DISQUS

I am reminded of a story I have heard about Ludwig von Mises at a Mount Pelerin Society meeting in the late 1940s or early 1950s. After a discussion of taxation and redistribution, Mises said to the largely conservative group, "You are all socialists." In the appendix to The Constitution of Liberty Hayek says that conservatives have more in common with socialists (collectivists) than they have in common with classical liberals. The collectivism of the two former groups gets manifested in different ways depending on the circumstances. But collectivism it is. Permit me to advertise my recent blog on a similar subject:
http://thinkmarkets.wordpress.com/2009/05/20/wh...

The problem is that data are all too abundant. Any association must involve lags, identification of the relevant and only the relevant variables, etc. I am not a macroeconomist. So as a relative non expert I place a lot of reliance on theories that seem strong to me. Furthermore, when so wide a spectrum of economists agree on the interrelation between real and monetary-financial variables, I am loath to dump all that on the basis of Mulligan's "lack of association." This doesn't mean I am not willing to be convinced by data. But I'd have to see a lot more -- plus good theory -- to change my mind.

Mulligan is just wrong. The real and financial sectors are intimately related as almost every economist knows: Centainly both Keynes and Hayek would agree on this point.