Our latest production for EconStories: a commercial short film to support the launch of EconStories branded merchandise!

The spot was conceived last Monday, shot on wednesday with our in-house Sony FS100 and small team in DC and edited by Friday. Enjoy!

May God bless you, Steve. I love you. We love you. We already miss you. Now spread out and enjoy the elegant universe.

- john

…but what the hell do I know?

…but what the hell do I know?

May Issue Larr-Murphy Report (LMR)

Here’s an extended excerpt from the piece titled “The Question I Ponder: Who Plans (And Spends) for Whom?”:

It seems to me that once you adopt the top-down Keynesian methodology to the studying economics where “aggregate demand” and “aggregate supply” take the place of actual individual choices and market processes, the step toward planning is indeed easier to make. For this reason, I like to call Keynesianism economics without people or prices. And while most people tend to equate Keynes strictly with “stimulus” and the “short run”, his long-run ideas about reform sound an awful lot closer to central planning, particularly his opaque calls for the “socialization of investment”. Some of Keynes writing even echoes the utopian futurism of Marx, as he anticipated the end of economic scarcity “within one or two generations” thanks in part to the “euthanasia of the rentier” who exerts “oppressive power of the capitalist to exploit the scarcity-value of capital”.

Lastly, is it really so far off to regard the administrators of trillions in government spending programs as central planners? Are they that much different from India’s planning boards? They are certainly making centralized decisions about the allocation of resources without regard for market prices and the decentralized knowledge that comes along with them. How do Keynesian administrators decide where to spend the money? They can’t buy “aggregate supply”. There’s no “aggregate supply” store from which to “aggregate demand” some “goods in general”. Each of these terms are ex-post accounts. They’re abstract summaries. They aren’t real things that can be traded.

No, the Keynesian administrator must spend the money on particular people, firms and production. They must plan that spending from the center of Washington, DC. They must plan that spending with few ways of knowing if the firms that receive their subsidies and production that emerges conforms to people’s ongoing preferences. Will the solar panel company’s product still sell at cost-covering prices without the stimulus funds? How about that corn-ethanol? Does anyone really want that? Spending more on new housing stock seems like an odd bet given the current inventory. Is that a wise plan? It is a plan, though, hatched from the center that disregards market price signals.

It is noteworthy that none of our Keynesian critics took issue with the fact that our “Keynes” said that where the spending goes “doesn’t matter”. That’s probably because we were channeling them when we wrote those lines. Brad DeLong wrote in 2009, “At this point, anything that boosts the government’s deficit over the next two years passes the benefit-cost test–anything at all.”

The claim that these sectoral concerns are irrelevant and that anyspending will help I find unconvincing. Again, point me to the GDP store where spending can be done without effects on particular firms or sectors. As the real Hayek pointed out, “Mr. Keynes (and DeLong’s) aggregates conceal the most fundamental mechanisms of change”.  We still have real scarcity even below “full employment”, regardless of Keynesian claims to a “free lunch” during recessions. Wasting resources is never good in and of itself and going into debt to do it is even worse. Just ask the Japanese.

F. A. Hayek and his fellow Austrian economist Ludwig von Mises successfully demonstrated the infeasibility of socialism by noting the vital role that prices and profits play as information and incentive signals for entrepreneurial calculation. This information emerges out of the process of bidding and exchange we crudely call “the market”. Brad DeLong chronicles this argument beautifully in his 1998 review of James Scott’s “Seeing like a State”. I think he was less Keynesian then than now.

For so-called “stimulus” spending to be self-sustaining and not just a transitory bump pulling spending into the present at the expense of the future, (see “cash for clunkers”), the planners behind the stimulus must solve entrepreneurial problems just as subject to the problem of “socialist calculation” as socialism proper.

So yes, the question I pose to Keynesians is who plans, and who spends, for whom?

The first part of the piece reviews the numerous prominent Keynesians who were either employed as central planners or voiced strong support for planning. I think I made my case…

…but what the hell do I know?

This has been my life’s work for the past year is partnership with Russ Roberts and my Emergent Order partners Josh and Lisa. Be sure to visit EconStories.tv, the web portal for this and more economics done right. I think I can safely say that “Fight of the Century” is far and away the best thing I’ve ever created in my entire career so far…

…but what the hell do I know?

First up, I’ve left my job as creative director at Spike TV to form a new company dedicated to idea-driven content creation and production with partners Joshua Meyers and Lisa Versaci. The company is called Emergent Order and we’re in the process of wrapping up our first big project… the sequel to “Fear the Boom and Bust”!

Yes, Keynes and Hayek are back for another round in this all-new hip-hop song and music video titled “Fight of the Century”. It will be debuting this thursday, April 28th at EconStories.tv. This one has been 7 months in the making and has shaped up to be the biggest, most elaborate and best production I have ever directed. It is an epic. Be sure to follow us on facebook at www.facebook.com/EconStoriesTV to keep up with all the news on that front.

Finally, I am gearing up to begin blogging for Forbes.com, which is exciting. I will continue to maintain this blog as well, but it’s definitely going to take me some time to figure out the new work/blog/life balance. In the meantime, the best way to keep up with me and follow what I’m reading is to friend me on Facebook at www.facebook.com/johnpapola. Given facebook’s penchant for changing the privacy settings, I’ve abandoned it as a personal platform and use it solely as a micro-blog and way of connecting with friends and people in the community of ideas.