Originally posted by Palynka
Same goes for the PIH, innit?
This is why so many supposed libertarians seem to have gotten stuck in Economics 101. It only works if you keep it simple and unrealistic.
Consumption smoothing over the lifecycle is in the data. Anyone constructing a model of lifetime household behavior has to take this behavior into account.
The QT of M has lost it's relevance beyond intution because it's so damn hard to measure money anymore.
Supposed libertarians (at least the rabid American kind) get stuck because they have a faith-based approach to economics. Free markets always work best, and when a free market fails another free market grows up to rescue it. It's pure bollox, but some people just seem to like the idea.
As a first principle, I'm for government not directly manipulating the price or quantities in a market. Nevertheless, you and I both know that there are classic cases where the free market outcome is not socially optimal (even given the Coase theorem). Informational problems and commitment problems, as well as public good provision and some cases of externalities are all cases where some government intervention may be warranted.