Some Scattered Thoughts on Austrian Economics

This post isn’t really intended as a comprehensive and rigorous critique of Austrian economics – I’ll leave that to others. Instead, it’s a brief summary of why I reject Austrianism (the brand most common on the internet, anyway*).

To start, I’ll take the liberty of quoting a commenter from Brad Delong’s blog, who summed up my overall impression of Rothbardians (and to a lesser extent, Miseans) pretty nicely:

The weird thing about Austrians, it seems to me, is that they don’t like empiricism, but they don’t seem to really like deriving any conclusions that they didn’t already know from their axioms either. The rejection of empiricism, along with claims like how empirical economists can’t explain people commuting on subways, are part of Mises’s though. Also, though, look at the case of Austrian rejection of modern microeconomics on the grounds that its use of utility functions and such is inconsistent with preference rank-based description of human choice-making. Basically, that’s a rejection of the Von Neumann-Morgenstern theorem as far as I can tell. (Even though Morgenstern may have been something of an Austrian himself.) I’ve never read an Austrian actually explicitly reject the theorem, or explain his view on it in any way, but the rejection seems to be implicit in their discussions of conventional, non-Austrian micro. Why reject Von Neumann-Morgenstern? As far as I can tell, because it doesn’t fit their conception of how economic analysis should be done.

So, if you don’t look at the world empirically, and you don’t want to extend your axioms to their logical implications to conclusions that you didn’t already know, what’s left? The axioms themselves, and some thoughts hanging around their immediate vicinity. Or, to put it another way, your initial prejudices. Your thought starts where it ends, exactly where you wanted it to.

That’s what I take from Austrian economics, at least.

Internet Austrians have declared capitalism to be infallible and as such are unable to blame anything on the private sector – their conclusion is always that it’s the state’s fault. I just can’t align myself with something that seems to come to the same policy conclusions, whatever the question, whatever the situation, whatever the starting point and methodology.

Another reason I find the Austrian school to be unsatisfactory is its failure to predict and explain the 2008 crisis.

As LK has documented, Austrian claims to ‘predict’ the crisis with anything like the accuracy of Michael Hudson or Steve Keen are spurious. At best, the Austrians spotted a housing bubble, no more. Furthermore, their theory doesn’t even appear to explain the crisis particularly well, for the following reasons:

Put simply, ABCT is based on a misallocation of investment in capital goods. The imbalances created by this result in a recession, which is necessary as the capital is liquidated and put to ‘proper’ usage elsewhere. But this isn’t what happened in the financial crisis; in the crisis people were simply buying and selling the same assets to each other – housing, mortgages and their derivatives – and most of the debt taken on went into consumption. Murray Rothbard himself said:

To the extent that the new money is loaned to consumers rather than businesses, the cycle effects discussed in this section do not occur.

Even if you accept that low interest rates caused the boom, the Austrian prescription of liquidation does not follow, as there was very little capital to ‘reallocate’. After all, derivatives are just contracts, an there is currently an undersupply of housing in many Western countries.

And, of course, sectors unrelated to the crisis have slumped at least as much as ones that were central:

On top of this, there is simply too much historical counter evidence against the idea that credit expansion/CBs cause business cycles. The Dutch Tulip Mania occurred under 100% reserve banking. The Melbourne Land Crisis occurred under a private gold standard system. The South Sea Bubble occurred without a Central Bank (The BoE did exist but was the same as the one we know and love only in name). Furthermore, the period of fewest crises was post-WW2, with universal Central Banking. This list is far, far from exhaustive.

Since this is a scattered post, I’ll also add that Austrians have completely failed to rebut Sraffa’s demolition job on Hayeks P&P (no, the response that there is schedule of interest rates does not qualify as it is simply restating the criticism), and also that their use of uncertainty appears not to recognise the term in the Knightian sense.

So, there you go. That’s why I’m not an Austrian.

*For balance, here are some good Austrian blogs: Jonathan Catalan, The Radical Subjectivist and Bob Murphy (though his Krugman obsession does get tiring after a while).

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  1. #1 by Lord Keynes on January 27, 2012 - 3:45 pm

    Good post – nice work.

    For other posts debunking the Austrian trade cycle theory, see here:

    http://socialdemocracy21stcentury.blogspot.com/2011/12/hayeks-natural-rate-on-capital-goods.html
    This shows how Sraffa demolished Hayek’s Prices and Production.

    http://socialdemocracy21stcentury.blogspot.com/2012/01/hayeks-trade-cycle-theory-equilibrium.html
    How Hayek himself was forced to retreat from trade cycle theory because it was essentially an equilibrium theory and ignores the role of radical uncertainty and subjective expectations.

    A long list of my relevant posts:

    http://socialdemocracy21stcentury.blogspot.com/2011/12/my-posts-on-austrian-business-cycle.html

  2. #2 by Invisible Backhand on January 27, 2012 - 4:39 pm

    “Internet Austrians have declared capitalism to be infallible and as such are unable to blame anything on the private sector – their conclusion is always that it’s the state’s fault. I just can’t align myself with something that seems to come to the same policy conclusions, whatever the question, whatever the situation, whatever the starting point and methodology.”

    Love that line.

    Reminds me of the joke about the econ professor who was giving a lecture on Milton Friedman when he sees a student sleeping in the back row.

    He walks up to him, pokes him awake and demands, “What would Friedman recommend that situation?”

    The student says, “Well Professor, I didn’t hear the question but the answer is the free market.”

    • #3 by Unlearningecon on January 27, 2012 - 6:06 pm

      Haha, I actually heard it was ‘the answer is an increase in the money supply’. Potentially an urban legend but funny in any case.

  3. #4 by Blue Aurora on January 27, 2012 - 5:02 pm

    Agreed, nice work, Unlearningecon. You could also have cited Daniel Kuehn’s post on LK on Michael Emmett Brady. Dr. Brady made an excellent critique of the Austrian conception of uncertainty.

    http://factsandotherstubbornthings.blogspot.com/2011/10/lk-on-michael-brady.html

    • #5 by Unlearningecon on February 6, 2012 - 1:09 pm

      I did link to it at the end btw.

    • #6 by Bob Roddis on February 6, 2012 - 5:07 pm

      As Gene Callahan wrote in the comments on DK’s blog:

      This strikes me as way off base. Where does Hayek ever say the aggregation is perfect? His only point is that the market knows *more* than the planner can, not that it knows everything!

      My constant point is that the market actors themselves must always know more than the planner. Further, the prices actually paid for stuff make up the main source of such knowledge. There is no “perfect” knowledge in this universe.

    • #7 by Bob Roddis on February 6, 2012 - 5:09 pm

      Jonathan F. Catalan explains that non-Austrians simply do not comprehend the Austrian concept of economic calculation.

      http://www.economicthought.net/blog/?p=570

  4. #8 by Mattheus von Guttenberg on January 27, 2012 - 5:42 pm

    This is hardly a definitive or dangerous post to Austrians. A lot of your points are shallow and easily explained.

    To rebut the commentator you quoted:

    they don’t seem to really like deriving any conclusions that they didn’t already know from their axioms either.

    That’s how deduction works. It’s tautology. The conclusions are already implicit in the axioms; there’s no new “searching” that has to go on. We’re talking about (more complicated) unmarried bachelors and you’re saying “We already knew that!” The concept of diminishing marginal utility is implicit in the logic of action, the Austrians just draw it to the fore. I mean, you could say the same thing about mathematicians – “they don’t seem to really like deriving any conclusions that they didn’t already know from their axioms.”

    I’ve never read an Austrian actually explicitly reject the theorem, or explain his view on it in any way, but the rejection seems to be implicit in their discussions of conventional, non-Austrian micro. Why reject Von Neumann-Morgenstern? As far as I can tell, because it doesn’t fit their conception of how economic analysis should be done.

    I’m not as familiar with my game theory as I ought to be – but we’re not rejecting cardinal utility functions because it’s hip and counter-culture. There’s a distinct reason utility functions are impossible and unrealistic, and that’s because utility cannot be known or measured. Moreover, to borrow from my nearest algebra book, a function is: “If a variable y is related to a variable x in such a way that each assignment of a value x definitely determines one or more values of y, then y is called a FUNCTION of x.”

    Is that true for utility? Is there a precise, deterministic, mathematical relationship between utility and any possible variable? The degree to which we draw swooping utility functions overlaying cost curves is a unacceptable practice borrowed from coordinate geometry. Utility, again – is ordinal, it is intrinsically subjective, and it cannot be made known by other people. Mises, much before his time, was implicitly aware of the nature of non-reductive qualia that mathematicians and natural scientists still have not understood. The very nature of utility denies such a formulation.

    you don’t want to extend your axioms to their logical implications to conclusions that you didn’t already know, what’s left? The axioms themselves, and some thoughts hanging around their immediate vicinity.

    Talk about a straw-man. Right, because the first time an Austrian thought about money the entire corpus of ABCT burst forth from his head like Athena from Zeus. The entire Austrian practice is about drawing deductions that are not obvious. The only axiom is “man acts” and we draw the entire body of economic science spanning a thousand pages. If that’s immediate vicinity, then I want to see profound.

    Now for your writing,

    Internet Austrians have declared capitalism to be infallible and as such are unable to blame anything on the private sector – their conclusion is always that it’s the state’s fault.

    You’ll have to be more precise if you want a serious response. Using words like “infallible” invokes the idea that we think capitalism is some giant living in the hillside. Capitalism, in the strict Misesian sense, is a social system of private property and free markets. So, yes, where property rights are secure and people voluntarily trade and so forth, there is no problem. There certainly aren’t periods of prolonged mass unemployment or violent investment cycles.

    I just can’t align myself with something that seems to come to the same policy conclusions, whatever the question, whatever the situation, whatever the starting point and methodology.

    Why not? Surely you would be surprised to hear these words coming from a Soviet commissar, wouldn’t you? If you went back in time to Stalinist Russia and there were periods of extreme famine, pollution, shortage of all goods, sickness, and inflation – and you told someone these are because of the state how would you respond if he said what you did?

    I’m not familiar with how much Austrian economics you’ve read, but even a cursory understanding should illuminate why we feel that way. One obvious point is that governments do not operate on profit and loss; profit and loss are necessary tools for rational entrepreneurial action because the price system is a network of dispersed knowledge. Without appealing to he price system, we cannot know what consumers value, etc etc. This should be basic Hayek “Use of Knowledge” stuff. The state cannot engage in economic calculation. Basic Mises. Therefore, all action it takes is necessarily in the dark and without consumer feedback. Moreover, given the nature of bureaucracy and politics, these actions will more than likely be counter-productive. The notion that free markets maximize consumer value is not an axiom, its a conclusion.

    Put simply, ABCT is based on a misallocation of investment in capital goods. The imbalances created by this result in a recession, which is necessary as the capital is liquidated and put to ‘proper’ usage elsewhere. But this isn’t what happened in the financial crisis; in the crisis people were simply buying and selling the same assets to each other – housing, mortgages and their derivatives – and most of the debt taken on went into consumption.

    This comment is already far too long but suffice it to say your concerns have already been answered. Bob murphy has done a lot of work showing how this financial bubble is a typical Austrian business cycle.

    Murray Rothbard himself said:

    To the extent that the new money is loaned to consumers rather than businesses, the cycle effects discussed in this section do not occur.

    Quote-mining. What he’s talking about is the direction of the lending channels and the responses on different people. Of course, overconsumption is a necessary part of the business cycle that Austrians have repeatedly emphasized.

    On top of this, there is simply too much historical counter evidence against the idea that credit expansion/CBs cause business cycles. The Dutch Tulip Mania occurred under 100% reserve banking. The Melbourne Land Crisis occurred under a private gold standard system. The South Sea Bubble occurred without a Central Bank (The BoE did exist but was the same as the one we know and love only in name).

    Doug French, president of the LVMI, wrote his dissertation on how these historical episodes all have traces in cheap credit and investment bubbles. I recommend his work http://mises.org/Books/bubbles.pdf

    Since this is a scattered post, I’ll also add that Austrians have completely failed to rebut Sraffa’s demolition job on Hayeks P&P (no, the response that there is schedule of interest rates does not qualify as it is simply restating the criticism), and also that their use of uncertainty appears not to recognise the term in the Knightian sense.

    Modern Austrians have picked apart Sraffa (for instance http://mises.org/daily/1486). I’m less familiar with Knight directly, but even Keynesians I have talked to admit that Austrians use uncertainty in the Knightian sense (and they use uncertainty in Keynes’ sense).

    • #9 by Unlearningecon on January 27, 2012 - 6:03 pm

      ‘That’s how deduction works. It’s tautology. The conclusions are already implicit in the axioms; there’s no new “searching” that has to go on. We’re talking about (more complicated) unmarried bachelors and you’re saying “We already knew that!” The concept of diminishing marginal utility is implicit in the logic of action, the Austrians just draw it to the fore.’

      So you admit that your theory was constructed round preordained conclusions. OK…

      ‘I mean, you could say the same thing about mathematicians – “they don’t seem to really like deriving any conclusions that they didn’t already know from their axioms.”’

      No you couldn’t. Mathematicians come to conclusions they weren’t expecting – take the irrational numbers, proof, for example.

      When you talk about utility you only approach it from a revealed preference perspective. You don’t delve into where the decisions came from – neurology, how the decisions were affected by environment,and so forth.

      ‘Right, because the first time an Austrian thought about money the entire corpus of ABCT burst forth from his head like Athena from Zeus. The entire Austrian practice is about drawing deductions that are not obvious. The only axiom is “man acts” and we draw the entire body of economic science spanning a thousand pages. If that’s immediate vicinity, then I want to see profound.’

      You draw ‘government causes everything bad’ from it, i.e. your initial prejudices.

      ‘You’ll have to be more precise if you want a serious response. Using words like “infallible” invokes the idea that we think capitalism is some giant living in the hillside. Capitalism, in the strict Misesian sense, is a social system of private property and free markets.’

      – There’s no such thing as a free market, it is mythological.

      – You ignore power structures. If capitalism is entirely voluntary then why did many of the private property owners have to have peasants separated forcibly from their means of production to create a workforce dependent on wages?

      ‘So, yes, where property rights are secure and people voluntarily trade and so forth, there is no problem. There certainly aren’t periods of prolonged mass unemployment or violent investment cycles.’

      This is an assertion.

      Why are you talking about Soviet Russia? Can libertarians go a day without mentioning it? It’s irrelevant.

      ‘I’m not familiar with how much Austrian economics you’ve read, but even a cursory understanding should illuminate why we feel that way. One obvious point is that governments do not operate on profit and loss; profit and loss are necessary tools for rational entrepreneurial action because the price system is a network of dispersed knowledge. Without appealing to he price system, we cannot know what consumers value, etc etc. This should be basic Hayek “Use of Knowledge” stuff. The state cannot engage in economic calculation. Basic Mises. Therefore, all action it takes is necessarily in the dark and without consumer feedback. Moreover, given the nature of bureaucracy and politics, these actions will more than likely be counter-productive. The notion that free markets maximize consumer value is not an axiom, its a conclusion.’

      ‘Understanding’ meaning accepting your assertions. This is mostly based on assertions/circular logic, which I have bolded.

      Maybe the Rothbard quote is a red herring. You didn’t respond to my actual evidence/reasoning.

      Hayek DEFINITELY didn’t use uncertainty right,as shown in the paper to which I linked. If Mises/Rothbard used it, then guess what the conclusion was? Government = bad! Anything you introduce to the methodology, it comes to the same conclusions.

      I’ll read some of those Mises things but judging from what I’ve read so far it is hardly a shining beacon of scholarship. Austrians seem to think that merely writing about something means they have ‘rebutted’ it.

    • #11 by Lord Keynes on January 27, 2012 - 6:54 pm

      “Bob murphy has done a lot of work showing how this financial bubble is a typical Austrian business cycle.”

      I laughed out loud when I read this. Far from confirming the “typical Austrian business cycle theory” Murphy is the one honest Austrian who admits that there is a severe flaw in it on the basis of the non-existence of a unique rate of interest:

      http://socialdemocracy21stcentury.blogspot.com/2011/07/robert-p-murphy-on-sraffa-hayek-debate.html

      > To the extent that the new money is loaned to consumers rather than
      > businesses, the cycle effects discussed in this section do not occur.

      Quote-mining. What he’s talking about is the direction of the lending channels and the responses on different people.

      And credit flows to consumers don’t result in the typical Austrian trade cycle, Just give it up.

      “Modern Austrians have picked apart Sraffa (for instance http://mises.org/daily/1486). “

      You cite Robert P. Murphy, “Sraffa’s Production of Fallacies by Means of Fallacies,” Mises Daily: Wednesday, April 07, 2004.
      That attack on Sraffa’s neo-Ricardianism does NOT refute his critique of Hayek in 1932, and your statement is nothing but a lazy red herring.

      “I’m less familiar with Knight directly, but even Keynesians I have talked to admit that Austrians use uncertainty in the Knightian sense”

      They pay lip service to it, but don’t take it seriously – Hayek’s trade cycle theory is PRECISELY an equilibrium theory that doesn’t take Knightian uncertainty and subjective expectations seriously, and this was eventually recognised by Hayek himself:

      http://socialdemocracy21stcentury.blogspot.com/2012/01/hayeks-trade-cycle-theory-equilibrium.html

      This is why he abandoned his trade cycle theory work after about 1940.

      It was the major reason why he abandoned his trade cycle work.

      • #12 by Lord Keynes on January 27, 2012 - 7:13 pm

        Correction:

        Murphy is the one honest Austrian who admits that there is a severe flaw in it on the basis of the non-existence of a unique Wicksellian natural rate of interest:

      • #13 by Jonathan M.F. Catalán on January 27, 2012 - 7:54 pm

        It has nothing to do with honesty; or, do you really think that people who disagree with you are being dishonest? (That, incidentally, sounds like something some Austrians would say about Keynesians.)

      • #14 by Mattheus von Guttenberg on January 27, 2012 - 9:37 pm

        Yeah but Bob is nuttier than squirrel poop on interest theory. I mean, he endorses a liquidity preference model. CAN YOU BELIEVE IT?

      • #15 by Mattheus von Guttenberg on January 27, 2012 - 11:27 pm

        Well, economics and determinism are involved in wholly separate categories of inquiry, I think. Economics is concerned with the catallactic process of exchange and production whereas determinism is concerned with metaphysical concepts of necessity and liberty, agency, moral responsibility and the like.

        I think its important for everyone to study philosophy – and philosophy of agency which includes determinism is very important too. But as far as economists qua economists are concerned, it really is immaterial whether or not people have radical free will (they are prime movers unmoved like Richard Taylor thinks) or they are automatically determined and subject to antecedent conditions a la Holbach. We just study the interrelationships without getting into the metaphysics.

        I’m not sure what you mean by specific or general determinism. But there are two different types of determinism we speak of when regarding persons. Hard determinists are those that consider all events as determined, including human events. If human events are already determined by prior causes, then any action I take is not truly “my choice” but was determined to occur before. Hard determinists charge that free will is thus an illusion. Soft determinists agree with the universality of causal determinism, but they believe that free will can be more properly defined and can exist inside a determinist matrix. Prominent soft determinists are David Hume, Harry Frankfurt, Gary Watson. I think Mises was a soft determinist (not his words) because he writes a lot about determinism in Theory and History, Human Action, and elsewhere – but I believe he holds that free will does exist in another form. Modern Austrians like Rothbard and Hoppe are not determinists.

        What do you think about this post on framing? http://unlearningeconomics.wordpress.com/2012/01/13/why-does-neoclassical-framing-matter/

        I think it’s a very good article. The author takes it in a way I wouldn’t have though. I think the framing question is important. I would simply have taken the discussion in a different way to look at people’s perceptions of the state and the status quo, rather than our notions about the market. I believe people’s perceptions about the market are generally right (rewards production, equilibrates, etc) with some exception, but people’s perceptions about the state (social contract, taxes are the price we pay for society) are generally wrong, with some exception.

    • #16 by stickman on January 27, 2012 - 10:51 pm

      [W]e’re not rejecting cardinal utility functions because it’s hip and counter-culture. There’s a distinct reason utility functions are impossible and unrealistic, and that’s because utility cannot be known or measured. [...]

      [...]Is there a precise, deterministic, mathematical relationship between utility and any possible variable? The degree to which we draw swooping utility functions overlaying cost curves is a unacceptable practice borrowed from coordinate geometry. Utility, again – is ordinal, it is intrinsically subjective, and it cannot be made known by other people. Mises, much before his time, was implicitly aware of the nature of non-reductive qualia that mathematicians and natural scientists still have not understood. The very nature of utility denies such a formulation.

      I have never understood all this Austrian handwringing about ordinal utility and mathematics. Not only is the former fully compatible with the latter, but understanding why has been a mandatory part of every micro course that I’ve ever taken. Seriously: learning about monotonic transformations, quasiconcave functions, etc are fundamental components of utility theory in the standard neoclassical curriculum. (E.g. here and here.)

      Am I missing something? I feel like I’m taking crazy pills.

      PS – Mattheus, on your first paragraph and revealed preference theory, Samuelson is the real place to start… Though Varian is one place to get a thorough treatment of how things have developed since then. (Actually, I’m not sure why Delong sees fit to cite VMN on this score. Perhaps he wanted to highlight the VM-Austrian connection, rather than that bête noire to Austrian acolytes, Paul Samuelson.

      • #17 by Mattheus von Guttenberg on January 28, 2012 - 5:43 pm

        Every microeconomics course, from principles to production isoquants, has involved the implicit assumption of cardinal utility.

        Every time one uses a function that follows the pattern U=U(x,y) one starts assuming all sorts of mathematical properties about utility that do not follow from the concept of utility. Hazlitt chides Keynes at one point for writing similar algebraic function; we can take it casually that utility or satisfaction is determined by several things, but to put it in a mathematical function is to enter into an area of precision where there is none.

        And there’s all sorts of implicit considerations of cardinal utility in other places, too. Consumer surplus, indifference analysis, etc.

        I’m actually not familiar with Samuelson’s work on revealed preferences. Unfortunately, I have read very little by Keynesians (probably because I’m still a student).

        Note: Why do you say Samuelson is an Austrian acolyte?

      • #18 by Warren on January 29, 2012 - 4:46 am

        Mattheus,

        Not to crowd in on the interesting discussion, but he said bête noire (i.e. anathema) to Austrian acolytes not that he was an Austrian acolyte.

      • #19 by stickman on January 29, 2012 - 12:01 pm

        Mattheus, apologies but I find your response very confused. All the “problems” that you identify are dealt with in a standard neoclassical curriculum and, indeed, in the links that I provided above. (I’m not even sure what production isoquants have to do with consumer utility at this point, but I’ll leave that aside for the moment.) I highly encourage you to read over these links to understand why I make this claim: Start here to get a better sense of the underlying mathematics, and then go here for more extensive application in the context of utility theory.

        To illustrate briefly, however, the entire point of monotonic transformations in this setting is to assign an ordinal ranking to different consumption sets (basket of goods). For our purposes then, it is simply a way of rescaling utility functions to define preference relations.

        At this juncture I should also say that any combination of utility levels, production outputs or whatever can be defined mathematically. Now, it might be an extremely cumbersome function with little hopes of practical application, but that is largely beside the point. As long as we are sure of certain properties (like quasiconcavity) then we are able to make important deductions that are relevant to economic theory. (E.g. The seminal concept of a diminishing marginal rate of substitution – MRS – is derived along entirely ordinal lines.)

        On Paul Samuelson, what Warren said ;)

    • #20 by Min on March 7, 2012 - 10:39 pm

      “The only axiom is “man acts” and we draw the entire body of economic science spanning a thousand pages. If that’s immediate vicinity, then I want to see profound.”

      If that’s deduction, it sounds like you do not know what your assumptions are.

  5. #21 by Mattheus von Guttenberg on January 27, 2012 - 6:38 pm

    So you admit that your theory was constructed round preordained conclusions. OK…

    Sorry, no. The theory was constructed on the basis of axioms that are a priori true. You cannot disagree or deny that man acts. The rest of the deductions come from this axiom. I mean – are you familiar with logic? I would start going into Kant and the synthetic a priori but I want to make sure you understand what simple deduction is first. This is starting to make me really respect Kuehn as an adversary.

    No you couldn’t. Mathematicians come to conclusions they weren’t expecting – take the irrational numbers, proof, for example.

    Right, and economists (or more precisely, praxeologists) came to conclusions they didn’t expect either. The obvious, man-in-the-street economics is some form of vulgar Keynesianism/mercantilism.

    When you talk about utility you only approach it from a revealed preference perspective. You don’t delve into where the decisions came from – neurology, how the decisions were affected by environment,and so forth.

    Well right, but those factors aren’t relevant to the economic consideration. Neurology, chemical imbalance, psychology are fascinating from a deterministic perspective, but they do not give any light on the important questions of economics. The only important topic in economics is the specific action, ie, what the actor chose to do with his time and resources.

    You draw ‘government causes everything bad’ from it, i.e. your initial prejudices.

    Because that argument is just as bullet-proof as asserting Keynesians endorse their theory because they “love government,” right?

    There’s no such thing as a free market, it is mythological.

    I engage in free markets every day. I trade, borrow, lend, and give things to my roommate, friends, and family without any state interference at all.

    You ignore power structures. If capitalism is entirely voluntary then why did many of the private property owners have to have peasants separated forcibly from their means of production to create a workforce dependent on wages?

    Sorry, I got lost in this Marxist dribble. Care to try again?

    This is an assertion.

    No, this is a conclusion based on the study of economic actors. Have you ever studied those?

    Why are you talking about Soviet Russia? Can libertarians go a day without mentioning it? It’s irrelevant.

    Because Soviet Russia is the archetype of central planning and government management. It’s a reductio ad absurdum argument, although it’s not so absurd because it actually happened. It’s relevant because all state action is a difference of degree. The Soviet example, or the Nazi example, seem to be the strongest degree.

    ‘Understanding’ meaning accepting your assertions. This is mostly based on assertions/circular logic, which I have bolded.

    Please explain where I am being circular. Again, do you know the difference between assertions and conclusions?

    Maybe the Rothbard quote is a red herring. You didn’t respond to my actual evidence/reasoning.

    There’s plenty of evidence that shows that the fallout from the financial crisis was widespread, affecting many different sectors. ABCT affirms that busts occur in higher-order capital goods markets (like construction and manufacturing) and radiate from their in accordance to how the structure of production was distorted. Now I’m really not going to take Kuehn for granted anymore. At least he understands the topic he disagrees with.

    Hayek DEFINITELY didn’t use uncertainty right,as shown in the paper to which I linked.

    I haven’t read Hayek in a while to comment on his particular use of ‘uncertainty.’

    If Mises/Rothbard used it, then guess what the conclusion was? Government = bad! Anything you introduce to the methodology, it comes to the same conclusions.

    Well, they are using the same a priori framework. It’s not a surprise they come to the same answer. It would be more shocking if they disagreed.

    Austrians seem to think that merely writing about something means they have ‘rebutted’ it.

    Just like what you’ve done here?

    • #22 by Unlearningecon on January 27, 2012 - 7:09 pm

      ‘Sorry, no. The theory was constructed on the basis of axioms that are a priori true. You cannot disagree or deny that man acts.’

      So? This has 0 bearing on anything. Really.

      ‘he rest of the deductions come from this axiom. I mean – are you familiar with logic? I would start going into Kant and the synthetic a priori but I want to make sure you understand what simple deduction is first. This is starting to make me really respect Kuehn as an adversary.’

      It really depends. Mises comes to a lot of conclusions about state apparatus being desirable, and appears to endorse some form of utilitarian ethic. Rothbard doesn’t. I’m honestly not sure which one you endorse but there seems to be substantial disagreement about the ‘logic’ of the human action axiom and its implications.

      Btw if you keep throwing insults my way I will stop your comments or at least delete the offending passages. LK is incredibly tolerant of you lot but I’m not allowing stuff like this on my blog. It’s just unnecessary – learn to debate people properly.

      ‘Right, and economists (or more precisely, praxeologists) came to conclusions they didn’t expect either.’

      Mises started with an anti government bias and constructed his methodology around it. Surprise surprise, his conclusions were exactly what he wanted.

      ‘The obvious, man-in-the-street economics is some form of vulgar Keynesianism/mercantilism’

      Do you really expect me to take you seriously when you equate Keynesianism and mercantilism? Talk about not knowing about a theory you’re criticising.

      ‘Well right, but those factors aren’t relevant to the economic consideration. Neurology, chemical imbalance, psychology are fascinating from a deterministic perspective, but they do not give any light on the important questions of economics. The only important topic in economics is the specific action, ie, what the actor chose to do with his time and resources.’

      Yes they tell us why and in what situations people take different actions. We can look at how this affects the economy and how the system might be changed to make these actions more beneficial. It’s such a libertarian fantasy that there’s such a thing as neutral policy – have you read Nudge?

      ‘Because Soviet Russia is the archetype of central planning and government management. It’s a reductio ad absurdum argument, although it’s not so absurd because it actually happened. It’s relevant because all state action is a difference of degree. The Soviet example, or the Nazi example, seem to be the strongest degree.’

      You are aware that reductio ad absurdum is a fallacy when applied wrongly, right? Mentioning the USSR when somebody talks about moderate state planning/spending is an example of this.

      ‘Please explain where I am being circular. Again, do you know the difference between assertions and conclusions?’

      Yep, and you make assertions throughout your comment. If they were conclusions you would have demonstrated how you came to them. But you didn’t, you took them as a given and the reasoning followed from there. Circular.

      ‘There’s plenty of evidence that shows that the fallout from the financial crisis was widespread, affecting many different sectors. ABCT affirms that busts occur in higher-order capital goods markets (like construction and manufacturing) and radiate from their in accordance to how the structure of production was distorted. Now I’m really not going to take Kuehn for granted anymore. At least he understands the topic he disagrees with.’

      Of course, all that evidence you keep linking to. Still haven’t engaged my points.

      ‘Because that argument is just as bullet-proof as asserting Keynesians endorse their theory because they “love government,” right?

      No. This is the vital distinction. Keynesians and liberals advocate statist policies to deal with specific problems, whereas Austrians simply want to reduce the state for the sake of reducing the state. You don’t hear a Keynesian say ‘state spending is only x% of GDP, let’s increase it’, but you do hear the opposite.

      ‘I engage in free markets every day. I trade, borrow, lend, and give things to my roommate, friends, and family without any state interference at all.’

      Of course. It’s not like you live in a system governed by laws and regulation, with various public services.

      ‘Sorry, I got lost in this Marxist dribble. Care to try again?’

      This isn’t an argument, it’s an insult. Does it bother you that state coercion had to be used to create capitalism, a supposedly ‘voluntary’ system?

      ‘Just like what you’ve done here?’

      No. Notice i don’t use loaded words like ‘rebutted’ and ‘picked apart’. This is just the basis of whyI don’t consider myself an Austrian. I mean, look at the post name. If someone from Mises.org had written smething similar bt opposed it would be entitled ‘Why Keynesianism is Wrong/Stupid/Illogical’.

      • #23 by Mattheus von Guttenberg on January 27, 2012 - 9:31 pm

        So? This has 0 bearing on anything. Really.

        It has all the bearing in the world if you presume that Austrian economics is just a pseudo-scientific cloak for prejudices. Mises begins his analysis on the basis of an irrefutable axiom, and deduces laws of utility, choice, value – into money, interest, and capital theory from there.

        It really depends. Mises comes to a lot of conclusions about state apparatus being desirable, and appears to endorse some form of utilitarian ethic. Rothbard doesn’t. I’m honestly not sure which one you endorse but there seems to be substantial disagreement about the ‘logic’ of the human action axiom and its implications.

        There is more than one disagreement between them. But of course there is, they aren’t perfect. I think Mises makes some mistakes and Rothbard makes some mistakes – but they use the same methodology. I think some of Mises’ deductions are wrong. But you wouldn’t throw out mathematics or geometry if a geometer told you that triangles have 200 degrees in a Euclidean dimension. You would just correct him and move on.

        Btw if you keep throwing insults my way I will stop your comments or at least delete the offending passages. LK is incredibly tolerant of you lot but I’m not allowing stuff like this on my blog. It’s just unnecessary – learn to debate people properly.

        Are you serious? This coming from the guy who accuses the entire Austrian school, and by extension me, from masking our anti-government prejudices with baseless “assertions.” That’s incredibly rude. Either accept that this is a legitimate scientific inquiry or I won’t continue to debate with you.

        Mises started with an anti government bias and constructed his methodology around it. Surprise surprise, his conclusions were exactly what he wanted.

        Are you trying to tell me that the mode of logical deduction has an inherent anti-government bias?

        Do you really expect me to take you seriously when you equate Keynesianism and mercantilism? Talk about not knowing about a theory you’re criticising.

        If I were more rude, I’d call you thick. 1) I said “vulgar” Keynesianism, not Keynesianism. Go ask Daniel Kuehn for clarification. 2) An entire chapter of Keynes’ GT focuses on the similarity between Keynes’ theories and the economics of the pre-classical mercantilists. 3) A common Keynesian proposal is the construction of tariffs and trade barriers to stimulate national investment – which just so happens to be the most common mercantilist proposal. Get your facts right, bub.

        Yes they tell us why and in what situations people take different actions. We can look at how this affects the economy and how the system might be changed to make these actions more beneficial. It’s such a libertarian fantasy that there’s such a thing as neutral policy – have you read Nudge?

        Okay, but that’s ultimately not what we’re interested in as economists. I don’t care about why certain actors prefer Pepsi to Coke, Dyson to Hoover, apartment complexes to tenement blocks. That is the realm of neurology and psychology. I’m more interested, as I think economists should be, in the actual catallactics of exchange and production. What is a neutral policy?

        You are aware that reductio ad absurdum is a fallacy when applied wrongly, right? Mentioning the USSR when somebody talks about moderate state planning/spending is an example of this.

        All arguments are fallacies when applied incorrectly. That said, I don’t believe I did. The inherent problems in state planning exist in Soviet Russia just as they do in America. The difference is one of degree, not of kind.

        Yep, and you make assertions throughout your comment. If they were conclusions you would have demonstrated how you came to them. But you didn’t, you took them as a given and the reasoning followed from there. Circular.

        Right because I’m about to rehash a thousand pages from Human Action. Do you really think I came up with all this and I’m just flapping my gums? I told you. He starts with an axiom, and deduces laws from them. Go read it yourself if you want a step by step. It’s a complex argument that I cannot justify typing in a blog argument.

        Of course, all that evidence you keep linking to. Still haven’t engaged my points.

        Sorry, I’m not your secretary. Do your own homework. I’m just telling you it exists – and considering the LVMI is the most popular economic website in the world, it shouldn’t be too difficult to find.

        No. This is the vital distinction. Keynesians and liberals advocate statist policies to deal with specific problems, whereas Austrians simply want to reduce the state for the sake of reducing the state. You don’t hear a Keynesian say ‘state spending is only x% of GDP, let’s increase it’, but you do hear the opposite.

        We want to reduce the state for the sake of reducing the state. Really? Go find me a libertarian who tells you he wants to reduce the state for the sake of reducing the state. More likely, he’ll explain how he wants to reduce the state to achieve A, B, C… Z.

        Of course. It’s not like you live in a system governed by laws and regulation, with various public services.

        Now who’s putting the cart before the horse? Do you really believe that markets require state intervention to function?

        This isn’t an argument, it’s an insult. Does it bother you that state coercion had to be used to create capitalism, a supposedly ‘voluntary’ system?

        Well, but it didn’t. There are lots of historical episodes where state intervention forced a type of capitalism – or rather, forced a type of market system on an agrarian people (I’m thinking England/Enclosure Acts). But the process of voluntary exchange and private property doesn’t require state assistance or “boosting.”

        No. Notice i don’t use loaded words like ‘rebutted’ and ‘picked apart’. This is just the basis of whyI don’t consider myself an Austrian. I mean, look at the post name. If someone from Mises.org had written smething similar bt opposed it would be entitled ‘Why Keynesianism is Wrong/Stupid/Illogical’.

        So the Austrians aren’t very humble. Ok.

    • #24 by Mattheus von Guttenberg on January 27, 2012 - 9:34 pm

      I’m more than familiar with determinism and its corollary arguments on morality, free will and agency.

      I don’t think the topic of determinism has much to do with economics because economics concerns itself with specific actions, not the normative stance of those actions. Even if people are determined to act in certain ways from prior causes, it doesn’t refute the practice of praxeology nor does it changes the laws of marginal utility, laws of return, etc. This is actually an interesting question because Mises himself was a soft-determinist.

  6. #25 by Lord Keynes on January 27, 2012 - 7:02 pm

    “There’s plenty of evidence that shows that the fallout from the financial crisis was widespread, affecting many different sectors. ABCT affirms that busts occur in higher-order capital goods markets (like construction and manufacturing) and radiate from their in accordance to how the structure of production was distorted.”

    That is not what happened in 2001-2009: credit flows to consumers with poor credit history and no job or income (NINJA or liar’s loans) produced massive asset price speculation on secondary housing markets and excessive private debt. The crisis of defaulting mortgages was a result of massive credit flows to unworthy borrowers.

    When financial institutions invented exotic financial instruments (CDO’s such as mortgage backed securities) and loaded up on them, the collapse in their value caused a financial crisis and knock on effects on the real economy.

    This hasn’t got a damn thing to do with “standard” ABCT which says nothing about financial crises.

    A crisis of “higher order capital goods investments” didn’t produce the financial crisis and anyone who thinks so is deluded.

    • #26 by Mattheus von Guttenberg on January 27, 2012 - 9:35 pm

      So the boom in housing construction is the fiction of deluded fools?

      • #27 by Lord Keynes on January 27, 2012 - 11:14 pm

        “So the boom in housing construction is the fiction of deluded fools?

        The boom in housing construction did not cause the financial crisis.

        I repeat: it was a crisis of defaulting mortgages from a massive credit flows to unworthy borrowers.

        Moreover, many of these mortgages loans were refinancing and home equity loans, and the money obtained from the debt not used for new housing construction at all, but to pay credit card debt down or purchase more consumer goods. That severely contradicts the Austrian Business Cycle Theory explanation of the 2000s crisis.

      • #28 by Jonathan M.F. Catalán on January 28, 2012 - 12:25 am

        I don’t think the subprime crisis alone caused the financial crisis. What it was was the change in ratings (marked to market) of mortgage backed securities bundles which caused banks to suddenly contract credit as a means of quickly creating capital reserves (since the required reserve minima suddenly increased thanks to restrictions imposed by the recourse rule). There was a fiduciary contraction that probably would have not occurred had banks been offered more flexibility.

        I would say, based off this, that a large part of the contraction did not need to occur.

  7. #29 by bobroddis on January 27, 2012 - 7:24 pm

    The gist of the Austrian School theory is the concept of the limited knowledge of human beings and that economic calculation is essential for people to obtain proper knowledge as actors in society. Unadulterated free market prices perform that essential function. Interventionist and Keynesian-style policies interfere with that process. Pursuant to Rothbard, these basic observations are EMPIRICAL, although as a Kantian, Mises describes them as a priori. This is how human beings operate in the real world. If you have some empirical evidence to dispute this, produce it.

    The price distortions created by artificial fiat loans (and other artificial creation of fiat money) will tend to impact more long term and complicated schemes such as capital investment. But they can also impact other complex long-term investments like housing which are technically durable consumer goods. It is the length and the complexity of the line of investment and production that is important. Further, since consumer credit was not available when the original Austrian works were written, it was not properly addressed. That is no longer the case.

    Prof. Joseph Salerno has written “A Reformulation of Austrian Business Cycle Theory in Light of the Financial Crisis” that addresses these alleged concerns.

    http://econ.as.nyu.edu/docs/IO/18508/Salerno_2011April11.pdf

    Nevertheless, it is clear from his many hysterical writings that “Lord Keynes”, just like all anti-Austrians, simply cannot comprehend the basic Austrian concept of economic calculation. People can quibble about when, how and where interventionist distortions will impact economic calculation and malinvestment but not that such a result is inevitable.

    UPDATE – LK cannot still be fussing about a so-called SINGLE “equilibrium” rate of interest vs. a multiplicity of such rates, is he? More proof he refuses to understand economic calculation. Truly pitiful.

    • #30 by Lord Keynes on January 28, 2012 - 12:33 pm

      ‘The gist of the Austrian School theory is the concept of the limited knowledge of human beings and that economic calculation is essential for people to obtain proper knowledge as actors in society. Unadulterated free market prices perform that essential function”

      The knowledge problem of Hayek applies just as much to private agents – and radical uncertainty and subjective expectations destroy Hayek’s business theory anyway.

      “Prof. Joseph Salerno has written “A Reformulation of Austrian Business Cycle Theory in Light of the Financial Crisis” that addresses these alleged concern”

      And it is just as useless as all the other exposition of ABCT.

      (1) it’s dependent on a non-existent, imaginary natural rate of interest (p. 21, 30).

      (2) false assumption of full employment starting point. Stupid inability to explain why factor inputs cannot be imported.

      (3) From p. 26, where he finally talks of the asset bubble in housing, the phenomenon and its effects are obviously <not explained by ABCT. Nor are debt deflationary effects. Nor is the financial crisis.

      (4) The whole paper collapses by the time we get to this passage:

      “This enormous increase in net worth was based almost solely on paper profits and phantom capital gains on households’ real estate and financial assets. Misled by their inflation-bloated balance sheets, households were induced to “cash out” some of their home equity and increase expenditures on consumer goods and services. In the expression of the day, people began “using their homes as ATM machines.” Households financed their increased spending on boats, luxury autos, upscale restaurant meals, pricey vacations etc., through fixed-dollar debt.”
      p. 27.

      This constitutes credit flows to finance consumption. Cf. Rothbard:
      110 To the extent that the new money is loaned to consumers rather than businesses, the cycle effects discussed in this section do not occur. (Man, Economy, and State, 2004 [1962]: 995–996).

      (5) Salerno is more idiotic even than Hayek, and holds that secondary deflation is a good thing, totally ignoring the role of excessive private debt and deleveraging. Not even Hayek was that stupid.

      (6) Salerno’s emphasis on “monetary calculation” is a different concept from Mises’s attack on “economic calculation” in a command economy with no price system. You doubly reinforce your ignorance even of that subject.

      • #31 by Mattheus von Guttenberg on January 28, 2012 - 5:55 pm

        Your points are idiotic, LK.

        1) You are unsalvageable as far as a natural rate of interest goes, so I won’t bother.

        2) No Austrian begins with full employment.

        3) The asset bubble in housing is obviously a point for ABCT. You claim to know a lot about it. It’s a trade cycle that manifests in malinvestment in higher order capital goods. Hey – guess what houses are!

        4) You are whoring that Rothbard passage so hard lately, and you don’t even understand the context. Have you read MES? Because I have. He isn’t close to describing what you attribute to him.

        5) Because Salerno is a 100% reservist. Unless you want to take that argument up, I suggest we leave it.

        6) Monetary calculation IS different than economic calculation. But Salerno uses it exactly the way Mises does. They’re both necessary Austrian concepts. You are truly grasping, man.

      • #32 by Lord Keynes on January 28, 2012 - 6:43 pm

        Mattheus von Guttenberg,

        2) No Austrian begins with full employment.

        Wrong. The Hayekian version of ABCT does:

        http://socialdemocracy21stcentury.blogspot.com/2011/07/abct-and-full-employment.html

        In a letter written to John Hicks in 1967, Hayek confirms that his theory required the assumption of full employment at the beginning of the process:

        “Hicks to Hayek, November 27, 1967

        We have (a) full employment, (b) static expectations, (c) ‘equilibrium’ at every stage, so that demand = supply in every market, prices being determined by current demand and supply. Add to these the Wicksell assumption, of a pure credit economy and we clearly find that if there were in lags, the market rate of interest cannot be reduced below the natural rate in an equilibrium position; …

        Friedrich August Hayek, Good money, Volume 6, p. 100.

        Hayek to Hicks, December 2, 1967
        … I accept assumption (a), full employment …. (Hayek 1999: 102).

        3) The asset bubble in housing is obviously a point for ABCT. You claim to know a lot about it. It’s a trade cycle that manifests in malinvestment in higher order capital goods. Hey – guess what houses are!

        Houses were not capital goods to people treating them like ATMs or even just buying them to live on secondary markets – and not even all Austrians think houses are capital goods either, so don’t try this tired trick. The Austrian Robert Blumen’, for example, agrees houses are not capital goods:

        “Housing is a consumption good. True, it is a durable consumption good, and it may rise in value over time for many reasons, but it is not capital.”

        http://mises.org/daily/986

        4) You are whoring that Rothbard passage so hard lately, and you don’t even understand the context. Have you read MES? Because I have. He isn’t close to describing what you attribute to him.

        I understand the context perfectly well, fool.
        As for reading the whole of MES, this is a red herring: you don’t need to read the whole thing to understand his exposition of ABCT.

        Your ramblings are the intellectual equivalent of denying that the sky is blue. And even Hayek admitted that his classics ABCT had become increasing irrelevant because of credit flows to consumers in the modern world:

        http://socialdemocracy21stcentury.blogspot.com/2011/06/hayek-on-flaws-and-irrelevance-of-his.html

        6) Salerno’s emphasis on “monetary calculation” is a different concept from Mises’s attack on “economic calculation” in a command economy with no price system.

        Well, duh: That is precisely what I am saying.

      • #33 by Lord Keynes on January 28, 2012 - 6:52 pm

        Correction:

        ” 6) Monetary calculation IS different than economic calculation. “

        Yeah, precisely as I said in my original comment.

      • #34 by Bob Roddis on January 28, 2012 - 7:24 pm

        “The knowledge problem of Hayek applies just as much to private agents – and radical uncertainty and subjective expectations destroy Hayek’s business theory anyway.”

        This statement is just plain silly but it appears to be the apogee of LKay-sian “thought”. If humans are all subject to some form of fatal “radical uncertainty”, how can anyone possibly plan for the future? How can government overseers supported by SWAT teams possibly have superior knowledge to the actors on the ground about their own unique situations? And even if some overseers could have such knowledge [they can‘t and don‘t], who would be so foolish as to suggest that a priori anyone running the SWAT team has such special knowledge? I’ve asked LK this at least 20 times and he is unable to answer.

        LK’s statement is just his usual unintelligible gobbledygook meant to confuse and intimidate the weak-minded. Those few of us who understand the ABCT see it for what it is.

      • #35 by Lord Keynes on January 28, 2012 - 8:33 pm

        “If humans are all subject to some form of fatal “radical uncertainty”, how can anyone possibly plan for the future? “

        Not all processes or phenomena in life are subject to radical uncertainty: phenomena where strict mathematical probability applies (e.g., a game of roulette), for example.

        The economic system we know as capitalism, where most commodities are produced by decentralised investment decision-making by millions of agents and consumption by other agents with shifting subjective utilities, is an example of a non ergodic stochastic systems. As the level of non-intervention to affect the state of the system approaches zero, the future state of the system becomes increasingly uncertainty.

        It is precisely the interventions form outside that affect the future estate of the system by government that reduce uncertainty. I have already discussed a long time ago:

        http://socialdemocracy21stcentury.blogspot.com/2011/10/how-can-government-overcome-uncertainty.html

        “…usual unintelligible gobbledygook meant to confuse and intimidate the weak-minded.”

        Sounds like you’re unconsciously describing yourself!

      • #36 by Lord Keynes on January 28, 2012 - 8:34 pm

        Correction:

        “As the level of non-intervention to affect the state of the system approaches zero, the future state of the system becomes increasingly uncertain.”

      • #37 by Bob Roddis on January 28, 2012 - 9:07 pm

        If this is your understanding of “non-ergodic”, then you have the burden of proof to demonstrate that these types of problems a) afflict the Rothbardian free market; and/or b) that your proposed overseers with SWAT teams have superior knowledge to that of the economic actors themselves to deal with these alleged problems. I’ve asked you #2 at least 21 times by now.

        Attribute of a behavior that is in certain crucial respects incomprehensible through observation either for lack of repetition, e.g., by involving only transient states which are unique, or for lack of stabilities, e.g., when transition probabilities (see probabilities) are so variable that there are not enough observations available to ascertain them. evolution and social processes involving structural changes are inherently non-ergodic. To understand non-ergodic behavior requires either reference to the underlying organization of the system exhibiting it or the study of a large sample of systems of the same kind (see ergodic).

        http://pespmc1.vub.ac.be/ASC/Non-Ergodic.html

        You’re grasping at straws.

      • #38 by Lord Keynes on January 28, 2012 - 9:42 pm

        “If this is your understanding of “non-ergodic”, then you have the burden of proof to demonstrate that these types of problems a) afflict the Rothbardian free market;”

        (1) this appears to be an acknowledgement that the problems I describe DO affect real world markets, so seem to have effectively conceded the point

        (2) of course it would affect a Rothbardian anarcho-capitalist world. How would the world the capitalist investors have perfect foresight in such a system? The only way you abolish uncertainty is by completely accurate foresight.
        And since you claim to accept voluntary FRB, your system would be (by the logic of your ABCT) subject to trade cycles anyway.

        And money could flood in via the capital account and inflate asset prices too, causing debt deflationary collapse and so on.

        “I’ve asked you #2 at least 21 times by now.”
        Number 2?:

        2) No Austrian begins with full employment.

        What are you even talking about.

  8. #39 by Mattheus von Guttenberg on January 28, 2012 - 4:53 am

    This comment field is getting really bogged down so if you want to continue the conversation with me (Moira since she seems to be the only one asking me questions), lets do it on Economic Thought or facebook or something.

  9. #40 by Bob Roddis on January 28, 2012 - 9:53 pm

    Reply to LK’s #37 comment

    I will take for now your response to #1 and hold you to it. The point is that the future is uncertain for all humans, including those with SWAT teams at their beck and call. The best source of economic information in such a mysterious galaxy is via unadulterated free market prices which Keynesian-type “solutions” impair.

    I’ll ask #2 again for the 22nd time.

    Demonstrate the truth of your allegation that your proposed overseers with SWAT teams have superior knowledge to that of the economic actors themselves to deal with these alleged problems.

    Oh. And while we’re on the subject…..

    Since we’re all allegedly afflicted with the fatal disease of “radical uncertainty“, how can we ever be certain that last week’s official LK determination of our pathetic lives as a nonergodic stochastic system will even be true next week?

    • #41 by Lord Keynes on January 29, 2012 - 2:04 am

      “Demonstrate the truth of your allegation that your proposed overseers with SWAT teams have superior knowledge to that of the economic actors themselves to deal with these alleged problems.”

      A ridiculous straw man.
      The knowledge problem faced by decentralised private agents in a free market is how the investment plans of capitalist/entrepreneurs mesh with consumer preferences, their demand and other unpredictable, uncertain factors, future factors affecting their investment decisions.

      A government engaging in a Keynesian stimulus in the face of a recession does not face this problem, because it is not planning all production of commodities and consumption.

      Take take one example: A government can merely cut taxes, run a deficit, and stimulate the economy back into growth. The extra money is spent in whatever way the people who have got the tax cuts wish: they purchase whatever commodities they like. The capitalists can engage in whatever investment spending they like. The government does not need any “superior knowledge” of consumer preferences or what are future profitable investments, because it is not telling what to consume or capitalists what to invest in.

      In case of an stimulus through increased discretionary spending, this will often involve public infrastructure/public works, but even here the income streams from the new employment of workers will be spent by the people on whatever commodities they wish.

      In engaging in public infrastructure/public works, government does have access to a vast amount of information: governments all over the world collect the relevant statistics on population growth, transport problems, urbanisation, congestion, needed capacity for public utilities and so on and so forth, allowing the planning of public works. That the process isn’t completely perfect – and that some uncertain, future factors may change the social or economic value of certain projects – does not change the fact that in general such limited public investment benefits the economy and society. If the “knowledge problem” ruled out all public investment, then it would also rule all private investment, because private investment is also far from perfect.

      ‘Since we’re all allegedly afflicted with the fatal disease of “radical uncertainty“, how can we ever be certain that last week’s official LK determination of our pathetic lives as a nonergodic stochastic system will even be true next week?”

      Indeed.
      How can we be certain Mises’s disutility of labour axiom will continue to be true? That entrepreneurs will continue to seek profit at all tomorrow?

      But here you are just confusing the Hume’s problem of induction with the uncertainty associated with nonergodic stochastic systems. The problem of induction is a separate philosophical issue.

      • #42 by Bob Roddis on January 29, 2012 - 3:27 am

        This now all becomes a waste of time because there is no reason to believe that the discoordination you claim occurs in a free market actually occurs and you ignore how the government actions to allegedly cure the problem that does not exist cause the discoordination which is the cause of the malinvestment and unemployment in the first place. Your “cure” is the cause.

  10. #43 by Unlearningecon on January 29, 2012 - 12:06 pm

    Sorry for the late reply, I’ve been busy. I will respond only to main points and to things that LK hasn’t been talking about.

    Firstly, Austrians: I am not disputing that the price mechanism is a great way to allocate many resources, I just differ on how many ‘rules of the game’ there should be, so to speak. People are perfectly willing to accept rules in other spheres without asking weird questions like ‘how can the government KNOW better than paedophiles??’. It’s Adam’s Fallacy that causes them to separate the economic world from others and look at it in a skewed way.

    Secondly, Mattheus you appear to have taken this post a bit personally and have equated it to insults. It’s not, it’s a criticism. On the other hand, smugly questioning my grasp of logic and saying you have gained respect for Daniel Kuehn is insulting. I find it hard to believe you genuinely can’t see the difference between the two.

    Thirdly, linking me to various ‘Mises.org’ tomes and articles instead of addressing my points yourself is a standard Austrian tactic, but I’d prefer it if you responded yourself. There are plenty of books I could tell you to read and then accuse you of not doing your homework, but I haven’t, and won’t. I try to make the arguments myself.

    For example, tell me why Sraffa’s criticism of Hayek, centred on the non-existence of a natural interest rate, failed. Tell me exactly what impact the incorporation of Knightian uncertainty has on Austrian analysis. And it is a simple historical fact that peasants were forced into factories through game laws and land repossessions. It just happened.

    Fourthly, as for historical evidence, the South Sea Bubble is the one of which I have the most knowledge, and it appears to be pretty at odds with Austrian explanation. To put it simply, there were two directly substitutable financial assets, but the difference in their pricing was enormous and got bigger and bigger as the bubble collapsed. It just seems like standard irrational exuberance, without a Central Bank.

    Finally, I have a standard objection: your theory appears to be unfalsifiable. If you admit it’s a tautology then it’s going to be incredibly hard for us to engage.

  11. #44 by Bob Roddis on January 29, 2012 - 4:55 pm

    Regarding Hayek vs. Sraffa, Bob Murphy addressed that (even though you hate the idea of Mises.org links).

    http://consultingbyrpm.com/uploads/Multiple%20Interest%20Rates%20and%20ABCT.pdf

    Fine. So there are zillions of potential interest rates. Economic actors on the ground are in the best position to determine what those might be for their own affairs and contracts. The problems of distorted price and interest rates originating from fiat money creation and loans still apply. Statist bureaucrats issuing decrees and backed by SWAT teams are not in a position to have superior knowledge.

    Regarding uncertainty, life is uncertain and government interference makes life even more uncertain. Truth-revealing prices based upon undistorted reality are the best cure for uncertainty, at least in this life.

    • #45 by Unlearningecon on January 30, 2012 - 12:42 am

      It’s not the idea of any links at all, it’s that anyone who criticises Austrians is inevitably presented with barrage of them instead of the Austrian proponent actually engaging the argument themselves.

      I think this evades the point and just takes us to another bizarre rant about government bureaucrats. The point is that the interest rate is the same for different firms who have different forms of capital and hence misallocation will occur at every level, whilst investments that would have been ‘sound’ may not occur.

      Your use of the term ‘uncertainty’ confirms that Austrians do NOT use it in the Knightian sense. If I were being harsh I’d say you were simply using it in the colloquial sense, but Michael Brady suggests that Austrians use it to described dispersed knowledge. However, knowledge that doesn’t exist cannot be dispersed.

  12. #46 by Nicolas Cachanosky on January 29, 2012 - 5:26 pm

    A friend of mine pointed me to this interesting post. I apologize for not going through all, but only some, of the comments. Just a note that may be of interest to the readers of this site.

    It is important to distinguish between ‘austrian economics’ and ‘internet austrianism.’ To attack the former based on the latter is ‘hit a straw-man version’ strategy. Any familiarity with the work of austrian academics, and not just blog posts, should make the difference clear.

    Austrian theory does not work only on tautologies any more than mathematical economics is not built only on mathematical tautologies. For instance, I don’t know of any serious economist that questions himself, or want to empirical test, the fact that demand is downward sloping. Austrian economics does not reject empiric work, it rejects positivism, they are not the same thing. When austrians talk about apriori, they say that we know ex-ante experiences that demand is downward sloping.

    Austrian theory needs to make empirical assumptions about the world like any other theory does. Explicit mentions to this can be found in Mises’ Epistemologial Problems in Economics (1933) and Human Action (1949). The “all is tautology” position rests more on a Rothbardian reading of Mises than on Mises himself, who is more close to Hayek’s position than Rothbard seems to understand. In this respect, Machlup’s (another austrian who should need no introduction) The Problem of Verification in Economics (1955) makes the situation more clear. Mises (and Hayek’s) epistemological position is compatible to a Lakatosian research programm. This is not old, but contemporary epistemology. Certainly we cannot blame Mises to not talk in Lakatosian terms in the 30s and 40s (though he spoke as a popperian before Popper in some passages of espistemological problemas).

    The following paragraph is a sample of the austrian position. A good critic of the Austrian epistemological stance should recognize where this passage comes from:

    “However, in science one cannot be too cautious. If the facts do not confirm the theory, the cause perhaps may lie in the imperfection of the theory. The disagreement between the theory and the facts of experience consequently forces us to think through the problems of the theory again. But so long as a re-examination of the theory uncovers no errors in our thinking, we are not entitled to doubt its truth.”

    This is hardly a non empirical position.

    A short comment on the business cycle theory:
    First, the theory is about why a boom driven by credit expansion is unsustainable. It is not the role of the theory to predict precisely when the boom becomes a bust or how deep and long the recession will be. That would be to evaluate the theory on the wrong grounds. The trigger of the bust is an empirical prediction that in turn requires empirical assumptions of how the market will react.

    Second, the theory does not claim to be the only valid business cycle theory. The fact that any given business cycle does not conform to the ABCT does not prove the theory wrong any more than points to the fact that the empirical conditions of the ABCT where not present (i.e. some may say the behavior of entrepreneurial expectations). One cannot prove theories wrong through empiric work, that was already implicit in Popper and clear since Kuhn-Lakatos-Feyerabend.

    Third, business cycle theories assume ceteris paribus. The real workd is not in ceteris paribus. A lot of things happen together. No economic data matches perfectly any business cycle theory. In addition, any given variable may be pushed in different directions at the same time. What looks like a contradiction in first sight can be in actuality two theories working together, one with more weight than the other. This does not make any theory true, but puts more weigh on the analytical criticism of a theory than on the behavior of economic variables.

    • #47 by Unlearningecon on January 30, 2012 - 1:00 am

      Hi, thanks for your comment.

      You are right that there are some good Austrians around but I definitely distinguished. I noted that this was a criticism of the brand most common on the internet, which is Rothbardians or Rothbardians masquerading as Miseans. My last two points were aimed at Hayek.

      For instance, I don’t know of any serious economist that questions himself, or want to empirical test, the fact that demand is downward sloping.

      More fool them, because it isn’t downward sloping a fair amount of the time. Consider stock prices. (I appreciate this is a bit of a red herring but I can’t let it past!)

      First, the theory is about why a boom driven by credit expansion is unsustainable. It is not the role of the theory to predict precisely when the boom becomes a bust or how deep and long the recession will be. That would be to evaluate the theory on the wrong grounds. The trigger of the bust is an empirical prediction that in turn requires empirical assumptions of how the market will react.

      Nobody is expecting prophetic, dead on predictions but Austrians need to be able to do more than say ‘there will be a bust there will be a bust there will be a bust there will be a bust there will be a bust there will be a bust there will be a bust’ until there is a bust. This appears to be what happened with Mises in 1929, where he had been saying it every week for 5 years.

      Second, the theory does not claim to be the only valid business cycle theory. The fact that any given business cycle does not conform to the ABCT does not prove the theory wrong any more than points to the fact that the empirical conditions of the ABCT where not present (i.e. some may say the behavior of entrepreneurial expectations)

      Firstly, the ‘internet Austrians’ at whom this post is aimed often do claim it explains every theory and certainly that it explains 2008. I agree that 2008 does not refute the possibility of ABCT recessions alone, but it is still an important and relevant point as far as current debate is concerned.

      One cannot prove theories wrong through empiric work, that was already implicit in Popper and clear since Kuhn-Lakatos-Feyerabend.

      Are you sure about this? ABCT says ‘if we have low interest rates, there will be a boom then a bust’. But if we have a lot of examples of low interest rates that are not followed by this then I’d say that’s convincing evidence against ABCT.

      Third, business cycle theories assume ceteris paribus.

      This is a big statement and I’m not even sure it makes sense. If you are discussing the cycles of the *entire* economy how can you use partial equilibrium analysis? By definition business cycle theory is about dynamic situations.

      • #48 by Nicolas Cachanosky on January 30, 2012 - 1:24 am

        Very briefly (or as briefly as I can):

        1-. Examples like stocks imply a change in demand, not upward sloping demands. A second step is to ask why demand shifts the way it does. A rising stock implies a change in preferences or in the assessment of the situation, therefore demand shifts. There can also be a wealth effect on the consumer, and this shifts demand as well.

        2-. “There will be a bust there” is a pattern prediction. At least he saw a bust. No one claims Mises or Hayek where perfect. Surely, one can interpret it as finally confirmed because eventually a bust came. But one would not criticize a doctor who says every week for 5 years that if his patient smokes he is going to get cancer, until he finally gets sick. He simple cannot control for all the “empirical variables.”

        3-. I’m sure about the epistemological comment. I’m not saying empirical evidence is unimportant, I’m saying rejection rests in itself also on assumptions (this was already present in Popper but much more explicit in post-popperians). The ABCT does not just say “if we have low interest rates, there will be a boom and a bust.” The theory says “it there we have low interest rate there will be a boom and bust *plus a set of empirical assumptions.” One of the most relevant is the behavior of expectations. This is explicitly mention in Nationalokonomie and in Prices and Production (namely, before rational expectations). Therefore, as important as empirical evidence it can be, any decision on rejection rests on the subjective assessment of non-observable assumptions. (Also, the relevant interest rate for the ABCT is not observable as well; the ABCT is not about the market or nominal interest rate).

        4-. On the ceteris paribus, I meant that one analysis usually focus on one theory. My apologizes, maybe not the best use of ceteris paribus. This example help to clarify. Milton Friedman thesis of the Great Depression is the contraction of money supply. This analysis implicitly assumes constant other important factors, like regime uncertainty (which was not trivial at the moment). Any business cycle may be explained by different theories in different phases, and to not consider that “other theory may also be in place” can over emphasize the effects of any given theory or reject theory.

      • #49 by Nicolas Cachanosky on January 30, 2012 - 1:58 am

        A clarification on the demand issue. It is not to be meant “literally” as an illustration example. Re-reading your comment I guess you might be thinking of Veblen or Giffen goods. Anyhow, given how we define Normal, Giffen and other goods we do not test to see if a normal good has a downward sloping demand curve, but if it is or not a “normal” good (or any other with downward sloping demand curve).

        Probably, if one finds an upward sloping demand curve would not think that he found normal good with upward slope demand, but that either his observation is wrong or that this is not a normal good.

        However, the point was not so much on demand curves in itself, but as illustration of how and how not “apriori” is used by (austrian) economists.

      • #50 by Unlearningecon on January 30, 2012 - 11:18 am

        Generally speaking I accept your other points and you’ve clarified the demand issue below. But here:

        2. It’s more that Austrians tend to insist there will be a bust without any real underpinnings. To take an exception to the rule (in the true sense of the phrase), Steve Keen (post-Keynesian) had been convinced there would be a housing bust since 2005. He didn’t predict it accurately date wise, but he had a sure idea of why – the level of private debt was increasing exponentially. I don’t see something similar from the Austrians.

  13. #51 by Bob Roddis on January 29, 2012 - 5:29 pm

    And, because I’m too lazy to boil it down, I think Doug French has explained the South Sea Bubble:

    https://mises.org/resources/3628

    • #52 by Unlearningecon on January 30, 2012 - 11:19 am

      His explanation doesn’t appear to tell us why there was such a massive, increasing difference between subscriptions and shares (two directly substitutable financial assets). Austrians will say that the expansion of the money supply distorted pricing information but the nature of the subscriptions was clear from the start and it was largely invested in by the wealthy, who had the money anyway.

      Just seems like a clear-cut case of irrational exuberance to me.

  14. #53 by Lord Keynes on January 29, 2012 - 8:08 pm

    <i."Regarding Hayek vs. Sraffa, Bob Murphy addressed that (even though you hate the idea of Mises.org links)"

    If by “addressed” you mean exposed a massive flaw running through modern ABCT. Murphy in his own words:

    “In his brief remarks, Hayek certainly did not fully reconcile his analysis of the trade cycle with the possibility of multiple own-rates of interest. Moreover, Hayek never did so later in his career. His Pure Theory of Capital (1975 [1941]) explicitly avoided monetary complications, and he never returned to the matter. Unfortunately, Hayek’s successors have made no progress on this issue, and in fact, have muddled the discussion. As I will show in the case of Ludwig Lachmann—the most prolific Austrian writer on the Sraffa-Hayek dispute over own-rates of interest—modern Austrians not only have failed to resolve the problem raised by Sraffa, but in fact no longer even recognize it.

    Austrian expositions of their trade cycle theory never incorporated the points raised during the Sraffa-Hayek debate. Despite several editions, Mises’ magnum opus (1998 [1949]) continued to talk of “the” originary rate of interest, corresponding to the uniform premium placed on present versus future goods. The other definitive Austrian treatise, Murray Rothbard’s (2004 [1962]) Man, Economy, and State, also treats the possibility of different commodity rates of interest as a disequilibrium phenomenon that would be eliminated through entrepreneurship. To my knowledge, the only Austrian to specifically elaborate on Hayekian cycle theory vis-à-vis Sraffa’s challenge is Ludwig Lachmann.”
    (Murphy, “Multiple Interest Rates and Austrian Business Cycle Theory,” pp. 11–12).

    http://socialdemocracy21stcentury.blogspot.com/2011/07/robert-p-murphy-on-sraffa-hayek-debate.html

    A damning indictment of the incompetent of your beloved Austrian economists.

    And Murphy’s promised re-invention of ABCT, freeing it from the devastating critique of Sraffa has never appeared.

    • #54 by Bob Roddis on January 29, 2012 - 8:29 pm

      LK still does not understand the concept of economic calculation. Prices are the guide to discovering economic reality. Whether the theoretical but unattainable point of perfect Nirvana is called a single interest rates or mulitple interest rates is irrelevant to the basic message. If LK wants to hang his hat on someething this dumb, go for it. It’s all way less complicated than you anti-Austrians are making it out to be.

      • #55 by Lord Keynes on January 29, 2012 - 10:44 pm

        “LK still does not understand the concept of economic calculation.”

        Since the strict economic calculation debate applies to communist command economies with no price system or private ownership of capital goods, this statement can only be a charge that I do not understand the “economic calculation” associated with the Austrian trade cycle theory in a modern capitalist economy with large private ownershio of capital.

        I understand the alleged “economic calculation” problems and alleged distortions of the capital structure postulated by the ABCT perfectly well, and you just make a fool of yourself by repeating this tired nonsense.

  15. #56 by Anon on January 29, 2012 - 10:25 pm

    Why do you consider those three Austrians you listed as ‘good’ Austrians?

    • #57 by Unlearningecon on January 30, 2012 - 12:48 am

      They are pretty civil and engage issues without going on rants about the government or describing the beauty of the price mechanism every 3 seconds.

  16. #58 by Bob Roddis on January 29, 2012 - 11:05 pm

    In response to #51, “Lord Keynes”.

    No. The “natural rate of interest” concept concerns economic calculation which totally escapes you. There is no real significant relevance regarding proposing a single rate or multiple rates except that multiple rates are more realistic. Further, the very same “socialist calculation debate” about a complete absence of prices also applies precisely to prices distorted by Keynesian intervention. Because that concept is central to the ABCT, you choose to intentionally ignore it or it escapes you.

    Hayek:

    “The primary cause of the appearance of extensive unemployment, however, is a deviation of the actual structure of prices and wages from its equilibrium structure. Remember, please: that is the crucial concept. The point I want to make is that this equilibrium structure of prices is something which we cannot know beforehand because the only way to discover it is to give the market free play; by definition, therefore, the divergence of actual prices from the equilibrium structure is something that can never be statistically measured.

    The basic concepts are quite simple to comprehend. You purposefully avoid their meaning. Or fail to grasp them.

  17. #59 by Bob Roddis on January 29, 2012 - 11:18 pm

    In further response to #51, “Lord Keynes”.

    There is no real significance to the single vs. multiple interest rate issue and there is no significance to the socialist vs. Keynesian economic calculation issue. There may be differences, but they are not central. You are splitting non-existence hairs.

    • #60 by Lord Keynes on January 30, 2012 - 10:20 am

      “The “natural rate of interest” concept concerns economic calculation which totally escapes you. There is no real significant relevance regarding proposing a single rate or multiple rates except that multiple rates are more realistic.”

      With no unique natural rate ALL modern forms of ABCT collapse like a house of cards.

      So “multiple rates are more realistic,” are they? So where exactly are the formal expositions of ABCT with multiple natural rates?

      You cite me one modern Austrian economist who uses “multiple” natural rates. You won’t, of course.

      “there is no significance to the socialist vs. Keynesian economic calculation issue. There may be differences, but they are not central.”

      Rubbish: the socialist calculation debate concerns a command economy with no privately owned capital goods.

      There is a vast difference between this and the “economic calculation” problems alleged by ABCT, owing to alleged distortions in the privately owned capital structure.

  18. #61 by Lord Keynes on January 30, 2012 - 10:25 am

    And as for the desperate tactic of trying to claim ABCT is saved because of multiple natural rates, I’ve already disposed of it here:

    http://socialdemocracy21stcentury.blogspot.com/2011/09/abct-without-unique-natural-rate-of.html

    Even that appalling troll Major_Freedom (under one of his many pseudonyms) when challlenged couldn’t point to any expositions of ABCT with multiple natural rates:

    Pete@Sep 23, 2011 05:18 AM:
    “there is a rather large burden on Austrians to publish a more modern exposition of ABCT that takes into account the assumption of multiple natural interest rates.”

  19. #62 by yorksranter on January 31, 2012 - 1:23 am

    State bureaucrats are “backed by SWAT teams”.

    I haven’t noticed anyone pointing out that the private variety are backed by Blackwater, Doug the Bounty Hunter, Max Clifford, or Alex Marunchak. Eeeuw. TBH I prefer the Army.

    • #63 by Bob Roddis on January 31, 2012 - 1:46 am

      I fail to see how the existence of private criminal gangs hired by the government (which I oppose) has any relevance to the truism that government economic policy MUST be backed up by the threat of force. Especially when the problem which allegedly requires this extreme action does not even exist and the so-called “solution” is the cause of the problem.

      • #64 by Lord Keynes on January 31, 2012 - 2:30 am

        His point is that in your anarcho-capitalist fantasy world the private law codes would be backed up and enforced by private protection thugs and private swat teams.

        The threat of force and violence is necessary in ALL societies to enforce the law. Human society wouldn’t work without the use of force against criminals or the threat of such force.

      • #65 by yorksranter on January 31, 2012 - 2:16 pm

        Why should private criminal gangs only be hired by the government? Their very existence demonstrates that it’s possible for purely private entities to tyrannise over people.

      • #66 by stickman on January 31, 2012 - 4:25 pm

        For anyone interested in the debate over private security firms and violence, I might recommend the following documentary by Louis Theroux. It concerns policing in some poor parts of Johannesburg, with emphasis on private security firms:

        http://www.dailymotion.com/video/x7pwwp_louis-theroux-law-and-disorder-in-j_news

        For those who don’t feel like watching, a brief written summary of the documentary can be found here. In short, the documentary provides an insight into the violent methods employed by private security teams — and communities — in the absence of a strong police presence. (Of course, the ineptitude of such official police in these particular areas is just as depressing.)

        * With that done, I should say that I hesitated somewhat to provide this link; since it might give an unjustifiably skewed vision of violence in South Africa. (I can assure you that this in no way reflects my own experiences after having lived there for a quarter of a century plus.) Still, it is perhaps a telling example of what can happen in poor communities that have lost faith in the traditional police force and now rely on private firms to mete out violence and justice as they see fit.

    • #67 by Unlearningecon on January 31, 2012 - 11:34 am

      Civilised society has almost always been backed up by force. I don’t see what this has to do with economics.

  20. #68 by Bob Roddis on January 31, 2012 - 4:47 pm

    Most Austrians are libertarians and the basis of libertarianism is the total and complete prohibition on the initiation of force. Further, all interventionist economic schemes require a violation of the non-aggression principle (NAP). I am always open to hearing an interventionist proposal but insist that the proponent PROVE that a severe problem exists that cannot and will not be solved without the initiation of force AND that the proposed “solution” will not make things worse.

    My 39 year experience with libertarian and Austrian thought is that any discussion on this subject completely breaks down at this point with the interventionist not understanding what I‘m getting at. At which point I direct him to a long article on mises.org. And then he calls me a cultist.

    http://mises.org/daily/3660

    There’s also the “Power and Market” portion at the end of “Man Economy and State” which was a short stand-alone book when I first read it in 1973. It’s now at the end of MES.

    http://mises.org/rothbard/mes.asp

    The amazing Bob Murphy has written a study guide to MES. Rothbard discusses private security firms in “Power and Market“.

    • #69 by Unlearningecon on January 31, 2012 - 4:50 pm

      My position is that you take private property and other institutions as a granted with little basis to do so and then bend your ‘NAP’ around them in an attempt to justify them.

      In other words, I don’t buy the premise that libertarianism is about non-aggression seeing as it clearly does advocate aggression in situations which may not warrant it by the libertarians own standard (e.g. shooting someone who walks onto your land).

    • #70 by Lord Keynes on January 31, 2012 - 9:43 pm

      “I am always open to hearing an interventionist proposal but insist that the proponent PROVE that a severe problem exists that cannot and will not be solved without the initiation of force AND that the proposed “solution” will not make things worse. “

      Your opponents can easily reject your “non-aggression principle (NAP)” because the ethical system it is based on is unsound and lacks convincing justification:

      http://socialdemocracy21stcentury.blogspot.com.au/2011/08/rothbards-argument-for-natural-rights.html

      And as for Rothbard, any man who declares that police can retrospectively justify torture has lost any claim to an authority on morality:

      “We may qualify this discussion in one important sense: police may use such coercive methods provided that the suspect turns out to be guilty, and provided that the police are treated as themselves criminal if the suspect is not proven guilty. For, in that case, the rule of no force against non-criminals would still apply. Suppose, for example, that police beat and torture a suspected murderer to find information (not to wring a confession, since obviously a coerced confession could never be considered valid). If the suspect turns out to be guilty, then the police should be exonerated, for then they have only ladled out to the murderer a parcel of what he deserves in return”
      http://socialdemocracy21stcentury.blogspot.com.au/2011/10/rothbard-on-torture.html

      Rothbard the stone age savage is a sad, vile, nasty piece of work.

  21. #71 by Bob Roddis on January 31, 2012 - 5:40 pm

    I have long believed that without the ability to initiate force, people would tend to live in private voluntary communities and make contractual arrangements with each other and other communities so that no one would be shooting someone else simply for walking on someone else’s property. English common law covers many of these issues. In fact, liberal types would likely be living in voluntary communities where guns were banned. Social conservatives could live where porn was banned. By contract (a voluntary agreement).

    I don’t think there is much of a problem from people always shooting other people for walking on the lawn. I see war, genocide, crime, police brutality, economic collapse caused by interventionism and theft of purchasing power through fiat money creation as real problems. These are all problems caused by a lack of enforcement of the NAP.

    If your population cohort is a bunch of a-holes who believe in shooting people for walking on the lawn, then they are probably hopeless in any event and would reject any civilizing ethic out of hand.

    Further, in 39 years, I’ve yet to come across a libertarian who was not serious about the NAP. You will not tend to find hypocrisy on the issue. Which is why libertarians are appalled by drone strikes on Pakistani wedding parties and mainstream types are not.

    • #72 by Unlearningecon on January 31, 2012 - 5:45 pm

      I’ve always been appalled by the U.S. foreign policy and view the entire IMF/WB/US apparatus as modern imperialism.

      I find your views curious when aligned with Austrian economics, as they seem to be the views of a left anarchist. Have you read Debt by David Graeber?

      • #73 by Bob Roddis on January 31, 2012 - 6:59 pm

        I’ve read snippets of Graeber.

        BTW, Justin Raimondo and Scott Horton of antiwar.com are expressly Austrian and Rothbardian.

        http://antiwar.com/

        We’ve always been antiwar. I was antiwar when I worked for McGovern in 1972.

  22. #74 by Min on March 7, 2012 - 10:50 pm

    “It reminds me of what we call a conclusive presumption or irrebuttable presumption in law. I see no reason why it couldn’t easily be applied in the critique of Austrian economics.

    “A true presumption must be both commanded and rebuttable.”

    “Irrebuttable” means that it cannot be defended, right? What do you mean by “commanded”? Thanks. :)

    • #75 by Min on March 7, 2012 - 11:15 pm

      Well, I have done some web searching. Nevermind. :)

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