Yearly Archives: 2014

Gary Becker’s Failure to Understand the Current Crisis

By William K. Black

This is the fifth and final installment of my series of articles on Gary Becker, the recipient of the Swedish Central Bank’s Prize in Economics in 1992.  The prior articles dealt with Becker’s work that the central bankers cited in their award decision.  This article examines whether Becker, in the context of the worst financial crisis in 70 years, re-examined his views that led to his failed work on the family, women, discrimination, and crime or his colleagues’ anti-regulatory views at U. Chicago that proved so criminogenic.

Continue reading

Gary Becker’s Imperialistic Blunders about Crime

By William K. Black

This is the fourth installment of my series of articles about the absurdity of the Swedish Central Bank’s selection of Gary Becker for its Prize in 1992 on the basis of his embarrassing imperialistic forays into other disciplines.  One of the forays the Swedish Central Bank cited was Becker’s work on crime.  Becker was a terrible criminologist, just as he embarrassed himself in his related work on families, “human capital,” and discrimination.  He may have done the most damage in the field of criminology because he, and his disciples, influenced harmful policy changes.  As I have explained in earlier articles in this series, parents were far smarter than Swedish Central Bankers.  American parents ignored his advice that it was “optimal” not to educate girls.  Conservative politicians involved in setting our policies about crime, sadly, loved Becker’s ideas.

Becker confessed to a similar inability to understand basic concepts that normal human beings would understand in his Prize speech in 1992.

Continue reading

Gary Becker’s Apology for Discrimination

By William K. Black

Theoclassical economists have strange views on a wide range of subjects including discrimination.  Becker was an economist at U. Chicago.  Richard Epstein, Becker’s colleague at U. Chicago’s law school, cites Becker’s book about discrimination as his key citation to the economics literature expressing doubt about the desirability of laws against discrimination.  Epstein’s book calls for the repeal of all laws and rules limiting discrimination.  Forbidden Grounds: The Case Against Employment Discrimination Laws (1992: 2 n. 2).  Epstein’s poisonous fruit of Becker’s twisted vines was published in the year the Swedish Central Bank awarded its Prize in economics to Becker.  The Swedish Central Bank Prize cited Becker’s work on discrimination as one of the keys leading to his selection for the award.

Continue reading

Tax Bads, Not Goods

By L. Randall Wray

This is another instalment in the series on the MMT view of taxes. I’m back from China, participating in the annual Hyman P. Minsky Summer Seminar at the Levy Economics Institute. Yesterday my colleague, Mat Forstater, gave a talk on the job guarantee and “green jobs”. Along the way he made two particularly insightful comments on MMT and taxes that I’ll use to introduce this instalment.

First, he discussed the MMT view of “modern money”—that is to say, the money that has existed “for the past 4000 years, at least, as Keynes put it in his Treatise on Money. The money of account is chosen by the sovereign and used to denominate debts, prices, and other nominal values. It is the Dollar in the US.

Continue reading

Gary Becker Treatment of Women who Work for Pay as “Deviants”

By William K. Black

This is the second article in my five-part series on Gary Becker as an exemplar of the book we are writing about why economics is the only field in which one can receive the top award for proving wrong, anti-social, and intellectually dishonest.  In keeping with that triple failure the Swedish Central Bank prize in economics is frequently awarded in the year in which the recipients’ failures and intellectual dishonesty has become so obvious that only the most dogmatic of theoclassical central bankers could pretend not to recognize reality.  Becker’s award exemplifies this unintentional exercise in self-parody.

Continue reading

Gary Becker’s Nobel Prize for Getting It all Wrong: The Family

By William K. Black

George Stigler celebrated Gary Becker as theoclassical economics’ schwerpunkt that led their blitzkrieg assault on other social sciences.  Stigler proudly called economics the “Imperial” discipline.  The idea that imperialism was a desirable trait is a typical example of Stigler’s blindness to history and human suffering.  Stigler famously proclaimed that economics alone was actually a social “science” because only it had a theory of human motivation (maximizing self-interest).  The Sveriges Riksbank Prize announcement in 1992 cited Becker’s imperialistic forays into the family, human “capital,” discrimination, and crime as the basis of their award.

Continue reading

The Sinking of Norfolk

By J.D. Alt

How would Thomas Piketty propose to save the city of Norfolk, Virginia? He teaches us, ad-nauseum, that what the U.S. collective state has to spend on such things as sea walls, flood gates, elevating infrastructure and roadways, buying-out property owners so they can relocate to higher ground, etc., etc., is limited to the number of tax dollars that can be collected from U.S. citizens—as if the collective state itself were like a club, and if the clubhouse needs repairing, the club members must first pay a special assessment of dues—or, alternatively, the club can borrow dollars from the supply of Capital owned by the wealthiest  1% of its membership, or (as a creative alternative) the rebuilding effort could be structured in such a way that the newly elevated Norfolk would pay rent to the one percent in perpetuity for the privilege of living above sea-level.

Continue reading

Yes, Theoclassical “Economists [are] Basically Immoral”

By William K. Black

The failures of theoclassical economists and economics are total and myriad. Many of their theories are long-falsified dogmas. Their methodological preference is econometrics – which gives the worst possible results in bubbles and when accounting control fraud epidemics occur. Theoclassical policies are intensely criminogenic, anti-democratic, and grotesquely unfair. Their proudest creations – their risk and price models – proved to massively understate risk and overstate asset values. They betray the scientific method that they purport to exemplify because they are overwhelmingly mono-disciplinary, in thrall to their dogmas, driven by self-interest, incapable or unwilling to follow logical standards of internal consistency, and intellectually dishonest. They award Nobel Prizes to economists who fail what economists claim is the decisive test of truth and success – predictive ability. Theoclassical economists are infamous for their arrogance, praising their field as the only social science worthy of the term “science” and celebrating its “imperial” nature while ignoring work in other fields that has proven to have far superior predictive success. Theoclassical economists are infamous for their lack of altruism.

Continue reading

Why the Worst Get on Top – in Economics and as CEOs

By William K. Black

Libertarians are profoundly anti-democratic. The folks at Cato that I debate make no bones about their disdain for and fear of democracy. Friedrich von Hayek is so popular among libertarians because of his denial of the legitimacy of democratic government and his claims that it is inherently monstrous and murderous to its own citizens. Here’s an example from a libertarian professor based in Maryland.

“[W]hen government uses its legal monopoly on coercion to confiscate one person’s property and give it to another, it is engaging in what would normally be called theft. Calling this immoral act “democracy,” “majority rule” or “progressive taxation” does not make it moral. Under democracy, rulers confiscate the income of productive members of society and redistribute it to various supporters in order to keep themselves in power.

In order to finance a campaign, a politician must promise to steal (i.e., tax) money from those who earned it and give it to others who have no legal or moral right to it. There are (very) few exceptions, but politicians must also make promises that they know they can never keep (i.e., lie). This is why so few moral people are elected to political office. The most successful politicians are those who are the least hindered by strong moral principles. They have the least qualms about confiscating other peoples’ property in order to maintain their own power, perks, and income. In his bestselling 1944 book, ‘The Road to Serfdom,’ Nobel laureate economist F.A. Hayek described this phenomenon in a chapter [10] entitled ‘Why the Worst Get on Top.’”

Continue reading

CREATIONISM VERSUS REDEMPTIONISM: HOW A MONEY-ISSUER REALLY LENDS AND SPENDS

By L. Randall Wray

MMT has emphasized that there is a close relation between sovereign power to issue a currency and its power to impose tax liabilities. For shorthand, we say “Taxes Drive Money”. I’ve dealt with that topic in the previous instalments of this series on MMT’s view of taxes.

We’ve also demonstrated (as if it needed demonstration!) that sovereign governments do not “need” tax revenue in order to spend. As Beardsley Ruml put it, once we abandoned gold, federal taxes became “obsolete” for revenue purposes.  I’ll have more to say about good old Beardsley in the next instalment.

In today’s instalment I want to step back a bit to ask a more fundamental question: does the issuer of a money-denominated liability need to obtain some of those liabilities before spending or lending them?

Continue reading