It's gonna be T. I. Rubin's Psychology, Austrian Economics, and Smiling Dave's Gentle Sarcasm
"Most people are in arrested development and cannot use logic." Jacob. "Competition and capitalism are hated to-day because of their tendency to destroy poverty and privilege." William Hutt "America is unique in that our economy is totally dependent on global charity." Peter Schiff
Full disclosure: I enjoy Bill Simmons [but for his refusal to call the Thunder by name, a tired joke by now] when he is talking sports. But when he moves into politics or economics the poor fish has a lot to learn.
He has never run a business, as is obvious from his opinion about the NFL referees strike. Bill thinks that we are talking petty cash, so why doesn't the NFL just give in to the refs and be done with it?
Here's the quote: I mean … there can't possibly be any other explanation for lowballing your officials when they make a pittance compared to your overall profits and the well-being of your players, right? If Starbucks baristas ever went on strike, would Starbucks respond by saying, "Let's just throw homeless people behind the counter" instead of just increasing their pay from $10 an hour to $12?
Lowballing the officials? They make over $5,000.00 for an afternoon's work. I mean, we are talking Tax the Rich territory here. Go after them, Obama. They make 2,000 bucks an hour. Not to mention their pensions and benefits.
Let's have an imaginary dialogue to continue.
Bill: But you make so much money, NFL. Those officials make a pittance compared to your overall profits.
NFL: Bill, have you ever run a business?
NFL: Then you don't understand how I got so rich in the first place. You will never get anywhere doing business the way you suggest. If you fling your money at all comers just because you have large overall profits, then very soon you won't have large overall profits, but large overall losses. Wealth comes from not wasting your money, Bill.
Bill: What about the well being of your players? Shouldn't the refs get double their salary to make sure the player's well being is preserved?
NFL: Bill, are you on crack now? I mean, if crack was legal. What do you think will happen to the players if I bring in other officials? Will they be beaten and injured by the regular refs for crossing a picket line? Don't you know the unions won't do that to popular, high profile folks like NFL athletes? Or maybe you think the replacement refs not call penalties for roughing the passer. But why won't they?
Bill: But if Starbucks baristas ever went on strike, would Starbucks respond by saying, "Let's just throw homeless people behind the counter" instead of just increasing their pay from $10 an hour to $12?
NFL: Bill, like Smiling Dave pointed out, you have no business experience. How do you know what Starbucks would do? Let's talk about a real world example, not a hypothetical. Walmart's has resisted unions taking over their stores for years, and guess what? Walmart's is doing quite well, thank you.
But let's put that aside. Because you are showing great disrespect and being politically incorrect here, Bill. So unlike you. What have you got against the homeless? Do you want them not to have jobs? Do you think they cannot pour out a cup of coffee? Do you think a Starbucks barista cannot do her job unless she has a PhD and a home with a mortgage? You disappoint me, Billy.
Bill: I have nothing against the homeless. Some of my best friends are homeless.
NFL: Why am I not surprised? At any rate, you were also disrespectful to the replacement officials, who have been refs for many years in various leagues.
Bill: I'm still not convinced. Let me consult with Dork Elvis.
Dork Elvis: Bill, you gotta do the math.
Dealing with a union means even the worst of the clueless will never be fired for incompetence. The union will fight tooth and nail for his right to make wrong calls week after week. Contrast this with the replacement refs, who are easily given the boot if they mess up.
Bill: You mean like the teachers union and their incompetent teachers?
There is a long debate going on now in the forums over at mises.org, about whether the economist Piero Sraffa demolished the Austrian Business Cycle Theory before it ever got started. Some think it was like the Israeli Air Force destroying the Egyptian planes before they got off the ground, only in 1932 instead of 1967, and that the Egyptians did not get a Nobel Prize in Economics for being sitting ducks, whereas Sraffa's opponent, F.A. Hayek, did.
Those who want to get the major links to this topic need only go right here
to gather some links, and can get more if they get the links cited in those links.
But you, dear reader, aren't here for links. If that were the case, you'd be out golfing. No, you want to see Smiling Dave's humble take on this deep, tangled, intricate matter, and hope he will lay it all out for you in simple language. Fear not, intrepid seekers. Without further ado:
The essence of ABCT is the claim that booms and busts in modern times are caused by money printing by a central bank. [Indeed, even when central banks did not exist and booms and busts occurred, careful research will show that there was some other way the money supply increased, such as when the Spaniards brought in boat loads of gold from South America].
Now big picture, an increase in money supply means someone will be consuming more than he produced, as explained in this humble article [see second question]. Of course this will hurt the economy.
But Mises, and Hayek after him, fleshed out the details, wishing to explain specific patterns that seemed to occur again and again in booms and busts. They found that the key to understanding things down to the fine points is the lowering of the interest rate, which the central bank always seems to be doing when there is a boom and bust.
[EDIT: Just occurred to me that inflation of the money supply does indeed give someone the ability to be parasitic, but there is no guarantee that the parasite will malinvest. He may just consume randomly, or invest wisely.
So that Mises' making the interest rate key to a business cycle is very necessary.]
Obviously, to explain everything based on a low interest rate, one has to have a definition of "low". And their definition was "lower than it should be". Which of course requires a new definition of what an interest rate "should be". The easy way, that avoids all attacks from Sraffa and the blogger Lord Keynes and everyone else, is to say "whatever it would have been had the central bank not printed all that money". After all, central banks admit that they have the power to influence interest rates, and that their way of doing so is by printing money. [That's why he's called Helicopter Ben].
But Hayek had a certain fish to fry. [Edit: This has to be fact-checked]. He wanted, for reasons I have not investigated, the central banks to make sure they set the interest rate to the "real, genuine, authentic, natural" one, not one that is too low. Which means Hayek had to go out and find what the real interest rate is.
Nowadays, I think Austrians agree that we'd be better off without any central bank at all. We don't need a central bank to set any interest rate, not the real one and not the phony one. So that we have no need of finding out what the "real" rate is. Suffice to say that it is certainly higher than the one that comes into being after mountains of money printing, and that's enough to explain the ABCT.
In any case, Sraffa told Hayek that there are many different interest rates. Each commodity has a different rate of what it costs now and what it costs to buy a future crop of it, which is an interest rate. So that the central bank cannot set the "real" rate, because there isn't one. Each commodity has a different rate. It's like asking what is the real price of a car. Are you talking about a Jaguar or a jalopy?
Hayek wrote that he has no problem with that, since there is a tendency for all commodities to eventually converge to the same interest rate, and that number they all tend to is the magic number we are looking for, the real interest rate. Mises and Rothbard also made the same assumption as Hayek does, that there is indeed a magic number, albeit one that we may not be able to calculate in practice.
Bob Murphy writes that Hayek did not solve the problem with that explanation, and proposes his own solution. Given my level of understanding, I'll have to go tl;dr on his paper. Huisman also wrote a tl;dr article, apparently proposing 8 possible numbers.
Bottom line, there are two topics going on. First, there is a quest for the holy grail, the elusive magic number which is the real interest rate. Mises and Hayek and Murphy and Huisman and Sraffa and the blogger Lord Keynes are out there slugging it out, either claiming they found the magic number, or claiming it doesn't exist. The whole discussion is way over my head, at least when we get to the writings of the modern Austrians, Murphy and Huisman. But it is a technical topic of theoretical interest for specialists, and has nothing to do with refuting ABCT, as we have already shown and will shortly summarize again.
But Sraffa and LK then move on to a different, second, topic. They claim that if no magic number exists, then it is absurd to say that banks ever lend money at a rate lower than some non existent magic number.
They claim that the Austrians are saying that the winner of the World's Strongest Man contest declared on television is not the world's strongest man in fact, since the Incredible Hulk is stronger. And Sraffa and LK are refuting that by pointing out that there is no Incredible Hulk.
And that's where Sraffa and LK make their big mistake. They are saying that depending on the givens of a particular case, Jaguar or jalopy, you get a different number, and thus there is no one unique number at all. And my humble rebuttal is that there is a unique number, for a given particular situation. [Even though it may be impossible to actually calculate, it's there]. And that number is, given a specific banker and a specific given borrower on a given specific day and all the given specific details of a given specific loan, the rate that would have been set by that specific banker if there was no central bank printing money.
Now I know that some people won't be happy with an economics discussion unless they have some math jargon to chew on. So for them, here is that final paragraph, restated for their pleasure in cumbersome language:
Let A be a given borrower. Let B be a given Banker. Let C be a given loan made on date D with specific details of the loan denoted by E. Define X(A, B, C,D,E) as the interest rate that would have existed absent a central bank. Define Y(A,B,C,D,E) as the interest rate that actually happened, because the central bank printed tons of money. If, for a great many values of A,B,C,D, and E, we have Y<<X [meaning Y is much lower than X], then the conditions exist for a valid ABCT explanation.
This one is about sports writing, not economics or psychology.
I am getting very tired of seeing the phrase "under center" constantly when the writer means "playing quarterback". For instance, here's grantland.com: [The Arizona Cardinals] unfortunately have to play either Kevin Kolb or John Skelton under center this season.
Under center? Is there a hole in the ground beneath the center where the QB takes his position?
Probably the phrase comes from this picture:
Here, and in other diagrams of football strategy, the center is represented by the circle in the center, and the circle underneath him is the QB. Hence, under center.
Brilliant? No. it's not. Because if you replace a phrase with another phrase, the new phrase should be more enlightening than the old one, not less. What do we gain by calling the quarterback "that fellow who, in a football strategy diagram exhibited on a wall, is represented by a circle that is drawn underneath the circle represented by the center's circle"? That relationship gives us no info at all about the importance of the quarterback [= all important, not "underneath" anyone], his true relationship to the center [= the center is his flunky, not versa], the connection between the center and the QB in the essential part of the play [=none].
Calling the QB "under center" is like calling the President of the United States "Bootlick to LeBron James and every other athlete he fantasizes about". It misrepresents his true position. The Prez is the more powerful one.
Call the center, if he is ever worth writing about in the first place, the quarterback feeder, but don't call the QB under center.
The phrase is not even catchy. It's boring and misleading, like all the rest of football jargon.
Fullback, halfback, quarterback, what do those absurd words tell us? Nothing. Contrast this with, for example, pitcher, catcher, and first baseman. The pitcher pitches, the catcher catches, the first baseman loiters in the area around first base. What idiot made up these football words?
While we are at it, how about those supposedly informative replays that tell us nothing.
"For you kids watching at home, that one thousandth of one percent that will one day be big enough, strong enough, and athletic enough to be middle linebackers [whatever that is], check out this replay. I've circled Bud Weiser here in yellow. Look at his brilliant play right THERE."
There follows a few seconds of Weiser falling on his face with the ball nowhere in sight.
"See how he cleared the passing lane for Speedy Gonzo, you kids watching at home? Have we explained the subtle intricacies of this game so that you will now enjoy it more? What do you mean, the twenty second shot of our logo before the replay and after it interfered with your watching the actual game? We'll replay that 70 yard pass and the one handed catch for a touchdown, all that stuff you missed, right after these words from a few sponsors.
"What do you think, Southern Accent Jack? Aren't those kids at home a bunch of whiny brats?"
"Sure are, Jaws. The game of football hasn't made a man of them yet."
Sadly, most of the silly words used by football talkers came into use way before Smiling Dave was around to point them out. But we can still do something about "under center". It only came into use this preseason. Let's crush it while we still can.