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Debunking “America has become so anti-innovation – it's economic suicide”

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Re: Debunking “America has become so anti-innovation – it's economic suicide”

#51

Post by padobson »

ska wrote: post #43
padobson wrote: post #18

Earlier quoted context omitted.

It's not new at all. It's actually fairly easy to demonstrate. I recommend Murray Rothbard's America's Great Depression[0] from 1963. The quick hit is this: A. US Monetary policy provides large banks with extremely cheap capital B. Large banks competing with each other in the free market must make use of that capital C. Only so many investments are good investments, because in the end, there's only so much consumptio…

Beyond the issues with Rothbard's thinking, this : "Systemic financial crises can't happen without cheap, printed money" is ahistorical nonsense.

Ahistorical. As in not backed up by history?

You'll have to cite with examples. Here's some of mine:

Amsterdam opens the precursor to central bank in 1609[0]. Less than thirty years later, one of the earliest speculative financial crises on record demolishes the Dutch economy.[1]

In the early 20th century, fractional reserve lending practices paired with a rapidly growing economy leads to the first banking crises, most notably in 1907[2]. The damage is largely limited to financial types, but the banking industry starts clamoring for government help to feed their recklessness.

The government obliges them with founding of the Federal Reserve in 1913[3], which allows fractional reserve lending to go off the rails. A World War and a boom cycle later, and we have the worst financial catastrophe in history in 1929[4].

Going off the gold standard in the 1970s preceded the financial crises of the early 80s[5] and the Black Monday in 1987[6]

Finally, another lax round of monetary policy under Greenspan led to a rash of bad investments in dotcoms, and then Bernanke helped precipitate the 2008 financial crises.

Now, you can go ahead and say that I'm making a post hoc ergo propter hoc argument, and that's fine, BUT you absolutely cannot say Austrian economics is ahistorical. It completely relies on history as its foundation.

[0]https://en.wikipedia.org/wiki/Amsterdam_Wisselbank

[1]https://en.wikipedia.org/wiki/Tulip_mania

[2]https://en.wikipedia.org/wiki/Panic_of_1907

[3]https://en.wikipedia.org/wiki/Federal_Reserve_Act

[4]https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929

[5]https://en.wikipedia.org/wiki/Black_Monday_(1987)

Re: Debunking “America has become so anti-innovation – it's economic suicide”

#52

Post by otalp »

Robotbeat wrote: post #39
otalp wrote: post #15

Interesting that he mentions Elon Musk when his companies are literally kept alive by billions in government subsidies and contracts. I don't like the binary view of "Give all power to corporations, with no government intervention" and "Let the state control all means of research and access" The ideal is clearly in between, where the state should break up monopolies and punish companies that have detrimental external…

"Interesting that he mentions Elon Musk when his companies are literally kept alive by billions in government subsidies and contracts." Your point would be stronger without this falsehood. Both SpaceX and Tesla could do business without subsidies and government contracts. There were times during the worst parts of the Great Recession when this WAS true (and both businesses benefited from the technology and general en…

Without the NASA contract in 08, SpaceX would have gone down, according to Musk himself. It's true that they are increasingly less dependant on the government, and they hopefully reach a point soon where they are completely independent. But in the early stages when they weren't making profits, government contracts were crucial in keeping SpaceX alive and is the reason they exist today.

>If innovative corporations need government subsidies indefinitely to literally stay alive

I didn't say they need subsidies indefinitely. It's clear that once they start making large profits, it's not a necessity- but they take it anyway. I think SpaceX and Tesla are good examples of companies that governments should subsidise, because they are focussed on innovation in fields which are important for long term sustainability. I don't think they should subsidise Exxon or oil companies, for instance.

My point was you can't dismiss government subsidies as irrelevant when in comes to innovation. It is necessary to support companies that carry out important research, but aren't able to make profits yet.

Re: Debunking “America has become so anti-innovation – it's economic suicide”

#53

Post by Quanttek »

Many already mentioned (at least partially) the fundamental flaws in the economic theory he bases his text on, and also his bad examples (completely ignoring you could provide as many counterexamples of staet-funded innovation and private sector waste) but I just want to emphasize his quotes: Being so obsessed with trying to point out logical fallacies, they don't provide any proof or actual arguments for their side.

For example, the third quote literally provides zero evidence for the fact that the market's failures are primarily attributable to government intervention. Collective action theory alone points out how at least parts of the failures will be the market's.

Re: Debunking “America has become so anti-innovation – it's economic suicide”

#54

Post by mcguire »

subverter wrote: post #30
AmIFirstToThink wrote: post #14

Government does engage into efforts/projects that end up being wasteful. But, market forces should not be heralded as panacea of there being no-waste. Every private sector bankruptcy is wasteful for its investors. Yahoo, HP, Former Dell, Anderson Ton of examples of failed efforts, pure waste, nepotism, bribery and downright illegal (civil/criminal) behavior in private sector. I look at it this way... The will of the…

The market is certainly not perfect. There is waste, bad investment, etc. There's no avoiding that. Unlike government, however, the market is much more efficient in realizing and correcting for that.

Having worked in both government and corporate environments, I don't see it. The efficiency of the market is about as mythical as the long term planning ability of the government.

Re: Debunking “America has become so anti-innovation – it's economic suicide”

#55

Post by ThomPete »

AmIFirstToThink wrote: post #37
ThomPete wrote: post #32

Earlier quoted context omitted.

Agree completely, however companies tend to have better feedback loops to point to lack of ROI.

Better or shorter? Must-solve, long shot things like GPS, Internet, Modern Weaponry require resolve behind it to make it happen. I am sure those programs had hundreds offshoots trying things out to solve problem, to see if it works, within the umbrella of that major effort e.g. GPS. ROI measured in terms of money results in drug companies chasing chronic pills than cures. That need not be the only measure.

Shorter = better in my world. The government could have that too if they did budgets differently.

Re: Debunking “America has become so anti-innovation – it's economic suicide”

#56

Post by ThomPete »

pixl97 wrote: post #41
ThomPete wrote: post #32

Earlier quoted context omitted.

Agree completely, however companies tend to have better feedback loops to point to lack of ROI.

Ehh, maybe. Then again the Great Retail Apocalypse of 2017 may lead to to think otherwise. US retail is massively overbuild, most of that because the companies are allowed to take on tens or hundreds of millions of debt. This debt acts as a buffer "It's only bad now, it will be better soon, we promise". By the time feedback signals give a clear message that the investment will never be repaid investors are overextend…

That industrywide, the individual companies will soon find out if the overinvested or not.

Re: Debunking “America has become so anti-innovation – it's economic suicide”

#57

Post by atmosx »

padobson wrote: post #18
atmosx wrote: post #3

> When the government floods the economy with cheap money printed out of thin air, it distorts market indicators, making many unprofitable projects appear profitable. Oh, is that a new one? It's the first time I read someone stating that when VCs get high on drugs and spend their money on stupid ideas, it's because of something the government did.

It's not new at all. It's actually fairly easy to demonstrate. I recommend Murray Rothbard's America's Great Depression[0] from 1963. The quick hit is this: A. US Monetary policy provides large banks with extremely cheap capital B. Large banks competing with each other in the free market must make use of that capital C. Only so many investments are good investments, because in the end, there's only so much consumptio…

> C. Only so many investments are good investments, because in the end, there's only so much consumption, but the unnatural levels of capital driven by US monetary policy push banks to make bad investments (see every financial crisis since the Fed was founded).

If the US government in 2008 had let Goldman Sachs (and others) to get what they really deserved, possibly keeping afloat tiny investors/victims for social reasons, I think investment would be pretty balanced.

I would argue that the problem is a revolving door between Goldman and the US Gov that benefits very specific ppl and not the FED's policy.

Re: Debunking “America has become so anti-innovation – it's economic suicide”

#58

Post by ska »

padobson wrote: post #51
ska wrote: post #43

Earlier quoted context omitted.

Beyond the issues with Rothbard's thinking, this : "Systemic financial crises can't happen without cheap, printed money" is ahistorical nonsense.

Ahistorical. As in not backed up by history? You'll have to cite with examples. Here's some of mine: Amsterdam opens the precursor to central bank in 1609[0]. Less than thirty years later, one of the earliest speculative financial crises on record demolishes the Dutch economy.[1] In the early 20th century, fractional reserve lending practices paired with a rapidly growing economy leads to the first banking crises, mo…

I am of course not suggesting Austrian school has paid no attention to history. Insufficient, perhaps :)

I'm objecting to the rather stronger (than an austrian would make) statement that :"systemic financial crises cannot happen without cheap,printed money". Emphasis mine. You even have to squint very hard at your first example to make it fit - it's increasingly hard to try and argue from anything pre 18th century. You can probably (and many Austrian's would) try and make the argument for this as a root cause of most/all modern crisis, but of course alternate analysis exist that are similarly grounded. It's a complex subject.

Re: Debunking “America has become so anti-innovation – it's economic suicide”

#59

Post by otalp »

kbenson wrote: post #23
Crye wrote: post #6

I'm tired of these articles. Seriously. Government has funded hi-tech through the military for the last 70 years. That's not a secret and we wouldn't have what we have now with out it. The government knows this and the large corporations who benefit from it know it. Corporations are not willing to take on the risk to sink billions of dollars to develop a technology which may or may not pay out. Plus once it does pay…

> He cites SpaceX as this idea of private investment, completely overlooking the fact that the government is subsidizing the whole endeavour. Please.... Take your pick of any of the major US industries. Chances are the successful players they take a lot in subsidies. None of the Musk companies are really outliers in this, they just get a lot more attention (e.g. GM, Boeing, and GE all take a lot of subsidies).

True that Musk is absolutely not an outlier. But you can't really use him as an example of a company doing all their innovation without any government help. I'd rather the government fund SpaceX and Tesla than Exxon anyway.

Re: Debunking “America has become so anti-innovation – it's economic suicide”

#60

Post by padobson »

atmosx wrote: post #57
padobson wrote: post #18

Earlier quoted context omitted.

It's not new at all. It's actually fairly easy to demonstrate. I recommend Murray Rothbard's America's Great Depression[0] from 1963. The quick hit is this: A. US Monetary policy provides large banks with extremely cheap capital B. Large banks competing with each other in the free market must make use of that capital C. Only so many investments are good investments, because in the end, there's only so much consumptio…

> C. Only so many investments are good investments, because in the end, there's only so much consumption, but the unnatural levels of capital driven by US monetary policy push banks to make bad investments (see every financial crisis since the Fed was founded). If the US government in 2008 had let Goldman Sachs (and others) to get what they really deserved, possibly keeping afloat tiny investors/victims for social re…

I agree with the revolving door.

The way I see it, the Fed is inflating bubbles by pumping cheap money into the financial sector, and then the US Gov is bailing out the financial sector when the bubbles burst.

It's hard to distinguish between the government and big finance, that's for certain.

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