Here is my response,

Mr. ______,

I think the article exaggerates and confuses the libertarian (caveat: not all libertarians agree, of course) position on the relationship between the United States and Islam, and especially confuses the libertarian criticism of the protestation of the Mosque “at” Ground Zero (and, when I say “at”, I mean nearby, in a neighborhood that also includes churches and at least one synagogue, and so it’s not as if it’s completely arbitrary).

Take the following,

They defend Islam while trashing America as the violent oppressor of Muslims, the Middle East, and freedom.

Who defends Islam?  I don’t think libertarians defend Islam, over other religions or ideologies (except, of course, for the usual bias towards one’s own religion or lack of).  Rather, it’s more accurate to portray the libertarian position as one which opposes American involvement, other than that which has to do with commerce in the broadest sense of the word (government-free commerce, perhaps would be more accurate), in the Middle East.  Furthermore, we defend the right to private property and, by extension, freedom of religion—which, by the way, Americans tend to tout as their own (and so, in a sense, we are defending the United States, not Islam, per sé).

Furthermore,

For example, libertarian columnist Jack Hunter, aka the Southern Avenger, has a Youtube video up at Daily Paul agreeing with Rauf’s remarks that “the United States has killed more innocent Muslims than al Qaeda has killed Americans.”

Would you claim otherwise?

In any case, this seems a tangential point and it strikes me as taking Jack Hunter’s comments out of context (I admit to not watching Mr. Hunter’s Youtube video, however).  I don’t think Mr. Hunter would defend the slaughter of thousands of innocent people on 9/11.  Instead, Mr. Hunter would suggest that that does not justify the slaughter tens of thousands of Middle Easterners.

Furthermore, would you deny that 9/11 was the product of prior relationships between Osama bin Laden and the United States?  Would you deny that the 9/11 attacks, in some way, were provoked?  I don’t think you can deny any of that.  Now, we all agree (except maybe Imam Rauf—I can’t speak for him) that this fact does not justify terrorism.  But, it’s not useful to deny that the terrorism was provoked.

A roughly similar case would be that of the United States, with the caveat that I will concede that the circumstances were different (and so, I don’t mean to apply morality).  First, did U.S. economic aggression against Japan and covert military aggression against Germany (through lend-lease, Atlantic patrols, et cetera) provoke the Japanese attack on U.S. assets in the Pacific Ocean (note: provoke, not justify)?  Did, the Japanese attack on Pearl Harbor provoke the U.S.’s war of destruction wrought on the Axis Powers?

This is a moral free exercise in both cases: we are talking about provocation.

As a side note,

Hunter and Paul’s views are typical libertarian ideology that is more in line with leftists than authentic conservatives protesting Islamic conquer.

Thank goodness, because the conservative position is obviously one of denial.  And, yes, I agree that libertarians are not “authentic conservatives”.  Indeed, that is why we call ourselves libertarian, and not conservatives.

Is the libertarian position regarding Islam and the United States “leftist”?  If that means that the progressive-left position is similar to ours: yes and no.  I think that the progressive-left offers Muslim-Americans prioritization over other Americans, for the sake of political correctness (when talking about Muslim rights in the United States).  This is not the libertarian position.  The libertarians hold Muslims equal to others, and this includes rights to property.

I hope this clarifies the libertarian position.

Sincerely,

Jonathan M. Finegold Catalán

And Krugman was absolutely unambiguous about what he was talking about (he provided quotes of what he was disputing for God’s sake! How could you mistake him for trying to dispute anything else?!?).

This a product of naïtivity.  The Krugman piece in question is a recent blog post (“Hangover Theory at the Fed“), in which he writes,

But one more thing struck me: at least some members of the FOMC have bought into the hangover theory — the modern version of liquidationism in which mass unemployment is somehow necessary in the aftermath of a burst bubble…

Sure, he quotes Kocherlakota, but he lumps him into a group of “liquidationists” he calls “hangover theorists”.  To provide some background, Krugman links to his past Slate piece (“The Hangover Theory“) critisizing what he terms the “hangover theory”,

A few weeks ago, a journalist devoted a substantial part of a profile of yours truly to my failure to pay due attention to the “Austrian theory” of the business cycle—a theory that I regard as being about as worthy of serious study as the phlogiston theory of fire… Call it the overinvestment theory of recessions, or “liquidationism,” or just call it the “hangover theory.”

Talking about “crude Austrianism”, or suggesting that Krugman is simply referring to those who improperly present Austrian theory, is simply disingenuous and plain wrong.  In his Slate article, we know that Krugman takes his opinion that Austrian theory is unworthy of his time and effort, because his description throughout the article is severely lacking (and completely wrong).  Krugman, in effect, set up a straw man.

Furthermore, in his Slate article he wasn’t responding to any particular view of Austrian theory (as if there were widly differing views [that means there aren't]).  He was responding to the Austrian theory.

So yes, Krugman did offer specific quotes in his recent blog post, but immediately equated it to the “hangover theory” (i.e. Austrian theory), and in effect did set up a straw man.  I would be equally as wrong to quote an economist and ascribe his theory as Keynesian, when perhaps it has nothing to do with Keynesianism.  I would also be equally as wrong to defend myself by arguing that what I only meant was to criticize that particular economist’s “crude Keynesianism”.   Not only would I be wrong, but I would be intellectually dishonest.

So, tea partiers, please stop touting the inherent worthlessness of paper money.  The problem is not that our money is made out of paper, but the fact that our money is decided by government fiat.  True, a capitalist society may prefer a metallic commodity over paper (although, more likely than not it seems as if society prefers money substitutes, tied to some specie), but this distracts from the fact that it’s not the paper that’s the problem, it’s the government which disallows through various means the introduction of alternative, freely chosen types of money.

Al-Qaeda seeks to combat the idea that people of different religions can live harmoniously together in the same society. The anti-mosqueteers are certainly doing their best to combat this idea as well.

Al-Qaeda seeks to subordinate private property rights to religious law. This is exactly what the anti-mosqueteers do when they declare other people’s property “sacred ground” and propose on this basis to interfere with their peaceful use of it.

Al-Qaeda seeks to position itself as the representative of the entire Muslim community. The whole anti-mosqueteer position makes sense only on the assumption that they support al-Qaeda’s claim on this point – since otherwise banning an Islamic cultural center because the 9/11 highjackers were Muslim would be no more salient than banning a YMCA because the highjackers were male…

Al-Qaeda employs a double standard, condemning its enemies for killing innocents but excusing its own similar actions. This approach too gets its stamp of approval from the anti-mosqueteers, who express far more concern about what might be built near the site of the 9/11 bombings than about what might be built near the sites of American bombings of Muslims.

Al-Qaeda seeks to intimidate its opponents into appeasing its irrational demands. What are the anti-mosqueteers doing if not endorsing this tactic when they suggest that the Islamic Center should cave in and “compromise” out of concern for the anti-mosqueteeers’ “feelings,” regardless of the merits of those feelings?…

…government in the former nation is following a policy of (relative) fiscal austerity while government in the latter nation is following a policy of wild-spending and deficit-bloating fiscal expansion.

Looking through the archives of Think Markets, I found this very interesting interpretation of events in Germany, written by Andreas Hoffmann.  While Hoffmann doesn’t really argue either way, he shows how Germany could be used both to prove Keynesian and free-market theories.  For example, Hoffmann argues,

1. Private investment demand is up and does not need to be stabilized anymore. There is no ongoing balance sheet recession as most of Germany’s manufacturing companies underwent large scale restructuring in the 2000s and are competitive on world markets.

I am no expert on contemporary German economics, and nor do I claim to be an authority, but I generally agree with Hoffmann here.  In fact, this seems similar to Daniel Kuehn’s argument regarding the Depression of 1920-21.  When there is no liquidity trap, and therefore ample private lending and investment, there is no investment gap that the government needs to make up through stimulus spending.

A critic may respond: well, how does one decide whether or not a liquidity trap will occur?  The origins of the liquidity trap may be nebulous, and it may seem that economies are categorized only after empirical evidence.  But, the nature of the crash in Germany was fundamentally different than the crash in the United States.  In Europe, the bubble mostly occurred in faster-growing economies: Spain, Ireland, Estonia, et cetera.  It makes sense that the banks which took the hardest hits were in these countries, and so it makes sense that German banks may not suffer from the same uncertainty that Spanish or American banks do.  This may explain why they are more willing to lend.

The German economy, rather, seems to be based more on currency devaluation to boost exports.  The European Central Bank’s inflationary policies have, to a large degree, probably positively affected German exports.  This may also cause an increase in entrepreneurial confidence.  There may be no reason to believe that investment in the manufacturing sector is particularly harmful, at this point.

While some may interpret this as a bubble in the making, this is not relevant to the austerity debate per sé.   The fact is that, unlike in the United States, private investment did not take as big as a hit and is now growing.

For all intents and purposes, the argument is still theoretical.

While high-priced ice cream is not likely to bring down the economy, nor will it impoverish to many people, this comedic case is a perfect illustration of how the system works in higher government.  Indeed, this happens in most important sectors of the market, whether it be health care (and the various industries that make it up), oil, or any other service where the stakes are high and lobby groups are consistently looking to hamper competition.

Some might go on to say that the problem is money and wealthy corporations.  No, the real problem is government.  For those wary of this anarchist tag-line, I am not suggesting that we should abolish government.  I’m just highlighting the root of the problem.

China surpassed Japan as the world’s second-largest economy last quarter, capping the nation’s three- decade rise from Communist isolation to emerging superpower.

I wonder what will happen when the current Chinese bubble pops (also, see my piece, “A Closer Look at China’s Currency Manipulation“).

I definitely concur with this – and I think Cowen would too – what I think these critiques are missing is some sense of proportion. Sure these problems could emerge – but are they more serious than the additional unemployment that would result from the deficiency in demand that you’re going to see if mass layoffs across sectors occur?

I don’t think the notions of “aggregate demand” and “malinvestment” are mutually exclusive.  Malinvestment does lead to a decrease in aggregate demand if uncertainty increases.  In other words, it leads to a decrease in aggregate demand in the capital-goods sector (the recessionary period, after all, represents a shortening of the structure of production).

I touch on this in an upcoming article on unemployment (one where my final conclusions might be unclear and quasi-wrong, so I have to spend most of my night today working in another paragraph [if the editors let me]).  The problem is a lack of production, which means a deficient demand for labor.  Is the problem a decrease in demand for consumer-goods or lower-order capital goods?  Maybe.  But, this should only be a temporary problem (and alleviated by a fall in prices).  Ultimately, after all, doesn’t a lengthening of the structure of production require a decrease in present consumption?  I think the problem has more to do with uncertainty in the financial sector.

By propping employment in uneconomical sectors the government is not propping aggregate demand sustainably.  In other words, if the government is propping up laborer’s wages, which will be allotted towards consumption, while producing capital-goods nobody is interested in, the end result is a destruction of wealth.  This, clearly, is not wealth-inducing.

I will repeat what I claimed in another blog post in the past: the problem with Keynesian aggregation is that they fail to look at the different components which make up that aggregation, and conclude that if you inflate the aggregate figure then it’s all good.  I don’t think it works that way.

The supply of something is essentially limitless, except that it is limited by a scarcity of labor.  In other words, there are only so many hours per day a  person can work, and there are only so many people available to work, and so there is a limited amount of economic goods which can be produced.  So, we do not have a scarcity of resources available to us per sé, we have a scarcity of the ability to makes these natural resources actually useful (by applying our labor to them).  So, even here, it seems ludicrous to me to blame the world’s food problems on overpopulation.  An increase in population should increase the amount of food available to the world, not increase the shortage of food.

Neither is the problem a shortage of farmland.  There is plenty of land that has not been seeded, mostly because it’s not economical to do so.  The problem is government intervention (and, I know the connotation “government intervention” has when coming from a libertarian), and the limiting of proper distribution and economic rationing of food (or economization, if that’s the word you prefer) and the delaying of increases in productivity by deliberately undermining capital accumulation.

Indeed, I am not sure that it can be legitimately doubted that an increase in the capital-goods invested in sub-saharan African agriculture can raise the productivity of the farmland there.  This is, in fact, something which has been occurring for the past two years.  Clearly, the problem is not a lack of potential food production.

Something which struck me as ridiculous in Geyer’s article was her criticism of China’s food-importation policy,

Yet, virtually no one talks seriously about population control, or the relationship between grain production and human development. Meanwhile, this year, China has quietly bought wheat from Canada and Australia and corn from the U.S.

What’s her point?  This is a problem when people with non-economic backgrounds try to assess what is essentially an economic problem.  If the United States has a surplus of food, then what should stop Americans from exporting it to other countries?  If it ever became economical for the United States to reallocate resources from agriculture to industry, because of a rise in agricultural production elsewhere, then the implications would be great.  This is not a weakness, it’s a strength.  If there are Chinese starving it is because of artificial obstacles to their ability to acquire food, not because of any worldwide shortage.

As for the increase in food prices, I’m not sure this has to do much at all with an increase in global demand.  Rather, it seems to have to do more with distribution of food and inflation.  Finally, regarding Fedako’s point, even natural disasters should not cause food shortages.  One of the great things about capitalism is that the division of labor tends to extend so far that such basic necessities, such as food, no longer need to be worried about.  At least, this is true in the sense that food production tends to increase by so much, and prices tend to fall by so much, that even a decrease in supply will keep food affordable for the general population.