## Murphy vs. Graeber vs. Murphy vs. Graeber

I’m not going to give all the links (they are available if you click on the following), but here is the compilation of anthropologist David Graeber’s response to my article, and then here is my follow-up. An excerpt:

Graeber admits too that the temple authorities didn’t just independently pick silver because it was lying around. No, he says that silver was what was used to facilitate trades with foreigners.

This is exactly what I said the situation looked like, based on my reading of Graeber’s interview. Therefore, far from refuting my article, Graeber is here confirming it.

In conclusion, I still maintain that Graeber has yet to show us that the standard Mengerian story is wrong. Menger said that for money to emerge, you need to have antecedent barter transactions where at least one commodity outstrips its rivals in marketability. It then becomes the commonly accepted medium, and its exchange rate with other goods and services is determined through voluntary trades.

Graeber’s account is still consistent with that general explanation. The fact that the temples used silver as money, a practice which even he says they copied from the merchants who traded with foreigners, proves the point of my original article.

Bob,

I’m surprised you didn’t emphasize the Mises Regression Theorem on this matter. The theorem defines the logical problem of the origin of money and actually solves it! (on praxeological grounds). No empirical evidence could ever refute such a theorem. Graeber, even if he had more credible empirical evidence would have to also offer an alternative logical solution to the problem Mises lays out. One cannot hide behind “principles of empirical science” when ignoring such a blatant logical problem.

Not only do Austrians believe axioms should be refuted, but they also call hypothesis with respect to historical events, “theorems”.

That Mises’ hypothesis about the origin of money is logically consistent is the least you can expect of a hypothesis, or else it should be immediately discarded.

But the burden of the proof that the hypothesis is historically valid lies on those who advanced the hypothesis.

Learn the difference between deduction and induction. Learn the difference between the formal sciences, e.g., mathematics, logic,… and the empirical natural sciences, in which the former is a requisite to the latter (by the way). So no! all angles in a triangle equal 180 degrees is not an hypothesis, but a theorem, like Mises’ regression theorem. Now it should be very easy for you or anybody to demonstrate that the theorem is no theorem but an hypothesis by simply refuting it on logical grounds, that is, find the logical fallacy, or show why the logical problem is no problem at all by perhaps providing an alternative logical method by which money prices can form. I have yet to see one critic of this theorem that even attempts to do so. It’s all ignore ignore ignore, empirical, empirical, empirical.. It’s funny you guys actually believe you are scientists.

Dan,

Not only do they think they are scientists, as you point out, they don’t even know the scientific method they are trying to ape. MMT has yet to show he comprehends the difference between an observational study (and I was being kind in allowing Japan under that category, since it really doesn’t make the scientific cut) and a scientific experiment.

The more the MMT guys talk, the more holes I find in their foundation. It is a very weak religion.

I could teach you about the difference between deduction and induction any time.

Yes, the SUM of all angles in a triangle is 180 is a theorem of EUCLIDEAN geometry.

This is true within the formal system of euclidean geometry, that is, in the abstract world of our minds, not in the real world.

If you want to argue that the regression theorem holds in the abstract world of Austrian minds, fine (although you would need a formal system for that).

If you want to keep arguing that the regression theorem is a theorem about the origin of money in the real world then you are proving by induction your own ignorance of the limits of deduction.

‘Praxeologists ‘say that economics is the study of action, or purposeful behavior. That is, human beings employing means to achieve ends.

This is not an ‘abstraction’. Action exists in the real world. You are using means to achieve end in the very post you made. You use your understanding of ‘action’ to explain what ‘silly’ Austrians are attepting to do on this blog.

Praxeology IS an abstraction. Every deductive theory is.

I am not sure what you mean.

Yes, I see how geometry, a ‘deductive theory’ is. It’s conclusions are based on absolutely straight lines, etc. that don’t exist in the ‘real world.’

But, as human beings, we perceive action out in the real world.

His Lordship Lord Keynes has pronounced:

[M]ost of the basic Austrian axioms, like the human action axiom, require no “refutation “. They are trivialtruthsthat could be held as true even by Marxists without contradiction.http://consultingbyrpm.com/blog/2011/09/krugman-has-been-onto-us-for-years.html#comment-24092

The gist of the Austrian axioms is the precise description of the LACK OF KNOWLEDGE of human beings. They could be refuted IF someone could demonstrate that:

a) the knowledge of human beings is not, in fact, as limited as claimed; and/or

b) the logical consequences of such limited knowledge are not as the Austrians claim they are.

This type of analysis is NEVER attempted by Austrian critics and is avoided by them like the plague.

The study of economics is always the study of human exchange. Mises noted 95 years ago the Knapp’s state theory of money is completely devoid of notions of human exchange, just like MMT. When the MMTers inform us that the $14 trillion debt will be “paid off” with computer keystrokes, that is nothing more than an alleged factual description of a thieving government. It is not an economic theory.

When the MMTers inform us that the $14 trillion debt will be “paid off” with computer keystrokesThat’s the pre iPad version. Don’t they have tablets at the Fed? Voice recognition programs? They can’t be that yesterday…

Thats not what DD5 is saying. He is saying if his empirical evidence really discredits Mengers theory of the origin of money then his new theory should also at least be formulatable in logical consistent theorems, which it isn’t (At least not in a way which would refute Mengers theory in my and DD5s opinion). Summarized an empirical evidence that allegedly refutes another (armchair) theory but cannot itself be formulated in a logical consistent theory finally cannot logically be a refutation of the original criticized theory.

Therefore it only represents a misinterpretation of the available empirical evidence.

I’m surprised you didn’t emphasize the Mises Regression Theorem on this matter.This is probably because Bob doesn’t believe the (strong version of) the Regression Theorem is true.

The theorem defines the logical problem of the origin of money and actually solves it! (on praxeological grounds).As MamMoTh said, showing that something is logically consistent doesn’t show that it is true.

No empirical evidence could ever refute such a theorem.This is like saying you can’t refute Zeno’s paradox with empirical evidence. Of course you can. The fact that I can walk across a room doesn’t tell me what is wrong with Zeno’s argument, but it does establish pretty clearly that there is *something* wrong with it. Similarly, if the Regression Theorem says that X is impossible, and we observe X, that might not tell us what is wrong with Mises’ argument, but clearly there is something wrong with it, because the conclusion is false.

Dan: “No empirical evidence could ever refute such a theorem”

You: “Of course you can.”

Right, go refute that not all right angles are 90 degrees by using a protractor. Don’t forget to use Excel to calculate your average, median, and standard deviation. And don’t forget to generate some nice plots.

You: “Similarly, if the Regression Theorem says that X is impossible, and we observe X, that might not tell us what is wrong with Mises’ argument, but clearly there is something wrong with it, because the conclusion is false.”

Mises doesn’t conclude X on the basis of observation of X, which is what you are almost explicitly saying or at least implying above. So you either don’t understand the theorem, don’t understand what a priori reasoning is, or you are simply being disingenuous.

And what in the world is the “weak version” of the Regression Theorem?

Right, go refute that not all right angles are 90 degrees by using a protractor.That right angles are 90 degrees is true by definition.

Is the regression theorem true by definition? No. The regression theorem makes a historical, empirical claim about the origin of money. To say that an empirical claim can’t be refuted empirically is tres bizarre.

Mises doesn’t conclude X on the basis of observation of X, which is what you are almost explicitly saying or at least implying above.You’ve misunderstood me. Mises doesn’t argue for the regression theorem on the basis of observation. But observations inconsistent with the theorem can and do serve to refute it.

And what in the world is the “weak version” of the Regression Theorem?I have no idea. I just know that when Bob said he didn’t believe the regression theorem, he added the qualifier “strong version.”

“That right angles are 90 degrees is true by definition.”

So is the “sum of all angles of a triangle are equal to 180 degrees” once you understand that it is irrefutable! But if you object, and would like to call the latter a theorem, then fine. I change my challenge to: Go and refute the triangle theorem by using a protractor. Go! or do you take back your initial claim above that such a theorem (if valid by a priori reasoning) can be refuted by empirical evidence?

Wrong, the sum of all angles of a triangle are equal to 180 degrees is a THEOREM of EUCLIDEAN geometry, that does not even apply to the surface of the earth.

So is the “sum of all angles of a triangle are equal to 180 degrees” once you understand that it is irrefutable!Okay, but the regression theorem is not like that. It actually makes empirical claims, rather than simply being a definition.

Is it that you’re getting hung up on the fact that Mises called the regression theorem a theorem? If someone pointed out that there are no grapes or nuts in Grape-Nuts would you just laugh at their stupidity?

Ok, so that is factually not true! One could make this “accusation” of Menger, but not Mises. This is precisely the contribution Mises made to the Mengerian origin of money theory. He put it on a strict praxeological foundation. That’s why it’s called Mises Theorem and not Menger Theorem. And this is also why I was a little disappointed that Bob did not refer to it.

Now I suggest you refresh on the Regression Theoroem either by by referring to HA or even better, Rothbard’s section on the Regression theorem in MES.

Then come back and show me how Mises makes empirical claims.

This is precisely the contribution Mises made to the Mengerian origin of money theory. He put it on a strict praxeological foundation.You seem to be confusing a deductive argument with an argument that makes no empirical claims.

At least, that’s what I think the problem is. Surely you don’t think the regression theorem is devoid of empirical content?

“No empirical evidence could ever refute such a theorem”

Beautiful, Dan. A theory about how money arose in history that can’t be refuted by evidence!

If I made this up no one would believe it.

EVERY theory about how money arise in history is irrefutable by empirical evidence alone.

I don’t quite see why this is so hard to understand or why this is a sticking point for you.

I would. But I am no one.

Are you also one of those who believes one can refute the theorem: “the sum of all angles of a triangle is 180 degrees” using a protractor?

The Earth is not flat, so the sum of all angles of a triangle on its surface is not always 180 degrees.

Who needs a protractor?

“A theory about how money arose in history that can’t be refuted by evidence!”

It’s not a theory about how money arose but how money must have arisen. I see that many are the people who fail to (or should I say ‘refuse to’?) understand the difference (MamMoTh included).

MMT, as far as I am aware, there is no case where the regression theorem does not hold. Could you elaborate on a situation where it does not and why? I am assuming you are building – through Lerner (1949?) – on Knapp?

Could you give an example where that hypothesis holds according to you?

I am not building on anything. Just pointing out that the regression theorem is not a theorem but a hypothesis and that the burden of proof lies on those who advance the hypothesis, not the other way round.

As far as I know, there are basically 3 theories of the origin of money

1) institutional

2) religious

3) trade

Some people claim there is no evidence for 3). But absence of evidence is not evidence of absence, In any case, the concept of money being very hard to define I guess we might never know how money originated. All theories seem plausible to me, but that is the least you can expect from them, and maybe they are all true and something money-like originated in different ways, in different places at different moments in time.

But a theory is not a theorem.

Bob, you are really hanging on despreately here. Graeber’s account is radically different than the Mengerian one… and just because silver was sometimes used as a commodity in long-distance trade, it doesn’t refute it?!

Gene, you are not allowed to tell me what Graeber’s account says until you buy his book. Just ask Graeber.

And no Gene, his account isn’t radically different. I think he is saying that traders developed commodity silver money, and then the temple guys adopted it too.

Do we also need to read it?

Nick Rowe doesn’t seem to think so…

http://blog.mises.org/18371/murphy-replies-to-david-graeber-on-menger-and-money/#comment-800335

Beware of those quasi-monetarists, they are nuts!

Pretty lousy physics analogy, but at least he speaks of the regression theory, and not theorem.

Gene, this whole episode is funny. You initially had a blog post claiming that fiat money preceded commodity money. Then, in my article, I said something along the lines of, “Relying on Mengerian armchair reasoning, I dispute this interpretation of the evidence. Instead, I suspect that these traders were using barter transactions with the foreigners, and that this was explained by Mengerian lines, not the newfangled stuff. Furthermore, I cannot believe that the temple authorities could’ve generated an abstract unit of account, without relying on barter transactions to guide them.”

Then Graeber admits that the temple authorities didn’t invent fiat money at all, but instead used silver commodity money that they copied from the the merchants who used it in dealing with foreigners in spot transactions.

Then, you conclude that you have been totally vindicated and I refuse to let the evidence alter my original view.

I honestly didn’t believe in the Freudian theory of projection until you switched teams, Gene. But seeing is believing. When the facts change, I change my mind. Freud was right.

If anything, historical evidence showing the existence of no barter economies would strengthen Austrian claims, particularly about economic calculation under socialism. If a well developed economy could allocate scarce resources without money (since under barter there is no room for calculation of profits/losses and a well developed structure of production), then this would prove particularly troublesome for Austrians, relating to their strictures about calculation in market economies. All the Regression Theorem needs is that some good, which some individual valued (eating, looking nice, making goods with, etc), also “grew” a value to be exchanged solely for other goods. People started to trade for that good not because they directly wanted it, but because they could exchange it for something else. The Regression Theorem doesn’t imply an advanced barter economy that existed for years on end with suddenly money appearing and “injecting” itself in exchanges, but that barter existed primitively. A requisite for an actual economy beyond small groups of people is money, barter can only occur in the most primitive societies; this is needed for Austrian claims about economic calculation to be true. Without money you cannot engage in monetary calculation, and without monetary calculation you cannot engage in economic calculation. Without money economies cannot develop.