17
Jul
2014
Such Clever Young Boys
…we economics bloggers are. Noah Smith had a slow news day and responded to me on the “brain worms” stuff. Perhaps I’ll respond, only for the sports entertainment angle.
In the meantime, Twitter is my new medium:
Yawn.
Bob, I realize you’re not taking requests from the audience, but for what it’s worth, I for one would like to see a response. I found Smith’s original post unnecessarily offensive in tone, and thought your response was cogent. I also think Smith’s response to you is cogent, and although still snide, is at least more in keeping with the average level of snideness I see exhibited on economics blogs (as I’ve noted before, I did not realize you economists are such ruffians). I would be curious to read your take on what Smith said.
Bob, I agree with John. I loathed the tone and substance of Noah’s first post, but I thought his response was much better.
“And if they bet on the Austrian predictions that inflation (the real kind) would go up as a result of QE, they lost money.”
First off, there is no “Austrian” prediction that inflation would go up. There are Austrians that predicted that price inflation would go up as a result of QE, but there are also Austrians that predicted price deflation, and other Austrians that thought price inflation would be moderate. Why he continues to muddy the water with this type of bogus argument is, well, obvious.
Second off, I made money betting on price inflation. I’m not sure why he assumes people lost money if they expected price inflation. Does he think no Austrian made money investing over the last 6 or 7 years? Surely, he has a better investing record than Mark Spitznagel, right? Perhaps, he shouldn’t run his mouth about things he doesn’t know jack about.
“Now, that’s obviously not enough to convince a lot of Austrians to abandon Austrianism – once you have accepted a belief system that creates its own criteria for success, you’re very unlikely to change (that’s what I meant by calling Austrianism a “brain worm”; it is by no means unique in having this Ceti eel-like property). But from where I’m standing, failed empirical predictions are a big deal. And it’s not just inflation, either – it’s gold, the dollar, etc.”
This guy is such a tool. He says we have a belief system that creates it’s own criteria for success, but then says we have failed empirical predictions in the very next sentence. He is a perfect example of the “heads I win, tails you lose” type of guy.
In case anyone wanted it, here’s a playlist of the Austrian belief system being argued for from the ground up:
Lessons [about Praxeology]
http://www.youtube.com/playlist?list=PLEE9A33593A261433
I am not sure Austrian is the same a praxeological. Wikipedia has is that “Since Mises time, many, but certainly not all, Austrian thinkers have accepted his praxeological approach.”
So can one be an Austrian while rejecting praxeology? I imagine so, because praxeology as espoused by Mises at least appears to me to be flawed.
(As an aside, why is the P capitalised?)
I’m assuming it’s capitalized because it’s a title.
Flawed how?
Mises demonstrates the existence of action. We cannot disprove action because to do so would be action. However, all we can conclude is that I am capable of action. He then goes on to apply it to human behaviour which has not been proved to be action. He says that action cannot be determined from observing behaviour.
“If one were to merely observe the behavior of humans in the external world, one would not be able to induce the existence of purposive action from it…”
So if we observe someone apparently attempting to disprove the action axiom, it is not sufficient to induce that they are acting. We may infer it, it may appear reasonable, it may even be true, but it is not a logical conclusion.
Mises says “The fact that men act by virtue of their being human is indisputable and incontrovertible. To assume the contrary would be an absurdity.” However, this is not based on logic, but on assumption – it would be absurd to think otherwise. Apparently absurd things do turn out to be true.
We can tautologically say that Praxeology applies to action, but we have no way to bridge the gap to human behaviour. Thus Praxeology is either tautological, or based on an unproven assumption that behaviour is action.
As I said, this is how it seems to me. Perhaps there is a way to bridge that gap that I have not seen.
Harold:
Mises did not argue action is an absolute law of nature that cannot be destroyed. He knew quite well that humans are contingent and mortal.
Human action is not claimed as a law like gravity. It is a law of certain entities.
That action cannot be refuted because all refutations are actions, is not meant to prove that action is therefore eternal and ubiquitous. It is only meant to prove a ground for your knowledge. It is not like E=mc^2. It is the foundation of praxeology, the study of action.
You wrote:
“So if we observe someone apparently attempting to disprove the action axiom, it is not sufficient to induce that they are acting. We may infer it, it may appear reasonable, it may even be true, but it is not a logical conclusion.”
Correct! Praxeology cannot prove via observation that other entities besides the individual actor, acts. It is not meant to prove other actors exist. It is only meant to prove that no actor can deny it without contrsdicting themselves.
If I cannot prove you act via observation, then that doesn’t mean action is not provable. I can prove it to myself. I don’t need you to do it. If you are an actor, which I will guess is likely the case, then you can prove it to yourself.
Action is proven by individual actors, for individuall actors.
You then wrote:
“Mises says “The fact that men act by virtue of their being human is indisputable and incontrovertible. To assume the contrary would be an absurdity.”
“However, this is not based on logic, but on assumption – it would be absurd to think otherwise. Apparently absurd things do turn out to be true.”
Notice what he said. He said “by virtue of being human.” If you are a human, then you are an actor.”. That is not an assumption requiring empirical evidence. It is a logical statement of what a human IS. Whether or not other humans exist, is a separate question.
“We can tautologically say that Praxeology applies to action, but we have no way to bridge the gap to human behaviour.”
Sure we do. Praxeology only provides us with knowledge of logical constraints. It does not attempt to predict what the content (choices) will be.
“Praxeology is either tautological, or based on an unproven assumption that behaviour is action.”
The former, but that does not mean it does not expand our knowledge of the world.
if praxeology is only proved for individual actors, how can it be used for economics involving more than the individual actor?
I maybe able to prove to myself that I can act, but that does not prove which of my behaviours is action.
I have only had a quick reflect on your comments, I will return.
Economic analysis within the praxeological framework can assume that more than one actor exists. This doesn’t mean that praxeology is saying that more than one individual actors do exist. However, if one or more actors exist, and these actors interact with each other, then we can apply a praxeological economic analysis to these interactions.
Harold:
Praxeology is the study of individual action.
If you ask how can praxeology be used for more than one actor, then you have already answered your own question. The stipulation is more than one actor!
If what you really meant to ask is how can praxeology study inter-subjective phenomena given that only the individual can prove they themselves act, well that is easy. Each individual separately understands themselves to be an actor, and everything they do as actors is logically structured. If every individual does this, then it can be said that praxeology is being used to study everyone’s economic behavior.
Methodological individualism is quite powerful, but subtle and sometimes tricky to really understand. Action in isolation and action in groups is all individual action as such. You do not become more of an actor or less of an actor by acting with only material goods or both material goods and other actors.
Mises emphasized this. He wrote something to the effect that even if a million people all shouted in unison “We”, the actual phenemona taking place is 1 million individuals all separately choosing to say “We”. It is all still and never deviated away from individual actors and individual action.
He also emphasized that one of the surest mental traps is hypostatization, that is, to attribute a substance to mental concepts such as “the group”:
http://mises.org/books/ufofes/ch5~4.aspx
From Praxeology by Rothbard: “Praxeology rests on the fundamental axiom that individual human beings act, that is, on the primordial fact that individuals engage in conscious actions toward chosen goals.”
We have already established that we cannot say it is a fundamental axiom that “individual humans act”, only that “I can act”. Extrapolation to cover all individuals is supposition, not fundamental.
Rothbard again: “Furthermore, since praxeology begins with a true axiom, A, all the propositions that can be deduced from this axiom must also be true.”
You must start with the correct axiom. It is not “individuals act” it is “I can act”. Anything that does not start from “I can act” does not have to be true.
Even if we start with “I can act”, it does not follow that everything I do is action. I am capable of action, but much of my behaviour may not be action. Thus even for myself, I can only conclude that, as you say, everything I do *as an actor* is logically structured. I have no logical way to determine how much of what I do is “as an actor”, and how much is as something else.
“If what you really meant to ask is how can praxeology study inter-subjective phenomena given that only the individual can prove they themselves act, well that is easy.”
Can we take this to mean how the individual may use praxeology to study inter-subjective phenomena? Sounds nit-picky, but these distinctions are important here.
“Each individual separately understands themselves to be an actor, and everything they do as actors is logically structured. If every individual does this, then it can be said that praxeology is being used to study everyone’s economic behavior.”
This is not clear to me. Even if each individual believed themselves to be an actor in your terms, they may not use this in their study of inter-subjective phenomena. I am not sure whether you are saying that since everyone IS exclusively and actor, then any study of people is necessarily praxeology. I think you can see the flaw here if this is the case. Compare with the argument that economics is the study of God’s creation. Every individual is God’s creation, then it can be said that creation study is being used to study economic behaviour.
Harold,
What’s the point of distinguishing between “I can act” and “I act”? Doesn’t the “I” assume conciousness? Any behaviors that do not involve concious, purposeful behavior can’t be attributed to “you”, or “I”, or any mind. Therefore, it seems that there is no reason to say “I can act”, but only “I act”. How can you attribute non-action to a concious mind?
Maybe you are right about not being able to establish the existence of “other minds” (actors) with certainty. But this is a problem for the historian or sociologist who utilizes praxeology in their analysis, and not for the praxeologist himself. For praxeology only aims to provide a logical framework for action, and it does not aim to establish that actors exist.
That being said, while I may not be able to establish with certainty that other actors (minds) exist, you’re going to have to do better if you want to convince me that other minds (actors) do not exist when discussing the real world. Until then, I think praxeology is a great tool for analyzing the effects of action within the real world.
“What’s the point of distinguishing between “I can act” and “I act”? Doesn’t the “I” assume conciousness?”
“I” assumes identity. Consciousness is a difficult problem. Lets assume it for now. I said I can act, because I may also be able to do other things. “I act” leaves the other possibility unsaid, and may be misconstrued as a perpetual state like “I exist”, or Descartes “I am”. But OK, we can say “I act” in the same way we can say “I eat.” It is one of the activities I engage in.
“Any behaviors that do not involve conscious, purposeful behavior can’t be attributed to “you”, or “I”, or any mind.“
We are at identity again. When I breathe, I attribute that to me. Should I say “my body breathes”? Of course not. It *involves* a conscious mind, without which I probably would not have identity, but is not conscious behaviour. What I do, I do, consciously or otherwise. My identity is not just my consciousness.
“Therefore, it seems that there is no reason to say “I can act”, but only “I act”. How can you attribute non-action to a concious mind?”
My mind possesses consciousness, yet “I” do many things unconsciously. I do not attribute things to a mind, but to a person, or an identity, of which the conscious mind is a part.
“Maybe you are right about not being able to establish the existence of “other minds” (actors) with certainty.”
This is just to get at the “fundamental” claim by Rothbard. I am happy to run with the working hypothesis that other minds exist, as it seems are you. I do not claim that it is anything other than a working hypothesis. Praxeologists can claim their logical deductions for praxeological minds, but they have no way to logically map that onto the world. This makes praxeology unable to make any claims about the economy except as a result of the working hypothesis.
“I think praxeology is a great tool for analyzing the effects of action within the real world.”
I do not have a problem if someone says this model is a useful tool that helps them understand the world. But I am sure I have seen grander claims for praxeology.
“I said I can act, because I may also be able to do other things.”
You are speculating that you may be able “to do” other things. I think you need to better define what it means “to do” other things. Doing and acting seem synonymous. I think we have to stick with what you do know and that with which you have acknowledged; that you can act. Now, you need to only self-reflect (an action) in order to understand what behaviors are actions. What behaviors are purposeful? What behaviors can be changed? What behaviors are based on subjectively evaluating potential means and then utilizing those means to reach a chosen goal? Is economic activity mindless, pre-determined behavior?
“When I breathe, I attribute that to me. Should I say “my body breathes”? Of course not. It *involves* a conscious mind, without which I probably would not have identity, but is not conscious behaviour.”
Sure, breathing is a necessary condition for an actor. When you are regulating your breathing, holding your breath, etc., then you are “doing” something. Breathing, in general, as a necessary condition for your existence as an actor, is not you doing something. In the latter, you are not engaging in conscious, purposeful behavior.
“I do not claim that it is anything other than a working hypothesis. Praxeologists can claim their logical deductions for praxeological minds, but they have no way to logically map that onto the world.”
Well, I might not have anyway to logically map praxeology onto the world, but based on my interactions with other minds, as well as through self-reflection, I’m willing to go out on a limb and claim that all minds are praxeological minds even though I can’t claim it apodicticaly.
“This makes praxeology unable to make any claims about the economy except as a result of the working hypothesis.”
I’m not sure what this statement adds to the discussion. Can any school of thought make any claims about the economy except as a result of the working hypothesis? Do you mean those schools who rely on empiricism? If so, I don’t see how they can make any claims about the economy being that one can’t even observe an economic exchange.
Ben B – thanks for engaging with me.
“I think you need to better define what it means “to do” other things. Doing and acting seem synonymous.” I do not need to define anything. I can speculate that there may be other things I can do without specifying them. It is you who has made the claim that action and doing are synonymous – i.e. there is nothing else I can do. You need to substantiate that claim, and simply “well I can’t think of anything else” is not enough. Else it is just one more assumption.
“Now, you need to only self-reflect (an action) in order to understand what behaviors are actions. What behaviors are purposeful?” Self reflection can be very misleading. Self deception and mistakes are logically possible. Are we going with another assumption that the conclusions of my self reflection are accurate?
About the breathing – I attribute breathing to myself. Breathing is one thing I do that is not action. Praxeology does not relate to this, since it is not action. What I do not know for sure is what of my other behaviours is action and what is not.
That “rebuttal” from Smith:
He writes 4 points.
The first one is weak. Yes, Murphy’s part about “plentiful people think” is not scientific. But look at the context. Official stats. Of course Smith would use that as a springboard to snark, because Austrians are not scientific right? A better reading of that comment would strive to connect it to the “official” inflation statistics that Murphy is arguing are understated. More importantly, Smith’s “see what I did there” is absurd. Plenty of people really think the cost of living is a lot lower today than 2007? Excuse me? That is just ridiculous. Not even OJ’s lawyers would be able to spin that with a straight face. How many people honestly believe inflation is lower than the official stats? I’ll give the benefit of the doubt and concede it’s non-zero. But plenty? On par with those Murphy was casually and off handedly referring to? Give me a break.
The second point is an epic red herring. Murphy’s argument is that if we take into account stock prices, then the Fed has been very inflationary even by the price definition. Smith’s response? Not “Ok, sure, by that metric, inflation is quite high, I guess prices are rising significantly and Murphy isn’t so off after all”, not “OK, sure by that metric we have significant price inflation, but I was defining inflation in terms of consumer prices”, nothing like that. No, he suggests Murphy is being silly for worrying about stock prices rising significantly. Hello! That is sandbox level punditry.
The third point is jaw droppingly bad. He claims focusing on money supply “distracts from the fact that QE has not led to an increase in consumer prices.”
Now, for one thing, I don’t know what planet he believes he’s on, but on Earth, consumer prices are in fact rising. Is Smith granting humanity with yet another progressive redefinition of “rising consumer prices” to be “accelerating increase in prices”? Even if we go by the core of the inner core of core core inflation, it is higher today than it was before the first QE. Does he even read what he types?
For another thing, and using his own “see what I did there?” rhetoric: “Focusing on consumer prices distracts from the fact that QE has increased the money supply.” See what I did there? I am pretty sure he knows this can be done, which is why he had to then claim that “What kind of a prediction is it to say QE is inflation therefore of course QE causes inflation?” One, is he forgetting already that Austrian economics does not make predictions? Or is he just suggesting that we should define inflation as rising prices because only then can we make a prediction of some sort? That is just scientistic bias. It would be like claiming mathematicians should start redefining their terms so that they can start making predictions. Two, that “prediction” isn’t even derived from Austrian principles. Nothing in Austrianism contains the claim “Inflation of the money supply (i.e. QE) causes an increase in the money supply.” That is just saying A causes A.
No, what Austrians actually claim is a logical relation between A and B (and maybe C). Something like the quantity theory of money:
“If the supply of money increases, then if the demand for money holding is unchanged, then the purchasing power of money will be lower than it otherwise would have been.”
This is not an empirical prediction. It is true by virtue of the logical structure of action.
We cannot scientifically predict what the demand for money will be. That is where Murphy’s expectation went wrong with “The Prediction” of prices. He just underestimated the demand for money holding.
That doesn’t falsify Austrianism. Ironically, Smith USED the above Austrian principle in his own prediction. Smith was not as wrong about the demand for money holding as Murphy was, and as a result, his prediction of prices was not as wrong.
Even if the world were different, and the government WAS willing to report consumer price inflation as above 10%? That would not in any way vindicate Austrian economics. Mises predicting the stock market crash of 1929 didn’t confirm or prove Austrianism either.
The fourth point is saving the worst for last. Massive equivocation on the concept of “evidence”. He doesn’t seem to even understand that logic is not empirical evidence, and yet is still absolutely required for any knowledge whatever. Smith seems to Uruguay hamburger until back when yes. See? Logic is vital. Praxeology is a system of logic, grounded as all logic is on fundamental principles. It just so happens that the principle of Austrianism is individual action, and as a corollary, thymology.
What is the ground for Smith’s logic and his knowledge? He probably doesn’t even know what that means.
If Smith wants to refute Austrianism, then he has to out logic it. Period. Austrianism is not a theory that says “It is immune even from logical criticism!” No, it is immune from historical events (what Smith calls “evidence”), because human action is an activity, not a rigid sterile history. It can only be proven true or false through reflecting on that activity. If Smith refuses to do it, or what is more likely, unable to do it given the plethora of logical fallacies in his post, then that is not a problem of Austrianism, it is his problem.
Then he blabbers on about what “most people believe”, which is ad populum, and blabbers on about elevating certain subjective values of people caring about their portfolios going up or down as the standard, which is still more ad populum.
Failed empirical predictions he claims are a “big deal” to him. That is BS, because he still clings to empirically falsified empirical theories. Massive government intervention post 1929 and post 2008, and massive recessions followed. Falsified. He just convinces himself that they haven’t been falsified, by interpreting history using his own a priori non-falsifiable theories such as “Recessions occur because of too little government inflation and spending”, rather than “Recessions occur because of that “too little” government inflation and spending.”. He claims to be all about empirical evidence, but he is totally ignorant of the fact that his own understanding of the historical data is a function of his own a priori theories, and he only believes his theory is empirically confirmed when he cannot help but see his own theory in the data.
Failed empirical prediction of high price inflation? I am an Austrian, and I made a prediction of prices that they would not rise much because I did not underestimate demand for money holding. I believed the crash would be so great that even with massive money printing, people would be too afraid to spend as much as a mechanistic quantity theory would predict. Does that mean Smith would admit Austrian theory is right after all? Nope, of course not! For he would then insist that Austrianism doesn’t make predictions so it is not proven correct! A priorism FTW.
How in the world can an Austrian who predicted high price inflation be wrong when stock prices have risen as much as they did? What, does Smith believe that Austrians think the only prices affected by monetary inflation are consumer prices? Hyperinflation in consumer prices with the S&P500 at 700?
Smith is, without a doubt, one of the worst bloggers on the blogosphere. So incredibly sloppy and ignorant.
Small addendum:
Saying “QE has increased the money supply” is not a tautology. QE is not “increase in the money supply” per se. QE is bond buying. Whether that increases the money supply depends on whether and to what extent credit expansion or deflation is taking place.
Asset swapping
But… RPM’s mistake IMO is not market perception but the myth of the money multiplier.
The money multiplier is not a myth. It is just a mathematical relation between two variables.
What is a myth is the alleged fact that it is a constant. That is probably what you were referring to.
You’re good.
The MMTers are always screaming that the banks make the loans first and scramble to get the reserves later. And that undermines the entirety of the Austrian School which is based upon the reserves being there first.
When heard that, I thought it meant that the funny money system was even more insane and corrupt than I previously thought.
Leave it to authoritarian statists to find horrible government programs and then insist that the solution to the problems of mankind is to hand over the levers of power regarding those programs to them.
One can agree with how Mosler defines monetary operations and still believe in Austrian Economics.
I’m still trying to find out why every MMT’er is a statist on steroids.
Because the theory is derived from Marxist-Leninism.
It puts the state as the primary mover for money.
The one liners like “You may not like the way the system is set up, but deal with it because “this” is the way it is”, and “Money is a state creation, not a market creation”.
This is like laying out fresh juicy commie steaks for starved commie dogs.
MMTers are totalitarian fish who appear unaware of the existence of the water. Like all statists, they are congenitally unable to self reflect with their “just put me in charge and everything will be fine”. Thus, their program consists of “just put me in complete control of an unconstrained monopoly funny money system and everything will be fine”.
That’s why they get so mean when you try to pop the bubble in which they live.
The “Money is a creation of the state, not the market” being a one liner that attracts certain anti-capitalists requires some elaboration.
Marx attacked capitalism in many ways, one of which was its alleged reduction of human affairs to a “money nexus”. A lot of these commie types hate profit making, hate money, hate other people’s greed, etc.
Many of them want money abolished.
Because MMT states that money is a creation of the state, this presents an intellectual justification for regarding money not as any natural, organic outgrowth and evolution of individual production, trade and economic competition, but rather as an “artificial” creation of powerful states.
By doing so, they can then connect the talking point of abolishing the state along Marxist Utopian lines, with an abolition of everything the state has artificially created, such as money.
They have an attraction to theories that regard money as a creation of the state because the alternative would leave them helpless in abolishing money in a world of statelessness. If money were a creation of the market, which is true by the way, then abolishing the state to communist utopia would not carry with it an abolition of money.
Good points, MF.
When I resided in a nest of actual Marxists back 1970-1973, they were not hesitant to suggest that they were smarter than everyone else and their violence might be necessary against the stupid rubes.
Today’s commies cannot/will not concede that they are motivated by the same world view. As we see day after day, they are unable to face their own conceited arrogance and the violence implicit in their policies. It’s getting creepy.
These are all good points.
I would say that a gap needs to be bridged from MMT to AE. There is useful knowledge for us on how monetary operations work. This helps us highlight why “the system” is a fraud. And AE gives mmt’ers the knowledge about cronyism, politicians, productivity, moral hazard etc.
Mosler,kelton, et. Al constantly complain about politicians not doing the right thing and then Want to give them the keys to the Ferrari. MMT prescriptions rely on an ever increasing size of government, although they are cautious not to say that explicitly. L Randall Wray did promote a study correlating growth in government with growth in GDP though….. You get the point.
Roddis:
“Nosce te ipsum” terrifies them, so they turn to seek refuge in anti-rationalist actions, including violence.
We propose ideas and arguments that require them to think about and understand what disgusts or frightens them.
To understand economic calculation, intervention versus non-intervention, homesteading, private property, all of this requires them to think about something other than how mommy and daddy figures will fight to protect them from the harsh natural world that is only harsh because of their own beliefs about themselves.
What I do is try to play the role of their own inner selves. All the name calling, attacks, ridicule, I stand as the rock ego that, by learning about me, they learn about themselves.
Some have suicidal thoughts. They want to shoot me dead. Some have low self-esteem thoughts. They want to bring me down. Some want to defer knowledge of human life to others. They want to make me feel guilty about going against popular opinion. Some feel guilty by having my thoughts. They try to make me feel guilty for refusing to prostrate under the needs of others before my own, namely their needs. Hence the “you’re uncompromising” hypocrisy.
This knowledge from Austrianism cannot be transferred the same way kids do it by show and tell. This knowledge can only be learned by individual self-reflection. I can only guide willing participants. Many want to know without doing the required effort. They want to learn by force. They want revelation from without. They want history, empirical data, to change their brains without any voluntary action considerations, without any recognition of themselves as the ground of their knowledge.
Every actor has the potential.
Murphy’s argument is that if we take into account stock prices, then the Fed has been very inflationary even by the price definition.
…
What, does Smith believe that Austrians think the only prices affected by monetary inflation are consumer prices?
That was Mark Thornton’s point, here:
[Time stamped]
So Where’s the Inflation? Tom Woods Talks to Mark Thornton
http://www.youtube.com/watch?v=n0RusrwYsRE#t=5m16s
Thanks guest.
Hey, check these out:
We’re in the third biggest stock bubble in U.S. history
http://www.marketwatch.com/story/were-in-the-third-biggest-stock-bubble-in-us-history-2014-07-15
Bubble Paranoia Setting in as S&P 500 Surge Stirs Angst
http://www.bloomberg.com/news/2014-07-16/bubble-paranoia-setting-in-as-s-p-500-surge-stirs-angst.html
No bubble
Anyone see LK’s hilarious blunder?
I suggest being way more specific.
http://socialdemocracy21stcentury.blogspot.com/2014/07/austrians-and-definition-of-inflation.html?m=1
I made the exact same point:
http://consultingbyrpm.com/blog/2014/07/getting-my-hands-dirty-in-the-mud-with-noah-smith.html#comment-699251
Too funny
Wow. Now that gave me a real good chuckle. Poor LK.
No, your argument is flawed.
The word “inflation” from the time it is first used in an economic sense from the 1820s-1830s is used in both senses. The empirical evidence is quite clear.
E.g., see the English translation of Jean Baptiste Say’s A Treatise on Political Economy (1821):
“The experience of English commerce has, however, proved, that a casual inflation of the price of domestic, and depression of that of external products, may be the basis of permanent commerce.”
Say, Jean Baptiste. 1821. A Treatise on Political Economy; or, The Production, Distribution, and Consumption of Wealth (vol. 1; trans. by C. R. Prinsep from 4th French edn.). Longman, Hurst, Rees, Orme, and Brown, London. p. 176.
Notice how you provide no empirical evidence for your assertions, just lame blind faith.
No LK, words don’t arise with two meanings at the exact same time.
Your quote of Baptiste AGAIN refers to inflation of something. That means inflation by itself already had meaning.
Notice how the empirical evidence suggests my claim is right, whereas yours is wrong.
“That means inflation by itself already had meaning.”
Of course it did: its original definition was “The action of inflating with air”. That was how it was used in English for centuries, first in a literal and later in figurative senses. E.g., “inflation of the lungs” and later “inflation of style or prose.”
The economic senses arose at the same time and that IS supported by the empirical evidence.
Nah, it is highly unlikely for one word to arise and have two different meanings at the exact same time.
One or the other was most likely first. I doubt Mr. Smith in one location and Mr. Jones in another location both uttered or wrote the word inflation down at the same time, with two different meanings.
“Nah, it is highly unlikely for one word to arise and have two different meanings at the exact same time.”
B.S.
It is very common in all languages.
E.g., the Oxford English Dictionary shows that the word “redeem” entered into English from Anglo-Norman.
It acquired two senses at the same time in the mid 15th century:
(1) To ransom (a person) from slavery, captivity, or punishment
(2) Of a person: to make amends or atonement for
error.
LK:
Kind of a bad example LK, because
A. Mid 15th century could mean one was developed in 1447, while the other arose 1453 or whatever.
B. They’re two entirely different meanings. With inflation, they are more closely related, suggesting one influenced the other.
Nobody has refuted that post.
What did the first definition (i.e. statement of meaning, like from a dictionary) say?
The word inflation is first used in an economic sense from the 1820s.
Can you show me a dictionary from 1820s-1850 that defines inflation as “inflation of the money supply” or some equivalent definition?
Meanwhile the authoritative Oxford English Dictionary (OED) tells us that the word “inflation” as an economic concept has been defined in both senses — of prices and money supply — from the beginning:
“Great or undue expansion or enlargement; increase beyond proper limits; esp. of prices, the issue of paper money, etc. spec. An undue increase in the quantity of money in relation to the goods available for purchase; (in lay use) an inordinate rise in prices.
OED, Sense 6.
The 19th century quotations that follow in OED cite the use of the word in both senses:
1863
E.g.,
W. S. Jevons Serious Fall in Value of Gold i. 13 “The inflation of credit must be checked by the well defined boundary of available capital.”
1863
W. S. Jevons Serious Fall in Value of Gold i. 14 “A revulsion occasioned by a failure of the national capital must cause..a collapse of credit, and of any inflation of prices due to credit.”
——————–
“Can you show me a dictionary from 1820s-1850 that defines inflation as “inflation of the money supply” or some equivalent definition?”
First economic definition of inflation I can find is 1864. It only refers to currency though.
Even your Jevons quotes qualify the word.
It looks like it has been *used* in both senses (with apparent qualifications), but defined narrowly in one.
Qualifying the word before it was defined (in an economic sense) makes perfect sense of course, don’t want people thinking about flatulence.
Yes we have.
“Inflation OF PRICES”
That was you.
Nowadays we use the WORD “inflation” to reference price level changes. E.g. Annual inflation rate.
Guido Hulsmann “Economics of Deflation”.
The charge by Noah is that we NOW have changed the definition from price level increases to money supply increases. Wrong-o
Some Austrians are only referencing a historically common use of the word. And this doesn’t vindicate any failed predictions. Context matters. When RPM predicted price inflation, he could not change to the money supply definition. The context was clear In his bet. The same is true when any Austrian mentions inflation, even schiff. This is a diversion, and a particularly poor one, Lk.
I have yet to see Mr. Smith mention trivial topics such as economic calculation and/or the transfer of purchasing power to the first receivers of new funny money. But he must know about those topics, right?
From Bob’s rebuttal:
On the one hand, mainstream economists ridicule Misesians for their “medieval” approach to economic theory, in which they deduce results logically rather than producing falsifiable propositions. But then these same critics tell the world that the outcome of a CPI movement destroys the foundations of Austrian theory. Huh?
The key here is to understand the distinction between what Austrians claim they are doing and what they are in fact doing. Austrians claim that their conclusions are based purely on deductive logic and are therefore unfalsifiable (which is of course ridiculous). But in fact Austrian theory does make empirical claims, many of which turn out to be false. It is appropriate to mock Austrians on both counts.
It’s fun to mock Austrians while ignoring your own school’s mistakes. Do you look critically at your own economists?
How logical is it to say that a lack of stimulus caused this recession. They literally claim that is not falsifiable. If they spent 3 trillion, they could still plausibly claim we needed 6 trillion.
It’s fun to mock Austrians while ignoring your own school’s mistakes. Do you look critically at your own economists?
I have my own economists? That’s pretty cool. Who are they?
It was a generic statement as I cannot presume which school you are a follower of.
Totally different thing Cosmo.
Different.
DIFFERENT.
Josiah,
Austrian economics does not contain any empirical predictions.
You are confusing a theory, for people. People are not Austrian economics. Austrian economists who make predictions are doing so as non-Austrians, much like Keynesian-positivist economists who make logico-deductive arguments are doing so as non-Keynesian-positivists.
Austrian economists make predictions.
Austrian economics does not contain any predictions.
Clear as mud? They are not lying. You just can’t seem to handle PEOPLE making predictions while advertising themselves as Austrians. It is like you believe that they have to shut up and never make any predictions.
But Austrian economists are not ONLY Austrian economists. They are also people, and people like to make predictions.
I lost the thread of this. Can one make predictions using Austrian economics? My understanding is one can, Now, different people will make different predictions using different variants of Austrian theories, right? So it’s not really fair to say Austrian economics is not falsifiable — presumably, if it fails predict correctly enough times in a enough forms, it will be shown to be essentially erroneous; likewise it if predicts correctly enough times in enough forms, it will be shown to have predicative power and to be true, at least to some degree. Have I got that right? Or do I not?
John, this is my take on it.
Austrian economics only “predicts” whether this and that will happen IF so and so does occur, while all other factors remain the same.
Thus, from the perspective of Austrian economics I could “predict” that general prices will rise IF an increase in the money supply occurs across the board, while all other factors, such as the demand for money, remain the same.
Of course, this wouldn’t be a prediction at all because I am making a statement that applies to all instances of this type of action, whether these instances have occurred in the past or whether they might occur in the future. This is all Austrian economics can say. Austrian economics can not predict when or if individual actors will choose to increase the money supply, nor can it predict that if this increase in the money supply takes place that the demand for money will remain the same or be offset by some other change within the market.
When these arguments occur, I note that the topic is never a particular and/or specific Austrian point or claim. What specific Austrian claim has allegedly failed the empirical test?
HYPERINFLAGGALATION was mentioned once by someone the Austrians like.
Refuted!
This is one of the Christian college professors critiquing Jason Jewell’s Christian libertarian views (as heard on the Tom Woods show):
Laura Stivers is Professor of Ethics and Director of the Graduate Humanities Program at Dominican University (San Rafael, CA). Her latest book, Disrupting Homelessness: From Alternative Christian Approaches (Minneapolis , MN: Fortress Press, 2011), explores the role of Christian communities in justice work among the American homeless. She is also co-editor of the latest edition of Christian Ethics: A Case Method Approach (Maryknoll, NY: Orbis Books, 2012), a major introductory text in the field of Christian ethics.
What does it say to women and other marginalized people when a conception of justice begins from a perspective of power and privilege? When the perspective is not concerned about “end states” but only about “means”? When private property rights have more value than basic human needs? When no attention is paid to the multiple oppressions people face— sexism, racism, classism, heterosexism, to name a few? And when inequality is seen as natural and even divinely ordained (e.g., “To some He [sic] delegates more than to others”)?
While there are many critiques Christian feminists have of a libertarian theory of justice, I will focus on three. First of all, ignoring oppression, power, and privilege in the way our society is structured means that a “free market” will simply support the status quo of inequality to the detriment of most women and other marginalized people. The libertarian perspective is far from “neutral,” as it claims, but advocates a particular “lifestyle” of privilege for a few. Second, focusing on taxation as a means of theft and violence and denying the importance of actual outcome is counter to the Christian values of human dignity, solidarity, and the common good. A Christian feminist emphasis on right relationship as well as human dignity and capability to flourish entails support of policies that produce just outcomes. Thus, feminists would not view progressive taxation as theft, but instead as a powerful means of distributing wealth more equitably. Third, focusing on the state as the primary institution that is coercive, aggressive, and violent ignores the immense power capitalism and corporations have to destroy both people and the Earth. Christian feminists have no need to idealize the state, but they do critique any institution that does not support gender justice and the flourishing of all life. Furthermore, idealizing the family and church as “productive institutions of society” completely ignores the patriarchy and oppression in these institutions.
Sounds quite familiar.
Furthermore, the libertarian theory of justice offers no real way to protect the bargaining rights of workers, nor does its emphasis on a free market offer effective regulation to protect the environment from the exploitation of corporations.
**************
With their emphasis on right relationship and human flourishing, Christian feminists support policies that substantially lessen inequality. Feminists believe that a just society will ensure universal access to those resources that everyone needs to survive (e.g. food, shelter, and clothing) and will be organized in ways that enable people to participate democratically. For them, justice is about outcome, not simply means. Christian feminists can agree with libertarians that the state can be “what enables Big Business and other powerful interests to exploit ordinary people;” however, they do not agree that the solution is to get rid of the state. Instead they would opt for public policies that limit corporate influence on the state so that democracy has a chance. Taxation is but one tool that the state uses to distribute goods and power more equitably (what Christian feminists see as a more just outcome). Taxation as a means is not in and of itself unjust , but is an efficient way to collect money for public goods that everyone should have access to, such as education, police protection, roads, green space, and more.
Christian feminists ask why libertarians are so focused on critiquing the coercive, aggressive, and violent state yet disregard the inherent violence of capitalism and the dominating, and fast-growing power of multinational corporations [emphasis added]. Furthermore, they wonder why libertarians think families and private non-profits, especially churches, are the “truly productive institutions of society.” Advocates of a libertarian form of justice seem oblivious to the patriarchal nature of family, church, and many voluntary institutions.
(2014-06-19). Christian Faith and Social Justice: Five Views (p. 43). BLOOMSBURY PUBLISHING. Kindle Edition.
LOL, “inherent violence of capitalism”.
Stop it property owner!! I want to steal your food making machine but you keep violating my body! Oh how capitalism is so violent! If only we had a different system that sanctioned me starving people to death for the sake of my life. Then the world would not be so violent.
If only I’d renounce that pesky NAP, maybe I could get a gravy gig like this:
http://www.dominican.edu/academics/ahss/undergraduate-programs-1/hum/faculty/laura_stivers
You can always do it, bank the pay, then later write a book about how you only did it as an experiement and never really believed it.
More authors should play those games. I need entertainment, dammit!
Keynes did it, and Friedman did it.
2014-15 UNDERGRADUATE DAY ACADEMIC YEAR BUDGET
TUITION (12–17 units/semester)
$41,280 plus room and board etc. TOTAL PER YEAR $64,516
http://www.dominican.edu/admissions/aid/costs2/undergrad
Run that by me again… Who’s exploiting whom at Dominican University of California?
One good thing about beling a libertarian is that it gives you lots of practice in being disappointed and frustrated with other people while still maintaining a happy-go-lucky disposition. Like me.
It does indeed protect the bargaining rights of workers. No worker can be forced to work, thus (as an individual) they have full bargaining rights.
Maybe the individual author was trying to say that ‘the libertarian theory of justice offers no way to encourage the collective bargaining rights of workers.”
If so, this is not true either, libertarians fully support the right for workers for form collective and voluntary agreements amongst themselves… providing such agreements are not coercive (i.e. libertarians don’t support the use of violence to uphold bargaining rights).
From “THE USES AND ABUSES OF ECONOMICS – -Contentious essays on history and method” by Terence Hutchison:
Rothbard also, unwillingly or not, confirmed the total empirical emptiness of Misesian praxeology with regard to its assumptions about knowledge, because he simply [228] replaced the usual assumption of full and perfect knowledge, which has pervaded so much of economic theorizing since Ricardo, with blank vacuity, in that he had no other assumption about knowledge or expectations to put in its place: Let us note that praxeology does not assume that a person has chosen the technically correct method…. All that praxeology asserts is that the individual actor adopts goals, and believes, whether erroneously or correctly, that he can arrive at them by the employment of certain means. (1976, p. 20)
It is no advance, but, if anything, a retreat, to replace the long traditional assumption of full or perfect knowledge by total emptiness. What Misesian, or ‘Modern Austrian’ praxeology succeeds in achieving is a quite unacceptable combination of dogmatic, ‘apodictic certainties’ with total empirical vacuity. Instead of being left with the traditional, full-knowledge ‘theory’, we are provided with the marvellously rich, enlightening and totally uninformative model—or Misesian ‘apodictic certainty’—that people act with whatever tastes, and whatever kind of knowledge and ignorance, which they happen to possess. By rejecting Misesian a priorism or ‘praxeology’ in 1937 Hayek saved himself intellectually by turning, as he put it, ‘to economics as an empirical science’ (1949, p. 44).
http://en.booksee.org/g/Terence%20Hutchison
I fail to see that problem that the author seems to have found. Plus, Hayek’s confusions continue to be the gifts that keep on giving.
Rothbard did not presume “total empirical emptiness”, he presumed an unknown unknown. We don’t know to what degree the economic actor has limited access to knowledge.
Personally, I think it is better to admit what you don’t know, rather than pretending you do know.
The problem of unknown unknowns turns up a lot more often than most people are willing to deal with, but ignoring it does not solve it. I’m an empiricist and proud of it, I’m also the first to point out that there are limits to what you can do with empiricism and anyone willing to pick up a tool should know the approriate application for what they are holding in their hand.
Note that Mr. Hutchison never offers up the alleged information that Rothbard says does not exist. These critics of praxeology ever seem to analyze any particular Austrian assertion and then attempt to demonstrate that it is completely empirical and not self evident/universal/”a priori”. Just like they never want to get right up close to the concept of economic calculation. Just like none of our opponents can seem to grasp the concept of the NAP and its 4 or 5 primary implications.
As Laura Stivers pointed out: nor does its (libertarian social justice) emphasis on a free market offer effective regulation to protect the environment from the exploitation of corporations
Because strict liablity for pollution is not an “effective regulation.” I get it. .
TYPO: The “n” was just there. Someone stole it.
“These critics of praxeology NEVER seem to analyze any particular Austrian assertion….”
For future reference, Rothbard has discussed Walras:
As a Walrasian, Schumpeter believed that general equilibrium is an overriding reality; and yet, since change, entrepreneurship, profits, and losses clearly exist in the real world, Schumpeter set himself the problem of integrating a theoretical explanation of such change into the Walrasian system. It was a formidable problem indeed, since Schumpeter, unlike the Austrians, could not dismiss general equilibrium as a long-run tendency that is never reached in the real world. [emphasis added] For Schumpeter, general equilibrium had to be the overriding reality: the realistic starting point as well as the end point of his attempt to explain economic change.2
To set forth a theory of economic change from a Walrasian perspective, Schumpeter had to begin with the economy in a real state of general equilibrium. He then had to explain change, but that change always had to return to a state of equilibrium, for without such a return, Walrasian equilibrium would only be real at one single point of past time and would not be a recurring reality. But Walrasian equilibrium is a world of unending statis; specifically, it depicts the consequences of a fixed and unchanging set of individual tastes, techniques, and resources in the economy. Schumpeter began, then, with the economy in a Walrasian box; the only way for any change to occur is through a change in one or more of these static givens.
http://mises.org/journals/rae/pdf/rae1_1_6.pdf
Rothbard has discussed whether praxeology insists that firms always aim at the maximization of their money profits:
The fourth–and by far the least fundamental–postulate for a theory of the market is the one which Professors Hutchison and Machlup consider crucial–that firms always aim at maximization of their money profits. As will become clearer when I treat the Fundamental Axiom below, this assumption is by no means a necessary part of economic theory. From our Axiom is derived this absolute truth: that every firm aims always at maximizing its psychic profit. This may or may not involve maximizing its money profit. Often it may not, and no praxeologist would deny this fact. When an entrepreneur deliberately accepts lower money profits in order to give a good job to a ne’er-do-well nephew, the praxeologist is not confounded. The entrepreneur simply has chosen to take a certain cut in monetary profit in order to satisfy his consumption–satisfaction of seeing his nephew well provided. The assumption that firms aim at maximizing their money profits is simply a convenience of analysis; it permits the elaboration of a framework of catallactics (economics of the market) which could not otherwise be developed. The praxeologist always has in mind the proviso that where this subsidiary postulate does not apply–as in the case of the ne’er-do-well–his deduced theories will not be applicable. He simply believes that enough entrepreneurs follow monetary aims enough of the time to make his theory highly useful in explaining the real market.
https://mises.org/rothbard/extreme.pdf
Uh, that is a very nice idea, and I certainly think it happens that some firms, particularly small ones, do some things because they think they are the right thing to do, but are you telling me Rothbard doesn’t believe that in a capitalist system the primary concern of business is NOT to maximize profit? Because, well, that strikes me as about as close to a non-starter argument as I’ve ever heard of.
I guess maybe I didn’t read this right: it looks to me like Rothbard is saying that firms do work towards maximizing profit in a capitalist society, at least as a general matter. Hard to argue with that.
It helps to remind that all action is profit-seeking – just not necessarily in terms of money.
All profit is, is a more favorable state of being in place of a less favorable one.
This video is really helpful:
The Birth of the Austrian School | Joseph T. Salerno
http://www.youtube.com/watch?v=dZRZKX5zAD4
Yup. Non-profit ventures are psychic profit seeking ones.
That’s logical…..
Claim #1: We commies are “scientific” and only deal with actual evidence and events.
Claim #2: The free market has never existed.
THEREFORE….
From the actual existing factual evidence, we know the free market cannot work.
and
Claim #1: We commies are “scientific” and only deal with actual evidence and events.
Claim #2: The free market has never existed and can never exist.
THEREFORE….
From the actual existing factual evidence, we know that most economic problems in the world are the fault of the free market.
“The free market is an impossible utopia” by Henry Farrell:
http://www.washingtonpost.com/blogs/monkey-cage/wp/2014/07/18/the-free-market-is-an-impossible-utopia/
Bookmarked
Are you guys fighting with a little bit of a straw man here? Is the argument really the free market can’t work? Anyone who has an iPad or a tankless water heater knows the free market “works” — it provides a vibrant economy that makes things people really like and provides jobs, which people also need to have. I think the concern is a completely unregulated free market throws off some very bad consequences, including some of the things the Christian feminist was getting at. It’s hard to deny there are some very negative consequences to an entirely free market (see Charles Dickens), so then one can ask, well, what to do about it? Answer could be nothing, or it could be, regulate it in some way. You can think the answer should be nothing, but I don’t think asking the question, or noting problems with the free market, is inherently dopey. And I’m not sure saying the free market should be regulated by government in some ways is the same as saying “the free market just doesn’t work.” It’s more like saying, “it works more humanely with some tweaking.”
Charles Dickens is your go to guy on economic history and theory?
Ha! I was thinking the same thing.
I get a lot of…”Haven’t you read the Grapes of Wrath!?!”
Is there really some sort of an argument that the problems of the 19th century industrial revolution that Dickens and other novelists, historians, and economists have identified didn’t happen or weren’t problems?
On the comment that you just have to let people sort these things out themselves without intimating violence — again, as a practical matter, what does that really mean? If people can’t act collectively very easily against large business interests, or if those business interests use violence to prevent unions or other collective action entities from forming (which we know they did), how as a practical matter can “people” work these things out amongst themselves without the inevitable result being the powerful doing what they like to the weak?
I haven’t read the Murphy material that Bob Roddis alludes to (or if I did I don’t remember it) so I’m putting that on my list.
“On the comment that you just have to let people sort these things out themselves without intimating violence — again, as a practical matter, what does that really mean?”
It means you can do whatever you want as long as you don’t initiate violence.
“If people can’t act collectively very easily against large business interests, or if those business interests use violence to prevent unions or other collective action entities from forming (which we know they did), how as a practical matter can “people” work these things out amongst themselves without the inevitable result being the powerful doing what they like to the weak?”
If they initiated violence to prevent unions or other collective action, then I’d oppose that. Same thing if the union initiated violence (which we know they do). If you’re simply asking how the free market would be better at preventing the initiatory violence that the State allows or participates in, then I’d suggest the numerous books I’ve already recommended. I see no point in going round and round in circles over this issue. The answers to your questions are in those books. You might not find them convincing, but if you really want to understand where we are coming from the only way to do that is to knuckle under and read what the experts say. Unfortunately, there are no shortcuts that will actually help you understand our positions beyond studying them.
Industrial revolution article: http://www.fee.org/the_freeman/detail/a-myth-shattered-mises-hayek-and-the-industrial-revolution
https://m.youtube.com/watch?v=AXZBmbvaru8
I’ve read this article, and I think it’s interesting. But I do think much of it would be disagreed with by the overwhelming majority of historians and economists in a number of particulars. For example, the condition in factories and the work days during the industrial revolution were hideous, and indeed I don’t think there’s a lot of doubt work days for workers in the industrial revolution were much longer, and more dangerous, than during agrarian times. I think some recognition has to be given that an article like this is written with a VERY distinctive point of view and agenda, and while that is true of everything anyone writes to some degree, here it strikes me as far more pronounced, like the writings of say, a Marxist. That does NOT mean it’s wrong. But in my view there is a sort of unwarranted confidence, even certainty, in the views of a tiny minority of historians who’s ideas seem to contradict not only most other serious historians, but many of the social observers commenting at the time.
“Are you guys fighting with a little bit of a straw man here? Is the argument really the free market can’t work?”
I’m going to go out on a limb and say you didn’t read the article he linked to.
“It’s hard to deny there are some very negative consequences to an entirely free market (see Charles Dickens), so then one can ask, well, what to do about it? Answer could be nothing, or it could be, regulate it in some way. You can think the answer should be nothing, but I don’t think asking the question, or noting problems with the free market, is inherently dopey.”
Or you could think that the answer is to let people solve this unnamed problem in whatever way they think is best, as long as they don’t initiate violence to do so.
There’s a book by some guy named Murphy that addresses these “Dickens” issues:
http://tinyurl.com/n3en28y