Grayson has kindly agreed to help me and answer my questions in regard to Mises' Human Action, this will probably be a long thread and anyone is allowed to post questions in regard to Mises' Magnum Opus.
So here goes
I think it would be more convenient if we had a private conversation on this matter rather than clogging up the entire forum with the discussion. So just some quick questions off the top of my head dealing with earlier chapters 1. The nature of praxeology Despite spending several chapters on the subject I still feel as though the praxeological method is defined rather hazily, so am I right in considering that the praxeological method involves the creation and utilization of imaginary constructs as to human society and action based upon the "praxeological law" which is that man acts in accordance with his value preferences, Is this correct? Is praxeology a greater and larger study in some respect? 2. The leap Is there a reason why it seems as though Mises seems (to me) to jump from a meticulous dissection of all forms of exchange and creating a number of dichotomies (interpersonal, autistic, ECT.) he then seems to jump straight into the market society where all men automatically work for exchange with the universally accepted means of exchange? I feel as though its just a bit of a leap, not that its wrong. 3. The placement of "the market" Is there a reason why Mises talks multiple times about the market before his section which is totally devoted on it? For instance it seems to me as though "The sphere of economic calculation" would be better placed after the market section once the true nature of the market is revealed? 4. The ERE At the point where I'm at (Chapter 16) does the ERE ever reappear for analysis? I'm still at a bit of a loss for exactly the purpose that it served except the contrast of a sort of "Utopian economy" and the impossibility of the final state of rest in any but an imaginary construct 5. Empirical evidence Am I right in thinking that Mises' attack against empirical evidence being employed in economic analysis is that it can be fallacious because of the fact that variables cannot be tested and empirical studies ignore what really drives human behavior? While I agree with the basic premise I don't understand why it can't help to lead us to certain conclusions as long as we are primarily praxeological about our analysis. Isn't this practically proved by the fact that Mises constantly sites how capitalism has improved the standard of living for all humanity and that much of Rothbard's work was based off of empirical evidence?
"am I right in considering that the praxeological method involves the creation and utilization of imaginary constructs as to human society and action based upon the "praxeological law" which is that man acts in accordance with his value preferences, Is this correct? Is praxeology a greater and larger study in some respect?"
The constructs themselves are not based on praxeological laws. The constructs are a set of assumptions. They are mental tools which help us think through praxeological considerations and discover praxeological laws.
Is there a reason why it seems as though Mises seems (to me) to jump from a meticulous dissection of all forms of exchange and creating a number of dichotomies (interpersonal, autistic, ECT.) he then seems to jump straight into the market society where all men automatically work for exchange with the universally accepted means of exchange? I feel as though its just a bit of a leap, not that its wrong.
There is no such jump. Part 3 provides a transition from considering non-market action to market action by explaining what calculative action is, and how it differs from non-calculative action. Only after he has carefully spelled out that difference does he embark upon explaining how a market economy functions.
Is there a reason why Mises talks multiple times about the market before his section which is totally devoted on it? For instance it seems to me as though "The sphere of economic calculation" would be better placed after the market section once the true nature of the market is revealed?
You have to understand what economic calculation is before you can understand an economic system that is predicated upon it.
At the point where I'm at (Chapter 16) does the ERE ever reappear for analysis? I'm still at a bit of a loss for exactly the purpose that it served except the contrast of a sort of "Utopian economy" and the impossibility of the final state of rest in any but an imaginary construct
Yes, the ERE is used several times after that point. The ERE helps you think through the distinction between interest and profit, and helps you understand how non-ERE markets tend toward final prices.
Isn't this practically proved by the fact that Mises constantly sites how capitalism has improved the standard of living for all humanity and that much of Rothbard's work was based off of empirical evidence?
Mises' statement is an illustration, not evidence. Rothbard's empirical work is economic history, not economics.
"The constructs themselves are not based on praxeological laws. The constructs are a set of assumptions. They are mental tools which help us think through praxeological considerations and discover praxeological laws."
Could you give me an example of full praxeological reasoning? Something I don't understand is exactly how far praxeological laws run, for instance we have the praxeological axiom from which we can deduce our models, but then from here and using our models can we discover laws that are also praxeological? For instance if we reason it out and see that without money calculation is impossible would this then be a praxeological law? Or would this be catelectics? Also I don't understand the difference between economics and praxeology.
"Mises' statement is an illustration, not evidence. Rothbard's empirical work is economic history, not economics."
What do you mean illustration? Surely the point of providing the example of the fact that living conditions have improved under capitalism is meant to demonstrate Mises' point, if empirical support cannot help to back up an economic claim then there is no point in including it. Surely Rothbard's work on economic history in both "America's Great Depression" and his work on banking was meant to give an example of the fact that the Austrian theory was correct.
Could you give me an example of full praxeological reasoning? Something I don't understand is exactly how far praxeological laws run, for instance we have the praxeological axiom from which we can deduce our models, but then from here and using our models can we discover laws that are also praxeological?
When we use imaginary constructions to reason things out, we are still deriving conclusions from axioms. The imaginary constructions are just a set of assumptions which we use to isolate factors in our mind. To understand originary interest, we must distinguish it from profit. To help us isolate originary interest in our minds, we imagine a world in which there is no uncertainty, and thus no profit. We don't really derive originary interest from the ERE; originary interest is a category of action, and can be derived from the definition of action simply by spinning out further implied definitions, even without any imaginary constructions; just as we can derive the laws of autistic exchange directly from the action axiom even without Crusoe thought experiments, even though the Crusoe thought experiment might be a helpful tool. Imaginary constructions are thinking aids, not premises.
What do you mean illustration? Surely the point of providing the example of the fact that living conditions have improved under capitalism is meant to demonstrate Mises' point, if empirical support cannot help to back up an economic claim then there is no point in including it.
A geometry teacher might have his students see with measuring tape how the Pythagorean theorem plays out in the real world, as an illustration. That does not mean he's treating the measurements as proof of the Pythagorean theorem.
Surely Rothbard's work on economic history in both "America's Great Depression" and his work on banking was meant to give an example of the fact that the Austrian theory was correct.
No. Rothbard used economic theory along with empirical data for the purpose of determining what caused what during the Great Depression. He did not approach the historical event as a "test" for the theory.
Grayson Lilburne:A geometry teacher might have his students see with measuring tape how the Pythagorean theorem plays out in the real world, as an illustration. That does not mean he's treating the measurements as proof of the Pythagorean theorem.
This is a very 'greek' (platonic) insight.
wiki:A Form is an objective "blueprint" of perfection.17] The Forms are perfect themselves because they are unchanging. For example, say we have a triangle drawn on a blackboard. A triangle is a polygon with 3 sides. The triangle as it is on the blackboard is far from perfect. However, it is only the intelligibility of the Form "triangle" that allows us to know the drawing on the chalkboard is a triangle, and the Form "triangle" is perfect and unchanging. It is exactly the same whenever anyone chooses to consider it; however, the time is that of the observer and not of the triangle.]
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
"When we use imaginary constructions to reason things out, we are still deriving conclusions from axioms."
So then am I right in thinking that all of Mises' entire examination of economics is derived from the axiom "man acts to bring about what he believes will be a more satisfactory state" and then from there he builds all else? Would then the statement "money is tool for calculation and exchange" be a case of a praxeological law? Or would it be nothing more than an assumption for certain events, a condition only true under certain circumstances for instance the above would be an assumption because it does not imply that people are necessarily exchange things or accept money for transactions. If however I said "When individuals use money as a means for satisfying tier desires money becomes a tool for calculation and exchange through the price level and profit and loss" just as when I say "a quadrilateral is an object where all sides have equal length" is not necessarily true, it is only true if the quadrilateral in question is a rhombus, and therefore the above is an assumption, but when I say "a rhombus has four sides of equal length" this is then a geometrical law.
Are these two cases comparable?
"A geometry teacher might have his students see with measuring tape how the Pythagorean theorem plays out in the real world, as an illustration. That does not mean he's treating the measurements as proof of the Pythagorean theorem."
So it is indeed a case of backing up a statement? Although it is not the reason behind it per se? For instance if the teacher were to do this and the two legs did not, when their squares were added together, equal the hypotenuse, then the teacher would look like a bit of an ass. So this is a case of it does indeed help to back up the statement made.
"He did not approach the historical event as a "test" for the theory."
And what would Rothbard have done if his statistics did not match Austrian theory?
I'm sorry if I'm being difficult but this is what I've always wondered about the Austrian method. My feeling has always been that economics should be primarily logical/praxeological and then from there you attempt to validate your claims with empirical evidence. If the statistics do not match up with your theory consistently when all major elements are ideal then you're doing something wrong.
Yes, laws that refer to economic calculation are only applicable to conditions in which economic calculation is present.
For instance if the teacher were to do this and the two legs did not, when their squares were added together, equal the hypotenuse, then the teacher would look like a bit of an ass. So this is a case of it does indeed help to back up the statement made.
If the teacher exhibited results that did not agree with the Pythagorean theorem, it would only demonstrate that the teacher made a mistake in measurement or in calculation, or that he is not in fact dealing with a right triangle in the first place. It would not refute the Pythagorean theorem.
If the data does not seem to demonstrate the playing out of a certain market mechanism described by economic theory, (assuming the data is correct) that would indicate that circumstances must have been dominated by another market mechanism (also described by pure economic theory)/set of factors, or the interplay of several market mechanisms/sets of factors. The economic historian uses data to determine which economic laws are most relevant in any given episode. If the economic historian discovers trustworthy data that show that after an increase in the supply of a certain good, the price for that good increased, instead of falling, that would not testify against the law of supply. That would instead be an indication that other relevant factors are at work, like perhaps a precipitous drop in the supply of another good for which the first good can serve as a substitute.
If the statistics do not match up with your theory consistently when all major elements are ideal then you're doing something wrong.
The most historical data can do is give an economist a clue that perhaps he has performed fallacious reasoning in deriving the economic theorems he has been operating with. But even then, he must use discursive reasoning to catch the fallacy, and then to adjust his theory according to corrected reasoning. Say you went to geometry class tired, and, by making errors in logic, mistakenly derived from the axioms of geometry a faulty version of the Pythagorean Theorem that says that A squared plus B squared is actually C cubed. Then, through the course of measuring right triangles you found that the data did not match your theorem. That can be a clue that you had reasoned incorrectly in formulating the theorem. But it is not proof against your theorem. For all you know, you may be measuring incorrectly, or not dealing with right triangles. The historical experience is a clue, but it is not a replacement for correct reasoning. To truly be a geometer, you must not simply notice that A squared plus B squared in your experience generally equals C squared. To be a geometer, you must deductively derive that conclusion from the axioms of geometry. You must spot your error through discursive reasoning, and formulate the correct theorem through discursive reasoning.
I forgot to address this:
"Also I don't understand the difference between economics and praxeology."
Economics, in the stricter sense, is a synonym of catallactics. Catallactics is the subset of praxeology that deals with the market economy, which is the interplay of calculative actions in society.
Mr. Lilburne, if I may ask a question, I've never understood the distinction, within HA (of which, I've read about half) between objective and subjective economics.
For instance, Mises talks about time and capital and money as subjective concepts -they all exist as concepts only because they have reference to acting man. But then Mises talks about wealth and not just subjective wealth as in attaining ends but also material wealth which seems to be a wholly objective thing. Is there a tension between subjectivity and objectivity then in HA?
And two, is it just me or doesn't economics seem to have a very existentialist flavor to it?
I don't know what passages make you think Mises thinks of wealth as objective. Material things only constitute wealth if an individual subjectively esteems them to be useful.
What do you mean by an existentialist flavor?
"These grumblers do not realize that the tremendous progress of technological methods of production and the resulting increase in wealth and welfare were feasible only through the pursuit of those liberal policies which were the practical application of the teachings of economics." (44)
"Those fighting for free enterprise and free competition do not defend the interests of those rich today. They want a free hand left to unknown men who will be the entrepreneurs of tomorrow and whose ingenuity will make the life of coming generations more agreeable. They want the way left open to further economic improvements. They are the spokesmen of progress." (119)
So these passages suggest that Mises finds liberalism and economics a positive and objective good. Perhaps he is saying that it is an objective good from the fact that everyone's subjective valuations are maximized but then, isn't there an even more jarring dissonance between subjectivity and objectivity in HA/econ?
And by existentialist flavor -I think that heidegger, believed that being was=to the human person and his experiences and so his philosophy and metaphysics was focused on the acting person and was further reflected in his terminology like how something can be "at-hand" and etc. Isn't this shockingly similar to Misesean econ?
fakename: So these passages suggest that Mises finds liberalism and economics a positive and objective good. Not really. Maybe he thinks poverty makes a person more spiritual, and so the richer the world gets, the worse things are. All he is saying is that liberalism and capitalism makes everyone richer. He is not saying wether it is good or bad. Perhaps he is saying that it is an objective good from the fact that everyone's subjective valuations are maximized but then, isn't there an even more jarring dissonance between subjectivity and objectivity in HA/econ? Is 2+2=4 a subjective statement, that can be agreed or disagreed with depending on the subjective opinion of the individual? Wether you think it is or isn't, Mises states quite clearly in HA that of course it is objectively true. There is only one truth, only one logic, only one method of deductive reasoning. That is his position, which I happen to totally agree with. Does that mean HA has some dissonance between subjectivity and objectivity, given that he says values people place on things os subjective? Of course not. Truth is objective. There is only one truth. Opinions, on the other hand, are subjective. And they determine price. "I am willing to pay $20 for this thing" is another way of saying "In my opinion, this thing is worth $20." The content of economics is [ideally] a series of objective truths. [For example: Unless there are special circumstances, people would rather pay less than more for something]. The topic studied by economics are how people act given their subjective values. So although there is indeed room for objective statements and for subjective values, they live in harmony, not in dissonance.
So these passages suggest that Mises finds liberalism and economics a positive and objective good.
Not really. Maybe he thinks poverty makes a person more spiritual, and so the richer the world gets, the worse things are. All he is saying is that liberalism and capitalism makes everyone richer. He is not saying wether it is good or bad.
Perhaps he is saying that it is an objective good from the fact that everyone's subjective valuations are maximized but then, isn't there an even more jarring dissonance between subjectivity and objectivity in HA/econ?
Is 2+2=4 a subjective statement, that can be agreed or disagreed with depending on the subjective opinion of the individual? Wether you think it is or isn't, Mises states quite clearly in HA that of course it is objectively true. There is only one truth, only one logic, only one method of deductive reasoning. That is his position, which I happen to totally agree with. Does that mean HA has some dissonance between subjectivity and objectivity, given that he says values people place on things os subjective? Of course not.
Truth is objective. There is only one truth. Opinions, on the other hand, are subjective. And they determine price. "I am willing to pay $20 for this thing" is another way of saying "In my opinion, this thing is worth $20."
The content of economics is [ideally] a series of objective truths. [For example: Unless there are special circumstances, people would rather pay less than more for something]. The topic studied by economics are how people act given their subjective values.
So although there is indeed room for objective statements and for subjective values, they live in harmony, not in dissonance.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
"All he is saying is that capitalism and liberalism makes everyone richer"
That's exactly my point -how can Mises claim that the subjective valuation of individuals (which can lead to a multiplicity of effects) always tends towards making everyone richer (a word which itself should be fully subjective and that doesn't have to do with material wealth, yet seems to be taken objectively)?
So again, there must be some subjective-objective tension...or something?
fakename: "All he is saying is that capitalism and liberalism makes everyone richer" That's exactly my point -how can Mises claim that the subjective valuation of individuals (which can lead to a multiplicity of effects) always tends towards making everyone richer He does not say that the subjective valuation of individuals makes everyone richer. he says capitalism does. They are NOT the same thing. It's like asking "How can mere bricks (which can be used in a multiplicity of ways) always tend toward making everyone live in good homes, as opposed to sleeping on the streets exposed to the elements?" It's not the bricks that do it. It's the use the architect puts them to. Similarly, it is the way Capitalism "uses" people's subjective valuations, i.e. giving them freedom to do as they please with their property [peacefully], that makes everyone richer. How capitalism does that is in the book, I think. (a word which itself should be fully subjective and that doesn't have to do with material wealth, yet seems to be taken objectively)? "Rich" certainly is fully subjective, in the wider sense. But he is using it in the technical sense of material wealth. Should he have carefully pointed that out? Maybe he did, I don't remember. But it should be clear from the context. So again, there must be some subjective-objective tension...or something? Emotions and feelings are the most subjective thing there is, I think we can agree. And yet, they can be STUDIED dispassionately. One can read books and learn how to awaken emotions in people. Similarly, AE studies subjective values. But studies them dispassionately, objectively, with out taking sides, and using cold logic.
That's exactly my point -how can Mises claim that the subjective valuation of individuals (which can lead to a multiplicity of effects) always tends towards making everyone richer
He does not say that the subjective valuation of individuals makes everyone richer. he says capitalism does. They are NOT the same thing.
It's like asking "How can mere bricks (which can be used in a multiplicity of ways) always tend toward making everyone live in good homes, as opposed to sleeping on the streets exposed to the elements?"
It's not the bricks that do it. It's the use the architect puts them to.
Similarly, it is the way Capitalism "uses" people's subjective valuations, i.e. giving them freedom to do as they please with their property [peacefully], that makes everyone richer. How capitalism does that is in the book, I think.
(a word which itself should be fully subjective and that doesn't have to do with material wealth, yet seems to be taken objectively)?
"Rich" certainly is fully subjective, in the wider sense. But he is using it in the technical sense of material wealth. Should he have carefully pointed that out? Maybe he did, I don't remember. But it should be clear from the context.
Emotions and feelings are the most subjective thing there is, I think we can agree. And yet, they can be STUDIED dispassionately. One can read books and learn how to awaken emotions in people. Similarly, AE studies subjective values. But studies them dispassionately, objectively, with out taking sides, and using cold logic.
Is this correct?
Does this statement mean that distribution in a market economy is not distribution per se? Merely an aspect of exchange which does indeed distribute out scarce goods and services? If not I don’t understand this statement
fakename,
Praxeology and thymology are objective sciences concerning subjective values. Thymology can make make objective statements (though not with certainty) about the content of the ends of others. Given those ends, praxeology can help determine whether any means chosen are serviceable.
What exactly does mises mean in the section on monopoly prices when he is talking about labor unions? He states that the labor unions end up restricting supply but that this does not lead to a monopoly rate, how is this possible? Surely a limiting of available supply leads to a monopoly wage rate? The only reasoning to his meaning is the idea that the union absorbs as much labor as possible as it gains power until the point where it can effectively restrict supply. In this way all those who are in “before the gates close” receive higher wage rates because at this point the labor union does not attempt to restrict supply any further than is already the case, that is to say supply is fixed at X which is the wage at which all workers will labor for, but none will work below X, in this way the new supply is X and no one can be supplied below this number, but at the same time the labor union will not attempt to go any further and cut supply beyond this number. It is as though the entire workforce now only consists of those individuals who are in the labor union.
A monopoly price is, by definition, the result of a producer withholding some of his own stock. The labor which a union keeps out of a market is not part of "the union's stock", which it might otherwise sell on the market. The union does not own the labor which it locks out.
I don’t understand Mises’ conclusion in the chapter dealing with monopoly price. Why does he feel that it is impossible for it to emerge on a free market?
He does not say any such thing. According to Mises monopoly prices CAN emerge on a free market, although there is no way for any regulator to know what price would better serve consumers than the monopoly price, and as a rule (which means usually, not always) they are a result of government intervention.
Why is it that Mises seems to totally disregard the idea of monopoly of demand?
He does not say there cannot be a monopoly of demand. He says a monopoly of demand cannot result in monopoly prices.
Simply because an individual buyer of something will not enjoy the same amount of a good if he had offered a higher price why does this matter?
Restricting demand is not about holding out for a lower price. It is buying less.
There is still an optimal amount of a product that the individual wants, and therefore if a monopoly of demand ensues he will only offer it until this optimal amount is achieved.
That always occurs whether or not there is a monopoly of demand.
Is all that is to be gleaned from section 12 that “all prices effect all other prices”?
No.
What does Mises mean when discussing labor at the end of this section?
Market phenomena are mutually interdependent when they share non-specific factors. Labor is a highly non-specific factor which pervades the entire market. Therefore, labor makes all market phenomena mutually interdependent.
Why is it that labor is needed to integrate the entire pricing system?
Labor is not "needed to integrate the pricing system". The pricing system is integrated because labor is a factor of production which is required in every production process.
“Neither is the pricing process a form of distribution. As has been pointed out already, there is nothing in the market economy to which the notion of distribution could be applied.”
The intention of market participants is not to distribute goods, it is to acquire profits and avoid losses.
Am I right in considering at the end of the chapter Mises’ analysis that costs don’t mean anything
Mises does not say costs "don't mean anything", he says they aren't "independent of personal value judgments"
What is the difference between a money and a medium of exchange?
Money is a commonly used medium of exchange. If one kid, one time, exchanges trading card A for trading card B, only so that later he can exchange B for trading card C, trading card B is a medium of exchange, but it is not money, because it is not used as a medium of exchange by the market in general.
In Mises’ examination of money he seems to say there are two ways which money could have developed, either by forceful decree or by slow evolution through the market process. He seems however, to lean to the latter why is this?
I think "lean" is an understatement. As to why, what part of these 3 paragraphs, or the paragraphs which follow them, are not clear?
"There were authors who tried to explain the origin of money by decree or covenant. The authority, the state, or a compact between citizens has purposively and consciously established indirect exchange and money. The main deficiency of this doctrine is not to be seen in the assumption that people of an age unfamiliar with indirect [p. 406] exchange and money could design a plan of a new economic order, entirely different from the real conditions of their own age, and could comprehend the importance of such a plan. Neither is it to be seen in the fact that history does not afford a clue for the support of such statements. There are more substantial reasons for rejecting it.
If it is assumed that the conditions of the parties concerned are improved by every step that leads from direct exchange to indirect exchange and subsequently to giving preference for use as a medium of exchange to certain goods distinguished by their especially high marketability, it is difficult to conceive why one should, in dealing with the origin of indirect exchange, resort in addition to authoritarian decree or an explicit compact between citizens. A man who finds it hard to obtain in direct barter what he wants to acquire renders better his chances of acquiring it in later acts of exchange by the procurement of a more marketable good. Under these circumstances there was no need of government interference or of a compact between the citizens. The happy idea of proceeding in this way could strike the shrewdest individuals, and the less resourceful could imitate the former's method. It is certainly more plausible to take for granted that the immediate advantages conferred by indirect exchange were recognized by the acting parties than to assume that the whole image of a society trading by means of money was conceived by a genius and, if we adopt the covenant doctrine, made obvious to the rest of the people by persuasion.
If, however, we do not assume that individuals discovered the fact that they fare better through indirect exchange than through waiting for an opportunity for direct exchange, and, for the sake of argument, admit that the authorities or a compact introduced money, further questions are raised. We must ask what kind of measures were applied in order to induce people to adopt a procedure the utility of which they did not comprehend and which was technically more complicated than direct exchange. We may assume that compulsion was practiced. But then we must ask, further, at what time and by what occurrences indirect exchange and the use of money later ceased to be procedures troublesome or at least indifferent to the individuals concerned and became advantageous to them."
if a whole society decided to move directly from direct exchange to indirect exchange using a fiat currency then why would this be impossible rather than just unlikely?
He doesn't say it's impossible, just that it is indeed highly unlikely, especially compared to a market-based evolution, and that even if it did happen at some point somewhere, knowledge of that incident would do nothing to further economic science.
When, in section 4 of chapter 17, Mises talks about miners he seems to act as if they do not affect the economy in the same way that those who receive new money first do, why is this the case? Or am I misinterpreting Mises?
You are indeed misinterpreting him. In the paragraph you're referring to, he is explaining the reasoning of people who say that only in order to refute it.
Does Mises’ entire theory about demand/supply of currency imply that the market can never work very smoothly because prices will necessarily be uneven?
No; why would that be the case?
Can’t the demand and supply for money be predicted by entrepreneurs just like the rest of economic activity?
Money is one side of every exchange, so every entrepreneurial prediction of future prices entails a prediction about the demand and supply of money.
Does Mises imply that after the adjustment period is completed and monetary distribution returns to the comparative levels that they did before inflation that wealth and price structure will be necessarily changed forever?
Those two things contradict each other. Cantillon effects mean that the original comparative levels are never restored.
So unless he is only talking about hyperinflation, what is Mises thinking in this section?
When Mises talks about the "crack-up boom" or the "flight to real values", he is indeed talking about hyperinflations.
Because in the case of demand deposits the bank cannot lend out commodity credit because of the act that then it is no longer redeemable and it is not commodity credit at all.
" the amount of money which its customers have entrusted to it." does not necessarily mean demand deposits. It could mean CDs and the like.
"Restricting demand is not about holding out for a lower price. It is buying less."
Isn't this not necessarily true? If demand decreases then this implies that consumers will not purchase at the previous price, this does not imply that they will not buy previous number of goods at the newly desired, lower, price. Therefore whether a decrease in demand will result in a decrease in supply available at the new price depends upon whether or not the firms selling goods have a better alternative?
For instance, if the buyers of A, are now paying price X from price Y then they will quite likely buy whatever amount of A they want so long as the price is reduced to X. For the firms their supply will only decrease if price X is so low that producing the old amount of A results in a net loss? As far as I can tell the only instance that the above is true is if we assume a state of perfect competition.
"Labor is not "needed to integrate the pricing system". The pricing system is integrated because labor is a factor of production which is required in every production process."
"Market phenomena are mutually interdependent when they share non-specific factors. Labor is a highly non-specific factor which pervades the entire market. Therefore, labor makes all market phenomena mutually interdependent."
Could you expand upon these statements? Or at very least clarify what exactly is meant in this process of "integration"?
"You are indeed misinterpreting him. In the paragraph you're referring to, he is explaining the reasoning of people who say that only in order to refute it."
Does this imply then that in any society where the money supply increases that there will always be a misallocation of resources brought about by inflation if indeed those who bring in the increase in gold play the same effect as those who are given the newly printed bills?
"Those two things contradict each other. Cantillon effects mean that the original comparative levels are never restored."
I didn't know that Richard Cantillon (I assume it's named after him) had something named after his work, although I have heard that in many ways it was indeed a precursor to the ABCT. So why would this be the case that they are never restored to previous levels? Is it because of the fact that those who first recieve the new money will have increased their material wealth so that their demands are necessarily changed? Or is it this culminated with the fact that the market is always changing and therefore there is no possible way that the two are even comparable?
"Because in the case of demand deposits the bank cannot lend out commodity credit because of the act that then it is no longer redeemable and it is not commodity credit at all."
" the amount of money which its customers have entrusted to it." does not necessarily mean demand deposits. It could mean CDs and the like."
But in the case of demand deposits wouldn't what I have said above be the case?
So capitalism and subjective valuations are not the same? I thought that the latter lead to the former. Please describe the differences between the two though, since I myself can't find it in HA.
capitalism is where private people own the means of production and can do as they please with their money. As opposed to socialism, where they dont own it, or fascism/interventionism, where they are told what to do with it.
One can look around and discern by observation if a country is capitalist or not. What I mean is, it is a verifiable fact of reality.
subjective valuation is a theoretical answer to a theoretical q. what determines the price of things? Some say its subjective valuation, others that its the amount of labor invested in it.
Whatever the answer, it's unrelated to what a praticular country chooses as its economic system. As proof, I offer that the world has seen all three systems [caplism fascism, commies] even though there is only one true answer to the q "what determines price?"
As for why doesn't Mises differentiate, I guess because he assumed the difference was obvious.
But most people have called capitalism the system of voluntary exchange and include within it, the ideas of voluntary communism or worker's capitalism (syndicalism) etc. and indeed, people even are willing to include exchange under barter as capitalism even though there is no economic calculation. So it doesn't seem that money or private property (in the strict sense) is necessary for something to be called capitalism.
But is it not the case that voluntary communism and such isn't capitalist?
that's one for people who know more than me.
looking at the situation by analysing events through the lens of private property ownership, voluntary communism does not feature interpersonal exchange of property, since before and after one communist hands over some item and receives some other item from another communist, both items are owned by 'society'.
having individuals barter (direct exchange) is neither destructive of capitalism nor excluded from it, nor is it necessary for it. It is merely compatible with it. It is difficult to imagine private property societies without barter, with lots of people respecting each other by not interfering but being autarkic and not benefitting from division of labour etc.
On the other hand, private property is necessary for capitalism. Money is an important feature of capitalism in practice since economic calculation follows as a consequence of its introduction. Capitalism without money, is like a party without awesome music... its ok, but how much fun can you have.
The most rarified conception of capitalism simply boils down to private property, but since so much interesting and amazing stuff happens when money is in the picture, much investigation into capitalism must find a place for money in the analysis. One could say that money is required for capitalism to flower and give its full fruits.
For all intents and purposes when people advocate capitalism, they are really advocating fully fledged capitalism with all the trimmings. i.e. with money. Why not push the best case......
If demand decreases then this implies that consumers will not purchase at the previous price, this does not imply that they will not buy previous number of goods at the newly desired, lower, price.
Even if the price is lowered sufficiently for the same quantity to be purchased, the good in question is less urgently desired than before, as is directly implied by the drop in demand. That is fundamentally different from the case of monopoly prices. With monopoly-of-supply prices, the restriction of supply is not undertaken because money is less urgently demanded; it is undertaken because taking some of the monopolist's stock off the market will result in higher proceeds.
For instance, if the buyers of A, are now paying price X from price Y then they will quite likely buy whatever amount of A they want so long as the price is reduced to X.
What do you mean "whatever amount they want"? Assuming any given demand curve, they will buy a CERTAIN amount of A at price X.
For the firms their supply will only decrease if price X is so low that producing the old amount of A results in a net loss?
Drops in price do not precipitate shifts of supply curves, they simply involve movement ALONG supply curves.
As far as I can tell the only instance that the above is true is if we assume a state of perfect competition.
Which part of "the above"?
"Labor is not "needed to integrate the pricing system". The pricing system is integrated because labor is a factor of production which is required in every production process." "Market phenomena are mutually interdependent when they share non-specific factors. Labor is a highly non-specific factor which pervades the entire market. Therefore, labor makes all market phenomena mutually interdependent." Could you expand upon these statements? Or at very least clarify what exactly is meant in this process of "integration"?
"Integration" here refers to the connexity of prices. A change in the price of a good results in either upward or downward pressure on the prices of its factors of production, and vice versa. Labor is a factor of production for ALL goods. Therefore the prices of all goods are connected.
Mises thought commodity money expansion could bring about malinvestment, which is why he put the trade cycle portion of Human Action in the economics section, and not in the "intervention" section (although he was somewhat torn on the matter). Rothbard disagreed.
So why would this be the case that they are never restored to previous levels? Is it because of the fact that those who first recieve the new money will have increased their material wealth so that their demands are necessarily changed?
In part, yes. Those people are richer, others who receive the money later are poorer. All these people who are materially affected differently are both producers and consumers in different sectors of the market. This means supply and demand are altered in a myriad different ways, which disarranges the constellation of prices, changing forever the shape of the market. There is no reason to believe that every shift in fortune in every spot of the market will be met by an equal and opposite counter-shift after malinvestments are liquidated and consumption is moderated.
Yes, I believe so.
"So capitalism and subjective valuations are not the same? I thought that the latter lead to the former. Please describe the differences between the two though, since I myself can't find it in HA."
First of all, "A causes B" is different from "A=B". Secondly, what do you mean by "capitalism leading to subjective valuation"? Capitalism does not lead people to value things. All humans, by virtue of being actors, value things, with or without capitalism.
Capitalism, according to both Mises and Marx, involves both money and private property. I don't know who these "most people" you are referring to are.
I've been rather busy, so sorry for the tardiness...
Anyways, what I meant by "leads to" is something like "comprehended under" that is capitalism is comprehended under the category of subjective valuation. So to some intuitive extent capitalism seems to imply subjective value. I guess what I should say is that since we all have value subjectivity then, capitalism is implied as the consequent by modus ponens.
From the foregoing, I suppose that A causes B is at some level, the same as A=B.
Suppose that A=B, doesn't this mean that Every A is Every B? Or what comes to the same, that all A such that if A is A, then every b?
That is, it is possible for every identity to be logically the same as a conditional statement? And if a conditional statement sometimes means causality, perhaps there are times when cause equals identity? I'm not sure, the only way to check I think is to use a truth table but even then, there's the middle term "conditional statement" which is undistributed. Yet, still there seems to be some intuitive truth to the statement that sometimes equality is the same as causality -perhaps after the manner of formal cause? Sort of, what a thing is causes it to be...
You are the aristotle expert out of us two, though so I anticipate your agreement or disagreement with my analysis.
By "most people" I always thought about 90% of the people on these forums didn't nececssarily include money and private property under capitalism because they allowed communes to exist under their systems of anarcho-capitalism. I guess what you're trying to tell me is that private property and such is a necessary condition for anarchy but it doesn't exclude any other system too though it is necessary.
How much logic have you studied?
I see two possibillities:
1. You are familiar with some of the concepts in a vague way, but have not nailed things down, causing you to be totally confused about these matters.
2. Like some of my pals did in high school, you have no clue and are trying to BS your way out of it.
In either case, time to hit the books. Get the easiest shortest one that has all the concepts you mentioned in its index. You don't need the rocket science level to clear things up.
Ouuuch!
Am I really that bad at logic? Maybe I need more practice but I at least understand the main concepts (inference rules and such).
To be sure I studied some introductory logic in college, and read an intro to first-order logic (at least they seemed helpful).
Or maybe I'm just dumber than I thought (HA!)
OK seriously though, I've looked over what I wrote and I don't think that I made a mistake but obviously I must've so on what specifically did you think I made a mistake?
Please answer since this whole incident is rather embarrassing, and I'd rather not waste my own time thinking that I know something when I don't.
Thanks
I think I may see what you might be driving at.
are you trying to say that when we are thinking of capitalism we must think that values are subjective to have a proper understanding ?
and also that agents in a natural order, due to their values being subjective , will participate in a capitalist system.?
It's just a question using words in the way they are commonly used.
"A=B" means A and B are two name for the same thing. Example: Barack Obama = current prez of USA.
"A leads to B" means that even though they are NOT the same thing at all, having A in the world will, sooner or later bring about the existence of B. Example: money printing leads to higher prices.
"A is comprehended under B" means A is one kind of B. Example: The movie Dracula is comprehended under horror films.
"A implies B" means you cannot have A and not have B. Example: the existence of a Thurston Howell the Third implies the existence of Thurston Howell the Second.
Capitalism and subjective value are not related in any of the above ways.
Perhaps you have some idea that you have not yet found the words for.
Well maybe I'm just mealy-mouthed and have a far too liberal use of words but I'm pretty sure that capitalism can be construed as a being under(or comprehended) subjective value (as in, I value money and property and the freedom to use them). This I infer from a mises's use of terms -capitalism must be understood to mean, in HA's context, the valuing of the freedom to use property since the language of praxeology and by extension economics, is about subjective states of acting man.
As for the principle that A=B, I believe that it applies to both things and names. That's why I will clarify what I meant earlier by saying that A=B is the same as A-->B (or A leads to B). If two things are the same then the existence of one most excellently "leads to" the existence of the other.
If kicking a ball leads to it falling down a hill, as far as I'm concerned this principle of "leading to" is just a lesser instance of the principle of "equality" between 1+2 and 2+1.
Anyways though, about logic, maybe I should PM you or should I ask you about the logical principles you know right here; because if I do the latter I might derail the thread into a talk about logic? But if you know something I don't, I hope you don't mind me asking about it. Either way though I don't see how we are in disagreement, you seem to be talking semantics but I still seem to be talking logic...
As I said before, your use of a word should coincide with the common use. Here is how Wiki defines Capitalism. Note that it does not coincide with your definition. In particular, it has nothing to say about valuing anything.
Also, although your use of "subjective valuation" does coincide with general common use, in the little world of AE people have a different use for it. This may be causing some of the confusion as well.
As far as A=B being the same as A->B, nopers. Because A=B implies that A->B, but not vice versa. In fact, claiming such a thing shows you really have to go back to page one of your logic books. Same with your whole paragraph about kicking the ball. It is mistaken from start to finish.
All the logical principles I know will be found in any beginner's book that has truth tables and the "->" symbol to mean implication. We are talking about the first chapters of such a book.
As for semantics and logic, logic is only possible after we are all on the same page about the meanings of the words we are using.
What's the book that you use though because my book already has all the truth tables and connectives, etc.
That's really good. You have the right book then. All you need to do is reread it.
When you have reached the point in your studies where it becomes obvious that A=B is not the same as A->B, then we can continue the discussion if you wish.
fakename, if you want to represent equality in logic some otherway than using the = sign then you can use the bi-confitional <-> (the arrow points both ways)
(A -> B and B->A) is A<->B
yeah, I know about the biconditional and equality but maybe I'm just talking philosophy here but there is something in my heart which makes me suspect that equality is a higher and nobler form of imputation and perhaps logically it can be said.
So if biconditionality is a way to represent equality in logic, then by conjunction simplification, one can say that one of the conditionals (A-->B) is implied. Therefore equality implies the conditional.
>>Therefore equality implies the conditional.
precisely, this is not controversial, it implies two conditionals! this is necessary ....