Potpourri
==> Unfortunately it looks like they are charging for the videos from the Texas Bitcoin conference. But if you are really interested in deciding once and for all whether it’s a fad or the libertarian’s dream come true, I strongly encourage you to invest the $50 to gain access to the videos. (If you care, no, I’m not getting a commission from these videos in any way.) Of course I always recommend my own lecture, but also if you read this blog, you will surely benefit from the talks by Andreas Antonopoulos, Jeff Tucker, Michael Goldstein, and Stefan Molyneux.
==> David Gordon reports on a new development concerning Krugman’s famous babysitters’ co-op example.
==> Robert Blumen discusses Say’s Law and its relevance today.
==> Murray Sabrin wants to be the libertarian’s Man in Washington.
==> Another example of someone getting screwed over because he tried to help the police.
==> Gene Callahan has a good discussion of marginalism. (It gets good about halfway in; you’ll see where he’s going with the example.)
==> Noah Smith thinks macro has handled itself pretty well post-crisis. Dean Baker says in the comments, “If you can’t predict a monster crisis that swamps everything useful that has been done with macro policy over the last 3 decades, then you have a serious uphill battle here.” That’s gotta hurt. (Or rather, it should hurt. Noah as usual is unfazed in the comments; he is immune to my zingers too, Dr. Baker.)
==> Tyler Cowen discusses Daniel Drezner–the guy I called out last month for saying our recent austerity was the greatest in US history–on sanctions. I was getting ready to disagree with Drezner, but in the first quote Tyler provided, Drezner said that the sanctions on Russia wouldn’t achieve any kind of military concession. “Oh OK, I misjudged the guy,” I thought. Then Tyler quoted him some more, where Drezner explained that even though it wouldn’t accomplish anything in Ukraine, the US should go ahead and impose sanctions on Russia anyway. Suh-weet. Go ahead and click the link if you’re into that whole “I want to know the context” thing.
==> Robert Vroman–the original artist for Chaos Theory–wants an ideological cage match.
I loved that cat *at the margin* of the screen. It’s beautiful.
Bitcoin’s purpose is to remind everyone why libertarians are considered fools.
Libertarians are distinguished from all other ethics in that it considers initiations of violence to be absolutely immoral.
Why is that “foolish”?
Robert Blumen:
“The concept of a glut for a single good is easy enough to understand: there is more supply on the market than demand at the offered price. A glut can be alleviated by a fall in the price of that good. The producers of the good may take a loss if the market price is below their costs, but the market can always clear at some price.”
Bob Roddis and Tel take note of that.
Hmmm. Another Austrian employing a term that I don’t find particularly useful or helpful. I’m crushed.
Ken B,
You see this is exactly what I am talking about.
Does Roddis object merely to the “term” (word used) or the actual concept??
The actual concept of a tendency towards market clearing wages and prices by human action is absolutely fundamental to Austrian economics, and a whole set of Austrian arguments is based on it, such as:
(1) the belief that recessions/depressions will quickly end through economic recovery (with a tendency to a market clearing interest rate to boot);
(2) the Misesian notion that market economies have a tendency to economic coordination;
(3) Austrian arguments against wage and price controls;
(4) Mises’s explanation of the Great Depression; etc.
————————-
Yet according to Roddis the “term” is not “particularly useful or helpful.” Does he mean the mere expression or the actual concept??
If he rejects the later, why, then, does he even support Austrian economics at all?
Because undistorted prices provide essential information available nowhere else, such prices will provide essential guidance in effectuating and adjusting plans. Price slashing in the event of a failed plan is certainly one of the more popular options. Note that during the housing boom, for example, as housing sold for ever higher and higher prices, those prices were “market clearing prices”.
It is really pointless to explain this over and over and over because LK’s M.O. is merely to distort language out of context of the basic libertarian concepts of the NAP, violent intervention and prices as information.
TYPO:
LK’s M.O. is merely to distort language out of context of the basic libertarian AND AUSTRIAN concepts of the NAP, violent intervention and prices as information.
So do you agree that the actual concept of a tendency towards market clearing wages and prices by human action is absolutely fundamental to Austrian economics?
Yes or no?
This is your moment of truth, roddis. You need only give a straight, clear, non-evasive answer “yes” or “no” answer right now.
Of course, you won’t, will you. You cannot give any non-evasive answer. It is impossible for you, because you have been defeated and humiliated on this topic numerous times.
The moment you do give a clear answer it is all over for you and the mountains of rubbish you spout will be revealed as such.
Here we go. Unimaginable.
I’m out of here.
QED
LK:
Whatever you want to say is a “problem” of a real world laissez faire economy, from how slow prices adjust, to how many people get laid off, during any period of time, the Austrian argument against interventions by the state is that those interventions prevent information in free market prices from being observed and communicated, which prevents people from readjusting in accordance with actual market preferences.
This is the argument you’re dealing with. You are not dealing with any theory in Austrianism about how absolutely fast prices adjust, or how absolutely people can find work. In absolute terms, the argument is that people do adjust to other people in a free market, and that price adjustments are an important component to coordination. It isn’t the only one. There is also required relative supply adjustments.
It is wrong to believe that if you can find something off in Austrian theory about absolute price adjustments, that this implies government interventions in pricing are justified after all. Those are two different things.
On the one hand, there is the Austrian argument about what people do with prices vis a vis other people’s actions in the market, and hence talk about prices adjusting towards improvements in coordination.
On the other hand, there is the Austrian argument about government interventions hampering the communication of free market pricing, and hence hampering the coordinating mechanism of free market pricing.
Call these “the two arguments.”
Whether the mental tool of “market clearing” is a “significant” or “non-significant” component of Austrian theory, is a debate that will not settle or help in settling, the abive two arguments.
For let us imagine that you and Roddis end up agreeing that it is “significant”. Or assume you end up agreeing it is “non-significant”.
SO WHAT?
A. You will not have settled whether prices do in fact tend towards clearing, and
B. You will not have addressed the above two arguments.
“There are no predictions possible based on constancies in relations in human action”
The Austrian predictions of “quick” adjustment are not specific quantitative predictions positing a universal eternal numeric figure (say, 2, years 4 days).
Mises and others are making a qualitative prediction that is generally true that adjustment will rapid and short.
As in line with Murphy statement here:
7. PRAXEOLOGICAL PREDICTION
Praxeology can make certain predictions about the future, but they are necessarily qualitative.
Murphy, Robert P. and Amadeus Gabriel. 2008. Study Guide to Human Action. A Treatise on Economics: Scholar’s Edition. Ludwig von Mises Institute, Auburn, Ala. p. 47.
Better rewrite your ignorant statement, MF.
LK:
“The Austrian predictions of “quick” adjustment”
There are no predictions in Austrian economics. None. Zero. Nada.
“are not specific quantitative predictions positing a universal eternal numeric figure (say, 2, years 4 days).”
There are no quantitative predictions periods.
“Mises and others are making a qualitative prediction that is generally true that adjustment will rapid and short.”
Generally true? What does that even mean? Does that mean in 99 time periods of 100 reproducible time periods, in some repeating experiment? Or does it mean some other number? Or does it mean 99 time periods out of 100 successive time periods?
Austrian theory makes no predictions of what humans will learn and do in the future. In fact, it is precisely Austrianism that argues it is impossible.
Mises said many times, in books and in seminars, that there are no constants in human action. He kept saying that because of so many economists believing they can predict the future economy using constants.
Mises may have dropped mentions of how long he as Mises believed recoveries would take should there be a sudden problem arising in a free market, but he did not do so as an Austrian or praxeologist.
“As in line with Murphy statement here:
7. PRAXEOLOGICAL PREDICTION
Praxeology can make certain predictions about the future, but they are necessarily qualitative.”
This argument is contingent upon certain if then statements. It isn’t predicting the if statement, and hence isn’t predicting the future.
Murphy provides an example in the very next sentence:
“For example, it can tell us that (other things equal) a fall in the demand for apples will lead to a lower price of apples. But praxeology alone can never tell us that (say) a particular change will yield a 9 percent drop in apple prices.”
This is not a prediction that the prices of apples will fall. It is an if-then statement. It is probably too difficult for you to get this, but that part in bold is actually not a temporal cause and effect argument of subsequent events, but is actually a synthetic a priori argument about what is going on should these events occur.
A “fall in demand for apples” and “lower prices of apples” are actually referring to two aspects of the same actions. Sellers and buyers are agreeing to less money for trading apples, which implies, CETERIS PARIBUS, a lower price of apples.
The if isn’t a prediction. The ceteris paribus means supply could change and thus prevent the lower prices from being observed.
The two quoted propositions should instead be understood as a cause and effect in terms of thinking about what is going on. We think this, and therefore we should think that.
Whether or not ceteris paribus actually holds, and whether or not there is in fact a fall in the demand for apples, are both empirical questions that cannot be predicted in advance using constancies in relations.
In other words, the “will lead” portion of Murphy’s argument is not to be regarded as some sort of response now to a previous event that took place.
A lower demand for apples “leading to” a lower price of apples, ceteris paribus, doesn’t mean that sellers experience a reduced nominal demand now, and then automatically respond later on by reducing their asking prices so that “lower demand leads to falling prices.”
No, the ceteris paribus is crucial. It is meant to refer to two sides of the same coin for the same event, abstracted from time.
When we say “If there is a lower nominal demand for apples, then there will be a lower price of apples”, we are saying that a lower nominal demand for apples logically implies a lower prices of apples, CETERIS PARIBUS.
This logical relation is what enables us to “predict” what would happen if we happen to only know there is a lower nominal demand for apples, and nothing else changes. It is a “prediction” in the sense of what we can know “later on” after knowing that initial proposition.
If we know there is a lower nominal demand for apples, then we can then know, later on, and thus “predict” that there will be a lower price of apples, ceteris paribus.
This is not a prediction of the form “There is a lower nominal demand for apples now, and hence there will be a lower price for apples later on, ceteris paribus.”
No, it is actually a category of action known a priori.
Whether Murphy knows that is what he is referring to when he says “prediction”, is up to him to explain.
But what I am saying I stand behind. What Murphy says or does not say, does not ipso facto prove me right or wrong.
LK:
Whatever you want to say is a “problem” of a real world laissez faire economy, from how slow prices adjust, to how many people get laid off, during any period of time, the Austrian argument against interventions by the state is that those interventions prevent information in free market prices from being observed and communicated, which prevents people from readjusting in accordance with actual market preferences.
This is the argument you’re dealing with. You are not dealing with any theory in Austrianism about how absolutely fast prices adjust, or how absolutely people can find work. In absolute terms, the argument is that people do adjust to other people in a free market, and that price adjustments are an important component to coordination. It isn’t the only one. There is also required relative supply adjustments.
It is wrong to believe that if you can find something off in Austrian theory about absolute price adjustments, that this implies government interventions in pricing are justified after all. Those are two different things.
On the one hand, there is the Austrian argument about what people do with prices vis a vis other people’s actions in the market, and hence talk about prices adjusting towards improvements in coordination.
On the other hand, there is the Austrian argument about government interventions hampering the communication of free market pricing, and hence hampering the coordinating mechanism of free market pricing.
Call these “the two arguments.”
Whether the mental tool of “market clearing” is a “fundamental” or “non-fundamental” component of Austrian theory, is a debate that will not settle or help in settling, the abive two arguments.
For let us imagine that you and Roddis end up agreeing that it is “significant”. Or assume you end up agreeing it is “non-significant”.
SO WHAT?
A. You will not have settled whether prices do in fact tend towards clearing, and
B. You will not have addressed the above two arguments.
“This is the argument you’re dealing with. You are not dealing with any theory in Austrianism about how absolutely fast prices adjust,”
In fact, Austrians do make claims about how quickly these adjustments take to happen on the hypothetical free market:
“As we have indicated, because of uncertainty and ignorance, firms will experience shortages and surpluses about as often as market-clearing. In a free market, such disequilibrium outcomes would tend to be shortlived or temporary. However, if and when the surpluses and shortages become persistent or long-lasting—a situation thoroughly inconsistent with free-market conditions— the cause must be sought elsewhere: (1) in government price-fixing or other interventions, and (2) non-profit pricing policies.” (Shapiro 1985: 209).
“The price structure of the market decides what will be produced, how, and in what quantity. Through the structure of prices, wages, and interest rates the market brings supply and demand into balance and sees to it that each branch of production will be as fully occupied as corresponds to the volume and intensity of the effective demand. Thus capitalist production derives its meaning from the market. Of course, a temporary imbalance between production and demand can occur, but the structure of market prices makes sure that the balance is reestablished in a short time. Only when the mechanism of the market is disturbed by external interventions is the effect of market prices on the regulation of production prevented; they are disturbances that no longer can be remedied by the automatic reactions of the market, disturbance that are not temporary but prolonged.” (Mises 2002a [1931]: 170).
And Bob Murphy goes even further and makes specific claims about America history:
“Generally speaking, most depressions (or “recessions” as they came to be redefined after the New Deal) in U.S. history were over within two years, and all of them within five …. Krugman’s “explanation” for the stagnant investment of the 1930s can’t explain why the U.S. economy managed to quickly recover from all of the earlier depression in its history”
Robert Murphy, The Politically Incorrect Guide to the Great Depression and the New Deal, pp. 112–113.
“In absolute terms, the argument is that people do adjust to other people in a free market, and that price adjustments are an important component to coordination.”
So no time frame is involved?? lol.
It can take 10 or 15 years and you see no problem?
Funny how those authors above speak of a “short time” or “shortlived problems”.
But then I expect “short” can have any meaning you want to give it, right??
Just like “immediately”:
“immediately”, … can be taken to mean any time at all, since the standard for “short” and “long” periods of time is not objective but subjective,
http://socialdemocracy21stcentury.blogspot.com/2011/12/say-repudiated-says-law.html?showComment=1322756770135
LK
“In fact, Austrians do make claims about how quickly these adjustments take to happen on the hypothetical free market”
That isn’t Austrian economics.
When you observe a prediction of time, you are observing that person making an argument apart from Austrianism.
No falsifiable predictions in Austrian theory.
I am not surprised you still don’t understand even the most basic parts of Austrian theory.
When Murphy makes a prediction, he does so as Murphy, not a “representative” of Austrianism.
That Murphy is an Austrian economist, does not imply that everything he says is from Austrian principles.
“No falsifiable predictions in Austrian theory. “
Ken B,
Are you reading this?
“When you observe a prediction of time, you are observing that person making an argument apart from Austrianism.”
oh, haha…. So Austrian theory never says how long any adjustment process will take: it cannot even tell us whether free markets will lead to recovery from recessions in 2 years or less.
For all we know free markets might take 10 or 15 or 20 or 100 years to recover.
“That Murphy is an Austrian economist, does not imply that everything he says is from Austrian principles.”
Indeed. When he talks of the weather this does not, one would think, come from Austrian economic principles.
But when Murphy speaks of Austrian economics and indeed explicitly defends Austrian theory in print, one would assume that he is using Austrian economic principles to make predictions.
If not, what theory does he get his predictions from. Right out of his a**?
LK:
“So no time frame is involved?? lol.”
Correct, uh..”lol”.
There are no predictions possible based on constancies in relations in human action
“It can take 10 or 15 years and you see no problem?”
No problem that justifies violence. No problem that justifies pointing guns at innocent people threatening them with their lives, no. This is a problem derived from peaceful activity, and so ought to have a peaceful solution.
You do realize that not every complex social problem justifies violence, don’t you?
You are taking your own personal preferences, of how long other people should do something with their wealth, and you are arrogantly elevating that to be a preference that must replace their preferences, at gunpoint.
I know you have to habitually say “lol” to placate your own anxiety inducing convinctions, but you don’t have any rational justification in wanting your preferences to be violently imposed on everyone else so that their preferences cannot be manifested.
You say it’s “funny” that laissez faire economists typically use the words “immediately” and “quickly” to describe a free market. And what, I suppose you saying “10 to 15 years” is cool, calm, and composed ratiocination?
It takes however long it takes LK. If individuals are not contented with how long it takes, I see no reason why they can’t learn, adapt, anc change their approaches. I see no reason why Mr. X taking “too long” to hire someone, that guns should be pointed at everyone so as to centralize money, all in order to trick Mr. X into doing something now that he might regret later on.
You are going from “I dn’t like how long YOU are taking” to “Therefore guns ought to be pointed at innocent people.”
What is the logical connection between those two beliefs you have? That people should have their freedom sacrificed forever, for the sake of more chewing gum and gadgets in the present?
LK:
“Indeed. When he talks of the weather this does not, one would think, come from Austrian economic principles.
But when Murphy speaks of Austrian economics and indeed explicitly defends Austrian theory in print, one would assume that he is using Austrian economic principles to make predictions.”
One would assume? If that’s true, why am I not assuming that?
Clearly that assumption is based on the reader’s own knowledge, which in your case are flawed beliefs.
“If not, what theory does he get his predictions from. Right out of his a**?”
At root, yes. All predictions of what humans will do in the future are ass pulls. Now you know one of the reaons I consider Keynesianism to be such.
LK:
“oh, haha…. So Austrian theory never says how long any adjustment process will take”
There are no predictions in Austrian theory. It isn’t a prediction science. It is a logical one. If and then type statements, where the if statements are also not predictions of what will take place in the future.
“it cannot even tell us whether free markets will lead to recovery from recessions in 2 years or less.”
Correct. It cannot tell us anything with respect to timings.
“For all we know free markets might take 10 or 15 or 20 or 100 years to recover.”
If that is how long individuals want to go in refusing to change their asking price to facilitate employment, then so be it. It’s their choice to make, not yours. They’re not committing any violent crime that justifies any government pointing its guns at innocent people all over the country.
MF:
“There are no predictions in Austrian theory. It isn’t a prediction science. It is a logical one. If and then type statements, where the if statements are also not predictions of what will take place in the future.
Murphy:
7. PRAXEOLOGICAL PREDICTION
Praxeology can make certain predictions about the future, but they are necessarily qualitative.
Murphy, Robert P. and Amadeus Gabriel. 2008. Study Guide to Human Action. A Treatise on Economics: Scholar’s Edition. Ludwig von Mises Institute, Auburn, Ala. p. 47.
Better actually read some Austrian economics first, MF, before running your ignorant mouth off.
I think you guys are bogged down by the word prediction. I think MF’s view is that economics does make any synthetic predictions. As in there are no regularities or constants in human actions.
That is, if you ran an experiment on a person, the person changes their behavior precisely because they know they are being experimented on. This doesn’t happen with rocks, for example.
LK:
Try not to clutter the blog with repetition. I’ve already explained that quote above.
But the concept of “market clearing” is not well defined, making if very difficult to either agree with, or disagree with.
Does “market clearing” in your mind require that every item ever produced finds a buyer at a profitable price (i.e. no wasted effort anywhere) ? If this is your requirement then I disagree that such a thing can happen under any market system, free market or otherwise.
“But the concept of “market clearing” is not well defined”
On the contrary, it IS well defined in its most important sense: the concept that the quantity demanded of a good equals quantity supplied in a product market. That equilibrium — if it is obtained — in any single market is of course likely to be only brief.
If you’re saying that a central concept in both Austrian (and as a matter of fact neoclassical economics) is ” not well defined”, then that is a pretty shocking indictment of the economics you are peddling on this blog.
Give a very precise definition of “quantity demanded”, you are an empiricist so explain how to go about measuring it. Please do the same for “quantity supplied”.
Arguably from his wording in that one comment he means just a term. However never having suggested a substitute, nor explained why he finds that term inappropriate, I think you are right. There are after all only two choices: he accepts the underlying concept but disputes the wording, or he disputes the underlying concept. If his objection were pnly to the wording he would surely by this time have been able to come up with an alternative.
“nor explained why he finds that term inappropriate”
Ken, he explained himself numerous times. I don’t understand your requirements for explanation. He said, something along the lines, that distorted and non-distorted prices may both be considered as market clearing prices, and this ambiguity is a cause of confusion.
Hank,
Roddis said:
Note that during the housing boom, for example, as housing sold for ever higher and higher prices, those prices were “market clearing prices”. “
Are you even aware of how crazy that statement is?
A market clearing price is a price at which the quantity demanded of a good exactly equals the quantity supplied.
if roddis thinks that “during the housing boom .. as housing sold for ever higher and higher prices, those prices were “market clearing prices””, then he is implying that there was NEVER excess demand for houses and NEVER any excess supply (houses offered for sale but unable to find buyers) and there was some kind of stationary supply and demand equilibrium in the housing market for years on end — an utterly stark, raving mad idea.
His statement proves only that he does not now and probably has NEVER understood what a market clearing price even is.
You see, as you know, there was excess demand for houses, which changes precisely where
“the quantity demanded of a good exactly equals the quantity supplied.”
Which would in turn change the market clearing price.
I think the real point is that without the manipulation of interest rates, demand for housing would have been lower.
“A market clearing price is a price at which the quantity demanded of a good exactly equals the quantity supplied.”
Couldn’t it better be defined to mean one at which the quantity people want to buy of a good exactly equals the quantity people want to sell?
You seem to be overly focused on the importance of qty produced actually being sold in every period, which seems odd for a Keynesian.
OK then explain how, using an empirical measurement you can precisely measure the difference between a “clear” market (i.e. where supply equals demand) and a market with excess supply or excess demand.
To help you furnish an example, do apply your methodology to the student loan market in the USA as it stands today. Are student loans in equilibrium? Is there too much supply of loans or too much demand?
Hank, it is entirely possible Bob R has given an explanation. I just know I have never seen one, and I have seen acres of comments in his grudge match with LK.
The point you raise is a point in favor of the term, because it identifies a particular notion applicable in both circumstances. That makes it easier to distinguish clearly the differences.
And I’ve explained it numerous times, and we have put up plenty of links to essays that cover all of the Austrian uses for various “states of rest” and how each of those are defined and why some are observable, while others are theoretical constructs that may serve a purpose at times.
I’ve also admitted on multiple occasions that there’s no proof of convergance in Economics (not just Austrian economics, but ALL Economics)… and there’s no way to run a control experiment in macro economics, which limits the use of empirical methods (again, this applies to ALL Economics).
I don’t see why I should be surprised by this; that’s what I’ve always believed. It’s just that may reaction is, “gosh, man, that sucks for you” rather than “OMG STOP EVERYTHING we need extensive financial intervention to save merchants from the atrocity of having to sell at a loss!!!”
Blumen:
” the US economy has experienced zero real growth since 2000. This is what I call the permanent recession. Permanent, because, unlike past downturns — there will be no recovery. “
The first substantive evidence he gives for this statement is the real GDP estimates of John Williams of Shadowstats, based on William’s dodgy recalculated inflation rates.
But those “alternate” inflation estimates are unreliable. They do not even recalculate inflation data at all: what they do is add a questionable constant to the government inflation rate:
http://azizonomics.com/2013/06/01/the-trouble-with-shadowstats/
Moreover, the “Billion Prices Project” at MIT data provides very strong confirmation that the official CPI estimates are a reasonable measure of inflation, as I point out here:
http://socialdemocracy21stcentury.blogspot.com/2013/08/sumner-versus-schiff-and-shadowstats.html
And once Shadowstats’ “alternate” inflation data is rejected as false, all of its “alternate” real GDP measures are rendered worthless, because the real GDP calculations are based on the worthless inflation figures, so the main support of Blumen’s argument collapses.
It’s not dodgy to add a fixed percent to a number calculated using a fixed methodology.
If the “official” stat keeps underestimating the real rate due to the same underestimating methodology, then it makes sense that an adjustment to make it more accurate would also be fixed in its methodology.
To show the adjustment to be inaccurate, you have to show the “official” method has undergone enough significant changes to make a fixed adjustment unwarranted.
Robert Blumen:
“He argued this point using Say’s Law: because demand is constituted by supply, aggregate demand, meaning the demand for all goods on the market, consists exactly of all things supplied. Aggregate demand is not only equal to, but identical to, aggregate supply. The two can never be out of balance.”
That is obviously false. In fact, it looks like Blumen is simply flogging the dead horse of Say’s Identity:
“[Say’s Identity] is the assertion that no one ever wants to hold money for any significant amount of time, so that, as a result, every offer (supply) of a quantity of goods automatically constitutes a demand for a bundle of some other items of equal market value”. (Baumol 1977: 146).
If “aggregate demand” means the aggregate value of all purchases in a given time period with purchasing power derived from factor payments from production, then you can have a shortfall merely when
(1) some person or people in general choose to hoard cash they have earned or
(2) when people spend their money on financial/real assets on secondary asset markets and the people/institutions who receive the money hoard the cash or choose not to spent it all on consumption or real capital investment, e.g., banks might hoard money as reserves, rich people have a different marginal propensity to consume, and so on.
The absurdity of the Say’s Identity form of the law is clear from the Say’s own writings:
“Every producer asks for money in exchange for his products, only for the purpose of employing that money again immediately in the purchase of another product; for we do not consume money, and it is not sought after in ordinary cases to conceal it: thus, when a producer desires to exchange his product for money, he may be considered as already asking for the merchandise which he proposes to buy with this money. It is thus that the producers, though they have all of them the air of demanding money for their goods, do in reality demand merchandise for their merchandise” (Say 1816: 103–105).
So no capitalist EVER chooses to hoard money or not spend it on consumer or capital goods?!
‘If “aggregate demand” means the aggregate value of all purchases in a given time period with purchasing power derived from factor payments from production, then you can have a shortfall’
Seems like you are defining says Law to mean something like “the nominal value of all sales in a given period must equal the nominal value of all factor payments”. Is that correct ? If so then using that definition Say’s law will rarely if ever hold. You have defined it out of existence.
In a given period a qty of goods and services will be produced.
If the producers adjusted prices appropriately then everything produced would be sold and there would be an identity between physical qty produced and physical qty sold. All markets would obviously clear but AD might differ from total factor costs.
However suppliers may choose not to lower prices in order to sell everything they produced but to hold some stock to sell in future periods (which is perfectly rational if they think prices will be higher in the future and storage costs are low). In this case the “market clearing” price is still one where there is no excess supply – everyone is happy to buy or hold the available stock at the prevailing price.
In this scenario (as less transactions have taken place) AD has fallen. In the next period the fact the producers have lower expectations about sales and the fact they have bigger inventories will likely mean production is curtailed and we have a recession. But at no point did markets fail to clear. Neither does it necessarily follow that market intervention is the fastest way to end the recession.
“Seems like you are defining says Law to mean something like “the nominal value of all sales in a given period must equal the nominal value of all factor payments”. “
No, I am not arbitrarily “defining” it that way at all.
It is how major economists from Say’s time onwards have defined the law:
“(1) The total factor payments received for producing a given volume (or value) of output are necessarily sufficient to purchase that volume (or value) of output [an idea in James Mill].
(2) There is no loss of purchasing power anywhere in the economy. People save only to the extent of their desire to invest and do not hold money beyond their transactions need during the current period [James Mill and Adam Smith].
(3) Investment is only an internal transfer, not a net reduction, of aggregate demand. The same amount that could have been spent by the thrifty consumer will be spent by the capitalists and/or the workers in the investment goods sector [John Stuart Mill].
(4) In real terms, supply equals demand ex ante [= “before the event”], since each individual produces only because of, and to the extent of, his demand for other goods. (Sometimes this doctrine was supported by demonstrating that supply equals demand ex post.) [James Mill.]
(5) A higher rate of savings will cause a higher rate of subsequent growth in aggregate output [James Mill and Adam Smith].
(6) Disequilibrium in the economy can exist only because the internal proportions of output differ from consumer’s preferred mix—not because output is excessive in the aggregate” [Say, Ricardo, Torrens, James Mill]
(Sowell, T. 1994. Classical Economics Reconsidered, Princeton University Press, Princeton, N.J. pp. 39–41).
So you agree that you are saying saying “must equal”.
Most of those quotes only imply “could in theory equal”, that is: there could never be case where the total of factor payment could not in theory be used to buy up all the product. If this were not true then a situation of over-production would be possible, which supporters of Say’s law deny. Whether this happens in any given situation depends upon market conditions.
I think this is a key distinction.
That is because most of the Classical economists posited the “soft” version of Say’s law called “Say’s Equality” that **admits** — note that word — that the aggregate demand failures can happen:
“[Say’s Equality] … admits the possibility of (brief) periods of disequilibrium during which the total demand for goods may fall short of the total supply, but maintains that there exist reliable equilibrating forces that must soon bring the two together.”
Baumol (1977: 146)
Not “soon.” However long it takes individuals according to their knowledge and preferences, which in Misesianism, cannot be predicted from past data.
No, you do even understand Austrian theory.
According to Misesian theory, it cannot be predicted with universal **quantitative precise numeric constants** (say, it only takes 1 year 3 days in very time and place in hsitory), but can be predicted in qualitative sense of being rapid or quick.
No, it cannot LK. Austrian theory does not make predictions of what humans will know and do in the future, and thus cannot predict the future state of the economy.
You do not understand Austrian theory.
By “aggregate demand failure” do you you just mean “fall in aggregate demand ” ?
Baumol’s characterization of Say’s Law is incorrect. And so is yours.
It is not true that Say’s Law requires “a world where nobody holds money for significant periods of time because money can have no utility, except in what it can purchase in terms of commodities.”
Say’s Law states that a general glut of wealth is impossible. This is true. When you observe spending decline, and inventories building up, you are not observing a general glut. You are observing a partial, SEEN, relative overproduction, and a partial, UNSEEN, relative underproduction.
That you see people holding onto their earnings of money for positive periods of time, does not falsify Say’s Law. Do you honestly believe Say himself believed that people instantly spent their money earnings with no holding of money at all? This is a praxeological impossibility. It is necessary in the very concept of earning money, that money must be held for a period of time. Whether this time is one picosecond or one year, this is not what establishes a falsification of Say’s Law. It is not what makes it stand or fall.
What would make Say’s Law fall is a proof that human action can reach the point at which there is no further additional wealth qua wealth seeking. If you can prove this has taken place, I will concede Say’s Law was really a falsifiable theory within the constraints of human action after all, and not a deduction from human action and the economic categories as originally treated.
That statement you quoted from Say contains the proviso of “ordinary cases.” Say knew that “concealing”, or in other words “hoarding” can take place. Your rhetorical question that suggests Say believed people NEVER held money, is contradicted by the very passage you quoted. You bolded the one part, but the other part about “ordinary cases” shows that your last sentence is a false interpretation.
” This is true. When you observe spending decline, and inventories building up, you are not observing a general glut. You are observing a partial, SEEN, relative overproduction, and a partial, UNSEEN, relative underproduction.”
That only works if the total value of factor payments from production is totally spent. If widespread hoarding takes place, then a general glut is logically possible.
“That only works if the total value of factor payments from production is totally spent.”
That point is never reached LK. “Totally spent” is not a category of human action.
What I said is true for all cases.
“If widespread hoarding takes place, then a general glut is logically possible.”
False. All money holding is individually driven.
It’s easy to see you’re full of BS. You said “widespread” hoarding, as if there is even a concrete definition of such a thing. You’re really just talking about your own cash holding peferences…for others.
If I earn money, and I do not spend it that same day, or week, or even year, then ceteris paribus, “aggregate money hoarding” has increased. But this doesn’t mean I am fully satisfied in terms of wealth qua wealth. It is not true to say that my desire for additional wealth is now zero, and that should anyone produce any more goods available NOW, that my refusal for it means there is a “general glut.”
I still have a desire for additional wealth. JUST NOT RIGHT NOW. Why? Because the world is too much in one trajectory in terms of production, which I can see, and not enough in another direction, which I cannot see. That world I cannot see would have producers make ready goods for the future, not right now. That way, the partially completed goods will be produced and sold NOW, and I won’t SEE a partial relative overproduction anymore. I will see enough half completed factors NOW. That way, my temporal consumption can be satisfied.
This is the same for every other individual. Every other individual has a temporal consumption desire. But every individual lives in a world where there might be too many factors of production produced now, and not enough consumer goods ready now, or, there might be too many consumer goods now, and not enough factors of production now.
You see inventories build up and money hoarded now because people are telling producers “That’s IT! Don’t produce any more goods! I’m stuffed and satsified!”
No, they are telling producers things like “You produced too many factors of production now, and not enough consumer goods ready now.” Or, they might be saying “You produced too many consumer goods now, and not enough factors of production now.”
There are many possible partial over and under productions. There can not be a GENERAL glut of wealth as such, as long as humans act towards achieving goals (which are in the future, and in the past).
General gluts are not logically possible. Believing there are is due to holding incorrect assumptions.
So why are police specially protected from suing- do we do that for doctors for example? Why don’t they stop doing what happened there (my guess is hauling him in for a lineup out of sheer convenience). There are two problems from our perspective with prosecuting the wrong guy. The other being the guilty guy roams free.
“Dean Baker says in the comments, “If you can’t predict a monster crisis that swamps everything useful that has been done with macro policy over the last 3 decades, then you have a serious uphill battle here.” “
Yep, and those seismologists clearly have no clue how plate tectonics work either!!!
A poor analogy. Seismologists can pretty well predict where the big quakes are going to occur, just not precisely when. Macroeconomics as practiced today seems to be pretty inept in both where and when.
Bad analogy.
A single earthquake isn’t an “aggregate” phenomena like a depression is typically treated. An Earthquake on one side of the US might not even be noticed on the other side of the country.
Now, if you instead used the analogy of an asteroid large enough to affect the whole world, then it would not be unreasonable to assume that astronomers would be able to predict it hitting the Earth well before it does.
Now, I am not saying shame on macro for failing to do what it should be able to do. I hold that macro is incapable of doing what its physics envy inspired mainstream believes it can do.
Let’s say there’s a major earthquake.
Let’s say that the failure to predict it did more damage than all the advance warnings from past-3-decades seismology prevented.
Let’s say that the prevailing theory placed extremely low probability on such an earthquake happening — that prevailing signs, per the theory, weighed heavily against it.
In that case, yes, it would be an uphill battle to show that that prevailing theory is still valid — you would need more evidence it was an anomaly, or a significant revision to the model.
As for Drezner people advocate ineffective things all the time for longer term reasons. I bet a few readers here voted for Ron Paul. Drezner is honest enough to explain the limitations of his policy. You can certainly disagree but you’re using a double standard here unless you call out the RP voters similarly.
Drezner says it probably won’t accomplish anything in the Ukraine, not that it won’t accomplish anything. Open to dispute but not eye rollingly incoherent.
Ken B,
I believe the overall point is that Drezner is ignoring the possibility that sanctions might not only “not accomplish anything” but might accomplish BAD things, as economic warfare typically does.
Voting for Ron Paul is a bad comparison in the sense that there’s no potential negative in doing so. Sanctions often result in people going without food and necessary medical supplies all to prove some political point of questionable effect. That’s the general case against them, and the main reason why you shouldn’t advocate them unless you believe that some really good outcome will likely result.
Basically, it’s the difference between paying one cent for a ticket for a million dollar raffle, and paying a thousand dollars for a ticket for a million dollar raffle (assuming both raffles have equal total tickets sold).
“Voting for Ron Paul is a bad comparison in the sense that there’s no potential negative in doing so. ”
Well if enough people vote for him there’s an obvious negative!
Drezner is quite up front about what he thinks will work or won’t and why he supports what he does. he could well be wrong but Bob’s reaction only makes sense if Drezner said something contradictory or incoherent.
Bob’s reaction only makes sense if Drezner said something contradictory or incoherent.
Or if, say, Bob has gone on record opposing governments intervening in people’s economic lives. To say, “Well we need to screw with the Russian people in order to force concessions from their government” is one thing, to say “This won’t really achieve our military goals, but what the hell let’s screw with them to set a precedent” is pretty awful.
It may be awful or not or wise or not. But Drezner’s comment was not being priam facie a complete dolt unable to understand even his own argument. You were clearly implying rank doltery from Drezner. Your comment was “Suhweet” after noting “even though” he didn’t think it would work in the Ukraine but supported it “anyway”. My blood thinner analogy above is exact here.
You are doing something you accuse Krugman of, the sneaky oh so careful qualification. “even though it wouldn’t accomplish anything in Ukraine, the US should go ahead and impose sanctions on Russia anyway” My italics to highlight the qualification.
If Drenzer believes that no conceivable harm can come from economic sanctions then why only implement them now for the Ukraine situation? Why not put economic sanctions on everyone all the time?
That’s essentially the position that would be needed to make the Ron Paul voter analogy work. The ONLY disadvantage to voting for Ron Paul (assuming you agree with his policies) is that it takes a few minutes out of your day. No big deal.
If Drenzer believes the ONLY disadvantage to economic sanctions is that they might not work and that it takes some time to fill out the paperwork to put them into effect, then that would make the analogy sound. I refuse to believe anyone could be so dense as to think that way, but perhaps I’m wrong.
Dear Lord Keynes,
I know you won’t allow any dissenting views on your blog so I thought I would come here even though this may be deleted. Please stop:
1. Claiming all Austrians are Kantians
2. Making very ignorant statements about the Austrian position on economic laws
Here is Karl Menger on exact laws of which Mises called praxeological laws:
“The types and typical relationships (the laws) of the world of phenomena are not equally strict in all cases. A glance at the theoretical sciences teaches us rather that the regularities in the coexistence and in the succession of phenomena are in part without exception; indeed they are such that the possibility of an exception seems quite out of the question. However, some are such that they do indeed exhibit exceptions, or that in their case exceptions seem possible. The first are called laws of nature, the latter empirical laws.”
The reason you are confused about Mises passage in your blog post is because you don’t know the difference between praxeological laws and the assumptions of which it analyzes.
Just because you disagree with the existence of synthetic a priori propositions DOES NOT refute the propositions that Kant was referring to.
(1) I did not nor do I assert that “all Austrians are Kantians.” I said Misesian praxeology requires Kantian synthetic a priori knowledge to work. That is true.
I am perfectly well aware that other Austrians like Hayek or Rizzo reject strict Misesian apriorism. Hayek, for example, adopted a Popperian method — not unreasonable at all.
(2) as for Menger, he had strange ideas about economic laws, probably stemming from his Aristotelian epistemology:
http://socialdemocracy21stcentury.blogspot.com/2013/01/lachmann-and-menger-on-law-of-demand.html
1) This is not true for reasons explained by this author:
http://gaplauche.com/wp-content/uploads/2013/08/aristotelianapriorism.pdf
2) I think these ideas are thoroughly explained IMO by Knott:
http://praxeology.org/2013/07/16/the-structural-difference-between-social-science-and-natural-science/
If you agree with Lachmann then you also agree that the proposition in the law/principle of contradiction/non-contradiction is only probable in its modality, which I would think that many people would view as absurd.
That is a rather poorly explained area. Every time someone draws a supply and demand chart they are making an assumption that the curves are known, or at least knowable in some sense, and that the curves remain reasonably steady and unaffected by other changes going on at the same time. None of these things can be demonstrated in the abstract from first principles.
Dr.: i’m sorry Mr. Jones you’ve had a stroke and I cannot do anything to restore the movement and your left arm, however I can give you blood thinner will reduce the chance of a second stroke.
Bob: get a load of this doctor. He admits the warfarin won’t help with the left arm but he wants Jones to take it anyway. Suhweet!
LK: “Ken B,
Are you reading this?”
Yes. Don’t rub it in.
Why are you guys always confounded by this? Mises’ position was that all economic proposition are a priori analytical propositions from the action axiom. Here is Dom Armentamo:
“In chemistry, for example, it is possible to accurately measure an increase in the molecular weight (mass) of a compound after mixing precise amounts of chemicals together. It is also possible to repeat the very same experiment and get the very same results in any lab anywhere in the world. Economic phenomena, however, are of an entirely different nature. The data in economics is all historical and the economic consequences observed are likely the result of numerous influences, some known some unknown, most of which cannot be accurately quantified at all. Thus, given the inherent nature of economic data, the best that we can say about an economic study that claims to “test” some economic principle is that the findings may be “illustrative” of certain expected outcomes….but that is all.”
“Why are you guys always confounded by this? Mises’ position was that all economic proposition are a priori analytical propositions from the action axiom. “
No, that is untrue, and if it were true it would prove that praxeological laws are not necessarily true of the real world, when Mises and other Austrians say they are.
You are confused by what you think SHOULD be true and what actually IS true.
You are blinded by your own anti-libertarian bias.
They are analytically AND synthetically a priori true.
Mises was not fully aware that the action axiom bridges analytically true and synthetically true reasoning. Hoppe fleshed that out later on.
There’s an assumption included (often unstated) that most people can successfully look after their own interests, at least well enough to avoid destitution and starvation on a regular basis. You might recognise this is the same assumption included in Evolutionary Biology, because over time those who are completely unable to cope, get displaced by the more capable. This happens in each sphere of human activity.
Does this assumption require empirical evidence to support it? Well we could say that no statement about the real world is being made above. This is a merely a statistical result regarding the observability of states. Think of an example where you go to interview old war veterans and observe how many of them can tell you stories about lucky escapes. You might conclude that going to war makes people exceptionally lucky on the basis of correlation, but what is actually happening here is that there is no method available to interview unlucky soldiers. Observability is tainting your measurement.
On the other hand, the core of empiricism is the principle that if you can’t observe it, then it doesn’t exist. There’s no point coming up with a theory about something that never happens.
What if we were to look at, say, food seeking behaviour? We could accurately measure blood sugar and stomach content, then observe that when certain levels were reached certain behaviour followed. We can repeat this with high precision. Although the exact behaviours will vary, there will be very clear patterns. This puts the study of this behaviour into the natural science category.
The Adam Knott paper says “Social phenomena cannot be defined in physical terms. ”
This seems to rely on “if we assume or postulate that Y—the desire to change X—is not an observation, perception, or sensation”
This means that the desire to change is not related to measurable parameters, but has arisen within the mind through some immeasurable process.
Yet the above example shows that this particular human behaviour is related to measurable physical parameters.
So do we stick to the definition of sociology being separate from physical science, and thus the behaviours elicited by the measurable parameters are outside sociology. Or do we say that sociological effects have a physical component that can be measured?
The point is that these statements follow the boomerang principle as called by RP Phillips.
Here is Joseph Wood Krutch on a very similar issue, that of consciousnesses:
“This permitted the chemists to say, “I cannot find the soul in my test tube,” without exposing clearly the fallacy of his argument. If he had been compelled to say, instead, “I cannot find consciousness in my test tube,” the reply would be simple: “I don’t care whether you can find it there or not. I can find it in my head. Chemistry, by failing to find it, demonstrates nothing except the limitations of its methods. I am conscious, and until you show me a machine which is also conscious I shall continue to believe that the difference between me and a mechanism is probably very significant; even perhaps that what I find in that consciousness is better evidence concerning things to which consciousness is relevant than the things which you find in a test tube. . . .”;
Actually, of course, consciousness is the only thing of which we have direct evidence, and to say “I think therefore I am” is a statement which rests more firmly on direct evidence than the behaviorists’ formula “I act therefore I am.” After all, it is only because man is conscious that he can know or think he knows that he acts. What he minimizes really comes first and on it everything else rests. What the mechanist disparagingly calls “the subjective” is not that of which we are least, but rather that of which we are most certain. . . .
The problem of the apparent discontinuity between the two realms still remains. How a material body can be aware of sensations is perhaps the thorniest of all metaphysical problems. It is as hard to imagine how we get from one realm to the other, what is the connection between the world of things and that of thoughts and emotions—as it is to imagine how one might manage to enter the mathematician’s world of the fourth dimension. But . . . the physical body does think and feel. Much as the physical scientist may hate to admit what he cannot account for, this fact he can hardly deny. The seemingly impossible is the most indisputably true.”
Major_Freedom refutes all of Austrian economics in one fell swoop:
MF:
All predictions of what humans will do in the future are ass pulls
Robert Murphy:
7. PRAXEOLOGICAL PREDICTION
Praxeology can make certain predictions about the future, but they are necessarily qualitative.
Murphy, Robert P. and Amadeus Gabriel. 2008. Study Guide to Human Action. A Treatise on Economics: Scholar’s Edition. Ludwig von Mises Institute, Auburn, Ala. p. 47.
http://consultingbyrpm.com/blog/2014/03/potpourri-188.html#comment-301508
Looks like you’d better close the blog down, abandon Austrian theory, and allow geniuses like MF to do all economic theory in future, Bob Murphy.
LK:
This is the third time you’ve posted this exact same argument. I’ve already explained that quote above.
It does not mean what you think it means.
You explained it by saying:
This argument is contingent upon certain if then statements. It isn’t predicting the if statement, and hence isn’t predicting the future.
To be contingent upon events or statements means that it will be contingently true if the relevant statements are true and would be making a prediction.
But NO! says MF:it ” isn’t predicting the future.”
“To be contingent upon events or statements means that it will be contingently true if the relevant statements are true and would be making a prediction.”
No it isn’t, because the contingent if statement is not categorically temporally prior.
The argument about apples and prices and nominal demand for apples, is not a prediction over time. It is a “prediction” in the sense that if we know one thing at one time, then we can know through deduction another thing at a subsequent time.
It’s not an argument like “If I know the nominal demand for apples falls today, then ceteris paribus the price of apples will be lower tomorrow.”
It’s an argument like “If I know the nominal demand for apples falls in the future, then ceteris paribus the prices of apples will be lower as well.”
Do you see the difference?
When you see “lead to”, or “will result in”, in Austrian theory specifically, you have to understand these as how thought takes place over time in a deductive fashion.
Austrians are not predicting the future like positivist empiricists when they say they are predicting the future. When an Austrian says they are predicting the future, they are either pulling it our of their asses and not speaking in terms of Austrians, or they are referring to a logical hierarchy of thought, which, if certain thoughts such as “Lower nominal demand for apples” are true, that logically connected thoughts such as “Lower prices of apples ceteris paribus” are also true in reality.
If you notice, “Lower nominal demand for apples, ceteris paribus” and “Lower prices of apples ceteris paribus” are actually the same argument said two different ways, much like saying “Plane right angle triangle” and “Pythagorean’s relation holds” are actually the same argument said two different ways as well.
And, importantly, just because we can learn that they are the same argument, it doesn’t mean that learning a new argument deduced from another argument, do not expand our knowledge, or are useless. It would be absurd to believe that just because Pythagorean’s relation is already implied in the concept of a plane right triangle, that it is devoid of use and that we should be rest with knowing plane right triangles.
When we deduce from action, this has the special outcome of enabling us to know not only what is true analytically, but what is true synthetically as well.
Austrian economics rests on logical deductions. How is it a deductive reasoning a prediction?
All humans are mammal
If John is a human, then he must be a mammal.
Am I predicting John in a mammal or deducing that he is? If Austrianism were based on predictions it would be no better than that garbage Keynesianism which is based off magic.
LK,
This is unbelievably dense even by your standards. MF was far more careful than I was when he said
What do you cite? This…..
What do you think Bob meant when he said “predictions about the future”? Was he talking of “predictions of what humans will do in the future”? I suspect not. I somehow tend to think he was talking about economic phenomena rather than what humans will do. You know…. Like….. Prices would be higher than they would have otherwise been….. There would be a glut/shortage of this factor/good…. There would definitely be a depression in the future…..
What I mean, in effect, is that what you did was another instance of what MF called an ass-pull. The Bob Murphy quote has nothing to do with what MF was talking of. You are indeed very impressive.
Yes, bala, obviously you have severe reading difficulties:
MF:
“There are no predictions in Austrian economics. None. Zero. Nada.
You could not get a clearer statement of M_F’s extremism.
LK,
I picked specifically from your comment just above. Do not exhibit the depth of your dishonesty by dragging in other statements made by MF elsewhere. The Bob Murphy quote was cited precisely against the MF quote I have cited up there. I care a rodent’s posterior whatever else MF said.
Just explain how the Bob Murphy quote you pulled out shows the specific statement made by MF and cited by you in THAT comment in poor light.
I absolutely refuse to discuss anything else on this subthread except this point.
Unless you think Bob’s “qualitative predictions” have NOTHING to do human action in the future, and that prices and wages — and all other economic variables — magically move by themselves without ANY human actions and behaviour, his “predictions” must involve predictions about what humans will do in the future in a “qualitative” sense.
Neither you nor MF have a leg to stand on.
You Genius,
Bob’s point has “something” to do with what humans would do in the future but they are not predictions. They are logical corollaries of the fact that they would be humans in the first place even in the future. In that future, if they are human – and they are, given that you are talking of humans – they would engage in purposeful behaviour, seek to satisfy ends, choose the more valued end over the less valued, etc. These are not predictions, you illiterate on matters economic. These are necessary truths that are logical corollaries of the proposition “Man acts”.
Bala:
Bob’s point has “something” to do with what humans would do in the future but they are not predictions.
Robert Murphy:
7. PRAXEOLOGICAL PREDICTION
Praxeology can make certain predictions about the future, but they are necessarily qualitative.
Just keep talking, bala, and prove beyond any doubt you are devoid of logic, argument and basic rationality.
Genius,
Bob’s statement relates to economic phenomena, not to human behaviour. The statements an Austrian theorist makes about human behaviour are necessary truths that are logical corollaries of the action axiom. I know you do not want to acknowledge it because it would absolutely destroy you. So keep repeating unrelated nonsense and protecting your brain from imploding.
Your claim is that Austrian economics never makes any predictions about future?
Rothbard:
“On the basis of his business-cycle theory, Mises had predicted a depression at a time when, in the ‘New Era’ of the 1920s most economists, including Irving Fisher, were proclaiming a future of indefinite prosperity …”
Murray Newton Rothbard. 2009. The Essential von Mises. Ludwig von Mises Institute, Auburn, Ala. p. 38.
It follows then that Mises cannot have made any prediction about the future.
Evidently Mises was wasting his time. He should have been talking to you instead. That would have set him right.
“Bob’s statement relates to economic phenomena, not to human behaviour. “
The logical consequence of that is that “economic phenomena” are not determined by human behaviour and just magically happen.
Once again, Genius… Mises was making a qualitative prediction about an economic phenomenon, not a specific or general prediction about human behaviour.
Now!! What will it take for you to acknowledge the obvious truth that stares you in the face? I mean the truth that you know nothing about economics and should maintain a respectful silence in these discussions.
You are probably the densest human that was, has been and will ever be born. The human behaviour is a logical corollary of the action axiom and is not a prediction about human behaviour. The phenomenon is an undeniable logical consequence of the human behaviour and can be identified as something certain to occur, i.e., a prediction.
“Mises was making a qualitative prediction about an economic phenomenon, not a specific or general prediction about human behaviour.”
Which entails that “economic phenomena” are not determined by human behaviour and just magically happen.
There is no way around that for you.
You can fly into a rage and scream all you want, but your position is incoherent.
“The human behaviour is a logical corollary of the action axiom and is not a prediction about human behaviour. “I
Sure it is a prediction: you claim to use deduction from axioms to make general qualitative predictions of human behaviour.
How do I avoid justifiably calling you an idiot when you say this
after I have said this?
“The phenomenon is an undeniable logical consequence of the human behaviour and can be identified as something certain to occur, i.e., a prediction.“
lol.. so now predictions can be made??
I know that the beating you are now getting must hurt real bad, but I don’t see an alternative to keep beating you.
When something is a logical corollary of the action axiom. One may justifiably call it a qualitative prediction as long as it is not attempting to be quantitative.
They key point, once again, is that you are so dense that you can’t read or comprehend but you want to pontificate on things you know nothing about.
Read your own comment, you pathological prevaricator…
http://tinyurl.com/odfowrl
Already answered here, chump:
Unless you think Bob’s “qualitative predictions” have NOTHING to do human action in the future, and that prices and wages — and all other economic variables — magically move by themselves without ANY human actions and behaviour, his “predictions” must involve predictions about what humans will do in the future in a “qualitative” sense.
Neither you nor MF have a leg to stand on.
That alone utterly wipes you out: tell us whether Bob’s “certain predictions about the future [which are] … are necessarily qualitative” refer to things determined by human action and therefore must qualitative prediction of human action?
If you think his “predictions” involve no qualitative predictions of human action, then you are saying that prices, wages etc. all magically move by themselves and are independent of human action.
No doubt you’ll have an hissy fit now you have been totally destroyed on this point too.
You misinterpret the law of marginal utility.
Drug use is not an empirical refutation, for subsequent goods (i.e. “doses”) are not regarded as valued equally. They are not the same good, despite LOOKING the same.
You fail to grasp the subjective valuation foundation of “goods.”
In marginal utility theory, goods are not homogenous if they look the same. They are homogeneous if they are valued the same interchangeably.
You didn’t convert the law of marginal utility from a priori true to a posteriori true, you totally misconceived the nature of the concepts.
Destroyed here, you economic illiterate.
Destroyed here, genius.
“All predictions of what humans will do in the future are ass pulls”
So therefore we cannot even predict or know if humans will regard labour as a disutility tomorrow.
Therefore one of the foundational axioms of praxeology cannot be known to be true tomorrow, and all derived inferences in praxeology using it must be cast in doubt with respect to the future even a day from now.
The sole purpose of my comment was to show how irrelevant the particular Bob Murphy quote you cited was to the particular MF comment you were criticising. That’s it. Either explain how it addresses it or acknowledge that it was nothing more than an ass pull from your side.
Your typical pathetic attempts at sidetracking the discussion will not work.
I have a new development in Lord Keynes thinking:
He doesn’t even admit the existence of any laws of thought, much less praxeological laws. He agrees with John Stuart Mill and believes that the laws of thought are not actually laws, but conclusions derived from constant experience of their truth. From Mill’s Logic pg. 308 and Exam of Hamilton pg. 417. This means to him, no necessary propositions exist except for the arbitrary proposition that no necessary propositions exist.
That’s simply not true. Lord Keynes believes in analytic a priori truth.
Which means that he should concede all analytic propositions derived from the action axiom? No. For some reason, these analytic statements are not subject to the normal rules of logic.
Well, I think if Lord Keynes was confronted with a valid formal deduction of a given proposition P from the action axiom, then he would accept “If the action axiom is true, then P is true.” The thing is, he and a great many other people do not accept that very many propositions have actually been derived from the action axiom using formal logic. As far as I’m aware, the only formal derivations that have been done from the action axiom are the ones in this paper:
http://www.philosophie.uni-hamburg.de/Team/Cordoba/Materials/oc_Foundations-PraxEcon-05-final_2013-05-28.pdf
But I would love to see the works of Mises and Rothbard translated into the system of this paper (or a similar system with possibly more assumptions), if possible.
This sounds like your own personal problem. I can understand the way Mises and Rothbard is written right now so I really don’t have this problem.
“This sounds like your own personal problem”
No, it is a severe problem for Austrian praxeologists who have never answered Schuller’s challenge:
http://socialdemocracy21stcentury.blogspot.com/2013/12/schullers-challenge-to-misesian.html
Hey Keshav,
That article looks really interesting, I will let you know when I’ve read it all the way through.
FTA:
“Unfortunately, that is a very wide sense of ‘self-contradiction’: So wide, it even covers pragmatic and quasi-pragmatic features that no one would ever have thought are even capable of establishing axiomatic truths. The best we can get at this way is to find out that someone acts in a way that does not match what he thinks or says. On this account ‘I am presently attempting something’ would be the perfect synthetic a priori axiom: Surely no one can attempt to deny that without thereby ‘admitting’ what he is trying to deny. But it is not synthetic a priori. Nor is it an axiom. This is simply not the way to establish axioms, and it is certainly not the way to provide for a solid foundation for praxeology—one that aims not to be an easy target for criticism. Hoppe seems to have lost sight of the distinction between being true and making true: Axioms are required to be true, they are not made true. Reverting to pragmatic features may look plausible at first glance, but it carries the seed of refutation with it.”
There are a number of problems with this passage.
1) If axioms are required to BE true, as opposed to being MADE true, then how can the author also claim that Hoppe’s is “simply not the way to establish axioms”? The author is suggesting that correct axioms are those that are made correctly, and incorrect axioms are those that are made incorrectly, and yet that is the very “pragmatic feature” approach that he’s criticizing Hoppe for doing. He can’t have it both ways. The author doesn’t see to realize that the action axiom cannot be KNOWN as true without action. That’s what makes it a priori true. Action provides us with an epistemology. The author “has lost sight” of the overlap between a concept being true without thought, and a concept that is only true with thought. Action is one of those concepts. There is no distinction between what is true and what is made true, when it comes to the axiom of action. Action is grounded on the Ego, which posits itself and by virtue of positing itself, has made a truth that is axiomatic. The positing is the “being true” and “made true”, that the author is separating for all propositions. After all, the author is a according to his own description a linguist. Linguist theory recognizes concepts as known apodictically only insofar as they are analytic. Well, of course synthetic a priori true statements would be impossible to them. Yet would they grant THAT proposition of “Synthetic a priori true statements are impossible” to be just another analytic statement based on arbitrary definitions consisting of arbitrary symbols and arbitrary rules of symbol manipulation? If so, then there is no reason to believe it is saying anything true of the real world either. The author should read Hoppe’s “In Defense of Extreme Rationalism”.
2) The author just asserts of the action axiom that it is “Not synthetic a priori. He also asserts “Nor is it an axiom.” There is no explanation for why. He just claims that self-reflective analysis of performative consistency is “not the correct way”. Any way the author can dream up, would of course be an action. In order to really refute it, the author will have to show a refutation that is not itself an action. This is not just an arbitrary rule. It is what a necessary truth SHOULD appear to us. A necessary truth should appear to us in such a way that we couldn’t refute it no matter what we thought or did. If we had any cognition that there is a possible way to refute it, but we just haven’t fleshed it out in enough detail yet, that it is still an ongoing project, that we’re “working towards it”, then it would then be the case that it isn’t a necessary truth after all. For now the so-called truth is contingent upon certain assumptions and certain conditions. It would no longer be necessary. Thus, it makes no sense to quibble over the action axiom being presented as true based on it being practically irrefutable.
“There is no explanation for why.”
How can you say this when there is a section entitled: 4.1 Is our approach axiomatic?
Also, Keshav, I will freely admit that I still don’t completely understand the difference between an analytical approach and an axiomatic approach.
“How can you say this when there is a section entitled: 4.1 Is our approach axiomatic?”
What are you talking about? That section did not answer why those two statements are true.
Whatever man. I would like to continue this but I have stuff to do right now. I would like to note that the author does concede that the distinction or whether or not its axiomatic may be pedantic.
Hey Keshav,
Did you even read this paper? This author claims that praxeology is not even axiomatic so he didn’t make any deductions from any axiom.
“He doesn’t even admit the existence of any laws of thought,”
False: I would only deny that they are known a priori, not that they are true and fundamentally important.
They are very well confirmed principles in our macroscopic world in which humans live, and as such invaluable as the foundation of logic.
However, the view that they are ultimately known as true a posteriori is reasonable and defensive and as Quine argued supported by some interpretations of quantum mechanics.
“This means to him, no necessary propositions exist”
False. It means no such thing: certainly necessary propositions exist: they are called analytic a priori propositions, such as “all bachelors are unmarried”
Also, Kripke’s necessary a posteriori propositions, which are usually statements of scientific identify: e.g., “Water is H2O “
“reasonable and defensible”
How can you talk of “reasonable” when you want to solve the “problem” of individuals voluntarily not trading, with guns so that they are tricked into doing something now they might later regret?
Your whole rotten worldview is an abandonment of reasonable problem solving.
Be reasonable, see it my way.
I hope I don’t need to explain why this gun is all the proof you need.
*possibly true. Let’s not distort your position.
No, not just possibly true, but true to a very high degree of probability, given how strongly the evidence is for their truth.
What degree of probability do we need to enter the realm of necessary? 90% true? 99% true?
The probability of a posteriori propositions like the laws of thought is epistemic, not numeric like the probability of rolling 1 in a fair game of dice.
The epistemic probability of the truth of the laws of thought must be judged as very high indeed.
Is that argument right there falsifiable, or is it true for all experience?
Can you please give me the source of this theory? I would like to read more about it.
You are confused about the definition of necessary. HINT: It has nothing to do with probability.
Propositions have two categories: Necessary or possible. There is no in-between.
Here is what Lord Keynes must think:
All categorical propositions only express a degree of high probability. All bachelors are unmarried means that all bachelors are probably unmarried.
Nobody said probability based empiricists always practise what they preach.
Hey MF, if you would please give me a critique my first blog post I would greatly appreciate it. I know you are a busy person.
Could you please post a link to what you’re referring to?
My names highlighted, isn’t it?
Sorry Hank, I thought you meant on this blog here.
OK, I’ve read it. In a word, I think it’s incorrect.
The law of marginal utility is synthetic a priori, because it is referring to not just a law of thought, but a law of action in the real world.
If you understand the laws of thought to be actions, you’ll then know that the laws of thought are necessary truths about the laws of the “external” world constrained to actions.
“All bachelors are unmarried means that all bachelors are probably unmarried.”
False. Analytic a priori propositions have necessary truth: they are truth in virtue of the meanings of the terms used.
It is quite clear you have not even the foggiest idea of basic concepts in modern epistemology, Hank.
So go right ahead and embarrass yourself
“Analytic a priori propositions have necessary truth: they are truth in virtue of the meanings of the terms used.”
Praxeology is the study of how necessary truths of action, are necessary truths of “external” world events.
It’s clear you don’t have the foggiest idea of the most up to date Austrian theory.
I was illustrating how absurd it is to view the law of non-contradiction as a probable proposition, which is your position, even if you use terms like “epistemic.”
It isn’t absurd: there is a good straightforward argument for it in Quine, W. V. 1986. Philosophy of Logic (2nd edn.). Harvard University Press, Cambridge, Mass. pp. 86–87, on the basis of the known properties of quantum mechanical events.
But I expect your knowledge of philosophy and logic are as woeful and wretched as your knowledge of economics, hank.
If you claim that the law of non-contradiction is not necessarily true, then you are utilizing the law of non-contradiction in that very argument of distinguishing true from false propositions.
LK, you’re being led astray by anyone who would give your ideas credibility. Anyone can find historical support for their cockamamie theories.
Which means you admit the possibility, however small, of being totally and complete wrong, and, that it might mean you’re totally and completely wrong about what you believe about Austrianism.
Naturally I am not dogmatic and admit that the truth of any empirical theory is contingent and falsifiable — unlike Austrian religious fundamentalists like you.
“Naturally I am not dogmatic and admit that the truth of any empirical theory is contingent and falsifiable — unlike Austrian religious fundamentalists like you.”
Don’t be ridiculous. Austrians know full well that BY DEFINITION, empirical theories are those that are contingent and falsifiable.
You’re just defining what the meaning of an empirical theory is: contingent and falsifiable. Well duh, no Austrian denies that.
What Austrians do deny, is your A PRIORI assertion that true synthetic a priori propositions do not exist.
That is the issue here.
For even if you are presented with a synthetic a priori proposition, your theory necessarily leads you to reject it as such, and to instead understand it as as synthetic posteriori.
You are using your a priori theory that true synthetic a priori propositions do not exist, in order to understand all propositions.
Your theory does not actually admit the possibility of true synthetic a priori propositions.
How can you claim that you regard your theory as falsifiable, when you don’t even use the tools to recognize them as such? Empiricism can only test a posteriori, falsifiable propositions. It cannot test a priori, synthetic propositions.
You are a dogmatist. You are a dogmatist, unlike me, because I admit to the existence of both types of propositions, where some propositions are falsifiable and others are not, whereas you a priori reject all a priori propositions as a priori true!
Can’t you see you are not only contradicting empiricism, but contradicting your own a priori theory that no true a priori propositions exist?
“whereas you a priori reject all a priori propositions as a priori true!”
No, I do not. More rubbish from you.
I accept the necessary truth of analytic a priori propositions.
My view is that it is highly improbable that there are synthetic a priori propositions
“False: I would only deny that they are known a priori, not that they are true and fundamentally important.”
Is THAT proposition a proposition potentially falsifiable through experience, or is it necessarily true for all experience?
If it is potentially falsifiable, then you admit that laws of thought might be a priori after all, which means you admit that laws know a priori might well in fact exist.
If it is not potentially falsifiable, then you have just posited an non falsifiable, a priori true proposition.
So which is it? “I can’t say for sure”, or “I contradict myself”?
“certainly necessary propositions exist: they are called analytic a priori propositions, such as “all bachelors are unmarried””
What kind of a statement is “All statements are either analytic, and thus not capable of saying anything necessarily true about the world, or they are synthetic, and thus must be subject to falsification in order to say anything true about the world.”?
Have you conducted any experiment of collecting all heretofore advanced propositions, and “testing” them to see whether they are analytic or synthetic? Or are you positing your theory of propositions from an a priori foundation that doesn’t require any such testing?
(1) laws of thought are ultimately synthetic a posteriori, contingent, and not necessarily true, and of course capable in theory of being refuted: e.g., at the infinitesimal scales of the quantum world, it is possible — under some interpretations of QE — that the law of excluded middle may not apply (as argued by Quine, W. V. 1986. Philosophy of Logic (2nd edn.). Harvard University Press, Cambridge, Mass. pp. 86–87.
That I admit they are potentially falsifiable scores you no victories, and in fact your belief that they a priori causes you serious epistemological problems
(2) ““All statements are either analytic, and thus not capable of saying anything necessarily true about the world, or they are synthetic, and thus must be subject to falsification in order to say anything true about the world.””
That is synthetic a posteriori.
“Have you conducted any experiment of collecting all heretofore advanced propositions, and “testing” them to see whether they are analytic or synthetic? “
That is exactly what empiricist philosophers have been doing since the time of John Locke, idiot.
(1) The laws of thought constrained to action are contingent yes, in that action is not a necessary phenomena of nature, but they are necessarily true if action exists. They are not capable of being refuted, because all refutations are themselves actions. The law of the excluded middle being refuted is but a theory, that has never been observed, because observation itself rests in part on the law of the excluded middle, namely, the excluded middle between subject and object. There is no problem at all in identifying and recognizing that the laws of action are a priori true.
(2) If it is synthetic a priori, then you admit that it is possible that there exists true synthetic a priori propositions. You cannot claim they necessarily don’t exist, without contradicting yourself. And no, philosophers since John Locke have not in fact been collecting propositions and testing them to see if they are analytic or synthetic. They have all reasoned a priori whether they are or are not.
(1) ” They are not capable of being refuted, because all refutations are themselves actions. “
Nah, you’re confusing Mises’s action axiom with laws of thought.
(2) “You cannot claim they necessarily don’t exist, without contradicting yourself.”
And I do not. That there is no synthetic a priori knowledge is very probable.
“They have all reasoned a priori whether they are or are not.”
False.
Apparently non-Euclidean geometry and the empirical evidence never happened in the bizarre world you live in.
LK:
“laws of thought are ultimately synthetic a posteriori, contingent, and not necessarily true”
Is that statement an a priori statement or an a posteriori statement? If a priori, then you contradict yourself. If a posteriori, then you admit the possibility that the laws of thought/action are in fact a priori true.
But then you wouldn’t notice them anyway if you only utilized a theory that can sense falsifiable, a posteriori propositions.
“I deny you can deduce biology from pure reason.”
“Aha. You deny 2 + 2 must equal 4 do you!?”
Samuelson : We can do geometry.
Murphy: You can’t do geometry, you can do topology
MF: You can’t do topology, you can only do ass-pulling.
Samuelson: I can predict what I will learn in the future, uh…before I learn it.
MF: You cannot predict what humans will learn and do in the future.
LK: Murphy says you can!
MF: Murphy actually said you can only “predict” that if certain things take place, then ceteris paribus these other things will be taking place.
Ken B: Derp.
Ken B,
It just gets better and better:
MF:
There are no predictions in Austrian economics. None. Zero. Nada.
….
Austrian theory makes no predictions of what humans will learn and do in the future. In fact, it is precisely Austrianism that argues it is impossible.
Does that include the disutility of labour? That humans will no longer value the most valuable thing in their ordered preference scales tomorrow? That suddenly entrepreneurs will stop chasing profits tomorrow?
As I said, there goes the foundation for ANY belief Austrian theory will be relevant tomorrow.
Bob Murphy:
7. PRAXEOLOGICAL PREDICTION
Praxeology can make certain predictions about the future, but they are necessarily qualitative.”
MF:
This argument is contingent upon certain if then statements. It isn’t predicting the if statement, and hence isn’t predicting the future.
Law of non-contradiction: make way for MF!!
This is insufferable. This is pure semantics Lord Keynes.
This insufferable thing is what I suffered on the other thread.
Suffer is not a transitive verb.
Enlightening as always….
Speaking with you particularly, I think there is an argument to be made that it is transitive.
“Does that include the disutility of labour? That humans will no longer value the most valuable thing in their ordered preference scales tomorrow? That suddenly entrepreneurs will stop chasing profits tomorrow?”
Every proposition is either a prediction of what will occur, or it is not a prediction of what will occur.
It’s up to us to figure out what kind of a propositions we’re dealing with.
“As I said, there goes the foundation for ANY belief Austrian theory will be relevant tomorrow.”
The theory is true as long as action occurs tomorrow.
This is not a prediction of the future either, because actors are not invincible. Action might cease on Earth for example, due to an asteroid or other natural disaster. Or even a world war that results in our extinction.
“Law of non-contradiction: make way for MF!!”
I only contradicted your understanding of that passage.
More contradiction of the law of non-contradiction:
1: [sc. Austrian] theory is true as long as action occurs tomorrow.
2: This is not a prediction of the future either,
Pure genius.
Still no contradictions in what I said, and still confusion on your part.
Are you seriously unable to distinguish between:
1. I predict there will be actions tomorrow, and
2. If action takes place, then such and such are true?
Damn. I knew you were dense, but I didn’t know the density ran that deep.
OK, let’s step back a sec.
We saw a bunch of back and fill from Bala on predictions. He seemed to endorse Keshav’s assertion that he (Bala) believes you can make only trivial ‘predictions’ of the sort “if he chose x he preferred x”. But those ‘predictions’ are what Bala cited to deny that he said you could not make predictions.
So it looks here like MK is disagreeing with Bala, and that LK is disgreeing with Bala in one place and with MF in another.
“Every proposition is either a prediction of what will occur, or it is not a prediction of what will occur.
It’s up to us to figure out what kind of a propositions we’re dealing with.”
You said:
There are no predictions in Austrian economics. None. Zero. Nada. …. Austrian theory makes no predictions of what humans will learn and do in the future. In fact, it is precisely Austrianism that argues it is impossible.
http://consultingbyrpm.com/blog/2014/03/potpourri-188.html#comment-301632
All predictions of what humans will do in the future are ass pulls
http://consultingbyrpm.com/blog/2014/03/potpourri-188.html#comment-301508
It follows, then, that Austrians make no predictions about whether
disutility of labour will be true tomorrow, or whether humans will even value the most valuable thing in their ordered preference scales tomorrow: it follows clearly that there is no rational basis for thinking Austrian economics to be true tomorrow.
In future, we will hold you strictly to your crazy claims above, M_F, and the logical consequence that you have no rational basis for thinking Austrian economics to be true tomorrow.
E.g.: do not make any prediction about the future whatsoever, M_F, for we know — at least by your theory — that any such “prediction” is pulled right out of your a**.
“It follows, then, that Austrians make no predictions about whether disutility of labour will be true tomorrow”
Correct. It would be absurd for me to claim I can predict that someone else will not value working qua working.
I see no logical necessity derived from human action that leads to the conclusion that labor incurs disutility necessarily.
“or whether humans will even value the most valuable thing in their ordered preference scales tomorrow:”
This is not quite right. What is the case here is that IF human action exists tomorrow, THEN humans will do what is their most highly ranked action.
“it follows clearly that there is no rational basis for thinking Austrian economics to be true tomorrow.”
No, you’re still confusing a prediction, with a logical connection where the IF is not itself predicted.
I am not predicting the future if I say that a particular IF-THEN statement will always be true. This is because I am not predicting that the IF statement will in fact be true.
Again, you need to learn the difference between predicting X will occur, and saying IF X occurs then Y is occurring.
“In future, we will hold you strictly to your crazy claims above, M_F, and the logical consequence that you have no rational basis for thinking Austrian economics to be true tomorrow.”
Austrian economics is true IF action exists. This is not a prediction that action will exist tomorrow.
“E.g.: do not make any prediction about the future whatsoever, M_F, for we know — at least by your theory — that any such “prediction” is pulled right out of your a**.”
I don’t make predictions about when things take place.
Does that include the disutility of labour? That humans will no longer value the most valuable thing in their ordered preference scales tomorrow? That suddenly entrepreneurs will stop chasing profits tomorrow?
Labor, by definition, has disutility; It is a cost of production.
When humans no longer value the most valuable thing in their ordered preference scale, the new most valuable thing will be pursued, consistent with the Action Axiom.
Entrepreneurs may stop chasing money profits tomorrow, but all profit is at least psychic profit, and all human action is in pursuit of at least psychic profit.
These aren’t predictions.
“Labor, by definition, has disutility”
Rubbish. Not even Mises thought that:
“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).
I’m going to disagree with Mises, here, assuming that he takes “labor” to be a means to an end (and not sports, for example).
Labor is a cost of production. It’s only done because it gets one closer to fulfilling one’s preferences.
lK only cares that we talk about prices. We must talk about prices, whether they be mark up or market clearing or whatever so long as we talk about prices.
The reason we must talk about prices is to tick us into believing prices actually mean something.
The modern global digital fiat fractional reserve less banking system combined with massive intervention makes prices irrelevant.
Earlier in this thread lK mocked Bob Rodis for saying perpetually escalating house prices were market clearing prices.
House prices before the bubble and still to this day are resultant banking system giving away fiat money, therefore prices have been distorted and are near meaningless.
Absent sound money, prices are meaningless.
Calculating inflation is an equal exercise in futility. Billion prices project, lol. Billion lies project.
The fiat banking system, the intervention, the bailouts, the subsidy, the exemptions, the QE, the ACA, all of it adds up to a sum far greater than the parts. This is socialism. This is a political discussion. Economics RIP.
Economics no longer exist. This is a socialist world.
Major_Freedom statement 1:
“Back in 2009 I predicted high inflation, but Krugman’s treatment of Krugman would suggest that I need not abandon my theory,”
Major_Freedom in a comment on “My Final (We Hope!) Word on Paul Krugman and Inflation Predictions,” 25 September, 2013
http://consultingbyrpm.com/blog/2013/09/my-final-word-on-krugman-and-inflation.html#comment-74441
Major_Freedom statements 2:
There are no predictions in Austrian economics. None. Zero. Nada. …. Austrian theory makes no predictions of what humans will learn and do in the future. In fact, it is precisely Austrianism that argues it is impossible.
http://consultingbyrpm.com/blog/2014/03/potpourri-188.html#comment-301632
All predictions of what humans will do in the future are ass pulls
http://consultingbyrpm.com/blog/2014/03/potpourri-188.html#comment-301508
———————–
Therefore Major_Freedom’s statement 1 cannot have been a prediction of any kind, and it must have been – in his own words – an “ass pull.”
Statements by Austrian economists:
“One of the reasons for the swift diffusion of Misesian views in England in the 1930s was that Mises had predicted the Great Depression, and that his business cycle theory provided an explanation for that harrowing event of the 1930s.”
Rothbard, Murray N. 2006. Making Economic Sense (2nd edn.). Ludwig von Mises Institute, Auburn, Ala. p. 447.
“On the basis of his business-cycle theory, Mises had predicted a depression at a time when, in the ‘New Era’ of the 1920s most economists, including Irving Fisher, were proclaiming a future of indefinite prosperity …”
Murray Newton Rothbard. 2009. The Essential von Mises. Ludwig von Mises Institute, Auburn, Ala. p. 38.
“Mises’s book of 1928, Geldwerstabilisierung und Konjunkturpolitik, which predicted the Great Depression on the basis of his developed business cycle theory … .”
Rothbard, M. N. 2011. Economic Controversies. Ludwig von Mises Institute, Auburn, Ala. p. 231.
“… Mark Skousen …. expressly refers to the prediction of Mises and Hayek of the arrival of the Great Depression. This prediction appeared in writing in an article by Hayek published in 1929 in Monatsberichte des Österreichischen Instituts für Konjunkturforschung. More recently, in 1975, Hayek was questioned on this subject and answered the following (Gold & Silver Newsletter [Newport Beach, Calif.: Monex International, June 1975]): ‘I was one of the only ones to predict what was going to happen.’”
Jesús Huerta de Soto. 2012. Money, Bank Credit, and Economic Cycles (3rd edn.; trans. M. A. Stroup). Ludwig von Mises Institute, Auburn, Ala. p. 429, n. 28.
Major_Freedom statements:
There are no predictions in Austrian economics. None. Zero. Nada. …. Austrian theory makes no predictions of what humans will learn and do in the future. In fact, it is precisely Austrianism that argues it is impossible.
All predictions of what humans will do in the future are ass pulls
———————–
Therefore no Austrian economist can ever have predicted the Great Depression.
Kill thrift.
http://www.denverpost.com/news/ci_25309638/colorado-not-tracking-premiums-canceled-health-plans
LK,
Does Austrian economics make predictions?
From:
http://mises.org/rothbard/praxeologymethod.pdf
“Except for the fact that they are not quantitative, however, the predictions of the praxeologist are
precisely the same kind as those of the natural scientist. The latter, after all, is not a prophet or
soothsayer; his successful prediction is not what will happen in the world, but that would happen
if such and such should occur. The scientist can predict successfully that if hydrogen and oxygen
are combined in proportions of two to one, the result will be water; but he has no way of
predicting scientifically how many scientists in how many laboratories will perform this process
at any given period in the future. In the same way, the praxeologist can say, with absolute
certainty, that if the demand for butter increases, and the supply remains the same, the price of
butter will rise; but he does not know whether the public’s demand for butter will in fact rise or
fall, let alone by how much it will change. Like the physical scientist, the economist is not a
prophet, and it is unfortunate that the econometricians and quantitative economists should have
so eagerly assumed this social role.”
Austrian economics certainly make predictions but of the qualitative nature but ONLY under the assumption of “such and such should occur” as pointed above. You, LK, while acknowledging the qualitative nature of such prediction, you are wrongly insisting that such predictions can also be made for the future. THEY CANNOT! And everything you quoted seems to imply that. Austrians made some correct prediction on future events because their assumption with respect to how individuals would react (or not react) were correct. Those assumptions are not being made as economists. So if Austrians for example predict a rise in prices as a result of inflation, they are assuming (from historical experience) that every new dollar will not be held in one’s pocket indefinitely, forever!. They could assume otherwise, and then predict that no changes in prices will take place.
“Austrian economics certainly make predictions but of the qualitative nature but ONLY under the assumption of “such and such should occur” as pointed above. You, LK, while acknowledging the qualitative nature of such prediction, you are wrongly insisting that such predictions can also be made for the future. “
That incoherent statement reduces to a violation of the law of non-contradiction.
1: “Austrian economics certainly make predictions but of the qualitative nature”
Definition of “prediction”:
The action of predicting future events; an instance of this, a forecast,
(1) can only mean “Austrian economics certainly make predictions but of the qualitative nature about thd future”
2: you are wrongly insisting that such predictions can also be made for the future
Thanks, Dan, for confirming the intellectual bankruptcy of this view.
That’s not what i meant. i said it wrong.
I meant with respect to future individual action or choice. Austrians do not predict what FUTURE choices actors will make (in the future). That should resolve the contradiction.
The bankruptcy is yours. That quote from Rothbard precisely tells you that Austrians cannot make any such scientific predictions of the kind that you are implying they are making.
can you ban Lord Keynes already? hes hijacked every comments thread for months now and always with the same confrontational, childish and insulting tone. Or you can address the (repeated, annoying) discussion in a headline post and keep the entire debate there once and for all. Maybe you’ve already tried that and I’ve missed it.
In the meantime, he’s ruining your blog.
But Michael, what about mark up prices, price rigidity and sticky wages;)
LK’s absolutely laughable post on diminishing marginal utility completely exposes his complete ignorance of economics.
Read this to know how little LK understands of economics. The very first sentence out there demonstrates his complete vacuity.
A man who says this
and then this
and then responds in the comments with this
deserves nothing other than scorn and ridicule when he pontificates non-stop in economic arguments.
Oh, I thought you said above:
I absolutely refuse to discuss anything else on this subthread except this point.
So was that a lie or did you just change your mind?
See how much of a genius you are and how poorly you read? I said “sub-thread” out there.
It is interesting lK used satisfaction and utility synonymously.
Well anyways, marginal satisfaction like marginal taxes are really only understood when viewed as averages.
Gamble,
It is best that we do not discuss LK’s stupidity in that post out here. It would be arson against Bob’s blog. It will suffice if we use this post of his as a 1 ton sledgehammer to smash him out of existence every time he opens his mouth out here to “educate” others on economics.
And just to make sure that we have sufficient insurance against LK rushing to take down that post, I have already saved a PDF version of that post as it appears on his blog on my hard disk.
You bolded these words:
“So one’s “marginal utility” is the additional satisfaction
Presumably you think I am unaware that Austrians of course think utility is not measurable, and that they hold it is is ordinal, not cardinal. I am perfectly well are of that.
Inevitably, use of language involves ambiguity here and there, and I admit that sentence is poorly worded.
“well aware of”
Once again, I am left wondering how to avoid justifiably calling you an idiot.
The Austrian position defines utility as the subjective appraisement of the usefulness of a means towards the satisfaction of an end and marginal utility as the utility of the marginal unit. Satisfaction comes nowhere in it. Your first sentence in that blog post damns you completely. It is not about poor wording but complete, abject ignorance of the most basic concepts in economics. The portion I have bolded is the last nail in your coffin.
“Satisfaction comes nowhere in it.”
I mean satisfaction as you have use it. It is only end satisfaction that matters and utility is the usefulness towards that.
Just making sure I give you no leeway to twist and turn…. I mean in the sense you have used “additional satisfaction”. There is no such thing as additional satisfaction in the definition of utility or marginal utility.
No, bala, it is only your stupid assumption that the post is directed specifically against Austrian theory and that Austrian definition utility, when it is not.
It is directed against the general neoclassical and mainstream theory, where utility is regularly defined as
Utility is the pleasure or satisfaction derived by an individual from being in a particular situation or from consuming goods
Penguin Dictionary of Economics
It can — in point of fact — also be defined in this sense even by Austrians:
“The value of a unit is determined by its marginal utility or satisfaction.”
Thomas C. Taylor, An Introduction to Austrian Economics
http://mises.org/austecon/chap4.asp
For the third time, you have no clue how much I am struggling to avoid calling you an idiot. My criticism of your post does not necessitate any assumption that you are criticising the Austrian position. All it requires is that I hold that your definition of marginal utility is total, unadulterated nonsense.
If that is the neo-classical or mainstream definition of marginal utility, that one point alone condemns those schools of thought just as much as it condemns you for subscribing to it.
lol:
“The value of a unit is determined by its marginal utility or satisfaction.”
Thomas C. Taylor, An Introduction to Austrian Economics
http://mises.org/austecon/chap4.asp
“In praxeology, happiness (or utility, or satisfaction) is a purely formal term, defined entirely by the subjective goals of the individual actor.”
Robert Murphy, Study Guide to Human Action
“The satisfaction provided by the marginal unit is called marginal utility.”
http://austrianeconomics.wikia.com/wiki/Marginal_utility
Is Austrian theory also condemned?
Forget to look here, did you?:
“The value of a unit is determined by its marginal utility or satisfaction.”
Thomas C. Taylor, An Introduction to Austrian Economics
lol
Oh my god!! That, my dear genius, means that Thomas C Taylor has worded it poorly and needs to correct it. As I said, your density is and appears certain to remain unparalleled.
” These scales of preference may be called happiness or welfare or utility or satisfaction or contentment.”
Murray N. Rothbard,
Ends and Values and the Law of Marginal Utility
http://mises.org/daily/5929/
Presumably Rothbard was in error too?
A drowning man clutches at straws….
“It is interesting lK used satisfaction and utility synonymously.”
You mean just like Austrians?
“The value of a unit is determined by its marginal utility or satisfaction.”
http://mises.org/austecon/chap4.asp
Okay so this book was written in 1980. The chapter you sited, chapter 4, dedicates the first 3 paragraphs entirely to subjective theory of value. Maybe he should have stopped there?
He then goes on to confuse marginal utility with the paradox of value referring to the common water versus diamond example. Wiki makes this same mistake. Taylor never fully explains marginal utility, and is basically confused himself. This may explain your wrong comments that Bala quoted. Taylor then jumps to value and exchange, then jumps to money. He finally circles back to the “pervasiveness of subjective value.” This leads me to the original comment I made, regarding you using utility and satisfaction synonymously. You have to decide if you if even believe in utility. Governments like to assume and even mandate utility.
So rather than get into a semantic war of sorts let us assume you mare referring to marginal satisfaction. Now we can all be on the same page.
If 3 packs of ketchup come with my Mickey D’s value meal, how much will I pay for a fourth? What if McDonalds only gives 2, how much will I pay for a third package of ketchup? I purchase a 12 ounce bottle of water for 1.50. This works out to 12.5 cents per ounce. Will I pay 12.5 cents for a 13 ounce or will I only purchase that extra ounce if it is less than 12.5 cents…
Like I said in an earlier post, I think mental averages are crucial even though economist try to steer the discussion away from this. Mental averages cannot be replicated on a chalk board.
Value is subjective. To each his own.
Just go to the source. Go back to 1891 instead of Taylor. Taylor like so many others is trying to restate yet not plagiarize what has already been perfectly said and in the process, screws it up. Taylor did not even transmit the grain analogy correctly.
Read exactly what Eugen von Böhm-Bawerk wrote in 1891!
http://mises.org/daily/4356
LK,
After that post of yours on diminishing marginal utility, you need to develop the necessary humility and come here to learn, not to refute. You have shown that you know not the very basics of economics.
Contrary to MajorFreedom,
There is a point when Ego becomes a hindrance rather than helper.
Maybe ego has marginal utility, lol.
Helper to who?
I predict that in five years LK will still not understand economic calculation or the importance of voluntary relationships (vs. coercive relationships) which produce the essential information necessary for successful economic calculation.
Crap none of this matters, the wizards in Washington have taken into WW3, best case to stave of the imminent, impending crash, worse case, as a distraction from the crash and excuse for the crash.
Just remember none of these recent jerks have boys that could be drafted and as far as I know, to this day woman are not required to register for selective service.
If you have a boy ages 8 or older, be afraid, very afraid. These things have tendency to drag out…
https://news.yahoo.com/us-deploys-fighter-jets-poland-lithuania-200314022.html
For all the aggression that I have shown LK, I am also able to see why Bob considers him useful out here. For instance, consider the point that in dragging in all his surveys related to managers decision making on wages, he is actually strengthening Austrian theory, not weakening it.
Consider the following.
1. Labour is a factor of production, not a consumers’ good
2. It is employed in the region of diminishing but positive MPP
3. It is employed till DMVP = Price
4. When total labour applied falls, ceteris paribus, the DMVP goes up simply because the marginal unit is now of a small stock of the factor being applied in production.
When a producer encounters sales being lower than his estimates, his logical response as per Austrian production theory is not to cut wages but to cut the volume of factors employed. In doing so, he ends up cutting off the factors (including labour units) with the lowest DMVP and since the marginal unit of the remaining stock of the factors applied (including labour) applied would have a resultant higher DMVP (ceteris paribus), he is now better off at the same price of labour. Even if one says that the DMVP of the original supply of a factor applied in production has temporarily fallen below price, the producer may cut factor application to the point where DMVP once again equals price.
In fact, it would be folly on the part of the producer to cut wages because he risks losing the most productive units of factors (including labour) to other competing lines of production where the producer is ready to that factor its DMVP or at least more than the now reduced wages even if it is less than the DMVP of that factor unit in that line. He also risks being saddled with the least productive of the factors originally employed. It makes sense for him to systematically identify the least productive factors and release them from employment.
If you just look at the first paragraph on page 4 of this report that LK pulled up, you will see precisely this being identified. So, LK, in his attempts to refute Austrian theory, actually strengthens its arguments and conclusions.
Thanks LK for all the good work done.
Just to take my point further, let me address this link that he has provided.
Out there, the author is trying to explain why wages do not fall in a recession. Now, going by what I have said above, it would be easy to see that what producers would do when faced with sales being far lower than their estimates is naturally to cut their application of factors. This action does not necessarily lower wages because the factors will still be paid their DMVP eventually.
The question is what happens to the factors that have been released from employment. The important point to note is that the entrepreneurial decision frees not just these factors but also the corresponding portion of the capital that was earlier applied in those lines where the entrepreneurial error is now revealed. This capital, when it gets reallocated to other lines which are identified as producing what customers really want, will end up employing factors, also eventually at their DMVP in these lines. Arbitrage will eventually ensure that the DMVP in these new lines also gets aligned with the DMVP in other lines one way or the other.
In all this, there is no necessity that wages fall. In fact, if seen in the light of all the monetary inflation and attempted credit expansion that has become a feature of the response to recessions from the second half of the last century till date, we can see why wages may even justifiably rise during a recession.
All this does not translate into a refutation of Austrian economic theory, especially production theory. LK’s attack turns out to be completely misdirected, but he has given us enough material to strengthen our own understanding of Austrian production theory. For this, we owe him gratitude.
Have a barf bag ready before clicking this NdGT link https://mobile.twitter.com/neiltyson/status/443227677554515968