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What We Read Today 25 August 2014

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.

young-and-in-debt

  • In 2013 British Police Fired Guns: 3 Times (Public Radio International, Reader Supported News) Hat tip to Rob Carter. In 2012, 409 people were shot and killed by American police in what were termed justifiable shootings. In that same year, British police officers fired their weapons just once. No one was killed. In December, PRI's The World reported on Icelanders grieving after their police force killed a man - for the first time in the country's history as a republic.
  • Recent articles about Ferguson:

Timeline for a Body: 4 Hours in the Middle of a Ferguson Street (Julie Bosman and Joseph Goldstein, The New York Times)

Latecomers Bring Fresh Outrage To Weary Ferguson (Martin Kaste, NPR)

Schools in Ferguson Area Prepare for an Emotional Opening Day (Motoko Rich and Mosi Secret, The New York Times)

  • Articles about wars elsewhere in the world:

Gaza highrises flattened by Israel (Harriet Sherwood, The Guardian)

Gaza conflict: Erez crossing 'attacked' amid Israel raids (BBC News)

Bombings kill 42 in Iraq after Sunni mosque attack (Sinan Salaheddin, MSN News)

Republicans urge airstrikes in Syria to defeat ISIS (Leigh Ann Caldwell, CNN)

$1.5 Trillion and Counting: What New Involvement in Iraq Means for Federal Spending (Lindsay Koshgarian and Jasmine Tucker, National Priorities Project)

What Are Obama's Options for Stomping Out ISIS in Iraq and Syria? (Erik Ortiz, NBC News)

Ukraine: Most of Russian convoy destroyed (CNN Video)

Rebels parade captured Ukrainian soldiers in east as Kiev holds military procession (Fox News)

Ukraine Says Army Spending Raised As Merkel Warns on Gas (Daryna Krasnolutska and Tony Czuczka, Bloomberg)


There are 13 articles discussed today 'behind the wall'.

The first 6 articles today concern theories of money.

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  • Ludwig von Mises, The Theory of Money and Credit [1912] (Ludwig von Mises, Harold E. Batson, Treanslator, Online Library of Liberty) Mises presented a comprehensive theory that encompassed both commodity and credit theories of money, presenting convincing arguments concerning the concept of "sound money". He discusses how there is general acceptance of inflation because it presents a beguiling way for debtors to reduce the burden of their obligations and for producers because it creates for them the appearance of profit. Econintersect: In our reading of Mises so far we have yet to find where he explains how profit (and payment of interest) can occur in a sound money system where the value and quantity of money are restricted by any "standard" other than one which somehow would adjust the two parameters to create more money that would go to profit and interest. If such additional money were not created then profit and interest could only occur for some with losses for others. We have yet to see where such segregated losses are justified as preferred to the generalized "losses" from inflation.

The lyrical and sarcastic prose of Mises is evident frequently. Here is one paragraph where (in discussion of inflation) he castigates the Chartalist perspective which is a basis for the modern fiat money systems in use today:

For the naive mind there is something miraculous in the issuance of fiat money. A magic word spoken by the government creates out of nothing a thing which can be exchanged against any merchandise a man would like to get. How pale is the art of sorcerers, witches, and conjurors when compared with that of the government's Treasury Department! The government, professors tell us, "can raise all the money it needs by printing it."4 Taxes for revenue, announced a chairman of the Federal Reserve Bank of New York, are "obsolete."5 How wonderful! And how malicious and misanthropic are those stubborn supporters of outdated economic orthodoxy who ask governments to balance their budgets by covering all expenditures out of tax revenue!

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  • What is money? (A. Mitchell Innes, The Banking Law Journal) Hat tip to Stephanie Kelton. This is a thorough review of the origins of money written over 100 years ago and is a comprehensive refutation of the commodity theory of money, and a special case thereof, the metallic theory of money. This is an example of a fact based thesis which is not accepted by some who have a different logical argument without factual support. How often are we swayed by the presentation of "the way things ought to be" with the rejection of "the way things actually are"? See also next article.
  • Marx’s objections to credit theories of money (Anitra Nelson, Mt. Holyoke College) Marx's rationalization of the labor theory of value required that money be defined as a commodity. In fact the rationalization could be extended to credit as moeny, but Marx never did that because of his later tendency toward a political view that "social justice and human development require a world without state and money". A major surprise in reading this paper is the view of Marx as a Libertarian, a marked contrast to his political followers, the Communists, who were the ultimate statists.
  • The Development of the Theory of Money from Adam Smith to David Ricardo (Jacob H. Hollander, Quarterly Journal of Economics) This 1910 paper examines the inadequate definition of economically required amount of money in Smith's "The Wealth of Nations" and how it led over a generation to a clearly stated metallic theory of money summarized in the 1810 paper "High Price of Bullion".
  • Libya's Breakdown (Tarek El-Tablawy, Bloomberg) El_tablawy offers that Libya today may be "better equipped to turn out militants than oil".

Libya-oil-production-bloomberg-2014-aug-24-600px

  • The 11 Least 'Livable' Cities In The World (Elena Holodny, Business Insider) Yesterday we had a list of the 10 most livable cities in the world. Today it's the most unlivable. Hint: Stay away from Africa (8) and Asia/Oceana (3).
In the United States, for-profit universities have a six-year graduation rate of 22%, far below the 60% achieved by not-for-profit institutions. The former spend 23% of their revenue on recruiting new students, compared with a mere 1% spent by non-profit institutions. At the primary and secondary levels, charter schools (publicly funded independent schools) run by for-profit companies are 20% less likely than non-profit institutions to meet proficiency standards, with some of the weakest results coming from the largest for-profit institutions. Even companies that provide textbooks, educational software, management systems, and student loans fail to achieve the level of excellence reached in other sectors.

Read also: Get Predatory Colleges Out of Job Training (Editorial Board, The New York Times)

oil-energy-gdp

And the cost of energy will put pressure of compensation to labor.

wages-oil


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