Lord Keynes Strikes Again
One of the better-read thorns in my side is a guy (I assume) calling himself “Lord Keynes.” He is definitely smart, and has read a lot of economics, but he’s slick as glass and at best is Chaotic Neutral. I’m posting this exchange on the main page here because it will clear up some confusion over the utility debate, but also because LK frequently tries to trip up my commenters here with quotes from my own work. This places them in the awkward position of either defending what they thought was the Austrian orthodox position and throwing me under the bus, or of staying quiet and letting LK run victory laps. Usually (but not always) this is grossly unfair on LK’s part. I don’t know how his mind works well enough to speculate on whether that is his intention or not, but regardless, here you go…
==> In this comment, Bala wrote: “Utility is the subjective appraisement of the usefulness of a means towards end satisfaction. Nothing to do with emotions, happiness or satisfaction out there.”
==> LK licked his lips, sensing his prey had made a tragic mistake. He dug up three of my books and wrote:
Better break the sad news to Bob Murphy. Apparently he is such an idiot he thinks this:
“marginal utility: The marginal utility of a good or service is the amount of satisfaction—utility—you get when consuming one unit of it.”
Robert P. Murphy, The Politically Incorrect Guide to Capitalism, p. 18.“We can say that individuals rank outcomes in terms of happiness, utility, satisfaction, contentment, etc.“
Murphy, Robert P. Study Guide to Man, Economy, and State, p. 6.“In praxeology, happiness (or utility, or satisfaction) is a purely formal term, defined entirely by the subjective goals of the individual actor.”
Murphy, Robert P., Study Guide to Human Action, p. 2.
————-
Poor old Bob: doesn’t understand basic Austrian concepts.
==> OK, so what’s the deal? Is Bala totally wrong? Or is Bala right, and I’m an idiot?
Actually, it comes from using the terms “happiness” etc. in different senses. It’s easy for me to explain the distinction, all I have to do is give you the fuller quotation from my study guide to Man, Economy, and State that LK quoted from in the middle, above. Here is the fuller quote:
All action aims at exchanging a less satisfactory state of affairs for a more satisfactory state. We can say that individuals rank outcomes in terms of happiness, utility, satisfaction, contentment, etc. Regardless of the name, these terms are purely formal, and do not imply hedonism or crude Benthamite utilitarianism.
Value rankings are always ordinal, never cardinal. There is no unit of happiness or utility, and hence we can only say that a man preferred A to B; we never say he preferred A “three times as much.” — Yours Truly, Study Guide to Man, Economy, and State, p. 6
I am not disputing that you and Austrian economics holds that subjective utility is an ordinal concept, and not a cardinal one that can be objectively measured by meaningful homogeneous units called utils. Clearly that is true.
What was disputed by me is Bala’s statement that subjective utility in Austrian theory has got “Nothing to do with emotions, happiness or satisfaction out there.”
Are you seriously telling me that you defend that view? That subjective utility actually has nothing — absolutely zero — to do with the emotions we know as happiness, pleasure or satisfaction?
LK it need not have anything to do with those emotions. Someone can choose to go to the dentist to get a root canal rather than drinking a milkshake. Does that mean the root canal gives him more happiness or pleasure than the milkshake? Eh, I dunno. It gives him more utility, if all we mean by utility is, “The formal term to denote the outcome that is chosen by an acting individual.” That is what Bala is obviously getting at. It’s why, in the quotes from me, I say that these terms are “purely formal.”
That is nothing but an evasion of the question. I asked you: does subjective utility in Austrian theory actually have nothing — absolutely zero — to do with the emotions we know as happiness, pleasure or satisfaction, as bala outrageously said?
And, YES, any reasonable person would say that most people troubled by some painful dental problem would derive greater satisfaction from dental treatment to end their pain than from milkshakes. The dental treatment — even when they list their preference ranking only ordinally at that moment — has greater utility and is listed first because they desire it much more than anything else and the emotion of satisfaction obtained is what they desire most.
“The dental treatment — even when they list their preference ranking only ordinally at that moment — has greater utility and is listed first because they desire it much more than anything else and the emotion of satisfaction obtained is what they desire most.” Lord Keynes, I think you and Bala are actually trying to say the same thing, which is that the the end goal of the dental treatment is an outcome that gives more satisfaction than the satisfaction obtained by drinking a milkshake. But that is different from saying that the milkshake itself is more pleasurable than the root canal. So when preferences have to do with the happiness associated with the ends, not the means.
“So when preferences have to do with the happiness associated with the ends, not the means.”
Yes, and that’s the point. The ends are subjective to each individual, and since utility is only relevant to those ends, they cannot be compared across individuals.
Not only are the ends different for each individual, each person’s current state of uneasiness (the alieviation of which is the motive for economic action) is different. As well as the number of alternative means to alieviate that unease.
What Bala was trying to say was that one specific emotion isn’t always the highest ranked preference. Sometimes we actually want to be angry or sad.
I think it might help to suggest that “satisfaction” isn’t an emotion in the sense that Bala meant.
When we want to be angry, there’s something unsatisfactory about it – and yet, it’s more preferable to us than the current alternative.
“Satisfaction” is being used in two different senses, here. It’s a little bit confusing, but Bala is right.
Well, I agree with Bala’s point about means vs. ends, but I don’t agree with the rest of your comment. Isn’t uneasiness ultimately an emotion? And even if different people have different causes of their uneasiness, couldn’t the uneasiness of different people be compared in principle, even if we may not have the methods to do so right now?
“Isn’t uneasiness ultimately an emotion?”
(This is why I said it was difficult.)
It’s an emotion, but not in the sense LK needs it to be. (Thus the “two senses” comment).
The “degree” of unease is relative to the opportunity costs of one’s highest ranked preference.
So, there’s no unit of unease. It’s relative. To the ranked preferences. Which are subjective.
“… couldn’t the uneasiness of different people be compared in principle …”
Since the concept of unease only makes sense relative to subjectively ranked preferences, no.
The subjectively ranked preferences are what we base unease on, and we don’t rank preferences in the same way.
How do we use our emotions to weigh the outcome of future events against our present situation?
Fascinating question. Not really economics though is it?
Austrian economics (to the best of my knowledge) does not attempt to lever open people’s heads. Preferences are revealed by behaviour and only by behaviour. Therefore, in terms of Austrian economic theory it has nothing (absolutely zero) to do with the emotions, nor with any other internal state.
Psychology may well tell you that people make decisions based on emotions, and based on a bunch of other stuff too, that’s psychology, ask a psychologist if you want an answer from that perspective. Seems to me this is simply a demarcation question.
You might be interested in creating a fusion of psychology, and economics (perhaps call it behavioural economics or something) which would be a somewhat different approach. Should all Austrian economists rush out and suddenly become behavioural economists? Well seems that a lot of them have had the opportunity to do that, but chose not to do it, must be some reason (based on observation of their behaviour) why they don’t want to. Probably emotions, or if not emotions then some other reason.
Tel gets it.
” Therefore, in terms of Austrian economic theory it has nothing (absolutely zero) to do with the emotions,”
Another vulgar Austrian who never read Mises:
When science speaks of pleasure, happiness, utility, or wants, these signify nothing but what is desired, wished for, and aimed at, what men regard as ends and goals, what they lack, and what, if procured, satisfies them. These terms make no reference whatever to the concrete content of what is desired: the science is formal and neutral with regard to values. The one declaration of the science of ‘happiness’ is that it is purely subjective. In this declaration there is, therefore, room for all conceivable desires and wants. Consequently, no statement about the quality of the ends aimed at by men can in any way affect or undermine the correctness of our theory.” (Mises, L. von. 2003. Epistemological Problems of Economics. Ludwig von Mises Institute, Auburn, Ala. p. 59).
Show me a conclusion that Austrian economics makes based on internal states of people, rather than on externally visible behaviour of people.
The issue here is whether subjective utility is related to and indeed even identified with satisfaction’ or ‘happiness” in Austrian theory, as in Rothbard’s statement:
” In contrast, praxeology or economics, as well as the utilitarian philosophy with which this science has been closely allied, treat ‘happiness’ in the purely formal sense as the fulfillment of those ends which people happen — for whatever reason — to place high on their scales of value. Satisfaction of those ends yields to man his ‘utility’ or ‘satisfaction’ or ‘happiness.’ Value in the sense of valuation or utility is purely subjective, and decided by each individual.” (Rothbard 1998: 12).
Notice those terms are in quotes, LK.
It is because what Austrian economics means by utility, satisfaction, happiness, etc, are NOT the emotional concepts or feelings referred to by others who use those terms.
That is why there is typically a list of terms. It is because Austrians are trying to communicate a non-emotional, praxeological-scientific concept using emotion based terms.
You are misunderstanding what Austrians are saying when they use those same terms. They don’t mean emotions!
That’s exactly it, MF. These terms are used to bridge the gap of unintelligibility and unfamiliarity, nothing more. Once the gap has been bridged, they serve no purpose other than confusion.
The intro to any new theoretical topic is always well-served by analogy to the familiar. One discards these analogies after the intro.
LK, does this dental problem prevent one from enjoying a milkshake? Is happiness to be judged by a return to one’s nominal state?
If the subjective utility of my choices are emotional and happiness/satisfaction directed why has my happiness index been in decline since adulthood?
The question you ask is not so much of a problem for Austrians as we have an awareness of reality. This is more of a problem for someone coming from worldview where Ricardo Montalban can correct all of natures shortcomings.
“I asked you: does subjective utility in Austrian theory actually have nothing — absolutely zero — to do with the emotions we know as happiness, pleasure or satisfaction, as bala outrageously said? “
Strange how Bob Murphy is as silent as the grave and can’t give a straight answer.
So let Mises speak:
When science speaks of pleasure, happiness, utility, or wants, these signify nothing but what is desired, wished for, and aimed at, what men regard as ends and goals, what they lack, and what, if procured, satisfies them. These terms make no reference whatever to the concrete content of what is desired: the science is formal and neutral with regard to values. The one declaration of the science of ‘happiness’ is that it is purely subjective. In this declaration there is, therefore, room for all conceivable desires and wants. Consequently, no statement about the quality of the ends aimed at by men can in any way affect or undermine the correctness of our theory.” (Mises, L. von. 2003. Epistemological Problems of Economics. Ludwig von Mises Institute, Auburn, Ala. p. 59).
Maybe when you read Mises you should focus on what the words mean and what he is saying. In the same book you are quoting from he has a section “Cognition From Without and Cognition From Within” and another section “Economics and Psychology” where he makes it clear that economics is not attempting to be psychology. He goes over it from every possible angle.
Also this quote (my highlighting):
That’s pretty much spelling it out right there. This one is even stronger…
That’s a pretty strong statement about the nature of economics. You might not agree with it but if you are going to quote Mises in support of anything… well that’s Mises, that’s what he believed.
And I never claimed that Mises thought that economics IS psychology — only that subjective utility in Austrian theory is strongly related to emotions like happiness, satisfaction, pleasure, etc.
So your comment is one long red herring.
The very fact that you admit that Austrian economics is distinct from psychology, per Mises, is sufficient for you to have admitted that the terms “utility”, ” satisfaction” and “happiness” in Austrian economics do NOT refer to anything to do with emotions! Emotions are after all psychological concepts.
You say “strongly related” without showing a shred of proof or evidence of any relation whatsoever.
Merely quoting the terms “happiness” and “utility” being used by Mises does not in any way shape or form stand as proof or even a hint of evidence that praxeology is in any way related to or associated with emotions.
It is as if you would have us believe that if physicists use the term “strange” and “charmed” to describe subatomic particles, that this is somehow proof or evidence that physics is “related to” fairy tales and magic.
You lost this argument, all you’re doing is digging further into absurdity.
So according to our arch-genius M_F:
(1) whenever Austrian economists use words like “satisfaction” and “happiness” when describing what utility is they actually “do NOT refer to anything to do with emotions” and
(2) praxeology is not “in any way related to or associated with emotions.”
—–
This is plainly false and comical, but even If it were true then “utility” in Austrian economics would be an utterly empirically empty and nebulous concept. What would it even mean?
It is not “plainly false” and whatever you find “comical” has as much nothing to do with what Austrian economics actually says, as does praxeology have anything to do with psychology or emotions.
“If it were true then “utility” in Austrian economics would be an utterly empirically empty and nebulous concept.”
See that everyone? Everything must be shoehorned into LK’s narrow band of understanding via “empiricism”.
And what’s more, is that we’re supposed to take seriously his blatherings on what Mises, an anti-empiricist in economics, must have meant when he used certain terms.
LK you’re making zero sense here. You can disagree with Mises, fine, but for you to assert in your empiricist extremism that Mises must have meant, is the height of silliness.
Throwing your hands up in the air and claiming that Mises must either have meant an empirical argument of ” happiness” or else “nebulousness” is proof you lost the argument. For now you are trying to make an argument that is what I say is true, then Mises was wrong to write about an allegedly “nebulous” concept, and you are no longer trying to lecture us on what Mises meant by the terms.
“What would it even mean?”
Now you are finally starting where you should have started the entire time. Instead of shoehorning in your own understanding and then playing linguistic prescriptivism when you learned your a priori understanding was wrong, you should have first asked “What did Mises and Rothbard really mean when they used the terms ” happiness” and “utility” in quotes so often?”
You can know what Mises meant by doing what others here have done: read more and understand more.
Do you think it is a coincidence that those who you would call “Austrians” here are universally telling you that your understanding is wrong? You think that is just because your name is LK? Please.
To be quite frank, I do disagree with Mises, and I believe he did not put enough emphasis on empiricism, and his presumption that ALL action is purposeful makes a simplifying assumption that is useful for analysis but dangerous to 100% depend on.
That said, Mises is what he is, he very clearly made the point that action is what he is studying and that a proiri deduction was his approach. Trying to pencil him in as some sort of behavioral economist just doesn’t fit. Seems unlikely Mises is going to change his opinion on that at this err… late stage.
Mises also made some very valid points about the difficulty of applying empirical methods to macroeconomics… you cannot repeat an experiment, you have no control group, measurement of something like GDP is a necessarily imperfect observation of what goes on in an economy, measurement of inflation is also flawed, structural shifts are obscured, etc.
Anyone wanting to be a dedicated empiricist must understand the tools at hand, when they work, and when they don’t. Without understanding the tools, you can’t expect to get the job done. What’s more, since internal emotional states are even more difficult to observe directly than actions… I don’t see how attempting to base a theory around such unobserved factors does anything to improve the empirical rigour of the approach.
Besides the fact that behavioral economics is a distinct and different approach to Austrian economics… it still comes up against the problems Mises laid down. Worse, because on a macro scale it’s ridiculous to believe you are even making an approximate measurement of the internal emotional state of millions of individual people, you are forced to extrapolate a lot, from small survey groups or test subjects. Worth a try in some cases, but to be taken with extreme caution when drawing conclusions or making policy.
@anonymous:
” and his presumption that ALL action is purposeful makes ”
That is not his presumption.
And Rothbard — another one who doesn’t understand basic Austrian concepts:
“The natural law, then, elucidates what is best for man — what ends man should pursue that are most harmonious with, and best tend to fulfill, his nature. In a significant sense, then, natural law provides man with a ‘science of happiness,’ with the paths which will lead to his real happiness. In contrast, praxeology or economics, as well as the utilitarian philosophy with which this science has been closely allied, treat ‘happiness’ in the purely formal sense as the fulfillment of those ends which people happen — for whatever reason — to place high on their scales of value. Satisfaction of those ends yields to man his ‘utility’ or ‘satisfaction’ or ‘happiness.’ Value in the sense of valuation or utility is purely subjective, and decided by each individual.” (Rothbard, M. N. 1998. The Ethics of Liberty. New York University Press, New York and London. p. 12).
Notice he put the terms in quotes.
It is because he doesn’t mean why you assert he means merely because he used those terms.
Don’t blame anyone for your inability and lack in being able to understand what Rothbard or Mises meant. It is not their fault you refuse to understand that they don’t mean emotions when they say “happiness” in quotes.
So when Mises says:
“The modern concept of pleasure, happiness, utility, satisfaction and the like includes all human ends, regardless of whether the motives of action are moral or immoral, noble or ignoble, altruistic or egotistical.
In general men act only because they are not completely satisfied. Were they always to enjoy complete happiness, they would be without will, without desire, without action. In the land of the lotus-eaters there is no action. Action arises only from need, from dissatisfaction. It is purposeful striving towards something. Its ultimate end is always to get rid of a condition which is conceived to be deficient—to fulfil a need, to achieve satisfaction, to increase happiness.”
Mises, Ludwig von. 2009. Socialism. An Economic and Sociological Analysis. Ludwig von Mises Institute, Auburn, Ala. pp. 112–113.
When Mises uses the words “pleasure,” “happiness,” and “satisfaction, he doesn’t refer to ANY actual human emotion or state of mind in any way?? Hahaha.
What is Mises even referring to?
You – Major_ Freedom – are a walking joke.
“When Mises uses the words “pleasure,” “happiness,” and “satisfaction, he doesn’t refer to ANY actual human emotion or state of mind in any way??”
That’s right.
It is why he put the terms in quotes.
“It is why he put the terms in quotes.”
In the passage I just quoted from “Socialism. An Economic and Sociological Analysis” the words are NOT in quotation marks.
But I bet you are such a pathological liar you will not even admit this fact
K
So he doesn’t use quotation marks, yet you still think he doesn’t refer to any actual human emotions or state of mind in any way?
You STILL don’t get it!
Happiness and utility in praxeology are purely formal concepts. They say nothing about a person’s emotional state. Nothing, NADA.
Do you actually have no idea what formal labelling means?
It could very well be the case that a person could choose A over B while being an emotional wreck and super sad about it, while doing B instead would have made them content, or at least not as sad. This is possible.
A person could hurt themselves by choice, and experience pain, while doing something else would be associated with what behavioral scientists call “happier”.
Yet in praxeology, we sat that the person choosing A over B is associated with greater “happiness” because there is no other word available that can describe that person’s unique experience. We say the are “happier” choosing A because that is how we merely treat all choosing for all actors. It is a broad concept that is only used to refer to people choosing one thing over another. There is ZERO reference to their emptional, neuroscientific chemical composition that emotions refer to.
Clear yet?
The terms are, again, strictly formal, that’s it.
MF, LK did not say that people choose what makes them happiest, which is all your argument here would refute, but that people made choices based at least in part on emotion.
You cannot frame your argument without using emotion words because it would not make sense to do so. This is because the choices are clearly and inexorably linked to emotions. Is not the unease that all action intends to alleviate an emotion? If not, what is it?
Mises does not care what balance or mix of emotions, instincts reflexes or whatever lead people to act. To this extent Austrian economics does not concern itself with the emotions on which action depends.
So we could say it not the study of emotions, but neither does it have nothing to do with emotions. Emotions are the necessary fuel without which there is no action.
Harold:
“MF, LK did not say that people choose what makes them happiest, which is all your argument here would refute, but that people made choices based at least in part on emotion.”
No, LK’s argument was whether or not Austrian economics speaks to people’s emotions when the terms like “happiness” are used.
LK claimed that Austrian economics does speak to an actor’s emotions. That claim is false.
Whether or not “people in part base their choices on emotions” is out of the scope of praxeology.
“What is Mises even referring to?”
He is referring to what he painstakingly WROTE he was referring to:
You even quoted a number of those passages, conveniently not bolding the crucial parts, and bolding the terms “happiness” and “utility” instead and shoehorning in your own definitions of those terms.
Bold this part LK:
“Value in the sense of valuation or utility is purely subjective”
This means YOU cannot define what happiness even means for another individual. By saying Mises and Rothbard meant specific emotions, you are implying that utility is not subjective, but objective, and as such the term “happiness” must mean what you claim Rothbard and Mises meant.
The meaning of “purely subjective” means you cannot even speak of what is going on in the minds of others, emotions or otherwise. You can only go by your own subjective experience, and at most visually or in some other way observing the actions another person is taking.
That study of action has ZERO to do with emotions. When Mises says “happiness” he means the subject choosing a superior state of affairs over a less superior state of affairs without action.
You are like a Christian who insists that extreme atheists who talk about the Magic of the universe, must, by virtue of using the term “magic”, be referring to the Christian definition, which may mean something like Satanic demonic sorcery or witchcraft. And then, they say the author must be peddling witchcraft, because after all magic is ” strongly related to” the paranormal and the supernatural.
“The meaning of “purely subjective” means you cannot even speak of what is going on in the minds of others, emotions or otherwise. “
Then how would you know that people maximise utility, you buffoon? Or that they experience disutility from labour (as in the disutility of labour axiom)?
How would you know that people experience diminishing marginal utility from each successive unit of the same good? — if you “you cannot even speak of what is going on in the minds of others, emotions or otherwise”??
Thanks for utterly destroying the basis of Austrian economics for us.
“Then how would you know that people maximise utility, you buffoon? ”
Austrian economics says IF there is action, THEN such and such follows.
Austrian economics does not claim to be able to read people’s minds.
You seem mad, name calling like that. Looks like your “emotions” are getting the better of you, lol!
If Austrian economics “cannot even speak of what is going on in the minds of others, emotions or otherwise”, it clearly can say NOTHING of any empirical significance about real human beings or real world economics.
The absurd view you express above demolishes Austrian theory in its very foundations.
” Austrian economics “cannot even speak of what is going on in the minds of others, emotions or otherwise”, it clearly can say NOTHING of any empirical significance about real human beings or real world economics.”
Emotions are not economics.
Austrians are not obligated to pretend to be specialists in every field about humans.
Keynesianism says nothing about chemistry or biology, so according to your warped logic, Keynesianism is therefore somehow flawed or insignificant.
“The absurd view you express above demolishes Austrian theory in its very foundations.”
Lol. Non sequitur.
Good thing Austrians, and nobody else for that matter, are obligated to say anything “empirical” about the action or thinking of anyone.
Economics is a priori anyway.
You know this, as that was the very premise behind your clam that if Austrian economics doesn’t delve into positivist science of the human anatomy, or psychology, then a priori it is “fundamentally” “demolished”. Haha
It is up to the actor themselves.
If you are not a robot
“The disutility of labor is not of a categorial and aprioristic character. We can without contradiction think of a world in which labor does not cause uneasiness, and we can depict the state of affairs prevailing in such a world …. Experience teaches that there is disutility of labor. ” (Mises 1949: 65).
According to Mises, empirical evidence shows that human beings experience dissatisfaction from labour.
But according to you he is not saying anything about the minds, belief or emotions of any real world human beings?? hahaha
“According to Mises …”
“But according to you …”
Maybe this will help:
Austrians wouldn’t consider it a contradiction in terms for someone to find “satisfaction” in the pain of self-flagellation.
We wouldn’t say that he has the emotion of satisfaction, here. Only that he has satisfied his end, for which flagellation was a means.
We might be speaking past each other, here.
We’re using “satisfaction” in different ways, depending on the argument.
Disutility of labour entails human dissatisfaction and is something you do not want to do and could avoid if you could.
Don’t waste my time by telling me that disutility does not have a clear meaning and entail certain states of mind.
“Don’t waste my time by telling me that disutility does not have a clear meaning and entail certain states of mind.”
We’re saying that the ends do not necessarily have to entail the emotion of satisfaction, and therefore thinking of it as a unit that can be compared across people – or even across decisions made by the same person – is to misunderstand the nature of the economic action.
It makes sense for an individual to apply math to the means for attaining his ends, because he knows his ends and his opportunity costs.
He needs X amount of various goods to satisfy his ends.
But it doesn’t make sense to apply math to the economic actions of multiple people (aggregates), because they all have different ends.
Even in a company with multiple employees, the employer has arranged a mutually beneficial trade relationship with specific individuals such that each person is a resource that belongs to him.
And the employer is a resource to each employee, individually.
There’s no aggregation even in a company.
LK wrote:
“Don’t waste my time by telling me that disutility does not have a clear meaning and entail certain states of mind.”
Aaaaand LK just revealed his entire house of cards argument to be nothing but what we all knew from the start: one giant linguistic prescriptivism fallacy.
“If any Austrian uses the term ” happiness” then I declare that the definition they MUST adhere to, even if they are dead, even if they meant something different than my definition, is [THIS] and only this. Don’t you dare tell me that they might have meant something else, because from the very start that is what I a priori claimed! It would make me look foolish if after all this I granted you that they might have meant something else! Therefore, to save my sorry face, I have to continue to pretend that linguistic prescriptivism constitutes an actual argument of substance.”
Major,
“Aaaaand LK just revealed his entire house of cards argument to be nothing but what we all knew from the start: one giant linguistic prescriptivism fallacy.”
This is exactly the case, almost always the case. What I fail to grasp is why we don’t just say yes LK those words are used and let it go.
Words are terribly imprecise and yet some of the most sloppy use of language can convey meaning between people. Whether or not LK truly gets it may never be known but it is clear he has no interest in anything except his own agenda. As usual we have let LK control the narrative on not only an unimportant issue but one that on the most basic level (LK’s wheelhouse) he is essentially correct.
LK,
Right here, you have demonstrated that you do not have the slightest clue of how Austrian economic theory (sound economic theory) works. I know Bob Roddis keeps saying that very thing about you and your ilk (trolls like you) and a lot of people feel that he sounds like a broken record, but then the point is that you repeatedly prove him right as you are doing right now.
You seem to demand that an entire economics education be delivered to you on the comment boards of a blog site rather than read and learn by yourself. The visible problem is that you read but do not learn. So why would you expect anyone here to be patient enough to respond to your demands favourably?
Bear in mind, LK, that your demands are laced with rude and unjustified name-calling directed at the very people from whom you are demanding an education. That’s all you seem interested in, not learning. So how can you expect your potential educators to respond favourably?
Hi MF,
“Good thing Austrians, and nobody else, are obligated to say anything “empirical” about the action of thinking of anyone”.
Tel also pointed out “Our data are actions and conduct”.
Now tell me how peoples preferences can be revealed? Are they not revealed in the market place and does this not involve the gathering of “empirical” evidence?
Praxeology might give you some principles of economics (e.g; the downward sloping demand curve), but unless you look at empirical evidence how can you tell what the elasticity of demand is and the relationship between revenue and price?
Marginal utility (considered ordinally and subjectively) is one important factor in the determination of price, but aren’t preferences revealed in the market by actual choices?
John Arthur,
There is one’s own subjective experience, in which one can understand “internal” subjective ranking scales, marginal utility, etc.
What I meant is that in order to understand the entirety of Austrian economics, we do not require any knowledge of what other actors do. In that sense, Auatrians are not obligated to “empirically” know anything about anyone else.
Now if on the other hand a subject wants to accomplish specific goals that require the involvement of other actors, which is what Tel was referring to, then yes, the outward actions of other actors is “necessary” here.
“Are they not revealed in the market place and does this not involve the gathering of “empirical” evidence?”
They are always expressed in the marketplace, but they are only revealed to others to the extent that the prices reflect use-value.
The Keynesians keep manipulating paper money, not realizing that changing the marginal utility of paper does not directly change the marginal utility of the goods they represent.
This is why Austrians say that prices can be “wrong”.
Prices “revealed” in the market in paper terms can be misleading.
It’s why Peter Schiff can tell Art Laffer that an increase in the paper valuations of stocks “isn’t real wealth”.
LK,
“Don’t waste my time by telling me that disutility does not have a clear meaning and entail certain states of mind.”
Your problem is you don’t get that that this part of your statement:
“(…) and entail certain states of mind.”
Is wrong. Everyone and his brother is pointing to you that that bit doesn’t belong in ASE. Because it’s not the scope of said School. It doesn’t need it, doesn’t want it.
In spite of your visible rudeness, I shall give you the education you ask for. You asked
“How do we know……?”
The answer is “Man acts”. Now that I have given the answer, your job as a good student begins.
“Or that they experience disutility from labour (as in the disutility of labour axiom)?”
Because labor is merely a means to and end.
If you *could* achieve your desired end without labor, then it would be superfluous to labor.
“Then how would you know that people maximise utility …”
Because if they thought another action was preferable, they’d do THAT instead.
Someone truly wants to do one thing, but he does another, instead? That makes no sense. (Remember, we’re not talking about emotional “satisfaction”, here; Sacrificial acts merely reveal a higher preference for a state of being where he happens to be hurt.)
Maximum utility is only meaningful relative to one’s preference.
This is why someone doing a rain dance because he thinks it will make it rain can be pursuant to the maximization of utility, even though dancing doesn’t really cause rain.
“Because if they thought another action was preferable, they’d do THAT instead.”
So you think you can know how other people think?
Yet according to M_F Austrians “cannot even speak of what is going on in the minds of others, emotions or otherwise”. lol
“So you think you can know how other people think?”
Depends on what you mean by “how”.
I would say that, yes, I know *how* people think, but not *what* they think.
Their deliberate actions are controlled by them, alone.
If someone didn’t want to do something, then they simply wouldn’t do it.
How is this meaningful? It means that, knowing that economic actions reduce to individual subjective preferences, rather than aggregates, you won’t try to help the economy by ignoring individual preferences in favor of aggregates.
“So you think you can know how other people think?”
Only to the extent that what you see them do is towards their highest ranked goal out of all other goals.
It is a revealed preference. We don’t have to know or say anything about the second ranked goal through the nth ranked goal.
Hi Guest,
“How do you know that people maximise utility”?
(1) Can we really do this without empirical evidence? Models of market demand require the summation of individual demands .
(2) Won’t models that explain and predict consumer behaviour revealed in the market place be appropriate?
(3) So how well do models based on the assumption that a sufficient number of people in any market for any particular commodity maximise their expected utility actually explain and predict consumer behaviour?
(4) What happens when people trade in price fix markets rather than price flex markets? Is the assumption of utility maximising behaviour ( measured ordinally and not cardinally) a better measure of consumers’ behaviour than, say, an expected utility satisficing assumption? How can we resolve these issues by praxeology alone without empirical evidence from actual markets?
(5) What happens in those markets where there are off-equilibrium trades?
(6) “Maximum utility is only meaningful relative to one’s preference”
So what happens when the preferences of others influences our preferences?
What happens when sociological factors like norms, values, world views and ideologies influence our preferences and choices? What happens when patterned relationships between people influence, or even shape, our preferences? Is maximising utility ONLY meaningful relative to one’s preference?
John Arthur:
Remember, Austrian economics is a science that is not meant or designed to enable one actor to prove the existence of other actors.
It is strictly a science grounded on action. If a being is an actor, then it can know economics by way of introspection and deduction.
Austrianism is really meant for an individual actor to know economics. It is not a show and tell, let me convince you, you must accept what I say type science the way positivism/empiricism is designed and intended.
Ultimately, the individual must make the choice themselves, if they are to understand it. Nobody else can force them or convince them. It does not come from without. It comes from within.
“So what happens when the preferences of others influences our preferences?”
Here, it might help to make a distinction between Austrian Economics and Austro-Libertarianism.
Austrian Economics would say that, like emotions, other people’s preferences are ultimately irrelevant to human action. You act because it is in YOUR perceived best interest to do so.
Austrian Economics is descriptive, not prescriptive.
Consistent with this is the Austro-Libertarian view that, since no one has an intrinsic authority over anyone else, and people act on their highest ranked preference (given their opportunity costs), if you want someone to be a steady supplier of a certain resource, then it would be in your interest to attempt to lower the other person’s opportunity costs only to the extent that doing so costs you less than your second-ranked preference.
In other words, Austro-Libertarianism says that your rights end where another’s begin.
“What happens when patterned relationships between people influence, or even shape, our preferences?”
Then you will place different values on goods (the means of attaining your changed preferences).
This happens all the time, which is why Austrians say that the “equilibrium price” (bad phrase that we should stop using) changes all the time, and therefore should not be the focus of policy.
The so-called “equilibrium price” is also different for each potential set of trading partners, so there’s not just one, but billions.
(Chaos ensues in 3, 2, 1 …)
John Arthur,
I found this video playlist to be helpful, and I believe they would help in answering your questions more thoroughly:
Lessons [about praxeology]
https://www.youtube.com/playlist?list=PLEE9A33593A261433
Hi Major Freedom,
Thanks for your responses.
(1 ) I accept that Austrian economics is based on methodological individualism and subjectivism.
(2). However, can the exact slope slope of the downward sloping market demand curve be obtained by “introspection” and the Austrian logic of human action, alone?
(3) Some demand curves have greater slopes than others and the elasticity of demand varies at points along a demand curve as well.
(4). So if the demand curve is downward sloping and price increases so that the quantity demanded falls, how can praxeology tell us by how much this quanitity will fall and its impact on a firm’s revenue?
(5) iI we assume that each consumer maximises his/her expected utility from among alternative courses of action when making their decision in the market place, how can a firm know what impact its increase in price will have on its revenue unless it has some idea of the elasticity of consumer demand for its product ? Doesn’t this require some gathering of empirical evidence?
“… and price increases so that the quantity demanded falls, how can praxeology tell us by how much this quanitity will fall …”
Quantity demanded is relative to the individual consumers’ ends.
So, this is something that can never be known for sure.
An entrepreneur has to guess correctly based on what he knows about his customers, competitors, and fads.
John Arthur:
(1) OK.
(2) No, and neither can any method known to man allow us to know such a thing. All demand slopes and supply slopes, other than the intersection which is the observable price, are purely theoretical, and historical.
At every price point through time, you are actually observing prices that are associated with different sets of supply and demand curves. If you observe that the price of a good falls by say 10% after you know the supply increased 5%, then you cannot say that you moved along the same demand curve as before.
Think of prices over time as a series of X’s of supply and demand. Every part of the lines other than the intersections, are hypothetical counterfactuals.
I don’t like using these curves much, because of a penchant for people to treat them as spaces where we can observe prices move.
(3) OK.
(4) It cannot, and neither can any scientific known make such predictions.
(5) Empirical evidence in economics is just history, never to be repeated on any basis of constancies in causality as like phenomena in the natural sciences. Only to the extent will people react the same tomorrow as they did today, which cannot be KNOWN a priori, will a empirical evidence, I.e. history, be relevant, which means relevant to historians not economists.
Sorry, this is really silly nitpicking. This “disagreement” is caused by vague, ambiguous language. You can solve it by precise wording but then it will be unreadable, like lawyer speak. Every minor point will take paragraphs. Or you can take the civilized road and “work with him here”. It’s nice hard to see what he means.
Of course the act of valuing can have something to do with happiness in the sense that during action you pick A over B and psychologically speaking A can cause happiness. At the same time you can argue that it has nothing to do with happiness because people always act, i.e. pick A over B, regardless if it makes them happy. Just preferable. Some people prefer getting up and going to work over sleeping in but they wouldn’t say they are happy to be working.
Either way this has “nothing to do” with catdinal vs. ordinal. I hope you understand what I mean and won’t give me a “are you seriously saying this has nothing – absolutely zero – to do with cardinal vs. ordinal? 🙂
LK,
Utility is “the subjective appraisement”. It is the acting individual’s subjective appraisement of the usefulness of the means he is considering applying towards end satisfaction (or end attainment). The word “satisfaction” here has little to do with the emotions “satisfaction” or “happiness”.
End attainment (or satisfaction) provides (the emotion) satisfaction (we say the individual is sated), but the definition of the concept utility per se has nothing to do with (the emotion) satisfaction.
I hope this is clear enough.
“The word “satisfaction” here has little to do with the emotions “satisfaction” or “happiness””
So now it has at least “something” to do with emotion? Whereas before it had “Nothing to do with emotions.” But I guess violations of the law of non contradiction do not concern you. lol
I wonder why it turns out that every now and then, I end up giving you a lesson in English.
This time, it is the use of little. “little to do with”, in contrast to “a little to do with”, is practically identical to “nothing to do with”. So, the contradiction, if any, is solely inside your head.
>Bala wrote: “Utility is the subjective appraisement of the usefulness of a means towards end satisfaction.
>Nothing to do with emotions, happiness or satisfaction out there.”
I guess Mises was wrong.
Of course it has “something” to do with satisfaction. The word “satisfaction” is in his very definition (correct) of what utility is, the last word of the first sentence. But it’s not hard to understand that in the second sentence he means the same word in a different, psychological state of mind, sense. Think of Better call Saul : you would pick getting your legs broken to getting killed. But psychologically speaking you wouldn’t say you’re satisfied to have both legs broken.
Really, this is not hard to understand so you’re either not being intelectually honest or Dr. Murphy was wrong and you’re not that smart. I vote for the former.
““Utility is the subjective appraisement of the usefulness of a means towards end satisfaction. Nothing to do with emotions, happiness or satisfaction out there.””
If we grant the the word “satisfaction” means different things in the two places, we are still left with the real question. It is hard to think what utility is if it has nothing to do with emotions at all. The ends we want satisfied or fulfilled are largely, or possibly entirely emotional.
It is certainly true that we cannot substitute any single emotion for utility. Parents report reduced happiness apparently, but more satisfaction and self worth. It seems that parents and the childless report similar “life value”, as long as they have chosen to be parents or childless. So we can’t say utility is the same as happiness or pleasure, but it surely is based on emotions.
Maybe utility is based on emotions, maybe not. That’s a question for a psychologist, not an economist. Economics doesn’t analyze why people make the choices they do. Economics just acknowledges the fact they somehow do. That’s all that matters. That’s not to say it’s not interesting to study psychology, it’s just that it’s a different problem.
Called it.
Hardly awkward, Bob we know you are a great supporter of public transport.
Bumpitty bump!
I will say that LK typically goes to great lengths to find some quote and then narrowly interpret that quote, in a very similar way to the news media taking one-sentence gotchas and broadcasting them heavily.
…or sometimes we just don’t feel like feeding the trolls. Running victory laps after taking quotes out of context certainly feels like trolling to me.
(Actually, to be fair, being Keynsian strikes me as the ultimate in trolldom.)
All of which reminds me of the family car on which I learned to drive: A 3-cylinder Saab. They had a bumper sticker: made in Trollhattan by Trolls. (Several years before Trolling had anything to do with blogs.)
Maybe I’m missing interpreting the sentence, but I hope that readers never feel a need to defend an Austrian “orthodoxy.”
OMG!! I didn’t realise I had kicked up quite a storm out there. I did notice the little incongruity the moment I hit the submit button, but then decided against a “correction” quite deliberately.
LK as usual misses the point completely. Let me dissect my statement for clarity. I said
“Utility (Sub) is (verb) the subjective appraisement (adjective describing the subject, “Utility”) of the usefulness of the means (adjectival phrase that identifies the yardstick on which the appraisement is based/the purpose of the appraisement) towards end satisfaction (adjectival phrase that explains what the “usefulness” is for).”
So, if you see it closely, the “satisfaction” is used in the same sense as “attainment of the chosen end”. That is as far as Utility goes. So we see that the concept Utility (at least as I think Austrians use it) has everything to do with usefulness and nothing to do with subjective satisfaction or happiness.
That’s precisely what my second sentence identifies. I agree that multiple meanings of the same word do create confusion, but I expected people to get the difference (as probably everyone except LK seems to have).
Sorry! One small addition…
Utility has everything to do with usefulness but what it IS is “the subjective appraisement” of that “usefulness”. So to say that utility is “satisfaction” is ridiculous. But then, LK will always be LK.
But Bala, what is the reason the person chooses a particular end goal in the first place? Isn’t it ultimately out of drive to increase their happiness.
The point, Keshav, is that that “reason” is not something the economist grapples with. That man has ends that he acts to attain/satisfy is his starting point. My limited point is that the economic concept “utility” as used in economic theorising, especially in Austrian theory, has nothing to do with that subjective concepts “happiness” or “satisfaction”. To the economist, “satisfaction” is synonymous with “attainment” and is used only as “end satisfaction”. The end is either satisfied or not satisfied. There are no degrees in between.
And Bob, I also think the “confusion” is created by your attempts to engage the opposition on their terms, sometimes using terms as they understand them. It is, I guess, part of engaging with your readers and is a call you have taken (and told me as well). So I am not criticising it but just identifying it. It is just that by doing so, you are giving people like LK room to create confusion (as he has repeatedly demonstrated).
LK,
Here is one more English lesson. My last sentence (which you quoted) was
“Nothing to do with emotions, happiness or satisfaction out there.”
This was of course a loose statement which lacks a verb, but than we do use such language in casual speech. However, the core point is the use of “out there”. See this in the context of the previous sentence (in a paragraph of 2 sentences) in which I gave the definition (as Austrians would have it) of utility.
So “out there” refers to the definition presented in the previous sentence. Clearly, the point I was making was that the definition of the economic concept “utility” has nothing to do with the emotions “happiness” or “satisfaction” or with the concept “emotions” itself.
You seem to want to interpret it as meaning that the concept “utility” has nothing at all to do with the emotion “satisfaction”. Even if it may (which is irrelevant to the discussion), the point is (and was the one I made) that the emotion “satisfaction” has little to do with the economic concept “utility”.
You really are very interesting. Trolling seems too mild a word to describe your actions.
Correction…
“has little to do with the economic concept “utility”.”
to be replaced with
“has little to do with the definition of the economic concept “utility”.
If preferences are only revealed by behavior, then I guess unless Tel has been offered the choice of drinking a milkshake or being tortured then there’s no way to say whether he prefers milkshakes to torture. This is going to make me buying him a birthday present very difficult (maybe I should flip a coin)?
Entrepreneurs make good guesses all the time, but only because they have a relationship with their customers that a central planning agency doesn’t.
It’s true that you cannot know what a person’s preferences are, for sure, until they reveal them.
People can change their minds, or opportunity costs can change, making plans between individuals difficult.
But the individual is in the best position to reallocate his resources to his own benefit.
A central planning agency locks in structures of production that are necessarily uneconomic.
It’s in Tel’s interest to inform you of a birthday present that he is likely to still want on his birthday, so you can make an educated guess.
But if his preference were to change, you don’t want the gift request cards to continue saying the same thing, because then you’d be malinvesting your gift-fulfilling resources.
It’s true that you cannot know what a person’s preferences are, for sure, until they reveal them.
Right, even Tel doesn’t know whether he prefers torture to milkshakes, since he’s never faced that choice. The world is such a mystery.
No, YOU can’t know what Tel prefers, and he might not prefer the same things in the next second.
Tel may want a milkshake more than being tortured, but he just might choose torture because having a milkshake means divulging information that could get his family killed.
Or having the milkshake now would mean something worse than being tortured right this moment.
This is why the study of economics is about revealed preferences, only.
I actually enjoy reading Josiah pretend to be able to KNOW conclusively what a person thinks without a shred of evidence.
Kind of reinforces most of what he claims against free markets, anarchism, anything that does not depend on worshipping or obeying authority.
The problem here being, natch, that if even a single person does, has, or will prefer torture to a milkshake–which assuredly someone has–you don’t know what you profess to know, regardless of how far down the average utility scale you go in an attempt to score sarcasm points.
If you’re instead claiming that human beings use induction and introspection to guess at what other people prefer, usually on an intuitive basis, thanks for the insight.
“It’s true that you cannot know what a person’s preferences are, for sure, until they reveal them.”
The ridiculous thing being that he even specified that you can’t know *for certain*, not that you can’t make an educated guess that your wife would prefer, say, a diamond necklace to being backed over by an RV.
On this very comment thread, LK has demonstrated what Bob Roddis has always maintained – that Austrian opponents (like LK) have absolutely no understanding of even the most basic Austrian principles.
Any person who claims to understand Austrian principles should know that to possess in one’s mind the understanding (the subjective appraisement that we call utility) that Means A has greater utility than Means B and to choose Means B over Means A when the option is presented would be a contradiction. LK clearly doesn’t get it.
Any person with the least familiarity with Austrian principles will understand that
1. labour exerted always presupposes leisure, a consumers’ good, foregone
2. exerting labour in production is to exchange leisure for the goods labour yields
3. the value of labour is assessed in terms of the goods it yields
4. as more labour is exerted and the stock of leisure falls, the MU of the leisure units foregone increases
5. as more labour is exerted and the stock of the goods produced by labour rises, the MU of the goods yielded by labour falls
Hence we talk of the “disutility of labour”.
Any person with a grasp of basic Austrian principles will know that
1. Marginal Utility is the utility of the marginal unit
2. The utility of the marginal unit is appraised w.r.t the end it satisfies
3. The marginal unit of a larger stock of identical units of a means always satisfies a lower valued end
It is thus that the Austrian identifies that the marginal unit of a larger stock of a means will always have lower utility. It is thus that the Austrian identifies the law of diminishing marginal utility.
In all this, the Austrian knows that there is no role for subjective happiness or satisfaction. However, LK raises the following questions and comes up with a brilliant conclusion.
By demonstrating his total failure to comprehend the most elementary basics of the Austrian method that he attacks so vigorously, that too with truckloads of name calling, LK has just revealed the truth that he is just a troll of the lowest order.
ps – His echo chamber with Ken B makes for some hilarious reading
You are the one who knows very little about Austrian economics. And the fact that Bob Murphy allows this extraordinary degree of ignorance on his blog without ever correcting it shows how little he cares about actual serious debate here.
You have claimed that subjective utility “Nothing to do with emotions, happiness or satisfaction out there”. Practically every Austrian author who discusses utility links it explicitly or even identifies it with human pleasure, happiness, desire or satisfaction. You have not even the minimal honesty to admit this.
LK,
I have given an elaborate explanation, or rather an education. If you are not responding to it, the least you can do is to stop arguing by appeal to authority.
I see. Citing what actual Austrian economists think and say about Austrian concepts is some kind of invalid “appeal to authority”? lol I expect you think you are the world’s living authority on Austrian economics??
It is the fallacy of argument by appeal to authority when the reference has no bearing to the argument being given.
Once again, LK, (subjective) utility as used in economic theorising has nothing to do with the emotions happiness or satisfaction. Greater utility implies a subjective appraisement of greater usefulness in end satisfaction and leads to a higher ranking of the means concerned on the individual’s value scale. The converse is the case with lower utility. This ranking then leads the Austrian straight into a sound explanation of price. There is no room in this reasoning for emotions like happiness or satisfaction.
The onus is actually on you to show where in Austrian theorising utility connects up to the subjective emotions happiness and/or satisfaction. If you can’t (and you haven’t yet done that – citing authors talking in a general way about these emotions does not count), please show some decency (which too you aren’t) and ……..
“Greater utility implies a subjective appraisement of greater usefulness in end satisfaction “
And what does utility even mean in this sentence?
Read, will you. Utility is the subjective appraisement of the usefulness of a means towards end satisfaction (synonymous with attainment or fulfilment).
“Subjective appraisement of the usefulness of a means towards end satisfaction” entails the state of mind of SATISFACTION and certainly other emotions in real human beings if one is doing empirical economics, and not making utterly empirically empty statements of no relevance to any real human being.
On the contrary, the definition is rich without any direct reference to any emotion because it is the link that enables explanation of the ranking of means on the value scale starting from the action axiom.
Such a subjective appraisement is presupposed by the purposeful application of particular means by acting man because without such an appraisement, the application of the means would not be purposeful. Since man acts, we realise that man must have such an appraisement of usefulness, compare different means based on his knowledge and understanding, prefer one and purposefully apply it towards end satisfaction.
Thus, this concept of subjective appraisement enables the full development of the all important construct of the unitary value scale on which all ends and means are ranked and which is then used to develop individual supply and demand schedules which are then aggregated to obtain market supply and demand schedules ending finally in a sound explanation of the economic phenomenon, price.
By making possible a thorough explanation of the real-world phenomenon of price as it emerges in real exchange, it becomes an extremely rich concept even though it does not relate to any emotion in the process of being applied in economic theorising.
Your extreme empiricism sucks, as always.
Austrians go with causal-realism, you see….
It cannot avoid “direct reference to any emotion” if it invokes the concept of “satisfaction” from the initial definition. Satisfaction is an emotion/human state of mind.
That you cannot see this is comical.
Wrong again. The definition of utility makes no reference to the emotion “satisfaction”. That usage is the equivalent of “attainment” or “fulfilment”.
And you still don’t seem to realise that there is more than one meaning of “satisfaction”.
“Satisfaction is an emotion/human state of mind.”
We see where you’re coming from, and we’re sympathetic to your amusement and disdain.
But we keep trying to tell you that we’re using the word “satisfaction” in two different senses, and you keep trying to use only the one.
And Mises uses a kind of association (I forget the word for it) to clarify what he means, when he says: “Its ultimate end is always to get rid of a condition which is conceived to be deficient—to fulfil a need, to achieve satisfaction, to increase happiness.”
The phrase “to fulfill a need” doesn’t have a specific emotion associated with it; And then he goes on to add “satisfaction” and “happiness” to the list.
He’s trying to tell you that all of those phrases, in that particular context, mean the same thing.
There’s no specific emotion being referenced, and therefore no unit of emotional satisfaction to measure, such that you could compare it across individuals.
If I say “I want to be satisfied, and I have applied certain means to satisfy my ends,” I am using the word in two different senses, here.
Mises was using the word “satisfaction” in the second sense.
It is you who is ignorant on this LK, and you should be thanking Murphy for allowing your ignorance to go uncensored.
Your “understanding” of basic Austrian concepts is unfathomably misguided and so off the mark so as to go around the universe of wrong.
Praxeology, strictly speaking, is beyond the scope of any and all biological, psychological, and emotional causation for why an actor does what they do.
For the millionth time, Austrian analysis only says that actors have subjective utility scales. There is nothing, absolutely nothing anywhere in Austrian economics that explains the ranking as caused by emotions.
If someone does A instead of B, and the do A with great reluctance, sadness, guilt, for whatever reason, then the use of the term “happiness” to describe doing A instead of B is purely formal. It does not actually claim that doing A makes the person emotionally happy. The term “happiness” here is a formal description that is used solely for describing the fact that A is done rather than B.
To help you: I could very well be, according to the most up to date scientific knowledge of hormones and chemicals and neuroscience, “happier” if I were riding my motorcycle right now at this moment, instead of educating your ignorant mind. But I choose to type words to you. I am doing something right now that emotionally speaking, is associated with a less “happy” brain state.
But where Austrian economics comes in is that it totally and completely disregards the emotions and the neuroscience, and only recognizes that I did in fact choose typing words to you. When Austrians say making this choice is associated with greater “utility”, or ” happiness” they are not saying the person’s emotions are happier or whatever other term is used based on scientific understanding. Austrians just use the terms so as to communicate a broad conceptualization of what would otherwise have no terms available for us to use. We could call choosing A over B to be associated with greater “Schnargle”. That people choose those actions that bring about the greatest schnargle.
It is a formal description, that says NOTHING about the person’s emotional state.
You are being totally and completely academically dishonest. You are engaging in outright intellectual fraud.
“It is a formal description, that says NOTHING about the person’s emotional state.”
Of course it does: it says they experience greater satisfaction from higher ranked ends than lower raked ones. Satisfaction is a human state of mind and emotion.
If praxeology doesn’t speak of any real world human beings, it says NOTHING of the real world, and might as well be speaking about the Land of Oz or Narnia or Middle earth..
“For the millionth time, Austrian analysis only says that actors have subjective utility scales. “
It also says REAL WORLD people have diminishing marginal utility and experience disutility from labour, yet according you Austrians “cannot even speak of what is going on in the minds of others, emotions or otherwise”.
This incredibly comical statement refutes everything else you say, and the very epistemological foundations of the Austrian cult.
Higher ranked end => Preferred to lower ranked end
End = preferred state of existence
Higher ranked end = More highly preferred state of existence than lower ranked end
Greater satisfaction = In more highly preferred state of existence rather than in the alternative
So, the meaning of the extremely meaningful sentence highlighted above is as follows – 1 = 1. Nice, empty tautology (Before you pounce on it, not all tautologies are empty. Yours is). Not surprising coming from you.
For the nth time (n >> 1), there is more than one meaning of satisfaction.
But then praxeology speaks of real world human beings because it is the study of the logical consequences of the fundamental, irrefutable proposition Man acts. So you should agree that everything it says pertains to the real world.
It identifies these as the logical consequences of the fact that Man acts in a world of scarcity and does not depend on the economic theorist’s knowledge of the exact contents of the minds of billions of other people. An economist may make these statements without knowing what exactly is going on in the minds of others because he works on the basis of the necessary logical structure of the contents of the minds of others given that he comes to know the preferences of those others’ through and only through their concrete, observable actions.
So, the only one comical out here is you trying to call serious and deep thinking a cult when what you yourself are is a cult follower (You call yourself Lord Keynes, don’t you?). If that’s not cultist behaviour, I wonder what is.
(1) So in your bizarre idiosyncratic interpretation of Austrian economics the word “satisfaction” as related to utility does not refer to any human state of mind or emotion — despite the fact that Austrian economists go right ahead and associate utility with human states of mind called satisfactory, happiness and pleasure, etc. The depth of your ignorance is pretty clear.
(2) Austrians cannot even prove the human action axiom without treating it as an empirical proposition. The rest of your epistemology is founded on discredited Kantian synthetic a priori knowledge. Even worse, even Mises admits that the truth of the disutility of labour axiom cannot be known a priori:
“The disutility of labor is not of a categorial and aprioristic character. We can without contradiction think of a world in which labor does not cause uneasiness, and we can depict the state of affairs prevailing in such a world …. Experience teaches that there is disutility of labor. ” (Mises 1949: 65).
Bala says that in the concept of subjective utility and marginal utility:
” the Austrian knows that there is no role for subjective happiness or satisfaction.
Really? Mises says:
“The modern concept of pleasure, happiness, utility, satisfaction and the like includes all human ends, regardless of whether the motives of action are moral or immoral, noble or ignoble, altruistic or egotistical.
In general men act only because they are not completely satisfied. Were they always to enjoy complete happiness, they would be without will, without desire, without action. In the land of the lotus-eaters there is no action. Action arises only from need, from dissatisfaction. It is purposeful striving towards something. Its ultimate end is always to get rid of a condition which is conceived to be deficient—to fulfil a need, to achieve satisfaction, to increase happiness.”
Mises, Ludwig von. 2009. Socialism. An Economic and Sociological Analysis. Ludwig von Mises Institute, Auburn, Ala. pp. 112–113.
So according to Mises “the modern concept of pleasure, happiness, utility, satisfaction and the like includes all human ends,” but according to you in the concept of utility “the Austrian knows that there is no role for subjective happiness or satisfaction”!! lol
LK,
More appeal to authority instead of engaging with the arguments presented. How typical……
But then I wonder why you leave out the part where Mises says that the ends are the given to the economist. That would sort of complete the picture and provide the last nail in your coffin.
ps – Looks like you are just opening pdf versions of books by Austrians and applying searches on the words “happiness” and “utility”. No wonder these have no connection to the theorising.
Lord Keynes has no interest in thinking about the essence of Austrian analysis. He is just a rogue prosecutor bound and determined to find us guilty regardless of the evidence. Thus, he is constantly looking for quotes out of context from the Austrian masters in order to gin up a phony dispute or to claim a particular person does not understand Austrian analysis.
The praxeological concept of human action is BROADLY GENERAL. Of course, emotions do play a part in what motivates people to act but only a part. However, it makes no sense to worry and worry and worry about what exactly motivates a person to act in a certain way (but generally –it makes sense to make informed guesses about the motivations of one’s customers which is separate topic). For purposes of catallacs, we are only broadly concerned about what we actually own and control that can be used for exchange with others in order to stay alive and prosper. THE FACT THAT A CERTAIN EXCHANGE ACTUALLY TOOK PLACE is the best evidence that each party thought at that time that he/she was bettering his/her condition. The underlying ultimate reason why each person made the exchange is probably unknowable but also irrelevant to Austrian analysis. We might make an informed guess, but it is irrelevant to general and broad Austrian analysis.
Further, the terms of actual exchanges (prices) are essential to communicate to the vast society and world of strangers the value and cost of what they own and control vs. what others may own and control and for which one may want to engage in an exchange. It is essential that those prices reflect the underlying terms of the exchange as best as possible. Artificial monopoly money creation and credit expansion distort that process as does government spending. The Keynesian claim that prices or wages can or do become “sticky” makes no a priori logical sense nor is there any evidence that it ever happens, even in a totally corrupt price-distorted Keynesian environment. The concept was only invented so that phony egghead intellectualoids can be empowered to boss around average working people for whom they have total contempt. The concept has even less validity than the Marxist labor theory of value which at least sounds superficially plausible. Further, the basic Keynesian claim that the market may have or may lack “momentum” which can and must be provided by the benevolent and external central planner of funny money and deficits is beyond preposterous. It should be laughed at with the same level of glee that LK laughs at the Marxists.
“(prices) are essential to communicate … the value and cost of what they own and control vs. what others may own and control …”
“… It is essential that those prices reflect the underlying terms of the exchange as best as possible. Artificial monopoly money creation and credit expansion distort that process as does government spending.”
Yes! Because prices are information about subjective preferences, and if prices are quoted in terms of substitutes for the goods that have actual use-value, then it is possible that prices in terms of the substitutes do not reflect the values people place on the goods, if the number of substitutes do not match the number of goods for which they are a substitute.
And when that happens, malinvestments, and therefore booms and busts, are impossible to avoid.
The only way out is to stop using the substitutes (fiat money). This will require a monumental correction/crash, but once people restructure their production processes to conform to consumer preferences, the booms and busts will stop (those of a systemic nature, that is; Individual people, companies, and banks, will misallocate resources to some degree).
” The Keynesian claim that prices or wages can or do become “sticky” makes no a priori logical sense nor is there any evidence that it ever happens,”
No evidence of any downwards price or wage rigidity? Really?
Your ignorance of the real world is truly breathtaking to behold, bob roddis.
One can only say: if you are a spokesman for Austrian economics, this is the kind of ignorance that will reduce Austrian economics to a laughing stock.
That’s why real wage rates never fall in the face of illegal immigrants. That’s why the prices of flat screen TVs and computers never fall. That’s why Wal-Mart has no customers and higher priced mom and pop stores in town are flourishing.That’s why all the stuff made by Standard Oil in the 1880s never fell in price. Those poor clueless people need Lord Keynes and his wise funny money and debt manipulations or else they would all just run and jump off a cliff.
That’s fine Bob but any prices that take longer than say instantaneously to adjust are of course “sticky”.
We must keep in mind the old adage “If a tree falls in the forest, it must be a market failure”
Hey now Grand, the instantaneous adjustment in prices was never explicitly mentioned as what has to happen before guns pointed at innocent people was justified.
We must keep it unmentioned. Like Voldemort.
Then never explain in detail just how quickly prices have to change.
Then something something democracy, something something market failure, and abracadabra, the guns become justified!
Hey MF, if people are confused about how to price their stuff and labor, couldn’t they just hire LK to tell them the proper price or wage? And (for the 17,234th time), if they are too dumb to properly price stuff, how smart can they be about electing the proper funny money and debt manipulating overseer? The miracle of democracy.
Also, is there a list of official “standards” that tell academic Keynesians which prices and wages are indeed sticky? Do those professors ever try to just send letters to those folks too dumb to properly price their stuff with advice about properly informed pricing? I’m just curious.
Major,
I suppose we shouldn’t mention that social democracy in the 21st century looks remarkably similar to 1984. Or the fact that two seemingly intelligent men separated by some 70 years recognize one huge problem only to come to the same wrongheaded solution.
“roddis:
>That’s why real wage rates never fall in the face of
> illegal immigrants.” etc..
You’ve made the truly ludicrous claim that “The Keynesian claim that prices or wages can or do become “sticky” makes no a priori logical sense nor is there any evidence that it ever happens…. ”
If that were true, then there would be no trade unions that strongly oppose nominal wage cuts or individuals who resist nominal wage cuts (as, for example, here) and nor could there be any government price control or price floors in existence. But clearly these things exist and there is nominal wage rigidity and strong evidence for this (easily confirmed in Hanes 1993; Lebow et al. 2003; Campbell and Kamlani 1997).
You, bob roddis, are clearly so stupid and ignorant you have absolutely no idea what you are talking about.
—–
Hanes, Christopher. 1993. “The Development of Nominal Wage Rigidity in the Late 19th Century,” The American Economic Review 83.4: 732–756.
Lebow, David E., Saks, Raven E. and Beth A. Wilson. 2003. “Downward Nominal Wage Rigidity: Evidence from the Employment Cost Index,” Advances in Macroeconomics 3.1: 1–28.
Babecký, J., P. Du Caju, T. Kosma, M. Lawless, J. Messina et T. Rõõm. 2010. “Why Firms Avoid Cutting Wages: Survey Evidence from European Firms,” Central Bank of Ireland, Research Technical Papers 03/RT/13
http://www.centralbank.ie/publications/Documents/03RT13.pdf
Campbell, Carl M. and Kunal S. Kamlani. 1997. “The Reasons for Wage Rigidity: Evidence From a Survey of Firms,” The Quarterly Journal of Economics 112.3: 759–789.
As you explained, THESE PHENOMENA DO NOT OCCUR IN A FREE MARKET but only as the result of intervention. Since they do not occur, there is no need for a Keynesian or interventionist cure. BTW, there are no “nominal” prices in the free market.
I’m still the undisputed KING OF THE VULGAR INTERNET AUSTRIANS!
http://tinyurl.com/l7jzvqk
So basically you are admitting that your statement “The Keynesian claim that prices or wages can or do become “sticky” makes no a priori logical sense nor is there any evidence that it ever happens” was a piece of nonsense and is not true of the real world ?
Well, thanks for clearing that up.
For you, my friend
You are a living breathing misrepresentation machine. You are quite aware that I have asked you 50,000 times to identify that single market failure under the NAP that justifies violent intervention. I have also produced the full transcript of this episode multiple times where Hayek says that the problem Keynes was trying to solve through his ad hoc policies was that British wages were artificially too high due to prior government policy regarding the British pound.
https://www.youtube.com/watch?v=gaQcbGoW2C0
Hayek explains that in Great Britain during World War I, the pound was cut loose from gold, leading to large increases in prices and wages. Then after the war, the British government wanted to return to pre-war parity. Prices generally came down, but nominal wage rates remained high. Thus, workers saw a huge increase in their real wages because of the efforts at deflation (needed to go back on the gold standard at the old parity).
So, in order to prevent widespread unemployment (i.e. allow British workers to be competitive with the rest of the world), they either had to lower nominal wages or raise prices again. Hayek explains that the first option was politically unpopular, and also was–according to a complicated argument from Keynes’ General Theory–not even effective. (I.e. Keynes argued in his book that even if all nominal wages fell, that might end up reducing overall prices and hence not lead to a fall in real wages.)
But now the awesome part. Hayek says that Keynes’ theory was, at best, appropriate for the specific deflationary environment of the 1930s. After the war had passed, the great danger was inflation. And–according to Hayek–Keynes himself agreed with this, and even promised to rein in his foolish disciples if they ever got the crazy notion to advocate pump-priming in an inflationary environment.
December 16, 2008
http://consultingbyrpm.com/blog/2008/12/hayek-tells-bill-buckley-that-even-keynes-was-afraid-of-the-keynesians.html
I’ll bet that Lord Keynes can come up with some anecdotes about people in the midst of a funny money-induced depression who have problems properly pricing stuff and do not understand what is really going on. And thanks to the Keynesians, those people will never be told what is actually going on.
I notice that over at LK’s blog he and Ken B are engaged in their usual nonsense. LK found a quote by Rothbard about “happiness”. LK is playing the same game he played when he insisted that Austrians claim that flexible prices must always appear instead of flexible production schedules and that evidence of flexibility of production while maintaining prices refutes Austrian analysis. He then posted scores of examples of flexible production schedules. Truly pathetic. What he does tend to find, however, are examples of poor explanations by Austrian masters who are being too specific and not general enough in their analysis. When we dispute those too specific explanations, he accuses us of being “vulgar Austrians”. It’s old. It’s boring.
Enjoy.
Austrian economics, the study of action, praxeology – can we agree that these are basically about what Mises called action, which only occurs because of an unease in the person?
He is clear to distinguish this from a purely reflex or instinctive action. The flea jumps because a shadow passes overhead. This Mises did not consider to be “action”, but a reflex. The flea has no choice, it jumps because it is programmed to jump, and can do no other.
Mises clearly considered that the reason for doing something was of primary importance. It is essential to distinguish “action” from merely doing, or praxeology does not work. The thing that creates this distinction is the unease that humans have that fleas are presumed not to have.
What could this unease be if not emotion? It cannot be a mere brain state, or physical arrangement of things, or fleas could have it too. Mises explains what it is in some of the quotes LK provides. It is a mix of emotions, but cannot be called simply happiness.
Yes, the key state of mind/emotion is satisfaction. As you say, a driving force of conscious action would appear to be a state of unease/dissatisfaction with the current state of affairs. Utility is satisfaction but frequently linked with an array of other common emotions: pleasure, happiness, desire, etc.
Perhaps this will make sense to everyone. Praxeology pre-supposes emotion. There is not such thing as praxeology without emotion, because whatever causes one to prefer one thing over another it is an emotion. If it is not an emotion it is mechanistic, and there is no action. By arguing with this you have in fact agreed with it, or you could not have acted to respond.
Harold,
If my wife gets into her car and drives to Nevada while I am away at work, does it much matter for the purpose of determining her preference what emotions she might be feeling at the time? Whether she is angry with me, or rushing off in worry to visit a sick relative, might be very important to her and to me on a personal level, but that is really irrelevant to understanding what her actual preference is. That preference is only revealed when she makes the trip to Nevada. If she were angry with me, but did not drive to Nevada, we would know that driving to Nevada would have granted less marginal utility for her than remaining with me.
The point is not that emotions do not exist, or even that they do not motivate action, but that it is a fallacy to equate emotion with utility. Someone pointing a gun at my head and ordering me to cut off my own finger would certainly not result in any outcome that I would describe as satisfaction in an emotional sense, but in the end, I would choose whichever alternative offered the greatest utility, and that would lead to “satisfaction” in a purely economic sense. I would agree that there is usually an emotional component to the human experience when utility is gained, but that does not make them the same.
LK’s constant pointing out of the words “satisfaction” and “happiness” as proof of this fallacy’s supposed acceptance by economists is simply a failure to understand that these author’s are trying to relate the abstract concept of utility to the human experience of it.
“but that it is a fallacy to equate emotion with utility”
If you look in the other post about this, you will see that I demonstrate that it is Mises, not LK that equates utility with emotion.
“There is however no valid objection to a usage that defines human action as the striving for happiness.”
Mises was clearly saying that action is intended to improve one’s emotional state. Without emotion we can have no action, as we have only animalistic reaction or programmed response which cannot be action.
However, we can possibly agree that whilst emotion is essential to action, praxeology is not the study of emotion. Emotion is merely a prerequisite. The only thing it says about emotion is that action will of necessity be intended to improve the emotional state of the actor (i.e. remove the unease).
Whether Mises is correct that we can isolate the study of action from the study of emotion is another question.