@Rufus F.,

I think you should consider the role society has in socialization here. While its easy to compare rhetorically the threat of being "ostracized on the block" with the tyranny of a tyrannical state, there's an important difference. You *want* to be like the block. It's like when you join a club. You are quiet as you observe how its members behave. You observe how its popular members act and you try to emulate them. You are doing this because you've decided the club supports virtues you consider worthy hence you model their behavior. (An even more explicit example may be a gym. You will follow the exercise routines of the people who have bodies that you would like to have).

The tyranny comes in when you are forced to conform to some ideal you do not share. This is why "neighborhood committees", zoning laws, or condo associations often restrict freedom in ways we could barely imagine 'the state' doing yet we happily tolerate it, for the most part. For the most part we consider this all good socialization for helping us and others become the people we want to become.

Tyranny then seems to consist of being forced to become the type of people we don't want to become. It's interesting that first person accounts of tyrannical states (North Korea, Nazi Germany, the USSR etc.) seem to focus not so much on the individual seeking to be an individual but the individual being pushed to become something he finds detestable. For example, neighbors being pressured to 'inform' on their neighbors, children being pressured to 'inform' on their parents all seems very wrong because this subverts the idea of what most of us want to be.

In contrast, being told we can't have car parts in our front yard or being told we *must* keep our house freshly painted may sometimes feel annoying, may feel unreasonably 'goody goody' given the context of where we live but isn't quite tyranny.

The problem here is that there seems to be a false dichotomy. There's us here and over there 'the state'. But we are the state. Consider the following:

a. Sunbathing nude on your front lawn.
b. Having sex with your wife or gf or both on your front lawn!
c. In your car parked on your street.
d. Running a junk yard, repair shop on your front lawn.
e. Renting your basement out as a dormitory style living quarters for 15-20 day laborers of dubious immigration status.
f. Opening an adult bookstore or strip club in the middle of a town's most respectable business district.

In all these cases you are quite likely to have 'the state' knocking at your door. The state, though, is not some alien occupying power. It's likely knocking on your door because you've offended your neighbors tastes. Yet in the US its possible to engage in all of those types of activities. How is this? Because in some areas its within the accepted 'tastes'....at least it doesn't offend tastes as much as to provoke a state reaction.

The question then is by what systems or measures should issues of taste become so strong that a tipping point is reached that state action is justified. Before you say a simple, high bar, keep in mind zoning laws are very low yet widely supported. Yet most people don't figure they are a serious infringement. Yes you can't open a junk yard on your front lawn but you knew that when you brought your house and you felt it was a good deal because you knew your neighbors were likewise prohibited thereby protecting your home value.

On a simple level, 30% office buildings being empty can mean three things:

a. The market is changing, we don't need office buildings as much so they go empty as rents come down.

b. The entire economy is in recession.

c. Some combination of both.

Keynes and Hayek had no debate about a. Yes the market might change leaving too many buildings. In that case rents fall quickly. Maybe the buildings get filled up or maybe they just start to fall apart. Elsewhere, though, there is excess demand and as the market works to clear the office building market by decreasing it other markets expand.

Long before Keynes and Hayek, though, government has always tried to interfere in a. Building owners become a loud and noisy lobby. They seek special rules to 'cushion' the market turning against them. The expanding markets are often diverse and have no direct incentive to counter lobby. That's an old fight but its important not to pretend its an argument against Keynes. If so you're just arguing a straw man.

b and c are more problematic. Let's just say that 15% of the vacancy is due to recession and 15% is due to changing market. Half the vacancy is healthy market corrective action, despite the pain to landlords. The other half has two problems:

1. It is producing more pain that is needed to correct the market, hence it is inefficient.

2. 15% of office buildings are not really surplus. When the whole economy recovers they will be filled. By not being filled now the buildings begin to rot. If the recession lasts years when the economy finally recovers that 15% of buildings will be unusable. Instead of expanding capital into new and useful things it will have to go towards rebuilding what had already been built at great cost.

People follow a similar pattern. Long term unemployment causes human capital to rot. People loose their work ethic, find ways to survive on welfare or other family members. Let it go on too long and when you finally get recovery you'll have to waste a lot of capital just getting people back into the groove of full time work.

I agree with you that gov't planners don't know how much of that 30% is due to recession versus market change. We know the figure is almost certainly greater than 0%, though. We do know that demand is deficient by the across the board glut of under utilized people and capital. Stimulus can be simple and broad based. It doesn't have to know how much of the 30% is due to recession since it seeks to simply cure the recession, to fill the pool with water, and let the market figure out how much of the 30% to start using again and how much to let rot away.

@Christopher Carr,

I was just pointing out that in terms of GDP, there is nowhere to go but up after a devastating destruction of capital, by definition.

That explains the GDP of Europe post WWII but not the US. And, while I don't have figures on me, I don't think the US's post WWII growth can largely be attributed to internal growth rather than exporting to Europe and Japan.

I guess I would counter Krugman’s office space example with the existence of computers. The reason those hypothetical offices are going unused is because technological change has made them obsolete.

This makes sense in a full employment world where unused office space is pared with shortages in the home office and mobile office market. While there are some industries that are expanding (such as health care), the lack of demand everywhere else can't be found there.

Here's where WWII and Hayek's failure are well illustrated. Hayek would say that having too many office buildings causes the whole economy to go through pain. The market needs the unemployment and depression to clear out this wasted capital so room is made for the new, more useful capital. As I said WWII put both theories into overdrive. At the end of WWII we had a lot more 'useless capital' than 30% too many office buildings. We had nearly the whole economy restructured towards military production that was no longer needed. This should have been Hayek's worse case Keynesian fiasco. Not only was full employment achieved by ditch digging and filling, but the whole economy was shifted towards ditchdigging/filling. Families raised their sons to be ditch digger/fillers. Companies made digging/filling machines, universities were putting R&D into making better diggers/fillers. Now all in the sudden everyone realizes there's no more reason to dig and fill ditches! The counter reaction should have made the Great Depression look like a little summer rainstorm. Hayek's theory would say that we should have experienced the economic equilivant to nuclear winter. Instead we got nothing of the sort. Yes there was a brief unemployment spike as hundreds of thousands of GIs returned home and started looking for civilian work but the economy quickly began its push towards civilian production.

Your contention that the office buildings would just rot away until they become a nuisance for everybody seems highly unlikely. Can you come up with any real-world examples where development was not constrained by bureaucratic meddling, government takeovers, and politicking, a la Ground Zero?

In general that is what happens. There are homes and buildings that stay vacant for long periods of time. they do often end up rotting away so that if demand ever does come back, developers who take over the property end up having to tear down the structure and build from stratch. Yes gov't does have various regulations that try to push property owners from letting that happen but that doesn't change the dynamic. Look at the ghost towns in Nevada and Florida where swimming pools breed mosquittos. Look at Brooklyn in the 70's where vandals set empty buildings on fire for fun.

What happens if we follow the Hayekian theory? Perhaps an entrepreneur comes and converts the empty office buildings into a department store, but that isn’t very popular and it is then allowed to go through bankruptcy and liquidation procedures.

Actually I think you're misreading Keynes and Krugman. The point Krugman was making was that the lack of new investment right now is not due to business 'uncertainity' over cap-n-trade or healthcare or future tax increases. Its over the simple fact there's no need. If an entrepreneur needs an office building he has a slew of empty ones to pick before he considers building a new one from scratch.

The point is to bring the economy to full employment or full demand. Then the lack of demand in one market (30% empty office buildings) is mathematically offset by excess demand in other markets (work from home set ups). Hayek talks about spontaneous order but ideally Keynesian stimulus incorporates a lot of spontaneous order. Total demand is increased but not specific demand. The goal isn't to push up office building rentals but to simply push up total demand. It very well might be that there will still be underutilized office buildings that will end up rotting away. That's ok provided the economy is at full employment.

The $8K homebuyers credit therefore is not ideal Keynesian stimulus. Extended unemployment is better as it increases demand in a diverse manner accross multiple markets. I personally would consider adding a bit of 'supply side Keynesianism' with, say, a $5K 'relocation grant' for long term unemployed individuals who live in areas with greater than average unemployment.

Even so, though, the $8K is not nothing. It doesn't seek to reverse the rampant overdevelopment in the foreclosure cities of Florida and Nevada but it does increase demand all over to one degree or another.

Let me also reiterate that I’m not arguing against government spending, just abstract “fiscal stimulus” measures, which are usually poorly thought out and the goals of which are secondary to achieving full-employment.

Actually I think the 'abstract' measures are better. Look at the stimulus package. The 'shovel in the ground' stuff was a minority of it. Most of it was payroll tax cuts, unemployment extension and food stamp boosts and helping the states with a bit more Medicaid matching. Where this stimulus ended up is very hard to track as its mostly 'spontanaous order' stuff. Hence the difficulty in linking stimulus to specific job creation. I would say the stuff that was more thought out (cash for clunkers, homebuyers credit) wasn't as good (although cash for caulkers seems to offer a lot more bang for the buck) but I'd rather have it in a deep recession than not.

An analogy I like to use is a big swimming pool and a huge swim party you are hosting. The role of Keynesianism is basically to add water to the pool if its really low and the partiers don't have enough room to play their games. Where the water you add ends up is really unanswerable since it mixes with all the other water and where the partiers end up partying (north side of the pool, south side, deep end, low end etc) is really spontaneous order stuff.

Now if you are into tinkering with the dynamics of the party you may decide there are too few partiers at the southwest corner of the pool in addition to the water being too low. So you set up some type of hose-fountain thing there to both add water to the pool and attract people to that corner. This idea may or may not be well thought out but the fact remains the pool needs more water and if the choice is between letting it stay empty or the silly fountain thing better to opt with the later.

@Christopher Carr,

Your evaluation of the economic benefits of WWII suffers, I believe, from the broken window fallacy. Let's just say Germany and Japan were never hostile. Your analysis seems to indicate that if the US had invaded them anyway and left them with massive destruction the US would benefit from their regrowth.

Additionally while there was some profits made by the US in Europe's rebuilding it competed for capital in the US's own dramatic post war expansion. Yes if you destroy a lot of capital the marginal return on new investment goes up but as you said the US didn't loose a lot of capital in WWII destruction. If your model was correct the US would have seen slack investment while most capital went to rebuilding efforts in Europe.

IMO if we didn't have WWII but if we did push the economy to full employment in the early 40's we could have achieved 1970 in 1960 or 1950.

The distinction between digging holes and 'real' growth is a bit spurious here. Full employment generates real growth. Full employment puts all the current infrastructure to work. Therefore since capacity is being utilized the prospect of private investment expanding capital does not appear as risky. As Krugman points out, with something like 30% office space vacancy why would anyone start building office buildings? What happens if you follow the Hayekian theory? You don't push full employment, the 30% of office capacity is unused and no one has much incentive to either build or innovate (why invent a replacement for offices? If you need an office the market has plenty of empty ones) until the 30% starts to disappear by rotting away and only then is the incentive to make 'real investment' there again.

Likewise full employment makes existing debt more secure and generates savings for spontaneous order free market innovation and investment. Consider Europe. Just suppose they had full employment. Would Greece still have debt trouble? Quite probably but not as bad as it is now and the rest of Europe wouldn't have to worry as much about its debt. Full employment isn't a cure all, those who act intelligently reap more from full employment than those who don't but going below full employment doesn't spur more intelligent decisions. Pain for the sake of pain doesn't earn the economy more in the long run.

Now if instead of the Hoover Dam, FDR had just used useless ditch digging he might have still generated full employment. But every year since full employment in the US has been richer because that dam has been there generating power, adding to income year in year out. Clearly a wise use of spending, not letting the 'crises go to waste' so to speak, is better than a foolish spend. But the economy needs spending now.

Now Hayek's argument was bad investment needed to be purged by a slump. The 30% of office buildings really need to rot and if we need five years at 10% unemployment so be it. But this doesn't square with US experience. A lot of the 'wasteful investments' of WWII didn't have to rot under 20% unemployment before a consumer economy could roar back. Businesses quickly used full demand to convert the tank factories back into car factories, to start building factories making new things that were invented in WWII.

Hayek believed that, if the war had never happened, New Deal stimulus would have continued to imperfectly direct production towards probably value-less pursuits,

WWII from an economic POV was a 'value-less pursuit'. You can debate whether the Hoover Dam was not as useful an investment if the gov't had simply let the private market choose how to invest the funds used to build it, but even today its there generating power and income.

A battleship, though, is yielding no income today. It yielded fantastic returns in protecting our freedom but in economic terms it was the ultimate dead end of stimulus that Hayek feared was coming....the equilivant to paying one group to dig a ditch and another to fill the same ditch.

Keynes, though, argued for stimulus regardless of whether it was valuable. Yes the Hoover Dam is a better way to use stimulus than paying people to dig and fill ditches, but when facing a Depression either will do the most important job of returning the economy to full employment.

On the contrary, World War II was not a reset button but pushing Keynes's theory into overdrive. It was also pushing Hayek's theory into overdrive. The US put a huge amount of investment in war production. When the war was over a lot of that investment was useless. Yet the economy did not require a crash and depression to 'clean out' that useless investmet and retool for a consumer economy, it transformed itself with hardly a disruption.

If the economy could have transformed itself so seemlessly after the massive 'malinvestment' caused by huge gov't spending as well as direct planning of the economy then what of his explanation that the Great Depression was a needed correction to misinvestment in the 20's? Whatever foolish decisions were made in the 20's by individuals buying stocks or Florida swampland couldn't light a candle to the economics of WWII.

Excellent point, but do you think perhaps the 'local restrictions' are misguided? A visit to a theatre or club is by definition expensive. If nothing else you gotta get out of bed, get dressed, drive, walk or ride there and pay whatever it costs. Maybe visiting the strip club isn't a sacred experience but it at least requires some action, some decision making and some responsibility. As a result there is at least a little bit of artistry given to the field.

The internet, though, can produce endless porn for free and you never even have to get out of bed.

I agree with your 'personal experience' argument but I'd also divert the problem to the 'personal responsibility' bucket. The fact is modern society allows us to overconsume here. Modern society's wealth allows us to overconsume in lots of ways. Just as our forefathers had to learn to hunt and deal with the elements, we have to learn to deal with a world of plenty in a responsible way. Some of us will fail and some of us will need extra help but to me that seems to be a fact of life.

Seapking of bad logic:

Matthew opens his attack on Stephens by making a red herring out of his argument. His argument is that America's committment to freedom includes both the noble and ignoble. He mistranslates that as a claim that "porn is good because the hijackers hated it". Well that's not the point. Who cares that terrorists looked at porn? If they read Ayn Rand novels would you say the 1st amendment was suspect and we needed a new list of forbidden books????

He then goes to:

Stephens begins his article by disclosing that he has a Playboy in his office drawer. I take it that Stephens shares the common opinion that pornography, precisely because it has so little value as speech, is the greatest sign and guarantee of our liberty. After all, if a government refuses to restrict something as worthless as pornography, we can be fairly certain that more substantial forms of speech are protected. This is the kind of thinking that I’d like to see my more secular and libertarian-minded friends abandon. Whatever you think of pornography’s ill effects, its presence is no sure symbol for freedom.

Isn't freedom, though, the right to live with the consquences of bad decisions? The smoker is free to smoke but more likely than not he is making his life worse for it. The idea that 'ill effects' mean that somethign isn't a symbol of freedom gets it backwards.

The only justification for limiting freedom are serious ill effects. The old Catholic list of 'forbidden books' was a restriction of freedom supposedly to avoid the ill effects of 'bad ideas' spreading through the intellectual atmosphere. Ill effects are, in fact, a symbol of our freedom. Our bad marriages and romances reflect the fact that we are free to choose our lovers as we please. Our lousy TV shows reflect that we have no interest in a 'culture czar' regulating the content of our TV stations. Our oversized bellies indicate that we aren't being woken up at 6 am and lead in a series of exercises by Big Brother in our TVs ala '1984).

Now maybe you can make a case that porn has such huge ill effects that it merits limiting freedom in order to restrict it. That's fine but Matthew should not be throwing rocks from his glass house when he talks about logic. Stephens is on point when he asserts living with ill effects (also called bearing responsibility for your own decisions) is an excellent symbol of our freedom.

This type of indulging is hardly unique to mdoern day Islamist terrorists. I recall reading that early Christians sometimes 'indulged' before their martydom because they too believed dying for Christ would automatically generate forgiveness for any sins.

I think you're missing an key element of the hijackers religious belief: that their impending martyrdom guaranteed all sins would be forgiven. As a result they indulged in a lot of forbidden activities before 9/11 because they felt it was 'fair' if they were giving up their lives to the cause.

Go try to open up an adult bookstore in the middle of some Taliban controlled area and see just how 'open' things really are.

Actually I think the question is can Congress impose a tax on not being covered with insurance since the 'mandate' is not actually a criminal penalty. I think it probably could.

But if that's not the case its pretty certain Congress could impose a 'head tax' (say $3,000 per person) or income tax increase with a refundable credit if you have health insurance. Then you have your mandate well within any reasonable Constitutional argument.

Going beyond that, http://www.marginalrevolution.com/marginalrevolution/2010/01/if-only-we-had-the-stomach-for-this.html cites Paul Starr's idea which is essentially make the mandate more into an offer you can't refuse. Specifically anyone who doesn't opt to be insured will have a 5 year exclusion from receiving any subidies to buy insurance, will not be protected from the 'no-pre-existing condition' requirement on insurance companies, and so on.

I too was troubled by the Joker supposedly being an agent of choas, a 'man without a plan' pulling off such intricately, impossibly detailed convoluted plans. But then I caught the movie again and I think a different take on the Joker makes better sense.

Forget about the Joker's speech to Dent. It's his final speech that reveals his true nature. The Joker is like the Devil in the Book of Job. You recall the Devil tried to break Job by tormenting him with an array of horrors. Horrors so unlikely to all happen at once that they are almost totally implausible. I think this is what the Joker is about in The Dark Knight. He pushes and tests Batman, Dent and the people of Gotham by constantly upping the ante.

When I saw the movie I was struck with how realistic it seemed. Many seens took place during the day where Batman and his gizmos look kind of silly. Gotham isn't the semi-fantastic city from the first movie or the movies in the 1990's but a pretty real looking city. The reaction to the Joker isn't all that unrealistic as you make it out. In the real world who would have expected the Joker to not only plant a bomb inside one of his cronies but also to be able to time the arrest of himself and his crony just right so that the bomb would spring him from jail? Like the Devil, the Joker's torments are realistic in the sense that we can imagine a terrorist or criminal doing any one or a few of them but there is something borderline supernatural in his ability to gather all the torments together and keep inflicting them on the victim. There's a moment when you imagine the people of Gotham saying 'no way' as they hear not only has the Joker escaped but planted a bomb in a hospital...wait blew up a hospital but now will blow up two giant ferries filled with people! How did Job feel when he suddenly woke up with oozing sores AFTER his wife died, his kids died, his livestock died, his house burned etc.

Unlike Job, the Joker is pushing multiple people. Batman mostly passes, resisting the temptation to violate his rule against killing the criminals he fights. Dent fails, allowing himself to be sold on the idea that his committment to justice was just an illusion and the world is nothing more than meaningless chance. The people of Gotham pass after both its criminals and citizens decide they will not murder others to save their own lives.