25
May
2015
Yet More on Utility Theory
Another post at Mises CA:
Someone might choose to go to the gym and lift heavy weights, rather than sit on the couch eating pizza. Thus the lifting of the weights gave more utility, even though it was physically painful and very unpleasant per se. Or, a person might choose martyrdom over renouncing her religious or political views. Again, this embrace of death gives more utility to the martyr, but it doesn’t convey happiness or pleasure in any hedonistic sense.
But in fixprice markets, mark-up prices are the major form of prices.
Thanks, Roddis, for pre-LKing the comments.
I happen to think it is essential to always keep in mind the end product to where LK’s long chain of obfuscations is heading.
I don’t begrudge economists their right to define “utility” however they want. However, David Friedman’s objection was that economists actually do use utility as a cardinal concept in some circumstances, and that this is necessary to make sense of certain behavior (e.g. risk aversion).
And I think he’s wrong.
Are you saying economists don’t ever use cardinal utility, or that it’s wrong to do so? According to Wikipedia:
The idea of cardinal utility is considered outdated except for specific contexts such as decision making under risk, utilitarian welfare evaluations, and discounted utilities for intertemporal evaluations where it is still applied.
Is that wrong too?
It must be the latter, Josiah. But then, implicitly any model that uses calculus on some kind of utility function implicitly assumes cardinality. I can’t see how you can have ordinality and continuity at the same time. Ordinal preferences imply discrete preferences.
But then again, I’m an applied guy, so what do I know about all this theoretical mumbo jumbo. 😉
You touched on an important point.
Not only does using calculus imply cardinal preferences, but cardinal preferences imply that preferences are continuous.
If one still insists that one is only referring to discrete “utils”, then one is really referring to ordinal preferences and then on a tangential action, associating emotional intensity and feelings to the rankings. That latter action is not doing economics.
What if Friedman et al just stated that when humans, operating under uncertainty, make choices, these choices appear to observers to be made as if utility is cardinal or it is otherwise able to act at the margin?
“Let me try another way to illustrate the distinction: Someone might choose to go to the gym and lift heavy weights, rather than sit on the couch eating pizza. Thus the lifting of the weights gave more utility, even though it was physically painful and very unpleasant per se. “
None of this changes the fact — whether the end desired is painful or not — that what is gained is greater satisfaction, a human state of mind and emotion. No doubt this is why you do not mention “satisfaction” in the Mises Canada post as being strongly linked to utility.
Curiously, you want to say that the concept of utility is completely “formal” (which presumably means wholly abstract) , but even here apparently you will not acknowledge that the concept must still refer to an abstract state of mind of humans called satisfaction.
But, furthermore, a wholly abstract definition of utility will not do: it must at some point be applied to the real world and defended as an empirical concept related to real human beings.
“To say that Option A gave an individual more utility than Option B really doesn’t mean anything else except that the individual preferred A to B.”
Preference is a state of mind. Yet are you going to persist in saying utility has no relationship to human states of mind?
Yes, the key state of mind/emotion is satisfaction. As you say, a driving force of conscious action would appear to be a state of unease/dissatisfaction with the current state of affairs. Utility is satisfaction but frequently linked with an array of other common emotions: pleasure, happiness, desire, etc.
Oops this second comment belongs on the other thread in reply to Harold:
http://consultingbyrpm.com/blog/2015/05/lord-keynes-strikes-again.html#comment-1493870
LK, you are cool with me. But beware. The unscrupulous will use typos and poorly worded blog comments to defame you for years and years in the future.
Then “when the fact change, so does my mind” does not apply.
This is a simple discussion of concepts.
When you define “satisfaction” as “the same as what austrian economists mean by ‘utility'” then obviously utility will mean the same as satisfaction.
LK,
It is not true that a specific human mental and emotional state is the goal of all economic action. Nor must utility refer to any particular state of mind.
Utility is a placeholder for the economic agent’s goals, period. It refers to nothing in particular. If by utility we meant anything in particular, we would simply say that people are satisfaction maximizers, or happiness maximizers, and dispense altogether with utility.
Utility’s very lack of content allows it to be *complete*, meaning that that there is no way for a rational economic agent to escape the utility maximization paradigm. Even if someone acts with the goal of violating the utility maximization paradigm, they will still be contained within it. Thus economics is able to describe certain principles of economic behavior regardless of the nature of the economic agents. So even if we found a race of aliens who lack any analogue to our feelings or mental states of happiness or satisfaction, economics would be able to gracefully incorporate these new creatures into its analysis.
Preference is a state of mind. Utility is not. Higher preferences give more utility, but this just means that higher preferences are more highly preferred. No further content. This is because preferences are real things whereas utility is a placeholder in a model. Utility is not even something that doesn’t exist. See some of my recent blog posts for more on this subject.
” It refers to nothing in particular. If by utility we meant anything in particular, we would simply say that people are satisfaction maximizers, or happiness maximizers, and dispense altogether with utility.”
So it refers to “nothing,” but can be defined as referring to the fact that people are “satisfaction maximizers, or happiness maximizers”? You badly need to understand the law of non-contradiction.
“Utility’s very lack of content allows it to be *complete*, meaning that that there is no way for a rational economic agent to escape the utility maximization paradigm. Even if someone acts with the goal of violating the utility maximization paradigm, they will still be contained within it. “
That reduces it to a TOTALLY empirically empty tautology. This just confirms my comment below about the epistemological status of Austrian assertions about utility.
Utility is a placeholder for unknown values, and so it may be replaced by known values. E.g. if we learn that a utility maximizer values happiness, then we may model them as a happiness maximizer. But this does not mean utility means happiness. Rather, utility has done its job as a placeholder and has been replaced with happiness.
Utility maximization is the logical format of economic choice, period. So yes, a tautology, but that is the nature of logic. The point is that all economic behavior, regardless of the specific values or goals of the economic agents, may be described via the logic of utility maximization. Tautology yes, empty no. This has nothing to do with Austrian economics or epistemology. See my blog post “If utility did not exist, it would be necessary to invent it.”
“So it refers to “nothing,” but can be defined as referring to the fact that people are “satisfaction maximizers, or happiness maximizers”? You badly need to understand the law of non-contradiction.”
That isn’t what he said.
He said it refers to nothing in particular, but IF for argument’s sake we were to refer to something in particular, then happiness maximizer might be the way to go, but then if that is the case, then the concept of utility would become moot.
He is purposefully arguing a point by way of a reductio.
“That reduces it to a TOTALLY empirically empty tautology.”
It has implications for the real world.
Just like the law of gravity will prevent you from thinking you can throw a ball (on Earth) and it will stay at the same height, the Action Axiom will prevent you from thinking you can centrally plan an economy.
Surely you could centrally plan an economy, but you would end up with surpluses and shortages? There is nothing in praxeology that says ending up with surpluses and shortages is either a good or a bad thing. Or have I got that wrong?
“None of this changes the fact — whether the end desired is painful or not — that what is gained is greater satisfaction, a human state of mind and emotion.”
That is not a fact that Austrians speak to when they use the terms utility and satisfaction!
It could very well be emotional satisfaction, but that is irrelevant to the point.
So when Austrians use “satisfaction” in relation to utility it doesn’t refer human state of mind? If so, it couldn’t even be talking about human beings.
Do you actually believe, I mean seriously, that nobody would notice you deftly changing your stance from guffawing at the notion that Austrian utility is not predicated on or related to emotions, to the completely different stance that we’re saying Austrian utility is not related to “states of mind”?
You moved the goalposts, LK. You are trying to make it now seem like what we have been disagreeing with you about is whether utility refers to ” states of mind”.
Are you now backtracking and no longer claiming that we’re denying Austrian utility is related to “emotions”?
“But, furthermore, a wholly abstract definition of utility will not do: it must at some point be applied to the real world and defended as an empirical concept related to real human beings.”
False. If the only INTENT is to garner an absolute truth that is true for ALL action, then no, it need not “must at some point” describe an actual content of an actor’s behavior.
Such a description would only be historical anyway, good for the historian to study and write about. Praxeologists on the other hand want to know what will be true in the future for all actions.
Praxeologists on the other hand want to know what will be true in the future for all actions.
Yes yes yes.
And because it ALWAYS happens and we KNOW it always will happen, it’s “a priori”. On the other hand, the precise motivation for each person and each action cannot be known a priori.
“Preference is a state of mind. Yet are you going to persist in saying utility has no relationship to human states of mind?”
More argument from definitions.
Why do you persist in committing the linguistic prescriptivism fallacy?
Why do you believe everyone MUST use your definitions?
What’s more if utility as an Austrian concept is supposed to be a synthetic a priori knowledge, it cannot be defended as a merely “formal” concept as if it is divorced from the real world and merely abstract, because synthetic a priori knowledge must be knowledge of the real world (synthetic not analytic) that is necessarily true.
It is precisely because utility as an Austrian concept is synthetic a priori that it does not speak to any particular empirical emotional state of others, and thus serves as a formal concept used to describe the very much synthetic a priori knowledge of one’s own subjective value scales.
How did I know that LK would come back with a bunch of psychobabble not related to economics?
Is this why you read everything Krugman writes?
Good one Yancey.
With impeccable timing, Tom Woods not only spruikes the benefits of interpersonal utility comparison but goes one step beyond to intergenerational utility comparison. 😉
http://tomwoods.com/podcast/ep-409-the-doomsayers-are-wrong-as-usual/
Having grassed on him, I probably should point out that this is a very informal discussion, does not pretend to be an Austrian analysis, nor even a real economic analysis at all. Tom is beyond all things a historian, and the discussion linked above is all about historical perspective.
Anyhow, worth a listen, perspective is useful.
Mises, Human Action, p14: ” There is however no valid objection to a usage that defines human action as the striving for happiness. ”
“In the praxeological terminology the proposition: man’s unique aim is to attain happiness, is tautological. It does not imply any statement about the state of affairs from which man expects happiness. ”
He seems to be very very clear here (unusually). Although he goes on to explain that happiness is meant formally, it is very clear that he is talking about an emotional state. Human action is all about striving for what we colloquially call happiness. He is also very clear that praxeology says nothing about how any particular human will attempt to attain this. So the person in Bob’s example is going to the gym because it makes him happier.
“We call contentment or satisfaction that state of a human being which does not and cannot result in any action. Acting man is eager to substitute a more satisfactory state of affairs for a less satisfactory. His mind imagines conditions which suit him better, and his action aims at bringing about this desired state. The incentive that impels a man to act is always some uneasiness”
An absolute requirement of action is emotion. Far from having nothing to do with emotion, we can have no praxeology without emotion.
Equally clearly, it says nothing about what emotions are involved except unease. Praxeology has nothing to do with determining whether happiness is more important than self-worth, or hedonism is preferred to altruism, or future contentment is worth pain today.. In this sense it has nothing to do with emotion.
Perhaps an example would be table football – does it have anything to do with tables? The table is assumed; it is an essential component of the game, but someone playing the game would probably not think it had much to do with tables.
Actually Harold, the fact that Mises said that man’s aim to achieve happiness is “tautological”, really serves as proof that he is using the term “happiness” in the formal sense.
It is perverse to assume he meant it as anything other than emotion. He repeatedly uses words for emotions and I have not seen anywhere where he denies that these actually are emotions. Such as here: ” There is however no valid objection to a usage that defines human action as the striving for happiness.” If he believed people were not striving for an emotional state this statement is untrue, since there are obvious valid objections. If he actually states somewhere that these words do not refer to emotions, please point me to them. Failing that it is a considerable stretch top interpret them any other way
Also it is not detrimental to his case if it is emotionally based.
Do you not agree that Mises was saying man acts to try to improve an emotional state, and we could call this state “happiness”? And that if we acknowledge this it in no way invalidates praxeology?
Emotions are not what praxeology is about, but emotion is a necessary condition for praxeology to exist. Mises entire hypothesis is based on this. In the absence of emotion we can have no preference.
LK asked “”does subjective utility in Austrian theory actually have nothing — absolutely zero — to do with the emotions we know as happiness, pleasure or satisfaction, as bala outrageously said? ”
The answer is that in humans it has everything to do with emotion, but that is incidental to Austrian economics. It would make no difference to Austrian economics if the thing maximised were something other than emotion, it is just impossible for it to be anything else.
I thought an analogy might be a computer game where the objective is to obtain melons. Is the game about melons? I think Austrian economics in some aspects is about emotion in the same way that game is about melons. However, the relationship is deeper, because emotions are involved in the theory of the game in a deeper way that the melons are in the game.
“It is perverse to assume he meant it as anything other than emotion.”
If a specific emotion is not in view, if any emotion can be associated with the end, then emotional “satisfaction” isn’t what’s being talked about.
“Emotions are not what praxeology is about, but emotion is a necessary condition for praxeology to exist.”
You’re missing the point, which is that you can’t measure “emotional satisfaction” for purposes of economic analysis, if it’s possible for the specific emotion to change depending on the end that is sought.
That was not my point at all, so I was not missing it, I was making a different point. If could get agreement of my reasonable point, then we could move on to the point you make here, but we could do so from a sound basis. If everyone thinks that action is not based on emotion, then there is no point discussing whether emotion is in some way comparable between people. If we can agree that emotion is necessary for action, then the answer to that question becomes important.
Harold, atoms and molecules are “necessary” for human to exist, but praxeologists do not deal with the science of atoms or molecules!
The point being made here is not that emotions do not exist. It is that praxeology does not deal with them.
That is not my point -see below.
But that is the point you made.
MF – I said “Emotions are not what praxeology is about, but emotion is a necessary condition for praxeology to exist.” The first part seems to paraphrase your comment above pretty accurately. The second part then adds a completely different point. The point I made is not the one you seem to believe it is.
Harold,
Are you sure that you are not conflating what you may be convinced is the case with human actions, with what praxeology actually deals with?
It is not “perverse” to say that praxeology does not require nor imply any emotions.
The use of the terms “satisfaction” which admittedly we all grew up to be associated with an emotional state of pleasant feelings, euphoria, and so on, does not give any of us blanket license to then claim that praxeology co gains analysis of emotions.
Mises used positive sounding terms that most people use when taking about emotions, to describe the experience of achieving one’s goals. But he could just as easily used negative sounding words like possessed ,or cursed, and so on, if he were brought up to associate what we do with witchcraft or whatever.
The striving for satisfaction in an emotional context is open to include instinct, reflex, arousal of the nervous system, etc. But action as dealt with in praxeology consists only in the fact that humans strive to achieve goals, and all that can be logically deduced from this.
You said that it is not detrimental to Mises’ case if it is emotionally based. That however is irrelevant. The question is whether it in fact is or is not. You make it seem like the only motivation for defending the “no emotions” view is by an agenda to attack anything that would be detrimental regardless of its truth value. That is not the motivation.
You ask:
“Do you not agree that Mises was saying man acts to try to improve an emotional state, and we could call this state “happiness”?”
No, he was saying man acts. He calls action striving towards happiness a tautology.
“And that if we acknowledge this it in no way invalidates praxeology?”
It would completely invalidate it, because it would move beyond the scope of praxeology.
You said:
“Emotions are not what praxeology is about, but emotion is a necessary condition for praxeology to exist.”
No it isn’t. Praxeology can exist REGARDLESS of the emotional states of people’s minds.
Even if someone does something that psychologists or psychiatrists would say is self-inflicted pain, torture, hatred, or what a theist might call demonic possession, or evil, or satanic possession, a praxeologist would consider ALL of that action as “striving towards happiness” or “striving towards satisfaction”.
You asserted:
“Mises entire hypothesis is based on this. In the absence of emotion we can have no preference.”
You are still conflating what YOU believe is true for why humans do things, with what praxeology treats it as.
You wrote:
“LK asked “”does subjective utility in Austrian theory actually have nothing — absolutely zero — to do with the emotions we know as happiness, pleasure or satisfaction, as bala outrageously said? ”
“The answer is that in humans it has everything to do with emotion, but that is incidental to Austrian economics. It would make no difference to Austrian economics if the thing maximised were something other than emotion, it is just impossible for it to be anything else.”
That statement you made “It would make no difference to Austrian economics” is what we have all been saying all along.
Whether emotions are in fact the primary motivation for why people do things, is as Mises said outside the scope of praxeology.
Remember, this whole debate was over LK’s (false) claim that praxeology studies emotions. LK claimed that emotions do “make a difference” in praxeology.
The dispute was never over whether or not humans are emotional species as can be shown by psychology or biology or whatever other field of inquiry.
“I thought an analogy might be a computer game where the objective is to obtain melons. Is the game about melons? I think Austrian economics in some aspects is about emotion in the same way that game is about melons. However, the relationship is deeper, because emotions are involved in the theory of the game in a deeper way that the melons are in the game.”
No, the praxeologist would say computer software it outside the scope of its field of inquiry.
Harold,
Check out Page 120 of HA where he says this.
“Utility means in this context simply: causal relevance for the removal of felt uneasiness. Acting man believes that the services a thing can render are apt to improve his own well-being, and calls this the utility of the thing concerned. For praxeology the term utility is tantamount to importance attached to a thing on account of the belief that it can remove uneasiness.”
From this statement, I see utility as having nothing to do with the emotions that underlie ends and preferences among them. Utility seems to be just the causal relevance for the removal of uneasiness, i.e., a subjective appraisement of the usefulness of means towards end satisfaction. The causal relevance has more to do with the cause-effect relationship between the means and the end state sought to be achieved through its application.
As I see it, Mises has been very categorical on this point. Unless you dig up something else where Mises says “Utility is …..” or “Utility means …..” as a definition of utility, I rest my case.
Your case rests on shaky foundations. Mises refers frequently to action being the relief of uneasiness. Removal of that uneasiness he compares to happiness, i.e. removal of felt uneasiness is something like increase in happiness.
Do you think action is possible without emotion? A computer uses means that result in an end. A computer has no emotion. Therefore what a computer does is not action, but programming. A spider rushes out onto the web to bite an insect in order to eat it. Yet without emotion, it is not action – just instinct.
“Do you think action is possible without emotion?”
Logically, yes. The living being engaged in action could jolly well be a cold, calculating, unemotional creature. Even such a creature would need a concept of utility as defined above since without it, purposeful behaviour is logically impossible.
So emotions as the basis of utility is not a logical necessity. That it is so in the real world of human beings does not tell us that utility cannot be conceived of without being related to or driven by emotions.
“Do you think action is possible without emotion?”
Logically, yes”
I am not entirely sure, but this may be true. We have no words to describe anything else that could result in action, because we do not have a concept of what it might be. This seems to me more of an a priori than belief in self ownership with regard to argumentation.
However Mises in his writings gave a very strong impression that he believed that Human action did not occur without emotion. I don’t see why anyone should have a problem with this, it would seem that Mises did not.
“However Mises in his writings gave a very strong impression that he believed that Human action did not occur without emotion.”
That, I guess is because of the human element in human action. Action per se does not need to be connected to emotion but humans being humans, emotions enter the picture. However, when our objective is to study the logical consequences of the fact that man acts, there is no logically necessary place for emotions in that analysis because it is action that is a given and our objective is not to explain behaviour or predict outcomes starting from human nature but to explain the consequences of purposeful behaviour by humans.
So, one should read Mises’ statements in their entirety as a case for keeping emotions out of the theoretical analysis of the logical consequences of human action. What he is saying is that human beings do have emotions and that these emotions influence their choices of ends, but that is a matter of no consequence to the economic theorist.
This is the best comment on this thread about the subject.
Bob,
Going by this definition given by Mises, I think you are wrong to talk of a means “giving” utility to its user. I think it is this misuse of words that misleads people into thinking that utility, like happiness or satisfaction, is something that can be given. From there, to make a further leap and come to the conclusion that utility is satisfaction or something closely related to it is but a small step.
Consistency in saying that a means “has” a utility will clear the picture rather quickly.
How does marginal utility explain price? The marginal utility of my 10th car is virtually nothing, and devoted to the useless task of being 8th backup car – but the price of cars is not close to zero
This video explains it very well:
The Birth of the Austrian School | Joseph T. Salerno
https://www.youtube.com/watch?v=dZRZKX5zAD4
As you demonstrated when you bought your 10th car, the useless task of being the 8th backup car was worth more to you than the other things you could have bought with the amount of money you spent.
Also, the dealer has other customers for whom that model has a higher marginal utility.
“How does marginal utility explain price?”
Marginal utility explains the ranking on the individual value scale. The value scale with all means ranked explains individual supply and demand schedules which explain aggregate supply and demand schedules, which eventually, through a proper understanding of the market process, explain price.
“The marginal utility of my 10th car is virtually nothing”
You are mixing up stated preference with demonstrated preference. You can say what you want about how you value the 10th car but when you acted, you did indeed value that 10th car higher than all the other things you could have obtained with that unit of money.
“You are mixing up stated preference with demonstrated preference. You can say what you want about how you value the 10th car but when you acted, you did indeed value that 10th car higher than all the other things you could have obtained with that unit of money.”
What if I had a large reserve of money in the bank? Then all we can say is that I valued the car less than the bank reserves. In fact, I value all my purchases more than bank reserves. I don’t think this says anything about my preference of cars to something else, say oatmeal.
“Then all we can say is that I valued the car less than the bank reserves.”
Bala saw that objection coming, which is why he referred to the “unit of money” spent.
Not all of his reserves are worth the same to him.
Thanks. That was precisely my point, though he doesn’t seem to have grasped it or its consequences (going by his reply).
You’re welcome. And here’s Rothbard on the matter:
Toward a Reconstruction of Utility and Welfare Economics
II – Utility Theory
Ordinal Marginal Utility and “Total Utility”
https://mises.org/library/toward-reconstruction-utility-and-welfare-economics-0#2a
“There is, however, no reason why marginal utility must be conceived in calculus terms. In human action, “marginal” refers not to an infinitely small unit, but to the relevant unit. Any unit relevant to a particular action is marginal. For example, if we are dealing in a specific situation with single eggs, then each egg is the unit; if we are dealing in terms of six-egg cartons, then each six-egg carton is the unit. In either case, we can speak of a marginal utility. In the former case, we deal with the “marginal utility of an egg” with various supplies of eggs; in the latter, with the “marginal utility of cartons” whatever the supply of cartons of eggs. Both utilities are marginal. In no sense is one utility a “total” of the other. …
“… We must conclude then that there is no such thing as total utility; all utilities are marginal. In those cases where the supply of a good totals only one unit, then the “total utility” of that whole supply is simply the marginal utility of a unit the size of which equals the whole supply. The key concept is the variable size of the marginal unit, depending on the situation.[23]”
“You are mixing up stated preference with demonstrated preference. You can say what you want about how you value the 10th car but when you acted, you did indeed value that 10th car higher than all the other things you could have obtained with that unit of money.”
What if I had a large reserve of money in the bank? Then all we can say is that I valued the car less than the bank reserves. In fact, I value all my purchases more than bank reserves. I don’t think this says anything about my preference of cars to something else, say oatmeal.
The point is you don’t have a preference for cars vs oatmeal per se. You value your first car a lot, then the second much less. If you have no car and no oatmeal perhaps you prefer one car to some oatmeal. If you have one car, then perhaps you prefer some oatmeal to a second car. We cannot say you prefer cars to oatmeal in a general way.
If you were the only person in the market, then after you had a car the price would have to drop in order to meet the new demand. You would offer only a small sum for a second car.
An absence of being able to say you like cars over oatmeal “in a general way” does not suggest a measurable intensity in liking that first car “a lot”.
What is suggested, although not in this particular order of understanding, is that value is done at the margin.
The rankings are not able to be measured cardinally. No such thing as a util.
It makes a bit more sense when considering a good that is used for a purpose – if I am thirsty, the marginal value of each sip of water for the purpose of thirst-quenching goes down, simply because I am less thirsty
It is not clear to me if this concept is applicable across different uses. I have a car – another car is useless to me for driving because I cannot drive two cars at once (this seems analogous to being thirsty). But considering if my wife should have a car is a completely different decision – it is an independent valuation of the costs and benefits of her car use against the cost of a car. Whether or not I have a car is irrelevant to the conclusion about her having a car (maybe I am paralyzed). There is one good, but two independent and unrelated margins
“It is not clear to me if this concept is applicable across different uses.”
Unless you want to tow a second car behind a remote controlled first car, for example.
Or one on top of the other, because you need the height.
“But considering if my wife should have a car is a completely different decision – it is an independent valuation of the costs and benefits of her car use against the cost of a car.”
An independent valuation, but not necessarily on a different value scale.
Do YOU get more satisfaction out of your wife having a car than whatever else you could have with that same unit of money.
(“Happy wife, happy life.”)
“An independent valuation, but not necessarily on a different value scale.”
Ok well, that’s it then – independent valuation where you consider the value of each good separately is the opposite of marginal valuation where the value of a good is just based on the marginal use
Ben,
The problem is that your comprehension of marginal utility is flawed. You are stuck with the theory of satiation of wants. That’s not how it works. Here’s how it does.
Each unit of water enables satisfaction of an end. If you have only 1 unit of water, you satisfy your most preferred end alone forsaking the rest. If you have 2 units of water, you get to satisfy your 2 most preferred ends. If you have n units, you satisfy the n most preferred ends.
If out of these n, you lose 1 unit, the end you miss out on is the nth ranked one because the remaining n-1 units would be used to satisfy the n-1 most preferred ends. This means that that one unit of a stock of n satisfies the nth ranked end. The usefulness of that 1 unit out of a stock of n is in the satisfaction of the nth ranked end. This 1 unit out of a stock of n is called the marginal unit of a stock of n. The utility of this marginal unit is called the marginal utility of the stock of n and is the subjective appraisement of the usefulness of the marginal unit in satisfying the nth ranked end.
The larger the n, the lower ranked is the end satisfied by the marginal unit and the smaller it is, the higher ranked is the end satisfied by the marginal unit. A unit of a means that satisfies a more valued end is necessarily more useful than one that satisfies a lower valued end. This means that the marginal utility of a stock will fall as the stock becomes larger and rise as the stock becomes smaller.
This is what we understand as the law of diminishing marginal utility. This concept, properly understood, enables ranking all means on a single value scale for economic theoretical analysis. It also explains why there is only one margin and not two.
I get the concept, I just disagree that is is possible to generally rank wants the way you describe. For example, I like watergun fights, and I like a green lawn. Water is an input to these things, but they also require other things like plastic waterguns, kids to fight with, land to grow grass on, sunshine, etc. The notion that I have a preferred use of water with respect to watergun fights and green lawns is nonsensical – they are different things with completely different aims.
I think that marginal value makes perfect sense when applying a good to a specific end – there is only so much water I can add to my lawn before it starts to drown the grass, I can only shower for so long, I only need one flush, etc. I just disagree that I can sensibly say I prefer one use to another.
A good can have a preferred end given a single moment and time and a single set of circumstances – but a split second later the result can be completely different. The notion of a generalized “preferred end” of a good is nonsensical
Ben, you don’t actually own 10 cars, right? But just about everybody has thousands of gallons of water (in normal circumstances). If cars fell out of the sky (like water does) so that most people had 10 cars, then their market price would indeed be much lower.
Going the other way, someone in the desert who stumbles upon a convenience store would be willing to pay a lot for a gallon of water.
Cars are READILY reproducible goods. Yet the price of newly produced cars tend to be set on total average unit costs and profit mark-up — on other words by cost-based mark-up pricing.
It doesn’t matter whether you as an individual purchase a 2nd, 3rd, 4th or 5th car, that price of a newly produced car is unlikely to change. Subjective utility does NOT explain price determination of cost-based mark-up pricing. Nor are cost-based mark-up pricing market-clearing prices.
About the only Austrian who properly understood this was Lachmann:
“In different markets prices are formed in different ways. Not all pricefixing agents have the same interests. Here historical change plays its part. The decline of the wholesale merchant, whose dominating role Marshall took for granted, for instance in textile markets, and who naturally aimed at setting such prices as would permit him to maximize his turnover (a short-run consideration), reduced the range of markets with flexible prices. The rise of the industrial cost accountant as a pricefixer, with his interest in ‘orderly marketing’ (a long-run consideration) and his aversion to frequent price changes, has made most prices of industrial goods in our world Hicksian fixprices. In all markets dominated by speculation of course prices must be flexible. On the other hand, all bureaucracies, including those concerned with production planning in large industrial enterprises, naturally abhor flexible prices.” (Lachmann 1994: 166).
“Those who glibly speak of ‘market clearing prices’ tend to forget that over wide areas of modern markets it is not with this purpose in mind that prices are set. They seem unaware of the important insights into the process of price formation, an Austrian responsibility, of which they deprive themselves by clinging to a level of abstraction so high that on it most of what matters in the real world vanishes from sight.” (Lachmann 1986: 134).
————————-
As long as Austrians like you refuse to understand this, your price theory will be badly flawed. You will lose time and again in arguments with economists including some neoclassicals who properly understand the reality of cost-based mark-up prices.
Oh!! These “costs” are prices of producers’ goods, aren’t they? So what determines these prices? The costs of the 2nd order producers’ goods? Aren’t these prices too? So what determines these prices? The costs of the 3rd order producers’ goods? But aren’t these prices too? I don’t know if I can really stop at Stage 3, but I am unable to escape the conclusion that your “explanation” is nothing more than a rehash of “turtles all the way down”.
There is no Austrian theory about how prices are “set” (or that people will tend to slash prices and not production while maintaining their prices in bad times). People are not going to go to the trouble of making something for sale without first being fairly certain in advance [appraisement] that they will be successful not only at selling it, but selling it at a profit. Selling at a profit will almost always be the goal of a manufacturer and seller of products (or even a service). Thus, the tendency of a successful business will be “mark-up” pricing because otherwise the product line will fail.
To claim that this tendency refutes Austrian analysis is pitiful, pathetic, dishonest and just plain dumb. Of course, this is the final end product of LK’s long line of Austrian obfuscations. There is no need to debate him further because this pronouncement is an admission of his total defeat.
So, in essence, you are saying that nowhere in Austrian theory is there a requirement for prices to be flexible and that they should adjust towards market-clearing levels to ensure a strong tendency towards supply and demand equilibrium in product markets? lol
I guess Mises was just an idiot who didn’t understand basic Austrian concepts:
“The market interaction brings about a price at which demand and supply tend to coincide. The number of potential buyers willing to pay the market price is large enough for the whole market supply to be sold. If government lowers the price below that which the unhampered market would set, the same quantity of goods faces a greater number of potential buyers who are willing to pay the lower official price. Supply and demand no longer coincide; demand exceeds supply, and the market mechanism, which tends to bring supply and demand together through changes in price, no longer functions.” (Mises 2011: 101).
We’ve been over this a billion times. People and their plans are flexible absent statist control and SWAT teams. There’s nothing left to say. Go away.
What so NOW a flexible price system is a crucial part of Austrian analysis in an ideal free market? make up your mind…
For the record only which you continue to distort, I have been saying the same thing for years. Free people can and will be flexible with their prices, locations, styles, lines of production etc. Austrian analysis does not insist that there will only be price changes in lieu of other options to adapt to changing conditions. Your entire position is based upon the preposterous “flexible prices only” claim. Give up.
http://mikenormaneconomics.blogspot.com/2013/06/lord-keynes-gardiner-means-on.html?showComment=1371829945331#c2975312340347892687
At Bob Roddis’s link, LK quotes Rothbard:
“But since costs are determined by expected future selling prices, this means that costs were previously bid too high by entrepreneurs.”
And therefore the current level of production is malinvested resources that need to stop.
LK:
You quote Mises:
“The market interaction brings about a price at which demand and supply tend to coincide.”
That is true for markup pricing, and all other pricing. Markup pricing does not disprove prices being a function of supply and demand.
You have never shown a shred of logic or evidence that even hints at prices NOT tending towards supply and demand in a free market.
No, sellers saying they will not cut prices when there is a decline in nominal demand does not invalidate this.
If demand falls, but sellers do not cut prices, what has happened is that supply has fallen. Prices are always exactly equal to supply and demand.
But, if sellers do not reduce prices when nominal demand falls, and they build up their “withheld” inventory, this additional inventory is not forever withheld. Sellers who keep inventory withheld do not intend to keep it forever withheld. The fact that they continue to own the goods is sufficient proof of this.
If they are waiting for increased demand, and they get it’s then the goods can be sold. If they don’t get it, then for all sellers there is an incentive to do something with the goods, and that incentive is all that is needed and necessary to serve as proof of the “tendency” that has been argued since day one.
There is not one iota of wording about any definite time periods that must elapse or would elapse.
The concept of “flexible prices” is NOT an objective description of the prices as numerical trends. Flexible prices refers to the individual human power and control over the prices as deemed by subjective valuations in a free market.
Your fundamental error in all of this is your abject inability to approach Austrianism with anything other than a vulgar positivist empiricism where the only reality is what you can see, whereas what individuals experience as subjects is somehow “not the real world”.
You keep making error after error because you are unable or unwilling to understand how to think like an economist. You only think like a historian, a data collector, a bean counter.
“If demand falls, but sellers do not cut prices, what has happened is that supply has fallen. Prices are always exactly equal to supply and demand.”
So prices “are always exactly equal to supply and demand” even when the products markets have excess supply and are not in equilibrium? hahaha
I bet “market clearing price” can mean anything you want it to mean now.
Presumably Rothbard and Murphy do not understand basic Austrian concepts under your crazy definition!:
“Private business prices its goods and services to ‘clear the market,’ so that supply equals demand, and there are neither shortages nor goods going unsold.” (Rothbard 2006a: 259)
“A surplus (or a ‘glut’) occurs when producers are trying to sell more units of a good or service than consumers want to purchase (at a particular price). A shortage occurs when consumers want to buy more units than producers want to sell (at a particular price). In this context, the equilibrium price (or the market-clearing price) is the one at which the amount supplied exactly equals the amount demanded. If the market is in equilibrium, there is no surplus and no shortage.” (Murphy 2010: 156–157).
.
LK:
If I refuse to sell a good, that good is not a part of supply.
The meanings of supply and demand above are merely the proper meanings of the terms.
They do not stand against the causes of prices falling when costs fall.
I certainly agree that if cars fell out of the sky the price would be low, and that the price of water in the desert would be high. It seems pretty intuitive that scarcity affects prices. It’s not clear how the marginal value concept is any different from the concept of scarcity
Is hunger an emotion? Thirst? A rancid smell? No. Yet I personally would find utility in removing these.
Is that because you dislike a rancid smell? Is there some quality intrinsic to the smell that indicates it should be removed?
Insects may be repelled by a rancid smell, but we do not think they have acted in the Misean sense when they move away – they have reacted, not acted. Has the insect found utility in these movements? This is a crucial question. What is it about the human that his responses are action, yet the insect’s are not? Can we say the insect prefers to avoid the rancid odour? It certainly reveals this by its movements.
“Has the insect found utility in these movements?”
The insect wishes to alieviate the unease of the rancid smell, so it voluntarily acted.
(Muscle memory is still action, not involuntary reaction; Try using muscle memory when your limbs are numb.)
LK! O LK!!
There’s something that seems to have escaped your attention (and, I think, not unintentionally).
You said
to which I said
Now….. Would you please address this important objection raised to your entire thesis on prices? Your theory seems to explain prices based on prices. Turtles all the way down. Makes you look quite intellectually unsound, doesn’t it? So please do answer at the earliest and clear the air.
Factor input goods prices — like all goods prices — can be divided into 2 fundamental categories: (1) flexprice and (2) fixprice markets.
You appear to so ignorant you think I deny the existence of flexprices.
And as for the “Your theory seems to explain prices based on prices” claim, perhaps you are again so ignorant you think that a price cannot be based on prior factor input prices? If that is so, then how is it that mark-ups are used all the time in the real world:
http://finance.yahoo.com/news/20-products-giant-markups-115730856.html
LK,
Stop trying to tap dance around the question. If you say prices of consumers’ goods are explained by costs, those costs being prices, you still have to explain those prices, for which, by your own theory, you need to look at the cost of making those producers’ goods whose prices you call costs of making the consumers’ goods.
So, you are indeed saying that prices of consumers’ goods are explained by prices of stage 1 producers’ goods which are explained by prices of stage 2 consumers’ goods and so on forever in a turtles all the way down explanation.
You need to demonstrate through argument that it is not so. Otherwise, you need to acknowledge that that is indeed the truth of your position and that it is (and always has been) flawed. As MF said, stop being a bean counter and show that you can think like an economist.
Hahaha,
Given that “fix prices” relate to goods the factors and components of which are ultimately “flex prices”, is sufficient proof that what you call ” fix priced” goods are in fact all set by flex prices.
The “fixed” part of the pricing is merely the phrase economists use to refer to pricing determined by, constrained by, a function of, a series of flex prices, rather than direct supply and demand for the fix price good in question.
When the nominal demand for a good set by fix price falls, what happens is that there is a backwards adjustment of flex prices in the components, and those flex price adjustments then by your own theory become the new determinants of the newer set of fix prices.
If you produce cars, and you find that the nominal demand for your cars declines, and you do not reduce your prices, what you will invariably face is a reduced quantity of money at your disposal to buy components that go into car production. If those components are set by the sellers as fix prices, then they will have a reduced quantity of money to buy their components, and so on, until we get to flex prices components. Then those prices fall in accordance with demand, and then once those prices are lower, all the way back up the chain will all the “fix priced” goods fall in price, because as you said, fix prices are determined by costs of production.
All prices are flexible in accordance with demand. Just because fix prices do not fall as soon as you subjectively prefer they do before you throe your hands in the air and call for guns to be pointed at innocent people, it does not mean that the Austrian theory of prices tending towards supply and demand becomes invalidated. No Austrian ever claimed that fix prices have to move in lock step with the nominal demand for those fix price goods.
If you bothered to read the Austrian economist Bohm-Bawerk, you would have known that Austrian theory of pricing was never solely or exclusively a theory of prices for all goods being always and everywhere set by the direct demand for those goods.
Read Bohm-Bawerk’s pricing theory where he considers sacks of grain.
“When the nominal demand for a good set by fix price falls, what happens is that there is a backwards adjustment of flex prices in the components, and those flex price adjustments then by your own theory become the new determinants of the newer set of fix prices. “
False. I’ve told you again and again that the evidence is that most of the time this doesn’t happen in mark-up pricing: if some flexprice factor input costs fall, most businesses will just prefer to maintain price and enjoy higher profit margins.
http://socialdemocracy21stcentury.blogspot.com/2013/11/downwards-rigidity-of-prices-and-mark.html
The proof of this can be seen in the surveys of business behaviour and the fact that since the 1940s deflation virtually never happens in recessions.
“False. I’ve told you again and again that the evidence is that most of the time this doesn’t happen in mark-up pricing: if some flexprice factor input costs fall, most businesses will just prefer to maintain price and enjoy higher profit margins.”
First, even if that were true, which it isn’t, then you would be contrsdicting your previous claim that fix prices are set in accordance with costs of production. Clearly that means if costs rise then prices rise, and if costs fall then prices fall.
But we know it is false.
If one business experiences decreased factor prices, they can earn MORE profits by selling at a reduced priced.
This is competition in the real world.
“The proof of this can be seen in the surveys of business behaviour and the fact that since the 1940s deflation virtually never happens in recessions.”
The presence of a central bank that prints money so as to prevent price deflation does not refute the causes of prices. The very fact that the Fed has to keep printing money so as to prevent prices from falling is proof that my theory is correct and yours is incorrect.
And you appear so lost and desperate that you do not realise that I am NOT talking of flexprice and fixprice. I am talking of how your economic theory (whatever there is of it) explains prices.
Your objections are laughable.
When a business sets a mark-up price, all it needs are the direct overhead and variable costs (and hence prices of those direct factor inputs), NOT the prices of factor inputs of those factors nor the ones before them, etc.
Nice job of handwaving there with the word “laughable”. I guess, in your mind, that releases you from the requirement of having to explain that your position is not one of explaining prices from prices.
Remember that the question is not what a business needs but how the underlying economic theory explains the formation of prices in the economy as a whole.
Once again, you are essentially saying that consumers’ goods prices depend on costs incurred in stage 1. But these costs are in turn nothing more than prices of factors employed in stage 1 of the multi-stage process. So, in the process of attempting to explain consumers goods prices, you have brought up a new set of prices that you need to explain.
Going by your “theory”, one needs to look into the costs of the stage of production that churned them out, i.e., Stage 2. But then, as in the previous case, these costs are once again the prices of the factors employed in Stage 2. So we have, once more, a set of prices that you need to explain.
Taking this further to Stage 3, Stage 4 and so on, I see nothing other than an explanation that sounds like turtles all the way down. So do stop the handwaving and revert with a real explanation.
(1) So, what, now you are not even disputing that many businesses set their prices as a mark-up on total average unit costs?
(2) I have already told you that some factors will have flexprices (determined by supply and demand) and some fixprices. There is no vicious circularity involved in saying that fixprices are determined by prior costs of production, nor in saying that a prior factor that has a fixprice will have been determined by its costs of production too.
You’re like an idiot who won’t believe that chickens come from eggs and eggs from chickens because its “turtles all the way down!”
LK,
While your reply is not unexpected coming as it does from you, it is outright dishonesty to pretend to have answered the question or addressed the challenge posed when all you have done is to sidestep it.
The question was not about the nature of prices (fix or flex) but how your economic theory explains the economic phenomenon “price”.
When you say price depends on costs, which again are prices, your explanation is indeed yet another example of turtles all the way down.
Incidentally, the chicken-egg problem has a clear solution. If the question is
the answer is the egg because the first chicken must have been born to a non-chicken ancestor whose egg hatched into the first chicken.
If, on the other hand, the question is
the answer is the chicken because only a chicken can lay a chicken egg and the first chicken must have hatched out of the egg of a non-chicken ancestor.
Phew!!! So much for eggs and chicken. Will you now stop the evasion and explain why your explanation of prices from prices is not a case of turtles all the way down?
Responses to different threads on the same theme. Guest said of the insect avoiding a smell: “The insect wishes to alieviate the unease of the rancid smell, so it voluntarily acted”. My understanding was that Mises said this was not action, as the insect did not “choose”, it responded as it was instinctively forced to do. If this unconscious behaviour is action, then I withdraw my argument, since this is not emotion. Can anyone clarify? If I am wrong I have a lot of Mises quotes that will need explaining.
MF: “It is not “perverse” to say that praxeology does not require nor imply any emotions.” You need to look at what I said, which was ““It is perverse to assume he meant it as anything other than emotion.” Your response is a non sequiteur. When Mises uses terms like happiness not in quotation marks, why would we think he was talking about something other than emotion unless he tells us he is doing so? It is perverse to say he talked of happiness, but he meant something completely unrelated.
“But he could just as easily used negative sounding words like possessed ,or cursed, ” This goes back to the insect. If someone is possessed, they are not controlling their body, but being controlled by the possessor. I would say that was not action, so that is not a valid objection. Surely the curse has the same problem as the possession – there must be a curser, and if we act out the curse we are not choosing. Again if these are human action, then I have mis-understood. To clarify, I am not saying that Mises believed happiness per se was the true goal, but it was some emotional state that the word happiness may be used to mean reducing unease without too much distortion. This is different from saying that by happiness he might as well have said cement, or fnurgles.
I agree he could and did use negative words – in particular unease. I would argue the insect does not feel unease and that is why its behaviour is not action. None of your arguments in any way shows that Mises was not actually talking about emotions when he apparently talked about emotions.
“The striving for satisfaction in an emotional context is open to include instinct, reflex, arousal of the nervous system, etc. But action as dealt with in praxeology consists only in the fact that humans strive to achieve goals, and all that can be logically deduced from this.”
Mises said that the origin of the goal was immaterial, be it instinct or whatever. The distinction between the insect and the man is not that humans lack instinct. It is that for humans to act, the instinct can do no more than determine the goal, which man then chooses to act towards or not. No choice, no action.
“It would completely invalidate it, because it would move beyond the scope of praxeology.” If it beyond the scope, how can it invalidate it?
“You are still conflating what YOU believe is true for why humans do things, with what praxeology treats it as.” From what he wrote, Mises thought so too.
“Remember, this whole debate was over LK’s (false) claim that praxeology studies emotions.” I thought his claim was that emotion had something to do with it, rather than was the study of.
“No, the praxeologist would say computer software it outside the scope of its field of inquiry.” I did not ask what the Praxeologist would say. Is it or isn’t it? The biologist may say that whether apples are more expensive that pears is outside its field of enquiry, but we can still resolve the issue.
There cannot be a preference without emotion. If you argue with me you have accepted my proposition, since your preference to argue has demonstrated emotion. Praxeology pre-supposing emotion seems to me a much stronger claim than argument pre-supposing self ownership.
So if I can sum up my position. Praxeology is not the study of emotions. The origins of the preferences is not relevant to praxeology, which Mises, you and I and most here agree with I think. Praxeology studies what happens after the preference exists. However, the preferences cannot exist without emotion, else they are not preferences but programing. I believe this reflects Mises’ position, since this reflects what he wrote.
If I can presume to summarise your position, to see if I am right. You agree with me up to “however”. After this you believe that preferences can exist without emotion, and they may be based on something else. Or possibly you have no opinion on that, as it lies outside Praxeology, in which case you are in no position to disagree with me.
This still leaves open the question of whether Austrian economics has something to do with emotion. The phrase is imprecise, and as I see it can be answered both ways – hence the essentially unresolvable debate. Does the computer game have absolutely nothing to do with computers?
Action presupposes preference. Preference does not presuppose emotion. So that’s where I guess your argument ends.
Something like Cyberdyne Systems Model 101 or T1000 can have preferences without emotions.
This gets at the heart of the matter. Is it generally agreed among Austrians or Praxeologists that when a computer takes some course of action, this is the “action” that Mises talked about? If I program a computer to select the largest number from a list, then when it picks the largest number from a list, that computer has demonstrated a preference for the largest number? My understanding was that Mises rejected this. If I am wrong, I will have to go back and re-read, but it seemed very clear to me at the time. He talked specifically of animals that were not “acting” because they simply responded in a manner over which they had no choice. So you think the insect is acting also? That is two to nothing so far.
These issues often get glossed over – it is pretty important to determine what action is. As I said, if this is what action is, I withdraw my objection. But I think it will raise lots of other issues.
The insect acts. The computer doesn’t.
Action in the Austrian sense is purposeful.
This is quite complex. Bala says computers act, Guest says they don’t, yet insects do. There seems to be little agreement here, and some confusion over what action is.
One section from Mises:
“We interpret animal behavior on the assumption that the animal yields
to the impulse which prevails at the moment. As we observe that the
animal feeds, cohabits, and attacks other animals or men, we speak of its
instincts of nourishment, of reproduction, and of aggression. We assume
that such instincts are innate and peremptorily ask for satisfaction.
But it is different with man. Man is not a being who cannot help yielding
to the impulse that most urgently asks for satisfaction. Man is a being capable
of subduing his instincts, emotions, and impulses; he can rationalize
his behavior. He renounces the satisfaction of a burning impulsc in order
to satisfy other desires. He is not a puppet of his appetites…What distinguishes man from beasts is precisely that he adjusts his
behavior deliberatively”
“Thinking and acting are the specific human features of man.”
how does that relate to insects acting?
I am saying that action, i.e., purposeful behaviour, is possible without emotion. I deliberately chose Cyberdyne Systems Model 101 and the T1000 because these are not computers but machines based on AI. They have been given a purpose. They have capabilities and limitations. They operate independently of direct human control. They operate on the basis of the knowledge they start with and that which they gather through their experiences. They are aware of their own and their opponent’s capabilities and limitations. They face situations where there are alternative courses of action and they independently choose from those based on how each influences the success of their mission.
These unemotional machines too act, i.e., engage in purposeful behaviour. They seek to accomplish a mission – one to protect and the other to kill. It doesn’t matter whether the purpose is their own or has been given to them. The point is that their behaviour is driven by a purpose.
The T1000 is an especially interesting example because its purpose has been given to it not by a human but by a renegade machine also driven by AI.
In any case, these examples were given to help you conceive of the possibility of action without emotion. No one is saying that human action is in no way connected to emotion but economic theory (including concepts such as utility), which is the study of the logical consequences of human action, has nothing to do with them.
“What distinguishes man from beasts is precisely that he adjusts his
behavior deliberatively”
Meh. Mises was just wrong on this.
This is a minor issue, though, as it pertains to Praxeology, as you’ll see.
He was an agnostic, so he had secular views on the question of origins.
He mistakenly believed that he could logically hold secular views and still believe that humans were somehow different than other animals, rather than the consistent view that humans were just another animal.
Kind of like how Major Freedom believes. Heh.
I would consider Bala’s belief in AI to be similarly mistaken, since it presupposes that intelligence can theoretically be fully explained in terms of causal relations.
But regardless of their views on origins, Mises, Major Freedom, and Bala, are correct in their view that action, in the Austrian sense, is purposeful.
You are repeatedly missing a basic point that has been made elsewhere on these comments, once to you. A completely unemotional being can engage in action. Emotion is not a prerequisite for engaging in action. Human beings may be bound up with emotion, but that does not mean action per se is in any way connected with emotions.
Praxeology is the study of the logical consequences of the fact that man acts. In the proposition Man acts, man is the subject. Emotions are an attribute of that subject. acts is the predicate. I don’t know on what basis you insists on the existence of inextricable linkages between human emotions and action in the Austrian framework when is it man and not action that is bound up with emotion and praxeology is the study of the logical consequences of the fact that man acts. The logical corollaries of action are the necessary truths, not the incidental aspects of man’s nature.
It is like this.
Man acts. Action presupposes ends. Hence man must have ends.
Man acts. Action presupposes preference. Hence, man must have preference.
It is not like this.
Man acts. Man has emotions. Therefore action without emotions is not possible.
You are making a fundamental logical error and decorating it with a large volume of language to cover it up.
What Bala said.
Thanks to everyone for contributing constructively. I get the point that praxeology does not study emotion. Praxeology is outside emotion. I am postulating that praxeology could not exist without emotion, which is a different claim.
“Action presupposes preference. Hence, man must have preference.” Yes, but IF preference presupposes emotion, then we can also say hence man has emotion.
I think Mises does not help resolve this argument by differentiating man from beasts as he did. This distinction makes it uncertain what he meant. However we must not confuse Praxeology with Mises.
I see Bala and Guest disagree over the AI. It seems to me this disagreement is important. If the AI we have today can act, then action does not require emotion. Case closed.
But consider the AI. “They have been given a purpose. They have capabilities and limitations. They operate independently of direct human control. They operate on the basis of the knowledge they start with and that which they gather through their experiences. ” This applies to my computer program. It has been given a purpose – to pick the highest number. It operates independently of human control – we don’t have to supervise its working. Certainly it could take as input measurement from the environment, say how tall people were that walked past it. It operates on the basis of knowledge it starts with and that it gathers through experience.
Guest says “I would consider Bala’s belief in AI to be similarly mistaken, since it presupposes that intelligence can theoretically be fully explained in terms of causal relations.” I am not sure it can’t be. After all, what else is there, magic? Which would mean AI could in principle “act”, I just don’t think we there at the moment.
My hypothesis is that when AI reaches the point that it can act, it will have attained emotions. What else could we say is the criterion of distinction between an acting AI and a simple computerised machine?
Consider that someone can feel unease, yet have no way of alieviating it.
Austrians would say that this is praxeologically meaningless, since no action will take place.
When hungry, I prefer to eat.
When sleepy, I prefer to sleep.
I don’t get emotional about it.
I don’t need an emotion to have a preference.
Unless you are using an unconventional definition for ’emotion’.
UK government paying people to be morbidly obese.
http://www.mirror.co.uk/news/uk-news/too-fat-work-woman-refuses-5037613