So what about it? Is Marxism relevant today? Yes, if we can avoid the dogmatism and rigidity that were often associated with the tradition. Power, exploitation, class, structures of production and distribution, property relations, workplace hierarchy -- these features certainly continue to be an important part of our social world. We need to think of Marx's corpus as a multiple source of hypotheses and interpretations about how capitalism works. And we need to recognize fully that no theoretical framework captures the whole of history or society. Marxism is not a comprehensive theory of social organization and change. But it does provide a useful set of hypotheses about how some of the key social mechanisms work in a class-divided society. Seen from that perspective, Marxist thought serves as a sort of proto-paradigm or mental framework in terms of which to pursue more specific social and historical investigations.Understanding Society
What About Marx?
Daniel Little | Chancellor, University of Michigan at Dearborn
My comment there.
Anyone doubting the power of Marxian analysis and the continuing influence of Marx should become familiar with Michal Kalecki, who anticipated Keynes but was unrecognized at the time since he wrote in Polish. Later he traveled to Sweden, then England where he taught at LSE and Cambridge, influencing Piero Sraffa, also a Marxian, and Joan Robinson, and emerging the Post Keynesian tradition, which is now a major contender to neoclassical economics, New Keynesianism, and Austrian economics. In fact, some Post Keynesian acknowledge the influence of Marx and Marxians over Keynes, and they reject interpreters of Keynes like John Hicks ISLM model so dear to Paul Krugman and the Keynesian-neoclassical synthesis of Paul Samuelson. Since Marx is still persona non grata and association with him a career killer for Western academics, his influence is often not attributed public or minimized. But this is becoming less the case now that it is obvious that the mainstream approach to economics and economic policy has failed and its proponents are strongly resisting reconstruction. So don't count Marx out yet.
Marx was a gold-bug, no?
ReplyDeleteOh yes. Karl Marx, End Times religious nut-case. 100 million murdered is not enough, Mr. Little?
ReplyDeletehttp://mises.org/daily/3769/
Oh yes. Karl Marx, End Times religious nut-case. 100 million murdered is not enough, Mr. Little?
ReplyDeleteCountervailed by the fascist quote of Austrian economists provided here previously.
Ad hominem argument is irrelevant to ideas, which stand or fall on their merits.
So, Mr. Hickey, you read this 57 page paper in 20 minutes? And you now know that it is nothing but ad hominem argument?
ReplyDeletehttp://mises.org/journals/rae/pdf/R4_5.pdf
What "fascist quote of Austrian economists" do you refer to? Certainly nothing from libertarians or Rothbard.
Another Rothbard rant.
ReplyDeleteWhat "fascist quote of Austrian economists" do you refer to? Certainly nothing from libertarians or Rothbard.
ReplyDeleteYou have a short memory.
Need I recall Hayek support of Pinochet, which even Margaret Thatcher ran away from.
Let me be more specific. Marx envisioned a temporary dictatorship of the proletariat, and Mises and Hayek were in fact OK with a temporary fascistic dictatorship to save liberalism.
ReplyDeleteAnd that Rothbard paper contained zero economics and a lot of philosophical critique based on Rothbard's interpretation based on his own presumptions. The low point was comparing Marx to Satan. Kind of like Ferguson's dismissal of Keynes because he was gay or bi. If one shared Rothbard's worldview, one would agree with him. Otherwise, not so much.
The commentary in this thread is proof positive that conservative/libertarian/austrian economic "thought" is a morality tale, that there is godlike behavior on the one hand and sin on the other. It's no wonder things are going to hell when secular religious zealotry bombards us on a bi-minutely basis.
ReplyDeleteMarx is just one major landmark in a much larger and very diverse body of socialist and egalitarian economic thought that Americans need to rediscover and critically examine so they can sift out and debate its enduring insights without making the same mistakes that had tragic results for previous generations of egalitarian thinkers.
ReplyDeleteThe radical individualism and perpetual paranoia of modern American life is destroying us as a society and crippling our ability to make progress. These days, you could't even get three Americans to chip in to build a swing set at a public park without two of them complaining that they are being absorbed into the "collective" or the "Borg" or the "matrix" or the army of the pod people - or any one of hundreds of classic American paranoid fixations. We're all a bunch of sick loners who have built a sick society beneficial for only a small class of blood-sucking predators preying on the results of confusion, isolation and failure.
"Oh yes. Karl Marx, End Times religious nut-case. 100 million murdered is not enough, Mr. Little?"
ReplyDeleteGoodness me... Mr. Marx was busy indeed: to murder one hundred million people is really something.
Tell me: did he strangle, shoot or stab them or what? I mean, killing one person a minute, it would have taken Marx nearly 200 years without a break (no sleeping, eating, pooping, nothing) to murder 100 million people.
I can almost hear him, saying, as the bodies fall everywhere:
"Zis moorrrter bisyness ist moorrrter. MWAHAHA".
---------
Give the man his silver smoothy, so he can share it with Pilkington.
It doesn’t hurt my feelings if MMTers want to be associated with Marxism. Truth in advertising is always a good thing.
ReplyDeletehttp://www.flickr.com/photos/bob_roddis/5560086644/
Bob Roddis said...
ReplyDeleteWhat "fascist quote of Austrian economists" do you refer to? Certainly nothing from libertarians or Rothbard.
Roddis demonstrates he has no memory:
It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error” (Mises 1978: 51).
-------
And, by the way, roddis, want to prove you understand basic Austrian concepts?
Tell us:
Is the idea of prices adjusted in a flexible manner by human action towards their market-clearing levels one fundamental element in Austrian price theory and in Misesian economic coordination?
Care to give us a direct, clear, non-evasive answer to that question to prove you're not still a cowardly intellectual fake?
I thought not.
Oh, and have you read Salerno's “Mises and Hayek Dehomogenized” now?
ReplyDeleteNo doubt you've examined every comma and full stop, so you can tell us whether you agree with this:
“Mises conceives the market process as coordinative, ‘the essence of coordination of all elements of supply and demand.’ This means that the structure of realized (disequilibrium) prices, which continually emerges in the course of the market process and whose elements are employed for monetary calculation, performs the indispensable function of clearing all markets and, in the process, coordinating the productive employments and combinations of all resources with one another and with the anticipated preferences of consumers.” (Salerno 1993: 124).
You agree? Yes or no?
The picture Bob links to:
ReplyDeletehttp://www.flickr.com/photos/bob_roddis/5560086644/
Table of contents, page one, 'The Economics of Control' by Abba Lerner.
quote:
"Chapter 2: The Optimum Distribution of Goods.
"The optimum allocation of goods involves the equalization of marginal substitutability (M). This is automatically reached by free exchange, but is upset if there is any monopolistic exploitation."
Well, if it isn’t “Lord Keynes”. After the beat-down you received last week, I’m amazed that you would show your face. Oh wait. You’re afraid to show your face.
ReplyDeleteLet’s review.
Lord Keynes on March 22, 2013 at 9:04 AM said:
I do not deny that inflexible prices are an element in the Hayekian ABCT.
http://tinyurl.com/abqlro8
Last week:
[Roddis] What actually happened to the unsold 40,000? Don't you understand the real world enough to tell us?
[Tom Hickey] Depends on the merchandise, but in aggregate some was given to charity and ended up in thrift stores, some was liquidated and ended up in discount houses, some was factored and sold into the export market, some was sold through sales promotions, and some unplanned inventory was held over to the next period.
[LK] Right. I am not denying that this or combination of some of these might happen in some businesses. Or that often retail businesses want to clear stock by clearance sales.
http://tinyurl.com/mv4gt3n
Regarding Salerno: The pricing process is essential, indispensable and irreplaceable. It is obliterated by socialism and distorted by Keynesianism. But human beings are not robots and have limited knowledge (while Keynesian bureaucratic bullies are human beings too and suffer the same infirmities in spades). Thus, claiming that ALL MARKETS will ALWAYS clear seems a little overstated to me, although this will happen most of the time and laissez faire is the only cure for the impediments to this process caused by socialism and Keynesianism. I will agree to this amended version:
This means that the structure of realized (disequilibrium) prices, which continually emerges in the course of the market process and whose elements are employed for monetary calculation, PROVIDES the indispensable AND IRREPLACEABLE INFORMATION, (UNAVAILABLE UNDER SOCIALISM AND FATALLY DISTORTED UNDER KEYNESIANISM, MONETARISM AND MOST FORMS OF FRB) OF INDUCING THE TENDENCY FOR THE CLEARING ALL MARKETS and, in the process, PROVIDING THE INFORMATION NECESSARY FOR THE COORDINATION OF the productive employments and combinations of all resources with one another and with the anticipated preferences of consumers.
And it wasn't too hard to pull this out of the Golden Oldies collection for the 15th time:
ReplyDeleteGosh, LK. Has it already been a week since your last pathetic smear of Mises regarding Mussolini which I answered in full? (BTW, I don’t know of any Rothbardian who supported the CIA coup in Chile. And Hayek’s view on that topic has nothing to do with his monetary theories).
The influential economist John Maynard Keynes was a prominent supporter of Eugenics, serving as Director of the British Eugenics Society, and writing that eugenics is "the most important, significant and, I would add, genuine branch of sociology which exists".
http://en.wikipedia.org/wiki/Eugenics
Keynes’ position on eugenics goes straight to the heart of his economic theory. However, your Mises’ quote is taken completely out of context. Mises was clearly (and merely) pointing out that (in his opinion in 1927) the pre-Hitler form of fascism had halted the spread of Stalinist Pol Pot-like mass murdering Communism in Italy (Mussolini was indeed quite popular with hip leftists and even FDR until he joined up with Hitler in the late 1930s). But Mises also makes clear that fascism is a brutal and ignorant movement because fascists cannot even argue or engage in debate (just like socialists) and that fascism will lead to a civilization-ending war:
“Fascism can triumph today because universal indignation at the infamies committed by the socialists and communists has obtained for it the sympathies of wide circles. But when the fresh impression of the crimes of the Bolsheviks has paled, the socialist program will once again exercise its power of attraction on the masses. For Fascism does nothing to combat it except to suppress socialist ideas and to persecute the people who spread them. If it wanted really to combat socialism, it would have to oppose it with ideas. There is, however, only one idea that can be effectively opposed to socialism, viz., that of liberalism. ****
So much for the domestic policy of Fascism. That its foreign policy, based as it is on the avowed principle of force in international relations, cannot fail to give rise to an endless series of wars that must destroy all of modern civilization requires no further discussion. To maintain and further raise our present level of economic development, peace among nations must be assured. But they cannot live together in peace if the basic tenet of the ideology by which they are governed is the belief that one's own nation can secure its place in the community of nations by force alone.
It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.” Pages 50-51
http://mises.org/books/liberalism.pdf
See Ralph Raico:
http://mises.org/journals/jls/12_1/12_1_1.pdf
"I do not deny that inflexible prices are an element in the Hayekian ABCT.
ReplyDeletehttp://tinyurl.com/abqlro8"
Correct!
But wait:
"This means that the structure of realized (disequilibrium) prices, which continually emerges in the course of the market process and whose elements are employed for monetary calculation, PROVIDES the indispensable AND IRREPLACEABLE INFORMATION, (UNAVAILABLE UNDER SOCIALISM AND FATALLY DISTORTED UNDER KEYNESIANISM, MONETARISM AND MOST FORMS OF FRB) OF INDUCING THE TENDENCY FOR THE CLEARING ALL MARKETS and, in the process, PROVIDING THE INFORMATION NECESSARY FOR THE COORDINATION OF the productive employments and combinations of all resources with one another and with the anticipated preferences of consumers. "
So finally you're telling us that flexible prices moved by human action towards their market clearing levels is one fundamental element in Austrian price theory and in Misesian economic coordination!
You are saying "yes".
The consequences:
(1) This is a massive retreat. All the rubbish you've been peddling for ages now denying this has just fallen apart.
(2) Once you admit that large-scale administered prices implemented by people in private businesses thwarts this process, the whole Misesian flying-unicorn-world vision of economic coordination just fell apart.
Supply is coordinated with demand largely by direct output adjustments in fixprice markets, not by price adjustments.
(4) a tendency towards market clearing by flexible prices moved by human action IS an important element in your stock Hayek quote:
The primary cause of the appearance of extensive unemployment, however, is a deviation of the actual structure of prices and wages from its equilibrium structure. Remember, please: that is the crucial concept.” (Hayek 1975: 6–7).
Hayek is thinking of flexible wages and prices moved by human action here towards their market clearing levels to cure unemployment and clear product markets. This is a fundamental idea in this passage.
But you -- like the idiot you are -- have been denying this for ages.
But, as I said above, it's all just fallen apart, and you are exposed as the fool we all knew you to be.
Oh, and I can anticipate your idiot response: you'll say Hayek thought the actual "equilibrium" structure of prices and wages cannot be known or calculated beforehand. Yes, he did think that, but it in no way refutes or is inconsistent with his use of market clearing wages and prices.
This is a big day for you roddis. Defeated on virtually every point.
No, LK. I have not changed my position and you and the Keynesians have been eviscerated once and for all.
ReplyDeleteAnd Hayek’s view on that topic has nothing to do with his monetary theories).
ReplyDeleteCorrect.
The influential economist John Maynard Keynes was a prominent supporter of Eugenics, serving as Director of the British Eugenics Society, and writing that eugenics is "the most important, significant and, I would add, genuine branch of sociology which exists".
Yes, he had a role in the eugenics movement, but, just as you've similarly noted about Hayek, this has "nothing to do with" Keynes's economic theories.
There is no problem, inconsistency or difficulty with condemning and attacking Keynes for certain ridiculous and stupid personal opinions on other subjects, but also praising some of his economic ideas.
"Keynes’ position on eugenics goes straight to the heart of his economic theory. "
No, it doesn't, and you're plainly an idiot for thinking so.
"That its foreign policy, based as it is on the avowed principle of force in international relations, cannot fail to give rise to an endless series of wars that must destroy all of modern civilization requires no further discussion."
Yes, Mises said this and it only underscores the absolute short-sighted stupidity and immorality of this later statement:
"It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions "
No ideology that has an "avowed principle of force in international relations" can be "full of the best intentions".
Thanks for pointing out another contradiction in Mises's thought.
"No, LK. I have not changed my position."
ReplyDeleteLet us get this straight:
So it has ALWAYS been your view that flexible prices moved by human action towards their market clearing levels is one fundamental element in Austrian price theory and in Misesian economic coordination?
Is that right?
You changed your tune, roddis:
ReplyDeleteBob Roddis@November 4, 2012 at 8:34 PM
As I have stated over and over, Hayek uses the term “equilibrium structure” to refer to the price structure that would have existed but for GOVERNMENT intervention, especially granting banks the right to create fiat funny money loans out of thin air, thereby distorting the price, investment and capital structure. Hayek stated:
These discrepancies of demand and supply in different industries, discrepancies between the distribution of demand and the allocation of the factors of production, are in the last analysis due to some distortion in the price system that has directed resources to false uses. It can be corrected only by making sure, first, that prices achieve what, somewhat misleadingly, we call an equilibrium structure, and second, that labor is reallocated according to these new prices. ****
The primary cause of the appearance of extensive unemployment, however, is a deviation of the actual structure of prices and wages from its equilibrium structure. Remember, please: that is the crucial concept. The point I want to make is that this equilibrium structure of prices is something which we cannot know beforehand because the only way to discover it is to give the market free play; by definition, therefore, the divergence of actual prices from the equilibrium structure is something that can never be statistically measured. ****
In contrast, the modern fashion demands that a theoretical assertion which cannot be statistically tested must not be taken seriously and has to be discarded. As a result of this belief, a theory which, in my opinion, is the true explanation has been discarded as not adequately confirmed, and a false theory has been generally accepted merely because it happens to be the only one for which statistical evidence, even though very inadequate evidence, is available.”
This analysis has nothing to do with “market-clearing Walrasian price vectors”.
http://mikenormaneconomics.blogspot.com/2012/11/matias-vernengo-on-austrian-business.html?showComment=1352079298519#c7617435052728682495
So Hayek's quote has nothing to do “market-clearing Walrasian price vectors”?!
Is that correct roddis?
Then you retreated from this:
ReplyDeleteBob Roddis@January 30, 2013 at 10:06 AM
As Major Freedom has pointed out repeatedly, it was technically incorrect for me to say that the Walrasian concept had “nothing to do with” the Hayekian concept (which I originally whipped off in a blog comment 30 seconds after reading one of your ditties). The true statement is that the Walrasian concept and the Hayekian concept are completely different concepts but that Hayek tried to use the term “equilibrium” in an attempt to get his point across to people who were familiar with the pre-existing use of that term. Only in that tenuous sense does Hayekian “equilibrium” have anything to do with Walrasian “equilibrium”.
http://mikenormaneconomics.blogspot.com/2013/01/lord-keynes-debunking-austrian.html?showComment=1359558365695#c6165593818688624091
Here you admit you made a mistake:
it was technically incorrect for me to say that the Walrasian concept had “nothing to do with” the Hayekian concept"
First, it had "nothing to do with" Walrasian equilibrium, then only something to do with it in a "tenuous sense". But now you're implying that flexible prices moving toward market clearing levels IS a fundamental element in Austrian theory.
But now you say you have not changed your position, even though you have effectively admitted here that you did!
There's a word for this: idiocy.
"Bob Roddis said...
ReplyDeleteOk, so LK's not a lying bastard. He's just dumber than a crate of anvils. Austrian theory has nothing to do with "market-clearing Walrasian price vectors". During a long Keynesian boom phase, it's quite possible for unemployment to be at 1% and everything that's made being sold. Unlimited "market clearing" prices (for a while). But since these are false prices and do not reflect the underlying supply and demand schedules that would obtain absent the Keynesian fiat funny money injections, the boom will be unsustainable.
"Market-clearing Walrasian price vectors" have nothing to do with it."
Since Walras invented the idea of wages and prices converging towards their market clearing levels, it is obvious that any economist who has the same fundamental idea DOES shares this with the Walrasians.
But Roddis has denied this repeatedly in the past -- even though he has now contradicted himself and now admitted above that:
"the structure of realized (disequilibrium) prices, which continually emerges in the course of the market process and whose elements are employed for monetary calculation, PROVIDES the indispensable AND IRREPLACEABLE INFORMATION, (UNAVAILABLE UNDER SOCIALISM AND FATALLY DISTORTED UNDER KEYNESIANISM, MONETARISM AND MOST FORMS OF FRB) OF INDUCING THE TENDENCY FOR THE CLEARING ALL MARKETS"
In short, we have now witnessed the total implosion of roddis's cartload of garbage on this thread.
absent the Keynesian fiat funny money injections, Bobby Roddis
ReplyDeleteYou've never conceded that inexpensive fiat is the ONLY ethical form for government debts. Why not?
the boom will be unsustainable. Bobby Roddis
Implying that if money was not lent into existence, the boom could continue forever?
"You've never conceded that inexpensive fiat is the ONLY ethical form for government debts. Why not?"
ReplyDeleteBecause he doesn't think there should be a government, government taxes, or government debts.
Thanks LK for finding my explanation. I still think that "it's not the same thing" is about the same as "it has nothing to do with". Further, I EXPLAINED THAT MARKET CLEARING PRICES CAN EXIST FOR YEARS AND YEARS DURING AN ARTIFICIAL BOOM. So that MCP is not exactly FUNDAMENTAL to Austrian analysis because it is a corollary. The FUNDAMENTAL Austrian concept as far as I'm concerned is that REALIZED prices provide the necessary information so that people will make fewer mistakes regarding what other people will buy.
ReplyDeleteThe FUNDAMENTAL concept is that socialism, Keynesianism and FRB will distort the price, investment and capital structure in an unsustainable manner. The FUNDAMENTAL Austrian/Hayekian concept is the price distortions which cause the bust. Of course, markets will TEND to clear even after that Keynesian-induced catastrophe.
We've been over this 20 times. You attack me personally because, like all Keynesians, you cannot understand economic calculation and you are trying to create a distraction.
It doesn’t hurt my feelings if MMTers want to be associated with Marxism. Truth in advertising is always a good thing.
ReplyDeleteAnd it doesn't hurt our feelings that Austrian-Libertarians want to be associated with Mises and Rothbard either, and alliance of Hayek and Friedman that supported Pinochet. Or that Austrian-Libertarians don't support democracy.
"Bob Roddis said...
ReplyDeletethanks LK for finding my explanation. "
You mean demonstrating your severe contradictions and the collapse of your previous nonsense?
And notice how you've avoided answering all the questions that were asked of you.. Could it be that you're still a little coward?
" still think that "it's not the same thing" is about the same as "it has nothing to do with".
Yes, that says it all. You asserted in the past that "Austrian theory has nothing to do with 'market-clearing Walrasian price vectors'", and now you effectively conceded that it's the same fundamental idea.
The FUNDAMENTAL concept is that socialism, Keynesianism and FRB will distort the price, investment and capital structure in an unsustainable manner.
No, they do not, because supply is equated with demand via direct quantity adjustments in fixprice markets, where private business people have no interest in establishing market clearing prices.
Oh, and you are still ignorant of basic Austrian concepts, roddis.
Let us assume that roddis is here to actually provide a serious dialogue about Austrian economics.
ReplyDeleteIf so, he can give us a straight, direct answer to this question:
Does your stock Hayek quotation* invoke the idea of a tendency towards market-clearing prices and wages?
Yes or no?
Care to answer? Or want to avoid it like a complete coward?
-----
*Hayek quotation:
"The primary cause of the appearance of extensive unemployment, however, is a deviation of the actual structure of prices and wages from its equilibrium structure. Remember, please: that is the crucial concept.” (Hayek 1975: 6–7).
Bob the point is:
ReplyDelete1. You claim that absent government involvement prices naturally adjust to clear markets and thus (according to you) there are no substantial economic problems.
2. However the reality in capitalist economies is that prices are not generally flexible and adjustment actually happens through changes in output and employment.
3. So your arguments are about an imaginary economy which has nothing to do with how real economies actually function.
where private business people have no interest in establishing market clearing prices.
ReplyDeleteSo are you saying that in your world, year after year business people keep producing 5x the amount of junk they can actually sell profitably regardless of their ability to sell it profitably? Business people keep producing and bringing to market men's 70s bell bottom jeans through 2013?
"So are you saying that in your world, year after year business people keep producing 5x the amount of junk they can actually sell profitably regardless of their ability to sell it profitably? "
ReplyDeleteNo, idiot. They cut production and employment directly, instead of (as in your theory) adjusting prices to clear markets and equate demand with supply by trying to find a market clearing price.
In your example, the business would turn to some other product, instead of one they cannot sell.
That does not refute the point that y made.
Oh, and does your stock Hayek quotation invoke the idea of a tendency towards market-clearing prices and wages?
Yes or no?
Care to answer? Or are you still an utter coward?
y:
ReplyDelete"Prices" do not have volition and thus cannot be flexible or inflexible. Prices provide THE ESSENTIAL INFORMATION that informs people what other people might purchase in the future and at what price. The adjustments people make resulting from that information might be price changes, or changes in style, quantity or whatever ad nauseam. Or they might give up and join the circus. Further, if prices could instantaneous adjust all of the time, there wouldn't be funny money-induced depressions to worry about, would there?
The key points are that the problems Keynesians think they are solving are CAUSED by Keynesian policies themselves (and FRB pre-FED) because those policies impair the expression of unadulterated prices and there is no other source of that essential information other than such unadulterated prices.
I understand that you disagree with that analysis. But whether that analysis is the same as that of Walras and whether or not I know that doesn't make it right or wrong. LK's hair splitting on these topics is a tedious attempt to change the subject.
"'Prices' do not have volition and thus cannot be flexible or inflexible."
ReplyDeleteNo kidding! Roddis is such an idiot he thinks people believe that prices just magically move by themselves. You know this is a lame straw man, roddis.
" But whether that analysis is the same as that of Walras and whether or not I know that doesn't make it right or wrong."
We did not ask you whether it is exactly the same in every detail (it's not), but whether the idea of a tendency towards market clearing prices is a particular idea shared by both Walrasians and Austrians.
The fact that you will not answer shows you're a intellectual fraud.
They cut production and employment directly, instead of (as in your theory) adjusting prices to clear markets and equate demand with supply by trying to find a market clearing price.
ReplyDeleteMy theory does not assume a mechanical response of price cutting when the alternative of cutting production and employment might be more profitable. Thus, your “fixprice” example is completely in line with Austrian analysis. You carry on like this because you do not understand economic calculation. Mr. Hickey got you to admit that in the short run, prices are dropped on the over-produced items to “clear the market”. BASED UPON THE REVEALED PRICES FOR A PARTICULAR QUANTITY AND STYLE, production and employment was adjusted so that what was made could be sold profitably in the future.
Price cutting is just one option. The key concept is that REALIZED PRICES provided the information regarding how much of what could be profitably sold at what price in the future.
y:
ReplyDelete"So your arguments are about an imaginary economy which has nothing to do with how real economies actually function."
Yes, Roddis thinks we live in barter world. Everyone else realizes we don't.
So are you saying that in your world, year after year business people keep producing 5x the amount of junk they can actually sell profitably regardless of their ability to sell it profitably? Business people keep producing and bringing to market men's 70s bell bottom jeans through 2013?
ReplyDeleteWhat happens is different in different markets.
Some markets, usually low margin like computers, run on very tight inventory, Dell carries less than a week and Apple decided to match.
Other markets, usually high margin, run on very loose inventory, and factor what the don't sell to other venues to be sold at a discount. The remainder is liquidated.
Businesses with perishable products will reduce price if they have to, but are also likely to factor those goods, e.g., with an expiration date approaching.
But the basic principle is that firms generally do everything possible before marking down prices in their own venue because it sets a precedent. As a result they develop different strategies for inventory control based on quantity, and if demand falls they don't usually reduce prices but instead reduce production to clear inventory.
Sellers of final goods do use gimmicks to reduce inventory, such as clearance sales, but this doesn't reduce the market price because it is temporary and attracts impulse buyers afraid to lose out on a price cut that will be going away. This is very different psychologically from reducing prices.
We did not ask you whether it is exactly the same in every detail (it's not), but whether the idea of a tendency towards market clearing prices is a particular idea shared by both Walrasians and Austrians.
ReplyDeleteIn the context of observing that people will tend to make for sale only stuff that think they can likely sell, I think it is fair to say that both schools of thought share that particular idea.
But that is a different concept than revealed prices as the essential source of the information necessary for economic calculation or the distortion of those prices (and information) caused by Keynesian and/or FRB policies which is the point I was making so many eons ago.
zzzzzzzzzzzzzzzzzzzzzzzzz
"My theory does not assume a mechanical response of price cutting when the alternative of cutting production and employment might be more profitable."
ReplyDeleteYes, it does assume this in its ideal and prescriptive model of how markets should function.
But you are clueless on basic Austrian concepts.
"Mr. Hickey got you to admit that in the short run, prices are dropped on the over-produced items to “clear the market”."
No, roddis, that is NOT what I said. I said you can undoubtedly find SOME examples of this or a combination of the other factors he mentioned, but in the real world often businesses just add the goods to inventory, which contradicts your theory.
And again I ask: does your stock Hayek quotation invoke the idea of a tendency towards market-clearing prices and wages?
Yes or no?
Care to answer? Or are you still an utter idiot and little coward?
I am guessing the later.
"In the context of observing that people will tend to make for sale only stuff that think they can likely sell, I think it is fair to say that both schools of thought share that particular idea."
ReplyDeleteAnd so do Keynesians, idiot.
But that is not what I asked, roddis.
Is the idea of a tendency towards market clearing prices a particular idea shared by both Walrasians and Austrians?
This is great. Enjoying it. Please continue.
ReplyDeleteRoddis, do everyone a favor here.. LK is repeatedly asking a question. Here's what you do…
First, quote it:
"Is the idea of a tendency towards market clearing prices a particular idea shared by both Walrasians and Austrians?"
Second, answer it.
----------------------------------------
For Roddis: http://www.hark.com/braveheart/the-almighty-says-dont-change-the-subject
ReplyDeleteAccording to Wikipedia:
ReplyDeleteBecause for a long time most of Walras' publications were only available in French, only a relatively small section of the economics profession really became familiar with his work. This changed in the 1950s, largely due to the work of William Jaffé, the translator of Walras' main works, and the editor of his Complete Correspondence (1965).[citation needed] Walras' work was also too mathematically complex for many contemporary readers of his time. On the other hand, it has a great insight into the market process under idealized conditions so it has been far more read in the modern era.********
General equilibrium theory
In 1874 and 1877 Walras published Elements of Pure Economics, a work that led him to be considered the father of the general equilibrium theory. The problem that Walras set out to solve was one presented by Cournot, that even though it could be demonstrated that prices would equate supply and demand to clear individual markets, it was unclear that an equilibrium existed for all markets simultaneously.
Walras constructed his basic theory of general equilibrium by beginning with simple equations and then increasing the complexity in the next equations. He began with a two person bartering system, then moved on to the derivation of downward-sloping consumer demands. Next he moved on to exchanges involving multiple parties, and finally ended with credit and money.
Walras created a system of simultaneous equations in an attempt to solve Cournot's problem "(which supposedly Walras at first thought was complete merely because the number of equations equalled the number of unknowns)"[6]
The crucial step in the argument was Walras' Law which states that any particular market must be in equilibrium, if all other markets in an economy are also in equilibrium. Walras' Law hinges on the mathematical notion that excess market demands (or, inversely, excess market supplies) must sum to zero. This means that, in an economy with n markets, it is sufficient to solve n-1 simultaneous equations for market clearing. Taking one good as the numeraire in terms of which prices are specified, the economy has n-1 prices that can be determined by the equation, so an equilibrium should exist. Although Walras set out the framework for thinking about the existence of equilibrium clearly and precisely his attempt to demonstrate existence by counting the number of equations and variables was severely flawed: it is easy to see that not all pairs of equations in two variables have solutions. A more rigorous version of the argument was developed by Kenneth Arrow and Gérard Debreu in the 1950s.
http://en.wikipedia.org/wiki/L%C3%A9on_Walras
That does not sound like Austrian analysis to me, which was my original point and I stand by it. I do not know and I do not care if “the idea of a tendency towards market clearing prices [is] a particular idea shared by both Walrasians and Austrians”.
I have nothing else to say on the subject. I claim no specific expertise regarding Walras and never have. What is important is that the rest of you know nothing about Austrian analysis but claim to have refuted it. I find that quite fascinating (but bizarre).
"I do not know and I do not care if “the idea of a tendency towards market clearing prices [is] a particular idea shared by both Walrasians and Austrians”."
ReplyDeleteIn other words, you are too stupid to see or too dishonest to admit that
(1) the notion of a tendency towards market clearing prices to equate demand with supply is shared by both Walrasians AND Austrians.
(2) your stock Hayek quote also uses this idea -- Hayek calls it an equilibrium structure of prices and wages.
(3) Mises's "final state of rest" is just the Austrian analogue of Walras's general equilibrium (GE) state. Just like Mises, Walras of course never believed that his GE state would ever actually exist in the real world, but there is a tendency towards it.
Austrian theory places a tendency towards market clearing prices by human action at the centre of its theory of economic coordination. It is very similar to Walrasian theory in that respect.
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Congratulations, roddis, all your idiocy denying these things in the comments I have posted above (and which anyone can read and verify for themselves) has just collapsed.
You look like a complete fool and utterly deserve it too.
"What is important is that the rest of you know nothing about Austrian analysis but claim to have refuted it"
ReplyDeleteNo, roddis, YOU do not understand the Austrian theory you claim to support.
Bob Roddis@May 21, 2013 at 9:07 AM:
ReplyDelete"I have nothing else to say on the subject. I claim no specific expertise regarding Walras and never have."
Wow. You admit to being an ignoramus on Walrasian theory, and yet you claim that no Walrasian understands Austrian theory or Austrian concepts?
1. I claim that no Keynesian understands Austrian analysis. I have no idea what "Walrasians" know or think about anything much less Austrian analysis and I don't care.
ReplyDelete2. I claim to have never seen a reference to Walras promoting the idea of prices as the essential source of information for economic calculation or the distortion of the pricing process by Keyenesian/FRB policies which induce malinvestments. Throughout these eons of your hysterics on this stupid subject, you haven't produced such a reference either.
3. I do not like the term "market clearing prices". I don't use it and I do not think it is particularly helpful in understanding reality. When I see the term used, my reaction is always "WTF are you actually trying to say"?
(1) "1. I claim that no Keynesian understands Austrian analysis. I have no idea what "Walrasians" know or think about anything much less Austrian analysis and I don't care. "
ReplyDeleteMore proof of your profound ignorance, roddis.
Both Old (neoclassical synethesis) Keynesians and New Keynesians (like Krugman) are Walrasians (though Post Keynesians are not).
You know nothing about Keynesianism.
(2) "I claim to have never seen a reference to Walras promoting the idea of prices as the essential source of information for economic calculation"
Of course, they do -- equilibrium prices convey knowledge of how to equate demand with supply.
And so now you admit that the notion of a tendency towards market clearing prices to equate demand with supply is shared by both Walrasians AND Austrians?
(3) "I do not like the term "market clearing prices". I don't use it and I do not think it is particularly helpful in understanding reality."
So you reject a term and concept used by Mises, Rothbard and Hayek and react to the idea by saying "WTF are you actually trying to say"?!
Basically, you are ignorant of basic Austrian concepts.
You wouldn't understand Austrian theory if it bit you in the a**.
So you reject a term and concept used by Mises, Rothbard and Hayek ...
ReplyDeleteThe Austrians think two wrongs make a right. The wrong of bank credit expansion is to be "corrected" with bank credit contraction.
By their logic, pulling out a barbed arrow is the correct thing to do.
Fine. Then let's contract bank credit by banning any further credit creation and by providing the entire population, including non-debtors, with equal amounts of new fiat so the debtors can pay off their bank loans without deflation.
ReplyDeleteF. you don't seem to be very familiar with Bob's ideology. He thinks deflation is great and hates fiat money.
ReplyDeleteNice excecution LK. This was one of the more embarrassing ones for Roddis. Normally he just avoids questions he doesn't like. This time he didn't and he got slayed for it.
ReplyDeleteLord Keynes the Austrian Slayer.
y,
ReplyDeleteI used to be an Austrian till I found out they were deflation-loving gold-bugs who were insensitive to justice.
Reading the Bible helped me escape them too.
Of course I have a problem with debt-loving Keynesians too but not as much.
PS:
ReplyDeleteSince a monetary sovereign should never borrow, normally run budget deficits and NEVER run a budget surplus then debt-free fiat should normally accumulate in the economy equal to the sum total of the budget deficits.
PPS:
ReplyDeleteWe could call it "Citizen's Equity."
This comment has been removed by the author.
ReplyDeleteIt was the insistence on fiat gold that convinced me I was not dealing with true libertarians.
ReplyDeleteF.Beard
ReplyDelete"...and NEVER run a budget surplus…"
I don't think an MMTer would say that absolutely. If there was a sufficiently large trade surplus, then running a budget surplus might be appropriate to counteract demand-inflation.
I don't know if we've ever observed a country that has experienced this. So while theoreticall your statement isn't true, practically it might be.
"If there was a sufficiently large trade surplus, then running a budget surplus might be appropriate to counteract demand-inflation." JK
ReplyDeleteNo, because in that case the domestic central bank is lending or performing a currency swap to create new fiat for foreigners so the foreigners can buy the exports. The source of inflation is therefore the central bank. But a monetary sovereign has no need for a central bank in the first place! Moreover, why should the monetary sovereign subsidize the purchasing power of foreigners by reducing the purchasing power of its own citizens?!
FBeard,
ReplyDeleteWhile what you say makes sense for a country like the United States, for 'developed' countries...
For devloping countries without a capital stock, would the situation be any different?
Haven't pretty much all the developed countries in the world developed via heavy state investment + a trade surplus?
Is what China is doing now basically what the United States did early on? I thought this was the standard path from underdeveloped to developed, with the "current" developed countries being the major investors and the consumers
Seems to me that once the capital stock is sufficiently large, e.g. the United States today, then "we're up on our own two feet" and can deficit spend as needed. I wonder if this is possible for an undeveloped country.
Any thoughts?
Well, I don't see why a developed country could not have ethical relationships with developing countries. Once the US learns to quit exploiting its own people that model could be exported to other countries for mutual gain.
ReplyDeleteBut now it's dog eat dog to no ones real advantage.