I think in todays modern day finance is not applicable to the truth that Adam Smith discussed.

And you can bet that in Smith’s day, the people who wanted the government to crack down on engrossing and forestalling were just as willing as you are to grant the value of speculation in theory, but considered their particular circumstances to be different.

My purpose here is simply to refute your claim that Smith did not approve of commodity speculation. That is demonstrably false.

Of course, as is to be expected, you ignore this and continue to pretend that “times were different back then.” No, they were not. People have always and will always fear and misunderstand commodity speculation, just as people have always and will always fear and misunderstand international trade. Some things never change, and there will always be people like Muirgeo around who desperately need but adamantly refuse economic education.

my point on libertarianism is that it leads right back to what you call conservative crony capitalism. When deregulated corporations, bankers and Wall Street find easy profit in using their wealth to get new rules favoring their positions and digging into the public trough.

And the pin drops.

No. It doesn’t. It bears burden of proof with such a silly charge. See my cited quote in my previous post in this thread.

This is always where it wants to go. This is always its central point. This why I say it is duplicitous when it talks about free markets. Take note. And it has had this explained to it far too many times to waste time explaining and deconstructing this sophism again. Like I said already: it doesn’t care. It needs crony corporatism and libertarianism to be the same thing in order to make its silly assertions. It needs to overlook everything it has ever been told to make an argument. Basically it needs Peter and Paul to be the same person in blurry kinda way whose bluriness escapes it because it doesn’t care.

It thinks its on to something but it is really just chasing its own tail. It doesn’t get it. It doesn’t care.

And even when many libertarians in the past have flat out contradicted this whole sophism right to its face in plain English at Cafe Hayek…even Dr. Boudreaux and Dr. Russ Roberts themselves have done it…, it evades it, ignores it and shifts its point. Again recall my quote:

It likes to criticize libertarians for supporting things that they do in fact oppose and opposing things that they do in fact support. It also likes to conflate corporatism and free markets when criticizing free markets and separating them when trying to offer a hollow and hypocritical word of support for free markets.

In short, it is a duplicitous character that is not to be taken seriously.

I meant every word of it and it is 100% accurate. Feed it at your own risk.

John to summarize my point on libertarianism is that it leads right back to what you call conservative crony capitalism. When deregulated corporations, bankers and Wall Street find easy profit in using their wealth to get new rules favoring their positions and digging into the public trough.

In principle libertarianism sounds good but in practice it doesn’t work as shown by its complete lack of existence in any natural system. It is Darwinistically selected against as an unfit specimen on which to based human society. It’s a cultural evolutionary dead end. My simple request for evidence of a successful libertarian society always goes unchallenged and it is for that reason I favor the idea of well regulated markets as opposed to those where the rules are made by a privileged few. THAT’s IT! Nothing sinister just a pragmatic yet admitted imperfect approach backed by worldly evidence and in my opinion the closest one can get to using competition and market forces for the good of all.

Great post. With respect to this paragraphs that you quote, I don’t think the guy has the logic right. Everybody knows that correlation does not imply causality, but one of the hardest things to get your head around as an analyst is that in a complex system, lack of correlation does not imply lack of causality. Unless we are confident that we have the measurement period right and have properly accounted for confounding variables, we will often see non-correlated variables that, in fact, have a causal relationship.

This doesn’t mean that I have an opinion one way or another about the guy’s conclusion, just that I don’t think his evidence supports his assertion.

Let’s recall what I pointed out about its behavior:

It likes to criticize libertarians for supporting things that they do in fact oppose and opposing things that they do in fact support. It also likes to conflate corporatism and free markets when criticizing free markets and separating them when trying to offer a hollow and hypocritical word of support for free markets.

In short, it is a duplicitous character that is not to be taken seriously.

I do not like Limbaugh nor have I ever listened to him EVER. I’m not a conservative, nor a Republican. But like at Cafe Hayek, where Muirgeo was beaten to a pulp on virtually every deceptive faux-argument it ever made, it likes to treat people who see its BS as being its favorite conservative crony capitalist caricature. It likes to accuse people who don’t share its misguided solutions or perception of a problem as being part of the real problem. It continues to suffer from an inability to see arguments from libertarians and understand them as stand alone and consistent arguments that criss cross through the stereo typical monoliths of liberalism and conservatism but are not substitutes for them.

I’ve seen its pointless quibble and inaccurate statements far too often to be lured into them anymore.

It’s not even MY point that is being made. It is from Michael Greenberger a Former director of the Commodities Futures Trading Commission.

If you go to demandside.net you can download the the 7 minute podcast where he makes his case which specificallly adresses any issues that Michah brought. The full interview is on C-SPAN. So take some time away from Rush Limbaugh and go listen to a CSPAN interview.

John it is you who rebuts every item with no counter argument just a claim that everything I say is a straw-man argument without ever actually addressing the points being made.

The fact is John people like you, pavers you might be called, who deny the massive transfers of wealth that are going on based on market manipulation NOT based on standard competitive markets, it is you and your ilk that are pavers of the road to serfdom. I know not your motive weather it be personal profit, sheer ignorance or some grotesque Stockholm sort of syndrome but you are paving either way.
And as roads and debates go its rather fine with me looking down on you walking your low road. I simply wish to air truth whatever it ay be and Mr Greenberger’s interview is critical not to be passed over as some sort of straw-man argument.

Muirgeo does not care. It seeks only to twist and evade. It is not interested in engaging your point honestly.

A clear indicator is the classic “So, [insert strawman]…” type argument. That means it has nothing to say and retreats from detail to a more comfortable glossed-over meta-generalization. It would discuss/try to understand why speculators exist and hold the discussions of particular speculators on an honest playing field. It does not do this as you can see.

You waste your energy. It is a troll. Plain and simple. If it wanted to honestly discuss your points, you would be in a different conversation right now.

It plays dumb and obfuscates because it does not care.

I think in todays modern day finance is not applicable to the truth that Adam Smith discussed. The reality is that financial institutions once dedicated to mobilizing funds for productive investment have transmogrified into a predatory, risk-creating, speculative driven, global financial system engaged in the unproductive extraction of wealth from taxpayers and the productive economy.

Pretty much any paper by Sanchirico is worth reading, especially his ones on how inefficient norms develop and persist.

Michael Greenberger, a former director of the commodities and trade commission explains well on C-SPAN how speculators are responsible for 1/3 of the price of oil. These same Enron types create asset bubbles tae huge chunks of the profits away from the honest hard working and add nothing to the economy. They don’t if operate under an principles Adam Smith would recognize much less advocate.

Muirgeo, as usual, could not be more wrong. Adam Smith was a huge advocate of commodity speculation.

The story is told well in Adam Smith’s discussion of the Corn Laws in The Wealth of Nations. Smith reviewed 18thcentury public attitudes toward two new forms of wealth creation: “forestalling” and “engrossing” (terms picked for the same connotative reasons that “junk” and “hostile” are the adjectives of choice for non-traditional bond financing and changes in corporate control today). “Forestalling” was a new economic activity involving low-priced corn purchases during times of plenty in the hope that the corn could later be resold at a profit. “Engrossing” described a similar arbitrage activity focusing on price differentials among different locales within England. Engrossers, for example, bought low in Birmingham and sold high in London — or rather they hoped to do so. Both activities had become possible only as storage and transportation costs dropped.

Forestalling and engrossing were soundly criticized as sterile middlemen activities that produced no new corn but only raised prices. Such speculation, the conventional wisdom held, could only hurt the general public.

However, Smith explained clearly that such middlemen played an essential role. If speculators predicted scarcity and it failed to materialize, they lost money. They not only had to sell the corn at a loss, but also pay its storage and/or transportation costs. When the scarcity was real, however, Smith explained that “the best thing that can be done for the people is to divide the inconveniences of it as equally as possible through all the different months, and weeks, and days of the year” and, of course, across the nation. Smith noted that the corn merchant — the specialist in this commodity — was the most appropriate party to carry out this “most important operation of commerce.”1

Moreover, Smith noted, the risks were clearly shifted from the consumers to these specialists. When engrossers and forestallers were wrong (a situation all too likely in commodity markets) and prices fell rather than rose, they felt the consequences of their follies. On the other hand, when these speculators were correct and shortages did occur, both they and the citizenry benefited. As Smith explained, “By making [the people] feel the inconveniences of a dearth somewhat earlier than they might otherwise do, he prevents their feeling them afterwards so severely as they certainly would do, if the cheapness of price encouraged them to consume faster than suited the real scarcity of the season.”2

Smith detailed the consumer advantages of making uniform the supply of foodstuffs over time and avoiding the feast or famine problems that plagued untold generations before there were middleman.3 In modern terms, forestalling and engrossing were creative forms of voluntary risk-shifting, in which risks were transferred from risk-averse consumers and growers to risk-taking speculators.

Smith stated that “after the trade of the farmer, [there is] no trade contributing so much to the growing of corn as that of the corn merchant.”4 He continued, “The popular fear of engrossing and forestalling may be compared to the popular terrors and suspicions of witchcraft. The unfortunate wretches accused of this latter crime were not more innocent of the misfortunes imputed to them, than those who have been accused of the former.” To Smith, “the corn trade, so far at least as concerns the supply of the home-market, ought to be left perfectly free.”5

The reader will notice the clear similarity between the speculators and arbitragers of today and Smith’s corn merchants. Indeed, the forestallers and engrossers were simply the first workers specializing in risk management, information provision, and information processing. As in Smith’s time, such middlemen provide society with services that are no less valuable because they are intangible; speculators are willing to take risks that consumers would prefer to avoid.

It is still arguing points to people who don’t disagree and believe what Muirgeo argues more than it does. The Irony.

Another point, it pretends to tell people what is productive and what isn’t.

Of course, underneath it all, do not forget that it is a social democrat of the most common order. Make no mistake. It likes to be duplicitous.

Isn’t there some evidence that redistribution (broadly defined) helps with economic growth?

To clarify I see the current redistibution as one of pretax dollars going from the honest working class to the wealthy market and policy manipulators.Hedge fund managers and market speculators aren’t adding to the prodcitve economy they are taking from it and re-writing the rules to make it easier for them to take more still.

And now with them having manipulated the dividend tax Paris Hilton is only paying 15% on her earnings while I was over 25% with the AMT/ Medicare and SSI.