The Austrian Theory of Money — Murray N. Rothbard

The Austrian theory of money virtually begins and ends with Ludwig von Mises's monumental Theory of Money and Credit, published in 1912.1 Mises's fundamental accomplishment was to take the theory of marginal utility, built up by Austrian economists and other marginalists as the explanation for consumer demand and market price, and apply it to the demand for and the value, or the price, of money. No longer did the theory of money need to be separated from the general economic theory of individual action and utility, of supply, demand, and price; no longer did monetary theory have to suffer isolation in a context of "velocities of circulation," "price levels," and "equations of exchange."...

Mises Daily
The Austrian Theory of Money
Murray N. Rothbard
Originally delivered as a lecture at the 1974 South Royalton Conference on Austrian Economics. Published in Economic Controversies.

Joseph Salerno — A Program to Stabilize the Economy—in Four Words

Paul Cantor, Clifton Waller Barrett Professor of English at the University of Virginia and Associated Scholar of the Mises Institute, attended Ludwig von Mises’s seminar at NYU as a young man. He recently surprised and delighted a few of us by revealing that the line that he remembers Mises speaking most frequently in the seminar was “No farzer credit expansion!” As a native German speaker with an accent and less than complete familiarity with English usage, what Mises meant to say, of course, was “No further credit expansion!” Upon hearing this, it struck me that Mises pithily summed up in four words a program for “stabilizing” the economy, that is, abolishing booms, bubbles, and recessions. Why the entire program could—and should—be printed on a T-shirt.

Never heard of sectoral balances, I guess.

Mises Institute — Mises Wire

A Program to Stabilize the Economy—in Four Words

Joseph Salerno | academic vice president of the Mises Institute, professor of economics at Pace University, and editor of the Quarterly Journal of Austrian Economics.

Edward Harrison — Where Post-Keynesians and Austrians meet on economics

Credit.

Credit Writedowns
Where Post-Keynesians and Austrians meet on economics
Edward Harrison

See also

Can Macron reform Europe?: A mental model for thinking about the economics

Dirk Ehnts — Von Mises and the Position of the State in the Market

The state is not external to the people, enterprises and other institutions. I think that it is wrong to divide state and market. In modern states, they are intertwined. Maybe this topic should go in my course to create a debate about what terminology to use (dichotomy of state and market) and what we recognize as (economic) “science” over the centuries.

The view that market imperfections result chiefly from the side of the state versus the market, that the market and state can be disentangled, and reducing the influence of the state decreases market imperfections is an article of faith of economic liberalism. It is a foundational assumption that is regarded as self-evident. That's doing speculative philosophy, not empirical science.

econoblog 101
Von Mises and the Position of the State in the Market
Dirk Ehnts | Berlin School for Economics and Law

Lord Keynes — Are all Facts Theory-Laden?

Yes, facts are theory-laden. Ludwig Wittgenstein elucidated how this so through his investigation of logic, both scientific language in the Tractatus and ordinary language in the Investigations. Sociologists and anthropologists have also shown how reality is socially constructed.

Kant had suggested and cognitive science further suggests that humans project what they sense in addition to receiving it as data through the subliminal process of data organization of which the subject is unaware. This often accounts for why there are often disputes of fact even among experts. Individuals and groups organize the world differently, based on subjectivity and the process of social construction, including the logic of the language they employ in mentation and communication.

Lord Keynes presents a particular view of this in opposition to Mises apriorism. I am in general agreement with this criticism in that this is the dominant paradigm in the scientific community at present and it is based on the way the majority of people construct reality. 

But I am more agnostic from the philosophical point of view. 

The worldview that LK outlines is a relative worldview that characterizes a way of seeing the world at a particular historical moment for a particular vantage which falls under the general category of "realism" in philosophy. The way it is stated is known as "naïve realism" in that it assumes that "what you see is what you get" without epistemological explanation. 

There is a considerable controversy over epistemological explanation and simply asserting realism is considered to be an expression of the "commonsense" viewpoint that is socially dominant at this historical moment in this geographical location. The point of rigorous inquiry is that common sense has often proved wrong. It is a reason that science was developed along with the issues associated with supposedly self-evident principles of philosophy.

Social Democracy For The 21St Century: A Post Keynesian Perspective
Are all Facts Theory-Laden?
Lord Keynes

Branco Milanovic — Why individualism does not necessarily imply preference for a minimalist state?

Rand, Mises, Hayek, and left libertarianism briefly compared and contrasted.

Global Inequality
Why individualism does not necessarily imply preference for a minimalist state?

Branco Milanovic

Mises on the four classes of people and the basis of the market society

"Saving—capital accumulation—is the agency that has transformed step by step the awkward search for food on the part of savage cave dwellers into the modern ways of industry. The pacemakers of this evolution were the ideas that created the institutional framework within which capital accumulation was rendered safe by the principle of private ownership of the means of production. Every step forward on the way toward prosperity is the effect of saving. The most ingenious technological inventions would be practically useless if the capital goods required for their utilization had not been accumulated by saving.

"The entrepreneurs employ the capital goods made available by the savers for the most economical satisfaction of the most urgent among the not-yet-satisfied wants of the consumers. Together with the technologists, intent upon perfecting the methods of processing, they play, next to the savers themselves, an active part in the course of events that is called economic progress. The rest of mankind profit from the activities of these three classes of pioneers. But whatever their own doings may be, they are only beneficiaries of changes to the emergence of which they did not contribute anything.

"The characteristic feature of the market economy is the fact that it allots the greater part of the improvements brought about by the endeavors of the three progressive classes—those saving, those investing the capital goods, and those elaborating new methods for the employment of capital goods—to the nonprogressive majority of people. Capital accumulation exceeding the increase in population raises, on the one hand, the marginal productivity of labor and, on the other hand, cheapens the products. The market process provides the common man with the opportunity to enjoy the fruits of other peoples's achievements. It forces the three progressive classes to serve the nonprogressive majority in the best possible way.

"Everybody is free to join the ranks of the three progressive classes of a capitalist society. These classes are not closed castes. Membership in them is not a privilege conferred on the individual by a higher authority or inherited from one's ancestors. These classes are not clubs, and the "ins" have no power to keep out any newcomer. What is needed to become a capitalist, an entrepreneur, or a deviser of new technological methods is brains and will power. The heir of a wealthy man enjoys a certain advantage as he starts under more favorable conditions than others. But his task in the rivalry of the market is not easier, but sometimes even more wearisome and less remunerative than that of a newcomer. He has to reorganize his inheritance in order to adjust it to the changes in market conditions. Thus, for instance, the problems that the heir of a railroad "empire" had to face were, in the last decades, certainly knottier than those encountered by the man who started from scratch in trucking or in air transportation.

"The popular philosophy of the common man misrepresents all these facts in the most lamentable way. As John Doe sees it, all those new industries that are supplying him with amenities unknown to his father came into being by some mythical agency called progress. Capital accumulation, entrepreneurship and technological ingenuity did not contribute anything to the spontaneous generation of prosperity. If any man has to be credited with what John Doe considers as the rise in the productivity of labor, then it is the man on the assembly line. Unfortunately, in this sinful world there is exploitation of man by man. Business skims the cream and leaves, as the Communist Manifesto points out, to the creator of all good things, to the manual worker, not more than "he requires for his maintenance and for the propagation of his race." Consequently, "the modern worker, instead of rising with the progress of industry, sinks deeper and deeper.... He becomes a pauper, and pauperism develops more rapidly than population and wealth." The authors of this description of capitalistic industry are praised at universities as the greatest philosophers and benefactors of mankind and their teachings are accepted with reverential awe by the millions whose homes, besides other gadgets, are equipped with radio and television sets."

Ludwig von Mises

The Anti-Capitalist Mentality

Grove City, PA: Libertarian Press, originally published 1956, p. 31-33

(h/t Sandwichman at EconoSpeak)

Lord Keynes — Why Mises’s Praxeological Theories are not Necessarily True of the Real World

My commentary:

There are two approaches to necessary truth, one scientific and one dogmatic.

Both approaches use axiomatic theories that are deductive in that theorems follow from application of formation and transformation rules to axioms. If the rules are applied consistently, then the truth of theorem following from axioms and postulates is said to be analytic and syntactical from the logical standpoint and capable of being known before experience (a priori) epistemologically.

The difference between science and dogmatic ideology is that scientists proceed to generate testable hypotheses from the theorems they deduce that generate experimental protocol statements that can be disconfirmed through observation. 

This aspect of science is quite obviously contingent in that truth is contingent on confirmation through observation. That which a model represents lies outside the model and is independent of the model, so that the truth of descriptions is additive or "synthetic," and can only be known after experience (a posteriori). This requires observation.

Dogmatic ideology stops at the necessary truth of the deductive aspect of the theory and holds that confirmation is unnecessary since the necessary truth of axioms, since they are postulated, and theorems, since they are logically deduced, shows that it is impossible that they be false. Examination of the model is therefore sufficient epistemologically. This involves confusion of logic and epistemology.

This is false logic in that it confuses the model with that which is being modeled. Necessary truth applies only to models, and the relation of model to that which is modeled is contingent on that which lies beyond the model. That can only be known exogenously to the model, regardless of the logical necessity endogenous to the model.

This is important for understanding MMT, for instance, where accounting identities provide the necessary truth of a stock-flow consistent model but say nothing about the causality involved. That must be determined from by observation, e.g., of operations.

Social Democracy For The 21St Century: A Post Keynesian Perspective
Why Mises’s Praxeological Theories are not Necessarily True of the Real World
Lord Keynes

Lord Keynes — No Constants in Human Behaviour?

Comparison of Mises and Keynes on explanation and prediction in natural science versus social science, including economics. Being ergodic, natural science can produce causal explanations that yield precise predictions, whereas being non-ergodic, social science — including economics — tells stories. These narratives are not (necessarily) trivial, however, depending on the craft of the storytellers.

Social Democracy For The 21St Century: A Post Keynesian Perspective
No Constants in Human Behaviour?
Lord Keynes

(h/t Auburn Parks in the comments)

Lord Keynes — Keynesians, Austrians, Demand, and Production

Austrians emphasize price signaling, while Keynesians emphasize quantity signaling.

Social Democracy For The 21St Century: A Post Keynesian Perspective
Keynesians, Austrians, Demand, and Production
Lord Keynes

Lord Keynes — Mises’s Explanation of the Great Depression: A Critique

Relevant today because the debate between market fundamentalists and Keynesians is still very much alive.

Social Democracy for the 21st Century: A Post Keynesian Perspective
Mises’s Explanation of the Great Depression: A Critique
Lord Keynes

Lord Keynes — Lavoie on Administered Prices

The consequences of this are the following:

(1) one of the major (alleged) mechanisms driving an economy to Walrasian full employment equilibrium collapses and the whole notion that market economies have a strong tendency to general equilibrium must be abandoned, and

(2) the Austrian (or Misesian) notion that market economies have a strong tendency to economic coordination effected by firms’ adjusting their prices towards market clearing values is fundamentally flawed and wrong.

As we've argued many times here at MNE.

Social Democracy For The 21St Century: A Post Keynesian Perspective
Lavoie on Administered Prices

Lord Keynes

Lord Keynes on Mises and epistemology

Lord Keynes put up two interesting philosophical posts recently. I did want to comment on the first post, which is a good summary of the issues, but haven't had time. However, I did just write up a response to the second about Mises, putting it in historical perspective.

Social Democracy For The 21St Century: A Post Keynesian Perspective
Epistemology and Kinds of Knowledge

What is the Epistemological Status of Praxeology and the Action Axiom?
Lord Keynes

Mises action principle is Aristotle's every agent acts for an end (telos). Aristotle's approach to biology is teleological. This principle of causality was reiterated by Aquinas and was fundamental to Medieval Scholasticism as rational explanation of articles faith, contra the credo quia absurdam est, misattributed to Tertullian. Long and venerable tradition deeply embedded the principle of causality in the Western psyche. 

Hume attacked causality as a principle based on his assumption that knowledge is either from sense data or logic and no sense data correspond to causality other than observation of constant conjunction. Kant attempted to counter this move by moving causality from intellectual intuition to the logical structure of the mind that imposes a necessary connection between cause and effect in structuring knowledge. Aristotle's intellectual intuition of cause (aitia) as a real principle known through intellectual intuition become instead a category inherent to reason that is imposed on knowledge of that which is given in experience.

Not a bad move in retrospect in that it is being borne out somewhat in cognitive research on brain function. But this says nothing about reality outside the mind, which is really Hume's skeptical argument. In Hume's view, humans believe in an external world but know only sense data, which is then structured in terms of logic.

Kant's solution was no escape. It is simply the claim that humans cannot think beyond the bounds of spacial and logical categories — space and time, and existence and causality. The question remains that, although humans are hardwired to think within and in terms of these boundaries, does knowledge correspond actually to reality and do we know this for sure. For Kant it is impossible to know the thing in itself since knowledge as for Hume occurs within the confines of experience, which is structured subjectively. In the attempt to escape Hume, Kant has landed in subjective idealism instead of Aristotle and Aquinas's subjective realism in trying to avoid Hume's skeptical conclusion.

Kant did not realize (and probably could not at the time) that his categories don't always match up with scientific theory and findings. De eloped over a century later, QM and relativity are counter-intuitive, for instance, and suggest that reality is much more complex than the classical world of ordinary thought and observation in which Kant's epistemic categories apply "necessarily". Moreover, there is increasing reason to think that so-called reason cannot be separated from feeling ("passion") categorically, or nature from nurture. There is no "pure reason," anymore than there is an "invisible hand".

In addition, the the Kantian categories function as epistemic substitutes for the metaphysical "essences" that the ancients asserted were intuited intellectually. Hegel realized this in setting forth logic as metaphysics. 

Now anthropologists and sociologists are finding that these categories are culturally determined to a far greater degree than previously realized. Philosophy is turing out to be much more anthropological and sociological that Western thinkers had suspected previously. Wittgenstein made use of these anthropological and sociological discoveries in his later work exploring the logic of ordinary language.

The upshot is that Mises generated yet another metaphysical system. Metaphysical systems assume or posit their own criteria, which leads to circular reasoning, or assume unspecified criteria that lead to an infinite regress. This is no ticket to avoiding skepticism, as the failure of metaphysical systems to be universally compelling goes to show.

Scientific method was devised to counter subjectivity, but even science cannot avoid the issue of skepticism since its appeal is to experience and science has not shown how to bridge the gap between the knowing subject and objects of knowledge in that science presumes that immediate knowledge of objects and events is dependent on the senses.

But science makes skepticism a virtue in that scientific theories are general descriptions and general descriptions can only be falsified but never confirmed indubitably if the description is of an open set not all of whose members is known. Nonetheless, the question about the relation of knowledge and reality remains without an answer that is able to overcome skepticism as the view that human knowledge is relational, hence, relative to the knower rather than immediate knowledge of reality independent of the knower. This knowledge is inferred from the inability of the knower to control the known, and this inference depends on the principle of causality, which itself is in question.

Hume was not the first to put forward an argument for skepticism, and his is not the strongest case owing to his flawed assumptions. But he did put the ball in the court of those who wish to claim that there are universally compelling criteria supporting an intrinsic connection between subjectivity and objectivity that yields true knowledge of reality such that it is not influenced by subjectivity, and it is possible to know this for sure, that is, based on adequate criteria.

Mises is stuck in his own mind, which he has confused with reality, and has ruled out empirical testing on the grounds that he matter is settled — he says. No wonder Hayek ran away from that dogmatic claim.

Lord Keynes — Greedy Reductionism, Science and Economics

John E. King’s new book The Microfoundations Delusion: Metaphor and Dogma in the History of Macroeconomics (Cheltenham, 2012) charges neoclassical economics with the delusion that macroeconomic processes must just be explained in terms of microeconomics, and indeed that microeconomics is the proper foundation for all macroeconomic phenomena.

Social Democracy for the 21st Century
Greedy Reductionism, Science and Economics
Lord Keynes

Lord Keynes — Mises Flunks Evolution 101

Mises: "The fundamental facts that brought about cooperation, society, and civilization and transformed the animal man into a human being are the facts that work performed under the division of labor is more productive than isolated work and that man’s reason is capable of recognizing this truth. But for these facts men would have forever remained deadly foes of one another, irreconcilable rivals in their endeavors to secure a portion of the scarce supply of means of sustenance provided by nature. Each man would have been forced to view all other men as his enemies; his craving for the satisfaction of his own appetites would have brought him into an implacable conflict with all his neighbors. No sympathy could possibly develop under such a state of affairs.”

Reading too much Hobbes and not enough life science.

Social Democracy for the 21st Century
Mises Flunks Evolution 101
Lord Keynes

Lord Keynes — Mises on Mixed Economies and Socialism: He is Incoherent

Just reading Human Action on these issues, it is astonishing to me that anyone can ever declare that Mises was the greatest economist who ever lived (as some Austrians actually do). On this subject, Mises was an ignorant and muddle-headed idiot, and it is not surprising that after 1945 he was ignored by serious economists.

I can just imagine economists reading these passages of Human Action and then throwing the book in the dustbin as they moved on to more important matters.

Social Democracy For The 21St Century
Mises on Mixed Economies and Socialism: He is Incoherent
Lord Keynes

I have to disagree with Lord Keynes on, "I can just imagine economists reading these passages of Human Action and then throwing the book in the dustbin as they moved on to more important matters." Considering how mainstream economists are given to just making stuff up, they probably would  be OK with Mises on this score. It seems that economists will say anything no matter how ridiculous or incoherent if their assumptions call for it  — like asserting that "all employment is voluntary" in order to save the assumption of equilibrium. Facts? Meh.

Unlearning Economics — Yes, Libertarians Really Are Lazy Marxists

I have only really just started studying Marxism in depth (though I am stopping short of Capital for now). Subsequently, while reading Bertell Ollman‘s Alienation: Marx’s Conception of Man in a Capitalist Society, it once again struck me that (right-)libertarianism is really just lazy Marxism. In many ways libertarianism reads like the first third of Marxism: the area which explores methodological questions and the nature of man. Both libertarianism and Marxism are generally fairly agreeable – and in agreement 0 in this area, but the former never really fleshes out its arguments satisfactorily. Often I find, after describing some basic principles (non coercion etc.), libertarians make jump to property rights and capitalism being the bestest thing ever, without fully explaining it.*

I will focus primarily on Robert Nozick and Ludwig von Mises here, as they are the only two libertarians who really explored libertarianism from basic principles of man and his relationship to both nature and economic activity (Murray Rothbard was really an interpretation of Mises in this respect). Overall, I think Nozick and Mises combine to form a fair reflection of minarchist libertarianism.

Unlearning Economics
Yes, Libertarians Really Are Lazy Marxists

Lord Keynes — Austrians Should Read their Mises

Mises in Interventionism: An Economic Analysis:

If within a society based on private ownership of the means of production some of these means are publicly owned and operated, this still does not make for a mixed system which would combine socialism and private property. As long as only certain individual enterprises are publicly owned, the remaining being privately owned, the characteristics of the market economy which determine economic activity remain essentially unimpaired. The publicly owned enterprises, too, as buyers of raw materials, semi-finished goods, and labor, and as sellers of goods and services, must fit into the mechanism of the market economy; they are subject to the same laws of the market. In order to maintain their position they, too, have to strive after profits or at least to avoid losses.” (Mises 1998: 5)

Social Democracy For The 21St Century
Austrians Should Read their Mises
Lord Keynes

Robert Vienneau — Benedetto Croce As A Precursor To Ludwig Von Mises

For the philosophy buffs.

Thoughts on Economics
Benedetto Croce As A Precursor To Ludwig Von Mises
Robert Vienneau

P2P Debates: Arguments for and against central planning

For those interested.

P2P Foundation
P2P Debates: Arguments for and against central planning
Michel Bauwens