History

Re: Booms and busts before the Fed era?

DD5 — Thu, 13 May 2010 04:02:53 GMT

If I recall, I think Rothbard is basically saying this: The bread, the ham, the knife, etc.. are not consumer goods from the point of view of the guy preparing and eating the sandwich because the preparation of the sandwich is still part of production. He's obviously correct.

But I think that from a catallactic point of view, it would be perfectly fine to regard the bread, ham and knife as consumer goods, because they were obviously the last goods to be exchanged for money. If the same knife, bread, and ham were used to make a sandwich which was then sold for money, then those goods were obviously capital goods, and only the complete sandwich is the consumers goods. I think this distinction is the only one relevant for the analysis of a money economy because we can't really analyze (effectively and systematically) anything beyond that.

"finally, i need you to clarify your understanding of the 'future goods' 'present goods' terminology."

Rothbard from MES:

Goods being directly and presently consumed are present goods. A future good is the present expectation of enjoying a consumers’ good at some point in the future. A future good may be a claim on future consumers’ goods, or it may be a capital good, which will be transformed into a consumers’ good in the future. Since a capital good is a way station (and nature-given factors are original stations) on the route to consumers’ goods, capital goods and nature-given factors are both future goods.

The above also seems to be fully compatible with Mises' use of the terms.

Goods being directly

and presently consumed are present goods. A future good is the

present expectation of enjoying a consumers’ good at some

point in the future. A future good may be a claim on future consumers’

goods, or it may be a capital good, which will be transformed

into a consumers’ good in the future. Since a capital

good is a way station (and nature-given factors are original stations)

on the route to consumers’ goods, capital goods and

nature-given factors are both future goods.

Re: Booms and busts before the Fed era?

nirgrahamUK — Wed, 12 May 2010 23:45:14 GMT

I agree that a good which is 'capable of being consumed' and is thymologically often a consumer good, is in the act of abstaining from being consumed (i.e. its not providing direct utility) is acting as a producers good. it is useful for its indirect utility. a utility that stems from the the consumption of a consumable good 'in the future' .

you can only save consumption goods. much like you can only kill a living person. once they are killed, they are not a living person. so, yes you can save a consumption good, in so doing you come to have production goods. thankfully you have the power of resurrection, and the icecream you froze in the freezer (not because you received direct utility from it existing in a frozen state) can be unfrozen and consumed (giving you direct utility). frozen ice cream left in the freezer till later is a producers good.

One of the biggest confusions that we all have to deal with is that we reflexively and for thymological reasons refer to classes of objects that we routinely associate with 'productive activities' as producers goods, and ditto for the consumptive side.

look at the encyclopedia britannica's explanation of what is a consumer good. (no reference to subjectivity):

consumer goods

Top

Any tangible commodity purchased by households to satisfy their wants and needs. Consumer goods may be durable or nondurable. Durable goods (e.g., autos, furniture, and appliances) have a significant life span, often defined as three years or more, and consumption is spread over this span. Nondurable goods (e.g., food, clothing, and gasoline) are purchased for immediate or almost immediate consumption and have a life span ranging from minutes to three years. See alsoproducer goods.

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goods manufactured and used in further manufacturing, processing, or resale. Intermediate goods either become part of the final product or lose their distinct identity in the manufacturing stream, while capital goods are the plant, equipment, and inventories used to produce final products. The contribution of intermediate goods to a country's gross domestic product may be determined through the value-added method, which calculates the amount of value added to the final consumer good at each stage of production. This series of values is summed to estimate the total value of the final product.

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I ask how Misesian are such definitions?

>>If you're going to define a consumers good as such only in the process of its consumption, then I think you will run into such absurdities that at least for the sake of economic theory, you will have to abandon this definition. >>

What I see is that it is in the Misesian tradition to be just so pedantic. what is relaxed to allow for extended theorising is that reference to consumer and producer good, is not 'absolute' but it is relative. You think of the good as belonging to either some higher or some 'relatively' lower stage of production than some other good. in other words. ask not whether your particular bar of soap is a consumer good or producer good. but whether it is a higher or lower order good than some other bar of soap. like a small bar of soap that is all used up in one sitting (like in a hotel), or soap used in a production process, like cleaning a restaurant. and yet further comparisons, whether your bar of soap is of a higher or lower stage than some particular steel rod, or some particular TV set. or more instructive of my point, whether it is higher or lower than that bar of soap, had you put it to a different use, if we imagine that you decide to open a restaurant, or get direct pleasure from the wonderful experience of lathering a pet elephant and consuming it all. the bar of soap doesn't have its status in the continuum of production and consumption intrinsically, it is a subjective function.

I ask whether Rothbard goes into absurdities when he writes....

Let us trace the relations among these goods by considering a typical human end: the eating of a ham sandwich. Having a desire for a ham sandwich, a man decides that this is a want that should be satisfied and proceeds to act upon his judgment of the methods by which a ham sandwich can be assembled. The consumers’ good is the ham sandwich at the point of being eaten. It is obvious that there is a scarcity of this consumers’ good as there is for all direct means; otherwise it would always be available, like air, and would not be the object of action. But if the consumers’ good is scarce and not obviously available, how can it be made available? The answer is that man must rearrange various elements of his environment in order to produce the ham sandwich at the desired place—the consumers’ good. In other words, man must use various indirectmeans as co-operating factors of production to arrive at the direct means. This necessary process involved in all action is called production; it is the use by man of available elements of his environment as indirect means—as co-operating factors—to arrive eventually at a consumers’ good that he can use directly to arrive at his end.

...emphasis is mine...

finally, i need you to clarify your understanding of the 'future goods' 'present goods' terminology. do you have a clear text for me to refer to, which is indicitive of your use, or can you briefly explain yourself just how you are using it?

Re: Booms and busts before the Fed era?

DD5 — Wed, 12 May 2010 23:05:11 GMT

"These issues get so confused because of the subjectivity issue. let me ask you this. can you save a consumers good? (the act of saving is the act of not consuming it.........)"

You can only save a consumers goods. If saving is the process of forgoing consumption, then you must be saving the goods that you are not consuming. So the goods that you are not consuming are what if not consumers goods.

If you're going to define a consumers good as such only in the process of its consumption, then I think you will run into such absurdities that at least for the sake of economic theory, you will have to abandon this definition. For example if you buy a bar of soap, does it make much practical sense to define it as a future good right until the point that you use it? What if I only use it for 7 seconds 3 times a day? Is it now alternating between present and future good? I think these distinctions become nonsensical.

You have to be saving consumers goods because you can't save future goods. You buy your future good with your saved consumers goods. If you hoard your consumers goods then it seems to complicate things, however, I think you can simply treat the situation as if you were simply exchanging consumers goods with yourself for future goods. You are still saving consumers goods in order to consume them in the future.

Another way to show that you can't save future goods is that saving means forgoing consumption. Since you don't literally consume your future goods, you can't possibly be saving them. For example, if you own a machine that produces some intermediate goods, then you didn't save that machine but purchased it with your saved consumers goods. Consuming capital is just a figure of speech to imply not reinvesting in your machine, i.e., abandonment.

So according to the above reasoning, if it is correct, money fits in perfectly with the above as a present good.

Re: Booms and busts before the Fed era?

nirgrahamUK — Wed, 12 May 2010 21:53:57 GMT

>>What do savers and borrowers exchange? Present goods for future goods, obviously, right?

ok, a rich steel magnate, rather than turn all his iron into steel, decides to loan some iron out to a borrower who offers a favourable rate of exchange.

The rich steel magnate had indeed exchanged his present goods for future goods, that happened when he did the 'saving up' of accumulating the iron till he had a quantity which could be borrowed. It does not happen for him at the moment of lending.

if we take a global view, and merely look at what exists and what will exist (we aren't looking at what is a producers good and what is consumers good) its easy to say that the lent iron exists, whilst the future mansion the magnate will later have built for himself entirely from the proceeds of his investment does not exist) and from such an analysis we might say that 'present goods are converted into (exchanged) for future goods'. really the borrowing is just the peculiar way by which the production good (if it is one) is later turned into some combination of all or some or none production goods and all or some or none present goods at a future date.

These issues get so confused because of the subjectivity issue. let me ask you this. can you save a consumers good? (the act of saving is the act of not consuming it.........)

Re: Booms and busts before the Fed era?

DD5 — Wed, 12 May 2010 21:19:08 GMT

What do savers and borrowers exchange? Present goods for future goods, obviously, right? But in the money economy, they exchange money for IOUs. IOUs are claims to future goods, so naturally, money should be considered a present good. No? Otherwise, they are exchanging future goods for future goods. I'm not saying the article doesn't make a rather persuasive case, but I am still inclined towards the treatment of money as a present good.

Re: Booms and busts before the Fed era?

nirgrahamUK — Wed, 12 May 2010 21:05:04 GMT

indeed. bread is a capital good to the baker and it becomes a consumer good when in the mouth of a consumer. the status of 'capital/consumer' is determined subjectively.

however whilst bread is not praxeologically a consumer or capital good (we need thymology/a scene with definite agents to settle that question), perhaps we can narrow the scope? when it comes to money, by considering how we have defined it..... have we defined it as something which is marked out by its special ability to allow its spender to receive other goods in exchange for it it r? i.e. its utility is indirect, it owes its utility qua its moneyness to its status as a capital good; the gold money is desired for its ability to buy other things that may be consumed later.)

In other words, at first some gold is to some people a capital good and to others a consumer good based on their subjective evaluation of gold qua 'resource'. gold qua money is to all people a capital good because that's what we have 'defined' (this will get people to boo!) 'money' to mean. gold qua its industrial and aesthetic(directly servicing beauty) will still be capital good to some and consumer good to others. but not that same gold qua money.

Thoughts please? Its a difficult subject ripe for discussion. My mind is certainly not closed on the matter

Re: Booms and busts before the Fed era?

DD5 — Wed, 12 May 2010 20:39:13 GMT

" I have been led by this reading http://mises.org/pdf//asc/2003/asc9barnett.pdf

to conclude that money is a capital good. and not a 3rd category."

And I have been led by this to suspect that a compelling case can be made for all 3 possibilities and there may not be any objective method by which this can be resolved.

Re: Booms and busts before the Fed era?

DD5 — Wed, 12 May 2010 20:26:37 GMT

Ensuric: "Money is both a good and a class in itself (though there are many forms of money) which exerts an influence over the money rates of interest. "

So what exactly is the problem with the fact that increases or decreases in cash holdings can represent different changes in proportions between present goods and future goods. Are you still arguing over this or you're in agreement?

Re: Booms and busts before the Fed era?

nirgrahamUK — Wed, 12 May 2010 19:56:08 GMT

Esuric, I have been led by this reading http://mises.org/pdf//asc/2003/asc9barnett.pdf

to conclude that money is a capital good. and not a 3rd category.

There is also an interesting article here:

Extract:

Selgin and White (1996, pp. 91–92) offer, essentially, three arguments

against the problem of bank runs. First, “solvent banks are not inherently run prone.”

Second, the market would immediately eliminate banks thought to

be insolvent. And, third, banks could insert (temporary) “option clauses” in

their contracts with their customers. Let us consider these in turn.

http://mises.org/journals/qjae/pdf/qjae8_2_4.pdf

Selgin and White (1996, pp. 91–92) offer, essentially, three arguments

against the problem of bank runs. First, “solvent banks are not inherently runprone.”

6 Second, the market would immediately eliminate banks thought to

be insolvent.7 And, third, banks could insert (temporary) “option clauses” in

their contracts with their customers. Let us consider these in turn.Selgin and White (1996, pp. 91–92) offer, essentially, three arguments