Diplomacy > Aggression
This guy emailed me and things quickly turned ugly. But then it turned around and we are agreeing to disagree. He gave me permission to post our exchange (with his name removed). After the dust settled, I realized that he honestly had no idea what my actual position was; if I had been the guy he thought, I would have been a jerk.
Anyway, maybe you will be as pleasantly surprised by this near-miss as I was.
Robert –
I respect the work that you’re doing in trying to explain value of Austrian school of economics, stressing its focus on building up from experience of individuals in the system as opposed to macro approaches that are driven by abstract concepts. However, from my personal examination of these aspects, I still find the Austrian school to be wrong in its assumptions about the individual drivers, as a result of which it over protects “freedom” of the system to run itself. In this day and age, expecting the government to keep its hands off the system is futile, in which event we do need (as you seem to be committed to do) to educate ourselves and others on how best to understand what’s really going on.
My reason in contacting you is to ask for your opinion of the work of Steven Keen, and this recent presentation that he makes, essentially taking your approach (bottom up) in order to explain why he thinks mainstream economics (and European Commission banking in particular) are completely wrong. See link here – https://www.youtube.com/watch?v=X4HPyxrih5w&t=903s
Thank you.
[name removed]
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Hi,
Thanks for the note. I am pretty slammed with work right now but this is a review Gene Callahan and I wrote of his book a while ago:
http://www.gmu.edu/depts/rae/archives/VOL16_4_2003/6_BR_Murphy.pdf
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Thank you, but your review really perpetuates the basic gap of focusing on ideological differences (assume, for the sake of my comments though, that ideological includes a lot of jargon that may be correct, but is still jargon, not systemic behavior scientifically proven as true). If you do get the time at some point to watch the video link that I sent, I would like to ask your opinion on the examples that he uses to explain his perspective. Since I’m not an economist or academic trying to prove a point (just someone trying to understand the points), I would like to know if you agree with the point he is making with the examples. From that starting point (a point of hoped-for constructive agreement) I feel that I could begin to construct my own, more accurate understanding of the problems with our economic institutions and policies and how to work to improve them.
I personally believe that the traditional ideological position of “neo-classical” and Austrian economics is so committed to “free market” policies that, in effect, result in justifications for both Libertarianism (keep your hands out of or off of my business or assets) and implementation of the Greenspan and Bernanke “puts” (Fed involvement that is over the top intervention by the people who are supposed to be “free market” ideologues). There is so much gaming of the system by our institutions (government and corporations) that is perverse, all of which is “justified” by reference to either the Chicago School or Austrian School of economics, and none of which is truly scientific insofar as neither of these has any method by which to show how and why financial conditions consistently fly out of equilibrium (as opposed to your assumption that they naturally tend toward equilibrium). I am particularly impressed by Keen’s work specifically because of his “Minsky Model” (downloadable from his website) which he shows will perfectly explain why things like expanding levels of private debt push a financial system toward failure. As far as I can see, there is nothing in the work of either the Austrian School or the Chicago School of Economics which can model the disequilibrium outcomes. So, my focus on Keen’s work is on his use of real building blocks that I can understand without regard to any ideology on his part or mine. I hope that you can dig into this part of his work to see what I mean, overcoming the perception of bias that he is somehow steering you away from the ideological shoreline that you hold onto.
[name removed]
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[Then a day or so later, before I had responded, he sent another note:]
I hope my reply to your book review wasn’t too strident. In rereading your review I can see that you were responding “in kind” = economist to economist; using your established jargon to answer any commentary or criticism from Keen. Having said that, let me note that in a paper of only 3 pages, I counted references by you to over 16 different economic terms/concepts (society’s utility, network of practices, atomizing, social outcomes, etc.) that clearly mean something to you, but advance little to others who are just trying to understand why none of this makes real sense. And clearly, this comment would be applicable to Keen too – he “started it” so to speak by writing the book in the way that he did.
My point is that I am hoping that I can find a way to communicate with you that helps me really understand monetary policy and fiscal policy. My team is working on trying to find creative ways to deliver low-income housing and business development opportunities that could balance the economic inequality that exists in the US. A 10 year study by Richard Wilkinson (see his TED talk at http://www.ted.com/talks/richard_wilkinson.html + charts attached) shows how economic inequality, world-wide, is closely correlated to 11 different social dysfunctions. We have to start understanding this growing problem or it’s going to eat us alive. It’s a cancer that’s somehow hidden in the fabric of our social or economic world and we have to root it out. I sincerely doubt that a greater “free market” will do us any good – that only gives the rich the ability to get richer, which is why they fund all your studies and conferences = to justify their rape of the social and natural environment for their benefit. Sorry if that sounds biased, but is backed by science – real science.
[name removed]
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Thanks for the note. I know you have put a lot of research into your views and I realize I’m not doing it justice right now, but I’m really slammed with “day job” stuff for a while. I would say however that powerful rich people are able to exploit the vulnerable more easily in a society with a powerful State, because the powerful rich are more able to capture the State than the poor are.
Bob
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Thank you for acknowledging the disproportionate access to “freedom” in markets. The rich use their “freedom” a lot more effectively than others.
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[Then he sent another note later that day:]
My hope is that, some day that inequality (the freedom they’re wanting) isn’t so well supported by smart people like you who give them cover for their excesses.
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[Then I responded in kind:]
My hope is that someday smart people like you will realize that if you give the State the power to take money from rich people, it will end up hurting poor people.
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[He replied:]
As you know from all the work of economists, there is no State that exists without the right and power to take away money – that is what starts the ball rolling and keeps it rolling into the hands of the wealthy who obviously have more means of controlling the state, especially after the Citizen United decision gave them the right to fully buy all of our politicians.
Sad that you think your “protecting” the poor defenseless rich people.
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[Then I sent:]
This is the last email I can send right now. I want to note two things.
(1) If you go back and review your original email to me, it started out with you asking my opinion of Keen. You presented yourself as if you were asking my opinion and wanted my help. I took time out of my day to answer you, since I thought it was a sincere question. But quickly it turned into you lecturing me on my bias. I doubt this strategy has worked on others. I am truly pointing this out in case you don’t realize how annoying this comes across to someone who is just “meeting” you.
(2) Go re-read your last email. Your own argument suggests that the only way to protect poor people is to be against the State per se. That *is* my position:
https://mises.org/library/law-without-state
I’m guessing it’s not yours. So given your last email, why are you a supporter of the State existing?
RPM
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Wow. You have a created a really thick blanket for yourself. In reading your article on Law without State, I see the depth of your commitment to a totally “free market.” But one which is completely unrealistic (name one society that has ever experienced that in the history of the world).
Conceptually it may be possible in a multiverse that offers every alternative (1 out of a trillion potential universes). However, it would not be a realistic possibility in any world in which the wealthy exist, exercising their ability to aggregate power and manifest the creation of a State for their benefit (ex: how JP Morgan and team manifested the Federal Reserve System after their little meeting on Jekyll Island in 1913). Once started, then the wealthy perpetuate control by the State to deliver the most benefits possible to themselves. And “free market” apologists are used as perfect cover for their machinations (keep everyone’s hands off the system, so they can continue to manipulate it at their will). Your mythic dream of a pure free market is a wonderful cover for not needing to ever think through, with the existence of a State, what is needed in order to create an environment in which “market law [would] be more efficient; it will also be more equitable”. Your target end point is truly commendable, but it carries no commitment to achieving it in the real world that we actually live in.
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[Seeing an opportunity to deescalate, I wrote the following–and for real, I wasn’t being sarcastic:]
Thanks, I totally understand why you think I am being unrealistic.
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[He replied:]
Thank you for understanding me. And thank you for leading me to really understanding your perspective. I could have never guessed that without your directing me to the article, which I almost forgot to read. Wonderful learning experience for me.
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…and then I said it was funny that he had misunderstood what my actual position was, and asked if I could post this.
“…and then I said it was funny that he had misunderstood what my actual position was, and asked if I could post this.”
So don’t just leave us hanging. What did he say? And then did you post it? If so, I’ll leave a comment.
Imagine how misinformed you have to be to think Austrian economics has anything to do with Federal Reserve policy under Greenspan or Bernanke
I’ve said it before, but, honestly, Bob: you have the patience of a saint. I’d have hung up after “Sad that you think your “protecting” the poor defenseless rich people.”
Because of the “your” you mean? I almost punted too, but I thought, “Maybe this guy came from a broken home.”
You think I’m harsh on people with your / you’re troubles, you should see what I do to people who use the dreadful “singular they.”
Except that your/you’re is actually a mistake, unlike singular they, which has been proper English for a long time.
http://www.chronicle.com/blogs/linguafranca/2012/01/05/dogma-and-evidence/
Ah, but he got the other one right: “without your directing me to the article”. That’s the harder one.
… as opposed to the much more achievable mythic dream of a State ever genuinely doing the things it promises.
Hi Bob,
Austrian economics does not necessarily support free market ideology, as this guy maintains. e.g. Von Weiser was not a free market ideologue. He was what might be termed a social market liberal.
Mainstream neo classical economics also does not necessarily support free market ideology either. e.g. the debate over market socialism in the 1930’s.
Peace and well being to you.
Hi Bob,
Many (most??/) Austrian economists would claim that Austrian economics is value-free. If this is true, it is hardly an ideology. Although most Austrian economists support libertarian politics (either limited minimal government or Anarcho-capitalism), these are not necessarily the only outcomes that an Austrian economist might support.
Shalom,
John Arthur
“Many (most??/) Austrian economists would claim that Austrian economics is value-free.” Is this true? I believe they would be wrong, dispite synthetic a priori arguments.
Yes, it is true. Praxeology-Sociology done right-is a value free science.
Most Austrians are inclined toward laissez faire because they hold conventional views about the normative “form of the good.”
I think Mises once said you could imagine, without contradiction, a socialist praxeologist who studies economics to better help him make the world a poorer, more miserable place.
This is an interesting area of philosophy, and if there is one area where disagreement is probably more certain than amongst economists it is among philosophers. So I am not arguing that there are easy or obvious answers to these questions. However, I do not agree that Austrian Economics is value free.
There is a distinction between Praxeology and Austrian Economics, but again putting that to one side, I do not agree that Praxeology is value free.
We can argue that say, physics is a value free science. We can also argue that nothing is value free, but if we go down that route nothing is value free, so we can forget the whole discussion. Let us take it for now that physics done right is value free.
Praxeology is exploring the consequences of action in a Misean sense. The first thing we must accept is that action is a given, and this requires a value judgement.
If we do physics we must accept certain things – induction, the existence of the world. We accept these as a given in physics.
Mises himself says that we must accept action as a given because at the time he wrote there was no practical way to avoid doing so. That seems a far cry from a value free judgement.
By using only action, we are saying that the causes of action are a separate thing, not to be included in the study. This is a value judgement.
Praxeology is a self consistent system, based on axioms. It is more like mathematics than science. If we are to accept that it is value free we may have to reject it as a science.
Hayek’s based school of Austrian economics is of course different again, but perhaps this was not included.
This is just a few ideas, not the whole argument, but perhaps interesting to some.
“There is a distinction between Praxeology and Austrian Economics”
Of course there is, because Praxeology is sociology proper, not economics specifically. “Austrian Economics” refers to those distinctive conclusions the Vienna school reached by applying the methods of Praxeology to the study of Economics in particular.
“Praxeology is exploring the consequences of action in a Misean sense. The first thing we must accept is that action is a given, and this requires a value judgement.”
This is a strange statement. That humans act is self evident. According to what possible, imaginable value system could it be otherwise? Do Socialists deny that humans act? If not, how could it be relevant to whether a Austrian could be a socialist?
“By using only action, we are saying that the causes of action are a separate thing, not to be included in the study. This is a value judgement.”
Nonsense. This is like saying that if a biologist restricts his area of study to biology, he is making the value judgment that the study of non living things is a separate matter from the study of living things.
“Praxeology is a self consistent system, based on axioms. It is more like mathematics than science. If we are to accept that it is value free we may have to reject it as a science.”
I’m fine with you having such a definition of science. Very well. Praxeology is a value-free branch of applied logic, a branch of the branch of mathematics called “logic”
But usage of the term “science” in the manner that I did, to refer to the systematized study of any subject, is quite common, even if you reject that this is what science is.
“Hayek’s based school of Austrian economics is of course different again, but perhaps this was not included.”
Hayek’s methodological heterodoxies with respect to the Vienna school proper are a worthwhile subject to discuss. I admit they’re outside my area of expertise.
There are many points, but for now let us focus on a couple.
“The first thing we must accept is that action is a given, and this requires a value judgement.”
This is a strange statement. That humans act is self evident. According to what possible, imaginable value system could it be otherwise? ”
One possible other system is that we act on instinct. Not all “action” is conscious. Mises seems to assume that all behavior is “action”. I can concieve of a value system where “action” and “instinct” co-exist to explain “behavior”.
As an example, it seems to me that Mises rejects the concept of irrational behavior. If, for example, a person has an irrational fear of birds, then their “action” of remaining at all times indoors is rational. This seems to me to ignore a very significant input f their irrational fear into their action. A philosophy that rejects the possibility of irrational behavior seems to lack something very significant that s required to explain human interactions.
We can probably agree that man is capable of action as defined by Mises. That is not the same as agreeing that all behavior is “action” as defined by Mises. I think there is a necessary separation of action and behvior.
I am afraid of birds, and I never leave my house. I believe that by never leaving my house, that I will never have to deal with birds or the anxiety the fear of birds brings. I believe that these means will obtain the end of not having to deal with birds. I am acting rational because I believe that certain actions will bring about a certain end; it does not make me irrational if I am wrong about the means or the ends.
A value free system cannot make judgments as to whether a person OUGHT to feel discomfort at the possibility of encountering birds.
A person with an “irrational fear of birds” is someone with a preference for avoiding birds. The subject of why a person has the preferences they do is not relevant to explaining their actions. Praxeology explains the man’s behavior just fine. He wishes to avoid birds and he perceives the risk of encountering birds, and the cost, to be so high, that he is willing to take extreme measures to avoid them. I fail to see the problem. This is still action, and it is still rational given his preferences.
Again, the study of WHY individuals have the preferences they do is outside the subject matter of sociology. It is a matter of psychology or some such other area of study that may be relevant, such as biology.
Ben B, Andrew FL. I get that praxeology says every action one takes is rational. That is the tautology that does give rise to at least a reasonable claim of value free status for Praxeology. But there are still problems.
Behavior is a result of a long chain of causes. Mises also agrees with this, but decides that the chain is outside the scope of Praeology. Mises tells us that the final step in this chain is action. The instincts and beliefs that lead to the action are outside the realm of Praxeology, being possibly psychology or something else.
This leads me to think of two objections.
1) The idea that all behavior is at its end a result of conscious action is not necessarily correct. It may be correct, but I do not see why it is a necessary result. Why could some behavior not be simpy a continuation of the irrational causes?
It seems to me an article of faith that all behavior is the direct result of a Misean action.
2) If action is the result of possibly irrational causes and has no logical reason to to lead towards the attainment of the purpose of that action, why should we be interested in it at all?
The whole project seems to collapse unless we assume that the action will tend to achieve the objective of the action. If action is randomly correlated with outcome, as it could be as described so far, then why would we study it?
It is surely only in so far as the action does actually achieve the objective that it becomes an interesting point of study for economics.
We all agree that action may be based in false or irrational premises, and has no requirement to actually achieve the desired outcome of the individual.
Unless we believe that action will tend to achieve the desired onbjectives, it is a pointless study. Mises sort of assume this and talks of experience and such like guiding the action. But that is taking the discussion outside his remit. There is no reason to believe that action will help an individual achieve his goals uness we go outside the area defined as praxeology – that is to discuss experience and the reasons why we can generally think that action will progress one towards one’s goals.
Thus is seems we must either abondon the value free claim, and use it as a useful tool, or abandon any hope of Praxeology telling us anything useful at all.
Harold, when this conversation started it was about whether there is anything in the methodology of Praxeology/sociology which precludes the possibility of applying it through a Socialist value system. We are now well afield of the point.
“If action is the result of possibly irrational causes and has no logical reason to to lead towards the attainment of the purpose of that action, why should we be interested in it at all?”
This is some and! But in fact much of interest comes about from the study of particular forms of action in the face of ignorance. Austrians have written on this quite extensively.
Andrew, we have wandered, as these discussions tend to do.
“This is some and! ”
Yes, it is, rather.
“But in fact much of interest comes about from the study of particular forms of action in the face of ignorance.”
Given the big “and” there are a lot of ideas packed up in this. I am not sure where it is going, just bouncing ideas around. Feel free not to indulge me.
Mises says that action need not actually move one towards one’s goal. This could be due to ignorance, as you say. I want fuel economy and I have read the wrong reviews, so I get a car with poor fuel economy.
But it also could be due to simply action having nothing to do with goal attainment. I want fuel economy and I choose a car with low fuel economy because that is my preference at the moment. Even though I know all the information and I know that the car I am choosing does not fit my requirements, I still prefer it.
This sounds an unlikely scenario, but given that Praxeology is a tautology, is this actually forbidden? The origins of the preferences are outside the scope, so we cannot say anything about their suitability for goal attainment.
You’ve snuck in a logical contradiction here.
“I want fuel economy and I choose a car with low fuel economy because that is my preference at the moment”
Rephrased “I prefer to have fuel economy but I choose a car with poor fuel economy because I prefer not to have fuel economy.”
I must be misunderstanding you here.
I can restructure you hypothetical in a way that makes sense if I assume you mean that while fuel economy is important to the person in question, they nevertheless choose a car with poor fuel economy, because for some unspecified reason, something else makes them prefer the car with poorer fuel economy. But it’s hard to see the failure to behave rationally here. The margins on which one might choose between two alternatives themselves have a preference order for individuals. Just because fuel economy is *one* margin he might consider in choosing a vehicle, does not mean it is the exclusive margin at the top of his preference order.
Andrew, yes, I see your point. I feel I am onto something but will need to think about it some more and the feeling will probably turn out to be illusory.
“I can restructure you hypothetical in a way that makes sense if I assume you mean that while fuel economy is important to the person in question, they nevertheless choose a car with poor fuel economy, ”
Suffice to say that this is not really what I meant. I was more getting at something along the lines of how do we distinguish between an irrational belief and an irrational action.
I will think more about this. Thank you for the discussion.
“Having said that, let me note that in a paper of only 3 pages, I counted references by you to over 16 different economic terms/concepts (society’s utility, network of practices, atomizing, social outcomes, etc.) that clearly mean something to you, but advance little to others who are just trying to understand why none of this makes real sense…”
Does he understand yet that this was not a “paper,” and that since it was in an economic journal, it *will* use economic jargon?
WILL NOBODY THINK OF THE TRUMP????? [pulling out hair in deranged manner]
Keen is not unsympathetic to the Austrian School, but it does not seem to us that he fully
understands it.
Really?? Since no opponent of the Austrian School understands it (purposefully??), how can one trumpet that simple truth to the public diplomatically?
Here is Hayek calling Keynesian a hoax and a ruse, but saying it diplomatically:
http://bobroddis.blogspot.com/2014/02/being-polite-to-keynesians.html
Would you say that Gene Callahan, the co-author of the review you’re quoting from, does not understand the Austrian school? Because he no longer subscribes to the Austrian school.