Wall St. Rises on Fed Official's Comments

"I'll say again: there is no reputable scholar since Keynes and Galbraith who argue for a "liquidity bubble" in the 1920s. I'll say again: your positions, whether you desire it to or not, place you suspiciously in line with the liberal wing of economists in the Democratic Party."

You've already trashed the Austrian scholars for their opinions (in a previous post), but they are not "in line with the liberal wing of the Democratic Party" and they support the arguments for a liquidity bubble.

Whatever their opinion they are more conservative than your viewpoints. Much of what David says is supported by the true conservative economic school of thought, no NOT the Chicago School, the Austrian School.

You seem to throw out this shibboleth to anyone who challenges your message that Friedman is the sole authority on history. I've witnessed this over and over again. Please quit throwing mud at people who are more conservative than you...

We have cross talked here. I'll try to respond to your latest post:

"I didn't say the Chicago school analyzes the everything correctly."

You are right, you didn't. Bad assumption on my part.

"I do say that Friedman had the 1920s pretty well pegged, but should be modified by Barry Eichengreen's analysis of the weaknesses of the gold standard and Wanniski's study of the Smoot-Hawley Tariff."

Never heard of Barry but I lean towards Wanniski's theory of the Smoot-Hawley Tariff causing major problems.

"My more important point, though, is that if the Rothbardian/Austrian notions are sound, they could be presented and debated and, more important, proven by scholarship. Economics, ultimately, can be reduced to numbers. What should concern you is that these people don't even get in the arena."

I'm not a academic so I don't know if their ideas get "in the arena." I do know that I can read their thoughts on the Internet and they sound convincing to me. Is the Internet part of the arena?

"Internet" No, not really. While I am (more than most on FR) aware of the bias of academics, more often than not---especially in economics, less so in history---they will accept any "proof" if you have the numbers and data to substantiate it. I've seen Galbraith TOTALLY humiliated by a strong crop of young, mostly conservative, economists like Calomiris, Hubbard (currently in the Administration) and others. The internet is good because it allows people to inject new arguments into what I'll call the "first tier" of debate---pure argumentation, with some selected facts, but not "peer reviewed" by people who have the actual specific knowledge and skills to cross check the same data. But the Austrians generally don't get to the "peer review" part. I think they would get a fair hearing, IF . . . they have the evidence.

Smoot-Hawley, I think, is a GREAT example of why this is valid. Wanniski was once dismissed as a crank. But finally some economists actually started to test some of his assertions. While no actual "smoking gun" between the tariff and the crash has emerged, we do have some good new studies that show that 1) the tariff was FAR more damaging than has ever before been claimed, especially once one takes the value of the dollar into account (perhaps 5% of GNP by 1935!); 2) investors apparently discounted stocks based on movement of Smoot Hawley, and were aware of its pending impact. There are now at least three new studies on S-H's impact, generally supporting Wanniski's position.

First, "conservative" is a relative term. Are Libertarians "conservative" on economic policy? Well, that depends. Why do so many "free market" Libertarians claim that only gold is a "true" money? Genuine free market thought says that people should be free to negotiate terms of trade in any money. Any substitute for value that can be traded is money. Yet I've been in seminars with Libertarians who insist that only gold can be money, and who would not permit "free banking." (Friedman would agree, except he substitutes FED for free banking).

I didn't "trash" the Austrian school I said I didn't agree with it all the time; that like anyone they can be wrong; and that they are (I think) wrong on the Great Depression. They are usually right on everything else. I said that my concern is that very few of the Austrian school scholars are willing to take their case to the major journals. There are a few, and I've read them, but I have to say that they don't carry much weight.

I'm not slinging mud---why do you constantly jump to that conclusion when I go out of my way to try to frame things in terms of an objective audience (i.e., "their arguments are not well received by scholars who know the field?") It places you in the unflattering position of slinging mud against people you don't even know. I will tell you again: I know many "Austrians." Most of them "nip around the edges" of real policy debate. They have excellent arguments, for example, on the Jacksonian era and free banking---contrary to some of the other Austrian goldbugs. But I don't know of any who have addressed any problem since 1900, except minor issues of regulation, which I think we all agree on (most regulations are bad).

Of Friedman, I said I was the one who disagreed with him on an important issue: but that on the Depression he is closer than the Austrians, if you also incorporate Eichengreen's analysis of the gold standard.

I would think most free market thinkers would LOVE Friedman, because even though his personal opinion is that the Fed is/was necessary, his OWN RESEARCH shows that the Fed caused the Depression! I would think most free market/Libertarian/conservatives would love that conclusion. I do.

"I would think most free market thinkers would LOVE Friedman, because even though his personal opinion is that the Fed is/was necessary, his OWN RESEARCH shows that the Fed caused the Depression! I would think most free market/Libertarian/conservatives would love that conclusion. I do."

Can we still be friends,
Can we still be friends,
I agree with your analysis, except that the FED is necessary...

Rohry, this shows we still aren't communicating. I said (this is the third time I've said it, too) that I DISAGREE with Friedman that the Fed is necessary; that my own research in 19th century American showed that is isn't; that I debated him over this issue; and that I don't see why "monetarists" would argue for a Fed on one hand and free market everything else on the other.

"Rohry, this shows we still aren't communicating."

You're being kind. In reviewing your comments I see that I was being obtuse. If I was in your class I would have flunked out already (before Thanksgiving, that's bad)...

BTW, it was a gas talking to Miltie. I was on a barge on the Rhine River, and there were FOUR Nobel Prize winners aboard (unfortunately, I wasn't one!). Miltie, James Buchanan, Gordon Tullock, and George Stigler.

And you do realize that Miltie was the co-founder of the Libertarian "Mont Pelerin" Society, don't you? This is an ultra- well, "Conservative" association that cleaves (in general) to Libertarian principles, including abortion, drug use, and economics. Miltie's preference for the Fed here is all the more mysterious.

"I was on a barge on the Rhine River, and there were FOUR Nobel Prize winners aboard (unfortunately, I wasn't one!). Miltie, James Buchanan, Gordon Tullock, and George Stigler."

Now you've made me jealous as all get out. If I was there, however, I would have been reduced to talking baseball or the best German beers.

The closest I've come to your experience is having drinks with Chris Reeve (before he was Superman) and being yelled at by Ted Williams for dropping a pop fly (at his baseball camp).

I can top that: as a kid, my dad had a ranch in AZ and we rented it one time to the "Have Gun Will Travel" TV series with Richard Boone. They filmed a fistfight in one of our barns, then Boone gave me that cool "Have Gun, Will Travel" card. "Wire Paladin, San Francisco."