I have assembled below a set of links to various posts on my blog for debunking the theories of Austrian economics.
Please note that not all the posts actually debunk Austrian theories, as some are merely descriptive, and allow the reader to understand what the Austrians believe. Some examine the history of the school. A few posts are even constructive in that Post Keynesians and some Austrians can agree on certain points (such as the posts on Ludwig Lachmann).Read it at Social Democracy for the 21st Century
One important point I have always stressed is that the Austrian school itself is heterogeneous.
Debunking Austrian Economics 101
by Lord Keynes
LK does find some inconsistencies in some corollaries derived from basic Austrian concepts, many of which have bothered me for years. However, like all Keynesians, he will not or cannot understand the basic Austrian concept of economic calculation. Thus, his discoveries only demonstrate that the harm inflicted by Keynesian-style polices is even more multifaceted and complex than was originally believed. His analysis basically helps clarify the strengths and irrefutability of the Austrian world view and the Austrian case against the Keynesians and all interventionists.
ReplyDeleteThe fact that the concept of economic calculation is like Kryptonite to LK is solid evidence of its irrefutability. He's afraid to be on the same block.
http://tinyurl.com/7hqlloq
Read Here: "http://socialdemocracy21stcentury.blogspot.com/2012/02/austrian-nonsense-about-economic.html"
ReplyDeleteYou are the one who doesn't understand economic calculation.
Wine check, popcorn check
ReplyDeleteWaiting for LK to turn up now and watch him and Bob go at it :)
Economic calculation is impossible under socialism. Economic calculation is distorted under Keynesianism and MMT. Keynesian money dilution makes people think that $100,000 houses being purchased with $800,000 of new funny money loans are really worth $800,000 in the long run. It makes people take on debt that they otherwise wouldn't if prices hadn't been distorted by funny money loans.
ReplyDeleteI've seen that comment of LK's. I always thought it was directed at me because I've been exposing LK's nonsense for years. Neither LK nor you understand the concept of economic calculation. Which really doesn't hurt my feelings but it does make LK's analysis rather pitiful.
http://www.economicthought.net/blog/?p=594#comment-1551
This is fantastic! Just what I've been looking for. I plan on reading every one of these links. And who knows, perhaps I will return as a goldbug!
ReplyDeleteAnd FWIW Bob, if you feel LK's presentation is biased in any way, feel free to provide a rebuttal in a similar format. I know I'd be interested in reading it.
The economic calculation problem is about pricing in free markets (free of government influence) and central planning by government bureaucracy (socialism). That argument is is basically over since the fall of socialist planned economies. Those are the extreme positions. While theoretically interesting, they are no longer relevant practically, other than in the minds of those that see any government involvement in markets as "socialism."
ReplyDeleteGovernment influence in markets is here to stay. The question now for free markets is how to minimize it to Libertarian standards, and of macro proponents, how to optimize the role of government in the economy for effectiveness and efficiency. Effectiveness implies policy goals.
The debate now is over the range between the extremes — essentially whether macroeconomics (economics based on aggregates) is possible.
Free marketers say no; that all valid economics is microeconomics based on methodological individualism. This runs the risk of fallacies of composition, as Keynes pointed out.
The question is whether macroeconomics based on aggregates of data ultimately traceable to transactions is either possible, or even desirable on the assumption that it affords controls that correct issues arising from market imperfections. How well does macro deliver in policy formulation and how can it be improved are the questions that are dominant now, since politicians are hardly wont to trust their political fortunes to the assumption of the self-regulating nature of the free market.
There are good reasons to think that so-called free markets may promise more than they can deliver. Macro proponents argue that free markets presuppose perfect markets, but in reality there are none other than perhaps some bazars in the underdeveloped world where there is still no standardization and so goods are priced uniquely based on the ability of the buyers and sellers' ability to discern value of individual items.
So now simply to reference the historical economic calculation problem now is insufficient. It is necessary to be specific about cases.
For example, it is a plus or a minus that central banks are allowed to routinely set the interest rate and control the yield curve, too, should they desire to do so.
(continued)
(continuation)
ReplyDeleteNo one thinks that government should stay entirely away from markets owing to the free rider problem of cheating as well as the need for contract enforcement. The issue is where to draw the line with respect to government involvement.
No one today is arguing for a socialist command system, except maybe North Korea, but there are people at the margin arguing for completely free markets, although allowing government to protect liberty and private property within the limits they establish. That is a normative call.
The real issue, however, is whether the so-called free market is actually self-regulating. That is an assumption that needs to justified, and there is no empirical evidence for it that I know of. For example, in the bazars the incidence of cheating and mispricing is huge, and no developed economies ever emerged from bazar markets or barter economies.
The free market hypothesis also rests on quantity being fixed and price fluctuating, whereas in most modern markets other than financial markets, price is fixed and quantity floated to maintain the price. That is only possible in monopolistic markets. The fact is that even financial markets fail and the only fix is to disallow credit. However, credit is one of the great inventions of humankind and to disallow it would be comparable to disallowing use of the wheel to eliminate accidents.
This is not so much about Austrian economics v. Keynesianism or open market economies versus command economies as it is about the correct economics for the types of economies that exist in the contemporary world. These economies involve significant government involvement as well as external trade. A simple micro approach scaled up is not sufficient to deal with the complexity of the situation and leaving the economic calculation to markets is unrealistic for a variety of reasons, not the least of which is uncertainty in firm planning. Even if government doesn't get involved in markets (which is not possible in modern society), the economic calculation problem still exists for firms and households in planning. Add external trade and the picture becomes even more complex. Yes, trade can be denominated in, say, gold, but that just reintroduces the mercantilist issue in a more pronounced way.
The economic calculation problem is described by Keynesians in terms of uncertainty. There is no ergodicity in markets that would allow for models that emulate the hard sciences by assuming equilibrium. Equilibrium pertains to events that can be modeled with equations involving changes in term of space/time-mass/energy. Add biological events, and the circumstances become much more complex, still largely lying beyond human knowledge to adequately model in terms of a general theory. Add human psychology, and a general theory is at present unavailable and the path to one is yet unclear.
The economic calculation problem simply asserts uncertainty. The presumption that markets are naturally self-regulating like physical processes is without empirical basis. It is normative and essentially faith-based.
leaving the economic calculation to markets is unrealistic for a variety of reasons
ReplyDeleteLeaving economic calculation to the human beings who are the economic actors is the only way that living breathing human beings might calculate. You can’t read peoples’ minds. The only way to know what people value is from the terms of their exchange transactions (aka “prices”). Since socialism prohibited exchange at the point of a gun, there were no prices. As predicted, people lived like rats because economic calculation was impossible.
Similarly, Keynesianism DISTORTS prices. Both creation of funny money via loans or via government keystrokes creates distorted prices. Those distorted prices lead to the boom/bust cycle and/or malinvestment. That is the cause of the problems that statists blame on the free market. People misled by distorted Keynesian prices end up with debt overhang. Half of society ends up spending all of their time playing arbitrage games trying to outwit the phony distorted Keynesian prices instead of spending their time investing in sustainable activities. The other half is oblivious to the theft of their purchasing power by the Keynesian elite.
http://tinyurl.com/89os5u6
Government bureaucrats attempting to replicate or discover the true prices that have been distorted by Keynesian meddling (or actual wants or needs) are in the same position of ignorance as the totalitarian socialist overseer. Bureaucrats simply do not and cannot have the knowledge necessary to engage in economic planning. These is no alternative to free people engaging in free exchange creating the essential information for a prosperous society, free market prices. The Keynesian/MMT “solutions” are the cause of the problem by distorting those prices.
Contrary to this baseless Tom Hickey assertion, this debate is at the core of EVERY economic analysis:
While theoretically interesting, they are no longer relevant practically
Saying over and over that the debate is not relevant without engaging the argument does not make it so.
hickey,
ReplyDeletei agree. it's not about austrian vs. keynesian, it's deeper than that. growing up in africa, i was lucky enough to work my way through microfinancing, and then public consulting after going to school in s. africa. i've been at pretoria IMF for ten years now, and the disgusting amount of power in the hands of a few people is disturbing to observe. the ONLY time any communities were developed efficiently is when free trade was allowed. but the minute the wealth is CREATED (not theorized/talked about), private institutions with power of the government, but more importantly, the intellectual backing of a few pseudo-intellectuals, and the markets were immediately crippled. you can bet after managing currency ditches in africa i'm gonna throw out my copy of the general theory. but beyond this hedonism, i reached a conclusion that your political fathers conceived; FREEDOM. there's never been a sustainable free market BECAUSE of constant intervention/manipulation by public forces. the ends never justify the means. if you US listened to IMF, you'd understand. and the MMT guys down here are a giant joke. these were the guys who back in 98 said EU was a good idea...HA! as if theat proves THEIR "theory" of totalitarian hedonism.
you americans Will realize the true nature of thsi USD crash come 2013. is it any wonder why Niall Ferguson went to bilderberg this year? and why is it that here in pretoria IMF we're seeing so many saudis and chinese advising our micros here in pretoria to get out of USD? maybe if you guys actually worked in economics (it's akin to psychics, all charlatans while a few think the rest are charlatans). you realize that all economics is bullshit and freedom is the only cure. peace is the only cure.
be skeptical of my points as you may, but s. africa and all of aus. and china are going to experience a second coming as you japan and the disgusting borrowers PERISH.
peace.
This comment has been removed by a blog administrator.
ReplyDeletesorry for the double post. good night!
ReplyDeleteUh, macroeconomists are not living breathing human beings?
ReplyDeleteBTW, I know something about how markets actually work from experience. In the real world, many markets work by concealing vital information so as to influence price > margin. A friend of mine who was very successful used to say that the whole game is finding out the actual price. This guy could beat Walmart even though it enjoyed overwhelming economies of scale. It's buyers just didn't find out the real price, which was only known to a very few. Often the only way to get to the real price is through connections that are privy to it. The idea that goods are just traded in open markets is daft. If you believe that nonsense, you will go broke in business.
Markets don't tell the story. One has to dig it out as best one can, and it can take year. That's why sources are proprietary (highly secret).
That's how monopoly rent is extracted where no single seller controls supply. Most goods markets are monopolistic and government is not involved in any way in price determination. Many asset markets, too. As a result there huge extraction of economic rent, which should not be possible according to free marketers.
Bob Roddis:
ReplyDelete'As predicted, people lived like rats because economic calculation was impossible.'
Except that the Soviets were starting from such a place (remember: pre-revolution Russia was essentially an agrarian serfdom) that while they may have not been wealthy by American standards, their ascent nevertheless represented a remarkable period of growth relative to the world, both in terms of nations starting (in the 20s) from a weak or strong position. Though Japan was the shining star that lapped the course, the USSR was not far behind. Which might explain how said nation of serfs beat Americans into space.
One might go so far as to suggest that the rise of planned economies altered the structure of global labor (and put the fear of God into global capital) such that its benefits were also accessible to the market economies, which also entered into a period of unparalleled (relative) egalitarianism.
"Where Reds have prevailed, the outcome has been far-reaching material gain for the bulk of the population."
I would love to hear your response, sir!
@ Anonymous, I deleted the duplicate.
ReplyDeleteYou said: "MMT guys down here are a giant joke. these were the guys who back in 98 said EU was a good idea...HA! as if theat proves THEIR "theory" of totalitarian hedonism."
Sorry, but the MMT'er were on the other side of the euro as a "good idea." They pretty well predicted what would happen back then and have been saying so since.
Agree that elites use government to further their causes. When there is no government they to prevent them, they take what they want if they are able, and they usually are. That's just history.
Perfect markets might possibly be self-regulating but there is no theoretical evidence of why this should be so that is not based on apriori assumptions, and the free market hypothesis has never been tested in an economy where wealth can be accumulated. What we see instead is either warlordism or govt imposed feudalism, of which I see capitalism as merely an iteration.
Government is a fact of life and it can disciplined with democracy or it can't. That is the current experiment. The option is to abandon the rule of law, or develop a political option that overcomes the imperfections of democracy, chiefly the ability to be hijacked by an elite.
@ Bismarck
ReplyDeleteAnd don't forget that the capitalist countries did all they could to sink the communist ones economically, just as the US is doing its best to bring regime change to Iran through economic means.
But the actual reality is that socialism was never really tested. I have many friends that grew up under "socialistic" governments, and they tell me that they like the idea of socialism into which they were educated but very disappointed to find that it was not being practiced. The countries were in effect hijacked by elites. That is their criticism of the US, too, when they get to know it.
LK left a mushroom cloud over the Austrian landscape. At some point the debate is just over and it's time to move on. His post is probably that point.
ReplyDeleteMr Roddis
ReplyDeleteJust exactly what do you think we would have today that we dont have now, if we had never had a fed and been following "the amazing economics of perfect calculators"?
Certainly you must think we are missing something with all this funny money floating around getting us off track. How would our standard of living be changed?
Ill posit that nothing would be different except maybe the numbers in some bank accounts. We've not squelched (over all...in some places like N Korea sure) human initiative and ingenuity. We've solved most of the major technical problems we have faced and are still working on others. Our standard of living would likely be no higher. In fact with a hard money policy the last 100 years Id say we'd likely be way behind where we are. Relying solely on privte funding of things we would probably still not have the interstate system we have now, nor the electrical grid. Its no accident that the most advanced and developed countries in the world have the largest roles for govt and have been funny money economies for decades.
I'm still waiting for substantial examples of Bob's "Free Market" and "The Currency That Was Never Sullied".
ReplyDeleteOf course, that would require a fixed number of perfect participants and a slew of other conditions that have never existed.
The perfectly reflective pond, which the Expansionary Austerity Unicorn may use to fall in love with its own image. Hopefully just like Narcissus.
Just exactly what do you think we would have today that we dont have now, if we had never had a fed and been following "the amazing economics of perfect calculators"?
ReplyDeleteQuickly, off the top of my head....
1. Fewer wars. They'd be on a pay-as-you-go basis and average people would fuss about current tax extractions. The whole point of funny money is to hide that wealth and purchasing power shifting and swiping. Probably no WWI if there had been no central banks or fractional reserve banking. And thus no USSR, Hitler or WWII.
http://tinyurl.com/89os5u6
2. Fewer (or no) economic depressions and recessions. They're caused by price distortions which result from fiat money creation and fractional reserve banking. No housing boom, for sure.
3. Fewer super rich people getting rich off of funny money arbitrage and outright gifts from the Fed.
Economic calculation isn't "perfect". It just happens to be all that there is in our particular universe. There simply is no other source of such knowledge.
It's also interesting to know that once you poke the green exterior of MMT, you find deep red. Average folks will love that.
http://www.flickr.com/photos/40952739@N06/3767508429/sizes/m/in/photostream/
Examples, Bob?
ReplyDeleteEven just a currency that wasn't ever "distorted"?
@ Bob
ReplyDeleteAs I understand it in non-fractional reserve banking system a one to one relationship of deposits, that is bank liabilities, is a necessary for loans, that is, corresponding bank assets. You say there is no central bank and government has no involvement.
Where does the money come from originally. I assume you are talking about free banking, which means that if banks initially create the money that goes to deposits that are loaned out, it has to come from bank capital, which can't be scrip so I assume it is gold. How does the bank get the money for the gold? Or is money gold coinage?
Where does the money come from? People dig it out of the ground. It's scarce. Pliable. It creates alloys with other metals. It does not react with air, moisture or corrosive agents.
ReplyDeletehttp://lewrockwell.com/rep3/history-of-gold.html
The austrians are a sideshow for MMT. Getting sidetracked into these arguments just because they'll argue back is counterproductive. For the mainstream it makes MMT look sort of like the guy who can't stop telling you how stupid his brother is- they're not going to take you seriously because they don't care about your brother.
ReplyDeleteFocus on the operational realities!
How does it get distributed by the people that dig it out of the ground. Barter. You still haven't told me where the money comes from. So people dig it out of the ground. What happens next that turns it into money? I assume your answer must be the miner owners deposit the gold in banks after they have paid their workers in gold.
ReplyDelete@ KD
ReplyDeleteI'm really interested to hear how the money gets created without IOU's.
There you go. If you leave it in the ground, it's fine. If you try to turn it in to money, it quickly reacts with the environment and grows a 180-pound sociopathic tumor.
ReplyDeleteI'm really interested to hear how the money gets created without IOU's.
ReplyDeleteFor some strange reason, people like gold and silver and have for thousands of years. Peoples’ values are subjective. Who knows why people bought 220 million Bee Gees records. People trade their gold and silver for other things because they do. You can tell the value of the traded gold and silver by what it bought it return. Gold and silver are even mandated by the US Constitution. It’s not really that complicated.
You still have not told me now money is created in this system and traced how it flows to deposits for lending, Bob. You are fudging. Or did I get ir right. the mine owners deposit the gold and the banks make coins out of it in a free banking system in which there are no IOU's. Or do you let banks issue gold certificates on a one to one basis? If so who supervises the banks so depositors know that the bank is getting fractional about it and lending more certificates than it has gold on deposit?
ReplyDeleteAnd people have changed the content of gold and silver based money relative to it's denomination over those SAME thousands of years.
ReplyDeleteBob,
ReplyDeleteYou're really gonna have to get into operational details if you want to convince any us.
In general I find the people that have very libertarian laissez faire free market beliefs haven't really considered their fantasyland in detail. It seems they start from their conclusion... if government got out of the way, then everything would happen efficiently and we'd get the best outcome… and then build their theories to support their pre determined conclusion.
One of the aspects that attracted me to MMT is it starts from operational realities, and then (afterward!) poses the question what do we want and what can we do to get what we want (given the operational realities).
Bob, I hope you take the time to address the issues that Tom is raising. And Tom, I hope you keep pressing him on these issues.
Bob talks about freedom and choice but really he wants to impose his ideas and his gold fetish on everyone else. Same old.
ReplyDeleteOf course bob hates democracy.
ReplyDeleteThe austrian school religion must be imposed on everyone, and everyone's right to vote must be removed FOR EVER.
Dictatorship of capital.
"Fewer wars. They'd be on a pay-as-you-go basis"
ReplyDeleteHa ha ha ha ha.
Grow up.
"Fewer wars"
ReplyDelete"Ha Ha"
That was my response too. Just said as if it were obviously true. Because if we are all on one currency ,gold, we would be a currency union like the EU except extended to the whole world. But we wouldnt be of one country or one culture. Amazing how having this little yellow metal all of a sudden makes us all behave like civilized creatures and not savages.
KD
ReplyDeleteI understand where you are coming from but I think this Austrian stuff needs to be taken head on. Personally I think its interesting that Austrians get derided as a fringe school along with MMT yet every guy with a microphone on right wing radio is a hard money type and espouses virtually every point that Bob does. Classical school is much closer to Austrians than they want to admit and the dominant economic voices of our current republicans can barely be distinguished from Mr Roddis.
Its a not so innocent fraud that Austrians are fringe. Many of their leading voices have written some things in the past which make TPTB uncomfortable because average people are horrified by it (think of Rand Paul and alll the times he's been 'misquoted') but MANY people harbor Austrian ideas they just cant say them explicitly in mixed company.
I respect the Roddis' more cuz they dont hide their desire to become a Somalia of the Western hemisphere and they wear their gold buggery on their sleeve. Its al the other guys who agree with him mostly but pretend otherwise that are the real dangers.
yet every guy with a microphone on right wing radio is a hard money type and espouses virtually every point that Bob does.
ReplyDeleteNeither Limbaugh, Hannity, Levin, O'Reilly, Coulter, Frum, National Review nor anyone on Fox News other than Andrew Napolitano (and maybe John Stossel) are Austrians and they NEVER discuss the Fed, central banks or how funny money dilution causes the boom/bust cycle and funds elite looting of the masses and perpetual warfare. Napolitano discussed that kind of stuff every night on his Fox Business show and Fox axed him due to his effectiveness. Ever see Napolitano on O'Reilly's fascist show?
http://www.youtube.com/watch?v=SWshVi5-KX8
The right wing warmongers and the pro-police state brigade want nothing to do with Austrians and hard money because, as I've repeated ad nauseam, it would CONSTRAIN the government's illicit affairs.
OMG. Romney is a freakin' Keynesian who has rejected Ron Paul's plan to slash $1 trillion in year one. You inflationist crazies must be in ecstasy.
http://mikenormaneconomics.blogspot.com/2012/05/democrats-operate-under-gop-coercion.html
BTW, average people do not believe that government spending causes prosperity. That's why Romney has to be coy about his Keynesianism in alerting his elite Keynesian masters that he's changing nothing.
You still have not told me now money is created in this system and traced how it flows to deposits for lending, Bob. You are fudging.
ReplyDeletePeople dig it up. Then they find someone to lend it to. The parties make a contract for repayment.
Austrians are not purposefully obscurantist as are the Keynesians. Our program is not based upon the elite looting purchasing power from the masses without the victims catching on or being told that the Keynesian looting is "scientific" and really not looting at all.
Tom: How does it get distributed by the people that dig it out of the ground. Barter. You still haven't told me where the money comes from. So people dig it out of the ground. What happens next that turns it into money? I assume your answer must be the miner owners deposit the gold in banks after they have paid their workers in gold.
ReplyDeleteWell, hypothetically the gold itself is money. Even Knapp recognized that autometallistic money was a legitimate and historically observable phenomenon. And now we're living in the age of digital scales. Obviously, given the other digital aspects of our age, having an electronic representation of money is pretty essential, but as you say, this is easily accomplished through the banking sector. Whether this is done via free or regulated banking, full or fractional reserve, with or without state money, etc., is a separate matter.
As for who regulates banks, I think the idea (not mine, but what I am led to believe an Austrian might argue) is that The Market does via competition. If simple competition does not suffice to rein in "fraud," then independent regulatory or ratings agencies might fill the gap, such that in order for a bank to be competitive it might have to pursue voluntary audits and other such oversight practices. Of course, then the reliability of the overseers is probably something that will need verification, perhaps by some other independent panel. And that one probably needs regulation, too... well, it kind of starts to go all Gödel after a while.
A democratic state can sort of solve that problem, but then it opens whole other cans of "corruption" worms. It may just be that no system is perfect.
The question of gold as money under capitalism is not, I think, a battle worth waging. Perhaps it's due to my own preference for Marx, but I don't find the idea that, absent state intervention, market exchange (especially if the scope exceeds the community level) will become anchored to commodity money to be even the least bit strange, given the law of value. The originary aspect of Marx's own theory of money actually bears some similarities to Mises's "regression theorem," though it goes a bit further in its explanation and operates within a better analytical framework.
Speaking of barbaric genocidal end-time religious nutcases, Karl Marx was a religious eschatologist.
ReplyDeletehttp://mises.org/daily/3769
Bob Roddis said...
ReplyDelete".... His analysis basically helps clarify the strengths and irrefutability of the Austrian world view and the Austrian case against the Keynesians and all interventionists."
(1) Bob Roddis beautifully illustrates for us the meaning of vulgar Austrian
(2) anyone who tells you that their economic world view is irrefutable is talking nonsense. In fact, Roddis is an example of the type of ideologue that even Hayek condemned and repudiated.
E.g., see this comment by Hayek on why he adopted a Popperian methodology for economics in his later years:
“I became one of the early readers [sc. of Karl Popper’s Logik der Forschung, 1934]. It had just come out a few weeks before …. And to me it was so satisfactory because it confirmed this certain view I had already formed due to an experience very similar to Karl Popper’s. Karl Popper is four or five years my junior; so we did not belong to the same academic generation. But our environment in which we formed our ideas was very much the same. It was very largely dominated by discussion, on the one hand, with Marxists and, on the other hand, with Freudians. Both these groups had one very irritating attribute: they insisted that their theories were, in principle, irrefutable. Their system was so built up that there was no possibility – I remember particularly one occasion when I suddenly began to see how ridiculous it all was when I was arguing with Freudians, and they explained, “Oh, well, this is due to the death instinct.” And I said, “But this can’t be due to the [death instinct].” “Oh, then this is due to the life instinct.” … Well, if you have these two alternatives, of course there’s no way of checking whether the theory is true or not. And that led me, already, to the understanding of what became Popper’s main systematic point: that the test of empirical science was that it could be refuted, and that any system which claimed that it was irrefutable was by definition not scientific. I was not a trained philosopher; I didn’t elaborate this. It was sufficient for me to have recognized this, but when I found this thing explicitly argued and justified in Popper, I just accepted the Popperian philosophy for spelling out what I had always felt. Ever since, I have been moving with Popper” (Nobel Prize-Winning Economist: Friedrich A. von Hayek, pp. 18–19).
"The right wing warmongers and the pro-police state brigade want nothing to do with Austrians and hard money because, as I've repeated ad nauseam, it would CONSTRAIN the government's illicit affairs."
ReplyDeleteWrong!
Warmongering has been a direct result of Austrian economic policy in many countries. See Georgia’s invasion of S. Ossetia and it's economic failure understand Austrian school trained Mikheil Saakashvili (here http://antiwar.com/radio/2009/05/14/mark-ames-2/#idc-container and here (http://antiwar.com/radio/2008/08/18/scott-horton-13/) for proof from the noted Libertarian site Antiwar.com )
The constrained nature of the internal credit causes political extremist to push toward seizing outside resources because the deflationary nature of the Austrian policy and thus war results.
LK:
ReplyDeleteIt's always possible that someday someway somehow you will find a way to read peoples' minds and discover an alternative method to objectively learn and record their subjective values other than via objective free market prices. The fact that you and the rest of vast Keynesian horde avoid the subject like the plague leads me to think that it cannot be done.
But you know me. I am always open to new empirical evidence. Go for it.
BTW, why do hide your identity?
Continued...
ReplyDeleteQuote: "OMG. Romney is a freakin' Keynesian who has rejected Ron Paul's plan to slash $1 trillion in year one. You inflationist crazies must be in ecstasy."
Sorry,Bob, your hero likes hanging out with Nazis and I'm not cool with that. (http://newsone.com/1842275/anonymous-reveals-close-ties-between-ron-paul-and-neo-nazis/) and everyone who isn't in total denial must admit the Mitt Romney-Ron Paul alliance. Starting with Rand Paul who is actively supporting and defending Romney (http://www.realclearpolitics.com/video/2012/05/24/rand_paul_government_a_failed_business_that_romney_can_turn_around.html), (http://www.economicpolicyjournal.com/2012/05/hot-rand-paul-endorses-mitt-romney.html), http://www.theblaze.com/stories/is-mitt-romney-courting-rand-paul/
You also have the 2.,7 million donation to Ron Paul by Peter Thiel the cyberspy Oligarch (inqtel/NSA/DOD)and leading member of Steering Committee of The Bilderberg Group.
(http://www.details.com/culture-trends/critical-eye/201109/peter-thiel-billionaire-paypal-facebook-internet-success
I could go on and on about Paul's nepotism and his wife's closet friend Ann Romney. I could also go about the historical relationship between Mormon economics and Austrian economics based on the Neoconfederate/Southern Racist tries between Mormon racism and Libertarianism.
Libertarian believe in using the force of the State to protect unions of capitalist called corporations but believe in sending police and armies of regulators to harass workers unions.
Ron Paul like Hayek has called for a global dictatorship under a gold standard.
Quote "There’s nothing to fear from globalism, free trade and a single worldwide currency…. The effort in recent decades to unify government surveillance over all world trade and international financial transactions through the UN, IMF, World Bank, WTO, ICC, the OECD, and the Bank of International Settlements can never substitute for a peaceful world based on true free trade, freedom of movement, a single but sound market currency, and voluntary contracts with private property rights…. The ultimate solution will only come with the rejection of fiat money worldwide, and a restoration of commodity money. Commodity money if voluntarily and universally accepted could give us a single world currency requiring no money managers, no manipulators orchestrating a man-made business cycle with rampant price inflation.” — Ron Paul, Congressional Record, March 13, 2001"
Ron Paul a traitor since 2001.
Bob Roddis said...
ReplyDelete"2. Fewer (or no) economic depressions and recessions. They're caused by price distortions which result from fiat money creation and fractional reserve banking. No housing boom, for sure."
Roddis repeats this nonsense though his actual position on fractional reserve banking (FRB) is (by the logic of the ABCT) incompatible with it.
Again and again and again this guy tells us he would not ban FRB or the ability of private agents to create money (such as bills of exchange, promissory notes) because he agrees it is not fraud or immoral, contrary to ravings of the cult of Rothbard.
Examples of his acceptance of an endogenous money system:
"If the depositors aren’t misled and the payees aren’t misled, who cares?"
http://socialdemocracy21stcentury.blogspot.com/2011/10/if-fractional-reserve-banking-is.html?showComment=1317650068819#c5701869836754102910
"I don’t think free market fractional reserve banking can work. What I have said was that, pursuant to the non-aggression principle, if banks, depositors and payees have a contractual meeting-of-the minds to create such a commercial venture, I would not be in a position to interfere."
http://socialdemocracy21stcentury.blogspot.com/2012/04/keen-versus-krugman-great-debate.html?showComment=1333719048682#c1115210019499344145
He is therefore equally logically committed to an endogenous money system (what he erroneously calls a "funny money system") as any Keynesian - and by the logic of logic of his business cycle theory his libertarian paradise would be hit by endless Austrian trade cycles.
"It's always possible that someday someway somehow you will find a way to read peoples' minds and discover an alternative method to objectively learn and record their subjective values other than via objective free market prices. The fact that you and the rest of vast Keynesian horde avoid the subject like the plague leads me to think that it cannot be done."
ReplyDeleteThe issue was about method in economics, not the straw man of "objectively learning and recording peoples' subjective values".
Even Hayek rejected your absurd type of claim to have "irrefutable" economic theory. He regarded this type of thing as on a par with the nonsense of Freudian psycho-babble.
"Bob Roddis said...
ReplyDeleteWhere does the money come from? "
Historically from multiple sources: from debt instruments, commodities, high prestige goods, and by creation of the state.
http://socialdemocracy21stcentury.blogspot.com/2012/02/quiggin-on-origin-of-money.html
http://socialdemocracy21stcentury.blogspot.com/2012/01/origins-of-money.html
http://socialdemocracy21stcentury.blogspot.com/2012/01/mises-on-origin-of-money.html
Well, hypothetically the gold itself is money. Even Knapp recognized that autometallistic money was a legitimate and historically observable phenomenon.
ReplyDeleteIn talking about autometallism, Knapp went on to dismiss the idea that the commodity itself is money for anything beyond spot transactions. According to Knapp, when debt shifts payments through time, just the potential that one means of payment (gold) might be substituted in the future by and converted to another (say, silver) meant that the gold itself was just a nominal measure. In this view, the nominality of debts, not tied to a specific means of payment, is a pre-requisite for money.
"It's always possible that someday someway somehow you will find a way to read peoples' minds and discover an alternative method to objectively learn and record their subjective values other than via objective free market prices. The fact that you and the rest of vast Keynesian horde avoid the subject like the plague leads me to think that it cannot be done."
ReplyDelete(1) The very premiss of this statement is mistaken and deluded.
(2) Your statement "The fact that you and the rest of vast Keynesian horde avoid the subject like the plague leads me to think that it cannot be done" is blatantly false.
I have already addressed this issue of the alleged power or significance of "free market prices" here:
http://www.economicthought.net/blog/?p=594#comment-1564
http://www.economicthought.net/blog/?p=594#comment-1554
A sample:
The whole premiss of your question is wrong. Completely “unadulterated prices” in a free market wouldn’t necessarily be *right* prices in the sense imagined by economics at all. Many would be wrong, merely because producers/sellers aren’t perfect.
But in fact the market system doesn’t require perfectly “right” prices to be successful and dynamic, to create wealth, output and create economic growth. The market system is far more robust than what you think it is, with your feeble-minded obsession with price distortions. Monopolies and cartels can impose price distortions; price setting by business does it too. The market system doesn’t collapse because of such "distortions."
He is therefore equally logically committed to an endogenous money system (what he erroneously calls a "funny money system") as any Keynesian - and by the logic of logic of his business cycle theory his libertarian paradise would be hit by endless Austrian trade cycles.
ReplyDeleteAs always LK, you are wrong wrong wrong.
I think my position is the same as Rothbard’s. One is forbidden to initiate force against strangers. You don’t seem to understand the point about the payees having a FULL UNDERSTANDING of the nature of the beast. I think any potential payee with a FULL UNDERSTANDING of what FRB notes really are will say, “Hell no, pay me in real money”. If the payee is misled into thinking the FRB notes are the same as warehouse receipts, then there is fraud and the payee has a cause of action. Further, prices resulting from sales in FRB notes would be denominated in terms of those notes so there is little chance of anyone being misled as to the true source of those prices.
It’s like a free speech analysis. No prior restraint (other than being banned from a private area) but severe subsequent punishment for wrongdoing.
The fact that you have to go to such lengths to distort what we are saying demonstrates the pathetic weakness of your analysis.
And regarding my statement about “irrefutability”, I seem to recall bashing the historic ABCT just the other day.
http://tinyurl.com/7hqlloq
It is the basic concepts of human ignorance plus subjective values expressed objectively as prices that appear irrefutable. Keynesian policies are going to screw up the price system, but how that plays out is always a question of fact, but with several notable tendencies.
Bob R: "People dig it up. Then they find someone to lend it to. The parties make a contract for repayment."
ReplyDeleteThat's what I thought. So the world economy runs on gold dug out of the ground, oil pumped out of the ground, and no fiduciary certificates" (Mises) are permitted. That's bound to wok out just fine and dandy.
No wars, did you say? Minimal government when a police state would be required to protect private property?
Read much history?
Re: "perfect prices".
ReplyDeleteOf course there are no perfect prices. Just because someone paid $15 for a Vanilla Ice CD yesterday does not mean that someone else will do so again tomorrow. However, prices are the primary source of economic calculation and Keynesian policies distort that process thereby making the mysterious and unpredictable future even more unpredictable and prone to error.
Of course, my original point was that under socialism, there are no prices and no economic calculation. Under Keynesianism, there are distorted prices WHICH EXPLAINS THE BOOM/BUST CYCLE, structural unemployment and the rich looting the poor via arbitrage games. Those are the points you refuse to engage.
I've lived in the Detroit suburbs my entire life and we've had a fairly effective regime of private property and no police state. The populace has to understand the nature of private property and when they do, they generally respect it. There's not that much crime in the suburbs and what there is was caused by the government's insane war on drugs. Other than criminals, people generally don't go into other people's houses or steal their cars and bicycles. On the personal level, Americans understand private property and contracts. Of course, having been brainwashed in government schools, they simultaneously tend to believe in the Mary Poppins Theory of Government.
ReplyDeleteA: "The question of gold as money under capitalism is not, I think, a battle worth waging. Perhaps it's due to my own preference for Marx, but I don't find the idea that, absent state intervention, market exchange (especially if the scope exceeds the community level) will become anchored to commodity money to be even the least bit strange, given the law of value. The originary aspect of Marx's own theory of money actually bears some similarities to Mises's "regression theorem," though it goes a bit further in its explanation and operates within a better analytical framework."
ReplyDeleteBoth Austrian economics and Marxism are 19th century. Both school have made contributions but economics has moved on.
In the 21st century using a fixed numeraire is entirely possible, but it won't be gold, which is archaic and has nothing to recommend it except as a fetish historically. Instead, it will be energy units if it comes to that. There is already a fairly strong push in that direction by forward thinkers.
Speaking of barbaric genocidal end-time religious nutcases, Karl Marx was a religious eschatologist.
ReplyDeleteReading Rothbard on Marx is a trip. If it were just a matter of him being ungenerous, it'd be one thing, but this is downright inadequate. Just at a skim, it's clear he's attributed the equivalent of the "iron law of wages" to Marx, which he and Engels repudiated and derided at length. Canard about historicism, check. Deriding people who argue what Marx "really meant" while condescending to tell us what he "really meant," check.
Psychoanalytic analysis of poetry (!), check. Lacan might have given him points for effort, at least.
His Hegel is similarly laughable. He falls into Haym's old trope of Hegel seeing the Prussian state as the fulfillment of history. And then there's this: "Here are the origins of the magical Hegelian-Marxian 'dialectic': one state of affairs somehow gives rise to a contrasting state." That "somehow" is far more damning than he knew, as it reveals that he has no comprehension of what the process entails. It's as if he thinks "thesis-antithesis-synthesis" was something Hegel ever actually said.
Thanks. It's always handy to have another error-riddled mises.org piece to reaffirm the miserable state of Austrians' reading comprehension outside of their own narrow ambit. But then, why should they have to waste their time reading things they "know" to be false? Instead, let's just take Rothbard at his word, knowing full well that he was not above outright prevarication in order to "win" a debate.
Bob, I don't want to live in your fantasy world. I don't want to have to use gold as money.
ReplyDeleteDo I get a say, or a vote on this?
Not in your fantasy world, where democracy doesn't exist.
"I think any potential payee with a FULL UNDERSTANDING of what FRB notes really are will say, “Hell no, pay me in real money”.
ReplyDeleteDebt money such as bills of exchange, promissory notes etc is real money.
So now your position is: I would not ban free creation of debt money by the private sector but I just *know* it would not be accepted.
This is stupidity of the highest order.
Do you seriously believe private agents will never accept bills of exchange because they are a form of debt money? The empirical evidence of history shows us again and again and again that agents on the market invent debt money and have endogenous money systems, and that FR notes are just another part of this.
If the payee is misled into thinking the FRB notes are the same as warehouse receipts, then there is fraud and the payee has a cause of action."
The belief that FR banking began as warehouse bailments is itself just another fantasy of Rothbardian cultists.
Take one of earliest goldsmiths notes known to us from 1654:
“Rec[eive]d, ye [= the] 16th [December] 1654 of [= from] Sam Tofte the some [= sum] of Twenty five pounds w[hi]ch I promise to repay upon Demand I say R[eceived]
P[er] me* [= by me]
Feild Whorwood
interest of both £2-05-0.”
The nature of the contract entered into by Sam Tofte (the holder of the FR bank account who handed over the money) and the banker Feild Whorwood is made perfectly clear to us by the words of the banker: “I promise to repay upon Demand ...”. This was a receipt of money to the banker given by Sam Tofte as a loan or mutuum, and one re-payable on demand, with interest.
This is both a receipt for the sum delivered to the banker (but not a certificate of bailment) and, without any doubt, a promissory note.
I don't want to have to use gold as money.
ReplyDeleteFine. You would be free to use whatever money you want. In your case, it could even be 85 pound bags of belly button lint.
Mises used the term “catallactic” to refer to the process of human exchange which produces the prices necessary for economic calculation. Thus, an economic theory that is “acatallactic” omits any reference to that basic economic thing that humans do, exchange. Mises noted 100 years ago that Knapp’s “State Theory of Money” was “acatallactic”. And thus, idiotic.
ReplyDeletehttp://www.econlib.org/library/Mises/msTApp.html
You “state theory of money” guys have been avoiding the obvious truth for 100 years.
Statement 1 of Bob Roddis @ June 4, 2012 4:53 PM:
ReplyDeleteHis analysis basically helps clarify the strengths and irrefutability of the Austrian world view and the Austrian case against the Keynesians and all interventionists.
The fact that the concept of economic calculation is like Kryptonite to LK is solid evidence of its irrefutability. He's afraid to be on the same block.
Statement 2 of Bob Roddis @ June 5, 2012 11:14 AM:
"And regarding my statement about “irrefutability”, I seem to recall bashing the historic ABCT just the other day.
http://tinyurl.com/7hqlloq
So at June 4, 2012 at 4:53 PM the Austrian worldview was "irrefutable", but by June 5, 2012 at 11:14 AM the "historic ABCT" (the early business cycle theory of Mises and Hayek with its unique Wicksellian natural rate, still accepted by Roger Garrison
the most important modern defender of ABCT) is suddenly (presumably) not "irrefutable" any more!
"You would be free to use whatever money you want"
ReplyDeleteI'm free to use whatever money I want now. But most people won't accept whatever money I happen to choose because they want either bank money or government money.
The money accepted by banks and by government is the dominant money, always. So people end up having to use it.
Gold-as-money would only happen if it was chosen by the government and by banks.
This choice would then effectively impose gold-as-money on everyone else.
So the fact is, you dislike government and bank-imposed "funny money", and instead you want government and bank-imposed gold-as-money.
But you hate democracy so the populace must not be given a say in this. Gold-as-money must be imposed with or without their consent.
Bob, I don't see what the big kerfuffle is when gold is freely traded in markets and anyone can hold it. Anyone who doesn't like "funny money," if that is their view, can either undertake contracts specified as being settled in gold, or else immediately convert the money into gold in the gold market, which is a free market in which price fluctuates iaw supply and demand.
ReplyDeleteWhile I can understand that someone one may wish to see the political situation changed, that is a matter of politics and there is a party out there committed to it (Tea Party). They present their ideas on why they think it is a good idea, and others do so to. Then there are elections, after which politicians do what the ruling elite tells them to.
geerussell: According to Knapp, when debt shifts payments through time...
ReplyDeleteYes, it is pretty natural that debt becomes a discrete asset like that. As such, it can be traded for whatever monetary regime happens to dominate, even if the numeraire changes, so long as it IS enumerated. And where the law of value holds sway (e.g., capitalism), the numeraire will have to be a commodity if there is no state insisting upon something else.
My reference to going beyond community scale was mainly to avoid complications of debt, since Graeber and others have made it apparent that even non-enumerated debt can facilitate exchange within certain societal domains.
Also, Bob, "acatallactic" is no criticism at all for what amounts to a question of law, which money becomes as soon as it is adopted as a "creature of the state."
"Economic calculation is impossible under socialism"
ReplyDeleteThis isn't correct.
The economic problem with centrally-planned communist economies is that they are very inefficient, not that they make economic calculation impossible.
The claim that optimum economic calculation is only possible within a "pure" "free market" without any government interference is simply an unfounded and unproven assumption.
You assume that the outcomes produced by a "pure" "free market" economy are the best possible, and then argue that therefore only "pure" "free market" economies are capable of optimum economic calculation. It's a circular argument.
Bob:"Mises used the term “catallactic” to refer to the process of human exchange which produces the prices necessary for economic calculation. Thus, an economic theory that is “acatallactic” omits any reference to that basic economic thing that humans do, exchange. Mises noted 100 years ago that Knapp’s “State Theory of Money” was “acatallactic”. And thus, idiotic."
ReplyDeleteIt turns out that Knapp's view of chartal money ad Innes view of credit money were historically correct, and Menger/Mises view of commodity money not supported by historical evidence. It's purely apriori, like Aristotle's physics based on first principles that delayed the introduction of empirical science.
Face it, Bob, you happen like the (Mises-Rothbard) Austrian narrative although it is apriori, as many of its follower even admit. Apriori is no great sin in economics, because most schools rely on unproved assumptions to some degree. But to claim irrefutable truth? It's a choice not based on empirics and data but on preferences and norms.
Anonymous, you are free to use any unit of account in contract settlement that the counterparty will agree to, unless a jurisdiction limits enforceable contracts of that type to those with a specific means of settlement, as governments do in requiring settle of liabilities to it in its own liabilities, and that rule is non-negotiable.
ReplyDeleteNo one in modern economies is forced to use "government money' other than in the payment of obligations to the state and other situations in which the counterparty requires a specific unit for settlement.
It's true that most firms only accept the prevailing unit of account, so one must obtain it for exchanges. However, one need only be as liquid as necessary for short periods, since gold is highly liquid and one can store value in gold if one chooses.
But I am willing to bet that now there is a growing underground of parties willing to settle spot transactions in gold, or a lot of people are not putting their gold where their mouth is.
Mr. Hickey:
ReplyDeleteIf you are referring to Mr. Graeber, I don't think he helps the "state theory of money" side whatsoever. His analysis shows informal and subjective forms of exchange. Since he doesn't understand Austrian theory at all and thinks it is based upon an insistence of strict, formalistic spot transactions of "equivalencies", he fails to realize that he's actually arguing in our favor.
http://consultingbyrpm.com/blog/2012/04/murphy-vs.-graeber-on-money-round-2.html
http://consultingbyrpm.com/blog/2012/04/east-coast-and-west-coast-togetha-on-graeber.html
Murphy's attempted refutation of Graeber is not convincing:
ReplyDeletehttp://socialdemocracy21stcentury.blogspot.com/2012/01/david-graeber-on-origins-of-money.html
http://socialdemocracy21stcentury.blogspot.com/2012/01/david-graeber-versus-robert-murphy.html
David Graeber's Debt is not highly original, and he doesn't represent it as such as the extensive documentation shows. It reflects the view of the major economic historians and economic anthropologists.
ReplyDeleteIn the history of exchange, commodity money, precious metal coinage and barter are specialized forms adopted for limited circumstances rather than the general rule, which was originally credit growing out of social relationships, and later chartal was added as a "creature of the state."
.
Formal exchange grew out of informal exchange based on trust as "proto-credit." This is still the dominant form of exchange in that most families and friends don't keep accounts.
To the degree that exchange is formalized in contracts, and "money" as a unit of account is the means of denominating contracts that are not barter transactions. Formal exchange is objectified and made impersonal, since there is minimal social connection, whereas informal exchange is subjective and communal.
These are not black and white. The area of exchange also has a large grey area. For example, many markets are oral and understood, where a man's word is his bond, instead of contractually engaged formally in writing. Such contracts may be enforceable, however, if they meet the standards of contract law.
If you agree with that, we are on the same page.
Try spending your gold at McDonalds or Walmart.
ReplyDeletepaul: "Try spending your gold at McDonalds or Walmart."
ReplyDeleteWell, you can't spend your T-bills, euro or CHF there either. The key point is that one can save in any medium one can find a market for, which is what most people do. It's called portfolio management. When people anticipate spending then they exchange whatever for the unit they need to spend in the amount they need to spend. Most rational people, I would assume,only keep enough in their deposit account for near-term needs, and only enough cash in their wallets for spot.
Those who don't think that yields are sufficient to offset impending inflation use different asset forms. Similarly, if one is expecting the fx rates to change, one takes the appropriate position in light of expectations, recognizing uncertainty and being ready to react to feedback.
Bob: "Mises used the term “catallactic” to refer to the process of human exchange which produces the prices necessary for economic calculation. Thus, an economic theory that is “acatallactic” omits any reference to that basic economic thing that humans do, exchange. Mises noted 100 years ago that Knapp’s “State Theory of Money” was “acatallactic”. And thus, idiotic."
ReplyDeleteWhat is at issue is price theory. Menger introduced the noton of marginal price, as I recall. That was an advance at the time. Since the time that Mises was writing about this "100 hundred years ago," alot of debating has been done and ink spilled over price theory. The history of these debates shows that the notion that price is subjectively "determined in markets" is overly simplistic. Price theory is contested.
"Well, you can't spend your T-bills, euro or CHF there either."
ReplyDeleteTrue, but 99.9% of the population has no T-bills, etc.
Those that do have them also have cash, so would have no need to spend them.
Can use 'em to buy companies though.
T-bills have also out-performed gold as well as stocks over the past 30 years.
ReplyDeleteIf you bought gold in 1980 you are still in the red, adjusting for inflation, so I've read somewhere (maybe The Big Picture).
This pretty much exhausts everything I know about gold so…
Paul, most of those people don't have savings other than in their houses if they are homeowners and in their retirement funds. Maybe a little in a savings account or CD.
ReplyDeleteBob I just want to add about the irrefutability claim, that when the logic is compelling or the evidence convincing, then debate ceases. As long as debate continues, disagreement shows that the issues are not worked out enough to command universal assent. But along the way, details related to the issues get disconfirmed and drop off, so the debate gets honed.
ReplyDeletewow, Roddis got spanked left right and centre.
ReplyDeleteA: It's as if he thinks "thesis-antithesis-synthesis" was something Hegel ever actually said. Well, he did, IIRC, discussing Kant in the History of Philosophy, unless one is overly suspicious imho of the authenticity of the statement there. Isn't a bad 3 word summary either. Hegel scholars could stop complaining about this, but it's a hobbyhorse they like to ride.
ReplyDeleteBob: Mises noted 100 years ago that Knapp’s “State Theory of Money” was “acatallactic”. Mises was wrong, and clearly did not understand Knapp, misunderstanding him as something like the "legal tender" view. Real Credit/State theories of money are more "catallactic" than Austrian theory.
Tom: It's purely apriori, like Aristotle's physics based on first principles that delayed the introduction of empirical science. Tom, Grrr. Like building a foundation & scaffolding - which are hardly apriori except from a foreshortened perspective of a forgetful later millennium - that delays building a castle in the air.
Calgacus: Well, he did, IIRC, discussing Kant in the History of Philosophy, unless one is overly suspicious imho of the authenticity of the statement there. Isn't a bad 3 word summary either. Hegel scholars could stop complaining about this, but it's a hobbyhorse they like to ride.
ReplyDeleteI hoped it would be clear that by "said" I meant "claimed" or "argued."
As summaries go, it seems less useful if it gives rise to accusations of magical thinking, and Rothbard was hardly the first to make such a claim. Besides, the terms Hegel employed were meant to improve upon these; it is much less clear why a thesis would necessitate an antithesis than why an abstract would give rise to a negative.
@ Calgacus
ReplyDeleteA: It's as if he thinks "thesis-antithesis-synthesis" was something Hegel ever actually said.Well, he did, IIRC, discussing Kant in the History of Philosophy, unless one is overly suspicious imho of the authenticity of the statement there. Isn't a bad 3 word summary either. Hegel scholars could stop complaining about this, but it's a hobbyhorse they like to ride.
Anyone who thinks that Hegel's dialectic is based on "thesis-antithesis-synthesis" doesn't understand how it operates. Eastern philosophies operate very much like Hegel's dialectic, and no one has ever asserted that Eastern philosophies are driven by "thesis-antithesis-synthesis"
Bob: Mises noted 100 years ago that Knapp’s “State Theory of Money” was “acatallactic”.Mises was wrong, and clearly did not understand Knapp, misunderstanding him as something like the "legal tender" view. Real Credit/State theories of money are more "catallactic" than Austrian theory.
"Catallactic" means exchange based and it also emphasizes the social nature of the transaction. Based on this understanding it is clear that credit money is more catallactic than specie money since specie money is used chiefly for spot and needs no accounting, where as accounting grew out of the use of credit money. Accounting is also fundamental to development of the law of contracts that rose out of custom in order to settle disputes as societies scaled up in size and complexity and interaction became less personal and communal.
Tom: It's purely apriori, like Aristotle's physics based on first principles that delayed the introduction of empirical science. Tom, Grrr. Like building a foundation & scaffolding - which are hardly apriori except from a foreshortened perspective of a forgetful later millennium - that delays building a castle in the air.
I should have made it clearer that I was speaking of Aristotelianism rather than Aristotle, who I regard as one of the all-time greats, along with his teacher Plato and Plato's teacher Socrates, all of whom were quickly misunderstood hence misrepresented, in my view.
Neither Platonism nor Aristotelianism properly grasped what either Plato or Aristotle were about, and so their proponents, or really perpetrators, created caricatures. Both of these caricatures now known as Platonism and Aristotelianism shaped subsequent Western thought and institutions.
Sometime it's laughable. Ayn Rand thought she was an Aristotelian, for instance. At other times it was pitiful as in the case of the anti-scientific attitude of Aristotelianism, which was actually rather opposite of Aristotle, who was one of the earliest to emphasize the need for observation and empirical investigation. He was a founder of biology based on this.
The Mises Institute has digitized a lot of books by Hayek, Mises, Rothbard and other Austrian economist, and it gives them away as free ebooks over the internet, even though you can also buy paper copies and Kindle ebook versions from Amazon.
ReplyDeleteNow, why would the Mises Institute produce and give away ebooks "for free" when it could sell them at market prices like Amazon? According to Austrian economics, when you produce something without price signals telling you how much to produce, that leads to the economic calculation problem and runs the risk of causing economic chaos.
I am of the Austrian world view. I have no problem with Post-Keynesian policies under 1 condition. I will take back my criticism of fiat currencies and FRB. I will take back all other criticism if they accept Competing currencies (repeal legal tender laws). The government can follow post-Keynesian policies (have fiat currencies) while I trade, save and pay taxes in gold, silver, oil, natural gas and other real things. I pay my taxes in gold equivalent of government fiat money. The public at large is free to choose if they use gold or the fiat currency or oil or bitcoin. The real statists are those that defend legal tender laws. The flaw in Austrian economics is that it recognizes the bad side of humans in government but not the irrationally of humans in the market. The flaw in Post-Keynesian economics is that it recognizes the irrationally of humans in the market but not the bad side of humans in the government. Competing currencies corrects both. The benefit of competing currencies is that the public will have a mechanism to keep the government honest as the government action will be influenced by people voting with their wallets not their ballot (which is a failed experiment in my opinion). Then the Post-Keynesian vision can realized fully but only a corrupt version can be realized under legal tender laws.
ReplyDelete"Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men."
Centralization is the real evil but fiat and FRB are just instruments that can be used for both good and bad. Post-Keynesian should advocate competing currencies to prove they are not statists (A gold standard would be just as statist as fiat monopoly) and this debate between Austrians and Post-Keynesians will ultimately be decided by the public usage of competing currencies. I predict both will do well. I await your response.
Zakariya Moallin said...I will take back all other criticism if they accept Competing currencies (repeal legal tender laws). The government can follow post-Keynesian policies (have fiat currencies) while I trade, save and pay taxes in gold, silver, oil, natural gas and other real things. I pay my taxes in gold equivalent of government fiat money. The public at large is free to choose if they use gold or the fiat currency or oil or bitcoin.
ReplyDeleteThis would only be relevant if there state currency were eliminated since everyone is free now to save in whatever they wish and also to transact it whatever they wish with willing counterparties. To pay taxes in state currency, all one has to do now is on the day one wishes to pay the tax just exchange some of whatever one prefers to save in terms of for state currency.
"This would only be relevant if there state currency were eliminated since everyone is free now to save in whatever they wish and also to transact it whatever they wish with willing counterparties. To pay taxes in state currency, all one has to do now is on the day one wishes to pay the tax just exchange some of whatever one prefers to save in terms of for state currency."
ReplyDeleteWhat are you talking about. You must be joking. I remember Ron Paul trying to get computing currencies legalized. I remember the story below. So don't pretend legal tender laws don't exist or aren't fascist. State whether you are OK with having no legal tender laws and I can make my currency in my house and whoever wants to use it can us it.
"Yesterday we posted an article about a 67 year old man by the name of Bernard von NotHaus who was arrested in 2007 for minting "Liberty Dollar" gold and silver coins. NotHaus made no attempt to "counterfeit" legal US tender, as his goal was to offer Americans an alternative form of currency, not reproduce what is fast becoming a worthless fiat. NotHaus, like many Americans, was simply tired of the US Dollar (which has been devalued by over 95% since the creation of the Federal Reserve System in 1913).
What I find disturbing was the outlandish accusation by the US Attorney Anne M. Tompkins regarding NotHaus. In her statement she proclaimed that "attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism"
@ Zakariya Moallin
ReplyDeleteSeigniorage is traditional prerogative of a sovereign. Muck with that at one's own risk. But there is no law against providing specific weights of any commodity, which is what commodity money (commodity less the seigniorage) actually is.
"Seigniorage is traditional prerogative of a sovereign. Muck with that at one's own risk. But there is no law against providing specific weights of any commodity, which is what commodity money (commodity less the seigniorage) actually is."
ReplyDeleteThat my point. The sovereign(government) has the right to rob me if they wanted by inflation tax. why? who gave them that right? they can take taxes to pay for society needs by consensus. Why can't money creation be completely decentralized and the sovereign being one of many money creators? It is like saying the government is the only one that can make cars or make phones? now we have a private bank (FED) given the monopoly to make money out of thin air. clearly bankers hate market competition. money creation centralization is the real evil not whether money is fiat or commodity as that is left to personal choice and the free market. government should enforce private sector contracts involving money creation like bitcoin if contracts are signed. Austrian economics should stop promoting gold monopoly and just let the market decide, it ryhmes with their freedom agenda. statists reveal their true colors when it comes to this issue. Can Post Keynesian agree to that? Prove you ain't big government shills. We are you Lord Keynes. Would like to hear your response.
MMT and Post Keynesianism are admittedly compromise solutions that do not challenge govt control. They deal with the system that is in place in a way that results in growth, full employment and price stability.
ReplyDeleteWhat you are suggesting is a political issue that would change the existing system. That's another issue, and some MMT proponents might agree that is the politically desirable solution, or think that something else should be in place instead. I am a liberation of the left, so I would advocate a somewhat different solution that you, but would agree that the present situation is better replaced. You may agree with Ron Paul's views, for example, but he is not in the running. As far as my position goes, there are no politicians of the libertarian left in the US on stage.
My own view is that we are stuck with the present system for at the very least four more years, so we may as well advocate the best policies within that system in the meanwhile.
Obviously, you and I disagree about that since we differ over the nature and function of money, for example. But as a professional philosopher, I also have deep disagreements with the Libertarian approach of Mises and Rothbard since I disagree with fundamental assumptions and methodology.
I agree that what you are advocating is better than the current system. I agree that it will solve the current issues. economically you are sound but you have to holistically look at the political implications of imposing your views on others. Austrians are also guilty of this with the gold standard. but why should anybody decide what is best for me in the long run? Are we going to have government control in 5 years, 50 years or 500 years time? At what point do we dismantle government control and have free markets when it comes to money creation and fiat, gold and dates are equally legitimate in my view. Prove to me why government monopoly is perceived as necessary because I can understand but not agree with government control of natural monopolies like police, fire,rail, energy and water? why is money creation any different than mobile phones or the internet? looking forward to you answering all my questions. Cheers
ReplyDelete@ Zakariya Moallin
ReplyDeleteAgreed that hierarchical rule is the issue, but my solution is anarcho-communitarian rather than anarcho-capitalistic. So we agree on the diagnosis but not the treatment.
However, I have been working toward these goals since the 1960's and we are no closer to achieving them in practice. I realized the likelihood of this back then and decided to join networks of like minds and create as much of an anarcho-communitarian network as possible.
At the same time, given the situation that we have, I think that we can do better than we are and that is why I propose looking at a realistic description of the existing monetary system in terms of its structure and operations instead of either ignoring it or misunderstanding it as mainstream neoclassical economics and the neoclassical synthesis adopted by mainstream Keynesians do.
ReplyDelete"However, I have been working toward these goals since the 1960's and we are no closer to achieving them in practice. I realized the likelihood of this back then and decided to join networks of like minds and create as much of an anarcho-communitarian network as possible."
What is anarcho-communitarian and can you give examples. Is it like the transition town movement? if so I consider that capitalistic as it is voluntary and maximizes other benefits over money making. I support that movement and will emulate it in the future.
Anarcho-communitarianism is the attempt to harmonize personal liberty (freedom of choice bounded by responsibility), eqality (fairness and justice as the basis of the rule of natural law) and community-solidarity (fellow-feeling and cooperation as the basis of social groups and institutions). It looks to the ancient tribal structure as non-hierarchical organizational paradigm in which natural leaders are selected for managing tasks for which they are fitted. It sees hierarchical power structures and impersonal institutions as the chief obstacle this kind of functioning, which is natural as an outgrowth of family, clan, tribes and nation of tribes.
ReplyDeletePaul Goodman is an example of anarcho-communitarianism. Here is an interesting article about him at LewRockwell.com, emphasizing the general compatibility of his views with Libertarianism.
The Radical Individualism of Paul Goodman by Richard Wall