Economics Questions

Re: What does Economic mean?

Laotzu del Zinn — Fri, 22 Apr 2011 11:37:49 GMT

there can be no such thing as a magic czar, and therefore the calculation problem is insurmountable

This really defines the issue right here. Is leninism economic? No, but the people's actions within it are.

Re: What does Economic mean?

Graham Wright — Thu, 21 Apr 2011 20:06:22 GMT

vaduka:
Obviously I am not Mr. Sanchez, my reply was not asked for, but I will, nevertheless, write what I think.

I appreciate the input.

vaduka:
If the whole purpose of using the word economic(al) is for it to serve as an adjective for the description of the economization qualities of a system, then if a system (for example, a socialistic one, where a central planner orders what the structure of production to be) does not economize resources, it can not be said to be economic.

Yes, OK, but then the question becomes: can resources be more or less economized or are they either economized or not?

vaduka:
Any system that hampers the functioning of the pricing process by distorting its dynamics of adjustment of the price structure accroding to the changes of the individuals' subjective valuations, procures a structure of production characterised by misalloaction.

So the extent to which a system does this is the extent to which it is uneconomic?

Re: What does Economic mean?

vaduka — Wed, 20 Apr 2011 15:30:17 GMT

trulib:

Danny:
A social system of production is economic if production can be adjusted according to the relative wants of consumers.

Danny, am I right in thinking that you are being redundant by using both the term "social" and the term "economic" here? In other words, is a "social system of production" and an "economic system of production" the same thing?

Also, you say that only capitalism is economic, but is this a binary thing, or a sliding scale? Would it make sense to say that one system is more economic than another? For example would it make sense to say that "corporatism is more economic than communism" (or vice versa)? Or what word would you use to distinguish between a "bad" system of production and "very bad" system of production?

Obviously I am not Mr. Sanchez, my reply was not asked for, but I will, nevertheless, write what I think.

If the whole purpose of using the word economic(al) is for it to serve as an adjective for the description of the economization qualities of a system, then if a system (for example, a socialistic one, where a central planner orders what the structure of production to be) does not economize resources, it can not be said to be economic. Any system that hampers the functioning of the pricing process by distorting its dynamics of adjustment of the price structure accroding to the changes of the individuals' subjective valuations, procures a structure of production characterised by misalloaction.

Re: What does Economic mean?

Graham Wright — Tue, 19 Apr 2011 19:27:28 GMT

Danny:
A social system of production is economic if production can be adjusted according to the relative wants of consumers.

Danny, am I right in thinking that you are being redundant by using both the term "social" and the term "economic" here? In other words, is a "social system of production" and an "economic system of production" the same thing?

Also, you say that only capitalism is economic, but is this a binary thing, or a sliding scale? Would it make sense to say that one system is more economic than another? For example would it make sense to say that "corporatism is more economic than communism" (or vice versa)? Or what word would you use to distinguish between a "bad" system of production and "very bad" system of production?

Re: What does Economic mean?

Daniel James Sanchez — Sun, 17 Apr 2011 08:57:43 GMT

Sieben:

Danny:
I never used the term "incorporate", only you did.
You wrote: ""economic" in this sense means that there is some kind of linkage between the actual allocation of resources and the priorities of individual members of society."

I thought linkage meant actual interaction... i.e. incorporation. Do you still maintain that a market outcome achieved via happenstance is "economic" even though it is not linked to all individual preferences?

It is not happenstance, because the magic czar is expressly trying to adjust production according to relative wants. And that is a linkage.

Sieben:

Danny:
I would never use such a conveniently restrictive definition of it which in effect defines "economic" according to whether or not a system is actually capitalist.
That's kind of why I started this thread. As far as I can see, either everything is economic or only capitalism is economic.

Indeed only capitalism is economic, but not in the sense of some pointless truism, but instead because there can be no such thing as a magic czar, and therefore the calculation problem is insurmountable for socialism.

Sieben:

Danny:
Again, do you think you can make the case against socialism by word games?
Yes. I'm using the definition of words to figure out a priori if socialism is economic. I actually think my interpretation clears up a lot of the confusion associated with the Misesian claim that socialist calculation/planned economics is "impossible", since I'm saying that by definition they are not economic. There's no a priori reason that different systems of rights will result in different production strategies, so I don't think he means to prove that socialism will fail to make homes and produce food.

Have you read Economic Calculation in the Socialist Commonwealth?

Sieben:

Danny:
If the magic czar could arrange production just as a market would in the real world, and if a market, in comparison, was as disjointed as socialism is in the real world, do you think you could make a case against the magic czar's socialism by saying, "...but it's not 'economic' in this ridiculously restrictive sense that I'm using."?
Exactly. I don't think you can make a case against a system by calling it uneconomic alone.

Not with your useless definition of "economic", no. But using the definition of "economic" that actually has to do with human welfare, and that people actually care about, then you can.

Sieben:

Danny:
You continue to misunderstand what makes for a social system of production. The social coordination of production and provision is when productive activities are adjusted according to the consumer wants those productive activities are meant to provide for. In the case of a shoe maker, he is part of a social system of production insofar as his shoe making activites are adjusted (whether by market processes or by state diktat) according to the wants of shoe-wearers, not insofar as he himself simply doesn't want to get shot.
How does "social system of production" tie into "economic"? And to clarify, what you mean by social production is that its a two sided affair - the producer and consumers both get to decide whether its worth it to keep producing/consuming.

A social system of production is economic if production can be adjusted according to the relative wants of consumers.

Sieben:

You sound a little irritated. I am really sorry if I'm getting on your nerves. I have great respect for you, as you know. Thanks for taking the time to talk about this with me.

I respect you too, Sieben, especially for your enthusiasm, civility, and argumentation. But I get tired of every 10th person posting an economic theory thread here thinking they can revolutionize Austrian Economics before coming even close to mastering it. If you have reached the point where you can teach a survey course on Austrian Economics, then it might make sense to try for some groundbreaking stuff. Otherwise it's just hubris.

I also get tired of people trying to make economics a handmaiden sub-science of libertarianism.

Re: What does Economic mean?

vaduka — Fri, 15 Apr 2011 14:48:34 GMT

I thought we agreed that 'economic' meant incorporating people's preferences/priorities. If a system doesn't DO that, it isn't economic, even if all the buildings and factories are doing the same thing.

A socialistic system does not incorporate anything. It is rather characterised by assignment and give away. A central planner directs resources, which is the opposite of unmediated allocation. It may happen that a central planner appoints you to work what you would have chosen to be your occupation if you actually had the freedom to choose; you may also happen to consume something that actually does satisfy your most highly valued, ordinally ranked, want, but this is just a happenstance, an event that occurs by chance. And this still does not make the case for economization in a socialistic system. That is due to the incapability of determining what the alternative costs of your particular employment or of you consuming this good are.

In "Economic Calculation in a Socialist Commonwealth," Ludwig von Mises demonstrates, once and forever, that, under socialist central planning, there are no means of economic calculation and that, therefore, socialist economy itself is "impossible" ("unm?glich")--not just inefficient or less innovative or conducted without benefit of decentralized knowledge, but really and truly and literally impossible.

The socialistic system is not an economic system. That is because the seizure of all the factors of production by one owner obstructs the human individuals' capability of monetary calculation, which is, as prof.Salerno puts it,

the indispensable mental tool for choosing the optimum among the vast array of intricately-related production plans that are available for employing the factors of production within the framework of the social division of labor.

Without resorting to the catallatic attributes of money for economic calculation

...the human mind is only capable of surveying, evaluating, and directing production processes whose scope is drastically restricted to the compass of the primitive household economy.

Re: What does Economic mean?

Sieben — Fri, 15 Apr 2011 04:59:47 GMT

Danny:
I never used the term "incorporate", only you did.

You wrote: ""economic" in this sense means that there is some kind of linkage between the actual allocation of resources and the priorities of individual members of society."

I thought linkage meant actual interaction... i.e. incorporation. Do you still maintain that a market outcome achieved via happenstance is "economic" even though it is not linked to all individual preferences?

Danny:
I would never use such a conveniently restrictive definition of it which in effect defines "economic" according to whether or not a system is actually capitalist.

That's kind of why I started this thread. As far as I can see, either everything is economic or only capitalism is economic.

Danny:
Again, do you think you can make the case against socialism by word games?

Yes. I'm using the definition of words to figure out a priori if socialism is economic. I actually think my interpretation clears up a lot of the confusion associated with the Misesian claim that socialist calculation/planned economics is "impossible", since I'm saying that by definition they are not economic. There's no a priori reason that different systems of rights will result in different production strategies, so I don't think he means to prove that socialism will fail to make homes and produce food.

Danny:
If the magic czar could arrange production just as a market would in the real world, and if a market, in comparison, was as disjointed as socialism is in the real world, do you think you could make a case against the magic czar's socialism by saying, "...but it's not 'economic' in this ridiculously restrictive sense that I'm using."?

Exactly. I don't think you can make a case against a system by calling it uneconomic alone.

Danny:
You continue to misunderstand what makes for a social system of production. The social coordination of production and provision is when productive activities are adjusted according to the consumer wants those productive activities are meant to provide for. In the case of a shoe maker, he is part of a social system of production insofar as his shoe making activites are adjusted (whether by market processes or by state diktat) according to the wants of shoe-wearers, not insofar as he himself simply doesn't want to get shot.

How does "social system of production" tie into "economic"? And to clarify, what you mean by social production is that its a two sided affair - the producer and consumers both get to decide whether its worth it to keep producing/consuming.

You sound a little irritated. I am really sorry if I'm getting on your nerves. I have great respect for you, as you know. Thanks for taking the time to talk about this with me.

Re: What does Economic mean?

Daniel James Sanchez — Fri, 15 Apr 2011 04:15:24 GMT

Sieben:

Danny:
You are imposing your own definition of "economic" here: one which nobody, in choosing economic systems to support, actually cares about. To purposefully mirror people's priorities is to incorporate them.
I thought we agreed that 'economic' meant incorporating people's preferences/priorities. If a system doesn't DO that, it isn't economic, even if all the buildings and factories are doing the same thing.

I never used the term "incorporate", only you did. And even if I were to use that word, I would never use such a conveniently restrictive definition of it which in effect defines "economic" according to whether or not a system is actually capitalist. Again, do you think you can make the case against socialism by word games? If the magic czar could arrange production just as a market would in the real world, and if a market, in comparison, was as disjointed as socialism is in the real world, do you think you could make a case against the magic czar's socialism by saying, "...but it's not 'economic' in this ridiculously restrictive sense that I'm using."?

Sieben:

Its like the difference between you choosing chocolate ice cream, and me choosing it for you without your input.

Danny:
I already said that the preferences of the preponderance of humanity (the socialist comrades) are not expressed in the structure of production of a command economy.

Yes they are. They can either roll with the command economy or they can be shot in the face.

You continue to misunderstand what makes for a social system of production. The social coordination of production and provision is when productive activities are adjusted according to the consumer wants those productive activities are meant to provide for. In the case of a shoe maker, he is part of a social system of production insofar as his shoe making activites are adjusted (whether by market processes or by state diktat) according to the wants of shoe-wearers, not insofar as he himself simply doesn't want to get shot.

Re: What does Economic mean?

Sieben — Fri, 15 Apr 2011 03:26:56 GMT

Danny:
You are imposing your own definition of "economic" here: one which nobody, in choosing economic systems to support, actually cares about. To purposefully mirror people's priorities is to incorporate them.

I thought we agreed that 'economic' meant incorporating people's preferences/priorities. If a system doesn't DO that, it isn't economic, even if all the buildings and factories are doing the same thing.

Its like the difference between you choosing chocolate ice cream, and me choosing it for you without your input.

Danny:
I already said that the preferences of the preponderance of humanity (the socialist comrades) are not expressed in the structure of production of a command economy.

Yes they are. They can either roll with the command economy or they can be shot in the face. They usually prefer the former. Of course there's a TON of preferences that don't get revealed, but a ton of preferences don't get revealed under capitalism either. So I don't understand how the market is more economic than socialism. Its just the rights within which people can express preferences that change.

Re: What does Economic mean?

Daniel James Sanchez — Thu, 14 Apr 2011 23:56:16 GMT

Sieben:
But it isn't actually economic by the strict definition of the word. It has to incorporate, not just mirror, people's priorities.

Do you think the case against socialism can be made by mere wordplay, without reference to human purposes?

You are imposing your own definition of "economic" here: one which nobody, in choosing economic systems to support, actually cares about. To purposefully mirror people's priorities is to incorporate them.

Sieben:

So if everyone's preferences are to some degree expressed in the market, and to some degree expressed in a command economy, why is a command economy "uneconomic"?

I already said that the preferences of the preponderance of humanity (the socialist comrades) are not expressed in the structure of production of a command economy.

Re: What does Economic mean?

vaduka — Thu, 14 Apr 2011 23:56:01 GMT

So if everyone's preferences are to some degree expressed in the market, and to some degree expressed in a command economy, why is a command economy "uneconomic"?

I believe you have missed his point. Please review the first paragraph of my previous post.

Re: What does Economic mean?

Sieben — Thu, 14 Apr 2011 23:46:14 GMT

Danny:
Okay, so you recognize that the outcomes "match" the priorities. And by assumption, the magic czar was able to cause that match deliberately and could do so again. That is "economic" inasmuch as anybody cares about systems of production being economic, unless people fetishize either the process by which it occurs, or property rights for their own sake.

But it isn't actually economic by the strict definition of the word. It has to incorporate, not just mirror, people's priorities.

Danny:
I said everybody's preferences are to some degree expressed in a market, not that all preferences held by each person are.

So if everyone's preferences are to some degree expressed in the market, and to some degree expressed in a command economy, why is a command economy "uneconomic"?

Re: What does Economic mean?

DD5 — Thu, 14 Apr 2011 23:03:10 GMT

Jonathan M. F. Catalán:
Robinson Crusoe can choose between means and ends even without having a second person to exchange with. I was discussing something much more elementary than exchange.

In an autistic economy, one does not need to raise the issue of property rights. I don't think the context of this discussion, as well as your response of : "I wouldn't mention property rights", was that of an autistic economy.

Re: What does Economic mean?

vaduka — Thu, 14 Apr 2011 22:30:28 GMT

"But in real market economies, people's preferences about everything aren't revealed either. Like we don't know which sports car I prefer because I haven't chosen between any. So the universal permutation of preference expression can't be a defining criterion for markets either."

How are you supposed to demonstrate your preference if you do not have what the other party of the exchange wants; to put it in other words, you do not have enough money to effectively demand the sports car you prefer more to all the other sports cars. You are not part of the demand for the particular, favourite of yours, sports car.

"No there wouldn't. Just because its the same superficial outcome does not mean its "economic". There is no link to the priorities of all individuals. Its just kind of happenstance.

But if you just mean priorities period, then why aren't ALL possible systems economic? After all, my priorities are incorporated into the statist system because my priorities still matter even though there's aggression."

Let me put it this way. In order to demonstrate your preferences to other individuals who participate in the division of labour, you must be an owner of something. Clearly, you own your body, you can choose to supply your labour as a dentist. By doing so, you increase the supply of dentist services and impact the formation of the price of these particular services. That is how your preference to work as a dentist is incorporated in the price mechanism. That is how others gain knowledge that an additional one individual to the previously already occupied dentists is now offering the same services. Thanks to your non-restricted acting on your most prior way of occupation a more economic (that is to say, creates economic affairs with lower alternative costs) allocation of resources takes place. Thanks to the price mechanism you can calculate your inpit and output prices, which lets you determine whether or not to continue working as a dentist. That is the point of the calculation problem! Under socialism the dictator pretends as if you do not own your body, so he assigns you where to work, for example, as a truck driver. Clearly, then, your private preference for employment was ignored. The question arises, how can he be sure that by decreeing you to be a truck driver, he is not directing such an allocation of resources that results in relatively higher alternative costs. He can not know now, can not know in the future also, because there isn't a profit-loss mechanism in which these alternative costs to manifest.

'We're not talking only about exchange; we're talking about choosing means and ends.'

I thought that all we were talking about here was the economic interaction between human individuals in a socialistic regime compared to a non-socialistic regime and more precisely to such an action-coordination system that does not limit (or limits them relatively less) the non-intitiating violence ways of use of one's property. A socialistic State circumscrabes an individual's possible array of choices, some of which may or may not include an exchange as a mean to an end or itself be an end. Hence, exchange is a part of the, as you like to put it, means -ends framework.

'Property rights is implied in the very act of exchange between two parties. '

Re: What does Economic mean?

nirgrahamUK — Thu, 14 Apr 2011 22:22:45 GMT

sidenote: thats 'autistic exchange'