Jamesian Philosophy Refreshed

So with my astonishment noted as yesterday., let me proceed on the subject of Islamic Finance. This is a set of practices (and accompanying theories) that have grown up to allow devout Muslims to make use of their savings, without keeping them in a mattress on the one hand and without committing the offense Muslims call riba on the other. Riba is often understood to mean contracted-for rates of interest on debt in general. How does finance work without interest? There are lots of ways to go about answering that question. I've recently read a book by Muhammad Akram Khan entitled What is Wrong with Islamic Economics?   that holds among much else that rather too much ingenuity has been expended on trying to devise a system of finance without interest. The simple answer he prefers is that riba in the relevant sense is quite a narrow range of conduct, and completely distinct from the practice of charging for a borrower's access to investment capital.  R...

Below I'll provide a link to a well-written blast at the expense of Nassim Nicholas Taleb's latest book, Anti-Fragile. The thesis of the book is that there are three different states-of-being for institutions, individuals, even academic theories: fragility, robustness, and anti-fragility. These are also, in order: really bad, not so bad, good. [I've written about one aspect of this book in this blog quite recently -- Taleb figures in my series of posts about  Krugman and Gould. ] A brief illustration of the thesis might run this way: a nation that has built its whole economy around the production and sale of wine would be fragile. It would depend for its livelihood on the international market for wine, and, (even if demand for wine holds up forever) it could be devastated by climate changes that make its own terrain less hospitable to grapes. A nation that was less dependent on any single market or product would be robust. But better than robustness...

Sloppy thinking is still sloppy, even if the sloppy individual's heart is in the right place. Example: a fake Wilson quote. By way of introduction, please understand that I have become a more and more committed hard-money guy over the last four years. I have come to believe that prices are only going to be rational, that economies are only going to work efficiently, if the money supply is disassociated from the decisions of central bankers, such as members of the board of the US Federal Reserve.  I also have come to believe that a link to gold might be one good way of disassociating money from policy, or rather of subordinating policy to money, as is right and proper. So count me among the world's goldbugs if you like. I find, nonetheless, that within this company there is a lot of sloppy thinking, and part of that is the profligate use of willful unchecked quotations. For example, Woodrow Wilson, the president who signed the banking reform act that created the F...

So, continuing yesterday's discussion: what do Austrians say about MMFs? Let us be clear about the analogy Krugman draws between MMFs and banks. The term "fractional reserve" just means that the bank doesn't have all the money in the vault. Yes, there are a lot of checks floating around that represent the amount of money the bank is responsible to pay on demand and, yes, in the event of a bank run  this is a dangerous situation.  The bank only has some small fraction of the money in reserve. Hence the term. So: what do Austrians say about that? Is this a case where their hard money views come into conflict with their laissez-faire views, and where they ought in consistency with the former to demand that the government close these dangerous fractional reserve institutions down as so many embezzlers? Well, there are different approaches within this broad school of thought. But the general line of thought is well stated by Detlev S. Schlichter, in his recent book...

  Nobel Prize winning economist Paul Krugman, pictured here, whose writings for the mainstream press have made him easily the most visible Keynesian of our day, issued a challenge to Austrian economists recently. For those of you who may be new to such discussions, I'll explain the jargon. The Austrian school is the tradition of Hayek and Von Mises, [and for the record, Hayek too received a Nobel Prize], a school built on a subjective understanding of economc value, that is, the view that something has value because one or more individuals want it -- regardless of, say, how much labor or how impressive a technology was necessary to create it. Also integral to the "Austrian" school are distinctive views about economic calculation, the demand for hard or honest money, the bases of interest rates, and certain meta-theoretical ideas as to how economics ought to be studied. What especially sticks in Krugman's craw, though, is the Austrian view of the business cycl...

Almost nobody talks about "price parity" any more. A few decades back the term was the common coin of politcal debate, central to arguments about agricultural price subsidies. During the depression, Rooseveltian economists decided that a period about 20 years before that , 1910-1914, had been a golden age for farmers. The price of goods farmers had to buy (made by urban folk) were in a "parity" with the price of the goods they were selling, their crops and slaughtered critters. So (the Brain Trust decided) the goal of federal policy ought to be to get back to that parity. Ag subsidies, direct and indirect, were justified for over the next 30 years or so on the basis of helping farmers return to or maintain parity, defined by pre-WWI price relationships. These subsidies were by the the 1960s receiving heavy critical fire all along the political spectrum, and although the critics didn't manage to stop the subsidies (which are still very much with us in ...