What is a right-libertarian? [Archive]

Durruti's Ghost

28th October 2009, 20:49

Like all terms, "right-libertarian" does not have one set definition and is best defined by the people using it. However, it is generally used by two groups of people to mean two different things. When libertarian socialists such as myself call people "right-libertarians", they are placing them in a category that includes "anarcho"-capitalists, libertarian minarchists like Nozick, Libertarian Party members, Ron Paulites, and objectivists. When left-leaning "anarcho"-capitalists like Roderick Long call people "right-libertarians", they are placing them in a category that includes libertarian minarchists, Ron Paulites, and socially conservative "anarcho"-capitalists. This is distinct from what they call "left-libertarianism," a socially liberal form of "anarcho"-capitalism that embraces feminism (often radical feminism), anti-racism, trade unionism, and, on some rare occasions, State intervention on the behalf of disadvantaged groups when it is clear that this intervention actually does help said disadvantaged groups and is not simply another way of disadvantaging them further (with the caveat that the only reason these groups are disadvantaged in the first place is because of the State). Generally, this intervention (in their view) must have been forced on the State by social movements of disadvantaged groups in order for them to support it. Invariably, they maintain that the total elimination of the State apparatus would serve the interests of all disadvantaged groups. They have much in common with libertarian socialists; however, they are not libertarian socialists because they do not support an international proletarian revolution in which the workers take control of industries by force or, more fundamentally, a system of ownership based on possession rather than private property.

Mo212

28th October 2009, 20:54

But we do not view capitalism as inherently exploitative as you do. Many AnCaps would say they take libertarianism to its logical conclusion. There are exceptions of coarse, for example, I consider myself and AnCap, but not a libertarian.

I think the biggest problem with capitalism historically is how people have tried to justify unlimited profits, land and property accumulation, there should have been a cap on wealth ownership and how much % of the money supply you could own at any given time, because I believe we could make good arguments that money is a flawed store of value. Since you take the richest 30 people in the world with billions of dollars, stick them on some remote island and all that money isn't worth anything, it is only worth something in a social context of being able to command others to do your bidding because they have less then you because you've monopolized a rather large portion of the resources through threat of violence (police/army), and created a fictious legal institution and philosophy that at one had some legitmacy for the small business owner but in terms of physical, mathematical and geometrical efficiency, it makes sense to create larger more centralized production.

We could make a good case that capitalism is energy inefficient (i.e. consider everything we make in foreign countries that eat gas and energy at alarming rates) and this energy inefficiency is because money does cannot account for the complexity of the real world.

Money is a political institution and I think it served a decent purpose in earlier times when deep specialziation lack of government and police force couldn't easily enforce other peoples insane accumulation of property, as populations grew however there was a need to keep the population under control and hence the rhetoric of private property for control and keep societies productive resources in the hands of a few, while spinning it as benefiting everyone.

Now I'm not saying private property is evil, on the contrary, I believe unlimited accumulation is the evil abusive part of private property which cannot be effectively checked in a specialized society such as ours because money is the law for most people, they are too easily corrupted by it since they do not own any passive income generating investments in institutions that capture profits from society at large.

Dejavu

28th October 2009, 21:22

But we do not view capitalism as inherently exploitative as you do. Many AnCaps would say they take libertarianism to its logical conclusion. There are exceptions of coarse, for example, I consider myself and AnCap, but not a libertarian.

I am not going to give a detailed critique of this quote, because it would be unfair for me to argue against dejavu when he can't respond. But I will just say that it is not clear to me how capitalism on a large scale is synonymous with mercantilism. I am also not interested in winning the hearts and minds of most anarchists. I do not believe that Capitalism is functionally a state enforced system, and I don't think capitalism is incompatible with free enterprise.

Normally I would have backed up my assertions, but I am assuming that dejavu did not know you quoted him.

This is really semantics. If you were having a discussion with me I can accept what you mean by 'capitalism' but if you talk to a lot of other people about your 'capitalism' they will most assuredly not gather the same meaning from capitalism as you do. Capitalism is a convoluted and bastardized term to the point of meaning both one thing and its opposite at the same time.

Ancaps accept capitalism to simply mean voluntary trade and recognition of individual property rights. Unfortunately this is a romantic view of capitalism that most people do not seem to accept without 'baggage.' Capitalism is understood as currently existing capitalism , that is to say, state laws dictating property rights , state chartered corporations , the current monetary system ( even Milton Friedman insisted that the money supply must be artificially expanded because it is the only way to sustain a growing economy :rolleyes:),etc.

A socialist , especially around here, is going to think an 'Ancap' is simply one that wants to remove the state out of that equation but somehow maintain the same institutions of economic power. The socialist is going to think 'stateless capitalism' is worse because the 'crazy Ancap' wants to eliminate all protections for the worker. The socialist ( anarchist socialist) believes the state is evil to the extent that it serves capitalist interests but also, perhaps reluctantly, supports the state to the extent that it gives the workers some kind of benefits ( universal healthcare , unions , etc). Its sort of a love-hate relationship. In other words , given the convoluted meanings of capitalism, a typical statist is going to think you're nuts because they cannot see any other way property rights can be respected/defended other than a state and a socialist is going to think you're crazier than a state capitalist because you want still want the currently existing power structures , only without a state , therefore , totally screwing over workers.

Granted , these might not be your positions but if you stick to 'capitalism' you're going to have a tough time shaking this image. Also , the socialists actually have historical precedence to officially define capitalism since it was Karl Marx that coined the term. I mean common man , do you really want to wrap yourself up in a label that Karl Marx made up?

Now I disagree with 'Ancaps' on more than just semantic grounds. Some of these issues include the concepts of 'self-ownership' and property rights being derived from that 'axiom' as somehow being absolute. Cheering privatization. Some functionally acting as apologists for corporate interests like 'Wal-Mart' ( See Walter Blockheads), Hoppe makes me want to throw up although I can't blame an Ancap that doesn't support Hoppe, and also there are those Ancaps that seem to insist that everything must be privatized in order to have a free society to extreme absurdities such as no matter where you stand , you're on someone's property that has the right to remove you from it. Making bizarre rationalizations for 'voluntary contract slavery,' etc. Overall , I still think socialism ( Marxism more specifically) is nutty, but not all of their critiques are bad and should definitely be considered and as for capitalism , I don't see how adopting the term helps promote liberty in any way.

Bud Struggle

28th October 2009, 21:57

Can someone provide me with a good definition of a right-libertarian?

http://slog.thestranger.com/files/2008/01/originaleustice.jpg

The butterfly being the Proletariat.

IcarusAngel

28th October 2009, 22:32

I think leftists waste too much time with free-marketeers of the Mises variety. All of their 'good' philosophers died years ago and the only people who advocate Mises fascism are a few trolls on the internet.

Really, it might be a good strategy to just ignore the ancaps and free-marketeers unless their rhetoric comes up explicitly.

Skooma Addict

28th October 2009, 22:38

When libertarian socialists such as myself call people "right-libertarians", they are placing them in a category that includes "anarcho"-capitalists, libertarian minarchists like Nozick, Libertarian Party members, Ron Paulites, and objectivists.

It just seems strange that you would group objectivists, Paulites, AnCaps, and members of the LP into 1 category. It is to the point where telling someone that your a right-libertarian really doesn't say anything meaningful.

This is really semantics. If you were having a discussion with me I can accept what you mean by 'capitalism' but if you talk to a lot of other people about your 'capitalism' they will most assuredly not gather the same meaning from capitalism as you do. Capitalism is a convoluted and bastardized term to the point of meaning both one thing and its opposite at the same time.

Ancaps accept capitalism to simply mean voluntary trade and recognition of individual property rights. Unfortunately this is a romantic view of capitalism that most people do not seem to accept without 'baggage.' Capitalism is understood as currently existing capitalism , that is to say, state laws dictating property rights , state chartered corporations , the current monetary system ( even Milton Friedman insisted that the money supply must be artificially expanded because it is the only way to sustain a growing economy :rolleyes:),etc.

A socialist , especially around here, is going to think an 'Ancap' is simply one that wants to remove the state out of that equation but somehow maintain the same institutions of economic power. The socialist is going to think 'stateless capitalism' is worse because the 'crazy Ancap' wants to eliminate all protections for the worker. The socialist ( anarchist socialist) believes the state is evil to the extent that it serves capitalist interests but also, perhaps reluctantly, supports the state to the extent that it gives the workers some kind of benefits ( universal healthcare , unions , etc). Its sort of a love-hate relationship. In other words , given the convoluted meanings of capitalism, a typical statist is going to think you're nuts because they cannot see any other way property rights can be respected/defended other than a state and a socialist is going to think you're crazier than a state capitalist because you want still want the currently existing power structures , only without a state , therefore , totally screwing over workers.

Granted , these might not be your positions but if you stick to 'capitalism' you're going to have a tough time shaking this image. Also , the socialists actually have historical precedence to officially define capitalism since it was Karl Marx that coined the term. I mean common man , do you really want to wrap yourself up in a label that Karl Marx made up?

I guess this makes sense. But what am I going to call myself then? I need some label to distinguish my general beliefs. If not an AnCap, what term could I possibly use?

Maybe whether or not I should use the term capitalism depends on who I am talking to.

Now I disagree with 'Ancaps' on more than just semantic grounds. Some of these issues include the concepts of 'self-ownership' and property rights being derived from that 'axiom' as somehow being absolute. Cheering privatization. Some functionally acting as apologists for corporate interests like 'Wal-Mart' ( See Walter Blockheads), Hoppe makes me want to throw up although I can't blame an Ancap that doesn't support Hoppe, and also there are those Ancaps that seem to insist that everything must be privatized in order to have a free society to extreme absurdities such as no matter where you stand , you're on someone's property that has the right to remove you from it. Making bizarre rationalizations for 'voluntary contract slavery,' etc. Overall , I still think socialism ( Marxism more specifically) is nutty, but not all of their critiques are bad and should definitely be considered and as for capitalism , I don't see how adopting the term helps promote liberty in any way.

I do not believe in self-ownership or the idea that property rights derived from an axiom are objectively absolute. Voluntary slavery is an interesting concept to ponder. I wouldn't stop a person from becoming a voluntary slave, but I also would not stop someone from breaking their contract and ceasing to be a voluntary slave.

Skooma Addict

28th October 2009, 22:40

Kwisatz Haderach

29th October 2009, 03:00

But we do not view capitalism as inherently exploitative as you do.
You do not view...

See, your problem is that you talk as if this is some sort of curious little intellectual dispute. It is not. It is a matter of life and death for millions of people, and a matter of prosperity versus misery for billions. Debating whether or not capitalism is exploitative is like debating the physics of high-speed winds while standing in the path of a tornado. Class struggle is not a polite discussion about the relative merits of various economic systems. It is a war to the death between good and evil. You can sit on the sidelines if you wish, but, for God's sake, don't walk into it acting like you don't understand why we all can't just get along.

IcarusAngel

29th October 2009, 03:17

What is Mises fascism?

I have to hand it to you, even though your posts aren't the most intelligent, they are pretty funny.

Mises fascism is the preference for landed domination over resources versus democratic ownership of resources (Mises spoke highly of fascism 'saving' Western civilization versus the alternative). There are three types of ownership for any society of land: monarchistic and dictatorial rule, private owners, and public ownership (the degree of individualism varies).

Really, it isn't how private individuals come to own land, it's that they shouldn't own it altogether. A democratic society would determine what to do with resources and at what time. A democratic society would also solve any and all problems of pollution, child labor, and so on, instead of trying to justify it. The key difference between leftists and rightists imo is that rightists do not believe in democracy and freedom, so the whole 'left libertarian vs. right libertarian' issue within the Libertarian Party is irrelevant. (Note: most early libertarians called for public ownership, so libertarian-socialist is still an accurate term.)

My statement was accurate even if you don't think it was intelligent (you having admitted you don't understand social science and can't even cite a single source proving that Miseans are taking seriously) - Libertarians are losing ground even on the internet, the only place they've had to proselytize their theories. I guess the left could 'go in for the kill,' but time would be much better spent arguing against the capitalism that exists, not the fairy tale capitalism that will likely never come to be.

If you were 'intelligent,' you'd try and convince the "Libertarian left" members to try and join the 'right libertarian movement,' as the "Libertarian left" believes that private tyrants should continue to own resources.

Skooma Addict

29th October 2009, 03:27

See, your problem is that you talk as if this is some sort of curious little intellectual dispute. It is not. It is a matter of life and death for millions of people, and a matter of prosperity versus misery for billions. Debating whether or not capitalism is exploitative is like debating the physics of high-speed winds while standing in the path of a tornado. Class struggle is not a polite discussion about the relative merits of various economic systems. It is a war to the death between good and evil. You can sit on the sidelines if you wish, but, for God's sake, don't walk into it acting like you don't understand why we all can't just get along.

Your problem is that your judgment is clouded because you are too emotionally invested in your ideology. But yes, it is a matter of life and death for millions of people. If socialism were ever be implemented in a major country, millions of peoples lives would be ruined.

But your right, I do not think I am some enlightened hero who is fighting for the oppressed people of the world. I am interested in philosophy and economics, which is why I like talking about them. It's not like I spend my day attempting to figure out how to achieve my ideal society. I think doing so would just be a waste of time.

Skooma Addict

29th October 2009, 03:46

:lol:

Mises fascism is the preference for landed domination over resources versus democratic ownership of resources (Mises spoke highly of fascism 'saving' Western civilization versus the alternative). There are three types of ownership for any society of land: monarchistic and dictatorial rule, private owners, and public ownership (the degree of individualism varies).

Yea, Mises praised fascism for preventing Socialism from becoming the single dominating ideology in Europe. However he was not a fascist. Anyone who read his work Liberalism would know this. So anything that doesn't have democratic (majority rule) ownership of resources is fascism?

Really, it isn't how private individuals come to own land, it's that they shouldn't own it altogether. A democratic society would determine what to do with resources and at what time. A democratic society would also solve any and all problems of pollution, child labor, and so on, instead of trying to justify it. The key difference between leftists and rightists imo is that rightists do not believe in democracy and freedom, so the whole 'left libertarian vs. right libertarian' issue within the Libertarian Party is irrelevant. (Note: most early libertarians called for public ownership, so libertarian-socialist is still an accurate term.)

I understand how majority rule works, I just don't think it is a very good idea. I object to a democratic economy on ethical and economic grounds.

My statement was accurate even if you don't think it was intelligent (you having admitted you don't understand social science and can't even cite a single source proving that Miseans are taking seriously) - Libertarians are losing ground even on the internet, the only place they've had to proselytize their theories. I guess the left could 'go in for the kill,' but time would be much better spent arguing against the capitalism that exists, not the fairy tale capitalism that will likely never come to be.

I need to cite sources proving that "Miseans" are taken seriously? Boettke, White, Soto, Horwitz, and Selgin all publish works in mainstream economic Journals. I trust that you can use the google function and look for yourself. Austrian Economics is gaining credibility and popularity.

I do not really care if my philosophical beliefs are unpopular. Personally, I prefer to advocate for gradual change because I do not think I will live to see a free market. I am not actually trying to form an AnCap society.

If you were 'intelligent,' you'd try and convince the "Libertarian left" members to try and join the 'right libertarian movement,' as the "Libertarian left" believes that private tyrants should continue to own resources.

I do not consider myself A right-libertarian, and I dislike the majority of the Libertarian Left.

Kwisatz Haderach

29th October 2009, 03:52

Your problem is that your judgment is clouded because you are too emotionally invested in your ideology.
Actually, it is necessary to have clear judgment and be emotionally invested in one's ideology in order to be effective. One must have clear judgment in order to come up with good solutions, plans for the future, and strategies for implementing those plans. And one must be emotionally invested in order to have the determination to fight for those plans and follow those strategies in a largely hostile world (and often at some personal cost).

It is a fine line to walk, but I am trying to walk it.

But your right, I do not think I am some enlightened hero who is fighting for the oppressed people of the world.
It is not a question of being an "enlightened hero." It is a question of choosing sides.

When workers demand higher wages and bosses want to fire them, which side are you on?
When workers occupy factories so that they will have something to eat tomorrow, which side are you on?
When landlords kick people out of their homes because they couldn't pay the rent, which side are you on?
When workers rise up and fight the police or the hired goons of capitalist business owners, which side are you on?

When the bullets start flying between the people who want to be able to feed and house themselves and the people who want to have their property "rights" respected, which side will you be on?

We both know the answer to that question.

IcarusAngel

29th October 2009, 03:56

Skooma Addict

29th October 2009, 04:06

Actually, it is necessary to have clear judgment and be emotionally invested in one's ideology in order to be effective. One must have clear judgment in order to come up with good solutions, plans for the future, and strategies for implementing those plans. And one must be emotionally invested in order to have the determination to fight for those plans and follow those strategies in a largely hostile world (and often at some personal cost).

But my point was that many socialists are more emotionally invested than they should be. They will cling to their beliefs even though there is so much evidence against them. This is true of all ideologies of coarse, so this isn't really anything specific to Socialism.

When workers demand higher wages and bosses want to fire them, which side are you on?
When workers occupy factories so that they will have something to eat tomorrow, which side are you on?
When landlords kick people out of their homes because they couldn't pay the rent, which side are you on?
When workers rise up and fight the police or the hired goons of capitalist business owners, which side are you on?

I would need more information than what you gave me. I do not view the world as some kind of capitalist vs. worker battleground. I would give different answers depending on the scenario.

When the bullets start flying between the people who want to be able to feed and house themselves and the people who want to have their property "rights" respected, which side will you be on?

When the bullets start flying? I am extremely opposed to any kind of armed revolution, and I do not sympathize with those who will murder innocents in order to further their political agendas.

IcarusAngel

29th October 2009, 04:14

Miseans are the ones who prefer an axiomatic, non-empirical approach to economics, who believe if the evidence goes against them it's because of some 'hidden factor.' This gives it all the credibility of a cult.

You could find more engineers that believed 9/11 was an inside job than you could find mathematicians or any kind of social scientist (including economists) who take the cultish rhetoric of Miseans seriously.

Skooma Addict

29th October 2009, 04:15

lol. You go through something like EBSCOhost, not "Google," to access mainstream economic journals. Especially with broad names like "White" I'm not going to waste my time searching through google looking for an these supposedly famous austrian economists. Austrian economics is not 'gaining ground' and it is pretty much a dead field - even other economists who believe in an 'axiomatic' approach to economics and people like Caplan have been criticial of the school.

And my point is you'd have a much better chance of convincing someone at the Libertarian left forums than you would here.

I realize you know nothing about economics, but I will still take the time to tell you that AE is becoming more popular. Neoclassical Economists are reading and starting to take notice, and Hayek is becoming a common read for everyone in the profession. I also know Caplan is critical of the school, but he agrees with them on many points. Even in popular culture, there are people like Ron Paul, Tom Woods, and Peter Schiff.

I am more interested in proving people here wrong than I am in converting them to AnCap. Most Left Libertarians feel they have progressed above petty anarcho-capitalism, so it would be very difficult to convince them of anything.

Skooma Addict

29th October 2009, 04:21

Miseans are the ones who prefer an axiomatic, non-empirical approach to economics, who believe if the evidence goes against them it's because of some 'hidden factor.' This gives it all the credibility of a cult.

Just a display of economic ignorance on your part. But yea, Austrians have various epistemological and methodological disagreements with Mainstream economists.

You could find more engineers that believed 9/11 was an inside job than you could find mathematicians or any kind of social scientist (including economists) who take the cultish rhetoric of Miseans seriously.

Disregarding the fact that your wrong, that has nothing to do with the validity of AE. I realize you have no arguments against AE, so this is the kind of stuff you resort to, but if you want to debate about the validity of Austrian Economics, just visit the forums over at the Mises Institute. The people there will teach you a thing or 2.

IcarusAngel

29th October 2009, 04:36

Ron Paul also believes in creationism and his movement was largely made up of 9-11 truthers. And you don't have to be a professional economist to realize that the methods use by Austrians are seriously flawed, and violate not only modern economics but the scientific method and other principles as well.

It's because Miseans reject the scientific method that they not only believe in outdated economics, but pseudo-science in many fields like medicine, mathematics, and so on. You have not been able to prove the school has 'gained ground' at all and it's clear you have never taken an economics course either.

Skooma Addict

29th October 2009, 04:44

Ron Paul also believes in creationism and his movement was largely made up of 9-11 truthers. And you don't have to be a professional economist to realize that the methods use by Austrians are seriously flawed, and violate not only modern economics but the scientific method and other principles as well.

Is it inherently illogical to believe in creationism? You know there are some good arguments in favor of creationism, right?

If AE is so flawed, go start a thread over at the Mises forums and explain how AE violates the Scientific method. It will only take you 5 minutes.

IcarusAngel

29th October 2009, 04:56

Lol. There are no logical arguments in favor of creationism. It is cult thinking, much like Misean economics, so they are similar. It stands upon premises that cannot be neither proven nor disproven and so it inherently violates the scientific method. Miseans violate the scientific method when they insist that the evidence must confirm with their logical principles, and not the other way around. In real science, the empirical evidence directs the theories. The theories explain the facts. No where has a physical FACT been discarded because it violates an axiom. (I am also one who believes that mathematics largely coincides with physical reality, meaning much of it, like calculus, is discovered by observation of the physical world but that's another matter.)

I have debated two of the 'mods' at Mises forums - one claimed that, like mathematics, all Misean economics is reducible to logic (which is false, and has been proven false in mathematics) - and another claimed that capitalism is democracy (laughingman). He couldn't back himself up when I explained why capitalist 'democracy' is rigged and a joke, and a propaganda term, an he left the forum.

"Krazy Kaju" --another moderator-- also came here, but he went to PC before it closed down and was exposed as an ignoramous by a guy who believes in a different set of axiomatic economics (the other guy was just as cultish but it was funny seeing the Misean get owned) and so I have no interest being 'lectured' by a bunch of idiots who think 'creationism' is a science and that there is such thing as 'statist medicine.'

The fact that you think the people at Mises forums are 'intellectuals' and 'scientists' and that creationism is based on 'logical principles' says it all.

Skooma Addict

29th October 2009, 05:04

Lol. There are no logical arguments in favor of creationism. It is cult thinking, much like Misean economics, so they are similar. It stands upon premises that cannot be neither proven nor disproven and so it inherently violates the scientific method. Miseans violate the scientific method when they insist that the evidence must confirm with their logical principles, and not the other way around. In real science, the empirical evidence directs the theories. The theories explain the facts. No where has a physical FACT been discarded because it violates an axiom. (I am also one who believes that mathematics largely coincides with physical reality, meaning much of it, like calculus, is discovered by observation of the physical world but that's another matter.)

There certainly are good arguments in favor of creationism. As for whether or not something can be proven or disproven, prove to me that the reality you perceive using your senses is objective reality. After all, our senses deceive us.

The rest of this portion of your post was just straw men.

I have debated two of the 'mods' at Mises forums - one claimed that, like mathematics, all Misean economics is reducible to logic (which is false, and has been proven false in mathematics) - and another claimed that capitalism is democracy (laughingman). He couldn't back himself up when I explained why capitalist 'democracy' is rigged and a joke, and a propaganda term, an he left the forum.

"Krazy Kaju" --another moderator-- also came here, but he went to PC before it closed down and was exposed as an ignoramous by a guy who believes in a different set of axiomatic economics (the other guy was just as cultish but it was funny seeing the Misean get owned) and so I have no interest being 'lectured' by a bunch of idiots who think 'creationism' is a science and that there is such thing as 'statist medicine.'

The fact that you think the people at Mises forums are 'intellectuals' and 'scientists' and that creationism is based on 'logical principles' says it all.

I think you know you would be proven wrong very quickly, so you don't want to post there. If you are so certain you are right, you would take 5 minutes to start a topic over there.

IcarusAngel

29th October 2009, 05:35

I have debated with Miseans and have proved them wrong on their logical principles at Dawkins forums. I have no more interest in debating "Miseans" at their forum than I do joining an astrology forum and trying to explain to them the principles of astronomy. There is just no way they could understand it, and they'd ban me for trying to explain it to them. They simply ban people they disagree with and then claim victory. Mr.1001nights was banned within five minutes of joining Mises forums. Miseans don't understand logic, ethics, reasoning, the scientific method, etc. What I said about the scientific method is accurate (and not a straw man) and some people at that forum even ADMIT they don't like to applying it to human nature. I have more luck trying to explain freedom and socialism to Liberals who often agree with me that capitalism is a failure.

As for Peter Schiff, I will say he makes good points once in a while:

4n3g5lUgkWk

Notice his analogy of an American and some people from other nationalities on an island with the American somehow coming to dominate 90% of the resources. The other people work their asses off while the lazy American doesn't do shit except 'manages' the other workers.

Of course, as Schiff points out, they'd be better off getting rid of the American and running the economy themselves, enjoying the fruits of their labor while probably have quite a bit more leisure time as well (and for all intents and purposes probably will be more productive on top of it), just as the third world would be better getting America, the World Bank, and the IMF off their back and controlling the resources themselves, then start trading (as America, England, etc. built themselves up by restricting trade, then exploiting trade).

However, that same analogy can be applied to capitalists. Bill Gates goes off to sleep when his programmers are busting their ass releasing the next word processor. The workers would be better off if they were in charge of their own labor instead of having bill gates in charge of it, which he acquires from his monopoly over the land and the resources and copyright law that the STATE grants him. I know people who code at MS and they bust their ass for corporate profits.

So he's right that the other people on the island would be better without the American but he should realize that workers would be better without capitalists telling them what to do with their labor.

Il Medico

29th October 2009, 06:11

What is a right-libertarian?
An oxymoron.

Skooma Addict

29th October 2009, 13:52

Havet

29th October 2009, 15:18

If you were 'intelligent,' you'd try and convince the "Libertarian left" members to try and join the 'right libertarian movement,' as the "Libertarian left" believes that private tyrants should continue to own resources.

I smell strawman

Dejavu

29th October 2009, 16:35

I smell strawman

Yep

Mo212

2nd November 2009, 12:09

But anyways, can you prove to me that the reality we perceive with our senses is objective reality?

Do a death experiment, if you seriously believe the reality you perceive isnt real I advise you to drive down a highway blind and start randomly turning the wheel. My bet is you wouldn't because you know there are 100% real consequences to your actions.

People that doubt their own perception are crazy, anyone who says "how do we know what we perceive is real?"

Well we can do experiments to test that, we can have them

-stop eating food to see if it effects them (i.e. if reality is an illusion then they should not need food to eat)
-have the sense denier dip his hand in a vat of acid (because we can't be sure acid after all is "real")

Two naive experiments disprove "our senses our unreliable" if our senses were so unreliable we could not even have so much as a thought and wouldn't even be alive to talk about it.

Dejavu

2nd November 2009, 12:19

Change

Dejavu

2nd November 2009, 12:21

http://www.youtube.com/watch?v=2I0QN-FYkpw&feature=related

Yeah , Austrians don't know crap.:rolleyes:

Skooma Addict

2nd November 2009, 13:40

Do a death experiment, if you seriously believe the reality you perceive isnt real I advise you to drive down a highway blind and start randomly turning the wheel. My bet is you wouldn't because you know there are 100% real consequences to your actions.

I do believe that the reality I perceive with my senses is real. I believe it based on faith, because as of now I cannot prove that it is real.

People that doubt their own perception are crazy, anyone who says "how do we know what we perceive is real?"

So Plato was crazy I guess.

Well we can do experiments to test that, we can have them

-stop eating food to see if it effects them (i.e. if reality is an illusion then they should not need food to eat)
-have the sense denier dip his hand in a vat of acid (because we can't be sure acid after all is "real")

Those experiments prove nothing. The experiment depends on the reliability of our senses, which means there is some circular reasoning going on.

Two naive experiments disprove "our senses our unreliable" if our senses were so unreliable we could not even have so much as a thought and wouldn't even be alive to talk about it.

Yes we could.

Havet

2nd November 2009, 14:27

I do believe that the reality I perceive with my senses is real. I believe it based on faith, because as of now I cannot prove that it is real.

Trusting your senses is the only rational option because you can't survive without them.

there are always ways to check if your senses are reliable. Independent verification for example. Also, by cross-referencing your senses, if you can see something but can't touch it, chances are its an allucination, unless it's something you KNOW doesn't trigger a touch sense.

Also, there's logical consistency. The same way that sometimes you can tell you're dreaming, because logically inconsistent stuff happens.

Of course theres no 100% way to know if your senses are accurate. One of the typifying characteristics of insanity is that they don't realise they are having delusions/hallucinations, but the only alternative is completely useless.

if you're crossing the street, its perfectly possible that the car coming towards you is a hallucination, but the dangers of trusting your senses are far lower than the dangers of not trusting them

the benefit of objective reality is that there are often clues for when our senses are malfunctioning

Back to independent verification: If i see something, I can ask you if you see something too. If you can see it and I can see it, Then there's more probability that our senses are working than there is that they are not working, since we evolved to have accurate senses.

In any case, my argument is kind of pointless, because we both already fundamentally agree that there's no way to be 100% sure of anything.

Skooma Addict

2nd November 2009, 16:26

I want to say ahead of time that I do not necessarily believe in the claims I am making. I am just putting forward arguments which can be used to justify Idealism, dualism, or creationism.

Trusting your senses is the only rational option because you can't survive without them.

there are always ways to check if your senses are reliable. Independent verification for example. Also, by cross-referencing your senses, if you can see something but can't touch it, chances are its an allucination, unless it's something you KNOW doesn't trigger a touch sense.

Right, in the reality that I perceive, I can independently verify things to confirm that they are the way I actually believe them to be. If I am in a desert and I think I view a soda machine, only to discover that it is a mirage, then I know that I thought I saw something that really wasn't there. But I am saying that I don't know for certain whether or not the actual reality that I perceive is real. I cannot use my senses to prove beyond doubt that the reality I perceive with my senses is objective reality.

As Descartes said, the only thing I can know for certain is that I exist, because I cannot be deceived of my own existence.

Of course theres no 100% way to know if your senses are accurate. One of the typifying characteristics of insanity is that they don't realise they are having delusions/hallucinations, but the only alternative is completely useless.

if you're crossing the street, its perfectly possible that the car coming towards you is a hallucination, but the dangers of trusting your senses are far lower than the dangers of not trusting them

I agree with you here. Nothing here contradicts my previous claim.

Back to independent verification: If i see something, I can ask you if you see something too. If you can see it and I can see it, Then there's more probability that our senses are working than there is that they are not working, since we evolved to have accurate senses.

At most, that could only be used to confirm that what you see in your perception of reality is not an illusion, but it says nothing regarding your actual perception of reality itself. In order to prove that the reality you perceive is objective reality, you cannot use anything you perceive as a proof, including any and all people (because this would be circular reasoning).

In any case, my argument is kind of pointless, because we both already fundamentally agree that there's no way to be 100% sure of anything.

Right, which is why it is not illogical to believe things which cannot be proved or disproved.

Tungsten

2nd November 2009, 17:55

See, your problem is that you talk as if this is some sort of curious little intellectual dispute. It is not. It is a matter of life and death for millions of people, and a matter of prosperity versus misery for billions.

So your justification isn't based on an existential fact, but on a moral imperative?

Debating whether or not capitalism is exploitative is like debating the physics of high-speed winds while standing in the path of a tornado.

You cling to exploitation theory because there wouldn't be any justification for revolution, or communism without it.

Class struggle is not a polite discussion about the relative merits of various economic systems. It is a war to the death between good and evil.

A war between good and evil? :laugh: Shall I just call you Jesus Christ from now on? I hardly think that raising the stakes from one of discussion to one of violence is somehow indicative of a valid argument. If anything, the opposite is true.

Mises fascism is the preference for landed domination over resources versus democratic ownership of resources

Tragedy of the commons all over again.

KarlMarx1989

2nd November 2009, 18:58

I believe his name is Glenn Beck. He is a self-described libertarian.

johhy one two

2nd November 2009, 19:02

I would say maybe a lefty Tory like Kenneth Clarke perhaps.

Havet

2nd November 2009, 19:54

I want to say ahead of time that I do not necessarily believe in the claims I am making. I am just putting forward arguments which can be used to justify Idealism, dualism, or creationism.

I know, splitteeth also used that argument in the Religion sub-forum.

Right, in the reality that I perceive, I can independently verify things to confirm that they are the way I actually believe them to be. If I am in a desert and I think I view a soda machine, only to discover that it is a mirage, then I know that I thought I saw something that really wasn't there. But I am saying that I don't know for certain whether or not the actual reality that I perceive is real. I cannot use my senses to prove beyond doubt that the reality I perceive with my senses is objective reality.

As Descartes said, the only thing I can know for certain is that I exist, because I cannot be deceived of my own existence.

100% certainty is both impossible and useless.

The thing is, we have empirical evidence that supports the premise that we should trust our senses. Trusting our senses alone, however, is less likely to yield better conclusions than if we use other methods along (the ones I stated above, like cross-reference) to increase the probabilities.

Anyway, you touched a very important point:

"I cannot use my senses to prove beyond doubt that the reality I perceive with my senses is objective reality"

Of course. We also need to place in reason, logic and the scientific method in order to closely approximate a level of knowledge based on the objectively reality.

At most, that could only be used to confirm that what you see in your perception of reality is not an illusion, but it says nothing regarding your actual perception of reality itself. In order to prove that the reality you perceive is objective reality, you cannot use anything you perceive as a proof, including any and all people (because this would be circular reasoning).

Perhaps reality isn’t exactly how we believe it to be, but that's always been the case and will continue to be in the future. Prehistoric people had no understanding of galaxies, germs, or atoms, but that didn’t make those phenomena any less real. Their ignorance of these basic truths cost them dearly in hunger, poverty and disease.

This improvement came through the use of the Scientific Method, by using sound practices for establishing what was true, not fantasizing about what would be “nice” to be true. Advancement has come through finding what the laws of reality are, not by trying to wish those laws away.

For example, take the Matrix series (http://en.wikipedia.org/wiki/The_Matrix_%28series%29) (i'm sure you're familiar with it?)

The world of The Matrix takes the same situation and puts a twist on it. An objective reality did exist, but it wasn’t the one Neo thought it was. When he freed himself from The Matrix, he still lived in an objective reality, just a different one to the one he'd experienced previously.

His understanding of what reality was and his power over it increased, but he was still restricted by its rules. The world of the Matrix become a kind of computer-game for him, but outside it, he continued to live in a world that existed independently of his thoughts and perceptions.

If the truth of the Matrix had never been revealed to him, then it would have been irrelevant to his everyday existence. He would have lived life within the rules of the computer simulation. Ignoring those rules would have had serious consequences. He would have felt pain, hunger and sadness. The fact those feelings were the result of simulations would have had little effect upon his experience of them. They would have felt real, so for all intents and purposes they were.

Right, which is why it is not illogical to believe things which cannot be proved or disproved.

It is illogical to believe things where there is no evidence, and can neither be proved or disproved.

Parker

2nd November 2009, 20:19

Yeah , Austrians don't know crap.:rolleyes:

I agree with some of Peter Schiff's analysis, though not his prescription. Austrians keep claiming gotcha because of this guy, but there were other economists/analysts who were vindicated too:

Steve Keen
Michael Hudson
Nouriel Roubini
Dean Baker
Robert Shiller
Fred Harrison ...
... and some others.

The majority are Keynesian/Post Keynesian.

The difference is the Austrian's insistence that the government is to blame. The others see the crisis as arising from the market. If anyone is the single most astute voice in all of this, it's Steve Keen.

Actually, Keen is worth mentioning in another context. He is a follower of Piero Sraffa, who, along with Hayek's ex-student Nicholas Kaldor, completely demolished Hayek's theories in the 1930s - not that you'd ever read that in the Austrian accounts, which tend to claim, cult-like, that Mises and Hayek were totally right about everything ever.

[To be fair, I actually like some of Hayek, though I know that the Rothbardian tendency are such big fans of him.]

Skooma Addict

2nd November 2009, 20:28

100% certainty is both impossible and useless.

The thing is, we have empirical evidence that supports the premise that we should trust our senses. Trusting our senses alone, however, is less likely to yield better conclusions than if we use other methods along (the ones I stated above, like cross-reference) to increase the probabilities.

I am not so sure if 100% certainty is impossible. At the moment at least, I am 100% certain that I exist.

We have empirical evidence that the reality we perceive follows certain laws of nature. But we have no empirical evidence regarding whether or not the reality we perceive is objective reality. Just because I can see the laws of physics in effect constantly, that does not prove that the laws I see taking effect are not just part of an incorrect perception of reality. I do not see how we can use emperical evidence which we derive from our peception of reality to prove that our perception of reality is correct. Therefore, I believe that the reality I perceive is objective reality based on faith.

Does that makes sense? It is a very difficult subject to talk about. I haven't read too much on the subject either.

"I cannot use my senses to prove beyond doubt that the reality I perceive with my senses is objective reality"

Of course. We also need to place in reason, logic and the scientific method in order to closely approximate a level of knowledge based on the objectively reality.

Exactly, there are just some things empirical evidence just cannot account for. Empirical evidence cannot prove that the reality we perceive is correct, becasue all evidence must be derived from the reality which we perceive. It is a classic example of circular reasoning.

Prehistoric people had no understanding of galaxies, germs, or atoms, but that didn’t make those phenomena any less real.

Right, those things do exist in the reality that you perceive. But is the reality that you perceive correct?

This improvement came through the use of the Scientific Method, by using sound practices for establishing what was true, not fantasizing about what would be “nice” to be true. Advancement has come through finding what the laws of reality are, not by trying to wish those laws away.

The Scientific Method has allowed for many advancements, but since it relies on empirical evidence, it cannot be used to prove that the reality you perceive is objective reality, or the only reality for that matter.

It is illogical to believe things where there is no evidence, and can neither be proved or disproved.

What evidence is there for the claim that the reality you perceive is objective reality? Remember, you cannot use evidence acquired from the reality that you perceive, since that is exactly what I am questioning.

But anyways, I was trying to show some "good" arguments in favor of creationism. But I don't want you to get the wrong idea, I am an agnostic. I am just putting forth arguments as some dualists and idealists in the past have.

Skooma Addict

2nd November 2009, 20:34

Actually, Keen is worth mentioning in another context. He is a follower of Piero Sraffa, who, along with Hayek's ex-student Nicholas Kaldor, completely demolished Hayek's theories in the 1930s - not that you'd ever read that in the Austrian accounts, which tend to claim, cult-like, that Mises and Hayek were totally right about everything ever.

Um, Sraffa did not not demolish Hayeks theories. Heck, wasn't Sraffa a neo-Ricardian? Anyways, it is generally accepted that Sraffa did not disprove Hayek. Although it is true that whether or not something is generally accepted says nothing regarding whether or not something is correct.

How can Austrians claim that Hayek and Mises were both right on everything, when the two economists disagreed with each other on many topics? Do you know what your talking about?

Parker

2nd November 2009, 21:23

Um, Sraffa did not not demolish Hayeks theories. Heck, wasn't Sraffa a neo-Ricardian? Anyways, it is generally accepted that Sraffa did not disprove Hayek. Although it is true that whether or not something is generally accepted says nothing regarding whether or not something is correct.

Sraffa and Kaldor's critiques of Hayek convinced Hayek to re-write his theories - twice, and for him to largely abandon work on capital theory, so ...

Plus, I was not making an appeal to authority, just pointing out a connection, but here goes: Sraffa argued that Hayek's theory of interest only worked in a theoretical economy with no money. Also, that it rested on an equilibrium in the savings markets, when Austrians deny equilibrium occurs elsehwere (I'd argue that almost all Austrian theories rest on an implicit equilibrium, though the pay lip-service to dis-equilibrium.) And also, production is not linear in character or order; it is circular, according to Sraffa (production of commodities by means of commodities), which makes Hayek's triangles somewhat redundant.

IcarusAngel

2nd November 2009, 21:30

By the way, the fact that our observations of the world often contain private data does NOT, in any way, make science itself questionable. The fact that our observations vary from person to person does show that it will be difficult for fields like psychology and so on to claim themselves as 'sciences.' This is because very much knowledge of the field is based upon private data, such as emotions etc.

However, observations of the natural world can be CORROBORATED, TESTED, DEMONSTRATED, and reproducible. So that is why scientific data is a bit different from social science data. Creationism attempts to invoke supernatural causation where there is a lack of evidence and even in places where there is already evidence. So it is unscientific, and not logical.

It's like saying, there is no way to prove that the world sprang up five minutes ago. You could construct a logical argument that refutes any claim of historical evidence (god put it there), but it's still not a rational position because of we have our memories and we have vast evidence that shows that the world has been around longer than five minutes.

Miseans can't even be taken seriously considering they reject rational principles.

Havet

2nd November 2009, 21:49

Just because I can see the laws of physics in effect constantly, that does not prove that the laws I see taking effect are not just part of an incorrect perception of reality.

The laws of physics are proven to be linked with objective reality because we can replicate them in a number of similar condition experiments.

Exactly, there are just some things empirical evidence just cannot account for. Empirical evidence cannot prove that the reality we perceive is correct, becasue all evidence must be derived from the reality which we perceive. It is a classic example of circular reasoning.

Which is why i threw in reason, logic and the scientific method as ways to verify the truth of what our senses show us.

Without those three things we would have never discovered the existence of quarks (http://en.wikipedia.org/wiki/Quarks), because we cannot see them, taste them, smell them, touch them and/or hear them.

Right, those things do exist in the reality that you perceive. But is the reality that you perceive correct?

For all purposes: yes.

But there is a wild array of things we do not understand, and probably have no knowledge of yet. When we discover them, that will be the next step towards a greater understanding of objective reality.

The purpose of saying objective rather than subjective is precisely because reality doesn't change by what a person thinks. If I pretend there isn't a car in front of me when I cross the road that doesn't mean it isn't there.

To the extent that our knowledge is increasing, so is our understanding of objective reality. But some people have different views of reality according to the level of information and knowledge they have. Their different views, however, are always confronted to a final arbitrator: objective reality (http://en.wikipedia.org/wiki/A_is_A).

The Scientific Method has allowed for many advancements, but since it relies on empirical evidence, it cannot be used to prove that the reality you perceive is objective reality, or the only reality for that matter.

You asked if trusting only our senses was enough to perceive objective reality. Trusting only our senses does not allow us to perceive objective reality.

This is why the scientific method is not only reliable on empirical evidence, but also on other criteria, such as principles of reasoning.

What evidence is there for the claim that the reality you perceive is objective reality? Remember, you cannot use evidence acquired from the reality that you perceive, since that is exactly what I am questioning.

I can use evidence from the reality I perceive, since I perceive not only through my senses, but from other (http://en.wikipedia.org/wiki/Scientific_method) factors (http://en.wikipedia.org/wiki/Reason) previously (http://en.wikipedia.org/wiki/Logic) mentioned.

Anyway, like I said earlier, I cannot state with 100% certainty that the reality I perceive is objective since there is a myriad of concepts I don't yet understand, or are aware of.

I am aware of their existence from a pure layman's view. I know they exist because I have "faith" on the scientists who proceeded to prove it. Until I discover the methods they used, and how they got there, then I guess your statement that you perceive objective reality on faith is correct, until you decide to actually acquire the knowledge require for you to perceive the particular portion of reality you were not completely aware of.

Havet

2nd November 2009, 22:02

The difference is the Austrian's insistence that the government is to blame. The others see the crisis as arising from the market. If anyone is the single most astute voice in all of this, it's Steve Keen.

But the government was to blame. It created the background for what has happened.

Of course risk speculators, business owners and corporations also had a say in it, but the background was set from the beginning (see this (http://www.revleft.com/vb/showpost.php?p=1586315&postcount=403) useful post for more info).

Dejavu

2nd November 2009, 22:46

Miseans can't even be taken seriously considering they reject rational principles.

Keep writing. lol.
You are only embarrassing yourself. You remind me of a cheerleader for one of these court jester economists debating Schiff only to contradicted by reality.

http://www.youtube.com/watch?v=Z0YTY5TWtmU

Lucky guesses or something more? Perhaps an understanding of rational economics?:thumbup1:

Skooma Addict

2nd November 2009, 22:46

Sraffa and Kaldor's critiques of Hayek convinced Hayek to re-write his theories - twice, and for him to largely abandon work on capital theory, so ...

As I understand it, Sraffa was not the reason Hayek rewrote his theories. Hayek changed his mind many times throughout his life, and he never abandoned work on capital theory. But it doesn't really matter anyways, I prefer Hayek over Sraffa regardless.

Plus, I was not making an appeal to authority, just pointing out a connection, but here goes: Sraffa argued that Hayek's theory of interest only worked in a theoretical economy with no money. Also, that it rested on an equilibrium in the savings markets, when Austrians deny equilibrium occurs elsehwere (I'd argue that almost all Austrian theories rest on an implicit equilibrium, though the pay lip-service to dis-equilibrium.) And also, production is not linear in character or order; it is circular, according to Sraffa (production of commodities by means of commodities), which makes Hayek's triangles somewhat redundant.

Most of Sraffas ideas have been refuted long before he was born. Much of the Hayek/Sraffa debate was just them misrepresenting each other anyways. As for equalibrium theory, I would say Austrians have it better than Sraffians. I will save myself time and just quote Robert Murphy....

"Sraffa's method of determining equilibrium prices in a surplus economy already assumes that the system has settled down at the optimum level of production in all possible lines. Sraffa's techniques leave no room for the individual members of society to influence the methods of production that end up being used (whether or not there is a surplus), ultimately because there are no individuals in Sraffa's models.

This objection is strongest when it comes to the allegedly most important of Sraffa's results. Sraffa has shown that the rate of profits is "a free variable" (i.e. indeterminate and subject to external influence, in particular downward) only by excluding intertemporal optimization from his models. Yes, if the only function served by interest rates is to indicate the common rate of appreciation on invested capital, then there might be a range of values that will be consistent with general equilibrium.

However, if we also require that the market rate of interest reflects the subjective premium placed by consumers on present versus future consumption—a feature lacking in Sraffa's aggregate models—then this will eliminate the multiplicity of equilibrium rates of interest. Because it too is a "price" subject to supply and demand, there is nothing more nor less arbitrary in the determination of the interest rate than there is in the price of televisions."

Just out of curiosity, are you a Sraffian?

Dejavu

2nd November 2009, 22:49

But the government was to blame. It created the background for what has happened.

Of course risk speculators, business owners and corporations also had a say in it, but the background was set from the beginning (see this (http://www.revleft.com/vb/showpost.php?p=1586315&postcount=403) useful post for more info).

The government and its partner in crime , the Federal Reserve , created the conditions for rampant speculation. It is not intuitive to most people these days to source the government as the problem. IMO its partially psychological since it is a utter feeling of betrayal by leaders that are supposed to represent our interests.

Dejavu

2nd November 2009, 23:08

Oh god , not another Sraffian. :rolleyes:

IcarusAngel

3rd November 2009, 00:53

Keep writing. lol.
You are only embarrassing yourself. You remind me of a cheerleader for one of these court jester economists debating Schiff only to contradicted by reality.

http://www.youtube.com/watch?v=Z0YTY5TWtmU

Lucky guesses or something more? Perhaps an understanding of rational economics?:thumbup1:

Even a broken clock can be right twice a day. Furthermore, he isn't giving a deep, ideological Austrian analysis. He's using evidence that many serious economics use as well. But it wasn't just Miseans that predicted this crisis, it was Marxists, and many mainstream economists as well as someone predicted.

What people rejected is the assumption that economics boils down to a series of 'axioms' and other Misean claims in other fields that result from their kooky logical principles.

Their entire philosophy is based on shaky principles largely because Mises didn't understand logic and reasoning.

IcarusAngel

3rd November 2009, 00:55

Furthermore, we are not heading into complete collapse, as many Miseans are claiming. This is another capitalist 'recession' that will likely turn around. It was bad, but really it wasn't as bad as they are making it out to be. Capitalism will survive, barely unaltered, as oppressive as ever.

The good thing that can be said about the crisis is that it has woken a lot of people up to the failures of market economics and crony capitalism, and the need for regulation, but at an awfully high price.

Dejavu

3rd November 2009, 01:28

Even a broken clock can be right twice a day. Furthermore, he isn't giving a deep, ideological Austrian analysis. He's using evidence that many serious economics use as well. But it wasn't just Miseans that predicted this crisis, it was Marxists, and many mainstream economists as well as someone predicted.

What people rejected is the assumption that economics boils down to a series of 'axioms' and other Misean claims in other fields that result from their kooky logical principles.

Their entire philosophy is based on shaky principles largely because Mises didn't understand logic and reasoning.

So you're chalking it up to a couple lucky guesses. Did you even listen to Schiff's arguments? They were not nebulous but rather direct and precise.

What does economics boil down to in your opinion?

The rest of your argument is lacks backing and sounds like a statement of opinion.

Furthermore, we are not heading into complete collapse, as many Miseans are claiming. This is another capitalist 'recession' that will likely turn around. It was bad, but really it wasn't as bad as they are making it out to be. Capitalism will survive, barely unaltered, as oppressive as ever. Do you have a real and reasoned argument to back up this claim? I'm all ears.

The good thing that can be said about the crisis is that it has woken a lot of people up to the failures of market economics and crony capitalism, and the need for regulation, but at an awfully high price.No , the idiot that believes this is a consequence of the free market has not woken up at all. Again, do you have a real argument to back this up or are you content just stating your ideological opinions?

Skooma Addict

3rd November 2009, 01:53

What people rejected is the assumption that economics boils down to a series of 'axioms' and other Misean claims in other fields that result from their kooky logical principles.

Actually, the principals of AE are pretty sound. Mises was definitely wrong on a few points, but Modern Austrians are doing a great job clearing everything up. For example, it is now clear that free banking is superior to a 100% reserve requirement banking.

Dejavu

3rd November 2009, 02:18

Sraffa and Kaldor's critiques of Hayek convinced Hayek to re-write his theories - twice, and for him to largely abandon work on capital theory, so ...

Plus, I was not making an appeal to authority, just pointing out a connection, but here goes: Sraffa argued that Hayek's theory of interest only worked in a theoretical economy with no money. Also, that it rested on an equilibrium in the savings markets, when Austrians deny equilibrium occurs elsehwere (I'd argue that almost all Austrian theories rest on an implicit equilibrium, though the pay lip-service to dis-equilibrium.) And also, production is not linear in character or order; it is circular, according to Sraffa (production of commodities by means of commodities), which makes Hayek's triangles somewhat redundant.

There is no contradiction between talking about equilibrating tendencies as explaining coordination while pointing out that the economy is in disequilibrium at any moment. There are equilibrating tendencies, and there's also a discovery process that continually causes disequilibrium.

The equilibrium we're tending towards at one time is a different equilibrium than the one we were tending towards earlier, since in the meantime we've had new discoveries. Hayek's theory of the business cycle does not rely on the savings market being in equilibrium, but rather on the tendency towards equilibrium which is a common misunderstanding with Hayek.

If production is circular and not linear, there is no progress If the only point of producing things is to use them to produce the same things again, how can there be new inventions?

Dejavu

3rd November 2009, 03:11

The difference is the Austrian's insistence that the government is to blame. The others see the crisis as arising from the market. If anyone is the single most astute voice in all of this, it's Steve Keen.

Actually, Keen is worth mentioning in another context. He is a follower of Piero Sraffa, who, along with Hayek's ex-student Nicholas Kaldor, completely demolished Hayek's theories in the 1930s - not that you'd ever read that in the Austrian accounts, which tend to claim, cult-like, that Mises and Hayek were totally right about everything ever.

I dunno , Keen sounds pretty similar to Schiff. He was also heavily influenced by ( Austrian) economist Joseph Schumpeter and I can notice it in his economic outlook. I really liked Keen in the following interview:

Peter Schiff and Steve Keen on Dateline. (http://www.youtube.com/watch?v=l9uPEeVQ5Yc&feature=related)

Try to get passed the socialism and capitalism semantics.

Dr.Doom and Dr.Gloom. :laugh:

Die Rote Fahne

3rd November 2009, 03:21

A right-libertarian is a waste of space.

Skooma Addict

3rd November 2009, 03:30

A right-libertarian is a waste of space.

:crying:

Die Rote Fahne

3rd November 2009, 03:38

:crying:

Your tears are wasting more space.

Dejavu

3rd November 2009, 04:14

Renegade Economist: Michael Hudson (http://www.youtube.com/watch?v=3pwAFohWBL4)

Basically saying the same thing as not only Schiff, but an entire school of economics ( The Austrian) with only minor deviation. He's only referenced as a 'Renegade' because he does not go along with the rest of the flock in his branch of Economics.

In so many words , he says let the recession happen ,let the bad companies go bankrupt.

Parker

3rd November 2009, 09:21

Hayek's theory of the business cycle does not rely on the savings market being in equilibrium, but rather on the tendency towards equilibrium which is a common misunderstanding with Hayek.

Hmmm, as I understand it, it was very much the case. Classic ABCT argues that when the rate of interest falls below the natural rate of interest - which is formed when savings and loans balance, i.e., are in equilibrium - this leads to a lengthened structure of production.

I know that Hayek went on later (1936 iirc) to say that by equilibrium he didn't mean what everyone else meant by equilbrium, but as far as I can see he was just playing around with definitions, conceding the point while making it appear as if he wasn't.

If production is circular and not linear, there is no progress If the only point of producing things is to use them to produce the same things again, how can there be new inventions?

By circular process, Sraffa meant that commodities appear both as means of production and final products. Hayek's triangles therefore become meaningless.

Parker

3rd November 2009, 09:26

I dunno , Keen sounds pretty similar to Schiff. He was also heavily influenced by ( Austrian) economist Joseph Schumpeter and I can notice it in his economic outlook. I really liked Keen in the following interview

Yes, and he draws from Minsky and Marx too. Indeed, there are common points in all of these people's arguments. I agree with Schiff that there is so much debt in the economy and that it resembles a Ponzi scheme. The difference of opinion lies in the dynamics and from where this arises.

Keen, Marx and Minsky on one side will argue that the crisis is endogenous; on the Austrian side will argue that it is exogenous.

Try to get passed the socialism and capitalism semantics.

I am not sure what you mean.

Parker

3rd November 2009, 09:48

Most of Sraffas ideas have been refuted long before he was born. Much of the Hayek/Sraffa debate was just them misrepresenting each other anyways. As for equalibrium theory, I would say Austrians have it better than Sraffians. I will save myself time and just quote Robert Murphy....

"Sraffa's method of determining equilibrium prices in a surplus economy already assumes that the system has settled down at the optimum level of production in all possible lines. Sraffa's techniques leave no room for the individual members of society to influence the methods of production that end up being used (whether or not there is a surplus), ultimately because there are no individuals in Sraffa's models.

Is this that article on Mises-dot-org? Murphy himself misrepresents Sraffa. Production of Commodities by Means of Commodities quite clearly is an abstract model. ETA: Sraffa is making a critique of economics on its own terms, so he incorporates the assumptions of marginalism.

This objection is strongest when it comes to the allegedly most important of Sraffa's results. Sraffa has shown that the rate of profits is "a free variable" (i.e. indeterminate and subject to external influence, in particular downward) only by excluding intertemporal optimization from his models. Yes, if the only function served by interest rates is to indicate the common rate of appreciation on invested capital, then there might be a range of values that will be consistent with general equilibrium.

Again, this is in reference to the first part of the book. It is also a little dishonest to criticise Sraffa for this, as his method is parallel with the Austrian method, e.g. of Mises, of using a model of an "evenly rotating economy" to gain certain insights into the nature of capitalism, wage labour, the origins of profts, etc. - and none of this depends on the inclusion of "intertemporal optimization." You cannot have it both ways.

However, if we also require that the market rate of interest reflects the subjective premium placed by consumers on present versus future consumption—a feature lacking in Sraffa's aggregate models—then this will eliminate the multiplicity of equilibrium rates of interest."

Murphy is wrong on the maths here. Even if we allow for subjective preferences, mutiple equilibrium rates of can arise.

Just out of curiosity, are you a Sraffian?

No. There is a critique of Sraffa to be made, from a Marxian perspective (e.g., by Andrew Kliman) but it is irrelevant to the discussion here.

IcarusAngel

3rd November 2009, 10:17

A little Ph.D economics on the issue:

lxVxr2yaMsc

The market has created a HUGE inequality of wealth, basically great depression levels, with very low job creation. That is why we went into the recession. This has also created an America that mirros third world countries. What Schiff is purposing - gilded age style economics - are the same type of economics that lead into these recessions that do nothing but weaken the working class.

The fact is that FDR style capitalism is vastly more successful than Libertarian or Reagan capitalism.

Tungsten

3rd November 2009, 13:09

Furthermore, we are not heading into complete collapse, as many Miseans are claiming.

Whatever, King Canute.

You can only pay off so much debt - when the debt and the interest on that debt increases beyond your ability to pay it off, then you're screwed. As I said before - give it about 20 years.

The market has created a HUGE inequality of wealth, basically great depression levels, with very low job creation. That is why we went into the recession.

That's the effect, not the cause. I think you've pretty much frozen yourself out of any rational debate on this subject.

Skooma Addict

3rd November 2009, 13:58

Parker

3rd November 2009, 15:14

Parker, I will admit that I have read barely anything on Sraffa, mainly because he is a Neo-Ricardian, so I don't know if Murphy misrepresented him or not. I read the Lachmann piece on the Sraffa/Hayek debate, but I have never read anything by Sraffa himself.

his main book is actually less than 100 pages long. The rest is scattered throughout journal articles, etc., and his work in editing David Ricardo's legacy. He left behind a considerable body of unpublished work.

By the way, why avoid reading something because you think you might disagree with it?

How? Why would there be a time preference for each separate good?

I think that's the idea: spot and forward prices for all goods. How this then transfers into one money rate of interest is anyone's guess. It seems to me impossible, which is what was behind Sraffa's critique of Hayek's theory of interest, that money is not merely a veil but has a logic and significance all of its own. If money were netural, then the effects on the economy would be the same as if there were no moeny at all. Thus, in an economy with no/neutral money we reach all sorts of absurdities: an economy of multiple equilibria for goods, but only one for money. He was making a critique on Hayek's own terms.

What is Sraffa's Theory of interest? Does he think it represents the price of a commodity now relative to the price of that commodity in the future?

Interest rates are ultimately determined in the money markets.

[Sraffa's views are similar to those of Keynes in this respect. See Chapter 17 of The General Theory.]

Skooma Addict

3rd November 2009, 15:50

his main book is actually less than 100 pages long. The rest is scattered throughout journal articles, etc., and his work in editing David Ricardo's legacy. He left behind a considerable body of unpublished work.

By the way, why avoid reading something because you think you might disagree with it?

Ill read his book if its less than 100 pages.

But I read stuff I don't agree with. I have read stuff be NeoKeynesians and Neoclassicals. Also a lot of the oldies such as Adam Smith. I don't agree with a lot of stuff by Mises and Hayek by the way. But I have never read anything by A Neo-Ricardian. Do they at least believe in the subjective theory of value?

I think that's the idea: spot and forward prices for all goods. How this then transfers into one money rate of interest is anyone's guess. It seems to me impossible, which is what was behind Sraffa's critique of Hayek's theory of interest, that money is not merely a veil but has a logic and significance all of its own. If money were netural, then the effects on the economy would be the same as if there were no moeny at all. Thus, in an economy with no/neutral money we reach all sorts of absurdities: an economy of multiple equilibria for goods, but only one for money. He was making a critique on Hayek's own terms.

I do not think money is neutral in the way monetarists do. That is, printing new money is going to have consequences beyond inflation. As for how the money rate interest comes about, I don't think I would run into any difficulties if I say that interest is the result of peoples time preferences.

Interest rates are ultimately determined in the money markets.

Do you believe this as well? I think interest rates are ultimately determined by time preferences.

Have you read Hutt's critique of the General Theory?

Parker

3rd November 2009, 17:38

Ill read his book if its less than 100 pages.

But I read stuff I don't agree with. I have read stuff be NeoKeynesians and Neoclassicals. Also a lot of the oldies such as Adam Smith. I don't agree with a lot of stuff by Mises and Hayek by the way. But I have never read anything by A Neo-Ricardian. Do they at least believe in the subjective theory of value?

No, Sraffa disliked marginalism/subjectivism and thought it an abberation: one cannot understand economics simply from psychology. He attempted to erect an alternative to the labour theory of value by going back to Ricardo and basing his analysis on physical quantity flows of commodities and wages. I don't think he was successful - from what I understand of it, which might not be very much! Sraffa has had a huge impact on academic Marixsm, however.

I do not think money is neutral in the way monetarists do. That is, printing new money is going to have consequences beyond inflation. As for how the money rate interest comes about, I don't think I would run into any difficulties if I say that interest is the result of peoples time preferences.

I didn't mean to imply that you were a monetarist. What I (and Sraffa's critique) was getting at was that Hayek believed that money itself could not disrupt the co-ordination of economic activity. I think it does. Whether Hayek still beleived this later in his life, I am not sure.

One thing is for certain, in an economy of multiple equilbria, the notion of a "natural" rate of interest is difficult to sustain. There is no natural rate of interest.

Do you believe this as well? I think interest rates are ultimately determined by time preferences.

I am not convinced by the time preference argument, on two grounds, empirical and theoretical.

Empirically speaking, people save not because they are willing to forego present consumption but because they have a surplus over and above their present consumption needs. Most people have no choice but to spend all their income.

On a theoretical level, for time preference theory, interest - the money price of time - is treated as a given. It just is. Bohm-Bawerk says, iirc, that "interest is an everlasting gift from heaven", but this ignores the social set-up where some people can charge others for money. We are back to the Trinity Formula, the commodity fetishism that sees interest as the product capital, rent the product of land and wages the product of labour.

Have you read Hutt's critique of the General Theory?

I haven't but I might. :)

Skooma Addict

3rd November 2009, 18:04

No, Sraffa disliked marginalism/subjectivism and thought it an abberation: one cannot understand economics simply from psychology. He attempted to erect an alternative to the labour theory of value by going back to Ricardo and basing his analysis on physical quantity flows of commodities and wages. I don't think he was successful - from what I understand of it, which might not be very much! Sraffa has had a huge impact on academic Marixsm, however.

Yea, I definitely have a problem with this. I don't think you can just dismiss psychology/philosophy when discussing economics. I am actually quite surprised Sraffa actually believed in the LTV. When it comes to determining the nature of value, philosophy/psychology is more useful than economics.

I didn't mean to imply that you were a monetarist. What I (and Sraffa's critique) was getting at was that Hayek believed that money itself could not disrupt the co-ordination of economic activity. I think it does. Whether Hayek still beleived this later in his life, I am not sure.

One thing is for certain, in an economy of multiple equilbria, the notion of a "natural" rate of interest is difficult to sustain. There is no natural rate of interest.

I didn't mean to imply that you implied that I was a monetarist. But yea, I agree, I think money can disrupt co-ordination, although I do not know if it is in the same way Sraffa believed it could. But anyways, I need to read Sraffa because discussing his theories is quite difficult when I don't even know what he believed.

I am not convinced by the time preference argument, on two grounds, empirical and theoretical.

Empirically speaking, people save not because they are willing to forego present consumption but because they have a surplus over and above their present consumption needs. Most people have no choice but to spend all their income.

On a theoretical level, for time preference theory, interest - the money price of time - is treated as a given. It just is. Bohm-Bawerk says, iirc, that "interest is an everlasting gift from heaven", but this ignores the social set-up where some people can charge others for money. We are back to the Trinity Formula, the commodity fetishism that sees interest as the product capital, rent the product of land and wages the product of labour.

I disagree with both of your objections.

I do not see how someone can have a surplus over their present consumption needs. For all intents and purposes, people never really fulfill their present consumption needs. There is always something that a person would like to consume. I want a new plasma screen TV, and a good gaming computer for example. Lets assume I can afford these things, yet I decide to save anyways. I do not save because my present consumption needs have been fulfilled because at the moment, I really really want a new gaming computer right now at this moment.

That was a god-awful example, but I hope it got my point across.

If that were actually how Austrians treated interest, then I would object as well. But Austrians get their theory of interest from praxeology (The ones I agree with at least). The only assumptions Austrians make is that meaningful behavior is directed at substituting a more satisfactory state of affairs for a less satisfactory state of affairs. True, some Austrians in the past, Such as Bohm-Bawerk, made many incorrect arguments.

Now, maybe you have a problem concerning how Austrians derive time preference from Praxeology, but I could go on and attempt to explain why I think the Austrians deduction is correct.

By the way, are you an economics major or something, or are you just interested in economics? Are you a libertarian socialist for economic and/or moral reasons?

Dejavu

3rd November 2009, 20:27

Parker,

There is a lot of exchange between you and Olaf so when I get a little more time later I'll respond in more detail.

I think the Austrian school lends a vital consideration to economics as it tends to analyze it from a 'bottom up' approach meaning it focuses almost entirely on microecon and the viewpoint of each individual actor in the economy. Hayek explained it well by considering that tacit knowledge is distributed among all actors in the economy and what each individual values more than something else can only be known by the individuals themselves. ( i.e. what kind of economic activity will the engage in). The 'market' is merely an aggregate of all these individual activities coalescing.

Time is important because not all markets are the same. A lot of markets require different production inputs and all this is dictated by time since some goods require years to be completed while others require a much shorter time. This is where interest and money are relevant. If interest was lowered then the people involved in the short term production won't be effected as much as people in long term production since lowered interest rates do not immediately effect the entire economy but do over time. The natural rate of interest is the interest rate set on money via savings tending towards equilibrium ( not at equilibrium and never could be because A) different markets require different inputs based on time and B) discovery processes). Money is also relevant because it is the common denominator in all markets and without it price coordination would be difficult ( perhaps not in a static subsistence model like Sraffa's , but in a real life complex economy.)

I disagree that savings is merely the result of surplus and whatever is left over after all consumption needs are met. This sort of assumes that individuals will merely consume to their hearts content until they cannot think of anything else to burn their money on but somehow still have a surplus left over and never mind even calculating where they want to invest their savings later. How does one determine 'consumption needs' ( not to mention 'wants') for each individual besides the individual themselves? What formula can accurately predict this for every single person with a surplus? I agree that surplus is a necessary factor for savings as one can invest that surplus into either growth or prosperity but the surplus isn't an external factor , its allocated by the individual by either forgoing more or less consumption.

Hayek wasn't always easy to read and some in the Austrian School would question whether he was a mainstream Austrian or not given his divergence of views with Mises and others. Hayek was very influenced in the Walrusian tradition while other main body Austrians were more or less directly influenced by the Mengerian tradition ( Mises , Rothbard, etc). Hayek seems more to fall in line with Kirzner and Schumpeter.

Dejavu

3rd November 2009, 20:41

Yes, and he draws from Minsky and Marx too. Indeed, there are common points in all of these people's arguments. I agree with Schiff that there is so much debt in the economy and that it resembles a Ponzi scheme. The difference of opinion lies in the dynamics and from where this arises.

Keen, Marx and Minsky on one side will argue that the crisis is endogenous; on the Austrian side will argue that it is exogenous.

I am not sure what you mean.

Austrians argue that the entire system has design flaws and that can be traced to the central banks with unrestricted control over the unsound money supply and governments which both secure their control and regulate markets.

I believe Marxists would argue more about the validity of the theory property and markets themselves.

Keynesians would argue over bad planning vs good planning and the necessary or damaging role of private savings.

Yes I know this is extremely simplified but I think you get the point.

Jethro Tull

3rd November 2009, 20:44

What is a right-libertarian?

An oxymoron.

Dejavu

3rd November 2009, 20:55

Hmmm, as I understand it, it was very much the case. Classic ABCT argues that when the rate of interest falls below the natural rate of interest - which is formed when savings and loans balance, i.e., are in equilibrium - this leads to a lengthened structure of production.

I know that Hayek went on later (1936 iirc) to say that by equilibrium he didn't mean what everyone else meant by equilbrium, but as far as I can see he was just playing around with definitions, conceding the point while making it appear as if he wasn't.

By circular process, Sraffa meant that commodities appear both as means of production and final products. Hayek's triangles therefore become meaningless.

Afaik , according to Austrians , there is no fixed quantitative natural interest rate. Its not like 15% always and we can measure what falls below 15%. The interest rate is decided upon by the spenders and savers. As more money is being saved for future consumption the less of it there is in the circulating in the economy and the value of money increases encouraging savings. Eventually not everybody just wants to hold on to money and they want to invest it somewhere. When money is invested into capital then the interest rate of money goes down until it becomes equitable to save again ( i.e. collections on loans, return on investments , etc). In other words, as you already know the Austrian argument, it boils down to time preferences. A higher interest rate means people prefer consumption or spending in the future ( i.e. money is more valuable in the future than in the present) and low interest rate is the opposite ( people value spending and consumption now and money is more valuable in the present).

The ABCT delt with the artificial expansion of the money supply which necessitates the artificial lowering of the interest rate so all that new money and credit can flow into the economy. It creates market distortions because it requires the market to absorb money that otherwise would not have been there which encourages overspeculation creating bubbles ( money has to go somewhere). Eventually there is so much malinvestment that capital is destroyed or converted into useless projects that returns cannot pay out and there is a market correction which typically translates into a recession. This is an extremely oversimplified explanation meant for anyone to grasp but I think it gets to the point.

As far as the circular argument goes , the fact that some of a product will be reinvested into further production processes or capital is just a truism but there is no reason to believe that this is an ongoing process that is self-sustaining. Again , what of discovery processes? Back over a century ago someone decided to buy up some metal and other materials to build a car instead of having those same resources go into building buggies and horseshoes and other standard commodities of the time and how did that turn out?

Skooma Addict

3rd November 2009, 21:00

Those are some good posts Dejavu. Parker as well.

Havet

3rd November 2009, 22:33

A little Ph.D economics on the issue

Meh (http://en.wikipedia.org/wiki/Argument_from_authority)

The market has created a HUGE inequality of wealth, basically great depression levels, with very low job creation. That is why we went into the recession. This has also created an America that mirros third world countries. What Schiff is purposing - gilded age style economics - are the same type of economics that lead into these recessions that do nothing but weaken the working class.

The market is the reflection between trade of goods and services between people. Such trade can either be done freely, or not.

Do you think the current crisis was caused by the free exchange of good and services between people at all levels?

The fact is that FDR style capitalism is vastly more successful than Libertarian or Reagan capitalism.

Depends on what one wishes to succeed at. If one wishes to succeed at millions of unemployed, the destruction of the dollar and a long recession, then yes.

Capitalism, in any form, is by definition against a free market/free enterprise system. And that is what most people here are effectively arguing for, even if they have not yet grasped the full implications of what such (free) system could create (*winks @ Olaf)

IcarusAngel

3rd November 2009, 22:56

We (I) was talking about the standards used by scientists and by most economists. It isn't an argument from authority to note that economics must aslo use evidence, facts from the economy, and so on to conduct an analysis.

Someone (dejavu I believe) asked what I think economics should if it's not based a series of made up axioms, as in what Miseans believe. Economics should be based on empirical evidence, historical data, hard facts, and it should attempt to determine the result of policy x or policy y in an economy. Furthermore, I believe it should attempt to explain why capitalism fails for so many people, why so many people are poor, and issues like this, such as the consequences of the widening wealth gap. To do this, economics will require the assitence of political science and similar areas of study (likely economics falls under the domain of some of these other social sciences).

I do NOT believe in Misean 'axiomatic' economics and attempts to 'logically justify' greed etc.

Capitalism, in any form, is by definition against a free market/free enterprise system. And that is what most people here are effectively arguing for, even if they have not yet grasped the full implications of what such (free) system could create (*winks @ Olaf)

This is false. First of all Olaf has already proven he has no training in mathematics or logic or anything of the sort, yet has claimed to. Second, data from the Reagan years shows that the dregulation principles FAILED miserably. And the economic inequality happened BEFORE the Reagan recession, not after it.

Third, the GDP grew every single year after the New Deal was implemented except for the recession of '37, which caused by FDR's attempt to balance the budget. The economy was also stable for years after that. So the attempt to claim that Libertarian economics is somehow 'superior' is clearly false.

It was actully Minsky himself who showed that Libertarian/capitalist economics creates a scheme where the rich people are too extravagent and risky during prosperous times and too conservative during a recession, to the detriment of the economy as a whole. This supports FDR style capitalism, and Minsky supported an attempt to 'balance' capitalism, which I think also makes certainly.

Certainly the historical data is on mainstream economics side, not Austrian economics.

Finally, 'free-markets' are not about free choices. It's a choice between entering slavery or not entering slavery. That is not a free-choice.

IcarusAngel

3rd November 2009, 22:58

That's the effect, not the cause. I think you've pretty much frozen yourself out of any rational debate on this subject.

Actually, while the minimum value may have taken place during the recession any graph will show that the savings rate and so on were declining during the Reagan years before black money and were declining as well (for the working class) during the 'roaring twenties.'

Furthermore, the gap between the rich and the poor was INCREASING PRIOR to the Great Depression, so the maximum value (you have studied calculus, correct) would have taken place during the Great Depression, but after FDR's reforms the country balance itself and the gap between the rich and poor actually DECREASED.

As Krugman points out in the video, this stability went on for a long time well into the 70s, and of course ended during the Reagan years.

IcarusAngel

3rd November 2009, 23:18

The market is the reflection between trade of goods and services between people. Such trade can either be done freely, or not.

Do you think the current crisis was caused by the free exchange of good and services between people at all levels?

Yes, like even most economists I believe the fault primarily lies within the market, not with the government. From a political standpoint we can see that the market gets itself into a mess and then must be saved by the government. I don't think the market is based on 'free choices.' It's based on a property owners - who have come to own land through conspicuous means - selling what they want to consumers, and consumers having to take out loans on their wages just to be able to buy goods and services from said property owners, just to be able to survive.

I'm curious as to what you mean by 'most people here' support markets. You're talking about Olaf, you and Dejavu. As a leftist, I argue against free-markets and for decentralized, libertarian socialism or democratized ownership of the means of production (which doesn't imply decentralization) through syndalism. I believe this is how resources should be owned, controlled, and distributed. The question of 'markets' would never come up because people would go to where their natural talents lie or they would perform services in order to get more services in return. It would be a collective effort - just as capitalism is also a certain kind of collectivism (the bad kind, corporations) - but there would be plenty for room for breaking off and starting alternative coops and so on.

So, I'm against capitalism, against markets, and am for political freedom. However, if capitalism is around, the data (clearly) shows that democratic capitalism is better than Libertarian capitalism and since the government is too worried about taking care of its own citzens, and because they want to ensure that the country is actually producing something, there is less of a need for the type of economic imperialism that has accompanied laissez-faire capitalism. Laissez-faire capitalism leads back into corporatism and fascism.

So, hopefully I've made myself clear. An end to all 'markets' based on property owners and a society that is democratically controlled.

IcarusAngel

3rd November 2009, 23:24

Keep in mind: freedom is not the amount of stuff you can buy, but the amount of choices that you can make. If I want to study science I study science. If I want to be a carpenter I will be a carpenter. If I want to control these resources I control these resources. If I need this I will get this. And so on.

Capitalism inherently conflates 'freedom of the market place' with freedom itself. It's like saying 'the dictatorship needs more freedom to be a dictatorship.' It is a heavily flawed way of thinking and one rejected by nearly every leftists and most social scientists.

The thing is even many economists are starting to catch on now. There are attempts to reform economics - like 'Debunking economics' and so on - and I've even seen a few people here (not just me) quoting these texts. The whole field should be refocused although I can see how that is hard to do when right now economics is attempting to study the results of capitalism.

And even many of these economists, like Minsky, wanted to fund the poor and working class to stimulate weak demand. This is the economists that will hopefully take over in the twenty-first century absent a revolution against capitalism.

Havet

3rd November 2009, 23:28

We (I) was talking about the standards used by scientists and by most economists. It isn't an argument from authority to note that economics must aslo use evidence, facts from the economy, and so on to conduct an analysis.

It's an argument from authority to presuppose all the authors we post are irrelevant compared to yours simply because they don't have a PhD (which i don't even cared to see if they had or not, just like you didn't).

Someone (dejavu I believe) asked what I think economics should if it's not based a series of made up axioms, as in what Miseans believe. Economics should be based on empirical evidence, historical data, hard facts, and it should attempt to determine the result of policy x or policy y in an economy. Furthermore, I believe it should attempt to explain why capitalism fails for so many people, why so many people are poor, and issues like this, such as the consequences of the widening wealth gap. To do this, economics will require the assitence of political science and similar areas of study (likely economics falls under the domain of some of these other social sciences).

I do NOT believe in Misean 'axiomatic' economics and attempts to 'logically justify' greed etc.

Where has he mentioned axioms?

The only axiom I ever heard from Miseans, which I agree with, although find irrelevant, is the axiom: Humans Act. Trying to disprove it would result in a human act, therefore not qualifying as a refutation.

This is false. First of all Olaf has already proven he has no training in mathematics or logic or anything of the sort, yet has claimed to. Second, data from the Reagan years shows that the dregulation principles FAILED miserably. And the economic inequality happened BEFORE the Reagan recession, not after it.

Third, the GDP grew every single year after the New Deal was implemented except for the recession of '37, which caused by FDR's attempt to balance the budget. The economy was also stable for years after that. So the attempt to claim that Libertarian economics is somehow 'superior' is clearly false.

That's all nice and dandy except I (and to my knowledge so does DejaVu) do not advocate reformism. Anything Reagan did, whether an honest attempt to "free" the market could never have resulted in the predicted consequences, because of:

1) artificial privilege of capital granted by government
2) Inequality of opportunity
3) Inequality of authority

It was actully Minsky himself who showed that Libertarian/capitalist economics creates a scheme where the rich people are too extravagent and risky during prosperous times and too conservative during a recession, to the detriment of the economy as a whole. This supports FDR style capitalism, and Minsky supported an attempt to 'balance' capitalism, which I think also makes certainly.

Could you share such knowledge with us laymen?

Where have we even stated the opposite? This current crisis is a living proof that rich people were too risky during prosperous times (bubbles (http://www.youtube.com/watch?v=0F7SCbrU5sQ&feature=player_embedded), artificially low interest rates (http://www.dailyreckoning.com.au/interest-rates-8/2008/03/06/), Bush's tax cuts (http://crooksandliars.com/susie-madrak/study-bush-tax-cuts-cost-more-twice-m), Government's intentional bad statistics (http://www.youtube.com/watch?v=zPkTItOXuN0&feature=player_embedded), etc).

(Please do check the links. I believe some of them will be of enormous interest to you).

Certainly the historical data is on mainstream economics side, not Austrian economics.

Many mainstream economics did not predict the current crisis (and I don't count marxist analysis as mainstream).

Finally, 'free-markets' are not about free choices. It's a choice between entering slavery or not entering slavery. That is not a free-choice.

This is why we don't call current markets free-markets, and neither should you.

This (http://www.revleft.com/vb/would-anarcho-socialist-t116765/index.html?t=116765) is what I usually regard as a free-market (and you seem to agree, taking into account your post on that thread (http://www.revleft.com/vb/showpost.php?p=1537805&postcount=2)).

Dejavu

3rd November 2009, 23:28

Paul Krugman : The recession will end this summer? (LOL) (http://www.youtube.com/watch?v=O3ZD1hDCQ-4)

Skooma Addict

3rd November 2009, 23:38

This is false. First of all Olaf has already proven he has no training in mathematics or logic or anything of the sort, yet has claimed to.

Another baseless assertion. As I said before, your posts are really funny, which is why I look forward to them. By the way, I am still waiting for your example of a free market that was imposed on society, with no public goods. Take your time...

Third, the GDP grew every single year after the New Deal was implemented except for the recession of '37, which caused by FDR's attempt to balance the budget. The economy was also stable for years after that. So the attempt to claim that Libertarian economics is somehow 'superior' is clearly false.

What are libertarian economics?

Certainly the historical data is on mainstream economics side, not Austrian economics.

No it is not. You don't even know what Mainstreams or Austrians believe.

Finally, 'free-markets' are not about free choices. It's a choice between entering slavery or not entering slavery. That is not a free-choice.

Okay....I choose not to enter slavery.

Furthermore, the gap between the rich and the poor was INCREASING PRIOR to the Great Depression, so the maximum value (you have studied calculus, correct) would have taken place during the Great Depression, but after FDR's reforms the country balance itself and the gap between the rich and poor actually DECREASED.

What is your Theory of the business cycle? What is it that causes sudden and massive malinvestment in higher order producers goods?

IcarusAngel

3rd November 2009, 23:42

Paul Krugman : The recession will end this summer? (LOL) (http://www.youtube.com/watch?v=O3ZD1hDCQ-4)

With mainstream economics you take what makes the most sense and you make predictions. Sometimes they are not good. However, you can choose what you want to believe in. I've already said I agree with a lot of what Schiff, for example, says about the economy and manufacturing. Howeever, with Austrian economics there is a pressure to 'buy the whole package at once' instead of just putting forth the data and letting people interpret it as they will.

Skooma Addict

3rd November 2009, 23:46

With mainstream economics you take what makes the most sense and you make predictions. Sometimes they are not good. However, you can choose what you want to believe in. I've already said I agree with a lot of what Schiff, for example, says about the economy and manufacturing. Howeever, with Austrian economics there is a pressure to 'buy the whole package at once' instead of just putting forth the data and letting people interpret it as they will.

Do you just make this stuff up as you go along?

IcarusAngel

3rd November 2009, 23:53

Olaf, your childish rants are getting pretty pathetic even for you. I've already eludicated on the problems of Austrian economics several times in this thread and even most economists would agree with it. I've already outlined how the capitalist economy should be run several times - feel free to go back and read it. And yes, I reject the belief that human nature can be boiled down to set of logical principles. Ludwig von Mises was going off a current mathematical trend that he did not understand which is why he attempted to create a 'science' of human action, even though no such science exists.

Anyway, it is YOUR job, not mine, to show that Libertarian reforms and economics have been beneficial to the economies that they were implemented under. Of course, if you had such an explanation, you would have already provided it.

Skooma Addict

4th November 2009, 00:02

Olaf, your childish rants are getting pretty pathetic even for you. I've already eludicated on the problems of Austrian economics several times in this thread and even most economists would agree with it. I've already outlined how the capitalist economy should be run several times - feel free to go back and read it. And yes, I reject the belief that human nature can be boiled down to set of logical principles. Ludwig von Mises was going off a current mathematical trend that he did not understand which is why he attempted to create a 'science' of human action, even though no such science exists.

How surprising, you avoided answering my questions, so w/e. Whenever you want to explain to me what causes massive and sudden malinvestments in higher order capital goods, let me know.

Anyway, it is YOUR job, not mine, to show that Libertarian reforms and economics have been beneficial to the economies that they were implemented under. Of course, if you had such an explanation, you would have already provided it.

Free banking in Scotland. It wasn't completely free banking, but it was far better than what we have now.

Dejavu

4th November 2009, 00:14

IcarusAngel , you remember the dotcom bubble , right? You might have been too young but in 2000-2001 there was a burst sort of similar but less severe than the current housing bubble burst. A lot of people wanted to get Paul Krugman's advice lets say what this 'brilliant' and 'scientific' economist had for a remedy.

Paul Krugman's economic wisdom ( and we wonder why such an idiot gets a nobel prize but it is no surprise that people like IA become cheerleaders):

All following quotes can be found at http://www.pkarchive.org/

He encouraged the destruction of the dollar , the housing bubble , and insanely low interest rates ( yet he has the nerve to actually blame Greenspan later when Greenspan did exactly what Krugman would recommend)

Paul Krugman in 2001 said :

"During phases of weak growth there are always those who say that lower interest rates will not help. They overlook the fact that low interest rates act through several channels. For instance, more housing is built, which expands the building sector. You must ask the opposite question: why in the world shouldn't you lower interest rates?"
May 2, 2001

"KRUGMAN: I think frankly it's got to be -- business investment is not going to be the driving force in this recovery. It has to come from things like housing, things that have not been (UNINTELLIGIBLE).
DOBBS: We see, Paul, housing at near record levels, we see automobile purchases near record levels. The consumer is still very much in this economy. Can he or she -- or I should say he and she, can they bring back this economy?
KRUGMAN: Well, as far as the arithmetic goes, yes, it is possible. Will the Fed cut interest rates enough? Will long-term rates fall enough to get the consumer, get the housing sector there in time? We don't know"
August 8^th 2001

"KRUGMAN: I'm a little depressed. You know, inventories, probably that's over, the inventory slump. But you look at the things that could drive a recovery, business investment, nothing happening. Housing, long-term rates haven't fallen enough to produce a boom there. The trade balance is going to get worst before it gets better because the dollar is still very strong. It's not a happy picture."
August 14, 2001

"Consumers, who already have low savings and high debt, probably can't contribute much. But housing, which is highly sensitive to interest rates, could help lead a recovery.... But there has been a peculiar disconnect between Fed policy and the financial variables that affect housing and trade. Housing demand depends on long-term rather than short-term interest rates -- and though the Fed has cut short rates from 6.5 to 3.75 percent since the beginning of the year, the 10-year rate is slightly higher than it was on Jan. 1.... Sooner or later, of course, investors will realize that 2001 isn't 1998. When they do, mortgage rates and the dollar will come way down, and the conditions for a recovery led by housing and exports will be in place.
October 7, 2001

"Post-terror nerves aside, what mainly ails the U.S. economy is too much of a good thing. During the bubble years businesses overspent on capital equipment; the resulting overhang of excess capacity is a drag on investment, and hence a drag on the economy as a whole.
In time this overhang will be worked off. Meanwhile, economic policy should encourage other spending to offset the temporary slump in business investment. Low interest rates, which promote spending on housing and other durable goods, are the main answer. But it seems inevitable that there will also be a fiscal stimulus package"
Dec 28, 2001This is what happens when you lack fundamentals about economics. Krugman is the most popular modern Keynesnian there is and very much recommends the same remedies as the Keynesians in FDR's administrations ( and you wonder why the GD was even a GD and prolonged?) Btw, the last quote of Krugman's is the nail in the coffin. He knows that lowering interest rates will flood the market with a bunch of money and credit that should not be there and he knows that will lead to a bubble , and as he accurately predicted, the housing bubble would blow up. This is an explicit call for a housing bubble. Common man , I know you see it.

Btw , notice Krugman goes right back to encouraging bubbles with the current crisis by demanding interest rates be kept low ( or even 0) and stimulus spending. This is Keynesianism 101 , spend our way out of a crisis. I know you(IcarusAngel) like Krugman because he's a social welfarist but that does not lent any credence to the truth value of his propositions. You should think more objectively.

Dejavu

4th November 2009, 02:08

Whenever you want to explain to me what causes massive and sudden malinvestments in higher order capital goods, let me know. Or why there was stagflation in the 70s shortly after the Keynesians took over? :D If you want empirical evidence of an economic theory working the exact opposite way as its 'mathematical' model predicted you should really check this out. It played out exactly how critics predicted it would ( both Austrian - Rothbard- and non Keynesians . The same is true today with Schiff , the whole Austrian school , and non Austrians like Keen , etc)

Dejavu

4th November 2009, 02:20

I have a general rule for myself when I listen to Paul Krugman. Its usually that what ever he recommends as the 'cure' or diagnoses as a cause for the economic crisis , its usually a safe bet to believe the opposite.;)

Parker

4th November 2009, 08:45

Yea, I definitely have a problem with this. I don't think you can just dismiss psychology/philosophy when discussing economics. I am actually quite surprised Sraffa actually believed in the LTV. When it comes to determining the nature of value, philosophy/psychology is more useful than economics.

The problem is that this engenders its own "transformation problem", as subjective valuations have to conform to consistent, regular price magnitudes (i.e., how does it account for price as cost-price plus average rate of profit?).

I do not see how someone can have a surplus over their present consumption needs. For all intents and purposes, people never really fulfill their present consumption needs. There is always something that a person would like to consume. I want a new plasma screen TV, and a good gaming computer for example. Lets assume I can afford these things, yet I decide to save anyways. I do not save because my present consumption needs have been fulfilled because at the moment, I really really want a new gaming computer right now at this moment.

That was a god-awful example, but I hope it got my point across.

My point was that the empirical evidence shows that people save more the more income they receive. I don't want to get into a discussion about what people's "real" needs or wants, etc., are as I think it's both irrelevant and pointless. People have all sorts of reasons for acting the way they do. The point is that your logic also works the other way: I may in fact value something more in the future than now, because of how I anticipate future events.

Also, as a seller, the nature of time preference is reversed. I want to sell all my products as soon as I can, and I will offer a discount to customers who buy in bulk. This means that per unit cost is lower in the present than in the future, so it's hard to see how time preference translates into concrete economic activity.

Indeed, it seems to me if present goods were of a higher value than future goods and this were generalised, then the economy would be in a state of permanent backwardation. Spot prices would always be higher than forward prices.

In any case, at the level of the economy at which prices are primarily determined, the individual consumer with his time preference is not the main economic actor. It is the firm.

If that were actually how Austrians treated interest, then I would object as well. But Austrians get their theory of interest from praxeology (The ones I agree with at least). The only assumptions Austrians make is that meaningful behavior is directed at substituting a more satisfactory state of affairs for a less satisfactory state of affairs. True, some Austrians in the past, Such as Bohm-Bawerk, made many incorrect arguments.

I picked Bohm-Bawerk because his seemed to me the classic statement of time preference and also because others, e.g., Rothbard, were not as clear.

Now, maybe you have a problem concerning how Austrians derive time preference from Praxeology, but I could go on and attempt to explain why I think the Austrians deduction is correct.

My main objection would be how we can show from human action, in this case time preference, a relationship between people's psychological evaluations and concrete movements in interest rates. I don't know of any such relationship.

By the way, are you an economics major or something, or are you just interested in economics? Are you a libertarian socialist for economic and/or moral reasons?

I work for a financial information/news company in London. I didn't major in economics. I did a joint honours degree in history and politics. I'm glad I never studied economics!

I'm a libertarian socialist for both moral and economic reasons. Reading George Orwell convinced me of being a socialist, particularly his account of the revolution in Spain.

Parker

4th November 2009, 09:15

Parker,

There is a lot of exchange between you and Olaf so when I get a little more time later I'll respond in more detail.

I think the Austrian school lends a vital consideration to economics as it tends to analyze it from a 'bottom up' approach meaning it focuses almost entirely on microecon and the viewpoint of each individual actor in the economy. Hayek explained it well by considering that tacit knowledge is distributed among all actors in the economy and what each individual values more than something else can only be known by the individuals themselves. ( i.e. what kind of economic activity will the engage in). The 'market' is merely an aggregate of all these individual activities coalescing.

This is a crucial point and where I have a major disagreement with Austrian economics. At the macro level, the economy exhibits behaviour that is distinctly different to micro. The whole is greater than the sum of its parts. Also, the individual, which Hayek posits as the main actor in the economy, while important, is overshadowed by the firm, including, importantly, financial institutions and such like.

What is rational behaviour at the micro level is irrational at macro. For instance, it is rational to sell my shares when I expect the highest price, but if everyone else acts rationally in this way, the result is a plumeting share price.

Indeed, behaviour at the micro level is based on certain expectations of the future direction of the economy as a whole, which in turn is affected by the decisions of individual firms. Micro behaviour is continually learning its own collective macro behaviour. The market is not merely an aggregate.

Some of this might fit into the Austrian argument. I can't recall what Hayek wrote about feedback.

ETA: though Austrian economics focuses on micro, it definitely has a macro conception of money.

Hayek wasn't always easy to read and some in the Austrian School would question whether he was a mainstream Austrian or not given his divergence of views with Mises and others. Hayek was very influenced in the Walrusian tradition while other main body Austrians were more or less directly influenced by the Mengerian tradition ( Mises , Rothbard, etc). Hayek seems more to fall in line with Kirzner and Schumpeter.

For the record, I much prefer Hayek and Schumpeter over Mises and Rothbard.

Parker

4th November 2009, 09:18

Austrians argue that the entire system has design flaws and that can be traced to the central banks with unrestricted control over the unsound money supply and governments which both secure their control and regulate markets.

I believe Marxists would argue more about the validity of the theory property and markets themselves.

Keynesians would argue over bad planning vs good planning and the necessary or damaging role of private savings.

Yes I know this is extremely simplified but I think you get the point.

For the record, Marxists would argue that the crisis has arisen out of the nature of capital itself, which is prone to successive boom and bust cycles.

Parker

4th November 2009, 09:44

Afaik , according to Austrians , there is no fixed quantitative natural interest rate. Its not like 15% always and we can measure what falls below 15%.

Yes, I realise that the "natural rate" is not meant to mean a transcendent numerical figure and that it is more a theoretical construct (like Marx's "price of production").

When money is invested into capital then the interest rate of money goes down until it becomes equitable to save again ( i.e. collections on loans, return on investments , etc). In other words, as you already know the Austrian argument, it boils down to time preferences.

Actually, most new capital is not funded not from savings but from profits reinvested into production to create more profits. Sure, pension funds as savings have been an important source of liquidity, but this means that time preferences are not the source of capital expansion. Businesses work to a different logic than individual consumers. They have no choice but to re-invest or else they will go under. Of course, you can argue that the it is choice of the enterpreneur to keep going or just squander all his profits he made in the year and to hell with more investment, but this overlooks the fact that most companies are run by salaried managers whose personal life decisions do not enter the equation in this way.

The ABCT delt with the artificial expansion of the money supply which necessitates the artificial lowering of the interest rate so all that new money and credit can flow into the economy. It creates market distortions because it requires the market to absorb money that otherwise would not have been there which encourages overspeculation creating bubbles ( money has to go somewhere). Eventually there is so much malinvestment that capital is destroyed or converted into useless projects that returns cannot pay out and there is a market correction which typically translates into a recession. This is an extremely oversimplified explanation meant for anyone to grasp but I think it gets to the point.

I think its an accurate description, as far as I can tell. Rothbard provides a good overview of the ABCT in the first part of his book on the Great Depression.

Have a look at Steve Keen's work on credit (it is available online). He argues, based on empirical evidence, that the line of causation runs the other way: that it is the market that increases credit while the monetary authorities play catch up.

Instead of the goverment seeding money into the credit creation process, in practice banks extend loans according to the demand for them, then look for the reserves later.

ETA: I can't post links yet, but the piece is called "The Roving Cavaliers of Credit". Google it and it will come up.

As far as the circular argument goes , the fact that some of a product will be reinvested into further production processes or capital is just a truism but there is no reason to believe that this is an ongoing process that is self-sustaining. Again , what of discovery processes? Back over a century ago someone decided to buy up some metal and other materials to build a car instead of having those same resources go into building buggies and horseshoes and other standard commodities of the time and how did that turn out?

This isn't a major point, so we don't need to spend long on it. Maybe "circular" is the wrong metaphor. Think of the economy as a web. I didn't mean circular as in a closed loop. Of course, there is no reason to exclude innovations at all.

Skooma Addict

4th November 2009, 19:13

The problem is that this engenders its own "transformation problem", as subjective valuations have to conform to consistent, regular price magnitudes (i.e., how does it account for price as cost-price plus average rate of profit?).

Yes, there are fairly consistent, regular price magnitudes, but unless you can expand on this, I do not see how this is an argument against Subjectivism. It is also a very bad idea to look at subjectivity solely in the context of economics, and then completely disregard philosophy (I'm not saying you have done this). Just like ethics, value is completely subjective. I think you would have a very difficult time explaining how X can be objectively more valuable than Y, even when people may prefer Y over X. Also, a diamond may be very valuable now, but if you live on an island by yourself, then that diamond is going to lose a lot of its value. How would an objective theory of value deal with situations like this?

On a final note, how would such a theory deal with humans? It is clear that we do value others. Are you going to claim that come people are objectively more valuable than other people?

My point was that the empirical evidence shows that people save more the more income they receive. I don't want to get into a discussion about what people's "real" needs or wants, etc., are as I think it's both irrelevant and pointless. People have all sorts of reasons for acting the way they do. The point is that your logic also works the other way: I may in fact value something more in the future than now, because of how I anticipate future events.

Right, but the reason why you value something more in the future is because you anticipate future events. If I am in a desert with only a canteen of water, I will save some water for later because I anticipate that I will be thirsty. I agree with you here.

Indeed, it seems to me if present goods were of a higher value than future goods and this were generalised, then the economy would be in a state of permanent backwardation. Spot prices would always be higher than forward prices.

Water in the winter is not the same good as water in the summer. We are defining a the future version of a present good differently. Also, supply/demand is constantly changing.

In any case, at the level of the economy at which prices are primarily determined, the individual consumer with his time preference is not the main economic actor. It is the firm.

I disagree. Besides, there were prices before there were firms.

I picked Bohm-Bawerk because his seemed to me the classic statement of time preference and also because others, e.g., Rothbard, were not as clear.Bohm-Bawerk did not completely understand time preference. The best person on the subject is Mises.

My main objection would be how we can show from human action, in this case time preference, a relationship between people's psychological evaluations and concrete movements in interest rates. I don't know of any such relationship.

Well this obviously takes a while to explain. So I will go in steps...

There is only 1 logic followed by all humans, meaning people do not behave irrationally. That is, they do not go jump off a bridge in order to satisfy their hunger, while at the same time they know jumping off a bridge won't satisfy hunger. I am using the word "irrational" differently than many others use it. For example I say it is rational to bash your head against a tree if you think doing so will cure brain cancer.

I view polylogism, the normative and descriptive versions, as incorrect. Logic cannot be valid for one group, and invalid for another group. Wittgenstein even goes so far as to say that illogical thought is impossible.

"In a certain sense, we cannot make mistakes in logic. … [L]anguage itself
prevents every logical mistake. – What makes logic a priori is the
impossibility of illogical thought.

Thought can never be of anything illogical, since, if it were, we should
have to think illogically. … It used to be said that God could create
anything except what would be contrary to the laws of logic. – The truth is
that we could not say what an ‘illogical’ world would look like. … It is as
impossible to represent in language anything that ‘contradicts logic’ as it
is in geometry to represent by its coordinates a figure that contradicts the
laws of space or to give the coordinates of a point that does not exist."

So, is there anything I have said so far that you disagree with? If not, I will proceed further. If so, then I will clarify myself and respond to any objections. If your interested, this is by far the best piece on the topic...

http://mises.org/journals/scholar/long.pdf

I work for a financial information/news company in London. I didn't major in economics. I did a joint honours degree in history and politics. I'm glad I never studied economics!

I'm a libertarian socialist for both moral and economic reasons. Reading George Orwell convinced me of being a socialist, particularly his account of the revolution in Spain.

What is it that makes you think libertarian socialism is the most moral political system? Also, do you have a British accent?

Dejavu

4th November 2009, 21:36

Actually, most new capital is not funded not from savings but from profits reinvested into production to create more profits. Sure, pension funds as savings have been an important source of liquidity, but this means that time preferences are not the source of capital expansion. Businesses work to a different logic than individual consumers. They have no choice but to re-invest or else they will go under. Of course, you can argue that the it is choice of the enterpreneur to keep going or just squander all his profits he made in the year and to hell with more investment, but this overlooks the fact that most companies are run by salaried managers whose personal life decisions do not enter the equation in this way.

I disagree. Deferring consumption of profits now for long term investment for profits in the future is by definition an expression of low time preference. This also is a definition of saving. Likewise this applies to producers who do not blow away all the money they earn right away but defer some of it into making more money for the future ( again , low/high time preference expressions)

The fact that a business wants to stay in business demonstrates an expression of low time preference. They would like to make more money over time rather than squander all profit now for short term gain. The opposite would be trying to make a quick buck not worrying about long term consequences.

You have to save a portion of your profits in order to want to reinvest into the long term.

The logic applies to consumers as well. If you want to buy a new car then you can defer consumption of present things in order to save for a down payment or a full payment of the car in the future but you can't spend it all of your earnings in the present and expect to have the car in the future, likewise , you can't expect to spend as much now if you decide to save. These , again , are expressions of high vs low time preferences.

The salaried managers ultimately yield to what the owners want -- value either as profits taken home or increased share value and share value can only be worth anything if there are profits and/or successful sale/liquidation. Same expressions of time preference apply.

Have a look at Steve Keen's work on credit (it is available online). He argues, based on empirical evidence, that the line of causation runs the other way: that it is the market that increases credit while the monetary authorities play catch up.
Instead of the goverment seeding money into the credit creation process, in practice banks extend loans according to the demand for them, then look for the reserves later.

I'll read the information but this doesn't make much sense in the real world. If it was natural market processes creating the credit bubble then why on earth would the monetary authorities keep on expanding the money/credit supply? Wouldn't there be be empirical evidence of the Fed and other Central Banks doing the opposite , contracting money/credit a.l.a. raising interest rates?

This analysis you provided fails to see the distortions created by artificial expansion. When the Fed has banks buy up new cash they do it buy lowering the interest rate , I'm sure you are aware of this. Banks buy up the money but they don't want to hold on to it , they want to loan it out at interest. When banks have a larger stash of doe ( credit/money) they lower interest rates to borrowers from what they normally would be and now we have people that can't afford to pay for these lines of credit in the long run. This is not even considering the largest borrower of debt , the government, which even further and massively distorts the market.
In effect , what you have is manufactured artificial demand. I should also throw in there that the only reason banks still make highly risky loans is because of government guarantees on risk subsidy ( Fannie/Freddie which are GSEs actually , bailouts , FDIC , etc).

Dejavu

4th November 2009, 22:00

At the macro level, the economy exhibits behaviour that is distinctly different to micro. The whole is greater than the sum of its parts. Also, the individual, which Hayek posits as the main actor in the economy, while important, is overshadowed by the firm, including, importantly, financial institutions and such like.Not really. I mean macro as a single entity i.e. the economy or the market is very limited in scope on what it can tell you about the things actually going on in the economy. Sure , its necessary to work in aggregates like the steel industry but if we want to know what's going with steel in relation to the rest of the economy some degree of micro analysis is required. Aggregates of separate steel companies , steel companies compared to companies that use steel in their production processes, the labor involved ,capital investment , etc. You already understand this, I'm sure.

Austrians do not dismiss macro theory rather they just add a micro friendly element to it that has been missing from Keynesianism and other disciplines , and that's Capital Theory. This is why Austrians stress profits vs rents , price theory , capital , and time. They hold capital to be heterogeneous and not homogeneous and this has huge implications on both the micro and macro outlook.

What is rational behaviour at the micro level is irrational at macro. For instance, it is rational to sell my shares when I expect the highest price, but if everyone else acts rationally in this way, the result is a plumeting share price.Austrians would describe a 'rational action' in a much narrower sense. A rational action is that if you want to make a profit from your share , you have to sell it sometime. However this says nothing about the business prowess of the individual or whether they will make good calculations or not. It certainly doesn't mean that just because people take economic action , they are not prone to error and loss. The people that figured out the right time to sale their shares will profit the most , naturally.

For the record, I much prefer Hayek and Schumpeter over Mises and Rothbard. I figured you would. :D I am not really an 'Austrian' per say. I don't have 'allegiances' to any particular school of thought. I am more interested in concepts which can come from all ways of thinking. I would agree with most of the economics of the Austrian school but their Social and Political branch is something different. Btw , its great to have debate with an opposing view that actually has an understanding of economics ( and probably other things too.) Its really enjoyable.:D

Parker

5th November 2009, 18:57

Yes, there are fairly consistent, regular price magnitudes, but unless you can expand on this, I do not see how this is an argument against Subjectivism.

it's a question, more than a point: how do subjective values get transformed into prices, how can subjective values be measured with regard to prices, and how does (or can) this account for regular, stable prices?

On a final note, how would such a theory deal with humans? It is clear that we do value others. Are you going to claim that come people are objectively more valuable than other people?

I'm not sure I can answer your question. I guess it's because I am not so much interested in a theory of value in terms of why or how people do or should "value" things, or even if some people are more valuable than others; rather, I am interested in what regulates prices in a capitalist society (in a society of generalised commodity production and wage-labour).

Right, but the reason why you value something more in the future is because you anticipate future events. If I am in a desert with only a canteen of water, I will save some water for later because I anticipate that I will be thirsty. I agree with you here.

But if interest is then the result of time preferences, why don't negative time preferences result in negative interest rates? And, again, how exactly is time preference transformed into an interest rate?

I disagree. Besides, there were prices before there were firms.

What do you disagree with?

I am interested in the here and now, not so much in the past (though, to be sure, that is interesting.)

There is only 1 logic followed by all humans, meaning people do not behave irrationally. That is, they do not go jump off a bridge in order to satisfy their hunger, while at the same time they know jumping off a bridge won't satisfy hunger. I am using the word "irrational" differently than many others use it. For example I say it is rational to bash your head against a tree if you think doing so will cure brain cancer.

:ohmy:

What is it that makes you think libertarian socialism is the most moral political system? Also, do you have a British accent?

The first question would take me too long to answer just now, though it would be a good conversation for another time. As for the second question, I have an English accent - as opposed to Scottish, Welsh or Northern Irish :p

What about you, Olaf?

Parker

5th November 2009, 19:01

Btw , its great to have debate with an opposing view that actually has an understanding of economics ( and probably other things too.) Its really enjoyable.:D

Yeah, I agree. People with opposing viewpoints can have a sensible discussion without flaming. It is possible on the internets.

I will get back to your points, Dejavu, tomorrow as I have to go to my brother's house for dinner just now. Bye.

Skooma Addict

5th November 2009, 20:46

it's a question, more than a point: how do subjective values get transformed into prices, how can subjective values be measured with regard to prices, and how does (or can) this account for regular, stable prices?

I do not see how this is supposed to be an argument against subjectivism. As long as supply/demand is relatively stable, prices will be relatively stable. Besides, prices do change after all. It is not like they are always stable.

I'm not sure I can answer your question. I guess it's because I am not so much interested in a theory of value in terms of why or how people do or should "value" things, or even if some people are more valuable than others; rather, I am interested in what regulates prices in a capitalist society (in a society of generalised commodity production and wage-labour).

But a general theory of value needs to be able to answer my objections. There is nothing in the structure of the universe that says some things are inherently more valuable than others.

But if interest is then the result of time preferences, why don't negative time preferences result in negative interest rates? And, again, how exactly is time preference transformed into an interest rate?

Negative time preferences? I will explain how TP is related to the interest rate in steps.

What do you disagree with?

I am interested in the here and now, not so much in the past (though, to be sure, that is interesting.)

I disagree with your claim that prices are ultimately determined by the firm.

As I said before, there were prices before there were firms. Do you think different economic laws applied for people back then?

:ohmy:

I need to know what it is you disagree with. I cannot go on and explain how time preference determines interest rates until I answer all of your objections regarding rational action.

What about you, Olaf?

What kind of accent do I have? I have a Midwestern accent if there is such a thing.

Parker

6th November 2009, 12:46

I disagree. Deferring consumption of profits now for long term investment for profits in the future is by definition an expression of low time preference. This also is a definition of saving.

Savings is money deposited that someone else can borrow to finance their spending. Therefore, saving is not the same as investing. Money invested is precisely money that no-one else can borrow.

The fact that a business wants to stay in business demonstrates an expression of low time preference. They would like to make more money over time rather than squander all profit now for short term gain. The opposite would be trying to make a quick buck not worrying about long term consequences.

You have to save a portion of your profits in order to want to reinvest into the long term.

The firm's motivation for reinvestment is not for the provision of future consumption but for the increasing return on capital in the form of more profits and more growth, a condition which is imposed by the competitive environment itself.

It is only through the introduction of new technology, new techniques of production, new forms of organisation, etc., that the original capital is kept intact. As my old boss used to say to me: a business keeps moving or it dies. The motivation is derived not from individual psychology, but from the system itself.

The salaried managers ultimately yield to what the owners want -- value either as profits taken home or increased share value and share value can only be worth anything if there are profits and/or successful sale/liquidation. Same expressions of time preference apply.

Even so, the primary goal is still growth, not deferred consumption. In any case, shareholders are likely to be pension funds or somesuch entities - again whose goal is growth.

I'll read the information but this doesn't make much sense in the real world. If it was natural market processes creating the credit bubble then why on earth would the monetary authorities keep on expanding the money/credit supply? Wouldn't there be be empirical evidence of the Fed and other Central Banks doing the opposite , contracting money/credit a.l.a. raising interest rates?

Yeah, a lot of this is covered in Keen's article. As for raising interest rates, central banks do this all the time, especially in terms of "inflation targetting", and during boom time. They tend to follow the market, rather than completely set the agenda - though of course, they do still try to hold sway, not that this always works. And it's always worth keeping in mind that the central bank sets the target rate, rate at which commercial banks borrow from it. The market rate, the actual important rate, i.e., Libor, the rate over which onward lending is calculated, is a completely different matter.

So, while central banks can declare whatever interest rate they like, sooner or later reality will catch up with them. They don't have unlimited power, but they do of course have some leeway. In fact, the only way interest rates were kept so low after the dotcom crash was because of Chinese purchases of USTs. In other words, blame China. :D

This analysis you provided fails to see the distortions created by artificial expansion. When the Fed has banks buy up new cash they do it buy lowering the interest rate , I'm sure you are aware of this. Banks buy up the money but they don't want to hold on to it , they want to loan it out at interest. When banks have a larger stash of doe ( credit/money) they lower interest rates to borrowers from what they normally would be and now we have people that can't afford to pay for these lines of credit in the long run. This is not even considering the largest borrower of debt , the government, which even further and massively distorts the market.

Yeah, again a lot of this is covered in Keen's article. Studies showed that M2 levels increased before new reserves were found to supplement them. Banks don't get handed money which they then on-lend, they create lines of credit first, owing to demand/supply in the market. Commodity production and circulation now takes place mainly with credit money, with money functioning as a "unit of account". The proceeds of a loan are normally used to purchase goods and services and end up as deposits in another bank. Bank loans are tied to the movement of the world of commodities. We live in an almost pure credit money economy.

If the traditional fractional reserve model were true, the total level of money in the economy would be greater than the level of debt, but it isn't. There is far more debt than money and this gap has grown massively.

BTW, governments are the biggest issuers of debt. I wouldn't say this distorts the market. It is the market! (Or at least a significant portion). Banks, pension funds, insurers generally love to lend to governments as they always pay and assets can always be sold on the secondary market.

In effect , what you have is manufactured artificial demand. I should also throw in there that the only reason banks still make highly risky loans is because of government guarantees on risk subsidy ( Fannie/Freddie which are GSEs actually , bailouts , FDIC , etc).

Also, bankers are extremely competitive. If they think someone is making money, no matter how crazily, they will want to get in on it too.

I could go on. I haven't mentioned the shadow banking market, derivatives, etc. ...

Parker

6th November 2009, 13:04

Not really. I mean macro as a single entity i.e. the economy or the market is very limited in scope on what it can tell you about the things actually going on in the economy. Sure , its necessary to work in aggregates like the steel industry but if we want to know what's going with steel in relation to the rest of the economy some degree of micro analysis is required. Aggregates of separate steel companies , steel companies compared to companies that use steel in their production processes, the labor involved ,capital investment , etc. You already understand this, I'm sure.

yeah, sorry, maybe I wasn't being all that clear. It's just my knee-jerk reaction to neo-classical micro. Not saying that Austrianism is necessarily the same.

Austrians do not dismiss macro theory rather they just add a micro friendly element to it that has been missing from Keynesianism and other disciplines , and that's Capital Theory. This is why Austrians stress profits vs rents , price theory , capital , and time. They hold capital to be heterogeneous and not homogeneous and this has huge implications on both the micro and macro outlook.

I actually agree with all that too.:D Time is particularly important in Marx's economics, as is the differentiation between different capitals, how they interact with each other and are shaped by competition, and so on.

I figured you would. :D I am not really an 'Austrian' per say. I don't have 'allegiances' to any particular school of thought. I am more interested in concepts which can come from all ways of thinking. I would agree with most of the economics of the Austrian school but their Social and Political branch is something different.

Have you read Schumpeter's Capitalism, Socialism and Democracy? There are parallels with his work and that of Marx (i.e., "creative destruction") and also Kondratiev. He was also right, in my opinion, that capitalism would lead to modern corporatism.

Parker

6th November 2009, 13:47

I do not see how this is supposed to be an argument against subjectivism. As long as supply/demand is relatively stable, prices will be relatively stable. Besides, prices do change after all. It is not like they are always stable.

I asked these questions because this is what was raised in the aftermath of the "marginal revolution" of the nineteenth century. The question of the measure of subjective values, it seemed, rested on a tautology: prices could be explained by marginal utility (subjective evaluation) but the degree of utility could only be made with reference to price.

Mises answered that value is ordinal, not cardinal, but in my view this sidesteps the question of where prices actually come from. In my view it is a retreat from the classical cost production theory of value because it takes as its starting point exchange rather than production.

There are still the issues such as the marginal utility of capital, or even of money, diminishing marginal returns, and so on.

But a general theory of value needs to be able to answer my objections. There is nothing in the structure of the universe that says some things are inherently more valuable than others.

I agree. Marx's theory of value is not "objective" in that sense. For a commodity to have exchange value it must also be a use value (i.e. it must be of use to someone in some way). Value is formed in social production, but only as a potential. It is realised in exchange, when the commodity is sold. The measure of value is average or "socially necessary" labour time.

At its most basic Marx's LTV shows that value is a social relation. The products of social labour are apportioned out via private exchange. Therefore exhange value is the portion of social labour of one commodity compared to another. All labour is reduced to a common social substance, abstract labour. And all labour must be "socially necessary." Because of this, the LTV has tremendous explanatory power when it comes to social stuggles over time and the intensification of work, the working day, retirement age, replacement of workers by machinery, and so on.

The law of value in action works as a "blindly operating average". In a commodity producing society, like ours, where there is no conscious social planning of production, the law of value works in such a way as to distrubute all of society's labour amongst the various sectors and levels of production so that the needs of capitalist society - commodity-producing society - and its individual members can be met and society as a whole can reproduce itself. And this means that capitalism is prone to recurrent crises as this "blindly operating average" continually re-adjusts itself.

Negative time preferences? I will explain how TP is related to the interest rate in steps.

Forgive me for not being precise. I understand the logical process by which time preference is related to interest, but what I want to know is how this works concretely. So I ask, "what is the origin of interest?" Not, "what are the necessary conditions for its existence?" If I won't lend $1000 without getting back $1100, this is said to explain, with reference to time preference, the origin of interest. But, in terms of concrete society, where does the extra $100 come from?

ETA: I am aware that the common answer is "from the borrower". I am talking about the economic set-up of society.

Skooma Addict

6th November 2009, 18:05

I asked these questions because this is what was raised in the aftermath of the "marginal revolution" of the nineteenth century. The question of the measure of subjective values, it seemed, rested on a tautology: prices could be explained by marginal utility (subjective evaluation) but the degree of utility could only be made with reference to price.

If I can sell something that I don't even like for 1 million dollars, then I am still going to place a lot of value on that product. That doesn't change the fact that it is still my subjective preferances that are responsible for me valueing the good. Also, the degree of utility of something can be made without refernce to price. I can value a friendship, but I cannot really put a price on it.

The measure of value is average or "socially necessary" labour time.

If I find a diamond laying on the beach, that diamond is still very valueable to me even though no labor went into extracting it.

And all labour must be "socially necessary." Because of this, the LTV has tremendous explanatory power when it comes to social stuggles over time and the intensification of work, the working day, retirement age, replacement of workers by machinery, and so on.

The LTV isn't even a general theory of value. People value things which required no labor whatsoever. The LTV cannot account for this. How valueable something is has nothing to do with how much labor went into making the product. It is completely subjective. If I spend 40 years of my life gathering poop from sewers to construct a giant sculpture made of poop, will that sculpture be valueable since a lot of labor went into making it? No.

The law of value in action works as a "blindly operating average". In a commodity producing society, like ours, where there is no conscious social planning of production, the law of value works in such a way as to distrubute all of society's labour amongst the various sectors and levels of production so that the needs of capitalist society - commodity-producing society - and its individual members can be met and society as a whole can reproduce itself. And this means that capitalism is prone to recurrent crises as this "blindly operating average" continually re-adjusts itself.

What do you mean when you say there is no conscious social planning of production?

If I won't lend $1000 without getting back $1100, this is said to explain, with reference to time preference, the origin of interest. But, in terms of concrete society, where does the extra $100 come from?

The money isn't created out of thin air if that is what your implying. At any given time there is ony a limited amount of dollars in society. The 100 dollars could have come from a variety of sources. Maybe my friend gave me 100 dollars for example.

Parker

7th November 2009, 22:42

If I can sell something that I don't even like for 1 million dollars, then I am still going to place a lot of value on that product. That doesn't change the fact that it is still my subjective preferances that are responsible for me valueing the good. Also, the degree of utility of something can be made without refernce to price. I can value a friendship, but I cannot really put a price on it.

Value as an economic category in capitalist society and how you "value" friendship are two different things. I already said that I am interested in the former and not the latter. This is because I am interested in the concrete relations between people in this society and at this juncture in history.

Value is a social relation between people that assumes a particular material form in a capitalist society, a society in which commodity production is made general. Marxists use the word "value" in this way, just as other schools of thought use particular definitions of words themselves.

To argue that value arises solely from subjective desires involves a radical scepticism of cost-price. Costs of production condition price. Income distribution conditions spending/saving. How "subjective" is all this?

If I find a diamond laying on the beach, that diamond is still very valueable to me even though no labor went into extracting it.

And the diamond just found its own way out of the ground and onto the beach, did it? ;) If diamonds were found everywhere they would be worthless.

The LTV isn't even a general theory of value. People value things which required no labor whatsoever. The LTV cannot account for this.

See above.

How valueable something is has nothing to do with how much labor went into making the product. It is completely subjective. If I spend 40 years of my life gathering poop from sewers to construct a giant sculpture made of poop, will that sculpture be valueable since a lot of labor went into making it? No.

That's like the old mud pies objection: why don't mud pies have value? For a commodity to have value (exchange value) it must also be a use-value. If you make something no-one wants, you have wasted your labour. This is what I meant in my former message that value in commodities exists as potential but has to be realised in the realm of exchange.

What do you mean when you say there is no conscious social planning of production?

In capitalist society there is no overall plan that says how society's labour is to be co-ordinated in such a way that society's needs are met. The only way industrialists know if they are wasting labour is when their products are left unsold. Instead of making profits, they incur losses.

The money isn't created out of thin air if that is what your implying. At any given time there is ony a limited amount of dollars in society. The 100 dollars could have come from a variety of sources. Maybe my friend gave me 100 dollars for example.

It was a rhetorical question, really. Interest is a claim on future value. This presupposes certain social relations and it is from the nature of these realtions that interest arises, not from a trans-historical psychological category.

Skooma Addict

8th November 2009, 00:26

Value as an economic category in capitalist society and how you "value" friendship are two different things. I already said that I am interested in the former and not the latter. This is because I am interested in the concrete relations between people in this society and at this juncture in history.

Fair enough. But I definitely do not think different theories of value can be true depending on the situation. How I value friendship is subjective, just like my valuing of an apple is subjective. Neither has objective value. If you think otherwise, you should be able to explain why different laws of value hold true for each example.

And the diamond just found its own way out of the ground and onto the beach, did it? ;) If diamonds were found everywhere they would be worthless.

That isn't the point. The point is that if I find a diamond on the beach, that diamond is still very valuable to to me even though no labor went into extracting it.

Havet

8th November 2009, 00:29

That isn't the point. The point is that if I find a diamond on the beach, that diamond is still very valuable to to me even though no labor went into extracting it.

Sorry to meddle in, but this sounds obvious

What sort of diamond are you talking of? A rough diamond, or a finished diamond? Because certainly finished diamonds require labor to shape them. Even rough diamonds, in order to achieve a greater profit.

Parker

8th November 2009, 01:10

Fair enough. But I definitely do not think different theories of value can be true depending on the situation. How I value friendship is subjective, just like my valuing of an apple is subjective. Neither has objective value. If you think otherwise, you should be able to explain why different laws of value hold true for each example.

is friendship a commodity?

Parker

8th November 2009, 01:17

Sorry to meddle in, but this sounds obvious

What sort of diamond are you talking of? A rough diamond, or a finished diamond? Because certainly finished diamonds require labor to shape them. Even rough diamonds, in order to achieve a greater profit.

I think Olaf is saying that an item can be personally valuable to onself - an attractive pebble for instance - but that that "value" is not derived from labour.

The labour theory of value, however, does not argue that every tangible and intangible thing in the universe is valuable because of labour, but that the money value of commodities is conditioned by labour.

Dejavu

8th November 2009, 01:17

Holy crap Parker. Ok , let me read over your stuff. You'll get my reply soon enough.

Skooma Addict

8th November 2009, 01:29

I think Olaf is saying that an item can be personally valuable to onself - an attractive pebble for instance - but that that "value" is not derived from labour.

The labour theory of value, however, does not argue that every tangible and intangible thing in the universe is valuable because of labour, but that the money value of commodities is conditioned by labour.

Right. But as far as I am concerned, this is an inconsistency in a value theory unless it can be explained why it is that commodities have objective value, while nothing else does. I think it is actually extremely obvious that all value is subjective. I could spend decades making a commodity that nobody wants.

Parker

8th November 2009, 11:39

Right. But as far as I am concerned, this is an inconsistency in a value theory unless it can be explained why it is that commodities have objective value, while nothing else does. I think it is actually extremely obvious that all value is subjective. I could spend decades making a commodity that nobody wants.

Economic value is social. The value is not contained within something; it's not a physical property of the object. The object itself doesn't tell us anything about the nature of the economy in which it has been produced and traded.

A thing can be a use-value without having an economic value as a commodity. The air is valuable but it isn't worth anything. A commodity, however, must have a use-value. If you spend decades making something no-one wants, if you make something that is useless, you have wasted your labour.

Why people want particular use-values depends on the history, culture, etc., of that society and lies outside the sphere of this investigation. However, in making a television, for instance, you are going to require components, etc., and these must be paid for. It is difficult to see where your subjective valuation determines the cost-prices of inputs into commodity production, how it relates to use-values as means of production and the use-value of labour-power itself.

The labour theory of value is also a critique of the way in which production is organised, how the worker becomes alienated by his own product, and how capitalist society is an historical mode of production, one that is limited by human labour. Capitalism is therefore not a psychological condition, it is not a series of immutable natural laws, and it is not inevitable.

The reason why I reject a general theory of value, one that tries to encompass everything from why I value my wife's love to prices in a capitalist economy, is because we are talking about different things. The value a man places on his wife's love, or on the relationship with his best friend, is not an economic question.

To try to tie all this up in one theory of everything just leads to all sorts of inconsistencies.

Dejavu

8th November 2009, 16:01

Savings is money deposited that someone else can borrow to finance their spending. Therefore, saving is not the same as investing. Money invested is precisely money that no-one else can borrow.

Strictly speaking , savings is any part of present wealth you defer from present consumption typically for future use. There really is no point to save unless you plan to use the savings in the future in some way. Right? Investing is spending , I understand that but the resources for the investment had to come from somewhere and it seems to fit into time preferences.

The firm's motivation for reinvestment is not for the provision of future consumption but for the increasing return on capital in the form of more profits and more growth, a condition which is imposed by the competitive environment itself.

Growth can only be the result of surplus. Its not as if when someone builds a company they will immediately profit. They may not profit at all actually. But if they are seeing returns, if they wish to continue future operations , they will defer a part of that earnings (surplus) into further company growth. I don't see how this contradicts anything I have been saying thus far.

It is only through the introduction of new technology, new techniques of production, new forms of organisation, etc., that the original capital is kept intact. As my old boss used to say to me: a business keeps moving or it dies. The motivation is derived not from individual psychology, but from the system itself.

This is relative to the competitive environment around them, I agree to this extent. It is feasible that a company can keep on producing the same thing indefinitely (such as a circular model Sraffa offers in abstract) but this usually is not the case in capitalism at any rate. Creative destruction is usually the case at some point. Entrepreneurs are constantly striving for more and this involves taking risks. I don't believe the system itself is like some kind of automated materialism. I think it wholly depends on individuals with the ability to more or less accurately forecast what might future conditions be like. That is not guaranteed and thus involves risk.

Even so, the primary goal is still growth, not deferred consumption. In any case, shareholders are likely to be pension funds or somesuch entities - again whose goal is growth.

Again, growth is deferred present consumption because growth requires surplus for the future and which necessarily involves risk. And growth may not always be desirable but must be calculated, what leads you to this as always a given?

Yeah, a lot of this is covered in Keen's article. As for raising interest rates, central banks do this all the time, especially in terms of "inflation targetting", and during boom time. They tend to follow the market, rather than completely set the agenda - though of course, they do still try to hold sway, not that this always works. And it's always worth keeping in mind that the central bank sets the target rate, rate at which commercial banks borrow from it. The market rate, the actual important rate, i.e., Libor, the rate over which onward lending is calculated, is a completely different matter.

The point is that it is arbitrary and rarely determined by pure market forces. Government economics has been that of interventionalism thus they rely on a continual expansion of the money supply to finance their projects. As social programs and corporate welfare programs expand , the costs exceed the amount of direct taxation availble for funding. Often this money is borrowed ( either by new money creation or taking loans at interest - which can never be paid back given the design of the system). When more or less money is injected into the economy the interest rat acts as the flood gate so to speak for with the central bank has the controls. You can see the point about distortions.

So, while central banks can declare whatever interest rate they like, sooner or later reality will catch up with them. They don't have unlimited power, but they do of course have some leeway. In fact, the only way interest rates were kept so low after the dotcom crash was because of Chinese purchases of USTs. In other words, blame China.

I agree though it follows a flawed economic model that believes that stimulating another bubble can alleviate an old one and the real goods produced can compensate for the shortfall. Of course, this doesn't happen as it inevitably leads to massive distortions and misallocation of capital.

Yeah, again a lot of this is covered in Keen's article. Studies showed that M2 levels increased before new reserves were found to supplement them. Banks don't get handed money which they then on-lend, they create lines of credit first, owing to demand/supply in the market. Commodity production and circulation now takes place mainly with credit money, with money functioning as a "unit of account". The proceeds of a loan are normally used to purchase goods and services and end up as deposits in another bank. Bank loans are tied to the movement of the world of commodities. We live in an almost pure credit money economy.

I am not sure we actually disagree on the outcome but we seem to be on opposite ends about the causality.

Yes I've heard this line of reasoning however do not forget it is generally accepted that the central bank , after 9/11 pumped in about $200 billion to alleviate the dotcom fiasco. It is generally argued that this isn't so significant and cannot account for the 2 trillion lost and thus most of the bad credit must have come from the banks themselves expanding it and not the central bank. The problem is this , our fractional reserve system has a built in multiplier. Banks need only keep 10% in reserves which means they can multiply total bank credit. Never minding that , is it possible to show that the Fed, did , infact , lower interest rates and blow up this bubble? I'd like to see that study, btw.

http://angrybear.blogspot.com/fed_5.jpg
http://angrybear.blogspot.com/2005_12_25_angrybear_archive.html

Here is one of many graphs demonstrating that shortly after 9/11 and the dotcom bubble it plummeted and set the scene to blow up a new bubble.

If the traditional fractional reserve model were true, the total level of money in the economy would be greater than the level of debt, but it isn't. There is far more debt than money and this gap has grown massively.

All 'fiat' money is loaned into existence, at interest.

BTW, governments are the biggest issuers of debt. I wouldn't say this distorts the market. It is the market! (Or at least a significant portion). Banks, pension funds, insurers generally love to lend to governments as they always pay and assets can always be sold on the secondary market.

Also, bankers are extremely competitive. If they think someone is making money, no matter how crazily, they will want to get in on it too.

I could go on. I haven't mentioned the shadow banking market, derivatives, etc. ...

Governments are the largest debtors. When the government requires more than it can directly tax it always distorts the market because the shortfall is usually covered with (arbitrary) inflation. The government does not need to compete in the market to acquire resources. Btw , even when it does directly tax , this disrupts cost calculation. Since the government doesn't produce anything but merely redistributes other produced wealth , it does not 'pay back' anything. Citizens pay by arbitrary redirection of the economy and this doesn't create distortions? If you look at total debt and liabilities , it is easy to see that most 'government payment' is done via inflation which you believe doesn't distort the market?

Have you read Schumpeter's Capitalism, Socialism and Democracy? There are parallels with his work and that of Marx (i.e., "creative destruction") and also Kondratiev. He was also right, in my opinion, that capitalism would lead to modern corporatism.

I did though Schumpeter had a more favorable view of capitalism and thought it was 'too good' for its own survival.

Parker

9th November 2009, 01:38

Strictly speaking , savings is any part of present wealth you defer from present consumption typically for future use. There really is no point to save unless you plan to use the savings in the future in some way. Right? Investing is spending , I understand that but the resources for the investment had to come from somewhere and it seems to fit into time preferences.

The whole point of capitalist production is accumulation of capital, money thrown into production to make more money. The "time preference" model implicitly rests on a very old-fashioned conception of the company as the embodiment of a single person and his psychological desire. In modern capitalism, however, the "subject", the firm, is a collection of individuals and processes involved in making decisions that are rational for the enterprise, all enmeshed in an ensemble of routinised social relations.

In a market, the point is to maximise your advantage, so it makes me wonder how "subjective" all of this is, especially because behavour in a market coheres to routinised calculation procedures.

You also encounter the historical problem that capital was not originally accumulted by savings at all, but by diverting the proceeds of the plunder of the New World, coupled with the forcible dispossession of people from the land. This really makes a mockery of the argument that it is the willingness to defer present consumption that justifies profits.

In the real world, income distribution, opportunity and access to credit affects one's "time preference". Ultimately, time preference is really just a moral theory, not an economic one.

Growth can only be the result of surplus. Its not as if when someone builds a company they will immediately profit. They may not profit at all actually. But if they are seeing returns, if they wish to continue future operations , they will defer a part of that earnings (surplus) into further company growth. I don't see how this contradicts anything I have been saying thus far.

Because the system in practice has an apparent life all of its own (commodity fetishism, anyone?). No-one is in control and we are all subject to impersonal forces that compel us to act in certain ways. Obviously, the boss/co-ordinator/owning class is at the opposite end of the pole to the rest of us, but still caught up in the same economic logic.

I agree though it follows a flawed economic model that believes that stimulating another bubble can alleviate an old one and the real goods produced can compensate for the shortfall. Of course, this doesn't happen as it inevitably leads to massive distortions and misallocation of capital.

That "flawed economic model" is capitalism, for speculative bubbles are an inherent part of capitalistic behaviour. Plus, a credit-money system seems to me the most fitting form of money for an advanced industrial society (though strictly speaking the ideal money form is still de facto gold). Innovations in money allows capital to breach previously imposed limits. I agree though that it's all totally nuts.

BTW, what is a misallocation of capital? How can it be defined in a way that doesn't resort to a tautology?

I am not sure we actually disagree on the outcome but we seem to be on opposite ends about the causality.

Yes I've heard this line of reasoning however do not forget it is generally accepted that the central bank , after 9/11 pumped in about $200 billion to alleviate the dotcom fiasco. It is generally argued that this isn't so significant and cannot account for the 2 trillion lost and thus most of the bad credit must have come from the banks themselves expanding it and not the central bank. The problem is this , our fractional reserve system has a built in multiplier. Banks need only keep 10% in reserves which means they can multiply total bank credit.

This is a very old model of banking and totally inapplicable in the real world. Wikipedia, the internet, Econ 101 courses and even textbooks still keep this myth alive.

Banks' ability to extend credit depends on their capital adequacy. Their willingness depends on market conditions. In many countries, e.g. Sweden, Australia, New Zealand, Canada, UK, there is no reserve requirement as such, banks just have to make sure they have enough cash for day-to-day needs. In practice, banks hold about 7-8%.

You can see the failure of the old model of banking and lending today: massive injections of reserves, but no on-lending. M1 is actually smaller now than M0.

Never minding that , is it possible to show that the Fed, did , infact , lower interest rates and blow up this bubble? I'd like to see that study, btw.

Oh I agree that central banks/monetary authorities are implicated too. First, yes, the authorities could have chosen to allow a recession in 2001, but economic growth is such an all-encompassing force that in reality they were petrified of a recession and job losses. Second, there was widespread deregulation and non-regulation, of areas such as the shadow banking sector and permitting securitisation, etc. It's not all totally clear cut, however.

If banks expand their loans beyond their own required/voluntary reserve ratios they then need to increase their reserves by borrowing in the Fed funds market. Since there is now a shortage of funds, the Fed funds interest rate will rise along owing to the demand for those funds. If the Fed wishes to retain control of short-term interest rates, it won't have any option but to increase the level of reserves in the banking system through purchases of Treasury bills, which then increases the supply of reserves and lowers the rate.

The opposite holds if levels of lending are decreased.

Anyway, what this means is that the amount of reserves is thus not determined by the Federal Reserve. Instead, it is caused by the banking system's own demand for reserves. In meeting its own interest rate target, the Fed then acts passively. It has in practice no control over the growth in credit (M1, M2, etc.)

The studies are referenced in Keen's article: see esp, Basil Moore and Kydland & Prescott.

Merces

24th February 2010, 18:50

The idea that there is a right or left libertarian completely contradicts itself. Libertarianism is one thing; separation of the state from an individual's economic and personal freedoms so long long as they don't affect another individuals' freedoms as well. It may seem that its a right wing ideology, but the fact that rightism is more or less associated with the states' interverence in personal freedoms throw Libertarianism from their spectrum, and also throws them from the left spectrum as well due to economic principles. They more or less share in majoirty of the systems and oppose them as well. They oppose left's use of the state in economic affairs, and oppose the right in the affairs of personal freedoms. They share a common goal with the left in affairs of personal freedom, and share in affect the affairs with the right in economic freedom. Leftists may throw the very popular term "right" around in libertarians' faces all they want but the fact remains; Libertarians want complete seperation from the government in their affairs whether they be Economic or Individual freedoms. It's as simple as that.

Leftists I find are however highly attracted to the ideology of Libertarianism but don't seem to have the courage to call thenmsleves full libertarian but instead left libertarian, to justify their own political beliefs. I, a libertarian myself, beleive it is the most undiscriminative and humanitrian political and way of life ideology than any other. So of course you will have conservatives (Fox News namely), Liberals, Democrats, republicans and of course socialists and communists attack libertarianism or rather steal its ideas and ideologies and put a socialist mask on it to make themselves sound as if they are part of the revolution.

You either accept libertarianism fully or not at all.