http://bjps.oxfordjournals.org/cgi/reprint/XV/58/123.pdf (article claiming to weaken Mises's methodological claims)
http://www.cvoice.org/cv3cox.htm (article against calculation argument)
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1024311 (article purporting to discredit ABCT)
http://www.againstpolitics.com/austrian_economics/ (list of critiques - note that most of these have been responded to)
Thanks for this. Have any Austrian scholars responded to these in print? Would particularly like to see a response to the SSRN paper:
Some Capital-Theoretic Fallacies of Austrian Economics This article demonstrates certain doctrines of the Austrian school of economics are untenable. The focus is on certain aspects of capital theory undergirding Austrian Business Cycle theory. Other criticisms of Austrian Business Cycle Theory from Cambridge-Italian economists are briefly surveyed. This paper demonstrates an entrepreneur may simultaneously classify a capital good into several orders, as orders of goods are defined by Austrian economists. Hayekian triangles are defined. This paper demonstrates that the shape of a Hayekian triangle varies with the interest rate, even if real resources are not reallocated across stages of production. It is demonstrated, by means of an example, that no tendency need exist for entrepreneurs to respond to lower interest rates by reallocating resources from producing low order goods to producing higher order goods, or otherwise increasing the capital-intensity of the structure of production.
Some Capital-Theoretic Fallacies of Austrian Economics
This article demonstrates certain doctrines of the Austrian school of economics are untenable. The focus is on certain aspects of capital theory undergirding Austrian Business Cycle theory. Other criticisms of Austrian Business Cycle Theory from Cambridge-Italian economists are briefly surveyed. This paper demonstrates an entrepreneur may simultaneously classify a capital good into several orders, as orders of goods are defined by Austrian economists. Hayekian triangles are defined. This paper demonstrates that the shape of a Hayekian triangle varies with the interest rate, even if real resources are not reallocated across stages of production. It is demonstrated, by means of an example, that no tendency need exist for entrepreneurs to respond to lower interest rates by reallocating resources from producing low order goods to producing higher order goods, or otherwise increasing the capital-intensity of the structure of production.
The other also look like well-researched criticism of the Austrian School:
The “Economic Calculation” controversy: unravelling of a myth The economic calculation argument (ECA) has to do with the claim that, in the absence of market prices, a socialist economy would be unable to make rational choices concerning the allocation of resources and that this would make socialism an impracticable proposition. Tracing the historical development of this argument, this article goes on to consider some of its basic assumptions about how the price mechanism actually works in practice; in so doing, it attempts to demonstrate that the argument is based upon fundamentally shaky foundations. A rational approach to the allocation of resources in a socialist economy is then sketched out. Such an approach is predicated on a particular view of socialism as entailing a largely decentralised – or polycentric – structure of decision-making in contrast to the view typically held by proponents of the ECA that socialism would entail central – or society-wide – planning. Applying a decentralised model of socialist decision-making, this article identifies a number of key components of such a model and goes on to show how, through the interactions of these key components, the objections to socialism raised by the ECA are decisively overcome.
The economic calculation argument (ECA) has to do with the claim that, in the absence of market prices, a socialist economy would be unable to make rational choices concerning the allocation of resources and that this would make socialism an impracticable proposition. Tracing the historical development of this argument, this article goes on to consider some of its basic assumptions about how the price mechanism actually works in practice; in so doing, it attempts to demonstrate that the argument is based upon fundamentally shaky foundations. A rational approach to the allocation of resources in a socialist economy is then sketched out. Such an approach is predicated on a particular view of socialism as entailing a largely decentralised – or polycentric – structure of decision-making in contrast to the view typically held by proponents of the ECA that socialism would entail central – or society-wide – planning. Applying a decentralised model of socialist decision-making, this article identifies a number of key components of such a model and goes on to show how, through the interactions of these key components, the objections to socialism raised by the ECA are decisively overcome.
http://www.cvoice.org/cv3cox.htm [The economic calculation article] has been discussed here at great length by various posters, with discursions into side topics guaranteed to amuse.
The discussion focused more on the absurd solution proposed by that paper than his critique of AE per se. So a word or two about that will follow:
1. One objection he raises, that a mere price cannot possibly show the intensity of subjective values, was refuted. Bottom line: If you want it that badly, it will show up in how hard you will work to make money and pay for it.
2. Another, that the poor do not have their subjective values considered at all, was also refuted. Bottom line: In a world of scarcity, one cannot consume without somehow replenishing the existing stock of goods, or they will be all used up rapidly. On the other hand, forcing A to work so that B can get things means enslaving A. Mankind has found voluntary charity to be the best way out of this dilemma for the truly helpless.
3. He wrote:
Certainly, accounting costs are amenable to “exact calculation” using monetary prices but the question is what exactly is being accounted for in the process?. “Precise measurements” doesn’t tell us much; a game of monopoly entails precise measurement too but nobody suggests this implies some earth-shattering insight we would be foolish to overlook. What then is the significance of what is being precisely measured using monetary prices?
This was explained at length there, with a homely example of a chemist who uses an acid test to determine the exact shade of color a mixture of the acid with an unknown chemical produces. The chemist then knows what the unknown chemical was. The above critique could be applied to the chemist, word for word:
Certainly, colors are amenable to “exact calculation” using acid but the question is what exactly is being accounted for in the process?. “Precise measurements” doesn’t tell us much; a game of monopoly entails precise measurement too but nobody suggests this implies some earth-shattering insight we would be foolish to overlook. What then is the significance of what is being precisely measured using acid?
4. He goes on to say [with my comments in bold]:
The ECA asserts that a socialist economy would be unable rationally to chose between different combinations of factors to arrive at a least cost combination. In answer to the obvious retort that a socialist economy would not concern itself with costs in this monetary form, it might be contended that there will still be a need to reckon costs in some other guise and that it is precisely these substantive costs – or if you like, “real world” costs – that the price mechanism is able faithfully to represent via its pattern of objective exchange ratios. But how could this be proven.?
By deductive reasoning, and an observation of the world as we know it. See point 1 above, the more you want it, the more you will pay for it.
To prove this is the case one would have to demonstrate a precise correlation between these “substantive costs” and their monetary representations. One can determine whether such a correlation exists only by measuring one against the other.
No, not necessary, as just explained.
But that presents a problem for the ECA since, in doing this, one would have inadvertently shown that costs can indeed be independently measured, and rendered calculable, without recourse to market prices.
No, this is wrong, as just explained.
5. There is a list of things he claims are not priced into capitalism. These include externalities, spill over effects, pollution. Walter Block has invested a lot of time showing that these problems will fade away by privatization, and by stricter enforcement of property rights
The article then adds "social costs" to the list, which he says means the anguish to the worker and the disadvantage to society when he loses his job, and which are not accounted for on any firm's balance sheet.
Yes, it is indeed a sad thing when a man loses his job. The article makes two mistakes, however. It does not consider the "societal cost" of keeping an unproductive man on his job. We can observe the effects of such policy because the unions have forced it on many companies, causing them all to go bankrupt eventually.
Also, the article errs in assuming the place to look for the cost of a job is in some company's balance sheet, ignoring the other siude of the equation, the price a worker is willing to accept for his labor.
6. There follows a straw man argument, or at least a regrettable misunderstanding of the written word. Quoting Mises directly, he then procedes to forget what the quote actually says, and imputes to him the idea that calculating profit and loss "ensures" "unerringly" the efficient allocation of resources. He then points out, quite correctly, that it "ensures" nothing of the sort, and is subject to error. Here's what he says:
As Mises put it, “Every single step of entrepreneurial activities is subject to scrutiny by monetary calculation. The premeditation of planned action becomes commercial pre-calculation of expected costs and expected proceeds. The retrospective establishment of the outcome of past action becomes accounting profits and losses.
This statement is revealing. It inadvertently highlights a serious flaw in the ECA. The ability to compute profit and loss is what in theory is supposed to ensure the efficient – that is “profitable” – allocation of resources. But it turns out that it ensures nothing of the sort. Just because a system of market prices affords one a set of figures with which one can perform precise calculations does not mean that these figures will turn out to be correct – that is to say, will unerringly guide the entrepreneur towards a positive net income.
Mises said nothing of the kind, quite the opposite. He makes clear that a capitalist can never know the future with certainty, but at least he knows the present. A socialist cannot even know the present. Here is quote from Human Action:
The socialists, it is true, object that economic calculation is not infallible. They say that the capitalists sometimes make mistakes in their calculation. Of course, this happens and will always happen. For all human action points to the future and the future is always uncertain. The most carefully elaborated plans are frustrated if expectations concern-
ing the future are dashed to the ground. However, this is quite a different problem. Today we calculate from the point of view of our present knowledge and of our present anticipation of future conditions. We do not deal with the problem of whether or not the director will be able to anticipate future conditions. What we have in mind is that the director cannot calculate from the point of view of his own present value judg- ments and his own present anticipations of future conditions, whatever they may be. If he invests today in the canning industry, it may happen that a change in consumers’ tastes or in the hygienic opinions concerning the wholesomeness of canned food will one day turn his investment into a malinvestment. But how can he find out today how to build and equip a cannery most economically? Some railroad lines constructed at the turn of the century would not have been built if people had at that time anticipated the impending advance of motoring and aviation. But those who at that time built railroads knew which of the various possible alternatives for the realization of their plans they had to choose from the point of view of their appraisements and anticipations and of the market prices of their day in which the valuations of the consumers were reflected. It is precisely this insight that the director will lack. He will be like a sailor on the high seas unfamiliar with the methods of navigation, or like a medieval scholar entrusted with the technical operation of a railroad engine.
OK it's a long post already.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
OK, more about Robin Cox's article. We continue with his critique:
1. He asserts that the accepted thinking of the Austrian school is that only with "precise measurements" and "exact calculations" of every possible feature, past, present, and future, can a free market function at all. He then goes on to show the obvious, that it is hard to calculate anything exactly and precisely, much less the future. One need only say that his assertion is wrong.
2. He quotes Lachmann, an Austrian economist, who writes, “...profits are earned whenever there are price-cost differences; they are thus a typical disequilibrium phenomenon."
Cox thinks this means "...profit can only arise where the economy departs form the abstract model of perfect competition and optimal resource allocation. As Lachmann observes" etc.
But what do "equilibrium" and "disequilibrium" mean when Lachmann uses those words? Cox thinks disequilibrium means imperfect competition and suboptimal resource allocation. And that only in a state of imperfect competition and suboptimal resource allocation can one make a profit, according to Lacmann.
Let's bother to thumb through Lachmann's book and see if Cox is right. Here are some quotes:
...macro-economic equilibrium. This means that the economic forces the mode of interaction of which is at issue are long-term economic forces reflecting the movement of certain economic aggregates, like investment or exports, of apparently unchanging composition.
Bottom line: Disequilibrium doesn't mean "monopolies and wasting resources". It means "subject to changing forces". Sorry, Robin Cox. Next time read the book.
Oh, and try quoting in context, too. Because here is the full quote from the Lachmann book, with my explanation of what he is saying in simple English in bold and in brackets:
Profits are earned wherever there are price-cost differences.
[You make a profit when you can sell for more than it cost you to make]. They are thus a typical disequilibrium phênomenon
[meaning that usually this state of affairs doesn't last forever. Because there is always someone trying and succeeding in eating into your profits, either by jacking up your costs, or making you lower what you sell it for]
, imperm- anent,
[which is the basic definition of "disequilibrium" as Lachman uses the word, see above]
continuously shifting as regards ongin and magnitude,
[as any businessman knows only too well] affected by contrived change (innovation)
[as the horse and buggy industry found out]
as well as by un- designed change emanating from population movements,
[you can see a simple example of this in TV Westerns. When the place becomes a ghost town, the saloon has to close down]
shifts in demand
[to see this, try making a profit selling zoot suits nowadays]
and so on.
Well, we see that Cox really missed the boat when thought Lachmann was saying that profits are made by misallocation of resources. I mean, really. [To put it in context, Lachmann is arguing with schools of thought that think profits are forever, caused by long lasting powerful forces. He tells them that just the opposite is true. Nothing to do with what Cox is discussing].
But what about monopolies? Surely a guy with a monopoly will make nice profits, no? Maybe that's what Lachamnn means, somehow or other. Cox repeats what he thinks Lachmann is saying:
Thus , according to the free marketeers’ own theory of how the market behaves, the very imperfections which they deplore (such as monopolistic tendencies) are, in fact, "key profit-generating dynamics in the economic system...'''
Yes, monopolies will give you a profit, and moreover, they are key profit generating dynamics, deplorable thogh that may be. Not only that, a free market has "monopolostic tendencies". Take your eyes off that free market for one second, and before you know it, you'll have a monopoly. That's what Lachmann is saying in his own theory, explains Cox.
Which proves he didn't read the very next sentence in Lachmann's book.
Profits are a permanent income flowing from ever-changing sources, like the profits of a restaurant in which a different set of customers chooses a different set of dishes from the menu card every day. The existence of monop- oly power, however important as a source of profits, makes no
difference to our description because in the long run, with which we are here concerned, monopoly power is no more permanent than any other sources of profit.
And just for good measure, one more line:
The erosion of price-cost differences is prompted by many forces and may take numerous forms. Pressure of competition by rival sellers is by no means the only such force.
Bottom line, it's nice to have a monopoly, but Lachmann nowhere says it's the key to making a buck. I mean just go to the supermarket to the cereal aisle. Or any aisle. Note the wealth of the competing products. Also, far from there being a deplorable tendency for monoplies to form, Lachmann thinks there is a tendency for them to fall apart.
Once we grasp this, we see how the rest of that criticism, which we won't bother quoting here, is gibberish.
3. Another gem:
According to the ECA, in the absence of market prices that allow entrepreneurs to make profit and loss computations, economic efficiency cannot be assured. This, it is argued, is incompatible with the maintenance of a developed economic infrastructure. However, we have seen just how problematic such profit and loss computations are in the real world despite the evidence of a developed economic infrastructure around us (which the proponents of the ECA themselves delight in pointing out and attributing to the market). This suggests that there must be something seriously awry with the theory itself.
Paraphrase: The ECA claims that without knowing what is before their very eyes in the present [see previous post], socialism must fail. But entrepeneurs can only take educated guesses at predicting the future, and yet still make money and benefit us all. This suggests the ECA is flawed.
What can I say? Let's move on. In fact, let's end the post. TBC hopefully.
1. We are told that the whole concept of "wealth" is going to be chopped away with Occam's razor come socialism:
"In any event, the claim that a socialist economy would need to be able to calculate “net income” in some sense does not stand up to close scrutiny"
And why? Because who cares about "wealth", that bourgeois concept:
In such an economy [a socialist one], “economic exchange” of any sort would no longer apply. It would not be necessary to determine whether “more” or “less” wealth in general was being created than was being used up in the production of that wealth...
And why won't we care about wealth?
...for the very simple reason that the concept of wealth “in general”, a completely abstract and crudely aggregated notion of wealth, is of no practical use in itself and would be utterly meaningless outside the context of commodity exchange.
But I thought we had to know we weren't wasting our resources?
This emphatically does not mean that a socialist economy will have no way of ensuring that resources would be efficiently allocated (which I will consider later); it simply means that such an economy does not need to operationalise this wholly unsatisfactory notion of “net income” in order to achieve this efficient allocation.
Oh, I see. OK. So what is the criticism of the Misesian model here, exactly? I guess that there IS a solution to the calculation problem, which he will explain to us later. BTW, the other thread about this article shows he doesn't even begin to solve the calc problem.
The next one is more serious, appealing to Bryan Caplan, so we save it for next post.
1. Uh oh, guys. Time to put on our thinking caps. He is going to quote the redoubtable Bryan Caplan. For some reason the links he provides to Caplan's paper doesn't work, but here is one: http://econfaculty.gmu.edu/bcaplan/whyaust.htm
Bryan Caplan caught Mises in an embarrassing contradiction. Let's have a look see:
He begins by quoting Mises:
Socialism is not a realizable system of society's economic organization because it lacks any method of economic calculation... Socialism cannot be realized because it is beyond human power to establish it as a social system.
Can you spot the boo boo, Austrians? Here it is, explains Caplan:
This conclusion is amazing, for Mises repeatedly insists that economic theory gives only qualitative, not quantitative laws?
As we stare in shocked disbelief, Caplan backs up this claim:
For example, in Human Action, Mises tells us that:
The impracticality of measurement is not due to the lack of technical methods for the establishment of measure. It is due to the absence of constant relations. If it were only caused by technical insufficiency, at least an approximate estimation would be possible in some cases. But the main fact is that there are no constant relations. Economics is not, as ignorant positivists repeat again and again, backward because it is not "quantitative." It is not quantitative because there are no constants. Statistical figures referring to economic events are historical data. They tell us what happened in a nonrepeatable historical case.
Boy, that really zapped old Mises didn't it? Economics is a qualitative science, so you tell us, von Mises. In that case, what have numbers to do with it? How can you say economics is purely qualitative, then turn right around and insist that socialism MUST have numbers [which you claim it cannot supply] in order to survive?
Introducing his next line with a mysterious "if so" [if what?], Caplan follows through:
If so, then how could he possibly know by economic theory alone that the negative effect of the lack of economic calculation would be severe enough to make socialism infeasible?
Meaning not only are you contradicting yourself, and also being unfair to poor old socialism, insisting it must have numbers when you just said all of economics doesnt need any, but there is a third problem here as well. Stripped of the use of numbers, throwing them all out the window when it comes to economics, as you so foolishly insist must be done, Professor Mises, how can you possibly say how bad the calculation prob will be? You need numbers for that, too.
Caplan repeats this point to make sure we get it:
Granted, the socialist economy would suffer due to the impossibility of economic calculation; but how, on his own theory, could Mises know that this difficulty to so severe that society would collapse?
And to make sure the mentally challenged among us really understand, Caplan explains further. Mises says one guy living alone on a desert island could calculate. Then 2 guys, could too, right? But billions of people can't. So there must be some NUMBER which the minimum amount of people that cannot calculate. A NUMBER. You know, that thing you told us economics is not allowed to use, ever. In his own words:
The strength of this objection becomes even clearer when we consider the economic decision-making of Robinson Crusoe, alone on his island. As Mises explains, "Isolated man can easily decide whether to extend his hunting or cultivation. The processes of production he has to take into account are relatively short. The expenditure they demand and the product they afford can easily be perceived as a whole."[28] Crusoe's runs his one-man economy simply by using "calculation in kind" - mentally weighing his preferences and opportunities to make decisions. Mises concedes that this situation is conceivable, adding only that this method is unworkable for a larger economy.
[Mises just told us one guy living alone could be a successful socialist. No calc problems for him].
"To suppose that a socialist community could substitute calculations in kind for calculations in terms of money is an illusion. In an economy that does not practice exchange, calculations in kind can never cover more than consumption goods. They break down completely where goods of higher order are concerned."[29]
[But a whole community will not make it. They will have a calc problem].
This suggests some obvious questions. Does Crusoe's one-man socialism become "impossible" when Friday shows up? Hardly. What if 100 people show up? 1000? Mises' distinction between a modern economy and Crusoe's, and why the economic calculation argument applies only to the former, again shows that Mises has underlying quantitative assumptions in spite of his strictures against them. He is making a quantitative judgment that the lack of calculation would not greatly worsen Crusoe's economy, but would devastate a modern economy. Perhaps Mises was right, but pure economic theory did not give him the answer.
[Aha! It works for one, and for two, right? But not for a whole community, hey? Then there must be a NUMBER, yes that baby you threw out the with the bath, which is the cut off line. Caught you with your hand in the cookie jar, Ludwig, using underlying quantitative assumptions].
And let's not forget Robin Cox, who pipes in with his version of Caplan's argument:
According to Mises in Human Action (quoted in Caplan), “economics is not, as ignorant positivists repeat again and again, backward because it is not quantitative. It is not quantitative because there are no constants”. But if that is the case, how could you quantity the negative effects of this supposed misallocation in a hypothetical socialist economy and come to the conclusion that they were so severe as to make socialism infeasible?
2. OK, time for the defense to make it's case:
Me: I'm just a simple country boy, Professor Caplan...
Cox: No, I'm the simple country boy, striving to be a Spanish peasant. You are a decadent bourgeois running dog for the fascist imperialist so called....
Caplan: Let him have his say, Rob.
Me: TY Bry. Let's cut to the chase. Bry, you are confusing the object under study with the methods used to study it. You are saying one has to be a traingle, not a human being, to study geometry.
Cox: I'm still in high school, will this help me cut geometry class?
Me: All Mises was saying is that you cannot find an economic law by sifting through piles of statistics, or by plugging in a formula with numbers in it. You have to use your noodle, not your pencil.
Caplan: But he's saying socialists and capitalists MUST use numbers. So why doesn't he have to, also?
Me: Because he is not running an economy, he is studying how economys are run.
Cox: And George Orwell accused us of doublespeak!
Me: Let me explain. Have you guys ever opened a book on Mathematical Logic?
Caplan: Sure. Stupid book was full of upside down A's, backwards E's, arrows, squiggles, parentheses, cups and caps. Not a single number in the whole book. Tossed it away as useless. How can it possibly teach any Math?
Me: It was not teaching you Math, but about the correct way to study Math, about the limitations of Math, about the logic underlying Math.
Cox: And Mises?
Me: He was teaching you about what happens when people buy and sell. And they buy and sell using numbers. More than that, he claims that if they don't use numbers when buying and selling they will flail about in the dark, wasting resources like there is no tomorrow.
Caplan: Well if people buy and sell using numbers, and indeed have to buy and sell using numbers to avoid catastrophe, why is it invalid to use numbers when we study ABOUT how they buy and sell?
Me: Now you are asking the right question. Reread what he said about using numbers, and you might get it this time.
Cox: And what about Bryan's proving that Mises had to use a number too, the number of people that make it impossible to calculate?
Me: "Using numbers" is too vague a phrase. What he meant, if you read him in context, is that just because the numbers were a certain way today doesn't mean they will always be that way. They change all the time. We should be studying why they change, not what they are at a given point in time, and not to ever assume we have nailed down a number, like "the inflation constant", that will be fixed forever.
Caplan: Well if you can't use numbers, how do you know socialism will so suffer from the calculation problem as to be infeasible? You'll need to make a case for that with numbers!
Me: Oddly enough, Robin Cox answers that very question in his next paragraph after quoting you, Bry.
[Cox swells with pride at having got something right in that next paragraph, then turns red when he realizes it means he has contradicted himself].
[Bryan Caplan returns, ready to thresh this thing out some more]:
Caplan: OK, I give up. Why is it invalid to use numbers when talking ABOUT how people buy and sell?
Me: Because the numbers are always changing, like I said in the previuous post.
Caplan: But if they are changing for the economist, of what use are they to the socialist? They are constantly changing for him too.
Me: The socialist and capitalist need the present day numbers. All they need know is what price are today, make an educated guess about prices in the future based on their experience and genius, and they are good to go. The economist is much more ambitious. He is trying to unearth UNIVERSAL LAWS that apply in all times and places and numerical configurations.
Caplan: How can he possibly do that?
Me: Study Austrian economics and find out. I'll give you a tip, though. Mises, in the piece you quoted, was explaining how it cannot be done, i.e. by crunching numbers. And he explained why too, because whatever numbers you have, they are always changing.
We continue:
There follows an attack on poor old Mises based on the Theory of The Second Best, formulated by Richard Lipsey and Kelvin Lancaster in 1956.
Oddly enough, one of the authors, Richard Lipsey, seems to be saying that his theory disproves Socialism, not Mises. In fact, he states what sounds like a weak version of Mises' Economic Calculation Argument:
The upshot is that in practical situations, as opposed to theoretical models, we do not know the necessary and sufficient conditions for achieving an economy-wide, first-best allocation of resources. Achieving an economy-wide second best optimum allocation looks even more difficult than achieving the first best. Without a model of the economy’s general equilibrium that contains most let alone all of the above sources, we cannot specify the existing situation formally and so cannot calculate the second best optimum setting for any one source that is subject to policy change. This is an important point since much of the literature that is critical of second best theory assumes that economists know a distortion when they see one and know that the ideal policy is to remove the distortion directly, something that is necessarily welfare improving only in the imaginary one-distortion world.
Sadly, I can't find a free online copy of the literature, so will have to leave it at that.
I will note that the above linked article seems to be interpeting the Theory of the Second Best as saying that a GOVT cannot meddle its way into doing the right thing. The whole paper seems to have nothing to do with what an entrepeneur does on a day to day basis. He is not concerened with Pareto efficiency [making everyone in the world happier at the same time], but making himself and his customers happier. Also, I seem to remember a video by Israel Kirzner where he states that "perfect competition" as used by economists means the opposite of what normal human beings think it means. And so the assumption of "perfect competition" may muddy the waters considerably here. But I don't know.
Bottom line, though superficially Cox has shot himself in the foot once again, I would be glad to see input from someone more expert than me on this whole topic.
Well, the rest is pretty long winded.
First, that there is no empirical proof that the freer the market, the better things are. [Although the link in the previous post says that the research shows the freer the market, the greater the pareto effeciency]. Second, tarrifs are a wonderful thing. Third, there is no such thing as free market. He quotes Polyani that a free market historically always was acheived by its opposite somehow, central planning and and continuous intervention. After that he goes on and on that it costs money to calculate, money which could be saved if we just forgot about calculating altogether, in fact if we abandoned money forever. Finally, Marx never meant for any central planning to happen, but really wanted decentralized planning.
Since none of these things have anything to do with the calculation problem, I end here. Whew.
Postscript.
For completeness, a bit more on Caplan's argument against the econ calc problem.
He writes:
Ever since Mises, Austrians have overused the economic calculation argument. In the absence of detailed empirical evidence showing that this particular problem is the most important one, it is just another argument out of hundreds on the list of arguments against socialism. How do we know that the problem of work effort, or innovation, or the underground economy, or any number of other problems were not more important than the calculation problem?
This is an easy one. And you should have known this on your own, Bryan. All the other problems can be solved by good will, in theory. Edifying speeches could, possibly, make people work hard, innovate, stay away from underground economies. But the calculation problem is a brick wall that cannot be solved ever. Thus its theoretical importance.
The collapse of Communism has led Austrians to loudly proclaim that "Mises was right." Yes, he was right that socialism was a terrible economic system - and only the collapse of Communism has shown us how bad it really was. However, current events do nothing to show that economic calculation was the insuperable difficulty of socialist economies. There is no natural experiment of a socialist economy that suffered solely from its lack of economic calculation. Thus, economic history as well as pure economic theory fails to establish that the economic calculation problem was a severe challenge for socialism.
I notice no footnote referencing the "overuse" or the "loud proclamations". In any case, think of a dead man with a thousand diseases caused by germs evident in his bloodstream, plus his head has been chopped off. The germs might have gotten to him first historically. But germs can be cured by antibiotics, missing heads cannot be cured at all.
That argument by Karl Polanyi is curious. I've never read an Austrian criticism of it except for Rothbard's. I've always wanted somebody to reveal The Great Transformation for the disturbing fallacious voodoo that it oozes full of.
I don't think it makes any sense. For an Austrian critique of Polanyi have a look here: http://mises.org/daily/1607
EDIT: Just saw you edited your post and that you've read Rothbard. Polanyi is a strange one. At points he seems to understand the fundamentals of human action, but then goes completely off track. Ultimately his task requires the denial of scarcity.
Smiling Dave Caplan is a neo-classical economist, and you're creating a terrible straw man argument. He never said numbers can't be used in economics, merely that Mises doesn't use numbers in his economic theory. It's pretty obvious..
edit: After reading the rest of your posts on Caplan, I'm dumbfounded at some of your conclusions. You act as if Caplan is wholly ignorant of Austrian theory when he probably knows more than either of us do, especially considering he's former Rothbardian.
TY for your comments Zach.
I don't find where I wrote Caplan was anti numbers, only that he attributed that to Mises. So I think we agree.
I'm sure he knows more economics, both Austrain and non-Austrian, than I ever will. That does not mean he is infalible, of course, and I think I have summarized his argument correctly, and refuted it as well.
I'd be glad to see what you think my mistake is and where the straw man is hiding.
Did anyone read the first article by Anne Martin? I'd be interested in a discussion on that.
"When the King is far the people are happy." Chinese proverb
For Alexander Zinoviev and the free market there is a shared delight:
"Where there are problems there is life."
abskebabs: Did anyone read the first article by Anne Martin? I'd be interested in a discussion on that.
Need a free copy for that
I could send you my copy. Add me as a friend and send me your email.