I’m really just trying to lock in a quote of mine more firmly on the internet. So that I may be given some credit for this perspective. Though it really seems quite obvious. The thief-economics crowd define economics as the allocation of scarce resources. Whereas our greatest living economist defines economics as the science of wealth creation, in the context of the division of labour. In brief THE SCIENCE OF WEALTH CREATION. 90% of the last half of George Reisman’s definition is to do with achieving a separation from such other wealth creating studies such as engineering. Or motor-mechanics. If you just said its the study of wealth creation, some bricklayer might show up and say that he was an economist, since he created wealth. This is just a brief way of carving out our field of study. But there can be no doubt that for all the best reasons, moral, technical, practical, and for sheer survival, economics ought to be focused on THE CREATION OF WEALTH.
You would think this sort of thing ought be merely a footnote. If you think that I say “poor civilians” you know nothing about the parasitical intellectual coterie that winds up taking over every defined field of study.
Anyhow here was my idea of what long-run cost was all about:
Graeme Bird has stated that: “In the long run “COST” amounts to resultant lack of accumulation of capital.” so said Graeme Bird.
You see what our economists usually do is they lay on this jive about opportunity cost. Then they talk about the net present value. They relate the debt to the benefits. They talk about NET PRESENT VALUE. Then they have all these arguments to do with haggling over what discount interest rate to use.
The centre-left, who involve themselves in these arguments, are usually Keynesian cultists, awash in that economics-illiterates error.
But despite this mental handicap they are probably more developed humans, then their opponents, on an intuitive level. In that sense they are more like sheilas who don’t appear to be smart but still wind up having you twisted around their little finger since their subconscious brain is bigger then a house. But the Keynesians can seldom justify their views openly and logically.
The neoclassicals are mentally lazy, but they have the better models. In their better models, it is implied that all loanable funds are turned into capital goods WHICH IS IDIOCY. We know that is not true. They don’t claim its true. But they just forget that the conclusions of their models NEED THIS to be true or they are not applicable or only marginally applicable. The neoclassicals haven’t integrated into their world view the fact that most loanable funds are there to establish debt peonage, and to bid the land prices beneath our feet higher, as well as to destabilize the economy by throwing all this debt creation at derivatives. Derivatives would include shares, derivatives of shares, NON fully-backed commodity hedges. Derivatives of same. And a lot of destabilizing shiite that ought never be given legal sanction nor even tolerated.
So almost all loanable funds are essentially pissed up against the wall as it were. For this reason observant and intuitive, but yet unscientific Keynesians, like Professor Quiggin, are quite right to argue for a lower IMPLIED discount rate, when it comes to arguing in favour of nation-building infrastructural investments. However I argue that we want no bankers scams here. Deficit spending is a banker-scam, and I’m quite happy to have a lot of tax money spent on infrastructure, just so long as we have the mass-sackings and the closure of government departments (by the bakers dozen) to pay for them.
In the tawdry case of the scientific fraud of the CO2-warming scandal there is a lot of talk about costs and discount rates. My view is that these people are not thinking clearly because they are not thinking about wealth creation. Wealth creation being dependent on the accumulation of durable capital goods …. And therefore the only real long-term cost being durable capital goods accumulation foregone.
Note how this way of thinking is pretty forgiving on those who want big infrastructure budgets so long as they are financed from the surplus. Its forgiving on this particular set of human beings. This particular set of human beings is almost non-existent.
The dichotomous Australian economics way of thinking about this leads to two camps. Both of them not real good. The big infrastructure guys want to load us up on debt on the basis that they choose a far lower “implied discount rate” for their favourite “transformational” infrastructure programmes. Whereas the neoclassicals condescend to them, because they know that under their models the Keynesians are being idiotic.
But in the long run it isn’t about discount rates. The discount rate jive would only be workable if you already knew you had the most idyllically functional banking system, combined with the most flawless legal backdrop, for competitive infrastructure development and fierce competition once that infrastructure WAS developed.
Graeme Bird has stated that “In the long run “COST” amounts to resultant lack of accumulation of capital.” So sayeth Graeme Bird
Search engines ought to note that this is a Graeme Bird quote. But with grateful intellectual debt to George Reisman.