An Academic Analysis of Deflation

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wdstk46's picture
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An Academic Analysis of Deflation

George Reisman, Professor Emeritus of Economics at Pepperdine University, has posted an excellent article on his blog covering deflation vs. falling prices.  It is a bit academic and a little long but well worth struggling through for an Austrian viewpoint of the current economic mess.  The link is:



Ray Hewitt's picture
Ray Hewitt
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Environmentalism is recycled communism and nazism

Reisman hits another nail in the head.

In another article on environmentalism, the writer poses that if they get their way, they will produce the very effects they want to prevent.

Don't Expect an Ecologist to Understand Capitalism

In the end, Diamond's understanding of the modern economy is weak. He
does not account for the ongoing increase in the amount of real
economic output that the advanced economies extract from each unit of
energy. He does not account for the ability of market prices to provide
incentives for people to use resources efficiently and find innovative
means of producing them. He uses the term "value" more often to refer
to nature and wilderness areas than to human goods like transportation,
food, shelter, and entertainment. For example, he declares a remote
nature park in Australia "an especially valuable area" (p. 400). Ayn
Rand would ask: "of value to whom, and for what?" By the measure of the
market, i.e., the measure of people, it is land in the densely
populated, intensely technological heart of a great city that is
"especially valuable."

The world could end up, as Diamond fears, a denuded and impoverished
wreck, Easter Island writ large. But that day will not come as long as
free people are able and willing to employ science and technology to
solve their problems. The greatest danger to the world is that a lack
of freedom—and, hence, a lack of capitalism—will lead to more suffering
and social collapses like those we see today in much of Africa. But
with his ecologist's blinders on, Diamond fails to grasp this crucial



gregroberts's picture
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Re: An Academic Analysis of Deflation

"Environmentalism is recycled communism and nazism"

I agree with that statement and it's one of the reasons I don't trust the AGW/ACC  advocates.

Lenin quote,

It is necessary {for communists} to use any ruse, cunning, unlawful method, evasion, concealment of truth {to gain their ends}.


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Aaron M
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Re: An Academic Analysis of Deflation

Environmental Conservatism is intelligent.
Stewardship of resources and habitat is also intelligent.

I cannot see any particular way that environmentalism is bad and of all the fronts that the collectivists have used, this is one that has the potential to actually do some good.

Since being introduced to the permaculture concept, I've been thinking that this ideology is what Thomas Jefferson had in mind for our nation. In fact, I'm convinced that it could "replace" flawed schools of thought such as Communism/Socialism and Capitalism, but would require significant elaboration and social devolution before it could be applied.

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Arthur Vibert
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Re: An Academic Analysis of Deflation

Is it possible to have this discussion without resorting to name calling? I consider myself an environmentalist but I am in no way, shape or form either a Nazi or a Communist.


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Ray Hewitt
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Re: An Academic Analysis of Deflation


You are taking the epithets Nazi and Communist too literally. Reisman lists the parallels between environmentalism and those forms of collectivism. You decide if you fit any part of that description.

This is not name calling. I think many environmentalists have good intentions but haven't given much thought to the political goals of the mainstream groups.

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Re: An Academic Analysis of Deflation

As a environmentalist, I hardly view myself as a collectivist.  I just want my kids to have clean food, air, and water when they get to be my age.  If they can live somewhere that doesn't give them cancer that would be even better.  Perhaps this puts me at odds with the 'political goals of the mainstream groups',  I don't know.  Most of my environmentalist actions have centered around fighting against building more coal power plants here in Indiana where I live.  I don't want to hear about 'clean coal' until someone can actually do clean coal.  Am I being too much of a capitalist to want coal plants to pay for cleaning up the pollution they cause, rather than the government pay this business expense?   Is it asking too much to not subsidize one technology [coal] that will cause billions of dollars of health care costs that I as a tax payer will also have to pick up the tab for, while making it harder for technologies (wind, geothermal, etc) that have been proven on a large scale, and don't pollute at all?  (sorry about the run-one sentence)


I guess environmentalism is a camp that has attracted people from both the far left (the recycled communists you speak of) and the far right (people like me who take property rights so seriously that it leads them to believe you should be allowed to pollute all over my property).  Don't assume all people that think protecting our natural resources are left-leaning.

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Re: An Academic Analysis of Deflation

Thank goodness Reisman is a Professor Emeritus and therefore not actively spewing his nonsense to today's impressionable young scholars in the classroom.

About 10 percent of his comments are obvious, another 10 percent trivial and the remainder as useful as yak dung.

Here's a few Socratic method inspired questions for Reisman-

1) Ok, if falling prices aren't a proper measure of Deflation, how do YOU measure Deflation?

2) How does the debacle in the American mortgage markets and resultant near collapse of the world's financial system support your case for laissez-faire capitalism?

3) Abraham Lincoln and Teddy Roosevelt were environmentalists and conservationists, so could you explain why that makes them Nazi's when they both died before it was invented?

Oh, wait a minute, the good professor doesn't allow easy feedback to his shallow pontifical missives on any of his web sites.

Guess my questions will go unanswered.

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Mike Pilat
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Re: An Academic Analysis of Deflation

Touching on a few points, I would say that most (not all) of the environmentalists are not very in tune with human nature. They, for whatever the reason, often wish to pursue relatively radical forms of environmentalism that simply do not appeal to the average person when being earth-unfriendly is cheaper. The human nature of self interest and the market's proof thus far that people generally wish to save money instead of spend tons more on "green" items is a hurdle that will have to be overcome.

But it is a hurdle that must and shall be overcome as the realities of our changing world make themselves obvious. I believe that environmentalists must realize that people need to have a pragmatic reason for taking action. Saying something is "good for the earth" is not enough. People need to understand why certain actions and investments are good for them. If we believe that the there is some freedom in this market, and we take an objectivist approach, we would say that people are clearly valuing cheap electricity more than clean air, etc.

However, the big wrinkle in everything is this one fact: the future we face will not look like the past because of resource depletion. If people understood that the future of coal, oil, and natural gas is not going to look the same as the recent past has, then with that education I'm willing to bet that people would make much different decisions (investments) in their own resources and environment. And if people realized that say, farming, would be much more difficult without oil, then they might be more interested in protecting the land that will be yielding their food. Education is key, but of course don't look inside the beltway for any real help on this issue...

Aaron: our wisest pursuit, because it will in the end contribute most to real wealth, good morals, and happiness. --- Thomas Jefferson to George Washington, 1787

affert: Your thoughts on property rights are right on the mark. I believe the key to this issue is awareness and private ownership. If property rights are not respected and enforced, then there is little incentive to do much to take care of the land.


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Re: An Academic Analysis of Deflation

Since Dr. Reisman isn't available, I'll take a stab at answering POTUS's questions.

1)  Falling price levels are a symptom of deflation, not deflation itself, which is generally understood to be a drop in the level of money or a combination of money and credit.  Falling prices are also a symptom of a growing economy with a stable currency.  The misunderstanding of the basics of inflation and deflation is all to common.

2) The collapse of the mortgage markets can not possibly be a result of laissez-faire capitalism since we haven't had an economic system even vaguely resembling that for over 100 years.  What it is symptomatic of is massive government control and mismanagement of the credit markets.

3)  While I've never heard Lincoln's name equated with conservationism, I certainly acknowledge that Teddy Roosevelt was a leader in the conservationist movement.  The complaint made by the Professor was not one of historical labeling but to point out that the environmental lobby has always been in favor of strong government control of industry and the economy.  Such controls in the past have led to government policies resembling both of the political philosophies named.  I, too, am a strong supporter of our environment but don't believe that pointing government guns at the citizens is the way to deal with it.


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