First, I'm not sure if I understand what is so uniquely Austrian about the calculation argument. As I understand it the point is that entrepreneurs maximise profits by putting goods to their most valued uses and the price system is exactly what allows them to do this by means of relative price adjustments and profit and loss accounting (very briefly put). My first point is that this implicitly assumes some sort of harmony of interests, in some cases where this assumption doesn't hold, I don't see how the calculation argument is valid. In the case of asymmetric information, externalities or monopoly power entrepreneurs maximise profits by going against what is in the public interest (yes, Austrians will find this term objectionable). But the other point I'd like to make is that this is a pretty standard point in even principles level micro...
Second, in reality firms costs are highly interdependent and often inextricable from one another. What implications does this have for profit loss accounting? Well, as far as I can tell a lot of big firms don't actually know exactly how to maximise profits so they resort to rules of thumb. My can't government do this? And more importantly, in firms still exist and are efficient, clearly there are some other considerations as to what serves consumers best, why shouldn't they be applied to governments as well?
Third, one of the big arguments against math that I've noticed is that it isn't necessary, something along the lines of "we can express these arguments in verbal logic". I think this is completely besides the point, identifying correct arguments and saying, ex post, that we can say what is in mathematical terms in verbal logic misses the point. The math was useful in fleshing out these arguments in the first place.
Four, I've asked this before, but I want to ask it again: what justifies the large salaries of econ PhD in the private sector? Their model building abilities and econometric skills are often used so what causes firms to be so systematically misguided (that is, according to Austrians).
Five, what is wrong with the concept of willingness to pay?
Epicurus:What is an economy that does not have government intervention?
Just an economy. The market, voluntary exchange between individuals, does not require a coercive entity to function. Markets, and voluntary exchange, pre-existed before over-arching states. Market activity is a function of human action and human nature. It is an innate behavior of every man.
On the other hand it is not clear that theft and violence are innate features of every man. Sure you could argue it is with some, but you would be hard pressed to prove that it applies to all men equally. Human action on the other hand indisputably does. So you see, the two are not related.
Spideynw:There is no government. What more do you need?
Deep and insightful.
filc: For those that either do not understand the calculation argument or that think it's not an issue. Here is an off the wall question for you. What do you think the market rate for police protection should be? And are we somewhere in that ballpark? Is it even feasibly possible to tell? Might the pricing structure be different if police protection was provided on the market? What implications does that mean for resource redistribution, and protection.
Is adequate police protection even possible without a government? If not then calculation is a secondary problem.
Scineram:Is adequate police protection even possible without a government? If not then calculation is a secondary problem.
Its not a secondary problem.
A) Your sidestepping the question.
B) Even if we conceded your point, which I don't, you still have to solve the calculation problem with government. Whether protection can hypothetically be provided without government is irrelevant. It's a complete red-herring. The point is, how do you calculate with government. The question has nothing to do with hypothetical situations in the absence of government. The best thing you can do Scineram, as a pro statist, is to crack the calculation problem. Shying away from the problem only grants further evidence that it's an issue that statists can never solve.
Sad that no one else has tried to answer the question.
The same way everybody calculates. You use your judgement to balance between negative effects of taxes, the demands of police personnel, the demand of the public for protection and the extent of police repression and civil rights abuse. As it has always been done.
THe problem of 'calculation' is not a completely identical problem for a minimal government (or a government in a welfarestate) as the calculation problem within a socialist society. This analogy is not warranted.
The problem within a socialist society is the complete absence from any market for production goods. Within a minimal state - or welfare state - the problem is a question of (1) how much money and (2) what is the exact wishes of the people. But it's still possible to calculate - given a certain amount of money that the government wishes to use - the most efficient amount of protection as judged by the government itself. This is, however, possible in a socialist society.
The state is not the enemy. The idea of the state is.
Scineram:The same way everybody calculates.
So your saying that the state calculates the distribution of goods the same way as walmart? Walmart who competes for consumers, and the State who gets all consumers by default are the same?
Scineram:You use your judgement to balance between negative effects of taxes, the demands of police personnel,
How do you tell what the demand for police personnel is? And since your using taxes to pay for this, you already have all citizen's as a consumer by default. So how do you know what the naturally occurring rate of protection would be at? IE How much SHOULD be spent on police protection? How many scarce resources SHOULD we spare were it not coercively distributed? How can you tell when you are spending too much in police protection in some area's, and not enough in others, as judged by the demand of citizen's.
The price mechanism only functions in situations where goods are competed for in a voluntary exchange environment. Not in a coerced environment. In this way we can draw metrics based on price to read factors such as supply and demand.
Your saying that somehow we can do this, even though every citizen by default is a subscribing customer. But how does the state know when it does good or bad, there is never an increase or decrease in subscribers. It measure's it's success not based on consumer satisfaction, but using non-relevant metrics like how many homocide's happened this month as compared to last. Such metric's are non-sequiturs of consumer satisfaction. They indirectly measure performance. Services to individuals are measured in metrics of satisfaction, other metric's outside of that are just indirect metrics used to help bolster consumer satisfaction. It doesn't follow that the police agency are still providing a service in such a way that the citizen is happy about it. In fact in most cases people are apprehensive at best regarding police protection in this country. They just haven't been shown any viable alternatives yet.
So you haven't magically solved the calculation problem. If you had we could abandon the market all together, and provide all goods as we provide police protection. As LS stated there is no third option. Either you conceded that the market works, or you do not. If you choose a middle ground your abandoning any argument you once had, and tainted your integrity.
The difference is a matter of degree, not kind. The socialist system is the destruction of all economic calculation. The welfare state yields inept and monstrous calculations that are divorced from subjective consumer preferences. The fact that some calculation is possible in a welfare state does not mean that it avoids the calculation and coordination arguments put forth by Hayek and Mises (and in fact Bohm-Bawerk). In fact, the former makes the far broader argument against government interventionism.
"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."
AdrianHealy:THe problem of 'calculation' is not a completely identical problem for a minimal government (or a government in a welfarestate) as the calculation problem within a socialist society. This analogy is not warranted. The problem within a socialist society is the complete absence from any market for production goods. Within a minimal state - or welfare state - the problem is a question of (1) how much money and (2) what is the exact wishes of the people. But it's still possible to calculate - given a certain amount of money that the government wishes to use - the most efficient amount of protection as judged by the government itself. This is, however, possible in a socialist society.
Adrian, even in situations where we do not have total socialism the price mechanism is still tampered with and influenced. The calculation problem still exists, only to a different degree. Business cycles for example are a type of economic mis-calculation. I wrote about this a long time ago, perhaps you'd be of interest.
So you would have to attempt to answer my questions above, as to how the state knows how much resources to allocate to police protection, and how do they know when they are pleasing consumers?
Link here
Thanks Esuric, heh. Stated better then myself.
filc: How do you tell what the demand for police personnel is?
How do you tell what the demand for police personnel is?
And since your using taxes to pay for this, you already have all citizen's as a consumer by default.
So how do you know what the naturally occurring rate of protection would be at?
IE How much SHOULD be spent on police protection? How many scarce resources SHOULD we spare were it not coercively distributed? How can you tell when you are spending too much in police protection in some area's, and not enough in others, as judged by the demand of citizen's.
Your saying that somehow we can do this, even though every citizen by default is a subscribing customer. But how does the state know when it does good or bad, there is never an increase or decrease in subscribers.
It measure's it's success not based on consumer satisfaction, but using non-relevant metrics like how many homocide's happened this month as compared to last. Such metric's are non-sequiturs of consumer satisfaction. They indirectly measure performance. Services to individuals are measured in metrics of satisfaction, other metric's outside of that are just indirect metrics used to help bolster consumer satisfaction.
There are more important things than consumer satisfaction. Like homicide rates.
If you had we could abandon the market all together, and provide all goods as we provide police protection. As LS stated there is no third option. Either you conceded that the market works, or you do not.
In the production of defence it doesn't.
Scineram:You look at their perfomance, the social enviroment, the crime statistics, and make an educated guess.
As I stated above, these are second hand metrics and do not address consumer satisfaction. Whether or not there were more or less homocides last month does not say specifically how satisfied the citizen's are with the police agency's performance. Your conflating crime statistics with consumer satisfaction.
Scineram:The term is meaningless.
What exactly between pointing out the differences between the formation of prices on a market, vs the arbitrary assignment of prices by government is meaningless?
Scineram:You listen to them, look at the crime levels, hear out the police personnel themselves.
This was answered in my previous post, and repeated above. Looking at your crime levels and talking to your police personell are second hand statistics. Statistics that consumers may not even be interested in. Like, how many traffic sitations did we enforce this month, as opposed to something more important in the consumers eyes. Do not conflate arbitrary statistics with metrics of consumer satisfaction.
Scineram:No one knows that. You guess.
So you agree then that the state has no other means of figuring out how best to serve it's customers, other then blatant guesswork? I'd agree with you, this is the point I am making. Despite this fact you still advocate this system over the price mechanism provided on a market.
On the other hand private parties have direct outputs with which to measure by, to determine the effectiveness of various actions taken.
Scineram:There are more important things than consumer satisfaction. Like homicide rates.
A) Who are you to judge, on behalf of society, what actions police enforcement should perform for the benefit of "society". Who are you to say that protection against homocide is more important than anything else? Why are you the single arbiter of this opinion? When you make such a bold claim your attempting to play god, on behalf of society. Your in effect projecting your subjective valuation on the masses. Your statement necessarily implies that protection of homocide is more important than general freedom.
B) If homocide rates, and preventing them, are more important than consumer satisfaction. Why don't we just lock everyone up in a camp? Ball and chain them to their beds? Feed them when they need it. Guarantee 0 homicide rates. Who cares what the citizen thinks about it right? So long as homicide rates are low. If homocide rates are your key goal, there are more effective ways of accomplish this.
These are the directions you take when you move away from individual satisfaction, to matching the satisfaction of a single individual, such as yourself. Then compelling society to adher to your personal beliefs on the matter.
This fallacy fallacy ignores praxeology all together and pretends that your ideals are of greater value then others. To place an arbitrary statistic above consumer satisfaction, like placing homocide rates above consumer satisfaction, is to direct the production of defense in a direction that does not best meet the desires of individuals. If its not our goal to create the highest level of satisfaction for individuals, why bother to have an economy at all? There are a number of abusive ways to ensure no homocide. You sound as if you'd endorse that.
C) Homocide rates can simply fluctuate up and down due to external factors. That doesn't necessarily mean that police agencies are performing any better or worse. The best judge of an agency's performance is to have it judged not by one single bias arbiter(the state) but by thousands of individual judges(consumers). Each consumer making their own assessment and endorsing agency's which in their minds perform the best.
Scineram:In the production of defence it doesn't.
The market works great, except.....
So as LS stated. Your a free market capitalst, except when it involves an area that you are personally apprehensive about.
Your unprincipled inconsistency is why your argument fails. You advocate isolated socialism.
So we still have several un-answered questions. You agreed that the state performs simple guesswork on its performance levels. I maintain my questions as un-answered.
filc: What exactly between pointing out the differences between the formation of prices on a market, vs the arbitrary assignment of prices by government is meaningless?
A) Who are you to judge, on behalf of society, what actions police enforcement should perform for the benefit of "society". Who are you to say that consumer satisfaction is more important than anything else? Why are you the single arbiter of this opinion? When you make such a bold claim your attempting to play god, on behalf of society. Your in effect projecting your subjective valuation on the masses. Your statement necessarily implies that consumer satisfaction is more important than general freedom.
The market works great, except..... So as LS stated. Your a free market capitalst, except when it involves an area that you are personally apprehensive about. Your unprincipled inconsistency is why your argument fails.
Your unprincipled inconsistency is why your argument fails.
How many scarce resources should be allocated to ensure proper defense(According to you, if preventing homicide is the highest ideal, we should be allocating a vast percentage more of our productive output into creating a police state. Ensuring such a degree of no homicide necessarily will mean sacrificing various freedoms)(What supply should be created?) Which areas should receive these resources? Which areas should recieve the least?(Where is the demand at?) How much should we tax to pay for this? (Where's the price mechanism?) Whats the most effecient way of producing defense(Where is the competition, and entrepreneurial innovative discovery?)
scineram - I direct you to Rothbard's Man, Economy, State. Once you've read the first 4 chapters you'll realise the errors you are committing here.