So Krugman's new book came out about a week ago now, and Bob Wenzel has a pretty lengthy review at his blog...
It turns out, Krugman uses his infamous babysitter co-op nonsense as chapter 2 of the book (which is debunked quite nicely in the post above), so I figured I might use the opportunity to compile the threads we've had on this...
Baby-sitting Paul Krugman: Unraveling the Babysitter Analogy
Krugman's babysitter co-op analogy - am I missing something?
Ohy my god!!! LOL etc.
A debate against a brick wall
Not to necro a three year old thread, but I disagree with the "unraveling the babysitter analogy" one. First, it's not clear if a price fix was ever in place or individuals simply weren't willing to inflate away the value of their labor (raise the value of the scrip) for other reasons, like having enough to cover what was causing them to take scrip out of circulation in the first place (dues, apparently, or debt loads or liquidity preference in a big picture analogy). The OP offers his own explanations of why Krugman is actually right assuming there are some wage floors in place, but that's not the example given by Krugface (the '87 stock market crash leading to self-fulfilling expectations).
Second, the fact that they're not exchanging scrip doesn't mean that they desire the current state of affaris to continue. People might want to shit in parks themselves, but that doesn't mean they belive park-shitting should be legal. There's a difference between individual and collective preferences and, although OP may consider countercyclical payroll tax cuts to be slavery, the co-op, as a group, might vote to print more coupons to make all members better off.
Do you have some refutation to the debunking from the first link? Or is your post essentially irrelevant because Krugman is an ignoramus any way you slice it?
The inflexibility of scrip prices and the dues are meant to reflect something other than price controls and taxes (although Krugman could have been more clear on this)- the inflexibility (apparently) happened when "most couples were anxious to add to their reserves by baby-sitting, reluctant to run them down by going out." They weren't willing to reduce the value of their labor because they insisted on getting one scrip per hour- the goal of the sellers was to earn as much scrip as possible for their work, and the babysitting economy kept chugging along, although shrinking in proportion to the scrip supply. Perhaps if the buyers were price makers, they could insist on running down the price of scrips, but that's not the example.
Claiming that the scrips aren't money really needs some support, because they are a store of wealth without being a good or service in themselves, and means of exchange. Barter implies that you're directly exchanging two goods or services, and a scrip is definetly not a good or service.
The point of the shrinking scrip supply is to reflect a shrinking money supply and flight to liquidity, like what occurs during recessions. It's not the best example, I agree. But it's still consistent.
mustang19:They weren't willing to reduce the value of their labor because they insisted on getting one scrip per hour- the goal of the sellers was to earn as much scrip as possible for their work,
That makes absolutely no sense. The scrip were basically IOUs for one hour. In any real world scenario the paper itself would say something to the effect of "one hour of babysitting time" directly on it.
and the babysitting economy kept chugging along, although shrinking in proportion to the scrip supply. Perhaps if the buyers were price makers, they could insist on running down the price of scrips, but that's not the example.
Not only that, but the "price" of an IOU for one hour of babysitting time (which can only be earned through donating an hour of babysitting time) doesn't fluctuate. Again, this is not money.
So if your premise is wrong, and it's not even part of the example given, what's your point in bringing it up? This is what your trolling has been reduced to?
Claiming that the scrips aren't money really needs some support, because they are a store of wealth without being a good or service in themselves, and means of exchange.
Such support is provided at the link. You should read it.
Barter implies that you're directly exchanging two goods or services, and a scrip is definetly not a good or service.
Precisely. It's merely a piece of paper representing what boils down to a tally. They could accomplish the exact same arrangement by simply keeping a log book of each person's hours spent babysitting and hours spent using babysitting services. This is exactly Wenzel's point. It is good that you recognize this.
Money supply shrinks during recessions? What nonsense. Sure this occured at the hands of a central bank in the Great Depression, but even with the Federal Reserve this is not a rule. And it certainly doesn't happen in a free market. But I suppose this kind of abject nonsense is to be expected...
mustang19:Hey, I make stuff up a lot.
Mises Daily review from David Gordon:
Not necessarily. We're talking about a vageuly explained example here.
Saying the price doesn't fluctuate (although it conceivably could) doesn't negate it as money. That doesn't follow.
Why do you keep pretending you're not balls to the wall wrong about nearly everything?
It really isn't.
Precisely. It's merely a piece of paper representing what boils down to a tally.
But then it's not bartering like he claimed. You're jumping all over the place here.
They could accomplish the exact same arrangement by simply keeping a log book of each person's hours spent babysitting and hours spent using babysitting services. This is exactly Wenzel's point. It is good that you recognize this.
They could, but that's some kind of credit system. They're not exchanging goods or services directly for other goods and services, so it's not barter.
Money supply shrinks during recessions? What nonsense. Sure this occured at the hands of a central bank in the Great Depression, but even with the Federal Reserve this is not a rule.
So you're saying that money supply didn't shrink during just about every recession in history, free banking or not?
But I suppose this kind of abject nonsense is to be expected...
Done embarassing yourself?
mustang19:Why do you keep pretending you're not balls to the wall wrong about nearly everything?
Seriously? This is
[bahr-ter] verb (used without object) 1. to trade (goods, services, etc) in exchange for other goods, services, etc, rather than for money.
Nowhere in the definition of "barter" does it say the services have to be exchanged simultaneously. Your entire argument hinges on this one thing. "Well, technically they're not bartering because one person gets their service now and the other doesn't get it till later!"
I honestly can't tell when you're trolling or when you're actually this confused.
Show me where it did.
mustang19: John James:]But I suppose this kind of abject nonsense is to be expected...Done embarassing yourself?
John James:]But I suppose this kind of abject nonsense is to be expected...
I quote you admitting you make stuff up a lot, and I'm embarrassing myself? I suppose if I quote you admitting you are here to troll, that would mean I'm shaming myself, or something like that? I thought you would have created better material by now.
It was at least kind of rarely interesting when you seemed to at least make something that at least resembled an argument. But it's obvious you're not even trying now. I guess it's easy to get lazy when everyone sees through your bs? Would you really like to be banned, as you said? I'm sure that can be arranged.
Okay, we can stretch definitions to include any services exchanged at any time constituting barter. Technically, it could go either way. The notes could be considered money, or they could be considered irrelevant. One can't disprove that scrips could be considered "a medium that can be exchanged for goods and services and is used as a measure of their values on the market," aka money.
ed: Better definition, from dictionary.com: "Any circulating medium of exchange." Viva semantics.
Where money supply contracted? I only have deflation series, but look at the list of NBER recessions and the deflation rates over the free banking era.
It was at least kind of rarely interesting when you seemed to at least make something that at least resembled an argument. But it's obvious you're not even trying now.
You're trying to disprove an example by insisting that Krugman's semantics are the same as yours. And you're not doing a great job of it.
I guess it's easy to get lazy when everyone sees through your bs? Would you really like to be banned, as you said? I'm sure that can be arranged.
No thanks.
Also, while we're both arguing semantics like lobotomized infants:
http://www.stlouisfed.org/education/resourcetools/UploadFiles/discussion_answers.pdf
"Barter is the direct exchange of goods and services without the use of money."
Ka-ching!
mustang19:Okay, we can stretch definitions to include any services exchanged at any time constituting barter.
Stretch?
Technically, it could go either way. The notes could be considered money, or they could be considered irrelevant.
And the moon could be considered a rocket. But that wouldn't make it so.
One can't disprove that scrips could be considered "a medium that can be exchanged for goods and services and is used as a measure of their values on the market," aka money.
Yes one can. Wenzel pointed it out in the piece you didn't read.
The scripts [sic] do not have an exchange ratio against all products the way money does, i.e. money is about prices. The scripts [sic] simply reflect a call on babysitting services. That's it. A recession is about changing prices. The stock market collapses in a recession, housing prices collapse, prices are too high for some products, causing fewer sales resulting in businesses laying off employees and sometimes failing. How is any of this action reflected in Krugman's babysitting story? The answer is that it is not.
Surely you're not suggesting falling prices necessarily = a shrinking of the money supply...are you? Again, for your sake, I hope you're just trying to troll.
Semantics? It doesn't matter how you want to precisely define the words as long as you admit IOUs on little pieces of paper that are only good for an hour of babysitting service are fundamentally different than any "money" that has ever existed in history.
mustang19:Would you really like to be banned, as you said? I'm sure that can be arranged.No thanks.
Would you really like to be banned, as you said? I'm sure that can be arranged.
Wha? Why not? You literally said it was one of your top goals.
mustang19:Also, while we're both arguing semantics like lobotomized infants: http://www.stlouisfed.org/education/resourcetools/UploadFiles/discussion_answers.pdf "Barter is the direct exchange of goods and services without the use of money." Ka-ching!
The Fed?
Is that supposed to be a joke?
P.S.
Where's your devestating critique of Gordon's article?
That's his own made up definition, not the dictionary one.
It doesn't, but it suggests that the money supply does contract. Generally, money supply shrinks in recessions. Since you're going to claim otherwise during the pre-1920s era without presenting evidence, I'll let it go.
No, they aren't, according to the dictionary definition of money.
The Fed? Is that supposed to be a joke?
Well, we're arguing over the meaning of words here. I'll take the Fed's definition over some random guy on the internet any day.
In the comments under "Anon".
I don't think I would consider Krugman's example to be barter. The people engaged in any given exchange aren't necessarily exchanging services with one another.
EDIT: I was wondering if the gold standard amounted to price fixing. I see others have already raised that issue.
The use of a strict gold standard cannot be considered price fixing; it truly just defines some denomination to be defined as a unit of weight of the commodity. The word "dollar" goes back long before its use as an American currency. A dollar was approximately 1/20 oz of gold, if I remember correctly. No different than the British pound sterling was, literally, one pound of silver. This is lost in modern times due, in my opinion, largely to fractional reserve banking, which lead to full fiat currency, as well as public education neatly omitting this fact from their curriculum.
The only one worth following is the one who leads... not the one who pulls; for it is not the direction that condemns the puller, it is the rope that he holds.
"It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error."
- Mises
Later guys!
"
The use of a strict gold standard cannot be considered price fixing; it truly just defines some denomination to be defined as a unit of weight of the commodity. The word "dollar" goes back long before its use as an American currency. A dollar was approximately 1/20 oz of gold, if I remember correctly. No different than the British pound sterling was, literally, one pound of silver. This is lost in modern times due, in my opinion, largely to fractional reserve banking, which lead to full fiat currency, as well as public education neatly omitting this fact from their curriculum."
It would be considered price fixing if some government made it illegal to to trade gold for the paper currency at particular values, or if it was illegal for anyone else to trade gold for dollars. However, the dollars are often considered to be specific value, simply because they can be redeemed on demand for the gold.
Schools are labour camps.
What I am saying is that originally, things like dollars and pounds were just a definition of a weight of a commodity. I could be wrong, but I believe the issues you bring up are only due to the government monopoly on the printing of notes coupled with legal tender laws and other over-regulations, and the eventual misunderstanding of what was actually meant by the terms dollars or pounds. But sctrictly speaking, a gold standard implies merely that a note called a dollar actually represents a dollar (~1/20 oz) of good in reserve. The utilization (and eventual over-utilization) of fractional reserves is what destroyed the meaning of the gold standard, as well as a basic ignorance of the nature of coin, credit and circulation by the public.
I'm not sure that saying the gold standard just "defines" what a dollar is worth is really a sufficient explanation. The "exchange" of a dollar with gold is fixed in regards to all "exchanges" with the issuing institution. However, the dollar is not fixed in regards to exchanges with other parties. Theoretically, I could exchange 1 lb of gold for $1 from Bank A, then exchange that $1 for 2 lb of gold from Bank B. If Bank B was forced to trade 1 lb of gold for that $1, then that would be price fixing. This is what I gather the Austrian critique of Krugman is. However, what I wonder is, if allowing Bank B to trade 2 lb of gold for $1 would fix the stagnation, then where does that $1 get its value? All Bank B can do with it is exchange it for 1 lb of gold from Bank A.
In Krugman's example, the problem I think originates in the fact that the scrip is also used to pay the dues. Thus, the value of the scrip is more than what it exchanges for. In order to pay one's dues, one has to work more than consume. Clearly its impossible for everyone to do that. An end to the price fixing and continual deflation might solve things for Krugman's example provided the dues owed are less than the scrip supply.
But this doesn't match the real economy, and I wouldn't be surprised if Krugman fails to realize that. To make the baby-sitter situation match, suppose that instead of the baby-sitters being low on scrip, they're in debt. In order to get scrip, they need to borrow it from the same place that they pay their dues. For every scrip they borrow, they have to pay 1.1 scrip back. Now what would happen if the price fixing ended? Each family could now pay 1 scrip for 2 hours. But, they have to borrow that 1 scrip and thus increase their debt by 1.1 scrip. If they in turn work 2 hours, they'll receive 1 scrip back, but that doesn't pay off their last borrowing completely. If everyone alternates between working and spending, they'll just keep amounting an ever increasing level of debt. Thus, deflation doesn't help at all. Each family would still be motivated to work and refrain from spending.
mustang19:That's his own made up definition, not the dictionary one.
John James:Semantics? It doesn't matter how you want to precisely define the words as long as you admit IOUs on little pieces of paper that are only good for an hour of babysitting service are fundamentally different than any "money" that has ever existed in history.
mustang19:No, they aren't, according to the dictionary definition of money.
I essentially tell you that regardless of what a dictionary says, the two are fundamentally different...and your response is "not according to the dictionary"?
I'm starting to get worried you're actually as dumb as you sound.
mustang19:Surely you're not suggesting falling prices necessarily = a shrinking of the money supply...are you? Again, for your sake, I hope you're just trying to troll.It doesn't, but it suggests that the money supply does contract.
How does that follow?
Generally, money supply shrinks in recessions.
Again, prove it. I asked you to do that before, and you pointed me to price data. I ask if you actually believe that falling prices necessarily = a shrinking of the money supply, and you tell me no, "but it suggests that the money supply does contract"...right before you make this same comment from before.
So again. Prove the money supply shrinks in recessions.
Since you're going to claim otherwise during the pre-1920s era without presenting evidence, I'll let it go.
I made no claims. You're the one making claims without supporting them.
Funny how people who have no argument always make claims and then allege they are right until someone else proves them wrong.
Of course you would. That makes perfect sense considering you have about the same record of accuracy.
mustang19:Where's your devestating critique of Gordon's article?In the comments under "Anon".
Suuure it is.
So we're in agreement that you're making up your own terms?
Whatever.
This is an empirical question; I've presented the Seeking Alpha article to address it and I'm done discussing it unless you want to attack that article.
falling prices necessarily = a shrinking of the money supply,
I never said "necessarily".
You implied that money supply doesn't often fall during recessions, and that's empirically dubious.
There's no way to judge the accuracy of definitions of words other than looking them up.
Okay.