dont succesful businesses use mathematical models of some variety to predict human action all the time?
are there in existence statisitcal methods that succesful buisnesses rely on to a great degree to adjust production, issue forth new products and r&d, lay off people, etc?
if so, is it a stretch to think the the money business wouldnt do the same?
"In our debt based monetary system there is only one way to add money and that is through new debt."
i dont fully understand the mechanism of the us central bank and the frb-ing activity of the under-banks.
pg. 43 of harry browns book, "how you can profit from the coming devaluation" says that "in modern practice,....the government does not print paper money to cause inflation. It prints paper money in response to the inflation that takes place through the bank's deposit-loan expansion."
i dont know if that still holds exactly true with shifting bank regs and reserve account re-classifications; or if when the new paper money arrives in response to the banks activities if the new paper money allows further deposit-loan expansion.
sthomper:dont succesful businesses use mathematical models of some variety to predict human action all the time?
Which mathematical models?
Business is dominated by financial management, which tends to overvalue some statistics and methods to the detriment of other statistics and methods. For example, some might base a lot of what they do on growth data and ROI, which tends to favor growth of the business over quality, production values and long term investments which might not have an immediate return but are important to the health and status of a business. AE is not really interested in defining how a business is managed other than the fact that entrepreneurs respond to consumer demand in the most efficient way (the price mechanism).
There are various equilibrium mathematical models that are used for strategy, but these tend to be very basic and cannot predict human behavior - especially unpredictable human behavior - since the variables are limited and the assumptions assume a "right" choice. Alone, these models really are nothing but a bet with possibly a marginal increase in the odds of success. In contrast, praxeology assumes action without assumptions as to whether the action is "right" or "wrong". In addition, these actions are based on subjective, ordinal values over objective, cardinal values that mathematicians and mainstream economists favor.
Different businesses utilize different production models, but this is not something that AE covers - although ABCT does cover production.
I have to chuckle at claims that are made against Austrian Economics for using logic and reason over mathematics and the scientific method. Mathematics and the scientific method are also derived from logic and reason, so it's utter nonsense that their use is somehow superior.
But hey, if you have a mathematical model that can explain certain features of economics better than Austrian Economics then please share. Just make sure you're actually talking about something related to Austrian Economics to begin with.
"This is truly what this debate is about -whether or not mathematics is capable of describing human action."
the above was stated earlier, i assume , meaning the dabate over the original posts claims of
"Both Austrian and Keynesian economic theories hold fundamental beliefs that do not square up with math....The exponential growth of debt in our debt based money system is ignored and refuted by both theories."
"Both systems create bankruptcies and defaults while enriching banks at the expense of the people." (is some math involved in determining this?)
"If the exponential growth (of money) can be proven, then equally, Austrian and Keynesian theories are dis-proven."
"The two economic theories will try to explain away this reality by claiming that the velocity of money can be increased so that a given amount of money can be used for more transactions." (is there some math involed with this?)
"The two prevailing economic theories give us a false sense of choice...."
maybe there is more to the "can mathematics desctibe human action" than the actual statement...that i just didnt get??
all i asked was if successful companies make predictions based on previous mathematical data that, perhaps distantly, track and record human action? statistics and probabilities, iow??
""for instance, 80 percent of the time, 80 percent of our customers bought the 'new and improved' version of x product. we predict that....etc."" not perfect, but the math has been very accurate.
i dont know that the original post 'debate' was saying that numbers, addition, etc describe human action.
clarification??
sthomper: "This is truly what this debate is about -whether or not mathematics is capable of describing human action." the above was stated earlier, i assume , meaning the dabate over the original posts claims of "Both Austrian and Keynesian economic theories hold fundamental beliefs that do not square up with math....The exponential growth of debt in our debt based money system is ignored and refuted by both theories." "Both systems create bankruptcies and defaults while enriching banks at the expense of the people." (is some math involved in determining this?) "If the exponential growth (of money) can be proven, then equally, Austrian and Keynesian theories are dis-proven." "The two economic theories will try to explain away this reality by claiming that the velocity of money can be increased so that a given amount of money can be used for more transactions." (is there some math involed with this?) "The two prevailing economic theories give us a false sense of choice...." maybe there is more to the "can mathematics desctibe human action" than the actual statement...that i just didnt get?? all i asked was if successful companies make predictions based on previous mathematical data that, perhaps distantly, track and record human action? statistics and probabilities, iow?? ""for instance, 80 percent of the time, 80 percent of our customers bought the 'new and improved' version of x product. we predict that....etc."" not perfect, but the math has been very accurate. i dont know that the original post 'debate' was saying that numbers, addition, etc describe human action. clarification??
As I've already demonstrated, no Austrian position is refuted, in anyway by math, whatsoever.
"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."
"The FED creates money, not the treasury." my one dollar bill has a fed seal and a ustreasury seal printed on it.
are you incorrect here or is the wiki article when they mention below....
http://en.wikipedia.org/wiki/United_States_Department_of_the_Treasury#Responsibilities
"Producing all postage stamps, currency, and coinage;..."
funny thing...my debit card didnt work at a grocer today and a i had to pull out 18 in currencies .. and a few coins.
is that a medium of exchange? money, iow?
anyway...without using the austrian label...could you specifically word the positions that have not been mathematically refuted?
additionally, is this the only fact in the post??
"Our total money supply (M3) is around $15 trillion while our national and private debt total around $55 trillion. How do we pay an existing $55 trillion in debt with a total of $15 trillion? We are short $40 trillion..."
the poster wrote of revolution and renaissance???
why the rush when (if true) "when prices are adjusted for inflation, Americans today spend "40% less on clothes, 20% less on food, more than 50% less on appliances, about 25% less on owning and maintaining a car" than they did during the early 1970s. Over that same period, Census Bureau tables show, U.S. median household income rose by at least 18% in constant dollars -- despite the much-lamented (by Shell and others) decampment of "once flourishing" manufacturing jobs to China and elsewhere. That's why even America's poorest people nowadays can afford automobiles, cellphones and TVs."
http://search.mises.org/search?q=cache:qonZoei_H4IJ:blog.mises.org/archives/010595.asp+%22In+an+online+debate+with+the+Atlantic%27s+economics+writer%2C+Megan+McArdle%2C+&access=p&output=xml_no_dtd&site=default_collection&ie=UTF-8&client=default_frontend&proxystylesheet=default_frontend&oe=UTF-8
does the above sound like malinvestments?? less on clothing, less on food, automobiles?
I applaud your strident confidence in what you wrote.
I'm sure the fact-squaring errors are mine.
sthomper: are you incorrect here or is the wiki article when they mention below.... http://en.wikipedia.org/wiki/United_States_Department_of_the_Treasury#Responsibilities "Producing all postage stamps, currency, and coinage;..."
The treasury is responsible for less than 1% of the money supply. But what does this have to do with my points in anyway whatsoever? What does this have to do with the fact that all money is not debt money, and the monetary base can be recycled (velocity) to pay off all debt? What does this have to do with 100% reserves, or the debt superstructure? Like I said, all of your positions have been refuted, unless you can show me otherwise.
Read my comments. You guys conflate all forms of money into one category, and you generally know nothing about monetary theory, or economics really.
"your positions"
ive never claimed any position. ive just asked questions.
i assume you mean the private banks credit on top of the currency as 'the money'? unless there is some other money to which private banks in the us have. which i thought to a great degree were 'limited' by reserve ratios mandated by the federal reserve (note the word federal).
if i cash a check..isnt a federal reserve note what is given to me, which according to the wiki link, is made by the us treasury??
is there some other money to which you refer? the original poster even brought up the M3, which is comprised of different states of dollars ( if what i read is true). i didnt see any conflating.
100% reserves isnt a position that is refuted...its just a method of money holding that, from what i read, doesnt take place and likely never has.
i would guess that a paper dollar in hand isnt a debt...unless the govt somehow has placed citizens into a debt-state and any money held by anyone would be considered owed. that i am not sure about however.
but i thought a key tennant of so-called austrian econ was the business cycle and the harm it brings.
but if the figures i posted earlier about lower prices for many goods is true, and the prices have decreased in relation to wages from 3 decades ago....is the current money regime a 'bad' thing?
sthomper: "your positions" ive never claimed any position. ive just asked questions. i assume you mean the private banks credit on top of the currency as 'the money'? unless there is some other money to which private banks in the us have. which i thought to a great degree were 'limited' by reserve ratios mandated by the federal reserve (note the word federal). if i cash a check..isnt a federal reserve note what is given to me, which according to the wiki link, is made by the us treasury?? is there some other money to which you refer? the original poster even brought up the M3, which is comprised of different states of dollars ( if what i read is true). i didnt see any conflating. 100% reserves isnt a position that is refuted...its just a method of money holding that, from what i read, doesnt take place and likely never has. i would guess that a paper dollar in hand isnt a debt...unless the govt somehow has placed citizens into a debt-state and any money held by anyone would be considered owed. that i am not sure about however. but i thought a key tennant of so-called austrian econ was the business cycle and the harm it brings. but if the figures i posted earlier about lower prices for many goods is true, and the prices have decreased in relation to wages from 3 decades ago....is the current money regime a 'bad' thing?
You should read my comments before you continue.
sthomper:if the figures i posted earlier about lower prices for many goods is true, and the prices have decreased in relation to wages from 3 decades ago....is the current money regime a 'bad' thing?
Yes, the positives mentioned are a product of the evolving market, not the current money regime and would be even more positive if the market was freer.
We are the soldiers for righteousnessAnd we are not sent here by the politicians you drink with - L. Dube, rip
sthomper wrote:
Yes, businesses are constantly modeling to analyze sales and manufacturing strategies. For example:
Above is a simple spreadsheet model that displays how many more items must be sold to maintain the same amount of gross profit upon a price reduction. If the sale price is reduced from $1,000 to $900, then 30 units must be sold instead of 20 (base). Total sales must go from $20,000 to $27,000.
If costs per item are reduced from $700 to $600, then only 15 units need to be sold instead of 20 (base). Total sales can be reduced from $20,000 to $15,000.
Armed with this modeling tool, questions are quantified. Is it possible to sell 50% more units? Are there enough customers? Marketing leads? Mfg capacity? You can keep tweaking price, costs and sales to formulate strategies with other groups in your company. A new base may be established to help establish sales expectations at various time intervals.
The effects of the exponential growth of debt may also be modeled:
In this simple spreadsheet model, we can see that the amount of debt and the gap between money and debt will perpetually grow even if the money supply is not increased. As the gap grows, the money supply (if constant) becomes a smaller and smaller percentage of the total debt. For example, if it is 27% now (15/55) it will eventually be reduced to 17% (15/85). The result would be that the money supply would effectively contract.
In order to keep the same ratio as now, the money supply (M3) would need to be expanded from $15 trillion to $23 trillion. This would raise the total debt from $100 trillion to $108 trillion and the gap from $85 trillion to $93 trillion.
Since all new money may only be created as debt, we can see that we will never be able to repay the debt and it will grow exponentially.
This simple spreadsheet does not take the human element into account other than to project that every person in the U.S. (300 million) will need to borrow $9,862 dollars a year. A family of four will need to borrow almost $40,000 per year. Can this be sustained? I should mention that what ever the government borrows may be subtracted from private sector borrowing projections.
The modeling can be refined by adding historical trends, impact of interest rates, unemployment, income averages, GDP, etc. A range may be calculated to analyze the required human behavior. For example, will the average person need to take on a second job?
The model may be further refined by using higher math logic. For example, Laplace transformations may be applied.
Cheers,
Larry
for example, Myron Scholes, the Nobel Prize-winning economist, partnered in the famous "Black–Scholes" option pricing model's differential equation (Scholes is said to be the father of the derivatives market).
The equation was based on a widely used heat transfer calculation, thus an engineering approach. Yea, derivatives are terrible from the peoples prospective, but genius for malevolent banks. If allowed to continue, the big banks using this model will have all wealth transferred to them.
undoubtedly the use of math helps predict human action but it can only be imperfect. Human action cannot be predicted regularly due to changes in preferences and though preferences can be linked to quantities (caloric intake, etc.) it is not possible to extrapolate perfectly from even this relationship (with the rise of ascetes being a counterexample).
And from a purely theoretical view, this anti-interest theory proves far too much for it's own good. If the problem of interest is that it grows to an extent where it can never be repaid, then why do people and businesses profit? If interest makes up profit then how can profit even exist -how can long structures of production exist? Yet they do and as long as this is true it shall be a contradiction in the anti-interest debate.
If the money supply is stable dept could not possibly continue to grow.
You need to stop treating money like it is some kind of economic phenomena. It's a good on the market just as anything else and it also follows supply and demand just as anything.
If more people dipped into credit that would eventually raise the price of credit. Eventually interest rates would be at a point where it was more cost efficient to use savings. As more people dip into savings the cost of credit would lower and it would fluctuate in this manner. Supply and demand.
Your numbers are arbitrary. In our history interest rates were much higher and we had different monetary behavior then we have now. Also all your stats are pulled from an era where the price of credit has been subject to price controls by the fed. Your whole form of reasoning stems from Inductive reasoning.
DrKrbyLuv: dont succesful businesses use mathematical models of some variety to predict human action all the time? Yes, businesses are constantly modeling to analyze sales and manufacturing strategies. For example:
No they do not. They use mathematical models to guess human action. They predict nothing as they are speculating. It's a gamble and if their speculation is a good one than they may profit. No amount of mathematical prediction can predict or manipulate human action. Mathematical predictions couldn't have saved the horse and buggy industry. Any one who believes it will save their industry is also in error. It can only help them make educated guess but does not predict anything. Most mathematical models are created arbitrarily and it's variables are decided arbitrarily as is their values.
Statistician's can only paint a one sided picture. They only reveal what may be seen but what is not seen. People have often made arbitrary connections between homicide's in the summer. The concept that heat causes people to kill more. While the stats may show a correlation the conclusion no less stems from a form of inductive reasoning and is entirely arbitrary.
DrKrbyLuv:Armed with this modeling tool, questions are quantified. Is it possible to sell 50% more units? Are there enough customers? Marketing leads? Mfg capacity? You can keep tweaking price, costs and sales to formulate strategies with other groups in your company. A new base may be established to help establish sales expectations at various time intervals.
These models do not help business's in all cases. They can help assist the decision making process of a business but they are not conclusive.
This is where mathamatician's really fail. They think that everything can be conclusively proven via math.
Back to my previous point. They think that human behavior can be modeled and predicted via math. It's a huge fallacy.
So I'll state it again. When your mathematical models can accurately predict human behavior come let me know. I'll want to know which stocks to invest in since you will some how have an eye into the future.
filc:This is where mathamatician's really fail. They think that everything can be conclusively proven via math.
Good mathematicians recognize both the potential and limitations of their discipline. A good mathematician doesn't make these kinds of assumptions.
K.C. Farmer: filc:This is where mathamatician's really fail. They think that everything can be conclusively proven via math. Good mathematicians recognize both the potential and limitations of their discipline. A good mathematician doesn't make these kinds of assumptions.
Thats true, I spoke too generally which isn't good either.
Larry is correct.
Fact : All new money only comes into exsistance as an interest bearing loan.
Fact : When that loan principle is repaid that money is extinguished.
Question : Where does the money that one person uses to pay his interest come from?
Fact : Someone else's loaned principle.
Question : Wouldn't that make it impossible to get out of debt?
I think that answer is obvious.
tomozope: Larry is correct. Fact : All new money only comes into exsistance as an interest bearing loan. Fact : When that loan principle is repaid that money is extinguished. Question : Where does the money that one person uses to pay his interest come from? Fact : Someone else's loaned principle. Question : Wouldn't that make it impossible to get out of debt? I think that answer is obvious.
Fact: The moon is made of cheese.
These kinds of posts are generally taken that seriously. Mind backing up your baseless assertions? Rather then asking us to just blindly trust you why not at least attempt to educate us? Some reference for starters?
Even if you were correct though how did you disprove any Austrian "Theory"?
I only have three questions for the austrian theory, which I think they ought to answer.
Where is the gold going to come from?
How much gold is going to be needed to have it work as a general meduim of exchange?
How is it going to be put into circulation?
Here are some references for you. I hope this helps.
tomozope:Where does the money that one person uses to pay his interest come from?
tomozope:Wouldn't that make it impossible to get out of debt?
Isn't this contradictory -he pays his principal and interest yet is unable to get out of debt?
Even if he takes out another loan he can still get out of debt so the debt cycle just continues over and over again I don't see it necessarily destroying society -technically wages are debts yet mankind is better off with them.
I think the answer is obvious :)
(no hard feelings my snarky comment was just a joke)
tomozope:Where is the gold going to come from?
Why does it need to come from any where? It already exists. Silly question.
Where in the austrian creed to we mandate gold? Austrian's argue that whatever unit of exchange that will be most widely used is emerged as a market entity.
tomozope:How much gold is going to be needed to have it work as a general meduim of exchange?
Why does there need to be a quantity? What kind of nonsensical asinine concept do you have to make you think we all need exactly X units of gold to function. Also why does it have to be gold? Why not silver? Why not platinum? Why not a mix? Who knows what will be realized when the violent imposition of a fiat monetary system is removed.
Quantity is not important and if you think it is you have least economic understanding here on this forum. There is enough silver and gold for the entire globe to operate with and everyone would have everything he needed to trade and a fuly functional capitalist system could function.
You tell me, how much gold SHOULD everyone have based on your arbitrary assumptions? Maybe you should pull out your trusty calculator for this one.
tomozope:How is it going to be put into circulation?
How did it originally get put into circulation? How did paper money get put into circulation? How do cigarette's get put into circulation? This detail is not for us to decide. We are not gods or socialist dictators. Consumers demand how it gets circulated, not us.
Do you know what an economy is? Because based on your 4 "important" quotes before it seems you missed the boat somewhere. Also quotes aren't really references. Do you mind citing an actual periodical? I can site you dozens of books =p. You need not leave this site to reach them.
FYI, Economics is not the study of monetary theory. Monetary theory is but one sub-catagory.
Because if we are going to have any of it we would need to get some of it. If we can't get any of it then why even discuss using it because history has proven that the people never wanted to use the gold for money and they always preffered the paper over the gold. Any study of history shows this.
Then the Austrians should praise bank credit as the best medium of exchange because there is no law calling it money but it's what we use for money. It's so widely used that you can purchase anything in the world, including gold.
There needs to be enough quantity in order for soceity to function. If farmers can't plant crops (takes money) then we all starve. If there isn't enough money to buy gas we can't drive, ect...... Why would you want to use metals anyways? If the people preffered metals so much right now they would just use the U.S. Coinage all the time anyways. People preffer using the checking accounts, it's easier, more convient, and it works. P.S. We don't have a fiat money system, even Ben Bernanke will tell you that. We have a credit money system with a very small fiat component.
There simply isn't enough gold ever mined in the history of the world to make it work as a medium of exchange. I don't hate gold or love it, but I've done the math. YouTube Byron Dale "can we go to gold" he did the math, and it is correct. There just isn't enough. The principles of gold/silver under the 1792 free coinage act is what is important.
Gold always went into circulation as a wealth under the 1792 free coinage act. When the banking system switched us off from allowing gold/silver to be freely monetized they switched our money from an evidence of wealth to an evidence of debt. It matters not what you use for money but the principles under which it functions. But the paper money still wasn't the true money in the system, it switched over to "bank credit" or the banks "promise to pay" which is still what we use for money today.
I have no idea what an economy is, how about you tell me, and while we are at it can you tell me what the fuel that drives an economy is, and how that fuel can be used to only benifit a few people at the top or benifit all of society. What is the most effective tool for transfering all the wealth of the people into the hands of a few? Can you tell me what wealth is and the only way it can be created?
When did I say anything about monetary theory, I am stating monetary fact? Its the way our system works.
"The government claims to hold about 250 million oz of gold...."
the above was stated in a mises blog thread some time ago. i dont know if it is true or not. there may be as much gold in the hands of people as well - in other forms than coin or bullion.
i believe a dime weighs about 2.5 grams. the dime seems to me a usable practical coin. i am able to read it
250 million ounces of gold could yield about 3 billion 2.5 gram gold coins.
i gues they could be traded electronically..like a lot of things now. but there if you needed them.
i dont know very well the preference of previous gold/silver money users. they obviously had some appeal.
people used gold and silver coins - a lot from what i read.
would it be more accurate to say that people wanted gold and silver as money and paper as a corresponding substitute for their gold and silver amounts?
tomozope:Because if we are going to have any of it we would need to get some of it. If we can't get any of it then why even discuss using it because history has proven that the people never wanted to use the gold for money and they always preffered the paper over the gold. Any study of history shows this.
ha ha! tell another one!
tomozope:hen the Austrians should praise bank credit as the best medium of exchange because there is no law calling it money
ha ha, keep going!
tomozope:P.S. We don't have a fiat money system, even Ben Bernanke will tell you that. We have a credit money system with a very small fiat component.
a lolstorm is brewing !
tomozope:There simply isn't enough gold ever mined in the history of the world to make it work as a medium of exchange.
will it never stop, my sides are aching
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
Tomozope,
You should read some of the material on mises.org before posting here.
...just a suggestion.
The people preffered the paper because it was more convienent, just as people today preffer swiping a plastic card to debt this checking account -vs- writing checks or paying with cash, or coin.
Why wouldn't the people preffer the easiest and most conveinient method of payment?
Do you really believe that a banks deferment of payment is money?
fakename,
It's true indivually you can get out of debt but collectively we cannot. The only way for you to pay off your personal loans is to capture somebody else's loaned principle so you can pay your interest. All you've done there is roll the debt over onto someone else.
Giant_Joe,
What would you suggest I read?
1. Human Action, particularly the section dealing with money and the media of money.
2. Just about any article about the nature of theory of pure interest.
3. Any article regarding time preference and its influence on the structure of production.
That's my short list and no I'm not Joe. Just someone who thought it would be nice to give a basic rundown of some important theoretical frameworks.
"The power of liberty going forward is in decentralization. Not in leaders, but in decentralized activism. In a market process." -- liberty student
ladyattis,
can you link them for me?
tomozope:credit money system
this credit money....is it accounted in dollars? are dollars legal tender? are the FRN paper dollars the very definition of fiat money?
the answer to all these questions and more; is yes.
There is no statutory definition of the dollar. "dollars in your checking account" are not legal tender, FRN's are legal tender. Any coin or currency produced by the government are legal tender including federal reserve notes.
sthomper:"When debt is repaid it is extinguished, that is that the money ceases to exist which means that money can only be used to repay principal debt once."
No, this money usually enters someone else's bank account. The only time the FRB process is reversed is when people withdraw currency and don't put it back into a bank account i.e spend it if you live in america.
Criminals, there ought to be a law.
Criminals there ought to be a whole lot more. Bon Scott.
tomozope:There is no statutory definition of the dollar.
771 grains of silver. Statutory doesn't mean legitimate though.
Can't edit. Last post should say i.e not spend it if you live in america.
Umm sorry. I only had two pages of this thread showing up when I posted.