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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Fred Thayer

Posted by WARREN MOSLER on August 24th, 2012

Sadly, looks like Fred passed away about 6 years ago.

I got to know him pretty well working with him on the concepts in the paper, and I picked up a lot of little bits and pieces info on capitalism I still find myself using now and then. One that comes to mind is that one of the costs of capitalism is the scrap heap of failed enterprises, for example, which represents real costs that didn’t work out.

Fred Thayer / Pitt professor and prolific author of letters to the editor

By Joe Smydo

To take a lesson from Fred Thayer, one didn’t have to be his student at the University of Pittsburgh’s Graduate School of Public and International Affairs.

In newspaper op-ed pieces and letters to the editor, Dr. Thayer offered sharply worded commentary on economics, deregulation, unemployment, transportation, the business of professional football and merit pay for elected officials (often peppering his sentences with parenthetical remarks).

The professor wrote to academic journals, elected officials and faculty colleagues, too, cajoling, criticizing and pushing audiences toward what he considered more enlightened thinking and more rational public policy.

“Competitive bidding on government contracts never works well because it cannot work well,” he said in a Nov. 6, 1989, letter to the Pittsburgh Post-Gazette. “When many contractors seek business (the process calls for numerous bids), each bidder knows he must either lie to win (by offering an unreasonably low price), bribe an official or join with other bidders to illegally divide the business. Unfortunately, only bribes and collusion produce high-quality work.”

Dr. Thayer, 82, of Mt. Lebanon, died Saturday at Mercy Hospital following a stroke. His wife, Carolyn Easley Thayer, called him a “very brilliant, simple man.”

Not everyone enjoyed his advice. “But most people took it in good stride,” said a longtime Pitt colleague, Professor Jerome B. McKinney.

Frederick Clifton Thayer Jr. was born Sept. 6, 1924, in Baltimore, the son of Frederick Sr. and Marian Walter Thayer. The family moved to Pittsburgh, and Dr. Thayer graduated from South Hills High School in 1942.

Mrs. Thayer said a last-minute appointment to the U.S. Military Academy at West Point may have been the only way her husband, from a family of modest means, could have gone to college. He graduated in 1945 and spent 25 years in the Army and Air Force, sometimes flying transport planes, other times driving a desk at the Pentagon and the Council on Foreign Relations.

The Thayers met at Ohio State University, when she was a senior and he was working on a master’s degree and teaching in the Reserve Officer Training Corps. They married in October 1952 and had two children, Jeffrey, of Mt. Lebanon, and Sarah Thayer Schneider of Glen Rock, N.J.

Dr. Thayer received his doctorate from the University of Denver in 1963. Jeffrey Thayer recalled his childhood awe at the 750-page document, later published as “Air Transport Policy and National Security.”

“To me, the most important thing about my dad wasn’t what he did but what he said … I just think everything he ever said just made total sense to me,” Mr. Thayer said, recalling the time he was listening to the radio when Steelers broadcaster Myron Cope began discussing a letter the professor sent him.

After retiring a colonel in 1969, Dr. Thayer joined the Pitt faculty and built a reputation as a fiery advocate for what he considered sound public policy. Students, now some of the region’s leaders, loved him; administrators, who considered him a gadfly, didn’t, Professor Donald M. Goldstein said.

“He had a wicked pen, a poison pen,” Dr. Goldstein said. “We used to tangle, too, but in a nice way.”

Dr. Thayer taught at Pitt until about 1990, then took miscellaneous teaching assignments in the United States and overseas.

“He was always what you might call an individual who took a position that encouraged you to think better or more creatively,” Dr. McKinney said. Sometimes, he said, that meant taking an edgy or unorthodox view.

In his November 1989 newspaper letter, Dr. Thayer argued that low bidders must rely on cost overruns, shoddy work and litigation to make a profit on government contracts. “What we need is legal collusion [planning], with government openly dividing the business among available contractors,” he said.

Dr. Thayer at least once skewered a colleague in print but more often sent colleagues two or three typewritten pages to rebut or enhance a point he heard them make. Dr. McKinney said colleagues sometimes wondered how he had time to write the missives he sent “streaming past your desk.”

Think big deficits cause recessions? Think again!

By Frederick C. Thayer

33 Responses to “Fred Thayer”

  1. Hoonose Says:

    Mosler knows!
    Thayer knew!
    Ruml knew!
    Jim Lacey apparently knows, and so did a couple of economists that helped the USA prosecute and win WW2: Robert Nathan and Simon Kuznets.

    http://www.amazon.com/Keep-All-Thoughtful-Men-Economists/dp/1591144914?tag=nakorn-20

    I got to page 34.

    “Orthodox economic thinking at the beginning of World War II held that taxes should finance wars on a pay-as-you-go basis.”

    A fascinating book about what looks to be how MMT won the War. I’m still reading.
    And I’m betting that we didn’t need to use all of Great Britain’s gold that they shipped to New York at the start of the war….

    Reply

    roger erickson Reply:

    @Hoonose,

    It wasn’t just Britain’s gold. By the end, there was Hirohito’s gold,
    https://www.google.com/search?q=hirohito's+gold&sugexp=chrome,mod=15&sourceid=chrome&ie=UTF-8&qscrl=1

    aka Yamashita’s gold.
    Seagraves: https://www.google.com/search?q=yamashita's+gold&aq=f&sugexp=chrome,mod=15&sourceid=chrome&ie=UTF-8&qscrl=1

    All so much to do over nothing of consequence.

    Reply

  2. Tom MH Says:

    Re the Thayer article on deficits: now that the US trade deficit has become significant relative to GDP, we need to add it to the equation (as only an MMTer knows how). Subtracting the federal deficit from the trade deficit shows that after decades of nearly all surpluses, the private domestic economy – US businesses and households – went into deficit in 1997 and stayed that way until 2009. One way or another, the economy was going to restore a surplus. It did so, unfortunately, by entering a recession.

    Reply

  3. Monica Smith Says:

    Debt is good. The alternative is theft. Debt is the natural consequence of trade and exchange not being able to be equalized at the time they are made. Time is, in fact, the critical factor that’s omitted from all economists’ analysis. Time is what makes the economy dynamic and that’s what economic models cannot compute. Dynamic systems are difficult. Weathermen seem to have arrived at a point where they can make predictions with a consistent degree of reliability for three or four days.
    All economic models are predicated on a point in time. That’s why they are unreliable. Putting in more data does not change that.
    Also, deciding what to purchase on the basis of cost is a bad idea. There may be an assumption that quality is related to cost, but there’s nothing to back that up. Price is related to what people are willing to pay and what people are willing to pay is related to how much money they have, as well as the realization that the money itself is worth nothing at all.
    Of course, recessions follow a reduction of the national debt. Paying down the debt gives money back to people who have no idea what to do with it. So, at best, they play with it.
    That the appetite for things is infinite is an illusion. Poor John McCain only had nine houses because he wasn’t aware of how many he had. God forbid he actually had to maintain all that real estate! Poor Willard Romney can’t properly care for one dog or the lawn for one house and he doesn’t know how many horses his wife has. Only clueless people, who don’t know what’s involved, accumulate lots of wealth. The people who manage it for them like that it’s not their own and losses don’t matter much. So, we have bad management and periodic economic collapse.
    And producers get the shaft.

    Reply

    vincent Reply:

    @Monica Smith,
    So true, Although, you forgot to mention the greatest deficit reducer of our era, william j. clinton. just an oversight?

    Reply

    Monica Smith Reply:

    @vincent, I though the balanced budget meme was stupid when Clinton/Gore pushed it and don’t like it much better with Obama. Anyone who’s paid close attention to budgeting (plan making) by public corporations knows it’s largely a slight-of-hand to disguise preferences and dislikes that have little relevance to the general welfare. Capital budgets, in particular, have become repositories of favors for political supporters and the pet projects of unelected bureaucrats.
    One of my regrets is having voted for Gore, despite my gut reaction that Lieberman was a disaster. Of course, I didn’t know at the time that the neo cons had all the bases covered with Cheney, Lieberman and McCain.
    I tried making up for it by staying in NH in 2008 and doing my best to insure that Clinton’s inevitability wasn’t by backing Dodd in the primary. Clinton’s refusal to admit that Iraq was a mistake was telling.

    Reply

    Ivan Reply:

    @Monica Smith, Only clueless people accumulate lots of wealth? Monica…what are you talking about? This has to go down as one of your all time worst comments. When was MMT hijacked by the ultra left?

    Reply

    IJR Reply:

    @Monica Smith,

    Monica: “Only clueless people, who don’t know what’s involved, accumulate lots of wealth.”? This is what you really believe? You’ve made some really crazy left wing comments here in the past but this is a new low.

    Reply

    Monica Smith Reply:

    @IJR, Perhaps I should have specified “monetary wealth.” Since I consider currency to be intrinsically worthless, I have to think that. It’s not a directional idea. it has to do with my perception of currency as a tool whose accumulation is worthless, if it’s not being used. Might as well hoard millions of pounds of nails or straight pins. If carpenters or seamstresses are thereby deprived, that’s bad. That the hoarder’s psyche is gratified doesn’t make it better.

    Reply

    IJR Reply:

    @Monica Smith, It’s always being used, even if not being spent.

    Save America Reply:

    @Monica Smith, “I consider currency to be intrinsically worthless, I have to think that. It’s not a directional idea. it has to do with my perception of currency as a tool whose accumulation is worthless, if it’s not being used.”

    That is where you differ from many goldbugs. They are convinced the purchasing power of thier shiny metal will buy them goods and services at any point in the future, they have more trust in the shiny metal than thier government’s promises. Warren belabored on this point often back in the day with Greenspan. Greenspan kept telling congress members the problem with social security is that people don’t trust dollars will be able to buy food/medicine in the future, only maybe a few dog biscuits, that congress must somehow reassure the people they will get some food. Yet I meet many old hippies who are certain not only will the government not be able to give them food in the future (gold or fiat system), they will in fact be turned into soylent green food. LOL!

    You wouldn’t mind that would you Monica? As Erickson would say about amoeba’s reclaiming molecules, you and erickson certainly wouldn’t mind society taking your dead bodies and reclaiming all those molecules for the growth and nutrition of the living humans?

    To your original point, I don’t want to go out in the field and fight the snakes, and sun causing skin cancer, and pesticide spraying to pick my own strawberries. So I hoard dollars, I find new ways to do useless abstractive stuff like warren does to make the zeroes grow in my account so I can even be more assured of not having to go out into the field and fight snakes.

    My hedge fund friends hoard zeroes though because they have gotten used to many young lovers, and they are convinced as they age, the more zeroes they have in thier accounts or other massive hoards of resources they can control, they can exchange for sex with young lovers, since thier old sagging bodies will no longer pull them in.

    So if you don’t view the hoarding of currency or resources as important, I guess you feel you live in a universe where you will get all the food and sex you want for your entire life? Or maybe you have learned to live by direct photonic absorption from the sun and are assexual.

    I remember arthur c clarke said he moved to indonesia because he liked to scuba dive, but I am sure he had many young lovers there too. People save today, because they want security for tomorrow, Jesus said tomorrow is not promised, live for today.

  4. Save America Says:

    “Dr. Thayer argued that low bidders must rely on cost overruns, shoddy work and litigation to make a profit on government contracts”

    http://www.bloomberg.com/news/2012-08-20/private-market-tooth-fairy-can-t-cut-medicare-cost.html

    As Salam wrote, “we have new research which finds that had competitive bidding been in place in 2009, it would have reduced Medicare expenditures by at least 9 percent while preserving access to the Medicare defined benefit for all beneficiaries.” The Wall Street Journal editorial page cited the same analysis and made the same point. Case closed?

    No, because there’s very good reason to believe that the 9 percent differential is a mirage — and that experience to date does not support claims that private plans in Medicare lower costs.

    http://marginalrevolution.com/marginalrevolution/2012/08/another-chinese-bridge-collapses.html

    Reply

  5. roger erickson Says:

    “costs of capitalism is the scrap heap of failed enterprises, for example, which represents real costs that didn’t work out.”

    Yet those costs build up a tremendous store of resilience, aka, our diversity.

    It’s resilience that supports the ability to innovate further/faster.

    Most of the genius of social species is their ability to scavenge human capital from failed enterprises and re-purpose it to other options. Not so different from an amoeba withdrawing a pseudopod that didn’t find any food. Instead of abandoning all those molecules, it recovers them, and sends them to explore new areas, or support areas already reporting good returns. All species do that internally. Social species figured out communications capable of coordinating the process externally. Some better than others, obviously, and the same communications/coordination race still continues.

    Reply

    WARREN MOSLER Reply:

    yes, agreed

    Reply

    ESM Reply:

    @roger erickson,

    The cost of failure is the wrong focus. You would have failed enterprises regardless of the economic system. I think the real cost of capitalism is that you have duplicative/redundant effort. There was obviously a lot of overhead to be captured by merging all computer companies into IBM and all car companies into GM.

    But the benefits of competition far outweigh the costs of redundancy, not just in terms of incentive (which is extremely powerful) but also in terms of the ability to adapt to a changing environment and new technologies.

    That is one reason why I find arguments in favor of a single payer health care system that depend on supposed savings on bureaucratic overhead to be unpersuasive.

    Reply

    IJR Reply:

    @ESM, A “single payer” that determines how much a doctor can be paid without protecting that doctor from abusive lawsuits or providing financial support to attend medical school will ultimately destroy the medical profession. The pay will simply not be commensurate will the investment required or the risk taken as doctor pay will become a political issue.

    Want an example? Go to your local VA hospital and see the quality of care there. Basic medicine is fine. Anything advanced or requiring judgment or innovation just doesn’t exist. Ultimately a single payer system will lead to all doctors being employed by the government, just like at your local VA.

    We’re already dangerously close to single payer with medicare. We can’t afford for this to get any worse.

    Reply

    Monica Smith Reply:

    @IJR, When the recipient of a good or service doesn’t really want it, but requires it to survive, then an intermediary is appropriate. That’s true for fire suppression services, flood control and diversion, elementary education and incarceration. Whether the intermediary should generate an enormous profit for itself is another matter. I think not, if human husbandry is to be avoided.
    The notion that skills training and education should be paid for by the trainee is really stupid and socially self-destructive. It isn’t even possible for an individual to know ahead of time what he’s going to be good at, much less what talents society needs to be developed. So, the whole notion has proved extremely wasteful. More and more people are paying to learn more and more useless stuff and the level of incompetence keeps going up.

    ESM Reply:

    @IJR,

    @Monica:

    “When the recipient of a good or service doesn’t really want it, but requires it to survive, then an intermediary is appropriate.”

    Ah, yes, nanny-statism at its finest. The people are too stupid to know what’s good for them, so we need the government to take care of them from cradle to grave.

    I think you left-wingers might be surprised at just how competent people can be when you give them some measure of responsibility for their own lives. Coddling actually causes dependency and incompetence.

    “That’s true for fire suppression services, flood control and diversion, elementary education and incarceration.”

    No, these are examples of things with positive externalities. It is an appropriate role for government to correct externalities in the marketplace (either positive or negative). My preference is for government to act on the local level, since local government is more responsive to the people and more adapted to the externality at hand. At the federal level, my preference is for adjusting externalities through a sales tax (either positive or negative). But there are areas where national collective action is necessary (e.g. creating an army).

    “The notion that skills training and education should be paid for by the trainee is really stupid and socially self-destructive.”

    No, it’s not, since it is an investment in oneself (which can certainly be made based on good information about what skills are in demand and about what skills one already has as prerequisites). Whether one pays for that investment in cash, or in blood/sweat/tears, or some combination is beside the point.

    But I suspect what you are really opposed to is the high cost of a college education. If so, I would agree with you, since I think for the most part a college education is nowhere near worth the time spent, let alone the cost of tuition.

    But who is to blame for the fact that kids are encouraged to spend $150K to party for four years and take courses which “enrich” themselves but do not sharpen any marketable skills? Have you heard any prominent person recently talk about how, despite all of the evidence, “we” need to “invest” in higher education, which of course serves only to drive up the price regardless of results?

    Is it any wonder that the two areas of the economy which have seen inflation at multiples of the general rate of inflation are medical care and education, the two areas most mucked up by the government?

    Tom Hickey Reply:

    @IJR,

    I think you left-wingers might be surprised at just how competent people can be when you give them some measure of responsibility for their own lives. Coddling actually causes dependency and incompetence.

    You have evidence for this assertion, like a study, or is this your opinion based on what, exactly?

    ESM Reply:

    @IJR,

    @Tom:

    “You have evidence for this assertion, like a study, or is this your opinion based on what, exactly?”

    And here I thought I was stating something quite banal for rhetorical emphasis. Do you seriously believe differently?

    My evidence comes from personal observation, reading, and self-introspection.

    Tom Hickey Reply:

    @ESM,

    Except that it is a right wing talking point.

    My evidence comes from personal observation, reading, and self-introspection.

    OK, anecdotal evidence perhaps (?) influenced by your personal situation. I.e. opinion.

    Neil Wilson Reply:

    @IJR,

    And yet the rest of the world manages just fine with healthcare provided on the basis of need, not ability to pay.

    It works just fine. It’s certainly good enough.

    My uncle is British and emigrated to Canada where they also have an excellent public health care system. He also spends six months of the year in Florida and it amuses him greatly how much a particular class of US citizens go on about the supposed problems with public health care system – usually lack of choice.

    Problems that are little more than propaganda frankly.

    The US has an obsession with carrying guns and opposing public health care. The rest of the civilised world is the opposite. I’ve never understood this underlying paranoia in the US national character. Why is ‘everybody else’ such a threat?

    ESM Reply:

    @IJR,

    @Neil:

    “I’ve never understood this underlying paranoia in the US national character. Why is ‘everybody else’ such a threat?”

    It’s not “everybody else.” It’s the government. The US was founded on the principle that although government is necessary, it is also always a threat to the liberties of the people and therefore protections must be provided that minimize that threat.

    The right to keep and bear a personal weapon is a protection against tyranny. I’ve never owned a gun, nor do I intend to, but I actually feel safer knowing that there are over 200MM guns held by private citizens in the US. I’m willing to accept the occasional gun-facilitated massacre, as well as, by the way, a much lower rate of violent crime than the UK has, as a side effect.

    ESM Reply:

    @IJR,

    @Neil:

    “It works just fine. It’s certainly good enough.”

    Hmmm. How would you know? No doubt most people thought healthcare worked just fine 100 years ago too. They just accepted the fact that life was short and getting sick was probably a death sentence.

    Unfortunately, there really isn’t a good example of an alternative health care system run on free market principles.

    WARREN MOSLER Reply:

    the problem is people have a genetic disposition to take care of each other.

    nothing that a bit of genetic engineering couldn’t fix…

    Neil Wilson Reply:

    @ESM

    The government *is* everybody else.

    ESM Reply:

    @IJR,

    @Neil:

    “The government *is* everybody else.”

    Not yet. Although with 4 more years of Obama, we’ll get a lot closer.

    Neil Wilson Reply:

    @ESM

    ” I’m willing to accept the occasional gun-facilitated massacre, as well as, by the way, a much lower rate of violent crime than the UK has, as a side effect.”

    UNODC rate of intentional homicide per 100K of population

    US: 4.2
    UK: 1.2

    Which is an independent survey – avoiding the skew of locally produced crime statistics. In the UK we have a lower tolerance of what we consider to be violence. What would be just a case of bad manners in many countries is violent affray in the UK.

    ESM Reply:

    @IJR,

    @Neil:

    So would you claim that this article which reports that the rate of violent crimes is 2,034 per 100K people in the UK and only 466 per 100K people is all wrong because of an apples to oranges comparison?

    ESM Reply:

    @IJR,

    @Warren:

    “the problem is people have a genetic disposition to take care of each other.”

    If that were true, then it is strange that we need to have governments coerce people to do it.

    Neil Wilson Reply:

    @ESM,

    You’re quoting the Daily Mail.

    You might want to use the Daily-Mail-O-Matic headline generator to get a feel for the type of rag it is.

    ESM Reply:

    @IJR,

    @Neil:

    Yes, we have a similarly untrustworthy and partisan rag here in the US. But although the articles are very misleading, the raw data it reports is usually correct.

    You have avoided answering my question, however. There is a big difference between 2,034 violent crimes per 100K, as reported by the UK government, and 466 violent crimes per 100K, as reported by the US government. Do you believe that this difference is due entirely to different reporting methods?

    Obviously there are other factors involved besides just gun control and reporting methods, but I think generally allowing law abiding citizens to own guns reduces crime, if not perhaps the rate of gang-related homicides.

    ESM Reply:

    @IJR,

    Crap. Messed up the link. Should have been http://www.nytimes.com.

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