/liberty/ - Liberty

>>70397

Caplan is the Boss! I think he tops David Friedman.

>[Rothbard] credits [bussinessmen] with entrepreneurial foresight about all market-generated conditions, but curiously finds them unable to forecast government policy, or even to avoid falling prey to simple accounting illusions generated by inflation and deflation.

>Naturally, entrepreneurs will not turn down lower interest rates. Rather, the rational response to artificially low interest rates is to (a) make investments which will be profitable even though interest rates will later rise, and (b) refrain from making investments which would be profitable only on the assumption that interest rates will not later rise.

Because policy is erratic, so it's anyone's guess how high interest rates will be and how much the costs for low rates are socialized at a moment in the future.

>The Austrian theory predicts a decline in employment in some sectors, but an increase in others; thus, it does nothing to explain why unemployment is high during the "bust" and low during the "boom."

Maybe the reasons are political.

>>70404

I said Caplan was Boss, and he is no Austrian either.

>>70397

tldr xd

>>70397

>Mises and Rothbard did; and while they did have disagreements, these can be counted on one hand.[1] Thus a refutation of the one will almost always be a refutation of the other

After Man, Economy and State that no longer applies. Mises contradicts his own free market theory by remaining a Statist. You can't refute Rothbard through Mises. Mises is still a good example of what to expect Rothbard to be building upon, but can never be your main target. I can appreciate the effort of him at least reading their most popular publications, but in Rothbard's case too much of his critique is scattered around in journals or lectures never published under a single book's title. That wasn't an issue while he was still alive, ready to address anyone willing to approach him and other economists knew of him. It's best to direct this to the people who are most able to provide reference to Rothbard's work - current Mises U affiliates and students, not laymen. Which Caplan already somewhat did in the failed debate with Murphy.

He's not even a "final boss". Refuting his theory won't change what the State thinks it should do with the economy. Hell, Economics could have been an entirely laissez-faire dominated field and it would still have no real power over the economy.

Besides, this entire thing is another case of "you don't REALLY understand my definition." Look at it carefully and you'll see that he doesn't have a single argument that is anything different than that. And all he provides for the exposition of his definition is assertions, not arguments.

>>70443

>Which Caplan already somewhat did in the failed debate with Murphy.

Link? All I could find is Caplan vs Boettke and Caplan vs Walter Block.

>>70444

I saw the one with Block later and it's still more arguing over definitions.

>>70444

Another thing that bothers me is how Caplan keeps trying to appoint himself as chief of all Neo-Classical economists as if that is a clearly defined homogeneous group. He is way closer to Neo Keynesians, especially the Left Wing kind. As much as he would like to have some ad populum in his favor in the face of mainstream economics, he doesn't have even that rhetoric going.

>>70397

On the calculation-problem:

>If so, then how could he possibly know by economic theory alone that the negative effect of the lack of economic calculation would be severe enough to make socialism infeasible? Granted, the socialist economy would suffer due to the impossibility of economic calculation; but how, on his own theory, could Mises know that this difficulty to so severe that society would collapse?

Isn't that like saying that you cannot know whether blind people can find their way home unless you can quantify their disorientedness? If they have more than a block to walk, it's as good as certain that they'll get lost.

>>70449

He doesn't say exactly by how much because that would require him to calculate what he says can not be calculated centrally. Caplan's running in a circle. And we already have enough examples of failed central planning and intervention, so it's not even a pure a priori statement.

Anyone can tell you that if the major world debt bubbles pop, or even if a single one does, it will be devastating. Nobody is obliged to calculate for you just how many will either regress back to poverty or die.

It's this stance that still turns off other mainstream economists. The major gripe they have with the ABCT is not with its prediction of the trade cycle, but with its lack of State lead policy to prevent it. They want a specific cure that not only stops the pain but also heals the wound immediately.

>>70449

Yeah, the blind man might find his way home, but if the route is long, complicated, and constantly changing, he might as well give up.

>>70451

People that have been blind for a while can find their way home just fine. We have a blind old guy that walks the neighborhood all day and always knows where he's at without a dog to help him. To make the comparison more appropriate, a recently blinded person who's been used to his sight would have a tough time finding his way back especially if they're far from home.

>>70452

Read my post.

>if the route is long, complicated, and constantly changing

This would play merry hell with the person in the analogy.

>>70453

I read past the "constantly changing" part trying to rationalize it closer to reality in my mind. That's pretty much how it is. The biggest problem with calculation is that you have nearly only variables. Without a micro to base your macro on, the margin of error grows even higher.

>>70450

People often take it as a weakness of the Austrian School that it cannot calculate such things, when its statement is that no one else can, either. Which, to use another allegory, is like a quack doctor criticizing other doctors for not being able to regrow lost limbs with the use of crystals.

>>70449

Also:

>The strength of this objection becomes even clearer when we consider the economic decision-making of Robinson Crusoe, alone on his island. As Mises explains, "Isolated man can easily decide whether to extend his hunting or cultivation. The processes of production he has to take into account are relatively short. The expenditure they demand and the product they afford can easily be perceived as a whole."[28] Crusoe's runs his one-man economy simply by using "calculation in kind" - mentally weighing his preferences and opportunities to make decisions. Mises concedes that this situation is conceivable, adding only that this method is unworkable for a larger economy. "To suppose that a socialist community could substitute calculations in kind for calculations in terms of money is an illusion. In an economy that does not practice exchange, calculations in kind can never cover more than consumption goods. They break down completely where goods of higher order are concerned."[29]

>This suggests some obvious questions. Does Crusoe's one-man socialism become "impossible" when Friday shows up? Hardly. What if 100 people show up? 1000? Mises' distinction between a modern economy and Crusoe's, and why the economic calculation argument applies only to the former, again shows that Mises has underlying quantitative assumptions in spite of his strictures against them. He is making a quantitative judgment that the lack of calculation would not greatly worsen Crusoe's economy, but would devastate a modern economy. Perhaps Mises was right, but pure economic theory did not give him the answer.

I really don't know what is up with that. The number of people plays absolutely no role at all. None. When production chains are short, you can centrally plan an economy for a billion actors, no problem. When they get longer - which they have to, if you don't want to bottleneck economic progress - then that's not feasible anymore. The question of when production chains get too long for calculation-in-kind to be possible is very interesting, but not essential. You don't need to know which exact number of corns is required to get a heap in order to know that if you add corns, you eventually end up with a heap.

>>70456

Yea, that's not even a subtle implication Mises had. He states it all as plainly as possible so no confusion at all can arise. It just makes you wonder if Caplan mentally blocked anything he wouldn't like to see while reading it or just skipped past all the works he cites.

On the ABCT:

>Thus, it is readily conceded that (a) expansionary monetary policy reduces interest rates, and (b) lower interest rates stimulate investment in more round-about projects. Where then does the disagreement emerge? What I deny is that the artificially stimulated investments have any tendency to become malinvestments.

I think it was Murphy who said that artificially lowered interest rates trick entrepreneurs into being too optimistic about the state of capital development. That this will create malinvestment should go without mention. Murphys example was entrepreneurs trying to build an enormous towers when there are not enough bricks in the world to build it with. Of course, by pure chance, it can end well, but that result is unpredictable.

>It should be noted that other Austrians, particularly Roger Garrison, attempt to handle the expectational objection. Garrison astutely notes that "[M]acroeconomic irrationality does not imply individual irrationality. An individual can rationally choose to initiate or perpetuate a chain letter… Similarly, it is possible for the individual to profit by his participation in a market process that is - and is known by that individual to be - an ill-fated process."[50] This is definitely a possible scenario. But does it make sense in this particular case? It does not. Naturally, entrepreneurs will not turn down lower interest rates. Rather, the rational response to artificially low interest rates is to (a) make investments which will be profitable even though interest rates will later rise, and (b) refrain from making investments which would be profitable only on the assumption that interest rates will not later rise. If entrepreneurs followed this rule, then there would be no tendency for policy reversals to produce malinvestments.

Even when entrepreneurs realize that interest rates are artificially lowered (which they're not necessarily trained or qualified to recognize, for the reasons Rothbard mentioned, which boil down to "entrepreneurs aren't magicians"), then that doesn't mean they can assess the natural rate of interest. They'll still under- or overshoot it in their assessment. When it's the latter, we still end up with malinvestment. When it's the former, productivity is lowered as entrepreneurs use shorter production chains than would be profitable. Not sure yet if that would also entail malinvestment on top of decreased productivity, but I think not. Either way, the economy is hurt. While everything can go well, by pure chance, you shouldn't rely on that chance, just as you shouldn't play with fire lest you get burned.

>The Austrian theory also suffers from serious internal inconsistencies. If, as in the Austrian theory, initial consumption/investment preferences "re-assert themselves," why don't the consumption goods industries enjoy a huge boom during depressions? After all, if the prices of the capital goods factors are too high, are not the prices of the consumption goods factors too low? Wage workers in capital goods industries are unhappy when old time preferences re-assert themselves. But wage workers in consumer goods industries should be overjoyed. The Austrian theory predicts a decline in employment in some sectors, but an increase in others; thus, it does nothing to explain why unemployment is high during the "bust" and low during the "boom."

Again, an allegory: The people just wasted their money on bricks to build a tower that cannot be completed. They simply do not have the money/resources to buy ice cream anymore, because they already wasted it on other projects. There is no boom in any sector of the economy because wealth was destroyed. I guess strictly, there can be a boom, if the demand-schedules are just right, but can you count on that? No. Then it also doesn't

>>70457

Really, I have no idea how that happened. There are a lot of vulgarizations of the calculation-problem, but in what Caplan quoted, Mises was clear that production chain length was essential and not the "size" of the economy by any other metric. And that by someone who bragged about how he learned under Rothbard personally.

I fucked up:

>>70460

>I guess strictly, there can be a boom, if the demand-schedules are just right, but can you count on that? No. Then it also doesn't

discredit the ABCT. You don't know whether it will happen or not, so how can you infer anything from its happening or not happening?

>>70460

That explains why the Austrians stopped bothering with this guy. He's got nothing to offer and is as dense as a rock.

>>70404

> mfw that's my exact image name

ayyy

>>70397

> Bryan Caplan.

I know Walter Block has mentioned this once or twice, but has this guy ever come off as purposefully obtuse? A lot of the time he tries to find some way around basic economic reasoning only to fall flat on his face. I don't doubt that he has some good work on some subjects such as political theory, but when it comes to arguing against Austrian economics or even economics in general, he just falls flat.

Austrian School is stupid.

>>70506

Well, you're a poopy head too.

>>70499

> has this guy ever come off as purposefully obtuse

I'm unrionically sure that's his autism.

On indifference curves:

>The essential objection to indifference curve analysis is that it is impossible for action to demonstrate indifference. Action demonstrates preference, not indifference. Rothbard puts it thusly "The crucial fallacy is that indifference cannot be a basis for action. If a man were really indifferent between two alternatives, he could not make any choice between them, and therefore the choice could not be revealed in action."[17]

>The crucial assumption - shared by both Mises and Rothbard - is that no preference can exist which cannot be revealed in action. But why assume this? Is this not a peculiar importation of behaviorism into a body of economic thought which purports to be militantly anti-behavioral?

Behaviorism started out with the idea that all we can study is action turned outwards, and that the emotions, thoughts and ideas of a human being cannot be made the objects of study. This transformed into the belief that these inner processes are irrelevant.

Praxeology is the study of human action in general. In principle, it also applies to purposeful reflection, problem solving and other inner processes. That alone distinguishes it from behaviorism in both of its variants. I checked through Human Action again, and I found nothing to the effect that action is synonymous with bodily movement. I think praxeology isn't suited for dealing with inner processes, but in principle, it can be applied to them. Furthermore, action is only understandable from a subjectivist perspective, the kind that behaviorism rejects in favor of objectivism. There is nothing behaviorist about praxeology. The two are diametrically opposed, because while praxeology is impossible if we neglect actor's subjective goals, behaviorism is purposefully blind to these goals.

In praxeology, indifference has no place, because - as Rothbard said in what Caplan quoted - indifference cannot be expressed in action. Perhaps it makes sense to talk of indifference in a psychological sense, but pure psychology is not the proper method of economics, praxeology is. Therefore, when an economist talks about preference, it is always preference in the praxeological sense.

I studied some Thomism. In thomism, it makes sense to say that an actor is acting against his preference even though his action is voluntary. That's because thomism is a different framework than praxeology. If a professor sells all his books to pay his rent, then in the thomistic sense, that's against his preference, but voluntary. In the praxeological sense, it's an expression of his preference and cannot be anything else. Thomism looks at man as a moral creature aiming at fulfillment, praxeology looks at man as an actor. The two perspectives are different, and require a different terminology. A praxeologist can also be a thomist and vice versa, but a behaviorist cannot be either.

>>70499

I don't know him that well. The Myth of the Rational Voter is supposed to be quite good, but doesn't get mention that often. I also heard he got on a cruise with Tom Woods and they both massively spilt their spaghetti.

That article is all I've ever really read from him, and it supports exactly what you said. He didn't even understand the first thing about the calculation-problem, his understanding of praxeology was likewise lacking… honestly, I found only beginner's mistakes. His critique is somewhat sophisticated, but not in the respectable way. Walking on your hands after a criminal who stole your purse is also sophisticated but stupid.

>>70397

On continuity:

>Mises and Rothbard have a final related objection to standard neoclassical utility theory: the assumption of continuity. Quoting Rothbard, "[H]uman beings act on the basis of things that are relevant to their action. The human being cannot see the infinitely small step; it therefore has no meaning to him and no relevance to his action."[16] The implications are broader than they may initially appear, because as a mathematician will tell you, you can't differentiate a function that isn't continuous. This means that if Mises and Rothbard is correct, the pervasive use of calculus in economics must be rejected in toto.

>One obvious problem arises here. Without continuous preferences, it is also highly unlikely that e.g. supply and demand can ever be equal. If you draw the supply and demand curves continuously, then they are (almost) bound to intersect. But if you draw them as a discrete set of points, supply and demand in general don't have to intersect. Thus, the argument against calculus based upon the rejection of continuity also argues against even the use of simple algebraic constructs - like intersecting supply and demand lines - that fill Rothbard's works.

>Of course, one could say that the unrealism of continuity is only minor. But this is precisely the reply that Rothbard considered and rejected: "Most writers on economics consider this assumption a harmless, but potentially very useful, fiction, and point to its great success in the field of physics… The crucial difference is that physics deals with inanimate objects that move but do not act."[19] Rothbard thereby runs into a serious contradiction. If the assumption of continuity is not a harmless fiction, then it is incumbent upon him to remove all of the supply and demand intersections in his works, and to state that supply equals demand only under extremely rare conditions (for without continuous pricing, the odds that supply and demand actually intersect are very slim). This position is certainly coherent (and since Mises used no diagrams, it would be less work for him to adhere to it), but rather peculiar. Alternately, Rothbard could concede that assuming continuity rarely alters substantive results, and accept both supply and demand intersections and the use of calculus as methodologically kosher in economics.

If I'm indifferent to whether I pay $1 or $1.10 for a good, then that isn't praxeologically expressed. I will pay either (or any amount in between), depending on what my exchange partner demands. Same, mutatis mutandis, with him and his conditions. If I recall correctly, the first curves that Rothbard drew in Man, Economy and State were more like irregular stairs and not like actual curves. He switched to the latter for the sake of convenience, but the proper way are still the stairs. And they will meet at some point even though they have corners and aren't round. No idea what kind of role that is supposed to play.

You can also find the price of a good by looking at the utility scales of the marginal buyer and the marginal seller. That has the exact same purpose as drawing the curves to find the intersection of them, and it will show exactly what I said above: That there is a field where supply and demand meet. It isn't so much a point, Caplan is right about that. That's because while the goods are praxeologically the same, we can differentiate them in natura. If we forgot the latter perspective and only looked at the goods praxeologically, we'd have a point.

I think Caplan lost track of the concepts because he was too fixated on words and diagrams. Sadly, that usually doesn't stand in the way of getting a degree.

>>70451

even if you take every step completely randomly, on a finite distance there is a >0 chance of arriving at target

changing way is relevant only insofar that the actor might get 'trapped' in a period circular subpath. the chance for arriving is still >0, if this trapping happens with less than 100% certainty

>he might as well give up

friendly reminder that mixing examples with abstract, generalized statements really lends itself to all sorts of mistakes revolving around transfers

e.g. a statement about the example slips in as a statement about the abstract, generalized

or people conflate properties from both into some new object, or one person talks about the example while the other jumps to the abstract generalized

specifically, 0 or close to 0 would probably not make a difference to a blind human. and makes a huge difference if youre forming a foundational statement of an entire epistemology

>>70449

>it's as good as certain that they'll get lost

no thats caplans whole point: that however close to zero it might be, mises has not presentet proof showing absolute certainty the socialist state will 'collapse'

you can make an educated guess, but that is subject to the same calculation problem - you cannot get absolute certainty from empirical deduction unless you are omniscient and have infinite processing power

you can have adequate certainty (according to risk theory) to take some action, below 100%.

>>70450

>He doesn't say exactly by how much because that would require him to calculate what he says can not be calculated centrally. Caplan's running in a circle.

no, the point is mises - by his own argument - does not have to computing power to decide/calculate whether something can be centrally calculated or not

although I would point there is a way around:

compare the efficiencies of centralized vs more distributed calculation. you can use praxeological statements for that.

its a lot like comparing infinites in math. (yt/numberphile is probably an ok choice if youre interested. also very early in every calculus1 book)

>>70455

>is like a quack doctor criticizing other doctors for not being able to regrow lost limbs with the use of crystals.

except that 'other economic schools' can make some prediction. people usually critize the accuracy, to wich I would point out that the expectation of an educated guess is never worse than the expectation of an arbitrary guess. the outcome can be, but not the expectation. this follows easily because arbitrary guess means zero information, educated guess means >0 information.

the austrian schools whole point is that they are too cool for empircism. the big advantage of praxeology, aka a priori reasoning or inductive logic, is that you always have absolute confidence, assuming you didnt fuck up the logical induction. the big disadvantage is these are quite hard to make for many situation. this is where empiricism and the various other schools come in.

its quite staggering that they continue to hold onto their purity, considering the succes of quantfunds, insurance etc. there seems to be some unexplained empiri-phobia.

of course, we all know that fake economists deliberately push fake science for political reasons (and sometimes also because they have legit mental conditions like krugman)

>>70763

>even if you take every step completely randomly, on a finite distance there is a >0 chance of arriving at target

>changing way is relevant only insofar that the actor might get 'trapped' in a period circular subpath. the chance for arriving is still >0, if this trapping happens with less than 100% certainty

That's correct, but also irrelevant. There's a chance he can arrive, but there's also a chance that monkeys hammering on a typewriter will produce a brilliant work of literature. Obviously, you cannot count on either. You wouldn't let a money at a typewriter just because there's a random chance he'll write something good, and for the same reasons, you also wouldn't run a complex economy without price signals.

>>70764

>no thats caplans whole point: that however close to zero it might be, mises has not presentet proof showing absolute certainty the socialist state will 'collapse'

Mises never purported this. He showed that rational allocation of production goods is not possible in a socialist economy, and that was all he wanted to show.

>you can make an educated guess, but that is subject to the same calculation problem - you cannot get absolute certainty from empirical deduction unless you are omniscient and have infinite processing power

>you can have adequate certainty (according to risk theory) to take some action, below 100%.

We know that it will be well below even 1%. Maybe you could run some calculations on how much entropy there is in an economy, in principle, but you don't have to do that because it's evident that there's so much entropy that the chance of any central planner allocating production goods in an efficient manner is so low, no sane policymaker could possibly take it. Calculating this would be a fruitless academic exercise, like calculating how likely it is that a bunch of monkeys will write Shakespeare.

>>70768

>That's correct, but also irrelevant

quoting myself:

>0 or close to 0 would probably not make a difference to a blind human. and makes a huge difference if youre forming a foundational statement of an entire epistemology

>You wouldn't let a money at a typewriter just because there's a random chance he'll write something good

you might if the something is very valueable (and the probability is nonzero). a simple example would be, your probability is as close to zero as you can get without actually beeing zero, would always be good enough if the value of 'the something' is infinite. and perhaps sometimes be the best option even if less than infinite.

by the way, 'random' means completely even probability distribution across all possibilities, chance meaning 0..1 (these probabilities 0..1 beeing the possibilities), results in 'random chance' amounting to exactly 50%

>and for the same reasons, you also wouldn't run a complex economy without price signals.

sure, I wouldnt. consider though that these are two different situations, and as a result the evaluation of investment vs return is different as well. also consider that its really a question of alternatives. for a complex economy, choosing a strategy as far from optimal as no price signals, is not something we have to do. meanwhile giving

the point beeing that even very close zero expectations (by way of very close to zero probabilities of succes) might still be the best choice. so running an economy without price signals might be a legitemately good idea in the absense of any better plans. like it was the case a long time ago.

>Mises never purported this

yeah, agreed. Im just clarifying caplans point.

>Calculating this would be a fruitless academic exercise

not exactly, because some amount of calculation, or at least empirical deduction, would necessary to deduce its not worthwhile to go any further

granted, for some cases, these deductions will be trivial

by the way how is that related to what you quoted? cant see it

>like calculating how likely it is that a bunch of monkeys will write Shakespeare

idk, a calculation like that is pretty simple; if you take away arrow keys etc, theres exactly one sequence of symbols, so the odds are 1/ (number of available symbols ^ number of total symbols as in length of work)

the point beeing, if a calculation is easy enough it might worth the reward. there is some 'ai' research onto this; computers painting or crafting salad recipies or composing pop music etc.

>>70766

Austrians can still make general predictions. X government policy will have Y effect, for example.

>>70766

keynes did not predict the great crisis

>>70974

the proline is to combine a priori reasoning and use serious empiricism (doesnt have to be keynes) for everything it doesnt cover