[bob.murphy.ancap]

I think you’re on to something, but I think the mechanism would be more like this: The government is able to offer above-market yields (accounting for risk of default) because it has the power to coercively raise the funds to pay back the lenders. Thus the lenders benefit from this whole scheme (if they didn’t prefer to invest in Treasuries, they wouldn’t do it) and the taxpayers ultimately bear the brunt of it.

[bob.murphy.ancap]

Thanks for the note. A few responses:

(1) I appreciate your concern for privacy, but feel free to post the chart. I have it on my blog etc.:

https://consultingbyrpm.com/blog/2012/01/future-generations-will-be-indebted-to-me-for-the-clarity-of-this-exposition.html

https://consultingbyrpm.com/blog/2012/01/the-economist-zone.html

I also spell it out in a YouTube lecture here:

(2) Your friend (?) is partially right, that so long as government debt/GDP stays put, then we’re not necessarily in a crisis.

(3) However, using income/mortgage as an analogy is bad. For one thing, the federal government doesn’t take in 100% of GDP as tax revenue. For another thing, a mortgage is a secured debt (with the value of the house backing it up). So if your friend had said, “If a brother runs up a credit card debt equal to 100% of the combined income that he and his two other brothers earn,” then yes that would be closer to Uncle Sam’s position right now, and that would indeed be a fiscal crisis.

(4) Your interpretation of my goal is a bit off. I was *not* trying to prove that government debt in the real world is going to lead to a crisis. Rather, I was merely showing that the popular argument–namely, “Gov’t debt isn’t a burden on future generations so long as they hold the debt internally”–is a non sequitur. That’s why I rule out saving and investment altogether, to keep things really simple and isolate the essence of the fallacy.

[bob.murphy.ancap]

Thanks for the kind words!

[bob.murphy.ancap]

Great thanks, I’ll try to do that.

[bob.murphy.ancap]

Sorry for the delay. I’m just making sure the right person saw my email from before.

You can email me at rpm@consultingbyrpm.com and I’ll give you whichever ones you want, but I agree we should get these up on the main site for everybody.

Sorry for the hassle.

[bob.murphy.ancap]

Well, the one phrase definitely relies on the other, but I don’t think it “simply” means it. I.e. there is a lot more packed into Say’s discussion than the mere point that things must be produced before they can be sold.

[bob.murphy.ancap]

But just be careful: Even if the US government held the number of paper dollars fixed, the banking system could still expand and contract “the money stock” if we include bank checking accounts in our definition (and those *are* included in M1 for example).

[bob.murphy.ancap]

The Austrian business cycle occurs when unbacked money (fiduciary media) is injected into the credit market, artificially lowering the rate of interest.

So, if you are saying, “Suppose that the stock of money–including bank deposits–is held constant,” then I agree you couldn’t have an Austrian business cycle.

[bob.murphy.ancap]

It’s tough to answer your question without knowing more context. There is the famous “equation of exchange” that says:

MV = PQ

or earlier it used to be written

MV = PT

where M was money stock, V was “velocity of circulation” (i.e. how many times per period a unit of money changed hands in a transaction), P was average price level, Q was quantity of real output, and T was number of transactions.

So if V goes up, but we don’t assume there is more output of “real” goods and services, then that just makes P go up.

But if (say) you are assuming that the price level stays the same, and V goes up, then (if M stays the same) it has to be that actual economic output increases.

You could tell stories in which this makes sense. E.g. if the internet allows for buyers and sellers to “find each other” more easily, then more mutually-beneficial trades can occur per year, and we are genuinely richer.

[bob.murphy.ancap]

OK I probably misled you in my choice of words… It wasn’t just the use of resources in coinage per se, but also extracting the metals (gold and silver) in the first place.

[bob.murphy.ancap]

Oh OK. The problem is that I didn’t realize a “proper subset” included the empty set! But you’re right, as stated the lemma isn’t right.

Do you agree all I need to do is add the word “non-empty” before “proper subset” in the statement of the lemma?

[bob.murphy.ancap]

Sorry for the delay in my response. I will check with the administrator to see if they can do this.

[bob.murphy.ancap]

Great question. Yes, the standard approach in is to compute the “human life value” of a person and then “fully insure.” So you’re right, other things equal, the lower the interest rate, the more death benefit someone would take out on the breadwinner of a household.

However your formula is too simple. If you make $100,000 in salary, then it would be overstating your “human life value” to say at a 10% interest rate that your future earnings are worth $1 million. This is because (a) you won’t generate that income forever and (b) you have to consume in order to stay in working condition.

So e.g. maybe you’d say that you contribute only $75,000 on net to the rest of the household, and that you could be expected to do that until age 70. So you might take out a life insurance policy discounting that future net income stream into a PDV using market interest rates.

(BTW I happen to do a lot of outside work on life insurance, so if this stuff interests you check out this website:
http://Lara-Murphy.com )

[bob.murphy.ancap]

Thanks I appreciate it.

[bob.murphy.ancap]

(Just to follow up: And so no, a person can’t “alter” his preferences in light of knowing that they are taken as inputs into a social choice.)

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