" And the reason why I made that conversion is important. Libertarian insights in a lot of ways are basic, Econ 101 insights about the efficiency of free contracting writ large and converted into norms or political values. In other words, I think one of the most essential libertarian fallacies is building a politico-ethical system around positive social science findings (and, I want to stress, basic and introductory social science findings at that). It's kind of an odd way of going about formulating a politico-ethical system. We don't adopt Nietzschean super-man ethics because of evolutionary biology, and we shouldn't simply adopt libertarianism because of these insights. I want to be clear - my point is not that you have to mix up normative and positive findings to come to libertarianism. My point is only that it's possible to get everything there is to get out of libertarianism simply by improving people's knowledge of social science. This is only to say that it's not entirely clear to me what should be important here: teaching people more social science, or sharing libertarianism. But even that isn't entirely satisfying - after all, the reason why I abandoned libertarianism was because I kept learning social science. Yes, the market is efficient and the price mechanism leverages decentralized knowledge. But if institutions don't or can't internalize costs and benefits social scientific insights start to militate against the efficiency of markets. Uncertainty and imperfections ensure that market forces, as fantastic as they are, are going to remain sub-optimal. I haven't abandoned any of the introductory insights in adopting these views - the complement the introductory insights that I still use. I still have a relatively contractarian view of human relations. I still take a fairly atomized, individualist view of things. I still come down on Hayek and Mises's side of the socialist calculation debate. But I can't call myself a libertarian. So, if what we really want is to get people to take the implications of social science more seriously, then its not clear that that would move people towards libertarianism either." -Daniel Kuehn
I think this is an interesting insight, though I find issue with it for this reason: Did Rothbard not "keep learning social science"? What about Walter Block, or other career Austro/Libertarians? Is there an implication that in order to maintain Libertarianism, we must stop at elementary observations? I'm sure DK can clarify if he wishes, and I hope he does. Anyway, thoughts?
I take his passage to mean only that various factors like externalities/transactions costs/sticky prices lead to market outcomes that could be "improved upon" (as measured by some normative criteria) through other institutions.
Improved upon by whom? You need to make your position explicit.
"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."
It looks the discussion can be divided into DK's statement in the OP (and what it actually means) and what Hayek's arguments truly imply for government intervention. So let me address both parts of the discussion seperately.
#1. DK's Statement in the OP (and what it actually means)
By the way, my argument has nothing to do with "a set of normative beliefs". My argument is only about whether an economist can really say what is most optimal, or where optimality is -- I am arguing that an economist can't. Hayek would agree. I'm not misreading Kuehn, you're just missing my point. You still have failed to explain your point regarding this, or what that matters. That efficiency is subjective is precisely why Mises (and probably Hayek) supported free markets.
By the way, my argument has nothing to do with "a set of normative beliefs". My argument is only about whether an economist can really say what is most optimal, or where optimality is -- I am arguing that an economist can't. Hayek would agree. I'm not misreading Kuehn, you're just missing my point.
You still have failed to explain your point regarding this, or what that matters. That efficiency is subjective is precisely why Mises (and probably Hayek) supported free markets.
First, when I was talking about normative beliefs, I was explicitly referring to the fact that when you are evaluating a market outcome as being optimal or non-optimal (or more efficient or less efficient), you are having to make value judgements. This is why welfare economics (the branch of economics that tries to answer what exactly we mean when we use these terms) is inherently normative:
http://en.wikipedia.org/wiki/Welfare_economics
Second, when I am talking about efficiency, I am using the mainstream economic definition. That is to say, when you talk about gains in economic efficiency, you are a person "outside the market" looking at market outcomes and talking about improvements along some sort of normative standard. An example would be Kaldor-Hick efficiency:
http://en.wikipedia.org/wiki/Kaldor-Hicks_efficiency
The reason I keep bringing up this point the is that it seems very odd you have no problem saying this or that is more efficienct (applying a normative criteria to market outcomes given available information), but blow a gasket when DK says a market outcome is sub-optimal. Indeed, based on that single term you assume that DK must be referring to a notion of optimality that can only be defined in terms of a static equilibrium. If that is what DK meant I think you would have a point. But I have never read anything by DK that would suggest he believes such an antiquated notion. Certainly not in the OP. I think you may be reading way too much into that single term.
#2. What Hayek's arguments imply for government's role in resource allocation.
If Hayek was completely consistent with the conclusions he draws in "Economics and Knowledge" and "The Use of Knowledge in Society", he would disagree with most of what Daniel Kuehn is trying to argue. Anyways, in order to make a market outcome more optimal you need to have an idea of what you think optimal is, because when you plan something through government the outcome is no longer spontaneous. The market doesn't have a specific point to meet; the government does. Deciding where this point is still suffers from the Hayekian knowledge problem, since you still don't hold the vast swaths of subjective knowledge necessary to centrally plan.
If Hayek was completely consistent with the conclusions he draws in "Economics and Knowledge" and "The Use of Knowledge in Society", he would disagree with most of what Daniel Kuehn is trying to argue.
Anyways, in order to make a market outcome more optimal you need to have an idea of what you think optimal is, because when you plan something through government the outcome is no longer spontaneous. The market doesn't have a specific point to meet; the government does. Deciding where this point is still suffers from the Hayekian knowledge problem, since you still don't hold the vast swaths of subjective knowledge necessary to centrally plan.
I disagree, both with your reading of Hayek and your (I would say) narrow definition of what governments actually do. Believe it or not, there are more ways the government can work to improve upon market outcomes besides the old-school socialist central planning Hayek argued against in the 1930s. And Hayek on more than one occasion supported those alternatives. I am specifically thinking about Hayek's preference for common law (which is developed through an evolutionary process) over statute law (wich is not).
Think about it this way. Under property rules, rights to the use of this or that good are allocated through market transactions. And for the most part that usually works really well. But there are some times when property rights are hard to define or transactions costs are high. Under those circumstances, there is no reason to believe that property rights will be allocated to their most valued use (see Ronald Coase for further details). We can either pretend those situations don't exist or pursue alternatives. Hayek chose to take these situations seriously. And one alternative to traditional property rules/markets that he wrote extensivedly about was the use of liability rules that are created through judicial decision (common law).
From your perspective, I would think this would seem like the worst of all possible worlds.
"A single man is asked to decide upon the allocation of resources whose values are determined subjectively and cannot be observed!? Where does he then get the information to make his ruling!? And don't you realize his decision will create precedents that will influence subsequent cases he will never hear!? There is no way he has the information to adequately take those consequences into account!"
But Hayek himself had much more faith in the system than that because he realized that even though a single person was making a decision with limited information there was an evolutionary feedback process at work that would eliminate liability rules that are inefficient. The process for how this actually happens was expanded upon later members of the Law and Economics movement like Paul Rubin and John Goodman.
http://www.jstor.org/pss/724189
http://www.jstor.org/pss/724222
So I personally believe that if Hayek was completely consistent with the conclusions he draws in "Economics and Knowledge" and "The Use of Knowledge in Society" AND the Constitution of Liberty, he would NOT disagree with most of what Daniel Kuehn is trying to argue (at least in principle).
Ambition is a dream with a V8 engine - Elvis Presley
I see what he's getting at although I don't agree. If anyone reads any sort of academic economic literature you'll see many examples of "coordination failure". I wouldn't accept all of this at face value but libertarians invoking market mechanisms as their argument should realize some of this stuff as legit and accept that some coordination failure is inherent in market economies. That said, I don't see how this invalidates libertarianism at all. What else can you expect from a highly decentralized exchange network with tacit, dispersed, asymmetric knowledge where the future is uncertain and constantly changing? DK thinks he can circumvent these market "failures" presumably by some governmental mechanism, all of which assumes its neutrality, and assumes that it possesses the necessary knowledge to bring about the more optimal solution (whatever that means).
But honesty forces me to admit that, yes, in some instances the government can theoretically help allocate resources better by incentivizing certain behaviors and activities. Of course, this is in an ideal world and when it comes to actually implementing these things, it (the government) will always bump up against intractable knowledge problems as well as public choice incentive problems. Even if however the government can--in real life--outperform the market in some particular instance, this position still ignores government non-neutrality, which accepts that intervention is not costless.
It seems to me most people (including even libertarians themselves, but especially "statists") severely underestimate how deep and pervasive the effects of government intervention are. DK is no different in that he thinks government is practically neutral. Of course, he won't admit this because he's probably ignorant of how much intervention he takes for granted.
Student,
You are still really missing the point, sorry! That I consider market outcomes "more optimal", "optimal", or whatever is, frankly speaking, completely irrelevant. My criticism is only of Kuehn's categorization of market outcomes as sub-optimal (of course, in specific cases -- he would never make that a general claim); but, this doesn't imply any opinion of mine regarding what the actual optimality of the given market outcome actually is. So, half of your response to me was a waste of time, because it doesn't actually apply to anything I wrote!
If you consider market outcomes as sub-optimal and then write that government can increase optimality, it must mean that you have an idea of what "optimal" is. When we're talking about optimality in economics we're talking about the optimal use of the existing pool of resources (producers' goods). In order to know what is more optimal than a market outcome you need to know the sum of subjective data -- data that we know is unavailable (this is Hayek's entire argument against central planning!).
Even in the case of high transaction costs, in order to see government spending as worthwhile you'd need to somehow figure out that the outcome with government is superior (by whatever standard) to the outcome of whatever coordination of resources would have occured without government -- and it's not just about that single transaction, but the effect of intervention on the coordination process, which affects the entire economy.
So I personally believe that if Hayek was completely consistent with the conclusions he draws...
No, I said consistent with his arguments, not with his conclusions.
Uh, take a look back at your original post, bro. I just did. And I faithfully copy and pasted (then spoofed) your quote word for word. And yes, you said "conclusions".
Anyways, the point I was making by spoofing your original quote was to point that your interpretation of Hayek's arguments would be greartly different if you incorporate the arguments he made regarding the advantages of common law over statute law. Specifically, I am arguing that Hayek was not being inconsistent in the application of his ideas, its just that your conception of government institutions is stuck in '30s style socialism. I REALLY recommend you check out Hayek's work on common law (specifically in the Constitution of Liberty).
In my previous post I noted that Hayek argued that common law is an evolutionary process that allows dynamically efficeint non-market allocations to be made (that is to say more efficient relative to a system of only property rules) WITHOUT a pre-determination of what outcome actually is optimal. So I am having trouble connecting your post to what I actually said. Please help me out.
I think you are actually missing my point. but there is really no need to beat a dead horse.
Student-
Have not libertarians argued for a common law system, except one much more efficient as it would be more market based?
He seems to be implying that there is a optimal level concerning market forces which can be found through the social sciences. A field where there is certainty and perfections. I would ask which social science he is discussing.
'Men do not change, they unmask themselves' - Germaine de Stael
Just another way of singing the old verse, "If only I was in charge things would be set right."
Othyem:But honesty forces me to admit that, yes, in some instances the government can theoretically help allocate resources better by incentivizing certain behaviors and activities.
Can honesty force you to objectively define better?
Emphasizing market failure - whilst de-emphasizing governmental failure. Emphasizing calibration and optimization - whilst de-emphasizing institutional and knowledge problems. It's just intellectually dishones framing device to conceal one's political preferenses. The further one travels into that particular rabbits hole, the harder it will be to gain back some common sense.
I agree with all that Jonathan has said in this topic, and, frankly, I find the whole "markets are sub-optimal" silliness to be somewhat bizarre, if not downright dangerous.
LibertyStudent:Can honesty force you to objectively define better?
That's always the underlying piece of critical information that doesn't get discussed. Funny, since it is both the most important piece and the piece that shatters any statements similar to Othyem's:
"In some instances government can theoretically help allocate resources better more in line with the desires of those running the government by incentivizing certain behaviors and activities."
I believe that to be asolutely true; no need to slip in a "theoretically" . Since government is often contrasted with markets, there's typically an extra implied statement as well:
"In some instances government can theoretically help allocate resources better more in line with the desires of those running the government and less in line with the expressed preferences of individuals by incentivizing certain behaviors and activities.
LS, Yes. Greater ex post utility. In other words what the transactors would have done had they had all the appropriate information. To deny this is for one to tacitly accept that he or she knows absolutely everything about the future, otherwise how else could one claim that an intervention necessarily leads to less satisfaction for the transactors? Markets maximize ex ante utility and that's all I'm willing to admit a priori.
I don't think I'm saying anything that's particularly controversial. My position is merely that *theoretically* in some idealized instances government can help bring people's plans in alignment to what--ex post--would bring them the most satisfaction, taking a gods-eye view. This is presumably Daniel's belief, although he would lay less stress on the theoretical part and claim it can do this often. In fact this is the orthodox economics position. Instead of dismissing this as wrong we should instead be emphasizing how such attempts to optimize are beset by impossible knowledge problems as well as public choice incentive problems. The market economizes on this, the government does not. It's mistaken to think by admitting the government can sometimes clumsily stumble onto an answer and "get it right" that I'm somehow giving the green light for interventionist policies.
Phaedros: Student- Have not libertarians argued for a common law system, except one much more efficient as it would be more market based? I think this is precisely the problem with most libertarians... they only inconsistently apply the core moral principle of liberalism - the abolition of all personal privilege beyond those privileges which are recognized by unprivileged law - and leave out the most important industries to which this principle must be applied, namely, law and security. These libertarians are minarchists and imagine that a Utopian world where just a little privilege in law and security is possible, ignoring the fact that law and security are precisely the industries which limit false claims of privilege. That is, these two industries are the primary means by which murder, theft, robbery, rape, assault and all the other implicit claims of exorbitant privilege are limited. By permitting these industries to be monopolized (privileged production), there is no longer any limit to the extent to which the privileged producer may aggrandize his claims of privilege in every industry, in all property, in all persons. This is the State. The solution to the root problem begins in morality - as long as people generally accept the moral legitimacy of privilege, there will be the State. From a reformation in moral principles could flow a reformation in law. Specifically, we could see the end of subsidized public prosecution, State immunity from prosecution and individual liability of all State actors for their decisions even as agents of the State. From this would flow an end to the State's monopoly on the use of legitimate force since the State could not legally justify its privileged status in this industry. And from this would flow an end to the State's ability to coercively collect revenues, that is, to tax. With the collapse of taxation, the entire State apparatus would collapse. Clayton - http://voluntaryistreader.wordpress.com | Post Points: 20
Othyem:LS, Yes. Greater ex post utility. In other words what the transactors would have done had they had all the appropriate information. To deny this is for one to tacitly accept that he or she knows absolutely everything about the future, otherwise how else could one claim that an intervention necessarily leads to less satisfaction for the transactors? Markets maximize ex ante utility and that's all I'm willing to admit a priori.
Do you have an argument that doesn't rest on a strawman or is this it?
Othyem:My position is merely that *theoretically* in some idealized instances government can help bring people's plans in alignment to what--ex post--would bring them the most satisfaction, taking a gods-eye view.
Who are people?
Othyem:It's mistaken to think by admitting the government can sometimes clumsily stumble onto an answer and "get it right" that I'm somehow giving the green light for interventionist policies.
It's mistaken for you guys to think that government is anything other than a mass delusion, but I am willing to play along with this fantasy for the sake of conversation every now and then.
Clayton, I think Frank Herbert said it best (paraphrased) that law is a proxy for morality and conscience. Moral people don't need laws.