Political Theory

Re: Minarchy vs Anarchy

h.k. — Wed, 08 May 2013 21:59:54 GMT

David Friedman:

Actually, the teleportation system has speeded up a bit, possibly due to my living in Silicon Valley for so long.

I don't think the issue of cardinal vs ordinal utility is central to differences between the Chicago and Austrian approaches to economics. I wouldn't even assume that all Austrians reject Cardinal utility. It plays a major role in The Theory of Games and Economic Behavior, the original game theory book, coauthored by John Von Neumann and Oskar Morgenstern, and I believe Morgenstern considered himself an Austrian. That's more nearly a difference between utility theory pre and post Von Neumann, since he is the one who showed how you could produce a meaningful and useful definition of cardinal utility.

One difference between Chicago school economics and Austrian school as some of its proponents view it is the role of a priori argument vs empirical evidence. Some Austrians appear to believe that one can do economics entirely as an a priori science. In my view, that does not work--I have a hard time thinking of any testable proposition about the real world that can be proved by a priori economic argument. One can always make some sufficiently odd and special assumption about utility functions or production functions in order to make an apparently impossible outcome possible.

The Chicago approach, as I understand and practice it, involves forming conjectures on the basis of a priori argument, testing them against the real world, and using the result to accept, reject, or refine the theory.

I should add that I'm pretty sure not all economists who consider themselves Austrian would take the extreme a priori position.

There are a variety of other differences in emphasis. Also, there is Austrian business cycle theory, which I'm not competent to describe since I don't do macro. I believe my father's view was that the theory was logically possible but inconsistent with the real world evidence. His standard response to the question of whether he was an Austrian or a Chicago economist was that he was an American economist--he thought arguments about schools of thought just got in the way of doing economics.

Hope that helps. If you are curious about my version of Chicago economics, my Price Theory is webbed on my site for free, along with a lot of my articles and several other books, and my Hidden Order is available from Amazon.com.

A priori analysis is clearly the most important aspect of economics, it is where Austrians shine. Understanding ethics is crucial.

Re: Minarchy vs Anarchy

Raoul — Sun, 05 May 2013 21:36:38 GMT

Re Cardinal utility, how do you propose to measure it?

I would like to know, me too.

I can admit that individual utility functions don't involve cardinal utility, but I can't see how it is possible to build collective utility functions with ordinal utility. This point is not merely academic. It has important consequences on policy (especially on antitrust).

Re: Minarchy vs Anarchy

ToxicAssets — Sun, 05 May 2013 18:56:36 GMT

David Friedman:
Hope that helps.

I guess.

I mean, I think I see your point. It is not inconsistent to apply methodoligical individualism in a collectivist utilitarian context if we assume that individuals have, generally, some sort of altruistic feeling (I guess you call it "liberal sensitivities" in the US) toward random people.

I don't disagree with that by no means, even though I'm generally suspicious of any public declaration of love and empathy for people in general.

But the realization that individuals are generally like that, and not entirely selfish beings, maybe altruistic but only to their kin or close associates, is an empirical fact, and not an a priori conclusion.

At least theoretically, we could think of a race of purely selfish rational beings, that would still display social patterns of co-operation like trade and contracts and all other market phenomena. "Not from benevolence, but from their regard to their own interest".

They would co-operate only to to the point where it would benefit them to do so. And they would betray and violate one another whenever it was to their net advantage to do so. And no-one would care about collective ideals of economic efficiency in the sense of least total social cost or anything like that.

I'm not saying that everybody is like that, but I'm afraid enough people are, to the point that they can form an ecologically persistent niche.

And as far as empirical assessments about what people consider as "collective fairness", they seem more inclined to gravitate towards equality of outcomes proposals rather than sophisticated total cost minimization schemes of resource allocation.``

But that seems to change according to cultural backgrounds.

Thanks for your answer, I really liked your book Machinery of Freedom when I've read it more than 10 years ago back in Brazil. My copy circulated among and beyond my group of friends, and I've lost track of it long ago.

Re: Minarchy vs Anarchy

Jon Irenicus — Sun, 05 May 2013 02:35:45 GMT

One can always make some sufficiently odd and special assumption about utility functions or production functions in order to make an apparently impossible outcome possible.

In the realm of imagination, anything is possible. If you are interested in understanding the Austrian methodological position, try Rational Economic Man by Hollis and Nell.

Re Cardinal utility, how do you propose to measure it? I am sorry but academic treatises showing how it's "possible" to do something but cannot actually do it are rather lofty castles floating in the air. I don't care about defining it. It can be defined. We know what it is.

Re: Minarchy vs Anarchy

David Friedman — Sun, 05 May 2013 01:32:02 GMT

I don't think there is any inconsistency between methodological individualism and concepts such as economic efficiency, which can be thought of as a rough proxy for maximizing total utility. If you want to persuade people that a particular set of institutions is desirable, one way of doing so is to show them that, in some average sense, it results in people being more nearly able to achieve their objectives. That's relevant both because, ceteris paribus, it means they are more likely to be able to achieve their objectives and because most people are sufficiently benevolent to consider it on the whole desirable that other people be able to achieve their objectives. Economic efficiency isn't a perfect measure of the degree to which people can achieve their objectives, but I don't know of a better one that it's practical to apply in practice.

So far as my view of an anarchist legal system, which I suspect is what you are referring to, the point is that economic analysis implies it will tend towards maximum economic efficiency (with some complications that you can find discussed in some of my recorded talks). That has nothing to do with whether you are in favor of economic efficiency--it's a prediction about the outcome.

I go on to argue that economic efficiency correlates well, although not perfectly, with liberty, hence that the fact that such a system tends to produce efficient law implies that it is likely to product libertarian law. Since I know of no comparable line of argument to show that law generated through political mechanisms will be either efficient or libertarian, that strikes me as an important argument in favor of anarcho-capitalism.

Hope that helps.

Re: Minarchy vs Anarchy

ToxicAssets — Sat, 04 May 2013 11:32:15 GMT

Hello professor David Friedman,

I hope I'm not talking to some troll using your name.

Regarding these different perspectives on utility functions, there's also the issue of Chicago School utilitarianism. Some Chicago School people, like Ronald Coase in his namesake theorem, and yourself in Machinery of Freedom, seem inclined to work with abstract collective utility functions, and to understand the market as a process of optimization of such a function, and even to defend a vision of an utilitarian justice system, which I believe wouldn't make much sense for an Austrian economist adhering to the so-called methodological individualism.

Re: Minarchy vs Anarchy

David Friedman — Sat, 04 May 2013 06:46:34 GMT

Happy to help. As best I can tell, my father routinely answered mail from strangers. In that way as in others, I try to live up to his example.

Re: Minarchy vs Anarchy

Gavin23 — Sat, 04 May 2013 05:28:34 GMT

Thanks David Friedman. When I ask question on Internet forums about certain concepts or ideas I never expect the main proponent or creator of those ideas to be the one to answer me. So this was interesting to say the least (If it really is you) Ill look up Prince Theory on this site and add it to my to read list (which is growing rapidly)

Anyway just wanted to say if theres anyone whose done more to make me a Libertarian it would be your dad. He was one of the best if not the best in my opinion when it came to articulating and arguing in favor of libertarian principles in such a simple way that anyone could grasp it.

Re: Minarchy vs Anarchy

David Friedman — Sat, 04 May 2013 05:13:22 GMT

Actually, the teleportation system has speeded up a bit, possibly due to my living in Silicon Valley for so long.

I don't think the issue of cardinal vs ordinal utility is central to differences between the Chicago and Austrian approaches to economics. I wouldn't even assume that all Austrians reject Cardinal utility. It plays a major role in The Theory of Games and Economic Behavior, the original game theory book, coauthored by John Von Neumann and Oskar Morgenstern, and I believe Morgenstern considered himself an Austrian. That's more nearly a difference between utility theory pre and post Von Neumann, since he is the one who showed how you could produce a meaningful and useful definition of cardinal utility.

One difference between Chicago school economics and Austrian school as some of its proponents view it is the role of a priori argument vs empirical evidence. Some Austrians appear to believe that one can do economics entirely as an a priori science. In my view, that does not work--I have a hard time thinking of any testable proposition about the real world that can be proved by a priori economic argument. One can always make some sufficiently odd and special assumption about utility functions or production functions in order to make an apparently impossible outcome possible.

The Chicago approach, as I understand and practice it, involves forming conjectures on the basis of a priori argument, testing them against the real world, and using the result to accept, reject, or refine the theory.

I should add that I'm pretty sure not all economists who consider themselves Austrian would take the extreme a priori position.

There are a variety of other differences in emphasis. Also, there is Austrian business cycle theory, which I'm not competent to describe since I don't do macro. I believe my father's view was that the theory was logically possible but inconsistent with the real world evidence. His standard response to the question of whether he was an Austrian or a Chicago economist was that he was an American economist--he thought arguments about schools of thought just got in the way of doing economics.

Hope that helps. If you are curious about my version of Chicago economics, my Price Theory is webbed on my site for free, along with a lot of my articles and several other books, and my Hidden Order is available from Amazon.com.

Re: Minarchy vs Anarchy

Gavin23 — Sat, 04 May 2013 03:46:27 GMT

Wait David Friedman actually has an account and posts on this forum? I find that funny.

Ill read the links you provided thank you.

Re: Minarchy vs Anarchy

Malachi — Sat, 04 May 2013 03:31:57 GMT

http://mises.org/community/forums/t/29440.aspx

http://mises.org/community/search/SearchResults.aspx?u=5172&o=DateDescending

those are two links you might find interesting, the first is a discussion on Friedmanite ancap and the second is the search results for David Friedman's posts, as he appears roughly 12-72 hours after you utter his name on these forums, through the chicago school "multiplier effect" teleportation system based in chicago illinois.

he himself gave much better answers to your questions on this forums, but I think the main difference is that chicago school ecnonomists use cardinal utility.

Re: Minarchy vs Anarchy

Gavin23 — Sat, 04 May 2013 03:25:34 GMT

Great responses thank you guys.

In my reading Ive come across David Friedman. Son of Milton Friedman. Unlike his father he is an Anarcho Capitalist. At the same time though he is a Chicago School Economist?

So my question is what is the difference between Rothbardian anarcho capitalism and David Friedman's version of it? Further the differences between Chicago School and the Austrian school.

Re: Minarchy vs Anarchy

Graham Wright — Sat, 04 May 2013 03:18:05 GMT

Hello Gavin - welcome to the forum!

Gavin23:

Does being a Austrian economists mean you have to be an Anarchist? This site is named after Mises who I believe was a Minarchist not an Anarchist (Right?) Further many notable Austrian economists such as Hayek, Peter Schiff and others are also Minarchists. So whats the relationship?

Austrian economics is a value-free science and it teaches us that if we favor peace and prosperity, we ought to value the idea of private property and free markets and try to move society in that direction. Minarchists support private property and free markets in all industries except law (dispute resolution) and security / defense, for some reason. Anarchists don't make this exception, and support private property and free markets entirely. So you could say that anarchy is a full implementation of the norm that Austrian economics tells us maximises peace and prosperity. Minarchy is an incomplete implementation of it.

In Schiff's case, it is clear from his interviews by Adam Kokesh that he hasn't really thought much about anarchism and doesn't see much value in doing so, but if/when he does, I think he will become an anarchist. Hayek was from a different era and I think near his death he said something to the effect of "if I were young today, I would probably be an anarchist".

Mises is a difficult one. He is sometimes called a philosophical anarchist, because he believed in the principle of individual secession: that any group of people (right down to the individual level) should be able to secede from the authority of a larger state. He even said he wished this could be extended down to the level of the individual (which is anarchy), but he could not see how it was practical. It took Murray Rothbard to apply Austrian economics where Mises himself did not, to the industries of law and security, and see a way even those industries could and should be free markets.

Many on these forums seem to be Ron paul Fans. Do Anarchists support him or denounce him as some sort of traitor for his Minarchist views?

Yes, a lot of us are Ron Paul fans, and Ron Paul helped found the Mises Institute back in 1982. I am convinced that Ron Paul is a Voluntarist. I believe he adopted, when speaking to statists, Constitutionalist rhetoric and sometimes minarchist positions, purely as a means to spreading the message of liberty as far as he could. See my other video for more on that: Where do Ron Paul's ideas come from?

I tend to view myself as a Minarchist. Government restricted simply to Judicial System/Police and Defense. Im starting to read up on Anarchist ideology but regardless my question is are there Minarchists on this forum or is this a Anarchist majority forum?

Anarchists are the majority. Most of us started off as minarchists until we started hanging round this place.

Re: Minarchy vs Anarchy

Malachi — Sat, 04 May 2013 03:13:33 GMT

you do not have to be a minarchist or an anarchist. you could be a monarchist. or, even better, you could decline to espouse a politics at all, and simply perform value free analysis.

Re: Minarchy vs Anarchy

Wheylous — Sat, 04 May 2013 02:59:53 GMT

You might like http://mises.org/books/chaostheory.pdf