I have a friend who doesn't have the knowledge yet to answer this guy and I can't really check it over for another few hours, although I'm sure it's full of fallacies, false dichotomies and unsupported assertions - I find that non-Austrians are generally devoid of the ability to think logically or, as Herbert Dingle once said:
. . . I am not yet convinced that facility in performing mathematical operations must inevitably deprive its possessor of the power of elementary reasoning, though the evidence against me is strong. – Herbert Dingle
http://econfaculty.gmu.edu/bcaplan/whyaust.htm
Anyone want to rip this guy a new one?
http://mises.org/Community/forums/p/19689/364989.aspx#364989
http://mises.org/Community/forums/p/3841/52586.aspx
/thread
My Blog: http://www.anarchico.net/
Production is 'anarchistic' - Ludwig von Mises
shadeclan:I can't really check it over for another few hours, although I'm sure it's full of fallacies, false dichotomies and unsupported assertions
You're sure it's wrong, even though you haven't read it? You're sure it's "full of fallacies, false dichotomies and unsupported assertions"?
So, you've just made a string of assertions without any support. Yet, you insult another person as presenting arguments "full of ... unsupported assertions." Very wacky.
Bryan Caplan is a first-rate thinker.
"I'm not a fan of Murray Rothbard." -- David D. Friedman
I insult the guy based on the premise of the article. I did get a chance to skim it and one of the assertions he makes is that many of the assumptions of Austrian Economics is false. How can I take someone seriously who asserts garbage like that? First-rate thinker? I doubt it.
Looks like this was discussed. I'm sure both my friend and I will read them - thanks.
@shadeclan
just to be clear though, do not dismiss economists because they aren't Austrian Economists... you can learn a lot from non-austrian economists. David Friedman, an influence of mine, as well to some others on here, is an awesome economists and he is a neoclassical
shadeclan:I insult the guy based on the premise of the article. I did get a chance to skin it and one of the assertions he makes is that many of the assumptions of Austrian Economics is false. How can I take someone seriously who asserts garbage like that?
The premise of the article is a critique of Austrian Economics. If you are going to dismiss critiques out of hand for no reason better than because they are critiques then you should just move on, IMO. Austrian Economics doesn't need any more cheerleaders.
Bryan Caplan's 'why I'm not an austrian Economist' should better be termed 'why I'm an austrian economist, but why I differ on a few minor quibbles'.
The state is not the enemy. The idea of the state is.
You're sure it's wrong, even though you haven't read it? You're sure it's "full of fallacies, false dichotomies and unsupported assertions"? So, you've just made a string of assertions without any support. Yet, you insult another person as presenting arguments "full of ... unsupported assertions." Very wacky.
Here's a paper by an eminent mathematician proving that 2+2=17. What's that? You're sure it's wrong, even though you haven't read it? How very wacky.
Or not.
paul: You're sure it's wrong, even though you haven't read it? You're sure it's "full of fallacies, false dichotomies and unsupported assertions"? So, you've just made a string of assertions without any support. Yet, you insult another person as presenting arguments "full of ... unsupported assertions." Very wacky. Here's a paper by an eminent mathematician proving that 2+2=17. What's that? You're sure it's wrong, even though you haven't read it? How very wacky. Or not.
Are you saying that every claim made against Austrians are as self evidently wrong as 2+2=17?
they said we would have an unfair fun advantage
Bob Murphy wrote that Caplan's first claim, that mainstream economics does NOT assign numeric values to utils [to those who understand math], is totally correct. He points out the ridiculous mathematical error of some of Caplan's critics on this point.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
I'm not sure if he talked about this, but while certain Neoclassicals may say that they don't utilize cardinal utility (and all rankings in their utility functions are ordinal), they still utilize the tangency condition (MUa/Pa=MUb/Pb) in order to acheive the "optimal basket" on an indifference curve given a budget constraint, which consequently translates to the points on their demand curve. They may say that they don't use cardinal utility, but in reality they still use cardinal utility in their price formation.
Bryan Caplan's other claim that Rothbard extracted backwards bending supply curves from neoclassical metholdolgy without deriving them from his own value scale theorems is also unwarranted. A backwards bending supply curve, just like a Veblen good, is simply a connecting of the dots of a shifting supply/demand curve. The individual is not moving along a given value scale (a demand/supply curve) but rather changing in his ranking of goods (his ranking of leisure rises while ranking of money falls).
The error of saying a backwards bending supply curve of labor represents a single supply curve can also be revealed through a similiar so called "backwards bending supply curve" of cake. Rothbard mentions in his Chapter on Money that even though a supply curve may be "backwards", at each price an individual will still earn more money at the lower quantity supplied than at a lower price with greater quantity supplied. The individual realizes that at a lower quantity supplied of labor, he can earn more money at the higher price and enjoy leisure. This would be analgous to a seller of cake that at a higher price, decides to sell less total cake because he can earn more revenue from the smaller amount of cake sold and enjoy some of his cake as a consumer good. But it is much clearer from this depiction of the backwards supply curve that this is a change in the cake owners value scale.
Austrian economics doesn't need any more cheerleaders ... because everyone is an Austrian Economist? Considering the current lack of Austrian economists in positions of influence and in academia, I'd say that Austrian Economics needs more cheerleaders - a lot more!
2 + 2 = 17
Thanks, Paul. That was the point I was going to make.
mikachusetts,
I'd say that no, assertions made against Austrian Economics are not necessarily incorrect. AE is certainly not the last word on Economics and there are many more praxeological discoveries to be made. However, given the success of our current understanding of AE, coupled with the fact that Mr. Caplan made the sweeping statement that several of the most important AE assumptions are incorrect [or overstated] would lead me to conclude that the guy must be from some dimention where the usual laws of logic do not apply.
Of course, it could be stated that AE is correct in the same way as Aristotle's Crystal Spheres [almost] correctly predict the movements of the planets. However, we are comparing the predictive power of AE against that of an economic theory from which predictions are rarely correct. Until some genius comes along with another theory which is more correct than AE, this is what we are stuck with.
Read the damn article.
There is a difference between cheerleading and advocacy. Promoting people to study austrian economics is advocacy. Saying this like "non-Austrians are generally devoid of the ability to think logically" is cheerleading.
However, we are comparing the predictive power of AE against that of an economic theory from which predictions are rarely correct. Until some genius comes along with another theory which is more correct than AE, this is what we are stuck with.
I have an issue with this attitude, especially in light of how you're treating Caplan's criticisms. If this is about predictive power (as you claim) how often are Brian Caplan or other GMU economists incorrect with predictions generally? Do you have any notion at all that can be substantiated? (I certainly don't). More importantly, this is not about predicting anything. This is about methodology and epistemology. When you say things like "another theory which is more correct than AE" it means that you are either tentative about the fundamental axioms of praxeology, or doubt the process of logic which deduced economic laws from those axoims. If you have enough doubt in these foundations that you have to base your support of AE purely on its predictive power, then anything that you have to say about it really is just cheerleading.
"just to be clear though, do not dismiss economists because they aren't Austrian Economists..."
I agree to this. I learned a lot more by reading Keynes and Marx about Austrian Economics than just reading the Austrians. Not that I agree with Keynes and Marx, but understanding their points (and logical flaws) helped me to understand AE to a fuller degree.
From another point of view, reading non-Austrians like Ostrom presented arguments in a different light that are very Austrian friendly.
Black Numero,
The article is here: https://mises.org/journals/scholar/murphy.PDF
To set up the background, this is Caplan speaking:
As if to emphasize the strength of his disagreement with the mainstream approach to utility, Rothbard goes on to dismiss the standard intermediate micro theorem "that in equilibrium the ratio of the marginal utilities of the various goods equals the ratio of their prices. Without entering in detail into the manner by which these writers arrive at this conclusion, we can see its absurdity clearly, since utilities are not quantities and therefore cannot be divided."[6]
He continues:
What about the theorem - that Rothbard dismissed - which claims that utility-maximizing individuals equalize the marginal utilities of goods consumed divided by their prices? Doesn't this show that neoclassicals believe in cardinal utility? No, it does not; statements made in technical jargon often sound absurd if you forget the underlying definitions. A utility function just uses numbers to summarize ordinal rankings; it doesn't commit us to belief in cardinal utility. Deriving the marginal utility of individual goods from this function commits us to nothing extra.[10]
Now Murphy goes into nice detail everywhere but here, where he merely says:
The neoclassical equilibrium condition, which Hülsmann (following Rothbard) criticizes as fallacious, could be derived entirely from the ordinal preferences of the model’s agents. The introduction of utility functions is just a technical convenience which allows the use of differential calculus in order to render the analysis more tractable.
Would that someone would elaborate on this.
Here is a comment of mine on Caplan's argument of rational expectations versus austrian business cycle theory.
"First-rate thinker? I doubt it."
I'm an Austrian by methodology, but I agree with StrangeLoop here. Bryan Caplan is a very good economist. Neoclassical and Austrian economics can very often come to very similar conclusions, and sometimes for similar reasons.
I'm not sure what you mean by this. Don't know if its a typo.
Again, Murphy has restated Caplan's assertions that if U(a)=5 while U(b)=10, all it means is that B is preferred to A, not by a certain amount of "utils". Even though there are arguments to be had againist the use of utility functions (as other Austrians have pointed out), and whether or not Neoclassicals support the use of cardinal utility is besides the point. It doesn't matter if Neoclassicals support the use of cardinal utility, what matters is if their models depend on the use of cardinal utility in order to be correct. If, in the Neoclassical tradition, a point on an individual's demand curve is really the "Tangency condition" of the agent's budget constraint (where the slope of the two prices-the budget constraint- and the slope of the individual's utility function are equal), then say what you will about the utility functions, or this assertion being ordinal, but that statement itself requires cardinality. You can never have the utility of an additonal apple equal the utility of an additional orange because ordinal rankings per se must be ordinal (rankings cannot be divided) and this supposed indifference can never be expressed in action.
As far as I'm aware, I have yet to see a Neoclassical take the supposed ordinality of their functions and verbally demonstrate the tangency condition and subsequently their price formation.
This is from my own understanding of Neoclassical price formation from my intermediate micro class. Any errors above are entirely my own.
No. All I'm saying is that the idea that "being sure that a thing is wrong when you haven't read it is wacky" is incorrect.
(Not every claim made against Austrians necessarily falls into the category of things known a priori to be wrong, but some do)
Yeah, Caplan is as Austrian as Hayek; he's just not a Misesian or Wittgenstenian Austrian.
I do think he's wrong on a few points, but it doesn't matter enough to argue with him.
Also, he is practically identical to my friend's brother; right down to the voice and snorty laugh.
Here is part 1 of 13 of a debate with Boettke, the rest are all on Youtube:
http://www.youtube.com/watch?v=DPm5wDjaOSk
Yeah, Caplan is as Austrian as Hayek
Absolutely not. Caplan cannot be considered an Austrian economist in anyway whatever. He rejects Austrian price, capital, and business cycle theory (Hayek, on the other hand, was instrumental in the development of Austrian capital and Business cycle analysis). Additionally, he basically rejects the more nuanced points of the calculation and coordination arguments, and ignores decision making under uncertainty (focuses on calculable risk/the Bayesian approach, where novelty is wholly excluded, and where learning merely means adjusting the various probability distributions of all known possible outcomes).
It would be nice if you first familiarized yourself with Hayek's work before you entirely dismiss him. His method may vary from Mises', though that's debatable, but he is, without question, an Austrian economist. Some would argue that he is the most important Austrian economist, but that's another matter altogether.
"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion."
Prices and Production was good, his book on capital was confused, his political and philosophic stuff is crap.
1. Yep, that's exactly what's bothering me, Black Numero.
I would like to see how one can derive that equilibribrium condition without calculus. Murphy says it's possible. Anyone here know how to do it? ANd of course, lay it out for us? Or, on the other hand, anyone know how to prove that it's impossible?
2. On a related note, I read Barret's critique of the use of utility functions, and I think he missed the boat.
And Herbener's response to Bob Murphy also missed the boat.
IMHO, of course.
3. My thinking about utility functions not being cardinal is based on the following bit of math. There is a concept of an equivalence relation and the resulting equivalence class, commonly used in theoretical math. For example, in some constructions of the real numbers they are defined as equivalence classes of Cauchy sequences. [For that matter, fractions are defined as equivalence classes, too. How else could the ordered pair 4/1 equal the ordered pair 8/2]. I think what the neoclassicals are trying to say is that their util functions are not the objects of study, but equivalence classes of such functions.
I'm not sure if this helps at all with point 1. of this post, but it's usefull nonetheless.
1. Yep, that's exactly what's bothering me, Black Numero. I would like to see how one can derive that equilibribrium condition without calculus. Murphy says it's possible. Anyone here know how to do it? ANd of course, lay it out for us? Or, on the other hand, anyone know how to prove that it's impossible?
Yeah, thats where I always draw the line. Caplan can certainly make the argument that utility functions only describe ordinal relationships, but being able to use these ordinal utility functions to derive optimal baskets (tangency conditions) at "given prices" which are then used to develop a demand curve thats supposed to explain this "given price" (another valid critique is that their model runs on circularity) seems impossible.It doesn't really matter if the functions are "supposed" to explain only ordinal relationships, if they rely on cardinality than they must be rejected. If it can be done, I'd to see it (not saying this in a mocking tone, I truly want to see if its possible and one can trace out the theorem in verbal logic).
I find Caplan's contentions to be relatively insignificant. I don't see how the issue of indifference is a big deal, for one; it may involve a widening of one's concept of action or preference, but this does not take away from the general principles of praxeology.
He also expresses doubts about the impossibility of socialism, saying it would perhaps be less efficient but not totally impossible. Still, over long periods of time, without the necessary price mechanism, even Caplan may find it difficult to believe that socialism is merely inefficient.
His presence in mises.org is most welcome, as there are no fundamental differences in terms of belief in free markets and liberty in general.
The equiibrium condition doesn't need calculus or utility, cardinal or otherwise. Calculus is an assumption that's tagged on to make the analysis more tractable, as the neoclassicals put it, but it is not essential.
This is how the neoclassical economist proceeds:
I can certainly ask myself whether I prefer bundle a to bundle b, vice versa, or neither (called indifference). My preference relation summarizes this information for all bundles. Now, take two bundles which the preference relation ranks the same (i.e. two bundles for which I am indifferent), and say these bundles are
(100 beers, 4 shirts) and (80 beers, 5 shirts)
This means that I'd be indifferent to an exchange of 20 beers for 1 shirt. This is precisely my MRS, and it can be calculated for all bundles which my preference relation ranks the same. With continuity, this is just the ratio of the partial derivatives of the utility function (for tiny changes).
--
So their system is internally consistent. I think the best way to best explain this is: the preference relation (as the neoclassicals conceive of it) has two important properties. One is an ordinal property, how it ranks bundles. Another is a cardinal property, its MRS along levels sets of the preference relation. The utility representation preserves both of these important properties. But being a function, it also has several other (ordinal and cardinal) properties itself. But these are irrelevant; the only properties which have any economic meaning are the ones just described.
Of course, at that point Austrians could critique the neoclassical economist on their conception of preferences. But from within their system, there is no logical problem.