Sraffa did not believe in the LTV. Sraffa's work was a resurection of Ricardo, not Marx. I suggest reading Production of Commodities by Means of Commodities, his magnum opus. It's relatively short, at less than 100 pages, and it will give you an excellent understanding of the gulf between Hayek and Sraffa's conceptions of the economy. I also suggest Lachmann's article on the Hayek-Sraffa debate.
ziragt:Sraffa did not believe in the LTV. Sraffa's work was a resurection of Ricardo, not Marx.
Marx got the LTV from Ricardo.
Not quite. Ricardo has a LTV, but it is combined with a cost of production approach. The LTV is just an approximation, at best. At least, this is my understanding. A number of others also have this view, such as Stigler. Regardless, Sraffa has a cost of production approach.
Terry Peach's Interpreting Ricardo goes into detail on this, for those who are interested.
Aristippus:Douglass North is a bit of a joke.
I've only ever read Institutions, Institutional Change and Economic Performance from him, but I really liked it.
"I'm not a fan of Murray Rothbard." -- David D. Friedman
liberty student:Must not be enough pictures for you.
Must not be enough calories for you.
The Theory of Money and Credit
The Liberty Fund has a good print. Nice cover as well. (http://www.libertyfund.org/details.aspx?id=1756)
I'd say that is North's best work - my disparaging comments about him were mostly in comparison to Mises. If he had studied Mises his own work would be so much more complete. In fact his most important methodological difference from Neo-Classical methodology (imperfect information) comes directly from Hayek, which he acknowledges (this predates Hayek of course). It's very strange that North doesn't seem to have explored the other Austrians, considering that imperfect information is really the basis of his work.
While reading Economic Controversies, the biggest surprise so far has been how much Rothbard hates on the ideas of "market process" and Kirzerian "entrepreneurial alertness."
The objection to Kirzner makes sense (entrepreneurship is about uncertainty-bearing, not about opportunity-noticing, which is a labor function). But what is his objection to market processes?
Could you elaborate on what you mean - or where I can find - by 'opportunity noticing' is a labor function? Why is that not also an 'entrepreneurial' element? Why would that be a 'labor function'? I always took 'opportunity noticing' as part of the enterpreneurial uncertainty; because 'opportunities' are never certain - and it's just the other side of the same coin.
I do endorse your comments on Rothbard's history of economic thought. It's just not a good book if one wants to learn the authors who Rothbard discusses.
The state is not the enemy. The idea of the state is.
StrangeLoop: While reading Economic Controversies, the biggest surprise so far has been how much Rothbard hates on the ideas of "market process" and Kirzerian "entrepreneurial alertness."
Shouldn't have been that big of a surprise, though.
Daniel James Sanchez:The objection to Kirzner makes sense (entrepreneurship is about uncertainty-bearing, not about opportunity-noticing, which is a labor function). But what is his objection to market processes?
Basically, his methodological individualism runs counter to the idea of an impersonal "process"; rather, it is human action that propels the market forward.
That is intuitive to his worldview; however, once we introduce words like "market" or even "equilibriating tendences" (which he does), then I'm not sure Rothbard's argument holds up.
AdrianHealey: StrangeLoop: While reading Economic Controversies, the biggest surprise so far has been how much Rothbard hates on the ideas of "market process" and Kirzerian "entrepreneurial alertness." Shouldn't have been that big of a surprise, though
Shouldn't have been that big of a surprise, though
I understand his rationale, but disputes like that portray Rothbard as contrarian for the sake of being contrarian.
If anything, this anthology has made me dislike Rothbard; his negativity is too dominate a force in this collection--his inability to even reconcile other Austrians into his dogmatism (Rizzo, O'Driscoll, Hayek, Kirzner, etc.) is strange to me. I understand the need to be polemical when one is a heterodox economist yelling against the wind, but Rothbard seems to be as unfriendly as the worst caricatures of Rand.
I mean, his willingness to do coalition-building with leftists seems to be stronger than his willingness to exhibit academic civility with "deviant" Austrians!
I'm still looking forward to Rothbard's more non-economic / libertarian writing toward the end of the book, though; his talk on taxation and so on will surely provoke more agreement from me.
Adrian,
Noticing an opportunity isn't bearing uncertainty: a hired market analyst can do that. It's putting your own resources on the line afterward that is bearing uncertainty, the success of which, as Peter Klein argues in The Capitalist and the Entrepreneur, depends on judgment, not alertness.
Thanks SL,
That does seem to be a bizarre position on Rothbard's part, but I guess I shouldn't judge until I've had a chance to read it myself.
Daniel, I think you will be pleasantly revlieved to see that Rothbards take on 'market process' is entirely defensible... contrary to Strangeloops suggestion.
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
Daniel James Sanchez: Adrian, Noticing an opportunity isn't bearing uncertainty: a hired market analyst can do that. It's putting your own resources on the line afterward that is bearing uncertainty, the success of which, as Peter Klein argues in The Capitalist and the Entrepreneur, depends on judgment, not alertness.
Well; I'm not sure that that distinction really is that clear cut.
First of all; there is the pure entrepreneurial element which is inherent in all human action - all actions bear uncertainty. If I work at place x, I risk a better paying opportunity at place y. The entrepreneurial element isn't just present in the capitalist-entrepreneur. A labor-entrepreneur is not the same as a capitalist-entrepreneur; but both cary uncertainty and thus have an entrepreunerial to their actions.
Secondly; an 'opportunity' isn't something a market analyst can judge. Absence action; there is no 'opportunity' - as far as I'm concerned. So a market analyst can give suggestions; the 'noticing' only happens when act upon - and taken the correct course of action, which, obviously, involves risk. But both a laborer and a capitalist have to notice and act upon opportunities; wether or not it be taking a specific job or investing capital.
The difference between a capitalist-entrepreneur and a labor-entrepreneur is 'what's on the line'. For a laborer; it is 'only' opportunity cost - but the wage is certain (and the capitalist pays something tending towards the DMVP). The capitalist, on the other hand, risks (because of uncertainty and not because of risk, obviously) losing his capital if he makes a bad decision. But that doesn't seem to me the difference between an entrepreneur and a non-entrepreneur, but the difference between 2 specific kinds of uncertainty bearing actions.
I'm aware that this sort of deviates from the standard way of talking about it, but I don't think I'm wrong in presenting it like this.
Opportunity and uncertainty are connected if you talk about concrete human action - as far as I see it.
Well Adrian, if you can usefully reconstitute production/distribution theory according to your favored definitions, have at it.
It's not just Rothbard. I suggest reading Salerno's essay "The Concept of Coordination in Austrian Macroeconomics."
nirgrahamUK:Daniel, I think you will be pleasantly revlieved to see that Rothbards take on 'market process' is entirely defensible... contrary to Strangeloops suggestion.
I don't think it's indefensible; in fact, in large part, I think Rothbard is right. It's like the old joke: "How many libertarians does it take to change a light bulb? None, the free market will take care of it." To remove human actors is to remove a key factor in economic inquiry.
Rothbard's criticism is ineffective simply because he is arguing against a straw man: neither Hayek nor Kirzner (nor others, like James Buchanan) who emphasize the "market process" are removing human action from the analysis. In essence, if we accept "the market" (as Rothbard does) and add "equilibriating tendencies" (as Rothbard does), then we have a "market process." I consider the idea of "market process" an asset to Austrians: there is no stationary equilibrium, but rather an active process of discovery, entrepreneurship, etc.
Salerno doesn't take issue with the notion of a "market process" in that essay; indeed, as you know, "market process" is one of Salerno's favorite terms, especially as a better alternative to "market mechanism".
Right, but he does take issue with much of Kirzern's concept of the entrepreneur and his broader "Hayekian" approach to market coordination, which has everything to do with Kirzner's vision of the "market process". It's not just a matter of words.
Oh I see, so Rothbard has an issue with Kirzner's particular conception of the market process, not the notion of a market process as such. That makes more sense.
But once again, I think Rothbard painted a straw man. For instance, he tries to tie down Hayek and Kirzner as only focused on information through price signals, which is simply not true.
In the same paragraph, for instance, Rothbard writes, "Misesian Man knows a lot about his part of the market—not just prices, but all the qualitative knowledge that must also go into production and into risky ventures: the sort of customers he will have, the sort of products they will want, where to buy raw materials and how to transform them, and so on—that is, all the particular knowledge that Hayek has talked about in other contexts. The free price system is vital to the entrepreneur but it is not, as in Hayek-Kirzner, his only source of knowledge" (179).
When I read it, and still now, I was baffled about how Rothbard could invoke Hayek's emphasis on "particular knowledge," but then claim Hayek considered the "price system" an entrepreneur's "only source of knowledge."
It would seem to me that uncertainty is an inalienable feature of human life, hence it cannot be avoided. Saying that entrepreneurs bear uncertainty is like saying that entrepreneurs breathe air. So, I’m with Kirzner on that one: noticing opportunities is what drives the market.
Salerno's major argument against Hayek/Kirzner is that they see the "discovery of knowledge" as a necessary precondition for competition, while Salerno argues that for Mises/Rothbard it's the other way around. For what it's worth, I'm a critic of the hardline stance against Kirzner and Hayek which is expressed by Hoppe, and I'm guessing Rothbard, but I don't really know enough to comment with any authority.
Merlin,
Yes, we all face uncertainty, which is why Mises is clear that everybody, in that sense, can be an entrepreneur.
I don't want to be biatch, but I think my classification 'solves' this (basically semantical) problem. I'm open to comments, though.
Jonathan M. F. Catalán: Merlin, Yes, we all face uncertainty, which is why Mises is clear that everybody, in that sense, can be an entrepreneur.
Fine, but what is an entrepreneur than? Everybody?
Entrepreneurial action is very all pervasive, yes. Capitalist-entrepreneur is a specific kind of entrepreneurship.
AdrianHealey: The difference between a capitalist-entrepreneur and a labor-entrepreneur is 'what's on the line'. For a laborer; it is 'only' opportunity cost - but the wage is certain (and the capitalist pays something tending towards the DMVP). The capitalist, on the other hand, risks (because of uncertainty and not because of risk, obviously) losing his capital if he makes a bad decision. But that doesn't seem to me the difference between an entrepreneur and a non-entrepreneur, but the difference between 2 specific kinds of uncertainty bearing actions.
Well, what’s the need for two definitions? What’s the issue with the entrepreneur as the guy who seeks opportunities? The market analyst is an entrepreneur, to be sure: one that sells his services.
I don't like the term 'entrepreneur'; I prefer 'entrepreneurial element', with specific kinds of entrepreneurship.
And the capitalist entrepreneur - to be sure - fullfills a particular role, that the 'labor-entrepreneur' doesn't fullfill.
It's important to remember that the words 'producer', 'consumer', 'entrepreneur', et cetera, don't describe people, they describe types of action. So yes, everybody does have the ability to be an entrepreneur, and everyone eventually does pursue entrepreneurial action at some point in their life (or throughout their life).
AdrianHealey: I don't want to be biatch, but I think my classification 'solves' this (basically semantical) problem. I'm open to comments, though.
It's not a merely semantic issue. Again, if you can reconstitute production/distribution theory with your AdrianHealyian framework, then go for it. But if you're going to revolutionize Austrian Economics, you should probably do so in another thread.
Jonathan M. F. Catalán:It's important to remember that the words 'producer', 'consumer', 'entrepreneur', et cetera, don't describe people, they describe types of action.
Brilliantly stated.
Daniel James Sanchez: AdrianHealey: I don't want to be biatch, but I think my classification 'solves' this (basically semantical) problem. I'm open to comments, though. It's not a merely semantic issue. Again, if you can reconstitute production/distribution theory with your AdrianHealyian framework, then go for it. But if you're going to revolutionize Austrian Economics, you should probably do so in another thread.
You are giving me too much credit for what I tried to do - but yes, you are right. :)
Jonathan M. F. Catalán: It's important to remember that the words 'producer', 'consumer', 'entrepreneur', et cetera, don't describe people, they describe types of action. So yes, everybody does have the ability to be an entrepreneur, and everyone eventually does pursue entrepreneurial action at some point in their life (or throughout their life).
Sure, but what I’m saying is that that entrepreneurial action is not bearing certainty (since we all do, we need not have invented the entrepreneur as an ideal type at all) but seizing opportunities.
To illustrate, a classic speculator sees that the same share is sold at different prices in two exchanges, and he immediately buys low to sell high. Risk is negligible, as is uncertainty. So, is he an entrepreneur or is he not? If he is, than he is because he seized an opportunity, while risk was very low to zero.
AdrianHealey: Daniel James Sanchez: AdrianHealey: I don't want to be biatch, but I think my classification 'solves' this (basically semantical) problem. I'm open to comments, though. It's not a merely semantic issue. Again, if you can reconstitute production/distribution theory with your AdrianHealyian framework, then go for it. But if you're going to revolutionize Austrian Economics, you should probably do so in another thread. You are giving me too much credit for what I tried to do - but yes, you are right. :)
Well, you are actually trying to do more than you realize, and this is why...
Mises rightly stressed the importance of avoiding "terminological gymnastics", reminding us that the whole point of economic terminology is to create useful dividing lines for the purpose of explaining market phenomena. For example, in the terminological section of Theory of Money and Credit, he did not go on and on about how his terminology is, on its immediate merits, better than competing terminologies. Instead, he rested the utility of his terminology on the explanatory power of his entire monetary theory.
Our threefold classification is not a matter of mere terminological gymnastics; the theoretical discussion of the rest of this book should demonstrate the utility of the concepts that it involves.
Similarly, the merits of Mises-Rothbardian functional distribution (in which the delimitation of the entrepreneurial function has to do with judgment, not alertness) rests not on its own grammatical structure, but on the success of the Mises-Rothbardian production/distribution theory that uses it.
People love to engage in endless logomachy, thinking they can corner the "right" way of defining words in social philosophy without diving into the theoretical structure of the science in question. But it is not mere pedantry to resist dilettantish neologizing, and to insist on the distinctions used by Mises and/or Rothbard. These men have done the work of actually constructing a theory using their terminology. And the utility of their terminology rests on the success of their theory. If you want to show that your terminology is better than theirs, you need to construct a whole theory, which uses your rival terminology, and show how your theory has more explanatory power than theirs. Only then can terminological decisions be based on scientific utility, and not semantic static.
I get your point; but I don't think I'm making a whole new theory. I'm trying to 'solve' as it were the riddle between the two branches. I don't think there is a distinction and I don't think saying that it's two sides of the same coin is saying that I differ from their view.
I think Rothbard, as always, was too fast to dismiss a useful concept.
For the record; I'm not denying that 'entrepreneurship' is bearing uncertainty. I'm just saying that 'acting upon perceived opportunities' implies uncertainty and therefore that there is no distinction. Opportunities are always uncertain.
That is also in line with Mises his statement that all action is entrepreneurial action in some sense.
The difference between the capitalist-entrepreneur is that he doesn't 'just' risk opportunity cost, but also capital. (A worker gets his wage, a capitalist-entrepreneur get's interest with entrepreneurial profit/loss. (*insert necessary caveats as discussed by Rothbard in MES*)
But let me rephraze that in a new topic. Just because it's interesting
"Seizing opportunity", in my opinion, is implicit in the concept of bearing uncertainty. In the same sense, the laborer who sells his labor is seizing an opportunity when selling his labor, and is also acting against uncertainty, which makes that action entrepreneurial. He may not be a capitalist in the sense of distributing capital, but that action is entrepreneurial in nature.
To illustrate, a classic speculator sees that the same share is sold at different prices in two exchanges, and he immediately buys low to sell high. Risk is negligible, as is uncertainty.
I think it's a lot to assume that 'risk is negligible' (risk being no different than uncertainty, in this sense), but it's true that there are varying degrees of uncertainty. Nevertheless, the speculator is still a risk-bearer.