, not an anarchist. You constantly hear him saying in those videos "I am not an anarchist". He wanted governments to provide courts of law. The thing he fully appreciated was the corruption that occurs in government. He didn't like that regulations were being captured by special interest groups to serve the interests of a few at the expense of the many.

The courts are too weak to properly oversee the markets.
As an example during the Clinton administration - an SEC department head was very concerned about the derivative market. She saw that it was (is) little more than Las Vegas style gambling rather than investments. She and her department began a full investigation. As they were building a case and began to provide the FBI with incriminating evidence - Larry Summers (Treasury Secretary under Clinton) called her and tried to shut down the investigation. He was unsuccessful. So he setup a meeting with Clinton, Greenspan and 3 Republican senators and they submitted and passed a bill that removed SEC authority over the derivative markets.
The investigation was shut down. The department head was relieved of her duty - her department went from 43 investigators to 1. On that day - 35% of the markets were made immune to law enforcement.

Don't believe me?
Look it up - it happened.
Larry Summers went on after leaving office and made over $50 million in the derivative markets. He is now Chairman of Obama's economic counsel.

 

[AquaAthena]

What a brilliant man!

Milton Friedman: Why soaking the rich won't work. - YouTube

Milton Friedman - Redistribution of Wealth - YouTube

Timeless wisdom.

 

[DSGE]

Huh, I don't see that at all...

...Take logs of both series:

See it now?

What's there is the population increased by 2-1/2 million every year for twenty years with Clinton, Bush, and Obama. That means affects by population growth on employment were equal for all three administrations. E/P changed when policy changed. It began falling with Clinton's war on Gates, increasing after the tax cuts, and falling with "spread the wealth" mentality taking over.

The population growth thing is relevant for the "increasing after the tax cuts" part. I brought it up when you said:

Those 'tax-cuts for the rich' were followed by ten million people getting hired

The problem is, that's not "ten million extra people". It's not "ten million more people above trend". The increase in total employment under Bush is exactly what we'd expect just extrapolating from population growth. The baseline scenario coming out of the dot com bubble is that when the Fed returns the growth of NGDP back to normal, the rate of increase in total employment should go back to normal (increasing at the rate of population growth), which happened, NGDP returned to normal in 2003. If the Bush tax cuts did anything, they should have raised employment growth considerably. At bare minimum, it should have got EtP back to where it was before the dot com bubble. It didn't though. It doesn't turn up in the data. The data shows exactly what you'd expect coming out of a recession and returning to trend.

...Not sure why you think the US vs Microsoft case was so important...

It's the thread's topic, class warfare and the "spread the wealth mentality". War on Microsoft was followed by the '00 crash and Obama's 'spread the wealth' statement to Joe the Plumber was followed by the '08 crash.

So this is just you picking some events and saying "post hoc ergo propter hoc"?

Yeah I want to know why on earth you think the US vs Microsoft case was relevant to the early 2000s recession. You know it was a tech bubble, right? It wasn't businesses getting scared about the future because the US was going after a monopoly.

Haha. "Joe the Plumber was followed by the crash of '08". Firstly, what on earth could you think the causality is there? Obama's "spread the wealth" statement; phase 2...; unemployment!

And you realise the recession was well underway before Joe the Plumber?

 

[DSGE]

Friedman was a sound economist but leaned too far on the market-side.
A "libertarian for capitalism" - Friedman had no patience for even the smallest of regulations on the free markets. Indeed, Friedman was no small influence on Greenspan and the rest of the Reagan administration and is clearly one of the architects of the 80's deregulation era.
The fault of Friedman was he did not fully appreciate the corruption that will always result when greed is unchecked.

well he did. That's why he wanted courts. He was a libertarian, not an anarchist. You constantly hear him saying in those videos "I am not an anarchist". He wanted governments to provide courts of law. The thing he fully appreciated was the corruption that occurs in government. He didn't like that regulations were being captured by special interest groups to serve the interests of a few at the expense of the many.

The courts are too weak to properly oversee the markets.

Who's complaining about oversight? Government watchdogs are fine. You want organisations that have the resources to take a firm to court when they've broken the law and provide information to consumers. But at the end of the day, the consumer should be free to choose.

As an example during the Clinton administration - an SEC department head was very concerned about the derivative market. She saw that it was (is) little more than Las Vegas style gambling rather than investments. She and her department began a full investigation. As they were building a case and began to provide the FBI with incriminating evidence - Larry Summers (Treasury Secretary under Clinton) called her and tried to shut down the investigation. He was unsuccessful. So he setup a meeting with Clinton, Greenspan and 3 Republican senators and they submitted and passed a bill that removed SEC authority over the derivative markets.
The investigation was shut down. The department head was relieved of her duty - her department went from 43 investigators to 1. On that day - 35% of the markets were made immune to law enforcement.

Don't believe me?
Look it up - it happened.
Larry Summers went on after leaving office and made over $50 million in the derivative markets. He is now Chairman of Obama's economic counsel.

All investment is just Vegas. You only get a return for one thing: taking on risk.

I'm not sure why this anecdote is relevant. What derivatives regulation would you like?

 

[expat_panama]

...If the Bush tax cuts did anything, they should have...

That's interesting but causality is hard enough to identify even without being hypothetical. Getting back to the idea that--

...total employment increase under Bush was from population growth...

--how about we dump the idea of trying to 'prove' what caused what, and just work with what happened with what--

 

[DSGE]

...If the Bush tax cuts did anything, they should have...

That's interesting but causality is hard enough to identify even without being hypothetical. Getting back to the idea that--

...total employment increase under Bush was from population growth...

--how about we dump the idea of trying to 'prove' what caused what, and just work with what happened with what--

How about we dump the idea of actually justifying the statements of causality we make? What happened was exactly what was expected to happen just from population growth.

It'd be like if I tried to claim that in 1993 Clinton raised taxes on the rich and corporations. Subsequently, 20 million jobs were created. Taxing the rich creates jobs!

My evidence:

Ridiculous, isn't it? Clinton's taxes didn't cause those jobs because those jobs are exactly what you'd expect from population growth. If Clinton had done nothing there would have been the same number of jobs. Same goes for Bush.

 

[expat_panama]

...jobs are exactly what you'd expect from population growth...

Population growth by itself does not increase employment. We've had steady population growth at the same rate during both increases and decreases of employment. There are many nations with both high population growth rates and high unemployment, but there are exceptions. In contrast the 'spread the wealth' mentality consistently to rises and falls with employment in various other nations and over time in the US.

What's far worse than the poverty and unemployment is the thuggish despotism that comes with 'spread the wealth', as seen with Huey Long, Hitler, Mussolini, and Stalin.

 

[midcan5]

"What improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable." Adam Smith 'The Wealth of Nations,' Book I Chapter VIII

Ideologues like Friedman are as off the wall as ideologues such as Marx. The only difference is one worships ideas the other worships ideas. In the end the discussion should be practical and pragmatic, it is why both ideologies fail and continue to fail as the recent great recession demonstrated - and if it demonstrated one thing, it demonstrated Friedman essential premise of the wealthy creating happiness and prosperity was off track and wrong. Neither ideologue consider the central fact they are dealing with people and not concepts. See example below for an alternate thought.

'Christmas: Brought to You by Chinese Slave Labor' Christmas: Brought to You by Chinese Slave Labor » OWNI.eu, News, Augmented


Or a piece on a more practical ideologue. http://www.nytimes.com/2011/12/30/opinion/keynes-was-right.html “The boom, not the slump, is the right time for austerity at the Treasury.” John Maynard Keynes


"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary." Adam Smith

 

[DSGE]

Ideologues like Friedman are as off the wall as ideologues such as Marx. The only difference is one worships ideas the other worships ideas. In the end the discussion should be practical and pragmatic, it is why both ideologies fail and continue to fail as the recent great recession demonstrated - and if it demonstrated one thing, it demonstrated Friedman essential premise of the wealthy creating happiness and prosperity was off track and wrong. Neither ideologue consider the central fact they are dealing with people and not concepts. See example below for an alternate thought.

Friedman was nothing but pragmatic. And I think you've greatly misinterpreted Friedman if you think his essential premise is that the wealthy create happiness and prosperity. I'm not sure what you mean "dealing with people, not concepts"...

Or a piece on a more practical ideologue. http://www.nytimes.com/2011/12/30/opinion/keynes-was-right.html “The boom, not the slump, is the right time for austerity at the Treasury.” John Maynard Keynes

That's all well and good, but it ignores 75 years of further developments in economics; particularly our greatly increased understanding of monetary policy (which Friedman was instrumental in).

 

[Sallow]

Gotta love Milton Friedman. Advocated for all the protections provided by government with no provision as to how to pay for them.

Amazing guy. Voodoo economics works..by gumption.

 

[DSGE]

...jobs are exactly what you'd expect from population growth...

Population growth by itself does not increase employment. We've had steady population growth at the same rate during both increases and decreases of employment. There are many nations with both high population growth rates and high unemployment, but there are exceptions. In contrast the 'spread the wealth' mentality consistently to rises and falls with employment in various other nations and over time in the US.

For an economy without significant labour market frictions the steady state is for total employment to grow at the rate of population growth. Obviously there are business cycles. Nobody is saying population growth is the sole factor driving employment growth. Looking at the post-dot com bubble US the theory checks out pretty well. NGDP returns to trend, the economy returns to its balanced growth path, total employment grows at roughly the rate of population growth. There is no artifact present in the data which we ascribe to the Bush tax cuts.

As an aside, I don't subscribe to the "spread the wealth" mentality by any means. I just don't think blaming all this shit on it makes any sense at all.

 

[DSGE]

Gotta love Milton Friedman. Advocated for all the protections provided by government with no provision as to how to pay for them.

Amazing guy. Voodoo economics works..by gumption.

What are you talking about?