Free markets don't exist and Laissez-Faire doesn't work (fuck it that was just an eyecatch plz just read down below and don't use my words to assume anything about the author's)
Or so contends the author of the book 23 Things They Don't Tell You About Capitalism, Ha-Joon Chang, economics professor at Cambridge University.
Instead of telling all of you to read the book (which you should, it's less than $15 USD on Amazon), I'm just gonna copy-paste a good review with a summary of its contents.
The 2008 'Great Recession' demands re-examination of prevailing economic thought - the dominant paradigm (post 1970's conservative free-market capitalism) not only failed to predict the crisis, but also said it couldn't occur in today's free markets, thanks to Adam Smith's 'invisible hand.' Ha-Joon Chang provides that re-examination in his "23 Things They Don't Tell You About Capitalism." Turns out that the reason Adam Smith's hand was not visible is that it wasn't there. Chang, economics professor at the University of Cambridge, is no enemy of capitalism, though he contends its current conservative version should be made better. Conventional wisdom tells us that left alone, markets produce the most efficient and just outcomes - 'efficient' because businesses and individuals know best how to utilize their resources, and 'just' because they are rewarded according to their productivity. Following this advice, countries have deregulated businesses, reduced taxes and welfare, and adopted free trade. The results, per Chang, has been the opposite of what was promised - slower growth and rising inequality, often masked by rising credit expansion and increased working hours. Alternatively, developing Asian countries that grew fast did so following a different version of capitalism, though to be fair China's version to-date has also produced much greater inequality. The following summarizes some of Chang's points:
1)"There is no such thing as a free market" - we already have hygiene standards in restaurants, ban child labor, pollution, narcotics, bribery, and dangerous workplaces, require licenses for professions such as doctors, lawyers, and brokers, and limit immigration. In 2008, the U.S. used at least $700 billion of taxpayers' money to buy up toxic assets, justified by President Bush on the grounds that it was a necessary state intervention consistent with free-market capitalism. Chang's conclusion - free-marketers contending that a certain regulation should not be introduced because it would restrict market freedom are simply expressing political opinions, not economic facts or laws.
2)"Companies should not be run in the interest of their owners." Shareholders are the most mobile of corporate stakeholders, often holding ownership for but a fraction of a second (high-frequency trading represents 70% of today's trading). Shareholders prefer corporate strategies that maximize short-term profits and dividends, usually at the cost of long-term investments. (This often also includes added leverage and risk, and reliance on socializing risk via 'too big to fail' status, and relying on 'the Greenspan put.') Chang adds that corporate limited liability, while a boon to capital accumulation and technological progress, when combined with professional managers instead of entrepreneurs owning a large chunk (eg. Ford, Edison, Carnegie) and public shares with smaller voting rights (typically limited to 10%), allows professional managers to maximize their own prestige via sales growth and prestige projects instead of maximizing profits. Another negative long-term outcome driven by shareholders is increased share buybacks (less than 5% of profits until the early 1980s, 90% in 2007, and 280% in 2008) - one economist estimates that had GM not spent $20.4 billion on buybacks between 1986 and 2002 it could have prevented its 2009 bankruptcy. Short-term stockholder perspectives have also brought large-scale layoffs from off-shoring. Governments of other countries encourage longer-term thinking by holding large shares in key enterprises (China Mobile, Renault, Volkswagen), providing greater worker representation (Germany's supervisory boards), and cross-shareholding among friendly companies (Japan's Toyota and its suppliers).
7)"Free-market policies rarely make poor countries rich." With a few exceptions, all of today's rich countries, including Britain and the U.S., reached that status through protectionism, subsidies, and other policies that they and their IMF, WTO, and World Bank now advise developing nations not to adopt. Free-market economists usually respond that the U.S. succeeded despite, not because of, protectionism. The problem with that explanation is the number of other nations paralleling the early growth strategy of the U.S. and Britain (Austria, Finland, France, Germany, Japan, Korea, Singapore, Sweden, Taiwan), and the fact that apparent exceptions (Hong Kong, Switzerland, The Netherlands) did so by ignoring foreign patents (a free-market 'no-no'). Chang believes the 'official historians' of capitalism have been very successful re-writing its history, akin to someone trying to 'kick away the ladder' with which they had climbed to the top. He also points out that developing nations that stick to their Ricardian 'comparative advantage,' per the conservatives prescription, condemn themselves to their economic status quo.
9)"We do not live in a post-industrial age." Most of the fall in manufacturing's share of total output is not due to a fall in the quantity of manufactured goods, but due to the fall in their prices relative to those for services, caused by their faster productivity growth. A small part of deindustrialization is due to outsourcing of some 'manufacturing' activities that used to be provided in-house - eg. catering and cleaning. Those advising the newly developing nations to skip manufacturing and go directly to providing services forget that many services mainly serve manufacturing firms (finance, R&D, design), and that since services are harder to export, such an approach will create balance-of-payment problems. (Chang's preceding points directly contradict David Ricardo's law of comparative advantage - a fundamental free market precept. Chang's example of how Korea built Pohang Steel into a strong economic producer, despite lacking experienced managers and natural resources, is another.)
10)"The U.S. does not have the highest living standard in the world." True, the average U.S. citizen has greater command over goods and services than his counterpart in almost any other country, but this is due to higher immigration, poorer employment conditions, and working longer hours for many vs. their foreign counterparts. The U.S. also has poorer health indicators and worse crime statistics. We do have the world's second highest income per capita - Luxemburg's higher, but measured in terms of purchasing power parity (PPP) the U.S. ranks eighth. (The U.S. doesn't have the fastest growing economy either - China is predicted to pass the U.S. in PPP this coming decade.) Chang's point here is that we should stop assuming the U.S. provides the best economic model. (This is already occurring - the World Bank's chief economist, Justin Lin, comes from China.)
12)"Governments can pick winners." Chang cites examples of how the Korean government built world-class producers of steel (POSCO), shipbuilding (Hyundai), and electronics (LG), despite lacking raw materials or experience for those sectors. True, major government failures have occurred - Europe's Concorde, Indonesia's aircraft industry, Korea's promotion of aluminum smelting, and Japan's effort to have Nissan take over Honda; industry, however, has also failed - eg. the AOL-Time Warner merger, and the Daimler-Chrysler merger. Austria, China, Finland, France, Japan, Norway, Singapore (in numerous other areas), and Taiwan have also done quite well with government-picked winners. Another problem is that business and national interests sometimes clash - eg. American firms' massive outsourcing has undermined the national interest of maintaining full employment. (However, greater unbiased U.S. government involvement would be difficult due to the 10,000+ corporate lobbyists and billions in corporate campaign donations - $500 million alone from big oil in 2009-10.) Also interesting to Chang is how conservative free marketing bankers in the U.S. lined up for mammoth low-cost loans from the Federal Reserve at the beginning of the Great Recession. Government planning allows minimizing excess capacity, maximizing learning-curve economies and economies of scale and scope; operational performance is enhanced by also forcing government-owned or supported firms into international competition. Government intervention (loans, tariffs, subsidies, prohibiting exports of needed raw materials, building infrastructure) are necessary for emerging economies to move into more sophisticated sectors.
13)"Making rich people richer doesn't make the rest of us richer." 'Trickle-down' economics is based on the belief that the poor maximize current consumption, while the rich, left to themselves, mostly invest. However, the years 1950-1973 saw the highest-ever growth rates in the U.S., Canada, Australia, and New Zealand, despite increased taxation of the rich. Before the 'Golden Age,' per capita income grew at 1-1.5%/year; during the Golden Age it grew at 2-3% in the U.S. Since then, tax cuts for the rich and financial deregulation have allowed greater paychecks for top managers and financiers, and between 1979 and 2006 the top 0.1% increased their share of national income from 3.5% to 11.6%. The result - investment as a ratio of national output has fallen in all rich economies and the pace at which the total economic pie grew decreased.
14)"U.S. managers are over-priced." First, relative to their predecessors (about 10X those in the 1960s; now 300-400X the average worker), despite the latter having run companies more successfully, in relative terms. Second, compared to counterparts in other rich countries - up to 20X. (Third, compared to counterparts in developing nations - eg. JPMorgan Chase, world's 4th largest bank, paid its CEO $19.6 million in 2008, vs. the CEO of the Industrial and Commercial Bank of China, the world's largest, being paid $234,700.) American CEOs do not get punished for bad management either - instead receiving raises and restated stock options, or at least loan forgiveness and golden parachutes. (Collusion among CEO members of interlocking 'rubber-stamp' boards fed limited information is one reason for excessive U.S. CEO pay; lack of stockholder interest, thanks to being paid high and rising dividends, a short-term strategy, is another.) Chang asks, rhetorically, "If American CEOs are worth so much, how come their companies have been losing out to foreign competitors?" (And why aren't they investing like their foreign counterparts, instead of sitting on some $2 trillion in current assets?)
17)"More education in itself is not going to make a country richer." Increasing deindustrialization and automation have lowered knowledge requirements for most jobs in rich countries. The East Asian miracle economies turned in their impressive early gains despite literacy rates of about 50%, and Korean public schools had class sizes of 90; conversely, countries like the Philippines and Argentina did poorly despite having significantly better-educated populations, while Sub-Saharan Africa per capita income fell 0.3%/year from 1980-2004 despite literacy rates rising from 40% to 61%. Harvard economist Lant Pritchett analyzed data from 1960-87 and found very little evidence supporting the view that increased education leads to higher economic growth. Most education isn't even meant to raise productivity, and math/science courses are not relevant for most. Switzerland is one of the richest and most industrialized countries, but also has the lowest university enrollment in the rich world. (College education in the U.S. has already become a bubble - about half our graduates take jobs not requiring such education.)
Chang's recommendations include ending our "love affair with unrestrained, free-market capitalism and installing a better-regulated variety," having government become more active in economic affairs, and making financial markets less attractive. (U.S. financial assets/GDP exceeded 900% by the early 2000s, averaged 4-12% return since deregulation - higher than most non-financial firms at between 2-5%, and divert attention from manufacturing and its potentially much larger employment. Methods of doing so include taxing market transactions, banning short-selling and derivatives, and limiting bank leverage.)
(huge credit to the author of this review, "Loyd E. Eskildson "Pragmatist" (Phoenix, AZ.)")
So here's a call to all free-market advocates to tell me why he's wrong, preferably citing evidence. I'd put in more of my own content but I'm not going to presume to know more about the issue than an economics professor.
(And this is a request I suspect many won't abide by, but in responding to each point, please at least make a passing reference to the ones you don't/can't respond to. I.e. if you can't respond to point 14 because you don't know enough about the issue, say so, I'll respect you more for it)
EDIT: I'd also like to take the time to lament my long-ass username that makes the title preview on the left sidebar "Free Mar..." ;____;
I'll write a response, but keep in mind this guy is a development economist. His arguments are entirely sound on one level: although free market capitalism (through the principles of absolute and comparative advantage) should advance developing nations, but in practice it doesn't do that great a job. Tariffs, some sort of socialization, are generally required to get onto the big stage.
Still, capitalism has helped many ex-soviet nations, and it certainly isn't bad. The man does make a point though.
His argument falls apart when he starts saying it's less efficient globally.
Looks promising though I find most mainstream economics to be bogus in one way or another. This could be an interesting read though, thanks for sharing.
1)"There is no such thing as a free market" - we already have hygiene standards in restaurants, ban child labor, pollution, narcotics, bribery, and dangerous workplaces, require licenses for professions such as doctors, lawyers, and brokers, and limit immigration. In 2008, the U.S. used at least $700 billion of taxpayers' money to buy up toxic assets, justified by President Bush on the grounds that it was a necessary state intervention consistent with free-market capitalism. Chang's conclusion - free-marketers contending that a certain regulation should not be introduced because it would restrict market freedom are simply expressing political opinions, not economic facts or laws.
This is true, and a fact. Economics uses free market as an ideal to aim towards -- but recognizes that completely free markets do not exist. People won nobel prizes for finding new insights into what keeps us from Free Markets.
But note that all of the analysis is done assuming a free market -- the reason behind that is that we start with free market as the basic points, and we figure out what these "little things" that keep us from getting to a free market do to the economy. Free market, to economists, are generally comparison points and too many bad/amateur economists think that we actually believe that it exists. Psh.
But a completely free market has its own set of problems so it's not like it's a very good "ideal" anyway -- there always has to be policies that align the incentives in the right direction.
"Companies should not be run in the interest of their owners." Shareholders are the most mobile of corporate stakeholders, often holding ownership for but a fraction of a second (high-frequency trading represents 70% of today's trading). Shareholders prefer corporate strategies that maximize short-term profits and dividends, usually at the cost of long-term investments. (This often also includes added leverage and risk, and reliance on socializing risk via 'too big to fail' status, and relying on 'the Greenspan put.') Chang adds that corporate limited liability, while a boon to capital accumulation and technological progress, when combined with professional managers instead of entrepreneurs owning a large chunk (eg. Ford, Edison, Carnegie) and public shares with smaller voting rights (typically limited to 10%), allows professional managers to maximize their own prestige via sales growth and prestige projects instead of maximizing profits. Another negative long-term outcome driven by shareholders is increased share buybacks (less than 5% of profits until the early 1980s, 90% in 2007, and 280% in 2008) - one economist estimates that had GM not spent $20.4 billion on buybacks between 1986 and 2002 it could have prevented its 2009 bankruptcy. Short-term stockholder perspectives have also brought large-scale layoffs from off-shoring. Governments of other countries encourage longer-term thinking by holding large shares in key enterprises (China Mobile, Renault, Volkswagen), providing greater worker representation (Germany's supervisory boards), and cross-shareholding among friendly companies (Japan's Toyota and its suppliers).
"Free-market policies rarely make poor countries rich." With a few exceptions, all of today's rich countries, including Britain and the U.S., reached that status through protectionism, subsidies, and other policies that they and their IMF, WTO, and World Bank now advise developing nations not to adopt. Free-market economists usually respond that the U.S. succeeded despite, not because of, protectionism. The problem with that explanation is the number of other nations paralleling the early growth strategy of the U.S. and Britain (Austria, Finland, France, Germany, Japan, Korea, Singapore, Sweden, Taiwan), and the fact that apparent exceptions (Hong Kong, Switzerland, The Netherlands) did so by ignoring foreign patents (a free-market 'no-no'). Chang believes the 'official historians' of capitalism have been very successful re-writing its history, akin to someone trying to 'kick away the ladder' with which they had climbed to the top. He also points out that developing nations that stick to their Ricardian 'comparative advantage,' per the conservatives prescription, condemn themselves to their economic status quo.
Tough to argue, "rarely" is very misleading, and it is also very situational -- getting a relatively free market is hard to get running on places with low levels of education amongst other critical problems. It's akin to trying to impose Democracy and the problems that came with it on developing countries. If the author is saying "Blindly" imposing free market is bad then that's pretty much the case
"We do not live in a post-industrial age." Most of the fall in manufacturing's share of total output is not due to a fall in the quantity of manufactured goods, but due to the fall in their prices relative to those for services, caused by their faster productivity growth. A small part of deindustrialization is due to outsourcing of some 'manufacturing' activities that used to be provided in-house - eg. catering and cleaning. Those advising the newly developing nations to skip manufacturing and go directly to providing services forget that many services mainly serve manufacturing firms (finance, R&D, design), and that since services are harder to export, such an approach will create balance-of-payment problems. (Chang's preceding points directly contradict David Ricardo's law of comparative advantage - a fundamental free market precept. Chang's example of how Korea built Pohang Steel into a strong economic producer, despite lacking experienced managers and natural resources, is another.)
I don't really understand this point, it reads like a strawman, however.
"The U.S. does not have the highest living standard in the world." True, the average U.S. citizen has greater command over goods and services than his counterpart in almost any other country, but this is due to higher immigration, poorer employment conditions, and working longer hours for many vs. their foreign counterparts. The U.S. also has poorer health indicators and worse crime statistics. We do have the world's second highest income per capita - Luxemburg's higher, but measured in terms of purchasing power parity (PPP) the U.S. ranks eighth. (The U.S. doesn't have the fastest growing economy either - China is predicted to pass the U.S. in PPP this coming decade.) Chang's point here is that we should stop assuming the U.S. provides the best economic model. (This is already occurring - the World Bank's chief economist, Justin Lin, comes from China.)
No idea what the point of this is! But there's a lot of comparing flavors between apples and oranges and saying "apple is not the best fruit" is how I read this paragraph....
"Governments can pick winners." Chang cites examples of how the Korean government built world-class producers of steel (POSCO), shipbuilding (Hyundai), and electronics (LG), despite lacking raw materials or experience for those sectors. True, major government failures have occurred - Europe's Concorde, Indonesia's aircraft industry, Korea's promotion of aluminum smelting, and Japan's effort to have Nissan take over Honda; industry, however, has also failed - eg. the AOL-Time Warner merger, and the Daimler-Chrysler merger. Austria, China, Finland, France, Japan, Norway, Singapore (in numerous other areas), and Taiwan have also done quite well with government-picked winners. Another problem is that business and national interests sometimes clash - eg. American firms' massive outsourcing has undermined the national interest of maintaining full employment. (However, greater unbiased U.S. government involvement would be difficult due to the 10,000+ corporate lobbyists and billions in corporate campaign donations - $500 million alone from big oil in 2009-10.) Also interesting to Chang is how conservative free marketing bankers in the U.S. lined up for mammoth low-cost loans from the Federal Reserve at the beginning of the Great Recession. Government planning allows minimizing excess capacity, maximizing learning-curve economies and economies of scale and scope; operational performance is enhanced by also forcing government-owned or supported firms into international competition. Government intervention (loans, tariffs, subsidies, prohibiting exports of needed raw materials, building infrastructure) are necessary for emerging economies to move into more sophisticated sectors.
Of course Government CAN pick winners. But note that the Government can also pick a lot of losers. In fact, I'll argue that Government probably picks a lot more losers than winners.
"Making rich people richer doesn't make the rest of us richer." 'Trickle-down' economics is based on the belief that the poor maximize current consumption, while the rich, left to themselves, mostly invest. However, the years 1950-1973 saw the highest-ever growth rates in the U.S., Canada, Australia, and New Zealand, despite increased taxation of the rich. Before the 'Golden Age,' per capita income grew at 1-1.5%/year; during the Golden Age it grew at 2-3% in the U.S. Since then, tax cuts for the rich and financial deregulation have allowed greater paychecks for top managers and financiers, and between 1979 and 2006 the top 0.1% increased their share of national income from 3.5% to 11.6%. The result - investment as a ratio of national output has fallen in all rich economies and the pace at which the total economic pie grew decreased.
Oh, another attack on trickle down economics which we don't really believe in. I don't think this has much to do with capitalism, although I can think of a few questions that we can use to explore from this concept though in economics.
"U.S. managers are over-priced." First, relative to their predecessors (about 10X those in the 1960s; now 300-400X the average worker), despite the latter having run companies more successfully, in relative terms. Second, compared to counterparts in other rich countries - up to 20X. (Third, compared to counterparts in developing nations - eg. JPMorgan Chase, world's 4th largest bank, paid its CEO $19.6 million in 2008, vs. the CEO of the Industrial and Commercial Bank of China, the world's largest, being paid $234,700.) American CEOs do not get punished for bad management either - instead receiving raises and restated stock options, or at least loan forgiveness and golden parachutes. (Collusion among CEO members of interlocking 'rubber-stamp' boards fed limited information is one reason for excessive U.S. CEO pay; lack of stockholder interest, thanks to being paid high and rising dividends, a short-term strategy, is another.) Chang asks, rhetorically, "If American CEOs are worth so much, how come their companies have been losing out to foreign competitors?" (And why aren't they investing like their foreign counterparts, instead of sitting on some $2 trillion in current assets?)
It's a result of a lot of other things. Correct me if i'm wrong on this (since i'm assuming this) but I don't think US was under heavy competition with other countries until very recently. The CEO pay is a left over from the previous era if my assumption is true and the market will most definitely correct it in the long run -- because not even billion dollar firms can adjust immediately.
"More education in itself is not going to make a country richer." Increasing deindustrialization and automation have lowered knowledge requirements for most jobs in rich countries. The East Asian miracle economies turned in their impressive early gains despite literacy rates of about 50%, and Korean public schools had class sizes of 90; conversely, countries like the Philippines and Argentina did poorly despite having significantly better-educated populations, while Sub-Saharan Africa per capita income fell 0.3%/year from 1980-2004 despite literacy rates rising from 40% to 61%. Harvard economist Lant Pritchett analyzed data from 1960-87 and found very little evidence supporting the view that increased education leads to higher economic growth. Most education isn't even meant to raise productivity, and math/science courses are not relevant for most. Switzerland is one of the richest and most industrialized countries, but also has the lowest university enrollment in the rich world. (College education in the U.S. has already become a bubble - about half our graduates take jobs not requiring such education.)
The thing about Macroeconomics data is that they're mostly time series data which you can't really control for various other factors. That's the first thing to realize whenever you read a study by a macroeconomist. I think the data they're comparing is very misleading and there are likely a lot of other factors that "matter a lot more" that got omitted in their analysis. This is why time series kinda sucks and to prove any sort of causality (or even "disprove" any sort of established links) you can't really use time series but you need panel data.
The statistics is likely incomplete and misleading for this reason, even the very last statement -- "What kind of graduates take jobs not requiring such education?" If we controlled for the type of degree earned i can easily see that statement just saying something like "English major is not really worth it" but then you don't know if those English majors are going to use their education to write an amazing book later on in life. etc. It's very misleading overall.
I do think that there is a PhD bubble though, but that's more because the market hasn't adjusted properly yet and ideas haven't come up with ways using the glut of PhDs we have (or it's all because most PhDs want professor jobs and frankly there isn't going to be that many out there).
Some of the points Chang makes are obvious facts, but some of the other points are going "well why can things go bad in the short run" which is a completely mischaracterization of the free market concept which concentrates on the long run. We humans don't know and act everything immediately and it takes time for relevant things to be dispersed before people make changes. It seems like a rubbish book overall. Instead of using some sort of creativity to answer "why" these things have happened he just seems to set up strawmans and say "See? look!".It's kind of a useless book overall.
@OP: Your title is exactly the worst conclusion you can get from this book, btw. It contradicts the premise of this book completely -- the book tells you free markets don't exist, which is true, but all the problems are problems with not a completely free market but free market + a lot of other conditions that doesn't exactly make it a completely free market. You cannot logically conclude that laissez faire capitalism doesn't work lol (since laissez faire and free market are the same thing)
The article is one gigantic methodological error. The author has no clue about actual free market economics, the Austrian School, or what free market even means(aka inclusion of central banking in free market examples), so it bears little relevance to discrediting it.
On February 13 2011 02:51 xarthaz wrote: The article is one gigantic methodological error. The author has no clue about actual free market economics, the Austrian School, or what free market even means(aka inclusion of central banking in free market examples), so it bears little relevance to discrediting it.
I don't know much about economics beside the basics, but I can tell you 7 was true for my country.
While South America was expected from the US to join the NAFTA and US lobbied heavily for this, I'm really glad it never went through. It didn't represent SA's interests and it would gave us no chance against USA's subsidizing policies (specially related to grains). Last time Argentina "opened it's economic boundaries" and let foreign products with low taxes our industrial sector was annihilated. It's slowly re-growing now.
Over the years we got many IMF visits, "recipes for progress" and a load of bullshit regarding what we had to do to come back into the free market world. Some of this stuff involved money loans at ridicule taxes, constant IMF visits, signing for high taxes plans (to pay back the loans) and lots of other stuff that finally lead to a crisis in 2001.
After that we have been more or less independent of the IMF, and within the MercoSur, Argentina has been growing pretty steadily, with big reserves (even in the middle of the last world economic crisis) and something I think we can finally call "a plan".
I guess the main problem with free market and it's policies it's that it's based on people's good will for it to turn right. And you know what happens when you mix people with a lot of money. Be it that food shop one block away from your house, or an entire country.
On February 13 2011 02:51 xarthaz wrote: The article is one gigantic methodological error. The author has no clue about actual free market economics, the Austrian School, or what free market even means(aka inclusion of central banking in free market examples), so it bears little relevance to discrediting it.
Very true. I read the first sentence and stopped reading right there. Those that follow the Austrian School DID predict the oncoming recession and in media interviews, they were laughed at. Here is a perfect example:
On February 13 2011 02:51 xarthaz wrote: The article is one gigantic methodological error. The author has no clue about actual free market economics, the Austrian School, or what free market even means(aka inclusion of central banking in free market examples), so it bears little relevance to discrediting it.
Austrian School is irrelevant to discussion because it's just verbal logic. You can claim that the "world should work this way" all you want but in the end Austrian School makes zero contribution to anything that happens in reality due to how it's set up. It is also very dogmatic since it's literally untestable.
Secondly calling Austrian School as the "actual free market economics" is laughable, when no one takes it seriously (and for a good reason). No one cares about discrediting Austrians because you can just spew out roundabouts by blaming the government and some random policy anyway. Austrian isn't even a school of economics at this point, it is closer to a philosophy. Austrians often make the same mistakes like the author you are criticizing anyways so it's a bad point to bring out.
Very true. I read the first sentence and stopped reading right there. Those that follow the Austrian School DID predict the oncoming recession and in media interviews, they were laughed at.
"Even a broken clock is right twice a day". Considering the number of bad predictions austrians make all the time it's honestly not surprising.
On February 13 2011 02:51 xarthaz wrote: The article is one gigantic methodological error. The author has no clue about actual free market economics, the Austrian School, or what free market even means(aka inclusion of central banking in free market examples), so it bears little relevance to discrediting it.
Austrian School is irrelevant to discussion because it's just verbal logic. You can claim that the "world should work this way" all you want but in the end Austrian School makes zero contribution to anything that happens in reality due to how it's set up. It is also very dogmatic since it's literally untestable.
Secondly calling Austrian School as the "actual free market economics" is laughable, when no one takes it seriously (and for a good reason). No one cares about discrediting Austrians because you can just spew out roundabouts by blaming the government and some random policy anyway. Austrian isn't even a school of economics at this point, it is closer to a philosophy. Austrians often make the same mistakes like the author you are criticizing anyways so it's a bad point to bring out.
Very true. I read the first sentence and stopped reading right there. Those that follow the Austrian School DID predict the oncoming recession and in media interviews, they were laughed at.
"Even a broken clock is right twice a day". Considering the number of bad predictions austrians make all the time it's honestly not surprising.
Thanks for cleaning this up Milkis - even as an economic major who doesn't cling to strictly to free-market ideals, I respect the Chicago school, and hate when Austrian "economists" come in threads such as these with little meat behind their posts/beliefs - it really discredits the free-market belief.
I'm much more interested behind what the chicago-school has to say than the austrian-school. Let's try to keep discussions meaningful rather than writing 3 line posts and post a youtube video of peter Schick.
Wow so this guy says free markets don't exist (true) and uses it to support the claim that they don't work... yeah that makes sense. Guess what the hardest economic times have been the result of idiotic policies. The centuries of progress that we've had notwithstanding rampant government intervention are nothing short of a miracle
I just wanted to point out, since it was mentioned in the article, that Adam Smith didn't particularly advocate laissez-faire. Smith believed that some government intervention was inevitable and necessary. Also, Smith did not come up with the term laissez-faire; some people just assumed it was what he was advocating and slapped a term onto it.
I'm not an econ expert so I can't give any more input than that. ^^ Just wanted to point out a common misconception that I recently studied about in one of my classes.
On February 13 2011 07:54 gogogadgetflow wrote: Wow so this guy says free markets don't exist (true) and uses it to support the claim that they don't work... yeah that makes sense. Guess what the hardest economic times have been the result of idiotic policies. The centuries of progress that we've had notwithstanding rampant government intervention are nothing short of a miracle
This is fairly arguable, particularly since you've little support.
How about the most recent recession? It's argued by many to be the cause of a lack of intervention or deregulation in the financial markets in numerous areas (CDOs MBSs, fradulent underwriting in Mortgages, etc).
Also, I'm curious what your thoughts behind some other noticeable recessions or depressions are, or perhaps what drives the business cycle? Do you simply believe the only reason for economic downturns are government involvement, which is what you seem to advocate?
On February 13 2011 02:36 Milkis wrote: Some of the points Chang makes are obvious facts, but some of the other points are going "well why can things go bad in the short run" which is a completely mischaracterization of the free market concept which concentrates on the long run. We humans don't know and act everything immediately and it takes time for relevant things to be dispersed before people make changes. It seems like a rubbish book overall. Instead of using some sort of creativity to answer "why" these things have happened he just seems to set up strawmans and say "See? look!".It's kind of a useless book overall.
As I've discussed with you in chat, this book (and much of liberal ideology right now) is targeted at the popular form of free markets that Reagan and Thatcher attempted to implement (at least according to their stated goals), a form in which many people today still believe (cato institute, tea partiers, rand-worshippers, etc). In fact, gogogadgetflow a few posts above me seems to be one of those guys. If you'd like to disseminate the thoughts of the current Chicago school of free markets and show the rest of these guys how it differs from the popular "minimal government minimal regulation" free markets, feel free.
@OP: Your title is exactly the worst conclusion you can get from this book, btw. It contradicts the premise of this book completely -- the book tells you free markets don't exist, which is true, but all the problems are problems with not a completely free market but free market + a lot of other conditions that doesn't exactly make it a completely free market. You cannot logically conclude that laissez faire capitalism doesn't work lol (since laissez faire and free market are the same thing)
Yeah it was a misleading title/first line, I just wanted to catch the eyes of those I've described above, the ones that believe that regulation is the devil and consumers are better regulators of everything, even really opaque or monopolistic sectors, like healthcare and electricity respectively.
10)"The U.S. does not have the highest living standard in the world." True, the average U.S. citizen has greater command over goods and services than his counterpart in almost any other country, but this is due to higher immigration, poorer employment conditions, and working longer hours for many vs. their foreign counterparts.
Bizarre how he forgets to mention unsustainable debt based consumption. Still , he talks alot of sense , the present route of manufacturing leaving the US but the US remaining "rich" is untenable , what is the interest on a 14 trillion dollar debt bill?
How about the most recent recession? It's argued by many to be the cause of a lack of intervention or deregulation in the financial markets in numerous areas (CDOs MBSs, fradulent underwriting in Mortgages, etc).
Yes because removing Glass-Steagall (google it) was such a great idea....
The argument for preserving Glass–Steagall (as written in 1987):
1. Conflicts of interest characterize the granting of credit (that is to say, lending) and the use of credit (that is to say, investing) by the same entity, which led to abuses that originally produced the Act.
2. Depository institutions possess enormous financial power, by virtue of their control of other people’s money; its extent must be limited to ensure soundness and competition in the market for funds, whether loans or investments. 3. Securities activities can be risky, leading to enormous losses. Such losses could threaten the integrity of deposits. In turn, the Government insures deposits and could be required to pay large sums if depository institutions were to collapse as the result of securities losses.
4. Depository institutions are supposed to be managed to limit risk. Their managers thus may not be conditioned to operate prudently in more speculative securities businesses. An example is the crash of real estate investment trusts sponsored by bank holding companies (in the 1970s and 1980s).
On February 13 2011 07:54 gogogadgetflow wrote: Wow so this guy says free markets don't exist (true) and uses it to support the claim that they don't work... yeah that makes sense. Guess what the hardest economic times have been the result of idiotic policies. The centuries of progress that we've had notwithstanding rampant government intervention are nothing short of a miracle
Your way of thinking is pretty antiintellectual and counterproductive, if the progress happened in spite of government intervention, rather than with help from it, then it'd require intervention to hinder progress most of the time (this is your argument, saying that intervention => progress = miracle). China, Japan, and South Korea are all pretty good examples of the contrary, with the former developing its economy almost entirely through government-sponsored agreements with Japan (Japan gives China equipment to exploit their resources, China pays with some resources, gets to keep the rest) and then subsequently most of the West (cutting lots of manufacturing deals along the way, popularizing what's now known as outsourcing). Japan's postwar growth was hugely owed to governmental control of trade policy and governmental investment in trade-inducing infrastructure and communications technology. In South Korea, government initiatives and planning made South Korea an industrial power despite its lack of natural resources and small domestic market.
On the other hand, South America and Africa, who were pressured to acquiesce to government austerity measures and noninterventionism in the 80s from the IMF for loans, mostly failed to develop because trade liberalization pushes weaker economies to only export their cheapest products and put all of their eggs into that one cheap basket, hindering development. A huge reason for the recent surge in Mexican immigration is that NAFTA killed their agricultural sector. BUT PROTECTIONISM BE DAMNED, ITS A MIRACLE THAT EVERY POWERFUL ECONOMY TODAY INVOLVED SOME OF IT.
Like honestly, if you're going to argue at this point that it takes a "miracle" for government intervention to help an economy, you're essentially covering your ears and going "lalalalala I cant hear any arguments against government minimalism."
EDIT: And to respond to the wording of your post directly, no that's not what this guy does at all, he makes individual distinct points and backs them each up with historical evidence. A novel concept, no?
On February 13 2011 02:51 xarthaz wrote: The article is one gigantic methodological error. The author has no clue about actual free market economics, the Austrian School, or what free market even means(aka inclusion of central banking in free market examples), so it bears little relevance to discrediting it.
Austrian School is irrelevant to discussion because it's just verbal logic. You can claim that the "world should work this way" all you want but in the end Austrian School makes zero contribution to anything that happens in reality due to how it's set up. It is also very dogmatic since it's literally untestable.
Secondly calling Austrian School as the "actual free market economics" is laughable, when no one takes it seriously (and for a good reason). No one cares about discrediting Austrians because you can just spew out roundabouts by blaming the government and some random policy anyway. Austrian isn't even a school of economics at this point, it is closer to a philosophy. Austrians often make the same mistakes like the author you are criticizing anyways so it's a bad point to bring out.
Very true. I read the first sentence and stopped reading right there. Those that follow the Austrian School DID predict the oncoming recession and in media interviews, they were laughed at.
"Even a broken clock is right twice a day". Considering the number of bad predictions austrians make all the time it's honestly not surprising.
You used the concept of action in your post(examples "take seriously", "discredit","mistake"). Hence you implicitly agreed with the sole premise of (most of) austrian economics, the action axiom. A slight performative contradiction there, though not to worry, nothing that a bit of reading of the foundations of economics wont cure http://mises.org/th.asp
On February 13 2011 02:51 xarthaz wrote: The article is one gigantic methodological error. The author has no clue about actual free market economics, the Austrian School, or what free market even means(aka inclusion of central banking in free market examples), so it bears little relevance to discrediting it.
Austrian School is irrelevant to discussion because it's just verbal logic. You can claim that the "world should work this way" all you want but in the end Austrian School makes zero contribution to anything that happens in reality due to how it's set up. It is also very dogmatic since it's literally untestable.
Secondly calling Austrian School as the "actual free market economics" is laughable, when no one takes it seriously (and for a good reason). No one cares about discrediting Austrians because you can just spew out roundabouts by blaming the government and some random policy anyway. Austrian isn't even a school of economics at this point, it is closer to a philosophy. Austrians often make the same mistakes like the author you are criticizing anyways so it's a bad point to bring out.
Very true. I read the first sentence and stopped reading right there. Those that follow the Austrian School DID predict the oncoming recession and in media interviews, they were laughed at.
"Even a broken clock is right twice a day". Considering the number of bad predictions austrians make all the time it's honestly not surprising.
You used the concept of action in your post(examples "take seriously", "discredit","mistake"). Hence you implicitly agreed with the sole premise of (most of) austrian economics, the action axiom. A slight performative contradiction there, though not to worry, nothing that a bit of reading of the foundations of economics wont cure http://mises.org/th.asp
Since you're so convinced that the OP doesn't address the Austrian school, I invite you to go point-by-point and show me how it doesn't apply. I'm not an economics major or anything, I'm just trying to study the system from a pragmatic outsider's point of view. Tell me how the Austrian school circumvents or deals with the problems lined out in the OP.
More importantly, tell me how the Austrian school could be effectively implemented anywhere (just pick the country you're most familiar with and describe the legislation needed to enact an Austrian free market system). Because to me, it doesn't seem like a very pragmatic option.
On February 13 2011 02:51 xarthaz wrote: The article is one gigantic methodological error. The author has no clue about actual free market economics, the Austrian School, or what free market even means(aka inclusion of central banking in free market examples), so it bears little relevance to discrediting it.
Austrian School is irrelevant to discussion because it's just verbal logic. You can claim that the "world should work this way" all you want but in the end Austrian School makes zero contribution to anything that happens in reality due to how it's set up. It is also very dogmatic since it's literally untestable.
Secondly calling Austrian School as the "actual free market economics" is laughable, when no one takes it seriously (and for a good reason). No one cares about discrediting Austrians because you can just spew out roundabouts by blaming the government and some random policy anyway. Austrian isn't even a school of economics at this point, it is closer to a philosophy. Austrians often make the same mistakes like the author you are criticizing anyways so it's a bad point to bring out.
Very true. I read the first sentence and stopped reading right there. Those that follow the Austrian School DID predict the oncoming recession and in media interviews, they were laughed at.
"Even a broken clock is right twice a day". Considering the number of bad predictions austrians make all the time it's honestly not surprising.
You used the concept of action in your post(examples "take seriously", "discredit","mistake"). Hence you implicitly agreed with the sole premise of (most of) austrian economics, the action axiom. A slight performative contradiction there, though not to worry, nothing that a bit of reading of the foundations of economics wont cure http://mises.org/th.asp
Economics is the study of the fact that "People respond to incentives". No one will deny that. Pretending however, that this is what makes Austrian Economics "Unique" or acting as if this is only true on Austrian Economics shows that you have no idea what you're talking about overall. The issue with Austrian Economics has nothing to do with this specific premise.
Edit: Not that I'd expect most people who promote Austrian Economics to understand this fact -- 99% of Austrian Economics are internet libertarians who are more idealistic than anything else. It's actually a pretty amusing effect that mises.org had -- it attracted so many ignorant individuals blinded by ideology to the field to the point and makes themselves look absolutely retarded. It's an interesting externality after all ;D
On February 14 2011 06:24 Milkis wrote: Austrian School is irrelevant to discussion because it's just verbal logic. You can claim that the "world should work this way" all you want but in the end Austrian School makes zero contribution to anything that happens in reality due to how it's set up. It is also very dogmatic since it's literally untestable.
Secondly calling Austrian School as the "actual free market economics" is laughable, when no one takes it seriously (and for a good reason). No one cares about discrediting Austrians because you can just spew out roundabouts by blaming the government and some random policy anyway. Austrian isn't even a school of economics at this point, it is closer to a philosophy. Austrians often make the same mistakes like the author you are criticizing anyways so it's a bad point to bring out.
Very true. I read the first sentence and stopped reading right there. Those that follow the Austrian School DID predict the oncoming recession and in media interviews, they were laughed at.
"Even a broken clock is right twice a day". Considering the number of bad predictions austrians make all the time it's honestly not surprising.
You used the concept of action in your post(examples "take seriously", "discredit","mistake"). Hence you implicitly agreed with the sole premise of (most of) austrian economics, the action axiom. A slight performative contradiction there, though not to worry, nothing that a bit of reading of the foundations of economics wont cure http://mises.org/th.asp[/QUOTE]
Economics is the study of the fact that "People respond to incentives". No one will deny that. Pretending however, that this is what makes Austrian Economics "Unique" or acting as if this is only true on Austrian Economics shows that you have no idea what you're talking about overall. The issue with Austrian Economics has nothing to do with this specific premise.
Edit: Not that I'd expect most people who promote Austrian Economics to understand this fact -- 99% of Austrian Economics are internet libertarians who are more idealistic than anything else. It's actually a pretty amusing effect that mises.org had -- it attracted so many ignorant individuals blinded by ideology to the field to the point and makes themselves look absolutely retarded. It's an interesting externality after all ;D [/QUOTE] Lets not pretend Keynesian economics is a 'perfect' system either.
On February 14 2011 06:24 Milkis wrote: Austrian School is irrelevant to discussion because it's just verbal logic. You can claim that the "world should work this way" all you want but in the end Austrian School makes zero contribution to anything that happens in reality due to how it's set up. It is also very dogmatic since it's literally untestable.
Secondly calling Austrian School as the "actual free market economics" is laughable, when no one takes it seriously (and for a good reason). No one cares about discrediting Austrians because you can just spew out roundabouts by blaming the government and some random policy anyway. Austrian isn't even a school of economics at this point, it is closer to a philosophy. Austrians often make the same mistakes like the author you are criticizing anyways so it's a bad point to bring out.
Very true. I read the first sentence and stopped reading right there. Those that follow the Austrian School DID predict the oncoming recession and in media interviews, they were laughed at.
"Even a broken clock is right twice a day". Considering the number of bad predictions austrians make all the time it's honestly not surprising.
You used the concept of action in your post(examples "take seriously", "discredit","mistake"). Hence you implicitly agreed with the sole premise of (most of) austrian economics, the action axiom. A slight performative contradiction there, though not to worry, nothing that a bit of reading of the foundations of economics wont cure http://mises.org/th.asp
Economics is the study of the fact that "People respond to incentives". No one will deny that. Pretending however, that this is what makes Austrian Economics "Unique" or acting as if this is only true on Austrian Economics shows that you have no idea what you're talking about overall. The issue with Austrian Economics has nothing to do with this specific premise.
Edit: Not that I'd expect most people who promote Austrian Economics to understand this fact -- 99% of Austrian Economics are internet libertarians who are more idealistic than anything else. It's actually a pretty amusing effect that mises.org had -- it attracted so many ignorant individuals blinded by ideology to the field to the point and makes themselves look absolutely retarded. It's an interesting externality after all ;D
Lets not pretend Keynesian economics is a 'perfect' system either.
I swear it's absolutely hilarious how much I hear this silly pattern.
"Point out Austrian Econ is Rubbish" "Be accused of being Keynesian"
Except that I'm not even Keynesian and Austrians always seem to use this as a punchline or something
Keynesian Economics isn't perfect, but it had made great strides since the time of Keynes and its quite an interesting theory that is testable and expandable. This is why Neo-Keynesian is quite mainstream -- and why Austrian Economics is considered dead. Keynesian not being perfect is not the same as Austrian having issues -- nor does it justify Austrian having issues. Austrian has issues because the school has become pretty much dogmatic. Austrians are simply bad applied theorists because they have no idea what the limitations of their theories are because they don't believe that limitations exist. They don't add anything to our understanding of economics today.
Fiat currencies always fail , it is inevitable. Can you see that the USD is in the process of failing right now? Even Greenspan advocates a gold standard these days :
Well , any shortcomings of Austrian economics are just theoretical since the Austrian school has not had a chance to be used in a modern economy and any shortcomings could be fixed by market forces.Governments of course have continued to push Keynesian over Austrian because it is easier to print paper than print gold.
Like the video shows , even Greenspan is bearish on fiat , i foresee a gold/silver backed currency within 5 years in the United States.Fiat is in it's death throes.
One of the governments roles is to make sure these things do not get out of control via creating legislation that stops the excess and guides monetary policy in the right direction , things like the Glass-Steagall act (that was canned back in 1999.)
Personally i would rather have seen an Austrian response to the current economic crisis. Instead of giving the banks 700 billion just let them go bust. The crash has to come sooner or later , should have just felt more pain when the dot com bubble popped instead of creating more bubbles with freshly printed fiat that have the endgame of making average Americans poorer (real wages down since the 1970s).
On February 16 2011 16:41 iPlaY.NettleS wrote: Explain to me why the current system is so great when real incomes have declined since the 1970s? Excepting the top 1% of course. Inflation is a tax.
I don't believe I ever made a statement about the current system. Nor am I, and definitely neither are you, informed to make any educated statements about it.
But it's hilarious that you keep coming up with the oddest responses to my statements and dodging them. Figures all you can do is try and set up poor strawmans in a discussion -- you don't know what you're talking about, nor do you realize that you have no idea what you're talking about.
All you need to know is a basic account of history and the fact that it repeats itself.
History shows only currencies backed by gold and silver stand the test of time , Keynes was against a gold standard therefore his theory is doomed to failure.
The real crisis came after Caracalla, between 258 and 275. In a period of intense civil war and foreign invasions, the emperors simply abandoned, for all practical purposes, a silver coinage. By 268 there was only five tenths percent silver in the denarius. And prices in this period rose in most parts of the empire by nearly a thousand percent. The only people who were getting paid in gold were the barbarian troops hired by the emperors. The barbarians were so barbarous that they would only accept gold in payment for their services.
In the 3rd century this was a constant problem in Rome: all sorts of people were trying to escape the increased taxes that the military needed. The army itself [had grown] from the time of Augustus, when they had about a quarter of a million troops, [to where] by the time of Diocletian they had somewhat over 600,000. So the army itself had doubled in size in the course of this inflationary spiral, and obviously that contributed greatly to the inflation. In addition, the administration of the state had grown enormously. All these events strained the fiscal resources of the state beyond its ability to sustain itself, and the debasement and the taxation were both used to keep the ship of state going; frequently by debasing, then by taxation, and then often simply by accusing people of treason and confiscating their estates.
One of the Christian fathers, Saint Gregory Nazianzus, commented that war is the mother of taxes and I think that's a wonderful thing to keep in mind: war is the mother of taxes. And it's also, of course, the mother of inflation.
Salvian tells us, and I don't think he's exaggerating, that one of the reasons why the Roman state collapsed in the 5th century was that the Roman people, the mass of the population, had but one wish after being captured by the barbarians: that they would never again fall under the rule of the Roman bureaucracy. In other words, the Roman state was the enemy, the barbarians were the liberators. And this undoubtedly was due to the inflation of the 3rd century. While the state had solved the monetary problem for its own constituents, it had failed to solve that monetary problem for the masses and continued to use an oppressive system of taxation in order to fill the coffers of the ruling bureaucrats and military.
On February 16 2011 18:29 iPlaY.NettleS wrote: All you need to know is a basic account of history and the fact that it repeats itself.
History shows only currencies backed by gold and silver stand the test of time , Keynes was against a gold standard therefore his theory is doomed to failure.
The real crisis came after Caracalla, between 258 and 275. In a period of intense civil war and foreign invasions, the emperors simply abandoned, for all practical purposes, a silver coinage. By 268 there was only five tenths percent silver in the denarius. And prices in this period rose in most parts of the empire by nearly a thousand percent. The only people who were getting paid in gold were the barbarian troops hired by the emperors. The barbarians were so barbarous that they would only accept gold in payment for their services.
In the 3rd century this was a constant problem in Rome: all sorts of people were trying to escape the increased taxes that the military needed. The army itself [had grown] from the time of Augustus, when they had about a quarter of a million troops, [to where] by the time of Diocletian they had somewhat over 600,000. So the army itself had doubled in size in the course of this inflationary spiral, and obviously that contributed greatly to the inflation. In addition, the administration of the state had grown enormously. All these events strained the fiscal resources of the state beyond its ability to sustain itself, and the debasement and the taxation were both used to keep the ship of state going; frequently by debasing, then by taxation, and then often simply by accusing people of treason and confiscating their estates.
One of the Christian fathers, Saint Gregory Nazianzus, commented that war is the mother of taxes and I think that's a wonderful thing to keep in mind: war is the mother of taxes. And it's also, of course, the mother of inflation.
Salvian tells us, and I don't think he's exaggerating, that one of the reasons why the Roman state collapsed in the 5th century was that the Roman people, the mass of the population, had but one wish after being captured by the barbarians: that they would never again fall under the rule of the Roman bureaucracy. In other words, the Roman state was the enemy, the barbarians were the liberators. And this undoubtedly was due to the inflation of the 3rd century. While the state had solved the monetary problem for its own constituents, it had failed to solve that monetary problem for the masses and continued to use an oppressive system of taxation in order to fill the coffers of the ruling bureaucrats and military.
You're terrible at arguing, all of your past 4-6 responses have been non sequitur's with regard to Milkis', and you are now banned from my blog so it will no longer be bumped and bumped by your drivel.
You do not know how to put up a coherent argument, you seem to think that asserting fractions of truths and singular aspects of history makes a complete argument. It doesn't. You also seem to think that "Only Z has worked before, and X is not Z. Y promotes X. Therefore Y is doomed to fail." is valid logic. It isn't, please study logic to find out why (it's like you're arguing all new concepts are doomed to fail because they aren't old concepts. Aristotle anyone?). Stop it.
On February 16 2011 19:15 Ghad wrote: 90% of Laissez-Faire evangelists are close to fascists, so no thanks.
Could you please qualify your statement? Did you even read the OP? It's mostly regarding popular thought in America, so it might be kind of foreign to you, but I don't appreciate this kind of post, even if you are on my anti-Laissez-faire side.
On February 13 2011 02:51 xarthaz wrote: The article is one gigantic methodological error. The author has no clue about actual free market economics, the Austrian School, or what free market even means(aka inclusion of central banking in free market examples), so it bears little relevance to discrediting it.
Austrian School is irrelevant to discussion because it's just verbal logic. You can claim that the "world should work this way" all you want but in the end Austrian School makes zero contribution to anything that happens in reality due to how it's set up. It is also very dogmatic since it's literally untestable.
Secondly calling Austrian School as the "actual free market economics" is laughable, when no one takes it seriously (and for a good reason). No one cares about discrediting Austrians because you can just spew out roundabouts by blaming the government and some random policy anyway. Austrian isn't even a school of economics at this point, it is closer to a philosophy. Austrians often make the same mistakes like the author you are criticizing anyways so it's a bad point to bring out.
Very true. I read the first sentence and stopped reading right there. Those that follow the Austrian School DID predict the oncoming recession and in media interviews, they were laughed at.
"Even a broken clock is right twice a day". Considering the number of bad predictions austrians make all the time it's honestly not surprising.
You used the concept of action in your post(examples "take seriously", "discredit","mistake"). Hence you implicitly agreed with the sole premise of (most of) austrian economics, the action axiom. A slight performative contradiction there, though not to worry, nothing that a bit of reading of the foundations of economics wont cure http://mises.org/th.asp
Economics is the study of the fact that "People respond to incentives". No one will deny that. Pretending however, that this is what makes Austrian Economics "Unique" or acting as if this is only true on Austrian Economics shows that you have no idea what you're talking about overall. The issue with Austrian Economics has nothing to do with this specific premise.
You claimed the problem to be AE not being connected with reality. Yet you acknowledge the action axiom. That is a contradiction.
On February 13 2011 02:51 xarthaz wrote: The article is one gigantic methodological error. The author has no clue about actual free market economics, the Austrian School, or what free market even means(aka inclusion of central banking in free market examples), so it bears little relevance to discrediting it.
Austrian School is irrelevant to discussion because it's just verbal logic. You can claim that the "world should work this way" all you want but in the end Austrian School makes zero contribution to anything that happens in reality due to how it's set up. It is also very dogmatic since it's literally untestable.
Secondly calling Austrian School as the "actual free market economics" is laughable, when no one takes it seriously (and for a good reason). No one cares about discrediting Austrians because you can just spew out roundabouts by blaming the government and some random policy anyway. Austrian isn't even a school of economics at this point, it is closer to a philosophy. Austrians often make the same mistakes like the author you are criticizing anyways so it's a bad point to bring out.
Very true. I read the first sentence and stopped reading right there. Those that follow the Austrian School DID predict the oncoming recession and in media interviews, they were laughed at.
"Even a broken clock is right twice a day". Considering the number of bad predictions austrians make all the time it's honestly not surprising.
You used the concept of action in your post(examples "take seriously", "discredit","mistake"). Hence you implicitly agreed with the sole premise of (most of) austrian economics, the action axiom. A slight performative contradiction there, though not to worry, nothing that a bit of reading of the foundations of economics wont cure http://mises.org/th.asp
Economics is the study of the fact that "People respond to incentives". No one will deny that. Pretending however, that this is what makes Austrian Economics "Unique" or acting as if this is only true on Austrian Economics shows that you have no idea what you're talking about overall. The issue with Austrian Economics has nothing to do with this specific premise.
You claimed the problem to be AE not being connected with reality. Yet you acknowledge the action axiom. That is a contradiction.
How is this a contradiction? One axiom does not make AE automatically connected with reality. It is the conclusions AE reaches with the axiom that is disconnected with reality. The fact that "people respond to incentives" is a fine starting point, but it is not everything.
Though I do not have in-depth knowledge on the topic, I do tend to agree, and have always felt capitalism is not the best way of doing things. But with that said, what alternative is better?
On February 13 2011 02:51 xarthaz wrote: The article is one gigantic methodological error. The author has no clue about actual free market economics, the Austrian School, or what free market even means(aka inclusion of central banking in free market examples), so it bears little relevance to discrediting it.
Austrian School is irrelevant to discussion because it's just verbal logic. You can claim that the "world should work this way" all you want but in the end Austrian School makes zero contribution to anything that happens in reality due to how it's set up. It is also very dogmatic since it's literally untestable.
Secondly calling Austrian School as the "actual free market economics" is laughable, when no one takes it seriously (and for a good reason). No one cares about discrediting Austrians because you can just spew out roundabouts by blaming the government and some random policy anyway. Austrian isn't even a school of economics at this point, it is closer to a philosophy. Austrians often make the same mistakes like the author you are criticizing anyways so it's a bad point to bring out.
Very true. I read the first sentence and stopped reading right there. Those that follow the Austrian School DID predict the oncoming recession and in media interviews, they were laughed at.
"Even a broken clock is right twice a day". Considering the number of bad predictions austrians make all the time it's honestly not surprising.
You used the concept of action in your post(examples "take seriously", "discredit","mistake"). Hence you implicitly agreed with the sole premise of (most of) austrian economics, the action axiom. A slight performative contradiction there, though not to worry, nothing that a bit of reading of the foundations of economics wont cure http://mises.org/th.asp
Economics is the study of the fact that "People respond to incentives". No one will deny that. Pretending however, that this is what makes Austrian Economics "Unique" or acting as if this is only true on Austrian Economics shows that you have no idea what you're talking about overall. The issue with Austrian Economics has nothing to do with this specific premise.
You claimed the problem to be AE not being connected with reality. Yet you acknowledge the action axiom. That is a contradiction.
How is this a contradiction? One axiom does not make AE automatically connected with reality. It is the conclusions AE reaches with the axiom that is disconnected with reality. The fact that "people respond to incentives" is a fine starting point, but it is not everything.
No offense but you dont even seem to understand what the action axiom means, how the rigorous praxeological approach is used to derive the other laws, neither have you made an argument over what exactly is the problem with AE.. Which would lead the debate into the usual "explaining ABC of AE to uninformed economics major/lay person" and countering the endless non sequiturs and strawmen.. as Rothbard said, "It is no crime to be ignorant of economics...But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance. "
EPT
