05 Oct 2013

Outrage Over Outrage Over Government Shutdown: I’m Starting With the Man in the Mirror

Politics 161 Comments

(That’s not a typo in the title.)

Like most libertarians, I have been slightly amused by people freaking out over the government shutdown. Note, I’m not talking about people whose direct livelihood is affected, which includes not just federal employees but also DC-area cab drivers and restaurant owners. Rather, I’m talking about random commentators on the internet/media who are horrified at the principle of the federal government temporarily interrupting its production of greatness.

One knee-slapper is that without the government, human beings wouldn’t be able to enjoy a forest or mountain. (This reached absurdity when the federal Park Police tried to bar access to Mt. Vernon, even though it’s privately funded.)

Steve Landsburg pointed out another example, where somebody was complaining about not being able to get an export license as a problem of too little government. Steve pointed out, of course, that the reason the guy couldn’t export his merchandise was that government officials were actively preventing him from doing so; that’s not a problem of too little government. (In other words, it’s not as if Barbary pirates were barring the guy from international commerce, and he needed the US Navy to provide an escort if only John Boehner weren’t such a jerk.)

The same analysis applies to passport holdups and other inconveniences of that nature: The government says: “We will send guys with guns to your house and throw you in a cage if you don’t do XYZ,” and then when members of the ruling class get into a squabble, they make it literally impossible to do XYZ. Call that what you will, but it’s not a problem of anarchy.

* * *

OK, now that I hope I’ve convinced my libertarian readers of my bona fides, let me point out how my conscience dinged me on this topic. (I hate when that happens!) In the comments of Steve’s post, somebody wrote to Steve (who had been in his car listening to a radio story about the guy needing a license to export his wares):

So you’re in a car, on a road, driving safely in traffic, listening to a radio and complaining about government.

In a car, on a road, driving safely in traffic, listening to a radio.

Got it.

Does everyone see what this wiseguy is saying? He’s claiming that Steve is a hypocrite for making the point about export licenses, since he was (a) in a car, (b) driving safely, and (c) listening to a radio. I read this comment several times, and I’m 99% sure the guy is saying that there would be no cars, roads, traffic safety, or radios without the government, and so Steve needs to count his blessings before making some pedantic point about trade restrictions. Not only that, but the guy was being sarcastic about it, like his position was so self-evident that only an idiot could fail to see the irony of Steve objecting to trade restrictions from the comfort of his car.

So now that I hope I’ve reproduced similar feelings of outrage and annoyance among my libertarian readers, let me bring up something awkward: Our side does the exact same thing when left-wing anarchists protest capitalism, wearing clothes produced in foreign sweatshops and using cell phones to coordinate their movements. (I tried googling but couldn’t find an example, unfortunately.) So if you were (a) as annoyed as I was with Steve’s critic above, but (b) thought it was hilarious when the posters went around Facebook of 23-year-old socialists marching with products made by corporations, you might want to step back and amplify your tolerance for your fellow human beings.

Last point: Please don’t say: “Bob, we’re right and they’re wrong. Capitalism produces cell phones, and it could produce roads if only the government would let it. So that’s why our ridicule is funny, but theirs is stupid.” I don’t think that’s sufficient. The reason Steve’s critic is so annoying, is his smugness over what is a very debatable proposition. So by the same token, a left-wing anarchist could very understandably be upset at smug jokes and accusations of hypocrisy, the premise of which is that, “You need giant corporations and massive inequality in wealth in order to have cell phones.” They think that is a debatable proposition.

161 Responses to “Outrage Over Outrage Over Government Shutdown: I’m Starting With the Man in the Mirror”

  1. Z says:

    I’m amused whenever people make arguments that they would never apply across the board. I overheard a conversation yesterday when someone said “It’s democracy, and a law was passed. Get over it.” If they chose to apply that consistently, then fine, but I doubt it.

  2. Silas Barta says:

    Agree with your point in the second. I have to dispute this though:

    the reason the guy couldn’t export his merchandise was that government officials were actively preventing him from doing so; … it’s not as if Barbary pirates were barring the guy from international commerce, and he needed the US Navy to provide an escort ….)

    Isn’t it? Landsburg didn’t link the story, but it could very well have been something similar. For example, perhaps the foreign government (to which he’ll ship) only trusts goods if the exporter’s government has approved it — similar to how the UK will only admit Americans with a US-government-issued passport, and how your travel problems wouldn’t be solved if the feds just got out of the way. (Yes, that would make their border control “the pirates”.)

    And I know it’s kind of silly to justify government on the grounds that solves the problems of government, but it’s not as clear-cut as you make it.

  3. Innocent says:

    Okay, so here is my take, barring you make a living by taking money from the Federal Government, and that Government has not actively been trying to keep you from visiting one of the great national parks etc. Is you life really any worse off that the Federal Government is shut down?

    I am not saying there is not a place for Government. Nor do I suggest that a certain amount of regulation is not needed to organize and move forward. However If the Federal Government were to shut down for 6 months of a year, allow states to take over the national parks etc, would we really miss them. Heck I would argue you could cut the military in half as well and be fine, go ahead and create weekend warriors for the other half in case we NEED to go to war.

    As far as international trade goes I agree that THAT is an aspect of Federal Government that should not be placed as nonessential. But that is because you are actually dealing with foreign powers which is one of the main purposes of HAVING a Federal government…

  4. David R. Henderson says:

    Bob Murphy,
    Good point but what makes it good? It’s that you’re saying people shouldn’t be smug. I agree. But I was already critical of libertarians who are smug about those things.

  5. Daniel Kuehn says:

    The nice thing about being a pro-market, pro-government guy is that I can laugh at both memes.

    For what it’s worth, I didn’t read that comment as that those things wouldn’t exist, just that the state of development we live in is a function of having government.

    Of course, it’s also a function of having the market.

    • Matt Tanous says:

      “The nice thing about being a pro-market, pro-government guy”

      Holding inconsistent positions simultaneously allows you to do all sorts of things.

      • Daniel Kuehn says:

        Since when have governments and markets been opposite things? Or am I misunderstanding you? In which case what are you talking about?

        • Bala says:

          Since when have the system of voluntary exchange and the system of violent exchange ever been anything other than opposites?

          • Lord Keynes says:

            Law and order and enforcement of contract are the basis of any workable market system.

            That kind of coercion , far from being incompatible with markets, is the reason why they can properly function at all.

            Even Rothbard agreed:

            “Every legal system needs some sort of socially-agreed-upon cutoff point, a point at which judicial procedure stops and punishment against the convicted criminal begins.”

            • Major_Freedom says:

              “Law and order and enforcement of contract are the basis of any workable market system.”

              The state is an institution of neither laws, nor order, nor protector of contracts.

              “That kind of coercion , far from being incompatible with markets, is the reason why they can properly function at all.”

              Violations of private property rights is not necessary, and cannot guarantee, protection of private property rights, which is what MARKETS actually consist.

        • Major_Freedom says:

          “Since when have governments and markets been opposite things?”

          Since governments were grounded on disrespect and violations of private property rights, and markets were grounded on a respect and defense of private property rights.

          Are you for real?

          The reason governments are antithetical to markets is the same reason the Soviet regime or the Nazi regime were antithetical to markets. The only difference between then and now is a matter of degree, which by the way is shrinking every year it seems.

          • Lord Keynes says:

            “markets were grounded on a respect and defense of private property rights.”

            Except coercion is needed to defend private property rights and enforce contracts.

            One of government’s major functions has been to sort out private disagreements, including commercial ones.

            The view that MF is peddling is the extremism of Rothbardianism.

            It is not even shared by all Austrians:

            There are people who call government an evil, although a necessary evil. However, what is needed in order to attain a definite end must not be called an evil in the moral connotation of the term. It is a means, but not an evil. Government may even be called the most beneficial of all earthly institutions as without it no peaceful human cooperation, no civilization, and no moral life would be possible. In this sense the apostle declared that ‘the powers that be are ordained of God.’
            (Mises, L. von. 2007. Economic Freedom and Interventionism: An Anthology of Articles and Essays (ed. B. B. Greaves), Liberty Fund, Indianapolis, Ind. p. 57).

            • Bob Roddis says:

              What part of the “the initiation” of force (as opposed to “force”) escapes your brilliant mind?

              Go ahead. Throw out the common law concepts of property, torts, crimes and contract breach and recreate the wheel. Oh wait. The “progressives” already tried that.

              And for the second time, “since libertarians are actually for more improved ‘governance’ of the voluntary variety, these statist attacks do not really engage what we are proposing. How odd is that?”

              http://consultingbyrpm.com/blog/2013/10/outrage-over-outrage-over-government-shutdown-im-starting-with-the-man-in-the-mirror.html#comment-74936

              • Bob Roddis says:

                1. The problem with “states” as opposed to voluntary governance is precisely the less than haphazard way the rulers are chosen.

                2. Universal slavery was a ubiquitous historical reality.

                3 Nobody denies that states have historically made and enforced rules of commerce.

                4. And social democracy in multi-ethnic societies tends to lead to ethnic strife because once the largest ethnic group wins the election, it “owns” the government and the government owns society and its assets. See Africa. See Iraq.

                http://tinyurl.com/o2gcany

                BTW, what’s the difference between “social democracy” and “democratic socialism”.

            • Tel says:

              One of government’s major functions has been to sort out private disagreements, including commercial ones.

              Historically this is highly inaccurate. Look at the old Anglo Saxon concept of “moot”, which was precisely for sorting out private disagreements at the local community level without needing to resort to the use of force by a King or Lord.

              Look at the basic idea of a jury of one’s peers… emphasis on “peers” not public servants, or appointed officials but just randomly chosen regular Joes.

              Government may even be called the most beneficial of all earthly institutions as without it no peaceful human cooperation, no civilization, and no moral life would be possible.

              Again, historically not true (I don’t care who said it), there has been trade long before government existed, and trade operated over huge distances, much farther than any powerful clan or King could extend political or military control. Flint was traded right across Europe pre-dating any written history (we know because the flint artefacts have been found), Baltic amber was also an early trade commodity, then there was copper, tin, gold, silver and later iron, silk, spice, drugs. These commodities travelled across the known world on trade routes, completely irrespective of how many dominions they passed through in the meantime.

              Trade is the great common ground of all humans.

              The modern drug trade is illegal everywhere, adamantly opposed by government, yet it continues unabated. How can this be possible when all human cooperation depends on government? Criminal gangs simply don’t exist I suppose?

              • Lord Keynes says:

                “Historically this is highly inaccurate. Look at the old Anglo Saxon concept of “moot”, which was precisely for sorting out private disagreements at the local community “

                And I suppose citing some medieval examples of private torts from Anglo-Saxon tribal societies refutes the evidence of numerous ancient law codes of states?

                Ever heard of Hammurabi’s Code, from about 1792 BC-1750 BC?

                With its detailed laws governing all sorts of things including commercial law?

                http://en.wikipedia.org/wiki/Hammurabi#Code_of_laws

                Probably slipped your mind, like a lot of other things.

              • Ken B says:

                A moot is part of government Tel.

            • Major_Freedom says:

              “Except coercion is needed to defend private property rights and enforce contracts.”

              You’re equivocating the term “coercion.”

              Coercion, properly speaking, is not using DEFENSIVE force to stop initiations of force. A potential victim of rape or murder or theft is not “coercing” their attacker. They are stopping coercion from the attacker.

              The state is grounded on violations of private property rights, which is incompatible with the market process, since the market process is grounded on a respect and protection of private property rights.

              “One of government’s major functions has been to sort out private disagreements, including commercial ones.”

              It cannot be a solution to violations of private property rights when it itself violated private property rights.

              George robbing Peter to pay Paul in order for Paul to protect himself from Phil’s aggression, is not consistent with the market process. It is creating new violations of private property rights.

              “The view that MF is peddling is the extremism of Rothbardianism.”

              The view you’re peddling is antithetical to markets. The “free market advocates” you are referring to are not actually arguing in favor of a free market. They are arguing for a “mixed economy” where the most important service for humanity, namely, the protection of life and property, is systematically violated by a coercive, non-consensual territorial monopolist.

              It doesn’t matter whose name you attach to laissez-faire, what matters are the principles involved.

              “It is not even shared by all Austrians”

              I’m not a cultist like you who seeks to attach ideas to people, and then attacking and defending the people instead of the argument and principles themselves.

              • Lord Keynes says:

                “Coercion, properly speaking, …

                “Properly speaking” only according to your fallacy of equivocation.

              • Major_Freedom says:

                No, it is a correction to your fallacy of equivocation.

                Nobody would seriously entertain the notion that a victim of rape is “coercing” her attacker by defending herself with a gun or knife.

              • Major_Freedom says:

                If you want to play semantics, and insist that the victim can be viewed as “coercing” her attacker, then we can just use a different word to distinguish aggressive violence from defensive violence, and then I will point your attention towards the fact that the state engages in the former, which is mutually incompatible with the latter.

            • Matt Tanous says:

              “Mises disagreed, and because you are Austrians, you must take Mises’ word as law.” – LK

              I think, LK, what you are really doing is obfuscating the reality of economics – that it all depends on how much we spend on beer.

              “To justify any given amount of employment there must be an amount of beer consumed sufficient to absorb the excess of total output over what the community chooses to spend on everything else but beer when employment is at the given level.” – Henry Hazlitt (making fun of Keynes’ absurd theories)

    • Bob Murphy says:

      DK wrote:

      The nice thing about being a pro-market, pro-government guy is that I can laugh at both memes.

      What’s funny is that at first, I thought Daniel was saying, “I am above the fray; I can see that neither side should be smug.”

      But upon a second reading, I think Daniel is actually saying, “I am doubly smug: I laugh at the hypocrite fools on both sides of this issue.”

      • Daniel Kuehn says:

        Meh – I can laugh at memes without thinking they’re the greatest arguments.

        You don’t see me levying those memes against libertarians or OWS types, do you? Maybe on a rainy day I’ll pull something like that to warm my heart, but not generally.

  6. Daniel Kuehn says:

    FWIW I would be much more upset if the market got shut down than if the government got shut down.

    USSR <<<<<<< US, first wee of October 2013

    • David R. Henderson says:

      Like.

    • Silas Barta says:

      Kinda like Thomas Jefferson on newspapers lol am I rite?

    • vidyohs says:

      Permanently Mr. Kuehn? I seem to remember a couple of years ago, a youngster with your name saying on the Cafe Hayek that “There might be something to this socialism that we might want to look at more closely.” Changed your mind, eh?

      • Daniel Kuehn says:

        I’m not sure I follow. Context?

        I’ve opined on occasion that it’s not inconceivable in the far future we might rest on our developmental laurels and just be happy socialists. I think it’s unlikely. I’d personally rather push forward. But I think at some point of human development it’s plausible. Was that the context?

        • Matt Tanous says:

          “I’ve opined on occasion that it’s not inconceivable in the far future we might rest on our developmental laurels and just be happy socialists.”

          Being a socialist is far less of a “resting on laurels” and far more a “let’s see how far we can slide back towards mass poverty and starvation!”

          • Major_Freedom says:

            By sitting back on one’s laurels and hope that others actually do what the socialist in name only is too cowardly to do.

      • Ken B says:

        In the context of Bob’s point this is a wonderfully ironic comment.

    • Tel says:

      The USSR never shut down markets, they make them illegal but regardless of that markets still existed and operated.

    • vidyohs says:

      LOL, DK, in the context that I am familiar with your love of government as evidenced by your time spent on the Cafe, and somehow you never seemed to have met or talked about a statist or socialist (redundant) that you didn’t support or express admiration for. Paul Krugman being one of your heros. And, anyone who knows your past is expected to believe you would rather have government shutdown and markets left open? No, I don’t think that is going to happen.

  7. Matt Tanous says:

    There is a slight difference, in that the socialists could not get iPhones or whatever. From their perspective, they have better (i.e. closer to socialist) options. They don’t choose them. Far different than, say, using the monopoly government mail.

    That said, still no reason to be smug. Or to use logical fallacies like “Person X contradicts his own claims of ideal.”

  8. Tel says:

    I think Obana has blundered on this one, some of the stuff he is trying to shut down is so transparently stupid (like chasing away people visiting some memorial wall, which costs more money to chase them away than to do nothing), only a tiny percentage of the population are going to fall for it.

    In many ways the Republicans have successfully made their point by manoeuvring their opponents into behaving unreasonably.

    • Z says:

      I don’t know, I don’t think the memorial type stuff is even in the mainstream news networks.

  9. Bob Roddis says:

    Since libertarians are actually for more improved “governance” of the voluntary variety, these statist attacks do not really engage what we are proposing. How odd is that?

  10. Bob Roddis says:

    As LK teaches us, commercial matters have usually been enforced by states. Except for those ubiquitous and universal informal credit transactions that David Graeber describes. Here’s a painting of the historical method of states resolving commercial disputes:

    http://www.flickr.com/photos/bob_roddis/8525140770/

    • Lord Keynes says:

      “Except for those ubiquitous and universal informal credit transactions that David Graeber describes. “

      Government enforced laws governing private debt contracts and repayment of debt are ubiquitous throughout history.

      Do you even think before opening your mouth?

      • Bob Roddis says:

        What does that have to do with improving the form of governance to a voluntary form which would preclude the wars, slavery, rape, pillage and genocide that accompany “traditional” non-voluntary “government”?

      • Major_Freedom says:

        “Government enforced laws governing private debt contracts and repayment of debt are ubiquitous throughout history.”

        No they are not. There have existed private enforcement of agreements.

  11. Bob Roddis says:

    LK’s an Austrian and doesn’t know it:

    Thus Eiteman’s book Price Determination: Business Practice versus Economic Theory (1949) was born. In this, Eiteman argued that a firm that wishes to survive and engage in continued production will aim at generating revenue that covers their cost of production. This is generally achieved by creating a price based on costs of production and a markup for profit (Lee 1998: 126–127).

    George Richardson produced a critique of Hayek’s paper “Economics and Knowledge” (1937). Richardson argued that flexible prices, as in neoclassical and Hayekian theory, convey considerably less information than conventional theory thinks precisely because the continually changing nature of such prices severely impairs long-term business investment decisions (Lee 1998: 135). By contrast, a relatively stable administered price in the medium term allows business to calculate better estimates of future profits and sales trends, which allows far better planning in investment decisions (Lee 1998: 136; Richardson 1960 and 1965). Thus administered prices are very much part of business and corporate planning that actively gives stability to markets: in this sense, administered prices are a private sector way to reduce the degree of uncertainty they face in the market economy.

    Finally, an important point made by Sylos-Labini is that variations in normal cost prices through an economy require careful empirical investigation of each particular market (Lee 1998: 139), since many factors are involved.

    http://socialdemocracy21stcentury.blogspot.com/2013/10/lees-post-keynesian-price-theory.html

    This is amazing. People set prices based upon their unique understanding of their own unique circumstances which is knowledge that cannot be known to the central planners. Who knew? Thanks, LK.

    * based upon: “You’re a poet and don’t know it”.

    • Lord Keynes says:

      So you’re saying Austrian economics stresses that modern market economies have widespread, relatively inflexible administered prices, based on cost of production plus profit markup?

      I expect you admit that the Misesian notion of economic coordination caused by generally flexible prices moved by human action towards their market clearing levels must be abandoned, then?

      Also, that demand changes generally cause changes in output and employment, which confirms that aggregate demand is a fundamental element in modern market economies.

      Bob Roddis is a Post Keynesian “and doesn’t know it.”

      Expect him to repudiate Rothbard’s fantasies and become an MMTer any day now.

      • Bob Roddis says:

        Free people will set prices however they will set prices. Their knowledge is not something known to the central authorities or your a priori third party regulator.

        We’ve been over this before and you still do not get it.

        • Lord Keynes says:

          “Free people will set prices however they will set prices.”

          So you’re saying Austrian economics stresses that modern market economies have widespread, relatively inflexible administered prices, based on cost of production plus profit markup? yes or no?

          “Their knowledge is not something known to the central authorities or your a priori third party regulator.”

          lol.. if a business uses publicly announced
          administered prices, then a person in government or regulator cannot know the administered price?

          Your powers of deduction deserve a Nobel prize.

          • Bob Roddis says:

            So you’re saying Austrian economics stresses that modern market economies have widespread, relatively inflexible administered prices, based on cost of production plus profit markup? yes or no?

            No. Austrian economics stresses that exchanges are based upon the subjective valuations of the parties. The terms of those transactions are up to the parties themselves and produce objective information for others to observe that cannot be replicated before or after by a central authority or in any other procedure..

            Thanks again for demonstrating what you do not know. That you continue to misrepresent our position shows that that is your goal as opposed to an fair intellectual inquiry. The process of economic calculation and the knowledge problem are just not that complicated to be continuously misunderstood. The misrepresentation is intentional.

            • Lord Keynes says:

              So now you’re implying administered prices don’t exist, which contradicts your previous claim that my post somehow was also what Austrians say (“LK’s an Austrian”).

              Not only do you fail logic 101 but also you can’t even keep your story straight.

              • Richie says:

                How I wish you guys could make this episode of Star Trek a reality:

                Access to the corridor will be sealed forever and both universes will be safe, but the men named Lazarus will be at each others’ throats for the remainder of eternity. Kirk goes back through the corridor and in a hand-to-hand combat throws Lazarus into the corridor. Back on board, Kirk orders the Enterprise to fire phasers at the time ship, which then disappears in both universes; both Lazarus and Anti-Lazarus are trapped forever in the corridor and both universes are saved.

                http://en.memory-alpha.org/wiki/The_Alternative_Factor_%28episode%29

              • Bob Roddis says:

                Richie:

                Does this put you in the “evidence of ‘administered prices’ refutes Austrian analysis” camp?

                Or do you have a substantive dispute with my analysis other than the “EWWWW, they’re arguing about economics!” which you might hear at a bridal shower?

              • Major_Freedom says:

                “So now you’re implying administered prices don’t exist”

                He never implied that.

              • Richie says:

                “Or do you have a substantive dispute with my analysis other than the “EWWWW, they’re arguing about economics!” which you might hear at a bridal shower?”

                No, I despise LK, but this endless debate over and over and over and over and over and over and over and over and over again regarding the SAME THING is ridiculous.

            • Major_Freedom says:

              He uses a different term.

              What you call “administered prices” is in reality an intentional avoidance of incurring losses.

              It’s why you won’t sell your apartment or house for $100 right now. You are “administering” a much higher price, and in the process, reducing employment in the real estate industry. You are causing a recession.

              • Lord Keynes says:

                no, MF, administered prices are prices of produced commodities set based on average cost of production plus profit markup, not resale of second hand assets like houses.

              • Bob Roddis says:

                It does not matter to Austrian analysis.

              • Major_Freedom says:

                Houses are produced commodities, LK. The sellers set the asking prices by taking into account costs of production plus a profit markup.

              • Bob Roddis says:

                LK’s argument is even dumber than it might appear. He is arguing about what he claims that the Austrian master were saying. Let’s suppose he’s right (he’s not, but let’s suppose). Then. although the Austrian masters were wrong, we’ve now fixed what they had wrong. Which gets LK exactly nowhere.

              • Lord Keynes says:

                “Houses are produced commodities, LK.”

                Not when resold as a second hand asset as in your example:

                it’s why you won’t sell your apartment or house for $100 right now.

                “your apartment” implies second hand sale. If you meant otherwise, you’re a surprisingly incompetent user of English.

              • Lord Keynes says:

                “LK’s argument is even dumber than it might appear. “

                you’re descent into gibberish is impressive, roddis.

                Notice how you flatly refuse to answer the question: is it the case that many businesses set prices based on costs of production plus profit markup and these prices are relatively inflexible with respect to demand changes?

              • Major_Freedom says:

                “Not when resold as a second hand asset as in your example:”

                No, they’re still produced commodities no matter how many times it was sold prior.

                It’s the same thing as a retailer buying an already finished product from a wholesaler, and “setting” a price of costs that they pay (the selling price of the wholesaler) plus a profit for the retailer.

                You as an owner of a home are very much like a retailer who purchased an already physically completed product from a wholesaler.

                “Administered” prices are very plentiful in a normally functioning economy. There is nothing wrong with a seller asking for a minimum price that covers their costs, that justifies coercion against innocent third parties, which is what you advocate with coercive central banking and statism.

              • Major_Freedom says:

                “Notice how you flatly refuse to answer the question: is it the case that many businesses set prices based on costs of production plus profit markup and these prices are relatively inflexible with respect to demand changes?”

                Costs fall when aggregate demand falls.

                The fact that it’s not instantaneous does not at all justify inintiating violence against everyone through statism.

              • Lord Keynes says:

                False. Retailers purchase those goods for resale as capital goods, not consumer goods.

                A person who buys a house to live in it is purchasing it as a consumption good and any resale is as a second hand asset, just like second hand cars.

              • Lord Keynes says:

                And notice the absurdity of thread here:

                (1) MF is admitting administered prices exist

                (2) roddis is desperately trying to deny that they exist.

              • Major_Freedom says:

                “False. Retailers purchase those goods for resale as capital goods, not consumer goods.”

                Irrelevant.

                A seller sells goods to make a profit. There is no difference if the good itself is used by the buyer as a capital good or as a final good. From the seller’s perspective, it doesn’t matter what the buyer uses it for.

                “A person who buys a house to live in it is purchasing it as a consumption good and any resale is as a second hand asset, just like second hand cars.”

                Irrelevant to the point at hand. The pint at hand is prices, and the extent to which sellers set their prices by taking into account costs plus profit.

                A house is a capital good if the buyer intends to resell. That same house is a consumer good if the buyer intends to live in it.

                But this has nothing to do with the seller setting a price of cost plus profit.

              • Major_Freedom says:

                “(1) MF is admitting administered prices exist”

                I never denied the pricing tendency of sellers to take into account costs plus profit when setting asking prices.

                “(2) roddis is desperately trying to deny that they exist.”

                He denies that it is relevant to Austrian theory. He doesn’t deny that sellers take into account costs plus profit when setting asking prices.

              • Lord Keynes says:

                “He doesn’t deny that sellers take into account costs plus profit when setting asking prices.”

                Let him speak for himself instead of being your sockpuppet.

              • Major_Freedom says:

                “Let him speak for himself instead of being your sockpuppet.”

                He’s already spoken for himself on this issue, many times. It’s now public knowledge. I am entitled to let you know of what has been said by others a million times.

                We don’t need to keep re-confirming over and over like we’re on some kind of positivist-empiricist loop of insanity.

  12. Lord Keynes says:

    >“False. Retailers purchase those goods for resale as capital goods, not consumer goods.”

    Irrelevant.

    Wrong. The issue of whether the good is a capital or consumer good is highly relevant to the issue of the price.

    A house sold as a second hand good on a secondary asset market is very much a flexprice good: dependent on demand and supply and where the price can deviate significantly from its costs of production.

    Most sellers of houses as a second hand goods are not setting the price based on cost of production of the house plus profit markup at all: they sell at a flexprice based on current house price trends in the area and quality of the house etc. They might even sell significantly below costs of production.

    • Major_Freedom says:

      “Wrong. The issue of whether the good is a capital or consumer good is highly relevant to the issue of the price.”

      Not for the doctrine of “administered prices” it isn’t.

      This is what is called a red herring.

      “A house sold as a second hand good on a secondary asset market is very much a flexprice good: dependent on demand and supply and where the price can deviate significantly from its costs of production.”

      False. I bought my home for X dollars. I won’t sell it unless I will make a sufficient profit. I am “administering” this asking price.

      Administered prices are a function of subjective valuations of human individuals, NOT the other way around. The reason why you observe prices that behave a certain way, is because of the subjective valuations of the individuals behind the setting of those prices.

      You are ignoring the individual actions of markets, which is why you are not able to focus on a particular issue and stay on in until a solution is found. It is because individual subjective valuations, that is, individual action, is like kryptonite to your entire rotten worldview, and you know it.

      So you tiptoe and dance around it, going from one red herring to another, trying desperately to find an argument against the man that will stick.

      “Most sellers of houses as a second hand goods are not setting the price based on cost of production of the house plus profit markup at all: they sell at a flexprice based on current house price trends in the area and quality of the house etc. They might even sell significantly below costs of production.”

      HAHAHAHAHA, you just validated Roddis’ argument. Not that I have a dog in that show.

      • Lord Keynes says:

        “False. I bought my home for X dollars. I won’t sell it unless I will make a sufficient profit.

        And that does not refute the point that the general price of houses as second hand goods is fundamentally flexprice, not administered fixprice.

        The prices of goods in administered fixprice markets, by contrast, are indeed generally set by a business based on costs of production plus profit markup and are not flexprice.

        >“Most sellers of houses as a second hand goods are not
        >setting the price based on cost of production of the house >plus profit markup at all: they sell at a flexprice based on
        >current house price trends in the area and quality of the
        >house etc. They might even sell significantly below costs of
        >production.”

        HAHAHAHAHA, you just validated Roddis’ argument. Not that I have a dog in that show.

        If concede what I said there you just totally refuted yourself.
        QED.

        • Major_Freedom says:

          “And that does not refute the point that the general price of houses as second hand goods is fundamentally flexprice, not administered fixprice.”

          False. The “fundamental” of price formation is grounded on individual subjective preferences, not historical price trends.

          Your usage of the term “fundamental” is flawed because you’re ignoring the actual determinant of price formation.

          If I as a “second hand” home owner refuse to sell my house for $100, even if that is the current highest bid, because I am asking a price of cost plus profit, then I am in fact “administering” that price. The price I am asking is why you would observe a price of cost plus profit, and NOT the $100. You will observe a pricetage of cost plus profit, and you will see a lack of employment being generated in the real estate industry because of this.

          “The prices of goods in administered fixprice markets, by contrast, are indeed generally set by a business based on costs of production plus profit markup and are not flexprice.”

          You mean administered prices are…administered prices? That is nothing but a tautology.

          Your usage of the term “generally” is a consequence of you tiptoeing around the actual determinant of pricing: subjective valuations.

          You refuse to accept the fact that it is subjective valuations that are responsible for prices, including “administered prices”, so you try to avoid this and claim a historical trend or pattern of quantities that will serve as grounding for what can only be “generally” claims, or “fundamentally” claims.

          You’re ignoring the reason why this discussion even arose.

          And all the while you are unable to grasp the fact that a good as used by the buyer, as a capital good or consumer good, IS IRRELEVANT to specific point of a seller taking into account costs plus profit IF that is actually what they want to do when determining an asking price. What individuals actually want to do is where prices come in. This is what confuses you.

          “If concede what I said there you just totally refuted yourself.”

          No, because I already said I have no dog in the show between you and Roddis. I only recognized the fact that you just validated Roddis’ argument with your comment above. I am not claiming any truth or otherwise about it.

          • Lord Keynes says:

            “The “fundamental” of price formation is grounded on individual subjective preferences, not historical price trends. “

            The notion that today’s prices of second hand assets including financial or real assets is not in any way “grounded” on historical prices, including yesterday’s prices, is so stupid that it demonstrates intellectual bankruptcy.

            If that were true you would never see trend lines in asset prices and nobody would EVER base a price of a present house on the prices of houses yesterday. Talk to a real estate agent and see if they do not ground valuations of a house today in any way on yesterday’s prices for houses of the same quality or in the same location.

            Once again you demonstrate how incredibly ignorant you are.

            “You refuse to accept the fact that it is subjective valuations that are responsible for prices, including “administered prices”, “

            If this is supposed to mean that people will not buy something that they do not subjectively value, not only is it true, but does not refute anything I have said about administered fixprices.

            As usual, MF is evading issues by simply inventing straw man man arguments left right and centre.

            • Major_Freedom says:

              “The notion that today’s prices of second hand assets including financial or real assets is not in any way “grounded” on historical prices, including yesterday’s prices, is so stupid that it demonstrates intellectual bankruptcy.”

              It’s grounded on a subjective valuations of past prices, not past prices themselves.

              If the past price is X, then while an actor takes into account that past price, the future price is not determined by the past price. It is determined by a subjective valuation, and one of the things actors take into account is past prices.

              This is a completely different argument than the one you claim to be responding to.

              “If that were true you would never see trend lines in asset prices and nobody would EVER base a price of a present house on the prices of houses yesterday. Talk to a real estate agent and see if they do not ground valuations of a house today in any way on yesterday’s prices for houses of the same quality or in the same location.”

              No, I would not claim that. For now you are including a major premise of my argument, namely, you are now taking into account individual actor judgments about past prices.

              You are conceding the point of my argument and pretending that you are refuting it. Hilarious.

              “If this is supposed to mean that people will not buy something that they do not subjectively value, not only is it true, but does not refute anything I have said about administered fixprices.”

              No, it is supposed to mean that prices, all prices, are subjectively determined. They are not determined by whether or not the good is a capital good or consumer good, even though an individual actor might use the information of that fact as part of their decision making criteria.

              You are evading the argument because you don’t understand the premises involved.

            • Major_Freedom says:

              “If that were true you would never see trend lines in asset prices”

              This is also false in itself.

              The existence of historical trends does not prove the theory that current prices are grounded on past prices. It is a “historical accident” that prices rise or fall gradually over the long run.

              If I choose to go the library every day for one year, then while my choice to go yesterday may come into the decision criteria of me going today, it doesn’t determine this.

              My going today is a function of my choice that day, which can always be different, but not unlimitedly so.

              So if you observe a historical “trend” of what I did, it doesn’t mean that my going to the library is “grounded” on me going for the last year, or “fundamentally determined” by me going for the last year, or “generally” a function of me going for the last year. Yes, you could draw a line on an x-y chart of times gone and days of the year, but you aren’t finding a “law” of any sort that “proves” my going to the library is a mathematical or physical relationship between my past visits and current visits.

              My going today is determined by my subjective valuation, which may or may not include my past visits.

              Prices are observed to take on a pattern over a historical time period because of how humans have chosen to act in the past, which is UNIQUE.

              There is no natural law of the universe that says Bernanke can’t promise to inflate by $100 trillion dollars tomorrow, thus throwing what you thought was going to be a continued trend all out of whack.

              For example, look at the “trend” of reserves in the banking system. In 2008, you see a sudden, “non-trend” spike. The reason is because of the ACTUAL grounding on all economic phenomena: Subjective valuations. Bernanke and his goons made a subjective valuation, and the result was something NOT determined by past trends of reserves, but something else that should be obvious even to dim-witted positivist-empiricists.

    • Matt Tanous says:

      “The issue of whether the good is a capital or consumer good is highly relevant to the issue of the price.”

      “Is the purchase of a house a consumption expenditure or an investment? If you buy it as a home it is considered a consumption good; but if you buy it to rent to somebody else it is an investment. This would apply as well to an automobile or a power mower. “Consumption” and “investment” goods are not necessarily different KINDS of goods: they change their nature with their state of processing, whose hands they are in, or the changing purposes of their owners.” – Henry Hazlitt, The Failure of the “New Economics”, p. 51

      The issue of whether a good is a capital or consumer good is not relevant to the price at all. If I go to the car dealership to buy a car, it doesn’t matter one whit whether I’m buying it for personal use or to start up a small taxi business. The car and the sale of it operate the same.

  13. Lord Keynes says:

    “It’s grounded on a subjective valuations of past prices, not past prices themselves.”

    lol.. MF runs for cover after totally discrediting himself. So now it’s “subjective valuations of past prices” but somehow magically the “past prices” don’t “ground” the current price.

    “No, it is supposed to mean that prices, all prices, are subjectively determined. “

    Since you have already admitted that some prices are based on the *objective* factor of costs of production, your earlier statement refutes your statement here. You refute yourself in an impressive display of illogic.

    • Major_Freedom says:

      “lol.. MF runs for cover after totally discrediting himself. So now it’s “subjective valuations of past prices” but somehow magically the “past prices” don’t “ground” the current price.”

      There is no running for cover, and there is no discrediting.

      Do you seriously not know what “grounded” means? It means at the bottom of things. Being grounded on X means there is nothing below X that we can say something coherently about.

      To be grounded on subjective valuations of past prices, and to be grounded on past prices, are two radically different arguments.

      To argue that current prices are grounded on subjective valuations, and that subjective valuations may or may not include subjective valuations of past prices, is not to “run for cover” by any stretch. It is a crucial premise of my argument and my responses to your fallacious claims.

      “Since you have already admitted that some prices are based on the *objective* factor of costs of production, your earlier statement refutes your statement here. You refute yourself in an impressive display of illogic.”

      No it doesn’t refute it at all. If a subjective takes into account past prices, then current prices being based on past prices, is not the same thing as saying that current prices are GROUNDED on past prices.

      Grounded means there is nothing below it. Clearly, past prices are not below subjective valuations of past prices in terms of logical hierarchy. If past prices are going to play any role in current prices, it will be through being GROUNDED on subjective valuations of those prices. A past price of $400k for my house isn’t going to FORCE the issue through some physical law that the present price MUST be $400k plus a profit of 10% say. Only if I as an actor choose to take into account past prices, and conclude that I prefer to make a profit through a sale, will the current price be “based” on past prices. My subjective valuation is the ground of the asking price.

      • Major_Freedom says:

        And this is the same thing for sellers of “non-second hand goods”, to use your non-economic parlance.

        The reason why you observe some prices tending towards costs plus profit, is not because of the good itself, but because of the subjective valuation of the individual sellers, specifically, a tendency of avoiding losses and seeking gains.

        This tendency is not excluded from sellers who are selling “second hand goods.” If I buy a house for $X, and I personally do not want to sell it at a loss, then that is the GROUNDING for why you observe the asking price to be what it is. It is not because the good itself, the house, is physically this or that. What matters is my subjective judgment of the house.

        The fact that I may not sell my house RIGHT NOW for my asking price, does not justify someone else to initiate coercion in the form of central banking, such that there arises a greater quantity of money creation, the spending of which finds its way into the pockets of home buyers, such that I am able to sell my house for what I ask.

        • Tel says:

          What you are actually saying is that you make a subjective estimate of the future value of that house, and knowledge of past prices is a useful component of making that estimate, but knowledge about what makes a good house is also a useful component, and whether you are intending to live in it or rent it, when you intend to sell, all make a big difference.

          Suppose you had a street where all the houses on the even numbers side had historically sold at 20% more than the houses on the odd numbers side of the same street. You ask a few of the owners of the more expensve houses why they paid extra and they all say, “We checked historical prices and this is clearly the better side because the houses always sell for 20% more over this side. If you want to keep the value of your investment, you better buy on this side.”

          You ask someone on the cheaper side and he says, “There’s absolutely no difference between the two sides, we just got a good price, that’s all there is to it.”

          So you walk up and down, check the angle of the sun, check the age of the houses, the size of land, the slope, the water, check typical wind direction, check local regulations, can’t find any physical explanation for the price difference. Would you buy on the expensive side, or the cheaper side?

          • Major_Freedom says:

            You’re agreeing with the argument that it is not past prices that determine future prices, but a subjective valuation of past prices that can play a role in the determination of future prices.

            • Tel says:

              Yes I agree, the ultimate decision is made by market participants and their estimate of future value (which may well be influenced by past prices, and by other things, but is not IMHO determined by past prices).

  14. Bob Roddis says:

    LK saks: is it the case that many businesses set prices based on costs of production plus profit markup and these prices are relatively inflexible with respect to demand changes?

    Define “set”. Further, there is a difference between an offered price and a realized price.

    • Lord Keynes says:

      “Define “set”.

      lol…

      Set
      “to put into some condition:”

      I.e., a business’s managers’s calculate a price, based on cost of production and a profit markup, which they then charge that price for the product, and the price will not be changed when demand for the product changes in the short to medium term (often up to a year).

      Presumably you’ll be demanding a definition of “the” , “of” “a” “on”, and very other bloody word too, and then claim you’ll have to study the sentence in depth — including punctuation marks — before you can give an answer.

      • Major_Freedom says:

        “I.e., a business’s managers’s calculate a price, based on cost of production and a profit markup, which they then charge that price for the product, and the price will not be changed when demand for the product changes in the short to medium term (often up to a year).”

        This does not refute Austrian theory, and it does not justify violence against innocent people through coercive monopolies in money.

      • Razer says:

        The firm I work at will charge different prices for the same good, dependent solely on what it takes to make the sale. Prices can be cut in half if necessary. This completely falsifies your hypothesis. Please revise your hypothesis or admit you really don’t care about empirical facts.

        Well Mr. Coyote?

        • Lord Keynes says:

          “The firm I work at will charge different prices for the same good, dependent solely on what it takes to make the sale. Prices can be cut in half if necessary. This completely falsifies your hypothesis. “

          No, it doesn’t, because Post Keynesiam theory does not deny the existence of flexprice markets: it only states that fixprice markets are a widespread phenomenon, not the only type of market.

          • Major_Freedom says:

            Post Keynesianism denies the curative process of bankruptcy and re-allocation of employment due to changed demand for money.

  15. Bob Roddis says:

    I would anticipate that every successful maker of doo-dads for sale would base their business plan upon an anticipation that the final sales price will be above the cost of production. Otherwise, instead of working so hard to build a company, they could just go off making and selling hippie beads out the back of an old VW van.

    Most businesses fail. I would expect the successful ones to be selling above cost of production. Duh. If it would offend their customers to be constantly changing prices, then they might attempt to maintain “stable” prices. So freakin’ what?

    • Lord Keynes says:

      Of course you’re so ignorant that you can’t take the next logical set and see that once it is admitted that there are widespread administered prices in modern market economies, set and maintained by private businesses,

      (1) the notion of Misesian economic coordination caused by generally flexible prices moved by human action towards their market clearing levels is fundamentally flawed and wrong.

      Administered prices are not *distorted* away from market clearing levels, because they were NOT set at or towards these levels in the first place: most private business themselves shun the type of prices required under such a model.

      (2) Aggregate demand for products generally causes output and employment changes in fixprice businesses, and

      (3) Increasing the money supply does not necessarily cause price inflation in fixprice markets, which also significantly diminishes the alleged Cantillon effects you keep desperately flogging .
      ——

      (2) also supports the Keynesian view of stimulus.

      • Major_Freedom says:

        “(1) the notion of Misesian economic coordination caused by generally flexible prices moved by human action towards their market clearing levels is fundamentally flawed and wrong.”

        No it isn’t wrong, because costs are a function of spending, and if spending falls, so will costs. The fact that costs don’t instantly change does not refute the argument that coordination is based on prices changing to be reflective of true subjective preferences.

        If spending falls, but costs don’t instantly fall, and there arises unemployment as a result, then this does not disprove the fact that coordination is still taking place by prices TENDING towards market clearing prices in the sense that there is no unemployment.

        But even so, if sellers refuse to cut their prices, then in the Austrian theory, supply is considered to have fallen, because the subjective preferences of sellers who refuse to sell their goods at the bid prices, are goods that are NOT a part of “the market”. It is with this understanding that Mises claimed that all prices are virtually always “market clearing prices.”

        Mises did not hold that market clearing prices are prices that 0% unemployment requires. He held that market clearing prices are prices that are unhampered and enable both buyers AND sellers, so engage in the trade that BOTH sides together want.

        If there is Mr. Smith and he wants to buy or sell something, and Mr. Jones does not want to trade with Mr. Smith, then Mises will hold that there is market clearing prices regardless. You on the other hand, who believes employment is a right of some sort, or some ethical law that requires violence to bring about, will argue that there is a form of “market failure” taking place here, or at the very least, an “empirical example” that supposedly refutes the entire Austrian theory. All because Mr. Smith has either “idle resources” on hand, or “unsold labor”, with respect to the preferences of Mr. Jones.

        But in reality of course, there is coordination taking place between Mr. Smith and Mr. Jones, because their exchanges are not being forcefully restricted by George. Mr. Smith and Mr. Jones are engaging in either trades with others, or they are engaging in autistic exchanges in isolation.

        Austrian theory does not assert that if Mr. Smith wants to work, or sell a good, that there should be, or is, a Mr. Jones, instantly willing buyer of the good or labor. All Austrian theory asserts in this regard is that in a market economy, there will be a tendency of prices that arise that do enable Mr. Smith to find work, or sell his good. If it’s not today, because Mr. Smith MADE AN ERROR IN CALCULATION, then he will tend to learn from his mistakes, and change his behavior according to his new subjective preferences, such that instead of asking too high of a price for his labor, or asking too high of prices for his goods, he will instead find willing buyers of his labor or his good, because he will find it in his own interests to NOT repeat his past mistakes.

        “(2) Aggregate demand for products generally causes output and employment changes in fixprice businesses, and”

        No, it only causes a redirection of labor from here to there. More spending on products comes at the expense of saving and investment spending on labor.

        If spending on products increased high enough, then the demand for labor would reach zero, because a dollar can only be spent in one way. If it is spent on products, it isn’t spent on labor.

        Where demand for products determines demand for labor are in the “micro” sphere of individual companies and producers. An individual seller, and his workers’ salaries, depend on the demand for his products. He is competing with other producers. This is true for the individual seller. But in the aggregate, this competition offsets, and the dependency is in the OPPOSITE direction. In the aggregate, consumers and workers depend on savers and investors.

        Consumption determines the allocation of scarce labor. It is does CAUSE labor. The cause of labor is saving and investment in labor, and saving and investment requires property rights to be respected and protected.

        “(3) Increasing the money supply does not necessarily cause price inflation in fixprice markets, which also significantly diminishes the alleged Cantillon effects you keep desperately flogging.”

        Prices are not the sole mechanism by which the Cantillon Effect takes place.

        If a coercive monopoly of money printed $100 billion for the benefit of a group of friends, and those friends went out and spent that money, but the prices of what they buy do not rise over time as a result, then this does not in any imply that they did not benefit at the expense of others. There is no such thing as a free lunch.

        “(2) also supports the Keynesian view of stimulus.”

        No it doesn’t. Absence of trade that you expect, or claim others expect, does not justify violence against innocent people, especially to “prove them wrong.”

        • Lord Keynes says:

          “If spending falls, but costs don’t instantly fall, and there arises unemployment as a result, then this does not disprove the fact that coordination is still taking place by prices TENDING towards market clearing prices in the sense that there is no unemployment.”

          Gibberish.

          If the administered prices are not adjusted, then they are clearly not even “tending” towards market clearing levels.

          • Major_Freedom says:

            “If the administered prices are not adjusted, then they are clearly not even “tending” towards market clearing levels.”

            Garbage. If prices are not changing now, it doesn’t mean they will never change, which is required for you to claim that there is an absence of prices tending towards market clearing.

      • Bala says:

        What do you mean by Misesian economic coordination? What do you mean when you say that this Misesian economic coordination is caused by generally flexible prices moved by human action towards their market clearing levels?

        You are going to have to explain the theory behind this claim of causation before you proceed to debunk Misesian theory.

        • Lord Keynes says:

          What do you mean by “mean”? And define “flexible”.

          Also define “the”.

          You are going to have to explain these words before before you proceed to debunk my statement.

          • Bala says:

            Genius,

            My question focused on the Subject and the Verb of your sentence and therefore seeks to clarify whether you really understand that which you are criticising. Your answer makes it clear that you do not understand. Thanks all the same for the smart ass reply.

            • Lord Keynes says:

              No, Bala, your original hare-brained question suggests you’re incapable of providing any response to my statements above.

              As for Misesian economic coordination, I understand it in exactly the sense as described by Salerno:

              “Mises conceives the market process as coordinative, ‘the essence of coordination of all elements of supply and demand.’ This means that the structure of realized (disequilibrium) prices, which continually emerges in the course of the market process and whose elements are employed for monetary calculation, performs the indispensable function of clearing all markets and, in the process, coordinating the productive employments and combinations of all resources with one another and with the anticipated preferences of consumers.” (Salerno 1993: 124).

              • Bala says:

                Genius,

                Did you see this bit from Salerno? Guess not, going by all your ranting about market clearing prices…..

                “This means that the structure of realized (disequilibrium) prices, which continually emerges in the course of the market process and whose elements are employed for monetary calculation, performs the indispensable function of clearing all markets”

                Dropping the segment in parenthesis, given that it is a qualifier for the noun that comes before it, i.e., the structure of realized (disequilibrium) prices, the fragment reads as follows.

                “This means that the structure of realized (disequilibrium) prices (deleted portion) performs the indispensable function of clearing all markets”

                So it is the structure of realized (disequilibrium) prices and not the market clearing price that performs the indispensable function of clearing all markets.

                Hmm…. Interesting find out there. So will you stop ranting about market clearing prices and stop waving that rag around like it debunks Misesian Coordination? I guess you will not, but I am sure your response will be interesting.

              • Lord Keynes says:

                Yes, your butchery of the Salerno passage indicates how desperate and feeble your attempts are to twist its meaning contrary to the sense it has.

                Anyone reading the passage would understand that it is talking about (1) convergence toward market clearing prices and (2) market clearing prices.

                I expect you’re going argue now that Mises never — ever !! — held that market clearing prices and convergence towards market clearing prices have any role in economic coordination, are you?

                Funny how Salerno totally contradicts you:

                Entrepreneurs, however, can formulate and execute production plans only in a world in which economic calculation is possible, that is, in which catallactic competition generates market-clearing prices which, at every moment of calendar time and without fail, reflect, promote, and coordinate those uses of the available scarce resources that are expected to be the most highly valued by consumers. ” (Salerno 2010: 182–183).

                “prices that are generated by the market process and serve as the data for economic calculation. These are realized prices; or, in other words, they are the actual outcome of the historical market process at each moment in time and are determined by the value scales of the marginal pairs in each market. They are, therefore, also market-clearing prices the establishment of which coincides with a momentary situation, what Mises calls the ‘plain state of rest’ (PSR), in which no market participant, given his existing marginal-utility rankings of goods and money and knowledge of prevailing prices, can enhance his welfare by participating in further exchange.” (Salerno 1990: 121).

              • Bala says:

                The only butchery happening out here is the one you are engaging in. The dropping of the portion in parenthesis is legitimate analysis of a sentence. The portion in the parenthesis always says something about the word/phrase just preceding it, especially when it starts with which. Go back to your High School English lessons.

                Incidentally, I just used the definition you subscribe to to show what a genius you are. What do you do? Drop more quotes. Great argument!!!

              • Lord Keynes says:

                We can settle this debate easily: did Mises hold that market clearing prices and convergence towards market clearing prices have an important role in economic coordination?

                Yes or no?

                I expect you’ll just ignore and question and run away and hide.

              • Bala says:

                Genius,

                There is no debate, really. I just asked for the definition of Misesian Coordination as YOU are using it and what did I get? Something that shows you up as a babbler. Keep babbling. It’s all you seem to be capable of doing.

              • Lord Keynes says:

                Ah, I see, there is no debate… You agree that convergence towards market clearing prices is a fundamental element of Misesian economic coordination.

                Yet the widespread existence of fixprice administered prices
                shows that this is an unrealistic model for any modern market economy.

                No doubt you agree with that too.

              • Bala says:

                No, Genius.

                If realised prices are market clearing prices, only an absolute ignoramus like you will insist on talking of a convergence of realised prices towards market clearing prices and the criticality of such a convergence for Misesian Coordination.

          • Bala says:

            To make matters worse, I have debunked nothing including your statement. Your response is typical of you but very revealing of your clearly monumental ignorance.

            • Lord Keynes says:

              That’s right: you have debunked nothing.

              Nor do I expect you to be able to debunk anything I’ve said, or provide anything but incredibly dense comments.

              • Bala says:

                Genius,

                If I didn’t debunk anything, it was because I wasn’t even trying. You should know I can, going by how many times and on how many issues I have rip

              • Bala says:

                Sorry about the truncated reply. Here it continues, Genius.

                You should know I can debunk your ideas very well going by how many times and on how many issues I have ripped you to shreds.

  16. Bala says:

    Genius,

    You said this.

    The prices of goods in administered fixprice markets, by contrast, are indeed generally set by a business based on costs of production plus profit markup and are not flexprice.

    It appears you never learnt that the cost of producing a produced good is zero. You get it? Zero! Zilch! ShUnya!

    Don’t get it? Get back to the basics.

    • Lord Keynes says:

      “It appears you never learnt that the cost of producing a produced good is zero. “

      Presumably this gibberish is supposed to mean that if a good has already been produced and factor inputs fully paid for already, then no further costs are involved?

      True but irrelevant, and an idiotic straw man, since I would not deny such a trivial truth.

      Nor does it refute the statement about the way administered price businesses calculate their prices.

      • Bob Roddis says:

        Nor does it refute the statement about the way administered price businesses calculate their prices.

        For the 4,000th time, it is irrelevant to Austrian analysis if or how “administered businesses calculate their prices”.

        Richie is right.

        • Lord Keynes says:

          No, roddis, administered prices are not “irrelevant to Austrian analysis” if you think market economies achieve economic coordination in this way:

          “Mises conceives the market process as coordinative, ‘the essence of coordination of all elements of supply and demand.’ This means that the structure of realized (disequilibrium) prices, which continually emerges in the course of the market process and whose elements are employed for monetary calculation, performs the indispensable function of clearing all markets and, in the process, coordinating the productive employments and combinations of all resources with one another and with the anticipated preferences of consumers.” (Salerno 1993: 124).

          Of course, you’re too dense to notice this.

          All we see from you is a torrent of red herrings, straw man arguments and evasions.

          • Major_Freedom says:

            “No, roddis, administered prices are not “irrelevant to Austrian analysis” if you think market economies achieve economic coordination in this way:”

            The existence of individuals who ask for prices according to costs does not refute the passage you quoted.

            Costs are not fixed, despite the fact that you call them fixed.

            Costs can and do change. Just because they don’t change instantaneously, it doesn’t mean the quote you cited is refuted.

            Even final goods prices don’t instantaneously change with every change in nominal demand.

      • Bala says:

        Presumably this gibberish is supposed to mean that if a good has already been produced and factor inputs fully paid for already, then no further costs are involved?

        No, genius. It means that costs incurred in the past have no role in price determination in the present. It means that your efforts at dragging cost into the explanation of price is the hallmark of an economic ignoramus.

      • Bala says:

        Nor does it refute the statement about the way administered price businesses calculate their prices.

        So what’s a good % above zero? Your brilliance is dazzling! Truly dazzling!!

      • Major_Freedom says:

        ‘Nor does it refute the statement about the way administered price businesses calculate their prices.”

        Prices according to costs of production does not refute Austrian theory.

  17. Gamble says:

    How do we convince Congress NOT to restart Federal Government?

    Also, since Government is shutdown, I assume the Treasury printing press has stopped?

    I can also assume Ben Bernanke will not be purchasing 85B if only because there is no seller?

    I hope I have proven a point, Federal government is NOT shut down. This entire event is a hoax or worse a contrived effort to make the American people cry for more government.

    Libertarians must stop allowing mainstream media( state controlled) to define the narrative. Sure you guys are spinning the narrative but you are playing into their hands. What shut down? So what? Shut down more of it. Don’t come back. Since there is no government, why are you still collecting taxes???

  18. Bob Roddis says:

    Prices do not have volition. People do. Left alone, people will tend to make and sell goods and services above the cost of production to trade/sell or else they will die/starve. The terms of these exchanges (prices, styles, amounts, locations, customers) provide essential information that cannot be replicated by a central authority or any other means. Of course, the past sale of something at a particular price does not guaranty a future sale of the same thing at the same price.

    The assets of firms that fail will tend to be bought up very cheaply. Successful firms may like to maintain prices and cut production and not prices when faced with bad times that result invariably from Keynesian policy.

    Richie is right. We’ve been over this so many times before and it just induces more bile and dishonesty from LK.

    • Lord Keynes says:

      So you’re telling us that Misesian economic coordination is a unrealistic model of modern market economies!

      Administered prices aren’t distorted away from market clearing values because they were never set at or moved towards those levels in the first place.

      • Bob Roddis says:

        Are you a mangy dog chasing its infected tail around and around and around in a perpetual circle of hopelessness?

        http://consultingbyrpm.com/blog/2013/10/outrage-over-outrage-over-government-shutdown-im-starting-with-the-man-in-the-mirror.html#comment-74982

        • Lord Keynes says:

          LK’s argument is even dumber than it might appear. He is arguing about what he claims that the Austrian master were saying. Let’s suppose he’s right (he’s not, but let’s suppose). Then. although the Austrian masters were wrong, we’ve now fixed what they had wrong. Which gets LK exactly nowhere.

          This illiterate rambling answers nothing.

          Did Mises or did he not think that market clearing prices and convergence towards market clearing prices are fundamental in economic coordination? Yes or no?

          I expect you’re still pouring over Salerno’s article after 6 months, checking the meaning of every punctuation mark.

          • Bala says:

            But then, Genius, what IS coordination? If it is, as per the Salerno extract you claimed to subscribe to, the structure of realized (disequilibrium) prices that performs the indispensable function of clearing all markets and, in the process, coordinating the productive employments and combinations of all resources with one another and with the anticipated preferences of consumers, where do market clearing prices and convergence towards those prices come in as a fundamental element? Coordination is then also not about market clearing but about coordinating production and consumption, i.e., coordinating producers’ choices with consumer preferences. In that you also have to contend with the profit-loss mechanism.

            And what about the part where Salerno (as per your quote again) says that the realised prices are indeed the market clearing prices? The market clearing price would then no longer be the mythical thing you keep claiming it is…. Shocking!!!!

            • Lord Keynes says:

              “Coordination is then also not about market clearing but about coordinating production and consumption,”

              Coordinating demand with supply via flexible prices adjusted in trades towards their market clearing values.

              But you are saying that Misesian economic coordination has nothing to do with “market clearing prices”?

              lol..

              • Bala says:

                Genius,

                Go back and read the Salerno extract YOU quoted. It says the realised prices are indeed the market clearing prices. I even quoted it in the previous comment. Selective blindness, is it?

              • Lord Keynes says:

                He is using “realised prices” to mean present prices or prices of the very immediate past, which are also market clearing prices.

                Totally consistent with what I have said above.

              • Bala says:

                Totally consistent with what I have said above.

                No, Genius. It shows you up for the complete ignoramus that you are. Here’s where it shows. This

                Did Mises or did he not think that market clearing prices and convergence towards market clearing prices are fundamental in economic coordination?

                was your question, right? Not once but many a time.

                Now, Genius. If realised prices ARE market clearing prices, then realised prices CANNOT converge towards market clearing prices and hence such a convergence cannot be critical to Misesian Coordination (as per the meaning of the term that YOU accept and endorse.

                Savvy? Now! Run back to the cesspool that is your b(l)og.

              • Lord Keynes says:

                “If realised prices ARE market clearing prices, then realised prices CANNOT converge towards market clearing prices”

                That is a false and deluded interpretation of the Salerno passage.

                You are clearly so deluded that you actually think Salerno and Mises do not think that realised prices cannot converge to market clearing values? lol.

              • Bala says:

                Genius,

                Read this bit carefully. YOU cited it.

                “prices that are generated by the market process and serve as the data for economic calculation. These are realized prices; or, in other words, they are the actual outcome of the historical market process at each moment in time and are determined by the value scales of the marginal pairs in each market. They are, therefore, also market-clearing prices the establishment of which coincides with a momentary situation, what Mises calls the ‘plain state of rest’ (PSR), in which no market participant, given his existing marginal-utility rankings of goods and money and knowledge of prevailing prices, can enhance his welfare by participating in further exchange.” (Salerno 1990: 121).

                Now, please read the segments I have emphasised and then explain how my interpretation is a retarded interpretation of the Salerno passage.

                I think you need to grow a brain.

              • Bala says:

                Sorry, Genius. A small correction.

                Now, please read the segments I have emphasised and then explain how my interpretation is a false and deluded interpretation of the Salerno passage.

                I still think you need to grow a brain.

  19. Bob Roddis says:

    Whenever LK suffers one his recurring beatdowns here, he usually runs off and posts even more nonsense on his blog. When a liar’s lying, just let him run his mouth.

    Lavoie on Administered Prices

    Short and concise, but insightful:

    “… prices set by [sc. fixprice] firms in the short run are not market-clearing prices, and are not even intended to be so. According to Lee …, this was the most striking lesson to be drawn both from Mean’s administered prices and from the surveys conducted by Hall and Hitch (1939). The novel and radical feature of the classic article of the latter was that prices are not designed to clear markets. Prices are not such that they equate supply and demand schedules. In a context where supply is flexible, firms do not necessarily attempt to equate demand to the normal use of capacity when they set prices.” (Lavoie 1992: 95).

    It is also clear that administered prices are not simply a phenomenon confined to monopolistic or oligopolistic markets, but are widespread in modern market economies and found throughout many other markets where competition exists amongst numerous small or medium-sized firms (Lavoie 1992: 95–96).

    http://socialdemocracy21stcentury.blogspot.com/2013/10/lavoie-on-administered-prices.html

    I always thought that prices were generally designed to maximize profits, psychic, monetary or otherwise.

    Of course, we do not have access to this “research”. I wonder how many of these “fixprice” firms had little competition and/or were the beneficiaries of valuable IP, trademarks and trade secrets and/or New Deal hindrance of competition.

    Query: Why would a firm cut prices if it can make more profits by keeping prices high and selling less?

    Query2: What does any of this have to do with economic calculation and why would this lend support to a purposeful distortion of prices and the imposition of Cantillon Effects by Keynesian policies?

    • Lord Keynes says:

      (1) “I always thought that prices were generally designed to maximize profits, psychic, monetary or otherwise.”

      Administered prices are actually a private sector way of stabilising and maintaining profits. Do you agree?

      (2) “Of course, we do not have access to this “research”.

      Yes, I expect you could never have access to numerous studies and surveys all published and publicly available.

      E.g., a random sample:

      Means, G. C. 1936. “Notes on Inflexible Prices,” American Economic Review 26 (Supplement): 23–35.

      Hall, R. L. and C. J. Hitch. 1939. “Price Theory and Business Behaviour,” Oxford Economic Papers 2: 12–45.

      Andrews, P.W.S. 1964. On Competition in Economic Theory. Macmillan, London.

      Means, G. C. 1972. “The Administered Price Thesis Reconfirmed,” American Economic Review 62: 292–306.

      Okun, A. 1981. Prices and Quantities: A Macroeconomic Analysis, Blackwell. Oxford.

      Blinder, A. S. 1991. Why are Prices Sticky?: Preliminary Results from an Interview Study, American Economic Review, Papers and Proceedings (May): 89-96.

      Blinder, A. S. et al. 1998. Asking about Prices: A New Approach to Understanding Price Stickiness, Russell Sage foundation, New York.
      ——–

      Presumably nobody in human history has been able to read these surveys. Ever.

      • Bob Roddis says:

        Administered prices are actually a private sector way of stabilising and maintaining profits. Do you agree?

        It is certainly possible, which I conceded eons ago. I really do not care. Whatever floats their boat. It does not matter. It is not proof that voluntary arrangements fail and it is not evidence in favor of Keynesian induced price distortions and Cantillon effects. It is not evidence that funny money and Keynesian policies do not cause the boom/bust cycle and it is not evidence in favor of any violations of the prohibition against fraud and the initiation of force.

        IT DOES NOT MATTER as a refutation of either libertarian proposals or Austrian analysis. For the 4,000th time.

        http://consultingbyrpm.com/blog/2013/10/outrage-over-outrage-over-government-shutdown-im-starting-with-the-man-in-the-mirror.html#comment-74982

        • Lord Keynes says:

          lol.. administered prices refute the Misesian idea that modern market economies achieve economic coordination by flexible prices.

          But of course you’re too stupid and too dishonest to address this point, aren’t you.

          Also, as pointed out above, new money does not tend to raise administered prices and hence does not cause the alleged relative price distortions, or your Cantillon effects.

          Most prices are administered prices in the US and also in Europe and every developed capitalist economy, e.g.,

          Fabiani, S., M. Druant, I. Hernando, C. Kwapil, B. Landau, C. Loupias, F. Martins, T. Mathä, R. Sabbatini, H. Stahl and A. Stokman. 2006. “‘What firms’ surveys tell us about price-setting behavior in the euro area,” International Journal of Central Banking 2.3: 3–47.

          But I expect nobody has ever had “access” to this research, huh?

            • Lord Keynes says:

              Yes, says it all.

              A precious Austrian theory of yours stands refuted.

              Your response: “We don’t care”.

              Bob “We-don’t-care-our-economics-is-rubbish” Roddis.

              Should be your new name!

              • Bala says:

                Bob “We-don’t-care-our-economics-is-rubbish” Roddis. Should be your new name!

                Yeah! Just like Lord “economic ignoramus” Keynes or Lord “arse handed to him” Keynes should be yours.

              • Major_Freedom says:

                “A precious Austrian theory of yours stands refuted.”

                You have not shown this.

            • Bala says:

              Look below to know more.

          • Major_Freedom says:

            “Also, as pointed out above, new money does not tend to raise administered prices”

            This is false.

            New money entering primarily via the credit markets leads to increased investment spending, and increased investment spending raises costs. An increase in costs thus raises “administered prices”.

            “and hence does not cause the alleged relative price distortions”

            It does.

            “or your Cantillon effects.”

            It does that too.

  20. Bob Roddis says:

    Apparently I can get access to all this massive waste of my time if I go on campus but not remotely since I haven’t been a student since 1934.

    1.
    Academic Journal
    BIG BUSINESS, ADMINISTERED PRICES, AND THE PROBLEM OF FULL EMPLOYMENT.
    By: Means, Gardiner C. Journal of Marketing. Apr1940 Part 1, Vol. 4 Issue 4, p370-381. 12p.
    Database: Business Source Complete
    PDF Full Text (888KB)
    2.
    Academic Journal
    Administered-price thesis reconfirmed.
    By: MEANS, Gardiner C.. American Economic Review , June 1972, Vol. 62, p292-306, 15p
    Database: Humanities & Social Sciences Index Retrospective: 1907-1984 (H.W. Wilson)
    PDF Full Text
    3.
    Academic Journal
    U.S. consumption and investment propensities: prewar and postwar.
    / replies to T. C. Liu and C. G. Chang with rejoinder By: Mayer, Thomas; Means, Gardiner Coit; Bator, Francis Michel. American Economic Review , Mar1953, Vol. 43, p139-151, 13p
    Database: Humanities & Social Sciences Index Retrospective: 1907-1984 (H.W. Wilson)
    Article Linker
    4.
    Academic Journal
    Notes on inflexible prices.
    / with discussion; By: MEANS, Gardiner Colt. American Economic Review , Mar 1936, Vol. 26, p23-35, 13p
    Database: Readers’ Guide Retrospective: 1890-1982 (H.W. Wilson)
    PDF Full Text
    5.
    Academic Journal
    Growth in the relative importance of the large corporation in American economic life.
    By: MEANS, Gardiner C.. American Economic Review , Mar 1931, Vol. 21, p10-42, 33p
    Database: Readers’ Guide Retrospective: 1890-1982 (H.W. Wilson)
    PDF Full Text
    6.
    Academic Journal
    Corporations and the public investor.
    By: BERLE, Adolf Augustus, jr; Means, Gardiner C.. American Economic Review , Mar 1930, Vol. 20, p54-71, 18p
    Database: Readers’ Guide Retrospective: 1890-1982 (H.W. Wilson)
    PDF Full Text
    7.
    Academic Journal
    Economic institutions.
    / development during the 1930′s; By: MEANS, Gardiner Colt. American Journal of Sociology , May 1942, Vol. 47, p941-957, 17p; DOI: 10.1086/219048
    Database: Readers’ Guide Retrospective: 1890-1982 (H.W. Wilson)
    Article Linker
    8.
    Academic Journal
    Separation of ownership and control in American industry.
    By: MEANS, Gardiner C.. Quarterly Journal of Economics , November 1931, Vol. 46, p68-100, 33p
    Database: Readers’ Guide Retrospective: 1890-1982 (H.W. Wilson)
    PDF Full Text
    9.
    Academic Journal
    Stock dividends, large scale business, and corporate savings.
    / reply to J. Jewkes; By: MEANS, Gardiner C.. Quarterly Journal of Economics , May 1931, Vol. 45, p536-540, 5p
    Database: Readers’ Guide Retrospective: 1890-1982 (H.W. Wilson)
    PDF Full Text
    10.
    Academic Journal
    Diffusion of stock ownership in the United States.
    / with statistical appendix; By: MEANS, Gardiner C.. Quarterly Journal of Economics , August 1930, Vol. 44, p561-600, 40p
    Database: Readers’ Guide Retrospective: 1890-1982 (H.W. Wilson)
    PDF Full Text
    11.
    Periodical
    Roots of inflation / the international crisis Detail Only Available
    By: Means, Gardiner Coit; 1896-. New York : B. Franklin, 1975 Language: English
    Database: AGRIS
    Article Linker
    12.
    Periodical
    Looking Around.
    By: Means, Gardiner C. Harvard Business Review. May/Jun58, Vol. 36 Issue 3, p27-180. 14p.
    Database: Business Source Complete
    PDF Full Text (3.2MB)
    13.
    Book
    The modern corporation and private property / by Adolf A. Berle, and Gardiner C. Means.
    By: Berle, Adolf Augustus. New York : Macmillan, [c1932] 01/01/1932 xiii, 396 p. : diagrs. ; 24 cm. Language: English
    Database: WSU Libraries Research Warrior
    View in Classic Catalog / Place “Get It” Requests
    14.
    Book
    Industrial prices and their relative inflexibility. Letter from the Secretary of Agriculture, transmitting in response to Senate Resolution no. 17, a report relating to the subject of industrial prices and their relative inflexibility.
    By: United States. Dept. of Agriculture.. Washington : U. S. Govt. Print. Off., 1935. 01/01/1935 v, 38 p. diagrs. 24 cm. Language: English
    Database: WSU Libraries Research Warrior

  21. Bob Roddis says:

    These look promising as insomnia cures.

    26.
    Academic Journal
    The Administered-Price Thesis Reconfirmed
    By: Means, Gardiner C.. In: The American Economic Review. Jun., 1972, Vol. 62, Issue 3, p292-306, 15p.; American Economic Association. Language: English
    Database: JSTOR Arts & Sciences I
    PDF Full Text
    27.
    Academic Journal
    Simultaneous Inflation and Unemployment: A Challenge to Theory and Policy
    By: MEANS, GARDINER C.. In: Challenge. SEPTEMBER/OCTOBER 1975, Vol. 18, Issue 4, p6-20, 15p.; undetermined. Language: English
    Database: JSTOR Arts & Sciences IX
    PDF Full Text

  22. Bala says:

    Genius,

    This piece below was your masterpiece, wasn’t it?

    lol.. administered prices refute the Misesian idea that modern market economies achieve economic coordination by flexible prices

    No, economic chronicler. The Misesian idea (as per the idea of coordination that you subscribe to) is that realised prices achieved on the market, which also happen to be market clearing prices, are important for coordination between producers’ choices and consumers’ preferences.

    It operates through the profit-loss mechanism to ensure that those who produce in line with consumer preferences get their capital preserved or enhanced. Thus they manage to stay in business and continue to produce. Those who do not correctly forecast and produce in such a manner that they fail to meet consumer preferences are soon put out of business by the depletion, even leading to eventual loss of their capital.

    Now, please explain where flexible prices are critical to Misesian Coordination given that no convergence of prices towards market clearing prices is required because realised prices are market clearing prices.

    • Lord Keynes says:

      “Now, please explain where flexible prices are critical to Misesian Coordination given that no convergence of prices towards market clearing prices is required because realised prices are market clearing prices.”

      No, you have interpreted that Salerno passage in a manner contrary to its sense in an act of bizarre distortion.

      You are now saying that Mises never said that prices need to be flexible and moved towards market clearing values!

      This should be news to hordes of Austrian economists, not to mention Mises himself:

      ” It was Mises’ life work to demonstrate that the operation of the free market economy is the most efficient means of allocating scarce resources in an imperfect world, Those entrepreneurs who forecast and plan incorrectly will suffer losses; if their errors persist, they will be driven out of business. In this way, less efficient producers lose command over the scarce factors of production, thus releasing such resources for use by more efficient planners. The consumers in the economy are sovereign; their demands are best met by an economic system which permits the efficient producers to benefit and the inefficient to fail.

      The whole structure rests upon a system of rational economic calculation. Profits and losses must be measured against capital expenses and other costs. The heart of the competitive capitalist system is the flexible price mechanism. It is this which provides entrepreneurs with the data concerning the existing state of supply and demand. Only in this fashion can they compute the level of success or failure of their firms’ activities.
      http://www.lewrockwell.com/2002/03/gary-north/repressed-depression/

      There prevails upon the unhampered market a tendency for consumers to encourage production in every industry up to that point at which the marginal producer or producers make neither a profit nor a loss. Flexible market prices are the means for revealing that point to producers. Any outside interference with freely flexible prices must misdirect production and lead to diminished satisfaction of consumers.
      http://mises.org/daily/6120/How-Prices-Are-Determined?utm_source=dlvr.it&utm_medium=twitter

      • Bala says:

        You are now saying that Mises never said that prices need to be flexible and moved towards market clearing values!

        No, Genius. I am just pointing out the internal inconsistency in your statements. I asked you what you mean by Misesian Coordination. YOU gave me the Salerno quote. I worked within that to question you.

        All that is besides the point about a flexible price mechanism. Please note the portions you highlighted this time.

        The heart of the competitive capitalist system is the flexible price mechanism.Flexible market prices are the means for revealing that point to producers.

        Please explain how producers fixing prices contradicts a flexible price mechanism. Please explain why producers would never change the prices they fix. Flexible prices means prices that can be changed. Please note the use of the passive voice.

        That means (as Bob Roddis has been crying hoarse just above), prices are changed by agents, i.e., acting men. They do not move on their own. It is men, their subjective valuations and the changes there in (due to various reasons including that they learn) that are the ultimate irreducible cause of price changes. And men do change their subjective valuations. Is that the point you are disputing?

        So, your entire attack based on fix-prices stands exposed for the tomfoolery it is.

      • Bala says:

        Also note, Genius, that my previous comment was about Misesian Coordination while the new Mises comment you are pulling up is about a competitive capitalist system and that point at which the marginal producer or producers make neither a profit nor a loss.

        This is a different ball game and if you are doing it deliberately to move the goal posts and deflect the discussion (which you are capable of), it’s rather shameful though par for the course coming from you.

        • Bob Murphy says:

          Hey Bala, I don’t know if there is a cultural difference involved, but FYI you sound really hostile lately.

          • Bala says:

            Thanks for the feedback. Coming from you, I will only take it positively. However, do cut me some slack when a guy starts using strong language like hare-brained right at the outset. At that stage, I had only asked him a question seeking the meaning behind his use of the term Misesian Coordination. I really wanted to engage in a nice way, but he seemed intent on picking up a fight. Don’t you think so?

          • Bala says:

            And do you consider his first response to my first question to him anything other than smart ass, especially the part where he said Also define the?

          • Bala says:

            Incidentally, Bob, right up there when I asked him what he meant by the term Misesian Coordination, I knew that he was mixing up concepts of coordination with the concept of competitive capitalist system where profits and losses are eliminated by prices being adjusted by market participants towards market clearing levels. I was confident that this error would come out the very instant he explained the basis on which he was making his claims. The fact of the matter is that it has come out. His aggression in the form of the smart ass reply was only a way of temporarily evading it. His poor understanding backed by his (what I think is misplaced) confidence that I am a blundering fool made him get aggressive and use strong language like hare-brained. Therefore, I definitely think it is not unjustified on my part to then respond as I did, calling him Genius and sounding hostile.

            Just explaining, that’s all. Thanks all the same for the feedback. And I don’t think it’s about cultural difference. It’s just me…. :)

  23. Bob Roddis says:

    I smell politically supported big business cartels when I sniff “administered prices”.

    Gardiner Means has identified four different groups that were instrumental in helping to create the NRA: (1) business groups who had been interested in getting the antitrust laws set aside in order to allow firms in an industry to get together to eliminate “destructive price cutting or price chiseling”; (2) the “industrial self-governors” who were interested in a “more comprehensive industrial self-government” for industry; (3) organized labor; and, (4) various persons—such as Rexford Tugwell—who had more of a philosophical interest in industrial planning. Means went on to identify three principal benefits that were provided by the NRA: (1) the “therapeutic value” of ending the “state of shock” in which business found itself as a result of the depression; (2) establishing organized labor as a source of “countervailing power” within the business sector; and, (3) getting “the idea of industrial self-government”—which he acknowledged as being influenced by the “fascist experience” of earlier years—”out of our system.”69 In words that reflect the sense of “cooperation” that the business community had labored so hard to institutionalize during the postwar years, Thurman Arnold observed that the NRA “expressed the change which had come over men’s thinking,” adding that “[t]he profit motive, which at one time was a respectable justification for any sort of price-cutting, had become a somewhat immoral thing because of the competing symbol of cooperation.”70
    Some might wish to argue that the 1930s began in the business-dominated spirit of the Swope Plan and NRA codes of fair competition, but ended in the anti-big-business rhetoric of Thurman Arnold and the Temporary National Economic Committee. Indeed, as head of the Antitrust Division, Arnold’s “trust-busting” activities gave the outward appearance of a fundamental shift in governmental policy. But while his efforts had some limited impact on business behavior,71 there is little evidence of any business disenchantment with the general principle of a politically backed industrial “self-regulation.” Quite the contrary. Arnold himself declared in July 1939 that “[i]t is business men and business men alone who file practically all the complaints with my division, and it is for business men that the anti-trust laws must be enforced.”72 One searches in vain during the post-Schechter years for any widespread expression of business sentiment for an economic system premised upon laissez-faire principles, or for the impersonal order implicit in Adam Smith’s “invisible hand.”
    The New Deal is often equated, in both popular and scholarly literature, with the demise of laissez-faire brought about by a discreditation of its self-regulatory mechanisms. As a polemic on behalf of corporate-state policies, such a view is understandable. As a statement reflecting historical fact or economic analysis, it is woefully inaccurate. Legislative inroads into economic life were occasioned not by the failure of the market to provide order and discipline but by the market’s general immunity to being corrupted for the benefit of special interests. The purpose of such legislation, including the NRA legislation, was to repress and stabilize competitive conditions—to ossify industries and restrain those influences that represented the threat of change. Although the policy arguments offered on behalf of such political programs emphasized socially conscious motives, their real purpose was to provide the coercion essential for holding together a collectivized industrial order. The partnership between business and government that continued to unfold during the 1930s was much more than a simple marriage of convenience. It represented, instead, a response made necessary by the inherent weakness in every form of collectivism (including cartels), namely, the tensions between private and group interests.

    Shaffer, Butler (2011-04-05). In Restraint of Trade: The Business Campaign against Competition, 1918–1938 (LvMI) (Kindle Locations 2630-2636). Ludwig von Mises Institute. Kindle Edition.

  24. Bob Roddis says:

    The interests of lenders or investors are usually involved in any business organization, as evidenced by almost all large corporations. Bankers, not being renowned for their daring, and stockholders, desirous of preserving the present value of their interest in the corporation, have relatively cautious outlooks. In time, the entrepreneur—whose innovative, risk-taking, creative skills gave birth to the firm—comes to be regarded with suspicion and distrust by investors and creditors, who view his “freewheeling” methods as “irresponsible” and a threat to the enterprise. In order to insulate the assets of the firm from his more hazardous pursuits, the entrepreneur is removed from his position of control and replaced by the “prudent” and “fiscally responsible” manager. Such a change need not be hostile, however, as many entrepreneurs lack any interest in administering what they have created and are content to move on to other creative pursuits. Hired to preserve and protect the interests of the institution from risky decision-making, the manager is steeped in the methods of cost accounting, organization charts, projections, and paperwork systems, and regards the guaranteed rate of return on investment as preferable to the risks associated with actions that could as likely bankrupt the firm as multiply its value.

    A related problem that arises when the control of corporations shifts from owners to managers has been observed by Adolf Berle and Gardiner Means. After noting that the “[o]wnership of wealth without appreciable control and control of wealth without appreciable ownership appear to be the logical outcome of corporate development,”66 they point out how such a division of interests can generate a conflict of purpose between these two groups. The interests of the owners may lie in the distribution of corporate earnings, while those of the managers may rest in the pursuit of other ends (e.g., personal profits that come at the expense of the corporation, the prestige or power interests associated with their corporate positions, or, as Chandler has noted, the reinvestment of profits in the firm in order “to keep the organization fully employed”).67 SUCH CROSS-PURPOSES HAVE A TENDENCY TO REDUCE THE ROLE OF PROFITS AS A MEANS OF FOSTERING CORPORATE EFFICIENCY, a phenomenon that is particularly evident in corporations in which ownership is so broadly dispersed as to make organized opposition to current management rather ineffective.68

    66. Adolf A. Berle Jr. and Gardiner C. Means, The Modern Corporation and Private Property (New York: Macmillan, 1932), 69.

    67. Chandler, Visible Hand, 10.

    68. See The Structure of the American Economy; Part I, A Report Prepared Under the Direction of Gardiner C. Means, June, 1939 (New York: Augustus M. Kelley, 1966), 156ff.; see also Berle and Means, Modem Corporation.

    Shaffer, Butler (2011-04-05). In Restraint of Trade: The Business Campaign against Competition, 1918–1938 (LvMI) (Kindle Locations 5015-5020). Ludwig von Mises Institute. Kindle Edition.

  25. Bob Roddis says:

    The presumed benefits associated with organizational size generally failed to materialize from the merger movement that was so popular at the turn of this century. In his early study of corporate reorganizations, Arthur Dewing concluded that the experiences of firms that had undergone consolidation attested to “the inadequacy of mere consolidation as a basis of economic efficiency.”97 In one study involving ten unrelated companies, Dewing observed that the combined postconsolidation earnings had averaged only 65 percent of the preconsolidation levels.98 In Dewing’s opinion, the reasons that most combinations failed to live up to their promoters’ expectations involved “the difficulties attending the administrative management of a large business” and “the difficulties attending the creation of a business organization sufficiently powerful to dominate an industry in the presence of actual or potential competition.”99 Following the merger that created United States Steel in 1901, its market share fell from 61.6 percent in 1901 to 39.9 percent by 1920.100 Likewise, the 1902 merger that produced International Harvester was followed by a drop in market share from 85 percent in 1902 to 64 percent by 1918.101 Gabriel Kolko partially explains these declines in terms of the internal problems created by organizational size. In his view, “U.S. Steel… was a technologically conservative, increasingly expensive operation that illustrates the inadequacy of the dominant theories on the positive relationship between size and efficiency current since the end of the nineteenth century.”102

    102. Ibid., 38. The very successes that many large businesses—such as U.S. Steel—had in becoming the predominant firms in their industries also attracted antitrust investigations and prosecutions. Indeed, U.S. Steel was undergoing a major antitrust prosecution during the time period covered by Kolko’s study. BECAUSE AGGRESSIVE COMPETITIVE PRACTICES WOULD HAVE EXACERBATED ITS ANTITRUST PROBLEMS, THIS MAY HAVE CONTRIBUTED TO LESS-AGGRESSIVE BEHAVIOR that, in turn, could have led to a decline in market share. Such an explanation finds some support in the fact that U.S. Steel’s attitude toward independent producers had “never been characterized by any attempt at what is called ‘destructive competition’” and, indeed, reflected “a certain far-sighted magnanimity toward competitors.” See Louis Galambos, “The American Economy and the Reorganization of the Sources of Knowledge,” in The Organization of Knowledge in Modern America, 1860–1920, ed. Alexandra Oleson and John Voss (Baltimore: Johns Hopkins University Press, 1979), 273; also, Abraham Berglund, “The United States Steel Corporation and Price Stabilization,” Quarterly Journal of Economics 38 (November 1923): 1–30, at 29.)

    Shaffer, Butler (2011-04-05). In Restraint of Trade: The Business Campaign against Competition, 1918–1938 (LvMI) (Kindle Locations 5079-5087). Ludwig von Mises Institute. Kindle Edition.

  26. Bob Roddis says:

    Price too high? Or price too low?
    Now, which charge did they make?
    Well, they weren’t loath to charging both
    With Public Good at stake!

    In fact, they went one better
    They charged “monopoly!”
    No muss, no fuss, oh woe is us,
    Egad, they charged all three!

    “Five years in jail,” the judge then said.
    “You’re lucky it’s not worse.
    Robber Barons must be taught
    Society Comes First!”

    http://mises.org/daily/3801/

  27. Bob Roddis says:

    By the start of 1933, the retail trades were heavily involved in efforts to seek legal restraints against those retailers—especially the supermarkets—who engaged in loss-leader selling. Retail trade associations, composed largely of independent retailers, mounted campaigns to convince consumers—and legislators—that there was something almost fraudulent about a retailer offering to sell certain items below their actual costs as an inducement for customers to shop at that store. The Associated Grocery Manufacturers of America prepared a model state law that, it was hoped, would be used by retailers within their respective states in seeking legislative solutions. Some disagreement arose within the industry not as to the principle of such legislation, but of the form it should take. As a result, the AWGA also prepared a model bill for use against the chains. This alternate bill defined “loss leader” selling as selling below cost, whereas the manufacturers’ bill addressed itself to sales below purchase cost. The wholesalers felt that the manufacturers’ bill could benefit the chain stores at the expense of the independents by permitting the manufacturers to sell grocery products to the chains at quantity discounts, thus allowing the chains to sell such items at a legally lower price than the independents could do.14 This debate continued up into 1936 and helped spark interest in securing passage of state fair-trade laws, the Robinson-Patman Act (1936), and the Miller-Tydings Act (1937).

    Nowhere was the attraction to political solutions more evident than in the New Deal-era responses of independent retailers to the bogey of chain stores. The initial reaction of this group to the NRA was to devise a marketing code that would effectively strip the chains of any competitive advantages they enjoyed—a move the chains, understandably, sought to counter. The NARG, for example, supported a measure limiting the number of hours of employment for stores, a proposal that would have had less impact on the independent retailers, who could operate above the maximum hours level by having themselves or members of their immediate family working.15 The National Wholesale Grocers Association supported the maximum-hours concept and also offered recommendations for the prohibition of sales below cost, secret rebates, and “free deals.” At the same time, a group of New York City retailers—with the improbable name of the Business Independence League—called for a federal investigation of chain-store ethics and urged the enactment of a city tax on chain stores.16

    Shaffer, Butler (2011-04-05). In Restraint of Trade: The Business Campaign against Competition, 1918–1938 (LvMI) (Kindle Locations 4151-4163). Ludwig von Mises Institute. Kindle Edition.

  28. Bob Roddis says:

    Thus Gardiner C. Means pointed to the growth of corporate power as an important cause of the Great Depression. Rising industrial concentration had given rise to inflexible administered prices in many industries, and this was a factor which ‘greatly reduced the flexibility of the economic system and impeded the making of the necessary economic readjustment’. This increasing rigidity was not confined to big business, but could be identified also in the ‘protective reaction to corporate concentration’ by farm cooperatives, business associations, labour unions and consumer cooperatives. In many instances these forms of economic organization had also ‘become sufficiently strong by 1929 to markedly reduce the flexibility to adjustment through the market mechanism’. Finally international cartels, though seldom successful for long, ‘would act often, during the period of several years, to maintain prices and prevent basic readjustment’ (Means 1935a [1992], pp. 80-2; cf. Means 1935b, 1936).

    A similar case was developed by Arthur Burns in his massive work on The Decline of Competition. Burns’s empirical research established a clear ‘correlation between stability of price and instability of production’; industries with rigid prices after 1929 suffered a sharper decline in output than those with price flexibility (Burns 1936, p. 250). Burns did not flinch from the macroeconomic implications. By eliminating price-cutting, businessmen ‘have paralyzed the mechanism of response to declining demand; claiming to benefit industries purchasing from them, they have failed to realize the extent to which their policy magnifies reactions to a decline in business’ (p. 262). Thus the ‘stabilization of prices which enter into costs over a wide field of industrial activity tends….to destabilize industrial activity as a whole’ (p. 263).

    “IMPERFECTIONISM’ IN MACROECONOMICS: OLD LIGHT ON A NEW CONTROVERSY” by J. E. King*, Department of Economics and Finance, La Trobe University, Victoria, Australia

    http://tinyurl.com/krgwdue

  29. Bob Roddis says:

    Following the Schechter decision, the hard-pressed textile industries lined up in support of a continued observance of code principles,75 with some industry spokesmen advocating the enactment of legislation to provide for the enforcement of such codes.76 One such proposal sought “to preserve, through industrial self-government, such stabilizing benefits as accrued to this industry under the National Industrial Recovery Act” and went on to recommend “the strongest possible bureau of fair trade practices.”77 The influential ACMA recommended conformity to existing codes for its members.78 At about the same time, a meeting was held—under the auspices of the Industry and Business Committee for NRA Extension—among representatives of some 150 industries to discuss a proposal for legislation to create a new NRA system under which codes would be submitted to a congressional body for approval.79 This measure, offered by Peter Van Horn, president of the National Federation of Textiles, was an obvious attempt to satisfy the Supreme Court’s objection, in Schechter, that the NRA code-making process involved an unconstitutional delegation of legislative authority. By submitting such codes to Congress instead of to the executive branch, the approved codes would—the proponents of the measure hoped—have the effect of a validly enacted piece of legislation. A resolution favoring such a law received unanimous backing at this meeting.80

    In spite of Schechter, the textile industry had not given up on seeking political solutions to competitive problems. THE DESIRE OF NORTHERN TEXTILE FIRMS TO IMPOSE HIGHER LABOR COSTS ON THEIR SOUTHERN COMPETITORS—BOTH TO REDUCE THE COMPARATIVE ADVANTAGE IN PRICING ENJOYED BY THE SOUTHERNERS AND TO REDUCE TOTAL PRODUCTION—LED MANY IN THE TEXTILE INDUSTRIES TO BECOME SOME OF THE PRINCIPAL ADVOCATES OF MINIMUM-WAGE LEGISLATION.81 It was the quite practical interests of some employers seeking to benefit themselves at the expense of their competitors, and not any “humanitarian” sentiments, that was responsible for the enactment of the Fair Labor Standards Act in 1938. Minimum-wage laws not only served to increase the hourly rate of pay for Southern mills but placed a premium on overtime work, factors that both added to the production costs of the Southern mills and reduced the incentives for maximizing production. Labor unions added their support to such legislation in order to help eliminate lower-priced sources of labor.82 Any suggestion that the textile industries had soured on the use of the political state to alter market relationships and deprive competitors of their comparative advantages is hardly warranted by the evidence.

    Shaffer, Butler (2011-04-05). In Restraint of Trade: The Business Campaign against Competition, 1918–1938 (LvMI) (Kindle Locations 4681-4686). Ludwig von Mises Institute. Kindle Edition.

    • Major_Freedom says:

      Keep these posts coming.

  30. Bala says:

    Bob,

    Tell me if you think I am wrong in saying what I say.

    LK on his blog

    (2) the Austrian (or Misesian) notion that market economies have a strong tendency to economic coordination effected by firms’ adjusting their prices towards market clearing values is fundamentally flawed and wrong.

    My response:

    Wrong. Economic coordination is effected through freely determined market prices and the profit-loss mechanism. I say this because I hold that economic coordination refers to the process that brings producers’ decisions in line with consumers’ preferences.

    The eventual elimination of profits and losses in a competitive capitalist system is achieved by flexible prices, i.e., prices that are amenable to being reset by the very people who, as acting men, set them in the first place.

    I would greatly appreciate your feedback.

    • Bala says:

      Just to add to what I said, I see flexible prices as only an aspect of the broader concept of arbitrage action that drives profits and losses to zero in the competitive capitalist system.

  31. JdL says:

    I agree that it’s good to avoid taking cheap shots at people, but I think the analogy you’re making is pretty thin. The anti-capitalist who buys capitalist-produced goods is using things that probably would not exist but for capitalism, and which he is not forced to support unless he chooses. The driver on government roads is using something that the free market would easily provide if given a chance, and which he is forced to fund. Sneering at the latter is particularly ridiculous.

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