>What I like most: there's absolutely no sign that any of you are even remotely familiar with neoclassical economics. Question your dogma much?
what is your evidence? or have you deduced this apriori?
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
It's probably Giles or some such trolling.
Haha!
What I like most: there's absolutely no sign that Neoclassical is even remotely familiar with ABCT economics. Question your dogma much?
Wow that was easy!
Neo - I think this is what you are asking for:
http://www.youtube.com/watch?v=1IV4F8gGNy4
Also, Block has a pretty good piece on rational expectations and ABCT here as well.
"Man thinks not only for the sake of thinking, but also in order to act."-Ludwig von Mises
Vincent Bugliosi added a very important footnote to Lincoln's observation, to wit "But you can fool MOST of the people MOST of the time."
I just don't get it at all. Look at this housing bubble. Did it end differently then most people thought it would? I think it fair to say that yes, they were absolutely wrong. What about the dot.com bubble? Again, most people were totally wrong. What about Bernie Madoff's clients? How many of them thought his story would end the way it did?
Let us also remember, in any buying and selling of stocks, one guy thinks the price will go up, the other that it will go down. So 50% are always making a mistake right there.
How can you possibly assume that most people know what's what about economics? Especially given the total brainwashing they are constantly fed [excuse the pun].
That's one problem, the assumption that people are not stupid. Remember, by definition, half the the world has below average IQ.
The other problem is the unpredictability of the future. Who in 1491, besides a few Indians, knew there were THREE UNDISCOVERED CONTINENTS out there. Who knew the Greeks would defeat the Persians at Marathon? Who knew in 1988 that the Soviet Union was a year away from collapse? Who knew flying was possible? And on and on, constantly.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
Neoclassical:We expect learning to be part of the self-correction in the market
The Greenspan puts stop those who learn from winning... in the market. The Austrians all knew that there had to be some long term investment projects that the market can't see to completion. But we can't short them if the government's going to bail them out.
[edit: Thanks. You're interesting. Please stick around and don't be turned off by the hubris of some members. You are very welcome here]
chloe732:The entrepreneurs during the artificial credit expansion are not stupid. They are not foolish. The folks they are selling to are not foolish. Nobody is foolish. Whether or not someone is foolish is not the crux of the theory.
Neoclassical:According to the ABCT, they are! Why would so many investors make decisions that lead to economic disaster and liquidation?
chloe732:When I read critiques of ABCT, I almost always sense that the critic does not understand (or ignores / refutes) capital theory and the structure of production
@Neoclassical...Capital theory? Structure of production? Time preference? Pool of real savings? Distorted signals? You ignore the affect government intervention has on these things. Instead you ask why market participants don't see through the distortions to prevent disaster, and make this the basis of refuting the theory.
Answers have already been provided.
Neoclassical:What I like most: there's absolutely no sign that any of you are even remotely familiar with neoclassical economics.
You're wrong about that. Many members of this forum are very familiar with neoclassical economics. Some of those members have participated in this thread (I do not include myself in that category as I am a mere layman).
Neoclassical:Question your dogma much?
Do you?
"The market is a process." - Ludwig von Mises, as related by Israel Kirzner. "Capital formation is a beautiful thing" - Chloe732.
Please stick around and don't be turned off by the hubris of some members. You are very welcome here
He's welcome when he does some work rather than just trolling on and on.
When someone comes in here with a cavalier stance, knows next to nothing about Austrian economics yet makes bold claims regarding it and acts in a manner that is suspiciously trollish, a degree of "hubris" is meritted. Perhaps he should instead hope we're not turned off by his own attitude, that is if he's not here to troll. This sort of strictly one-sided White Knight-ing is a nuissance; it merely feeds the ego of people engaged in puerile behaviour, and in this case it's like you've jumped in this thread blindly, oblivious of the sheer amount of wilful ignorance he's commiting himself towards. "Interesting" is an odd word for it.
Rational expectations theory leads to the conclusion that no deterministic business cycle can persist because it would consistently create arbitrage opportunities. Get that? There would be profitable opportunities that correct the market! "I've always questioned whether there is such a thing, really, as a business cycle." -- Milton Friedman, echoing a quote I had from Eugene Fama earlier.
Rational expectations theory leads to the conclusion that no deterministic business cycle can persist because it would consistently create arbitrage opportunities. Get that? There would be profitable opportunities that correct the market!
"I've always questioned whether there is such a thing, really, as a business cycle." -- Milton Friedman, echoing a quote I had from Eugene Fama earlier.
So much the worse for RE then. It seems to be a dogma of your own. It seems like you're ignoring the fact that the signals that allow one to determine the level of productive savings are thwarted constantly. You've not answered what alternatives to it there are.
Freedom of markets is positively correlated with the degree of evolution in any society...
Jon Irenicus:When someone comes in here with a cavalier stance, knows next to nothing about Austrian economics yet makes bold claims regarding it and acts in a manner that is suspiciously trollish, a degree of "hubris" is meritted.
Behaving inconsistently with the approach and spirit of LvMI is never merited.
Jon Irenicus:This sort of strictly one-sided White Knight-ing is a nuissance; it merely feeds the ego of people engaged in puerile behaviour
I agree. Sieben's detractors are indeed feeding their egos by engaging in puerile behaviour.
IT IS the role of senior members of LvMI to be white knights. That change is what has brought about fantastic improvement in the community this year.
edit: Thanks. You're interesting. Please stick around and don't be turned off by the hubris of some members. You are very welcome here
Well said.
No it is not their role. Their role is merely to enforce the rules of the community and that goes particularly for moderators like you. Neoclassical has been treated with considerable patience considering his habit of ignoring responses and then merely rehashing the same arguments over and over. If you've any further problems take them up in the moderation forum.
I just want to be loved.
"I'm not a fan of Murray Rothbard." -- David D. Friedman
Jon Irenicus:Perhaps he should instead hope we're not turned off by his own attitude, that is if he's not here to troll. This sort of strictly one-sided White Knight-ing is a nuissance; it merely feeds the ego of people engaged in puerile behaviour, and in this case it's like you've jumped in this thread blindly, oblivious of the sheer amount of wilful ignorance he's commiting himself towards
Jon Irenicus:"Interesting" is an odd word for it.
Once again, Smiling Dave, I am not claiming that market participants have perfect forecasting. I am simply saying that all information publicly available is eventually acted upon by self-interested persons seeking profitable opportunities, thereby correcting markets. There can be no systematic mistakes that are repeated over and over again, such as being ignorant of government interference as explained by the ABCT.
C'mon, people! The superneutrality of money! That's all I'm saying!
Neoclassical, could you please address my post? Did you look at the Block article that was linked?
Neoclassical: Once again, Smiling Dave, I am not claiming that market participants have perfect forecasting. I am simply saying that all information publicly available is eventually acted upon by self-interested persons seeking profitable opportunities, thereby correcting markets. There can be no systematic mistakes that are repeated over and over again, such as being ignorant of government interference as explained by the ABCT.
Sieben, on the article, I strongly agree with Wagner (and not just because he is on of my favorite composers). A cycle theory that depends on the inability of people to distinguish, in the aggregate, between an increase in personal saving and an increase in central bank holdings of government debt must rightfully be dismissed on the grounds that it fails to incorporate any reasonable requirement of individual rationality in economic action. The aggregate data are widely and readily available. Austrian cycle theory is animated by a clustering of entrepreneurial error, and in the canonical statements that error would seem to reside in the inability of entrepreneurs to distinguish an increase in saving from an increase in central bank holdings of government debt.
Entrepreneurs, as all libertarians I expect to believe, are especially skilled at their specialty; hoever, Austrians believe they systematically--on a widespread level--make the same mistake, repeatedly, covering decades of time even since the ABCT was first articulated.
Let me say this differently: if there were an investment strategy that gave above-market returns, what would happen? More peoplpe would start using it. That information would then, obviously, correct the market. The same holds true for errors.
yessir:Hey, what is your BCT? yessir! I've been waiting and waiting for someone to muster up enough curiosity to ask me! Real business cycle theory is the one I entertain most. But a statement by economist John Cochrane hits my thinking more clearly, I think most people mean by a “bubble” just, “Prices were high and I wish I sold yesterday.” The efficient markets (hypothesis) never told you that wasn’t going to happen. What efficient markets says is that prices today contain the available information about the future. Why? Because there’s competition. If you think it’s going to go up tomorrow, you can put your money where your mouth is, and your doing it sends (the price) up today. Efficient markets are not clairvoyant markets. People say, “nobody foresaw saw the market crash.” Well, that’s exactly what an efficient market is—it’s one in which nobody can tell you where it’s going to go. Efficient markets doesn’t say markets will never crash. It certainly doesn’t say markets are clairvoyant. It just says that, at that moment, there are just as many people saying its undervalued as overvalued. That certainly seems to be the case. Ok, now you know what “efficient markets” means. What is there about recent events that would lead you to say that markets are inefficient? The market crashed, to which I would say, we had the events last September in which the President gets on television and says the financial markets are near collapse. On what planet do markets not crash after that? "I'm not a fan of Murray Rothbard." -- David D. Friedman | Post Points: 50
Ok, now you know what “efficient markets” means. What is there about recent events that would lead you to say that markets are inefficient? The market crashed, to which I would say, we had the events last September in which the President gets on television and says the financial markets are near collapse. On what planet do markets not crash after that?
What was the real shock in 2007?
Neoclassical:A cycle theory that depends on the inability of people to distinguish, in the aggregate, between an increase in personal saving and an increase in central bank holdings of government debt must rightfully be dismissed on the grounds that it fails to incorporate any reasonable requirement of individual rationality in economic action
And I would argue that the status quo is consistent with the market improving over time. Previous inflationary measures by the fed pale in comparison to their current course of action. One interpretation of the status quo is that the market has gotten so good at fighting these inflationary bubbles that the fed has to take more and more drastic measures each time to get the results they want.
Then there was also my point about Greenspan Puts that make otherwise unprofitable investments profitable... so you can't short these overinflated markets if the government won't let them fail. This is not explicilty part of ABCT but it explains why the current market couldn't use the knowledge of Austrian Economics to correct the bubble.
Of course the root of the problem is *still* interest rates. How the bubble gets corrected is up to the market.
You're not really criticizing ABCT in itself then are you. You just think that its unlikely for ABCT to continue indefinitely on the market, which makes the Austrian kneejerk responce to blame interest rates null (eventually). So then would you agree with a formulation of ABCT that said artificial manipulation of interest rates causes *problems*, which may or may not result in a bust? I think this would actually be more consistent with Austrianism, since we let go of our vague claim to some future bust. Conceivably the bust could be averted by some actions taken by entrepreneurs but the market fundementals are still problemmatic.
"all information publicly available is eventually acted upon by self-interested persons seeking profitable opportunities, thereby correcting markets."
Well, that's a big retreat from the rational expectations stuff you were quoting in earlier posts. So we are getting closer.
But even to this latest seemingly modest assertion I have to ask "Huh?"
First of all, Austriam economics is publicly available, and nobody acts on it. Put another way, there are various economic schools right now as we speak, with large followings, that reach totally different conclusions. So that lareg chunks of mankind have the info, but misinterpret it, and thus won't correct the market.
Not to mention for most of the twentieth century, when the world was evenly divided between Marxists and capitalists, each side having the same info, and each side thinking his way will bring maximum profits. But one of them must be wrong, since they belive opposite things, and thus won't correct the markets.
As another more recent example: The European nations at the last G-20 meeting beleived they will be best served by cutting govt spending, and yet Obama thought the opposite. Somebody has it wrong, despite having all the publicly available info.
Yet another example. As we speak, many people insist we are headed for intense deflation [due to credit contaction], others equally certain we are headed for very high inflation [due to money printing]. Naturally, they advise people to do opposite things. One says dump the dollar, the other says dump everything else and buy dollars.
"There can be no systematic mistakes that are repeated over and over again, such as being ignorant of government interference as explained by the ABCT."
I gave a systematic mistake made in huge numbers over the course of close to a hundred years. That mistake is either Marxism or Capitaslism. Whichever it is, hundreds of millions made that mistake, and still do.
As for the superneutrality of money which you mentioned in another post, what evidence have you to offer for it? Wikipedia says there is none.
Neo-classical, I'll ask the billion dollar question. How much AE have you read? I mean things written about AE by AE economists, not Chicago economists. I suspect there is nobody that does not know neo-classical posting on neo-classical community boards.
"People say, “nobody foresaw saw the market crash.” Well, that’s exactly what an efficient market is—it’s one in which nobody can tell you where it’s going to go."
Plenty of Austrians saw the Crash of 1929 coming, and this one as well. Look up 'Peter Schiff was right" on Google. He explained very clearly, before any Presidents said anything bad about financial markets, exactly what would happen, and why.
It occured to me that perhaps you should google "site:mises.org mises business cycle" and read the many articles addressing your very objection, that surely the suckers will wise up.
BTW, how did you come to believe what you believe?
Neoclassical:Real business cycle theory is the one I entertain most. But a statement by economist John Cochrane hits my thinking more clearly,
Here is John Cochran (different guy, similar name) on the subject of real business cycles.
Austrian Business Cycles, Plucking Models, and Real Business Cycles
Ignoring the flame/ego of a poster feeds it? Even if it increases, why do I care if I'm ignoring it anyway?
No, defences of his behaviour as against the "hubris" of others, when he deliberately refuses to address points raised against him. That is what I mean.
Neoclassical:hoever, Austrians believe they systematically--on a widespread level--make the same mistake, repeatedly, covering decades of time even since the ABCT was first articulated.
1) What Austrians believe this? You are not articulating ABCT.
2) When will you address the affect central bank policy has on the time structure of production? (see above posts, many of them)
3) When will you accept Grayson's challenge for a debate on methodological dualism? (different thread, but I think it would clarify things)
all information publicly available is eventually acted upon by self-interested persons seeking profitable opportunities, thereby correcting markets.
I do wonder what this means. Is it based on the definition of an EM as one where all publicly known information is accurately reflected in prices?
Smiling Dave:"all information publicly available is eventually acted upon by self-interested persons seeking profitable opportunities, thereby correcting markets." Well, that's a big retreat from the rational expectations stuff you were quoting in earlier posts. So we are getting closer.
It's not a retreat! It's exactly what I've been saying this whole time. This is my problem: no one even gets what I'm saying!
People will give you different forecasts, that's for sure. Ever watch Mad Money? It's insanity. The point is mistakes will be random, at best.
chloe731, I accepted the challenge roughly 2 hours before you wrote that.
Jon Irenicus:I do wonder what this means. Is it based on the definition of an EM as one where all publicly known information is accurately reflected in prices?
Yes. That information, once again, isn't clairvoyant; but, if you believe you have information that will generate profits, then there is an incentive to act upon it, right?
Really, efficient-markets hypothesis seems to be a reformulation of Hayek's assertion that prices can be trusted as more reasonable than anything an individual or committee can centrally plan.
I've seen Peter Schiff on YouTube, including his Google Authors appearance.
To quote Eugene Fama once again, I think most bubbles are twenty-twenty hindsight. Now after the fact you always find people who said before the fact that prices are too high. People are always saying that prices are too high. When they turn out to be right, we anoint them. When they turn out to be wrong, we ignore them. They are typically right and wrong about half the time.
Neoclassical:chloe731, I accepted the challenge roughly 2 hours before you wrote that.
Excellent!
Looking forward to following the debate. Should be educational for all of us. The subject matter is the foundational difference between the mainstream and Austrian approach to economics.
You might want to watch this as part of your preparation Praxeology: The Austrian Method - H. Hoppe
Caley McKibbin:How much AE have you read?
Well, I have two editions of Mises's Human Action! (One from Liberty Fund, and The Scholar's Edition from LvMI.)
Here's a copy-and-paste just from my LvMI account (I order much more from Amazon, such as Hoppe's Economic Science and the Austrian Method):
I used to believe the ABCT, so let's not mince words about my ignorance on the subject. In fact, I remember Thomas E. Woods (I think it was him) recently talking about how Austrian economics was posed for even greater popularity; why? Because it's so easy to understand!
Ultimately, I haven't disputed that lowered interest rates create more credit and more investments. This is essentially the ABCT; I won't get into Menger's differentation of goods. I disagree with your Keynesian twist: "animal spirits" overtake investors leading to irrationally optimistic "malinvestments" in particular sectors.
I'm getting mixed messages here.
1. On the one hand you say that people know what they are doing and will use the info at their disposal to make a profit.
2. On the other hand, people succeed pretty much randomly at this. They get things right about half the time.
What gives?
Also, let's not forget that if we accept assumption 2, then in the long run nobody will make any money in business, because half their decisions will be wrong.
Could you provide any links to research and evidence that 1. and 2. are true? Of course, we both know that appeals to authority don't count, right? By which I mean just because Eugene Fama "thinks" something, that doesn't count at all.
Neoclassical, it's indeed true that RE says that all info will be taken into account (efficient market hypothesis).
In a sense this attitude of "people will interpret info available to them" comes close(r) to the subjectivism of AE. (Although AE does not claim all changes in preference come from outside info per se, or at least does not need this assumption.)
What RE fails to see, however, is how markets are manipulated by agents who can socialize their losses: government, corporatists, socialists. It is because AE has an holistic, praxeological methodology that it can predict the crises, or at least tell where bubbles are most likely occuring. I'm looking forward to your debate on neoclassical methodology.
In a voluntary world, I'd buy index funds. In todays world, AE is the only school of economics that will save you from ruin.
If we believe Hayek that none of us know what a price ought to be apart from what market processes determine, then how can you know when a bubble has emerged?
To clarify, I don't know how much a loaf of bread should cost; I bet, on average, more people will complain "that costs too much" than "that costs too little," though, regardless of the product.
Likewise, I don't believe I have the omniscience to know when housing prices are "too high." Although, I will say that government subsidies distort demand, and thus price.
I disagree with your Keynesian twist: "animal spirits" overtake investors leading to irrationally optimistic "malinvestments" in particular sectors.
I think that states my position very well. Not everyone here agrees with it. I just want to make sure one qualification is clearly understood: The animal spirits start frisking about only after there is a flood of cheap money.
Consultant:In a voluntary world, I'd buy index funds. In todays world, AE is the only school of economics that will save you from ruin.
You can still buy index funds!
But, I guess, you're recommending commodities such as gold?