http://tap-the-talent.blogspot.com/2010/10/topless-femen-protests-putins-visit.html

You can watch the TV commercials of most major Ukrainian political parties here.

As a writer and a libertarian, I sometimes feel very lonely in my political beliefs. I’m absolutely delighted to have discovered the recent column by Nobel Laureate in literature, Mario Vargas Llosa.

“if not . . . the individual is no longer free and has become an automaton manipulated by invisible and all-powerful bureaucrats who, in the shadows of their offices, taking all important decisions concerning their fate”

See? Not all writers are socialists.

Mises.org.ua — Austrian Economics in Ukraine!

This was launch just recently by a friend of mine — one of the five or six known followers of the Austrian School in Ukraine. Be patient. Improvements to the site are in the works.

Well, the Mises Institute has done it to me again. I was so taken by Jeffrey Tucker’s recent lecture, “How Government is Unraveling Civilization by Force,” that I posted it on a social news site, calling attention to what I considered the lecture’s most provocative moment: Tucker’s quoting of Lew Rockwell: “It’s as if the socialists discovered that their plan creates poverty, so they decided to change their name to environmentalists to make poverty the goal.” The quote, aside from its combative tone, summarized the lecture rather well.

Sometime I think I engage in online economic and political debates because they sharpen my rhetorical skills and to force myself to re-examine and re-explore my libertarianism. Other times, I think I’m driven by a masochistic determination similar to the impulse which led me to sport of distance running as a teenager.

I immediately found myself in another long, long, frustrating debate about the Austrian school with a anonymous user who at least seemed earnest in his belief.

I’ve always admired the willingness of the Austrian School, and that of its great ambassador, Ron Paul, to address the best of the opposition. The willingness stands in stark contrast to the usual public debate, in which each side acknowledges only the most ridiculous, desperate, disreputable members of its opposition as if they represented the whole. The public debate consists of little more than building and burning straw-men.

I want to share the debate which ensued not to burn my own straw-man, though I admit, it occasionally lapsed into absurdity, but to demonstrate how statist ideology fails to live up even to the standards by which it judges and condemns the Austrian School.

One of the most challenging steps in my eventual acceptance of the Austrian School, was realizing the supremacy of theory over empiricism. I do not blame anyone for initially recoiling at the suggestion that economics defies empiricism, or, at least, defies an empiricism comparable to that of the hard sciences. I did.

When asked to live up to their own empirical standards, it becomes evident that statism begins with axiomatic acceptance of state power and free-market fallibility, and relegates the empiricism and math they so readily demand of the Austrian School to a role no more important than that of parsley on a steak. It is a garnish; little more than counting. They count taxes, budgets, unemployment checks, paper dollars, volumes of concrete, cheese, meat, corn, cosmonauts, tanks. They attempt to understand human society in all its complexity but their only tool is a tape measure.

Here’s the debate:

HIM:

That statement is so far removed from reality it’s disturbing to know that people consciously make this their world view in order to support an equally delusional ideology that actually creates poverty in the real world.

> Austrian economics was ill-thought of by most economists after World War II because it rejected mathematical and statistical methods in the area of economics.[27] Its reputation rose somewhat in the late 20th century with the work of Israel Kirzner and Ludwig Lachmann, as well as a renewed interest in Hayek after he won the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel (a.k.a. the Nobel Prize in Economics).[28] Following Hayek, one of Ludwig von Mises’s students, Murray Rothbard, became prominent in both Austrian applied theory and Libertarian philosophical thought.[29] However, it remains a distinctly minority position, even in such areas as capital value.

It’s interesting to know that the Austrian School of Economics has basically been unable to show that any of their principals actually hold up in the real world. The whole sub field of economics basically only works as a thought experiment.

ME:

For the sake of argument:

> It’s interesting to know that the Austrian School of Economics has basically been unable to show that any of their principals actually hold up in the real world.

Keynesian Economics vs. Austrian Economics

Applying Economics to American History

HIM:

Applying theory after the fact is something any idiot can do. There is no mathematical or scientific basis to anything Austrian School economists claim. It’s like Voodoo Economics, it’s all faith based.

ME:

Well, the first of the two videos I posted show Peter Schiff, a follower of the Austrian School predicting the crash of the housing market at a time when Bernanke, the Fed, and all the Media’s talking heads were saying it was impossible. Watch the video and you’ll see him ridiculed for making his prediction.

Other examples:

– In his book Socialism (1920), Ludwig Von Mises not only predicted the collapse of the Soviet Union, but said the country would be full of factories which produced almost no ready consumer good.

– Congressman Ron Paul, Austrian School follower, July 16, 2002:

> by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges of Fannie, Freddie, and HLBB have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions.

– When the world entered the all-paper money regime, most economists said than the price of gold would fall from $35. The Austrians predicted the opposite.

– The Austrians were right about the 1970s stagflation and the explosion in the price of gold after the gold window was closed.

Your move. :)

HIM:

There is nothing more than theory to any of that. That’s the entire point and you’re actively trying to ignore and obfuscate that point.

Show me where there are any mathematical or scientific examples that support those things happening in real world situations.

There are none, the Austrian School of Economics has never worked as anything other than a theory.

ME:

A valid concern. This point deserves more attention that we can give it here. Nevertheless:

I believe economics, the study of human action, defies mathematical or “scientific” modeling because of its complexity. In fact, mathematical modeling seems to always cherry pick whichever data provides the best propaganda — like the Soviet Union claiming a high GDP as evidenced by the fact that it produced vast quantities of concrete. Never mind the fact that citizens (subjects?) didn’t want more concrete. They wanted food, jeans, cosmetics, condoms, etc.

From F.A. Hayek’s Nobel acceptance speech:

> It seems to me that this failure of the economists to guide policy more successfully is closely connected with their propensity to imitate as closely as possible the procedures of the brilliantly successful physical sciences an attempt which in our field may lead to outright error. It is an approach which has come to be described as the ?cientisticattitude an attitude which, as I defined it some thirty years ago, ?s decidedly unscientific in the true sense of the word, since it involves a mechanical and uncritical application of habits of thought to fields different from those in which they have been formed.. . . . Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones.

edit: PS — how can you read Ron Paul’s 2002 statement about a housing bubble, or watch that Peter Schiff video where he gets ridiculed for predicting the housing crash, and not respect the forecasting power of Austrian Economics?

HIM:

That’s not a valid excuse for explaining why their models don’t work when in real world situations. If human behavior was too difficult to predict then how is it that they have developed an economic model that predicts how a free market would operate?

It’s not too difficult, they just got it wrong, that’s why the Austrian School of Economics is a relic from over a century ago.

ME:

Human behavior is not too difficult to predict and model with theory — artificially low interest rates create business cycles, minimum wages cause unemployment, government subsidies of loans cause irresponsible lending.

Human behavior too difficult to predict and model with math.

HIM:

BS, absolute bs. The whole field of statistics exists to predict human behavior. Google is so good at predicting human behavior using their alogrithmns that they know what you’re thinking.

Austrian Economists deny this because their philosophy of economics does not stand up to any real scrutiny.

http://www.huppi.com/kangaroo/L-ausmain.htm

> Summary
>
> The Austrian School of Economics is a tiny group of libertarians at war with mainstream economics. They reject even the scientific method that mainstream economists use, preferring to use instead a pre-scientific approach that shuns real-world data and is based purely on logical assumptions. But this is the very method that thousands of religions use when they argue their opposing beliefs, and the fact that the world has thousands of religions proves the fallibility of this approach. Academia has generally ignored the Austrian School, and the only reason it continues to exist is because it is financed by wealthy business donors on the far right. The movement does not exist on its own scholarly merits.

A pre-scientific approach? Please. Austrian Economics was destroyed a long time ago.

ME:

I’ve offered many examples of Austrians accurately forecasting economic events.

Can you offer examples of where the number crunchers have done similar things?

Can you offer examples of economic theories arrived at by your “scientific” approach from whichever school of economic thought you believe has the best approach?

Also, if you’re in the mood, why didn’t all those number crunchers see the housing bubble collapse coming?

> http://www.huppi.com/kangaroo/L-ausmain.htm

They quote Paul Samuelson, the mathematician/economist, who, as late as 1989, claimed the Soviet economy was poised to overtake ours, and that it served as proof that command economies can thrive.

> Mainstream economists believe in fiat money; Austrians believe in the gold standard.

> Mainstream economists assert that the mystery of the business cycle is deep and poorly understood; Austrians claim the government causes it.

I would say these two points are accurate.

Perhaps I’d be better off agreeing to disagree, but I think the case for business cycles caused by artificially low interest rates is closed. I think it’s supported both deductive and empirically.

Likewise, the case for commodity money (money that can’t be printed) is huge. I’m surprised anyone out there is even attempting to defend fiat money.

HIM:

But, you just said that people actions are impossible to predict, are they or aren’t they?

Why won’t proponents of Austrian economics test their theories like everyone else?

Why does Austrian economics fail to stand up when tested like other ideas about economics are able to?

Why? Because it’s a failed theory that real economists gave up on over 100 years ago. It’s a rich mans philosophy that’s sold to plebes to keep their hopes alive.

It’s voodoo economics, it’s faith based optimism, it’s religion disguised as economics, nothing more than worshiping the false god of the market.

ME:

> But, you just said that people actions are impossible to predict, are they or aren’t they?

No I didn’t. I said human behavior is too complex for physics-like mathematical models. Reread my comments.

I offered you many examples of accurate forecasts of important events made by Austrian School economists when all “mainstream” economists were predicting the opposite.

Do you have any examples of the triumphs of mathematical modeling in economics?

HIM:

Yes you did, you said human behavior is impossible to predict and then you claimed Austrian Economists had predicted human behavior plenty of times. Take your hocus pocus fruity economic theories and find someone dumb enough to buy them because no one with half a brain has given a fuck about Austrian economics in over 100 years. Except suckers.

ME:

Just re-read this whole thread. Nope, I didn’t. I said it’s impossible to model with math.

Perhaps we should agree to disagree about Austrian Economics.

Can you make the case for mathematical modeling in economics? Perhaps cite some instances where mathematical economics predicted significant events?

HIM:

That’s why Austrian economics is a myth, it’s been placed on the scrap heap of failed economic thought.

Peoples behavior can be quite reliably predicted using mathematical models, all modern theories are tested that way to insure that they work. The only people who claim that mathematical and scientific models don’t work are Austrian economists because those models show that Austrian economics don’t work.

Do you know what they call theories that don’t work? Failures, that’s when you pick yourself up and make new observations and come up with new theories that actually represent what happens in the real world.

That’s what most people do anyway. If you’re an Austrian School Economist you hold onto a dead theory for 100 years after it was tossed on the scrap heap of failed economic theories.

The Austrian School of Economics is worthless.

ME:

Can you name some non-Austrian economic theories that work?

Can you name some successes of your approach to economics, or successes of economists who believe in your approach?

HIM:

There are currently only two basic schools of economics, supply side and demand side. Economics alternates between serving the needs of one before switching back to serving the needs of the other. These two elements are constantly in and out of balance. Take away all of the names and different schools of thought and that is all economics ever tries to achieve.

The Austrian School is really just old school supply side economics.

All currently used economic models have been tested in the real world economy and all share similar elements. Regardless of that, it always comes down to an argument over who to favor in order to create a successful economy.

The wealthy claim that they make the economy run and rewarding them with more money means that they can create an even greater economy.

Everyone else, when they’ve really examined how money flows, tends to see that demand creates a healthy economy. So they favor a system that doesn’t punish effort but ensures that there is enough consideration for the demand side of the equation to keep things working.

ME:

Okay, you still haven’t cited any successful predictions, or articulated any theories, but thanks for the explanation. Serious questions here:

> The wealthy claim that they make the economy run and rewarding them with more money means that they can create an even greater economy.

Who does the rewarding?

> they [everyone else] favor a system that doesn’t punish effort but ensures that there is enough consideration for the demand side of the equation to keep things working.

What sort of system gives “consideration for the demand side”?

Also, if you think of any successful predictions of significant economic events made by non-Austrians please let me know. Or let me know of any theories.

HIM:

Those who continue to work and support their empires while accepting less and less for more productivity every year. Ultimately this leads to demoralized workers who rightly demand their contribution to the success of the overall system be recognized.

You have a very limited idea of who should be rewarded for a successful nation.

I’m apparently not answering your questions in a way that you can understand I’m answering them.

ME:

1) Nothing you’ve said rests upon a foundation of mathematical proof similar to what you’ve demanded of Austrian Economics.

2) I cited examples of when Austrian economists accurately forecasted major economic events (despite mass denial and ridicule). Can you cite examples of non-Austrian economists accurately forecasting major economic events?

3) All your theories (none of which seem to involve any math or empirical study), presuppose a very powerful, very benevolent force which presides over an economy, selecting winners, and upholding “justice”. For example:

> it always comes down to an argument over who to favor in order to create a successful economy.

> The wealthy claim that they make the economy run and rewarding them with more money means that they can create an even greater economy.

> favor a system that doesn’t punish effort but ensures that there is enough consideration for the demand side of the equation to keep things working.

> workers who rightly demand their contribution to the success of the overall system be recognized.

> You have a very limited idea of who should be rewarded for a successful nation.

I’m interested to hear you elaborate on who does the “rewarding,” “favoring” and “ensuring,” how they do it, and what would happen if they didn’t.

HIM:

Dude, you just don’t get it. That’s life.

ME:

Obviously not. Thanks for the dialogue.

I read a lot every day, newspapers, websites and blog. Here are some excerpts which speak to the issue of property rights, mostly from the Kyiv Post. There are also many other interesting things, the struggle between western and Russian identity, analysis of the recent Constitutional revision which bolsters executive power, the incessant accusation of government corruption, and more. I must pick and choose.

My greatest interest is property rights and commerce, so I chose these:

Sept. 24th Kyiv Post — Series of interviews regarding opaque, arbitrary customs procedures:

One of the businessmen who wished to remain anonymous said

“For instance, last week customs cleared your goods #1 (unit price by invoice is $100). This week you try to clear the same goods #1 (unit price by invoice is still the same $100), but some risk criteria has appeared an you are informed that the minimum price you can custom clear the goods for is $150 not $100. What’s more, nobody knows who increased this minimum price for the goods. Why? Which criteria for which goods should be used? …and why are they constantly changing?

You’re faced with the choice of either clearing the goods at $150 (and overpaying the customs duties) or returning them to the sender.”

Sept. 24th Kyiv Post — Headline: TAX authorities put squeeze on big, small businesses

“Ukrainian customs, tax and financial monitoring authorities are stepping up pressure on businesses of all shapes and sizes in a bid to meet tough revenue targets.”

Oct. 1st Kyiv Post — Front Page Headline: “Return of the Good Squads – Berkyansk Tax police fire on workers, wounding four.”

Oct. 1st Kyiv Post — Headline: “Nation’s pension system close to bankruptcy”

“Those who think the French pension system is bloated should take a look at Ukraine, a nation which has not only preserved but enhanced generous Soviet retirement benefits – which now threaten to bankrupt it.”

Oct. 1st Kyiv Post — Headline: “Bank Forum complains of smear campaign”

“A large Ukrainian bank owned by Germany’s Commerzbank claims that it has fallen victim to a damaging smear campaign allegedly concocted by Ukrainian businessmen who owe the bank tens of millions of dollars…

Allegedly slanted reports suggesting the imminent collapse of Forum, which ranks as Ukraine’s 13th largest bank in terms of net assets, have appeared largely on the Internet, according to [bank chairman] Kolesnik.

One of the most problematic such clients, according to [bank chairman] Kolesnik, is Dnipropetrovsk-based Sparta Group, co-founded by . . . According to Kolesnik, Sparta Groups owes Bank Forum around $38 million and is using fraudulent means to avoid repaying the debt.

Whether Sparta group, or any other problematic Bank Forum client, is in fact behind the smear campaign remains unclear.

Kolesnik said that Sparta Group used the Europe mall in Dnipropetrovsk as collateral for the $38 million loan. But in an attempt to wriggle out of the debt, the part of the street on which the building is located was renamed, so that the address of the property specified as collateral in the loan contract no longer corresponded to the current address of the building. The building was then resold a number of times.

‘According to Ukrainian legislation, the third resale is considered bona fide and is hard to challenge,’ said Kolesnik. In April, Levin and Zxelrod formally exited the business. Finally, Sparta declared itself bankrupt.”

Oct. 8th Kyiv Post — series of articles about anti-corruption efforts, mostly calling for government power as a solution

Oct. 8th Kyiv Post — Headline: Ukrainian prosecutors go after ArcelorMittal mill

“Another Ukrainian court is set to turn back the clocks [this is a reference to the recent reversion of a 2005 Constitutional change which weakened presidential powers], this time threatening a landmark, five-year-old privatization deal that brought state coffers $4.8 billion in the cleanest state auction ever held.

The general prosecutor’s office is suing ArcelorMittal, Ukraine’s biggest foreign investor, which purchased the country’s largest steel mill in Kryviy Rih back in 2005. . . .

The current Yanukovych team consists of many of the same officials who served before the Orange Revolution, when Kryvorizhstal (now ArcelorMittal KryviyRih) was first sold under former President Leonid Kuchma to his son-in-law … and billionaire …, a major financial backer of Yanukovych, for a meager $800 million.

Now, if prosecutors are successful, the Dnipropetrovsk Oblast mill purchased by Mittal Steel, now ArcelorMittal, will return to state hands — and maybe eventually back to … and … . . . .

‘We are taking this very seriously,’ said Cornier, a 25-year veteran of the company flown in from London to confront the emergency situation. ‘We paid $4.8 billion for this plant, and put $500 million worth of capital expenditures into it. We feel it is a very good plant and we don’t want to lose it.”

Oct. 8 Kyiv Post — Article about most successful (non-Russian) expats.

rank / country / industry
1 / Britain / steel, real estate, media
2 / Czech / investment banking, especially managing ipo’s
3 / Poland / film distribution, advertising, language dubbing, theater chain
4 / USA / restaurants & other ventures
5 / USA / agribusiness
6 / Sweden / farming
7 / Poland / flowers, now commercial real estate, manufacturing
8 / USA & Germany / restaurants, luxury brands, children’s entertainment centers
9 / USA / online and print media
10 / USA / radio broadcasting, online media, real estate

1’s estimated net worth is $500 million to $1 billion. 10’s is $12 to $15million.

15 Oct. Kyiv Post — Front Page Headline: Reprieve – Lawsuit against steelmaker ends

“In recent weeks, ArcelorMittal raised such an international outcry over the attacks on the company that President Viktor Yanukovych felt compelled to respond publicly on Oct. 8th, assuring the investor that the government had no intention of seizing the plant. It took prosecutors only two days (not including the weekend) to act on the presidential edict.

If ArcelorMittal had truly violated legal obligations made during its 2005 purchase, then why was the case dropped? . . . .

Khrypun, a judge who is no stranger to controversial cases, dismissed the dispute without explanation after lone prosecutor withdrew the state’s claims, also without explanation. . . .

Since then [the 2005 sale], Ukraine’s biggest investor has barely had a moment’s peace.

Over the years leading up to the lawsuit filed by the prosecutor’s office in July, ArcelorMittal Kryviy Rih has been accused by Ukrainian trade unions of reneging on its investment obligations. More recently, the Security Service of Ukraine, successor agency to the Soviet KGB, began investigating the company for customs violations on imported coal. . . .

Strange and violent incidents also happened to plant workers. In October 2009, gunshots were fired at a company car . . . .”

From an editorial on the subject:

“The only thing that is clear from this case is that anyone who is bold enough to invest in Ukraine should learn how to shout – the louder, the better.”

15 Oct. Kyiv Post — Headline: “Will Ukrtelecom sale be honest?”

“Ukraine’s government on Oct. 13 formally launched a privatization tender for a controlling stake in fixed-line telephone monopoly Ukrtelecom, the sale of which has long been stalled due to political gridlock.

The auction, to be wrapped up by Dec. 28, sets the stage for the nation’s biggest auction since top steel mill Kryvorizhstal was bought for a record $4.8 billion by the world’s largest steel group, ArcelorMittal.

With a starting price of $1.3 billion, the Ukrtelecom sale is likely to raise badly-needed fresh cash to cover stretched state finances. But . . . the sale is proceeding with controversial restrictions that threaten to exclude leading global telecommunications companies from the bidding.”

15 Oct. Kyiv Post — Headline: “Khoroshkovsky makes U.S. visit”

“Valeriy Khoroshkovsky, the head of the Security Service of Ukraine, will conduct a one-day working visit to the United States on Oct. 15.

The Ukrainian intelligence chief is expected to meet with top officials in the U.S. Federal Bureau of Investigation and the Central Intelligence Agency, as well as the U.S. State Department.

One of Ukraine’s richest people, Khoroshkovsky is a media mogul who is also a member of the High Council of Justice, which appoints the 10,000 judges in Ukraine.”

Sept. 5th Ukrainian Weekly — Headline: “A Donetsk entrepreneur tries to fight the system”

“Volodymyr Razumovskyi, a 38-year-old Donetsk entrepreneur . . . [has] a lovely wife, three children and a decorative plants business in the heart of Donetsk. . . .

Enter Oleskander Grupskyi . . . who became Mr. Razumovskyi’s neighbor in 2004. . . .

As with anyone wanting to do serious business in Ukraine, Mr. Grupskyi is a well-connected dude. He left the local police force to form his own business clan, maintaining valuable contact with the local prosecutor and police departments. . . .

In an undercover video shot included in Mr. Razumovskyi’s YouTube posting, Mr. Grupskyi boasts that for nine years he’s been a member of the Party of Regions of Ukraine . . . that he graduated from a KGB school. . . .

Mr. Razumovskyi’s 35-acre property, the site of Ukraine’s first plant nursery, is very attractive real estate within the city limits of Donetsk.

[Mr. Grupskyi] admitted himself in the undercover video: “You like the inspections? Until some intelligence emerges in your brain, you will be constantly inspected.”

On came the tax police, the prosecutor’s office, the sanitary inspectors and other local bureaucrats. There were 15 inspections in the last year, compared with three the prior year. . . .

In the worst case, local tax officials fined his business . . . nearly $10,000. . . .

[Mr. Grupskyi’s] boys allegedly destroyed Mr. Razumovskyi’s water main, causing more than $200,000 in damages and flooding the neighborhood. . . .

[The police’s] investigation led to the conclusion that “the reponsible persons can’t be established.” . . .

A February 2009 call came from someone claiming to be Mr. Grupskyi’s wife, who reminded Mr. Razumovskyi that he has three small children, advising him to care for them better.

The breaking point for Mr. Razumovskyi came with the shooting death of Mr. Grupskyi’s lawyer on July 12. . . .

That’s when Mr. Razumovskyi decided to plead his case to President Yanukovych on YouTube.”

If you think the US government doesn’t deprive citizens of property to benefit influential businessmen, think again.

“The dangers of deflation are chimerical, but its charms are very real. There is absolutely no reason to be concerned about the economic effects of deflation, unless one equates the welfare of a nation with the welfare of its false elites.” ~Dr. Jörg Guido Hülsmann

From Radio Free Market:

http://radiofreemarket.com/sites/default/files/RFM_Guido_Hulsmann_Final_092510 _0.mp3

From Kharkiv to Lviv, apparently. (source)

[youtube]2-FqSIy4RzU[/youtube]

If I understand correctly, at around 3:50 the lady says that it’s much harder for government to tax flea markets.

At 5:40, the lady talks about the superiority of Ukrainian socks over Chinese socks. :) These are exactly the little things I’m interested in. She, by contrast, says the government is doing this because of they prefer Chinese products and want to keep the Ukrainian people down.

I think this next video shows part of the same series of protests. These specifically against the closing of second hand stores:

[youtube]gYEKuVhOBwU[/youtube]

In completely, 100% unrelated news, Ukraine’s population continues to crash. In 1989, it was 52 million. In 2008, it dipped below 46 million due to emigration, a high death rate and low birth rate.

In an effort to counter this trend, the government, based on what I’ve heard, is banning certain types of alcohol advertising, running a tobacco-will-kill-you campaign, and excessively taxing adult men who remain unmarried.

I expect the success of these measures will exceed expectation, and, much like growing juicy vegetables in the garden, Ukraine’s government will very quickly raise a population of large, content, healthy, tasty, non-flea market shopping tax payers.