Smashed Yglesias

I’ve gone and done it again. I have disturbed my overlord, blogger Matt Yglesias. (Here’s my report on my first offense.)

Yglesias writes:

Bored by the proceedings at the Republican National Convention in St. Paul one day in 2008, I decided to try to gather some color down the road in Minneapolis, where Ron Paul and fellow dissident conservatives and libertarians were holding a counter-convention at the Target Center. At one point a speaker thundered that Barack Obama and John McCain "both have a lot to learn about Austrian business-cycle theory." The crowd went delirious with cheers, and soon chants of "end the Fed" echoed throughout the arena.

He is referring to my speech. (Here it is, in two parts.) He doesn’t get the quotation quite right; I certainly wouldn’t have said anything as wooden as "have a lot to learn about Austrian business-cycle theory." What I did say, having been taken by surprise by the loud cheers for Austrian business cycle theory, was that it would be interesting to ask John McCain what he knew about the subject. We may as well be speaking Chinese, I said.

So appalled is Yglesias at outside-the-box thinking that he doesn’t even notice or care about the shot I was taking at McCain. Yglesias, like the fake progressives who follow him, will take McCain over Ron Paul any day. (The rest of his article is devoted to a "progressive" defense of the Federal Reserve, an institution we all know is deeply committed to the welfare of the common man.)

Instead of being impressed that thousands of people were economically literate enough to know something about the Mises-Hayek theory of the business cycle, which won the Nobel Prize in 1974, Yglesias is beside himself that so many people had adopted a view that neither he nor his friends had approved for them in advance. He evidently prefers the crowds at the Democratic and Republican conventions, which – whatever else we may say about them – were probably not composed of people who could tell you a whole lot about business-cycle theory.

Here’s how Yglesias describes his reaction to the scene:

It was funny at the time. A bunch of cranks talking about their crank monetary theories and espousing a crank prescription.

Today, Paul is the chairman of the House Subcommittee on Monetary Policy.

Oooh! Ron Paul is so scary that Yglesias resorts to the single-sentence paragraph – a true master of English prose, this blogger! – to dramatize for us just how scary he is. Today, Paul is the chairman of the House Subcommittee on Monetary Policy. The earth may break free of its axis!

Since Austrian business cycle theory is not discussed by anyone along the officially approved Joe Biden/Mitt Romney axis, for Yglesias it is crankish by definition. For who but an incorrigible crank would look for economic truths outside the glorious reservoir of wisdom that is the American political establishment? (The vast majority of the economics profession, according to no less an eminence than James Galbraith, was completely blindsided by the recent crisis, yet Yglesias still thinks it’s a strike against the Austrians that they happen to be out of favor with the economics mainstream.)

The Austrian School argues that interest rates are not arbitrary things, and that interfering with them leads the economy down an unsustainable path that does not correspond to existing resource availability or the pattern of real consumer demand. There are plenty of good reasons, both theoretical and empirical, to subscribe to this eminently reasonable theory. It was the centerpiece of Meltdown, my New York Times bestseller from 2009, and you can learn all about it online (for instance, in this graphical representation or this easy-to-understand book, which you can also download as a free audiobook).

The non-crankish view, evidently, is that interest rates perform no essential coordinating function, and may be second-guessed by wise central planners who know better than the sum total of millions of economic actors, who give rise to market interest rates, what they should be. And if we want prosperity, why, we simply force those suckers lower. For no so-called economic law is any match for the iron will of our great leaders!

Yglesias, if he had his way, would impose on us, as chairman of the Monetary Policy Subcommittee, still another of the interchangeable drones committed to the idea that there’s nothing wrong with our monetary system that couldn’t be fixed with a one percent change, give or take. Ron Paul’s recent hearing with witnesses James Grant, Lew Lehrman, and Joseph Salerno would be out of the question. Dissident opinion would be studiously excluded, the former progressive slogan "question authority" long since abandoned. Do not question your overlords, citizen. Remember the new progressive slogan: shut up and obey!

Incidentally, read James Grant’s testimony before Dr. Paul’s subcommittee. Grant has ten times the writing ability, 100 times the wit, and ten thousand times the knowledge of a nonentity like Yglesias. According to Matt’s ex cathedra pronouncement, Grant – whose Grant’s Interest Rate Observer is widely consulted and sought after, which is why the thing is so expensive – must be a crank, since he questions the existing system. Go ahead and read Grant for yourself (the very thing Yglesias is obviously trying to discourage, by disparaging as "cranks" people orders of magnitude more intelligent than he is) and decide who possesses a true mastery of the situation, and who is the poser.

Yglesias, in typically Orwellian form, refers to a system that once existed, and yielded the world extraordinary prosperity and stability, as a "crankish" idea. As I show in Rollback, my new book, the crises and panics of the nineteenth century had precisely zero to do with the gold standard, and occurred more or less in direct proportion to derogation from the gold standard. By the time of the 1920s, the so-called gold standard was a pale imitation of the real thing, being in fact a mere gold-exchange standard in much of the world and a fractional-reserve system in the United States, but that hasn’t stopped the likes of Yglesias, who is evidently incapable of making or even understanding these distinctions, from blaming gold for the Great Depression.

We could ask Yglesias about time preference, the heterogeneity of capital, or the Hayekian triangle – all of which are fairly central to an understanding of Austrian theory – and we may as well be asking him to explain the Copenhagen interpretation of quantum physics. He knows none of this. All he knows is that if the Austrian theory is correct, his cherished overlords are part of the problem rather than the solution. Human beings can arrange their affairs without the violent intervention of the state? That’s a world our blogger refuses even to consider.

Now who is Matt Yglesias, anyway, such that he is even entitled to an opinion about a theory that his idols – Paul Krugman, most notoriously – can’t even state correctly? Eight years ago he got a degree in philosophy from Harvard, then he worked for some magazines, and now he’s a blogger. And here I was thinking he might not know what he’s talking about.

Yglesias’ wave-of-the-hand dismissal of a theory he knows only in caricature, along with all those who advance it, as "cranks," calls to mind one of my favorite columns by Glenn Greenwald. Greenwald – unlike Matt Yglesias a genuine progressive whom Robert La Follette would have been proud of – notes how terms like "crankish" or "crazy" are used as weapons in our political culture, and how selectively people like Yglesias deploy them:

Those who support countless insane policies and/or who support politicians in their own party who do – from the Iraq War to the Drug War, from warrantless eavesdropping and denial of habeas corpus to presidential assassinations and endless war in the Muslim world – love to spit the "crazy" label at anyone who falls outside of the two-party establishment.

This behavior is partially driven by the adolescent/high-school version of authoritarianism (anyone who deviates from the popular cliques – standard Democrats and Republicans – is a fringe loser who must be castigated by all those who wish to be perceived as normal), and is partially driven by the desire to preserve the power of the two political parties to monopolize all political debates and define the exclusive venues for Sanity and Mainstream Acceptability.  But regardless of what drives this behavior, it’s irrational and nonsensical in the extreme.

I’ve been writing for several years about this destructive dynamic: whereby people who embrace clearly crazy ideas and crazy politicians anoint themselves the Arbiters of Sanity simply because they’re good mainstream Democrats and Republicans and because the objects of their scorn are not.  For me, the issue has nothing to do with Ron Paul and everything to do with how the "crazy" smear is defined and applied as a weapon in our political culture.  Perhaps the clearest and most harmful example was the way in which the anti-war view was marginalized, even suppressed, in the run-up to the attack on Iraq because the leadership of both parties supported the war, and the anti-war position was thus inherently the province of the Crazies.  That’s what happens to any views not endorsed by either of the two parties.

Greenwald then quotes Conor Friedersdorf:

Forced to name the "craziest" policy favored by American politicians, I’d say the multibillion-dollar war on drugs, which no one thinks is winnable.  Asked about the most "extreme," I’d cite the invasion of Iraq, a war of choice that has cost many billions of dollars and countless innocent lives. The "kookiest" policy is arguably farm subsidies for corn, sugar, and tobacco -- products that people ought to consume less, not more….

If returning to the gold standard is unthinkable, is it not just as extreme that President Obama claims an unchecked power to assassinate, without due process, any American living abroad whom he designates as an enemy combatant? Or that Joe Lieberman wants to strip Americans of their citizenship not when they are convicted of terrorist activities, but upon their being accused and designated as enemy combatants?

…These disparaging descriptors are never applied to America’s policy establishment, even when it is proved ruinously wrong, whereas politicians who don’t fit the mainstream Democratic or Republican mode, such as libertarians, are mocked almost reflexively in these terms, if they are covered at all.

It so happens that Rollback contains a chapter on the Fed that smashes to smithereens pretty much everything Yglesias has ever written about central banking. For example, the claim that the Fed has, after all, made the economy more stable and given us fewer and shallower recessions is proposed as if it were so obvious that only a blind ideologue – or a "crank" – would challenge it. But it turns out that this familiar claim relies on statistics that – unbeknownst to Matt Yglesias, you’ll be shocked to learn – have been exploded over the past two decades. Even Christina Romer, former chair of Barack Obama’s Council of Economic Advisers, has noted that these faulty figures overstate the instability that existed before the Fed and understate the instability since. The instability of output that did exist before the Fed was due almost entirely to the kind of natural output swings, as from harvest failures, that plague an agricultural society, while the instability we have seen since the Fed’s creation is attributable far more to monetary policy itself.

We can be fairly certain, I think, that Matt Yglesias knows not a blessed thing about nineteenth-century bank panics, pre-Fed business cycles, or the scholarly revisions, to be found throughout the professional journals, to the previously accepted economic statistics that were once used to prove the relative success of the Fed. For that matter, neither do the vast majority of those who would condemn us as cranks for thinking there might be something a teensy bit dangerous and destabilizing about a central planning agency tinkering with interest rates and exercising a money monopoly. They bluff their way through snarky blog posts, knowing they’ll never have to debate a knowledgeable opponent face to face. It’s enough, they think, to call us cranks and leave it at that. We who are so perverse as to reject the glorious Biden/Romney spectrum deserve no better.

But meanwhile, hordes of brilliant young kids are mastering and building upon the edifice of Austrian thought. That an uncredentialed blogger who has made precisely zero scholarly contributions to anything at all wishes to lecture them for adopting something other than the reigning paradigm in economics – wherever did they get the idea that they ought to question authority? – is unlikely to give them much pause.

That’s bad news for poor Matt Yglesias, who is the worst kind of progressive – the left-shill for the regime. Not only are we not going away, but we’re actually getting stronger and more numerous. The rising generation of Austrians, I can testify, is full of geniuses – I might mention off the top of my head David Howden, Philipp Bagus, Mateusz Machaj, G.P. Manish, Malavika Nair, Per Bylund, Xavier Méra, Matt McCaffrey, and many more – who have mastered both the mainstream stuff to which Yglesias ritually genuflects as well as the Austrian alternative about which he knows only the cartoon version he encounters in the New York Times.

Good luck, buddy. You’ll need it.