Current Events

Re: "Econometrics is a travesty! "

Aristophanes — Fri, 20 Jul 2012 13:23:24 GMT

SD, I have thoughts on some of that, but am going to a wedding today. I'll post tomorrow or Sunday.

Re: "Econometrics is a travesty! "

Smiling Dave — Fri, 20 Jul 2012 12:04:42 GMT

In his next post, he begins to understand more and more about how even with all the data at his disposal, he doesn't have all the data at his disposal.

In his own bumbling way, riddled with mistakes both of fact and logic, he eventually stumbles onto the realization that there are thinking acting human beings behind those numbers, that not all transactions are created equal, and that you cannot just put them into a number cruncher and expect to get meaningful information. Very enlightening post.

Just for giggles, here are the bloopers in three of the four points he makes:

1. He pops out the old chestnut that Menger had it all wrong, that central planners invented money as a way of keeping tabs of debt.

Luckily, our man Bob Murphy has shown how ridiculous such a notion is.

2. He discusses this scenario: It is Thanksgiving. Mum has slaved over a hot stove all day to produce the turkey for everyone and, at the end of the day, it is expected that each ‘recipient’ of her ‘gift’ will help with the washing up. One family member declares that he will not be participating in the clean up and asks: “How much should I pay you to get out of my washing up duties?” The answer, most probably, is: “Get lost!”

This supposedly proves that it is perfectly possible to be utterly familiar with money, to use it all the time, but to refrain basing decisions on what to produce and for whom exclusively on monetary transactions.

So far, this is in accordance with AE, which says clearly that not all actions are for money alone. But he thinks this provodes support for his point 1, which of course it doesn't. Proving that some transactions do not involve money [washing up after Thanksgiving] when there is no money changing hands in the first place teaches us nothing about what is going on in transactions where money changes hands.

3. He defines pure and impure transactions:

What is a pure exchange? It is an impersonal market exchange where the relationship between the buyer and the seller is fully reducible to the objects exchanged (e.g. apples and oranges) and to the exchange ratio (e.g. two apples for one orange). Moreover, it is a relationship that expires the moment the transaction is completed.

He then makes the incredible blunder of saying that working for a salary is an impure transaction, by definition:

Take for instance the employment contract through which employees ‘sell’ their labour to employers. By definition, this is an impure transaction. Think about it: the employee cannot simply ‘leave’ after selling her ‘asset’ (i.e. her labour) to the employer. She must stay on the premises while her labour is ‘diffused’ through the company’s network.

Think about it. The employee certainly can 'leave' after selling her asset (i.e. her labour). Because she has not "sold" her asset until she actually sits down and does the amount of work agreed to. Just as when I contract to sell a washing machine to be delivered two weeks from now, say, the transaction is not completed until the buyer actually gets his washing machine.

Has the Valve company hired the wrong man for the job?

Re: "Econometrics is a travesty! "

Smiling Dave — Fri, 20 Jul 2012 10:27:30 GMT

1. His initial studies show that there is no equilibrium price for things [due to changes in the makeup of the economy], but there is a tendency to equilibrium.

Note that this economy has no room for entrepeneurship, as all possible uses for everything are known. Thus there will be a tendency to equilibrium, according to AE, [until the next change in the makeup of the economy, which happens when the software company changes the software with updates and the like].

So his results are consistent so far with AE. Of course, mainstream economics is in agreement here as well.

2. An interesting thing emerges from the comments. Even though he thought he had all the data at his disposal, he didn't. Because there are "black market" transactions going on, where players trade their game items for real world money, something that doesn't get reported to the software company.

Just brings out Mises' point about how the world is too complex to know things just from gathering data, because you don't know what to look for without theory telling you what's important.

3. Also an interesting note to the bitcoin crowd. He spells out that money has to have intrinsic value to get started, and the commenters ask him well what about paper money? So that even a mainstream guy understands about Mises' Regression theorem.

Re: "Econometrics is a travesty! "

Aristophanes — Fri, 20 Jul 2012 09:00:39 GMT

Fact is, Hayek's observations on scientism are relevant and prescient. His personal beliefs are of little concern to the evidence of what he spoke on. What is quoted in the OP is an observation that an economist had about economics and it is also an observation Hayek made in the past. It supports the whole "mises political agenda", Austrian Economics, as well as the general libertarian framework.

Can we get some posts about the Steam (Valve) digital economies?

Re: "Econometrics is a travesty! "

Aristippus — Fri, 20 Jul 2012 05:24:43 GMT

I think I mistook the two books of Hayek. I think I was supposed to say 'have you read L,L & L?'. Because I'm pretty sure that's where I got all that stuff from Hayek from, for in the video. He was 74 at that time.

Well the point was that Hayek drifted further away from socialism as he got older: 1920 Hayek was a communist, 1940 Hayek was a minarchist with qualifications, 1960's Hayek was perhaps less socialistic, 1970's Hayek was less socialistic still, 1990 Hayek was a free market anarchist. From his well-known quote from the 70's about the fact that he would be a market anarchist if he were younger, and also from his discussion of the cosmos in Law, Legislation and Liberty, it is clear that he was certainly leaning in that direction even then.

Re: "Econometrics is a travesty! "

vive la insurrection — Fri, 20 Jul 2012 05:23:10 GMT

OK, I don't know what else to say, I'm done for now.

Re: "Econometrics is a travesty! "

Smiling Dave — Fri, 20 Jul 2012 05:18:33 GMT

Road to Serfodom was written for a specific audience. It's a book built to help bridge a dialogue. It's not a book directed at libertarians, in fact it was written before there was any actual libertarian movement (though it was a book that helped convert people to libertarianism).

There are two possibilities here. Either he really believed all the socialism he wrote in R. to Serfdom, or he didn't.

If he did, he's a socialist right there.

If he didn't, but was lying in order to build bridges or whatever, white man speak with forked tongue.

Re: "Econometrics is a travesty! "

vive la insurrection — Fri, 20 Jul 2012 05:15:07 GMT

Unless you ask what people didn't like about him.

I never asked a question. I said I didn't understand something,and I still don't. And to clarify further, I don't know why people choose to make mountains out of molehills due to things that should be of tertiary concern. Which is what all this anti-Hayek mentality is to me. My not understanding wasn't supposed to be taken as a passive statement, but rather anassertion that it shouldn't be done.

I should have said "Rothbardians have no interesting ground on the Hayek critics that I've noticed on Mises.org" - which is the tone I meant to convey.

White man speak with forked tongue.

Rephrase:

Road to Serfodom was written for a specific audience. It's a book built to help bridge a dialogue. It's not a book directed at libertarians, in fact it was written before there was any actual libertarian movement (though it was a book that helped convert people to libertarianism).

Re: "Econometrics is a travesty! "

Smiling Dave — Fri, 20 Jul 2012 05:01:52 GMT

His personal politics and ideology at best should be tertiary concern.

Unless you ask what people didn't like about him.

For instance, say someone asks, "What's not to like about O. J. Simpson, he scored a lot of touchdowns?"

"He was a cold blooded murderer."

"That's only of tertiary concern, you politically driven ideologue."

I am becoming convinced that most of the critiques written by Rothbardian types on the Misesmain site are ideologically / politically driven.

If you mean they disagree with Hayek's politics and ideology, yes.

Furthermore, at the time Road to Serfodom was written for a very specific audience. It's a book built to help bridgea dialgoue. It's not a book directed at libertarians (though it was a book that helped make libertarians, and was around before libertarianism was an actual movement).

White man speak with forked tongue.

Re: "Econometrics is a travesty! "

Nielsio — Fri, 20 Jul 2012 04:53:36 GMT

Aristippus,

I think I mistook the two books of Hayek. I think I was supposed to say 'have you read L,L & L?'. Because I'm pretty sure that's where I got all that stuff from Hayek from, for in the video. He was 74 at that time.

Re: "Econometrics is a travesty! "

vive la insurrection — Fri, 20 Jul 2012 04:13:26 GMT

Also from this Horowitz article http://austrianeconomists.typepad.com/weblog/2009/12/the-false-dichotomy-of-rothbardian-anarchism-and-hayekian-classical-liberalism.html :

2. There is a story about Hayek from the 1970s that may or may not be apocryphal, and I suspect some of our more senior commenters can verify this, that is relevant here. Supposedly when he was engaged in a conversation about anarchism with a bunch of young libertarian academics(presumably at Menlo Park) in the 1970s, Hayek said something like the following "Look, I'm an old man now and I came to my classical liberalism in a different era, so I can't accept where you all are now. But, if I were a young man today, I suspect I might well be this type of anarchist."

And if you check the site a bit, you will find it is verified to a degree.

Re: "Econometrics is a travesty! "

vive la insurrection — Fri, 20 Jul 2012 04:07:16 GMT

All that matters is Hayek the thinker's analytical framework and what can be drawn from it,conclusions which the orignators themselves may not have seen (this is a common thing in science,and would also be a very Hayekian way to look at things). His personal politics and ideology at best should be tertiary concern.

I am becoming convinced that most of the critiques written by Rothbardian types on the Misesmain site are ideologically / politically driven.

Furthermore, at the time Road to Serfodom was written for a very specific audience. It's a book built to help bridgea dialgoue. It's not a book directed at libertarians (though it was a book that helped make libertarians, and was around before libertarianism was an actual movement).

Re: "Econometrics is a travesty! "

Aristophanes — Fri, 20 Jul 2012 03:53:37 GMT

Did you read what he said? He may be a Coase or a Keynes...

Re: "Econometrics is a travesty! "

Wheylous — Fri, 20 Jul 2012 03:46:14 GMT

The point of the OP is to point out how a real world company (Valve) is taking the next steps in advancing a quasi-Austrian framework

The economist they hired is run-of-the-mill new Keynesian, from what I understand: The Global Minotaur: America, The True Origins of the Financial Crisis and the Future of the World Economy (Economic Controversies)

Re: "Econometrics is a travesty! "

Aristippus — Fri, 20 Jul 2012 03:28:14 GMT

Jargon - Yeah, I really recommend The Fatal Conceit. It's relatively short but really strikes at the core problems of the state and comes out completely against it. I'd say it's my favourite work on free market anarchy.