The Glade 4.0

Yeah, exactly like they do with fiat currencies right now. It's like I've always argued, commodity money doesn't have real advantages, it doesn't stop the government from printing money whenever they want.

Facism is not a school of thought, it is a racial slur.

Ummm... because their price fluctuations are occuring relative to the paper currencies?

In comic strips the person on the left always speaks first. - George Carlin

Wait, Europe as a whole is pissing off Germany? Nooooo! For the love of God, stop pissing Germany off!

Someone remind me what happened the last time Germany got **** on economically?

Historians increasingly attribute the Depression to broad geopolitical upheavals. World War I shattered the existing global economic order. Dominated by Great Britain, it fostered vibrant trade and rested on the gold standard. (Under the gold standard, paper currencies could be converted into gold coins or bullion.) The war also spawned huge international debts, reflecting German war reparations and large U.S. loans to Britain and France. It was impossible to reconstruct the prewar order. Britain was too weak, the gold standard was too constricting, and the debts were too heavy. But countries tried, because the prewar order had delivered prosperity. This futile effort brought on Depression. Only when economic hardship became unbearable were unrealistic goals (keeping the gold standard, repaying debts) abandoned.

There are eerie, if crude, parallels now. The welfare state is today's equivalent of the gold standard. With aging societies, advanced countries have promised more benefits than their tax bases can support. Hence, high government debt. Greece is merely the canary in the coal mine. But politicians resist cutting popular benefits except under extreme pressure. It takes a crisis. Greece, again. Another unsettling parallel is the global economy. The United States' leadership since World War II is eroding before China's ascent. There's a danger now, as then, of a power vacuum. Witness the long delay in coming to Greece's aid. No one country acted decisively, even as markets grew nervous.

Who is "using" the gold in your question, Hop?

In comic strips the person on the left always speaks first. - George Carlin

Facism is not a school of thought, it is a racial slur.

I'm not exactly advocating a gold standard. However, the shift to fiat currency doesn't shift us to a non-commodity money; it simply changes what the commodity in question is. Rothbard and Hayek knew this, as did Ricardo and Malthus and a whole bunch of classical German economists; hence, the Labor Theory of Value exists. Indeed, Das Kapital is exactly about what happens in this situation for the most part.

The problem with the Great Depression is even sensible theories of what caused it don't look at the actual history and read the right things from them. The Gold Standard wasn't a problem; the liquidity crisis was. And what Dashel's examples ignore, for example, is how Eisenhower handled the Decade of Austerity with regard to equal amounts of debt and as bad an initial recession following World War II. Fiat Currency didn't make Eisenhower's policies; the United States was still on a Mixed Precious Metal policy until the late 50s for the most part. And that reluctance to shed the Gold Standard entirely saved our asses.

That said, we're facing other problems now and they go back to the Great Depression and the Federal Reserve's current inception and the FDIC. They go back to Social Security and the Great Society and the New Deal. And, they go back to John Maynard Keynes: you can neither inflate nor spend your way out of debt. You can only postpone the inevitable. And the world is feeling it now.

We're not making any more money than we were 50 years ago; we're just handling more currency. And, in a lot of cases, we're making less money per unit time worked per household. Actually, in the United States, that's near universal. Wage depression and household earnings have dropped as we doubled the work force. We're not producing tangible, durable goods. In fact, our entire economy centers around a service industry that depletes real wealth and consumerism that promotes bad fiscal habits. I've said all of this before; however, and most people here simply laugh and say, "Whatever." Sooner or later, you have to pay the piper.

The current Euro-Zone situation is horrible, because they bought into a whole bunch of economic hoodoo and social-economy thoughts that definitely don't work and don't create sustainability. However, we've put too much debt out there; we've borrowed too much money; and we keep trying to foster ourselves as the leading economic power in the world: we're not. That ship sailed in the mid 90s. And contrary to the claims of the Bush Administration, the recession that Clinton left us with never ended. In fact, it's highly likely we're still dealing with the contractions of the first Bush presidency. But American pundits and economists like to think of things in vacuums or nice compartmentalized eras; and that just doesn't work. We're talking about things from the top down; from the government to the people. And while social constructivism gives us some insight into those relationships, it doesn't change one hard truth about economics: the economy is an aggregation of trillions of micro-transactions a year across disparate regions, local economies, and trade venues. And when we try to normalize it across an area as functionally diverse as the U.S. we're beating our heads against the wall. Trying to do that for the world? That's just **** stupid, but heads of state keep trying.

It's all well and good to normalize currency within a nation, but we can't normalize the value or pricing of goods. We can't regulate the markets like we do, because we honestly do stop trade and innovation. And then, to top that off, we have issues like consumerism that drive the costs of functionally identical items up over time instead of down.

Our entire economic model and behavior is flawed.

But, enough of that ...

You want to know why the Great Depression is mistaught? Society needs it to be. 5 generations later, we don't question as a collective whole that FDR saved the world. We don't question social security or the suppressive effects of payroll taxes on earning and economic power. We don't question income taxes on everyone or the fact that the United States has one of the highest aggregate tax burdens in the world for it's tax payers. And when we do, we get comments like ...

"Well that's on the fringe;" or "The overwhelming consensus of economists is that ..." Except it's not. Our colleges just don't teach the dissenting opinions anymore. How many of you read anything by Murray Rothbard in your Macro Economics Classes? Or Ludwig von Mises? Or Hayek? I'm sure you got a ton about Friedman and Keynes and now Krugman and a whole bunch of other economists. How many of you were required to take Microeconomics or Economic History as non-survey courses (i.e. actual seminar sequences)? And what about political economy as a separate subject? Hell, when was the first time you learned about praxeology?

So, I'll shift the subject to something most of us can relate to.

Look at the Auction House on your server. Consider the value of Frozen Orbs after the implementation of Random, Cross-Server Instancing. What had to happen to make them more valuable than the 5 gold you cold get from a vendor? And, in the interim, what has happened to value of the goods that are valued by the game the same as a Frozen Orb? When you **** with supply and demand, you **** with things in an ever increasing system of complex interactions. And that's what Keynes never really got; that's what our economy doesn't get; that's what economies of scale, as envisioned by Krugman, really don't get ...

There's a reason it's called the Law of Supply and Demand; it's just too bad the economy theory and policy of the Twentieth Century ignores it almost wholesale. And I suspect, actually, I probably know, deep down, that it's the same reason we stopped teaching Economic History and Economic Theory that dates back to the Pharaonic Empires. It's just not politically correct. Unfortunately, the real world isn't World of Warcraft: God didn't come down from on high and say a Frozen Orb is now worth an Eternal Shadow or an Eternal Fire. And government's trying to play God don't have the same impact on reality.

In comic strips the person on the left always speaks first. - George Carlin

3. Greece > Austria > Spain > Portugal > Germany > The U.K. > The U.S. Dominoes.

Facism is not a school of thought, it is a racial slur.

Hopwin:

Why are you leery about praxeology (that is, the study of human action and behavior)? And how on earth would that have anything to do with my distaste for the Gold Standard and Fiat Currency?

In comic strips the person on the left always speaks first. - George Carlin

As for praxeology, it is misleading to call it a study of anything since it is not a science, it is an anti-science. They reject empirical data and go with what is "logical", a sort of proto-freakonomics. Saying it is a study of human actions and behaviors is the same as calling my day-dreaming about daisies a study.

Facism is not a school of thought, it is a racial slur.

Seriously, that's at least as bad as RangerDave's original post.

Ummm, no? Where do you get this stuff? Seriously, that's at least as bad as RangerDave's original post.

Empiricism, beginning with Hume's skepticism and including all of its positivist variants, shares the historicist's denial of necessity. It attempts to salvage the categories of "law" and "theory" by invoking the procedure of induction, i.e., the derivation of theory from the generalization of observed conjunctions of historical events. However, empiricism has yet to solve the "problem of induction." It cannot, on the basis of its own epistemological tenets, offer a satisfactory basis for the assumption that its generalizations apply with equal force to future events. Thus empiricism does not provide a true alternative to historicism. It leaves intact the claim, disputed by Menger and by Mises, that scientific knowledge consists entirely of generalizations "drawn from past experience that could always be upset by some later experience."

In countering positivism, Mises took refuge in Kantian epistemology and especially in Kant's defense of the category of the synthetic a priori. What Mises regarded as crucial in Kant was, however, not Kant's formal analysis of a priori knowledge or his epistemological idealism, but rather his conviction, contra empiricism and historicism, that reason could give universal and necessary knowledge—knowledge that was fresh and informative.

In the sense in which he applied it in economics, Mises' apriorism did not differ fundamentally from Menger's Aristotelian essentialism.

Praxeology represents an attempt to escape the nihilistic implications of both historicism and empiricism. It affirms the operation of inviolable laws within the realm of human action. It purports to establish the universal validity
of these laws by deducing them from the allegedly incontestable truth that people act purposefully, the "axiom of action." Although supposedly irrefutable, this axiom is not merely "analytic," i.e., nonempirical or vacuous.
It is based upon the reality of the pursuit of ends and the choice of means for their attainment that distinguishes all mental (and, hence, human) activity. Thus a priori to Mises means "independent of any particular time or place."
It does not imply independence from all "experience," although it does denote independence from the sort of sensory experience that empiricism and positivism emphasize: "It rests on universal inner experience, and not simply on
external experience, i.e., its evidence is reflective rather than physical."

22 • The Review of Austrian Economics
Sense data alone, on the other hand, could not reveal to us the essential purposefulness
of human actions.

Nor is experience of the empiricist variety effective in refuting theories derived praxeologically. Rather, refutation of a praxeological theory requires discovery of a fault in the chain of reasoning employed by the praxeologist. Empirical evidence does not "falsify" a theory, but rather serves to establish the appropriateness of the theory's application to a particular, concrete event. To meaningfully deny the "action axiom" (i.e., the claim that people act purposefully) is difficult. Denial of the axiom's empirical validity involves a purposeful act on the part of skeptics. It therefore confronts them with the uncomfortable choice of either conceding the issue or proclaiming that their own disagreement is purposeless. Thus, any denial of the action axiom is selfcontradictory.

Yet it is neither "empty" nor "arbitrary": it is axiomatic in the sense that distinguishes an axiom from a postulate. It is epistemologically distinct from the a priori assumptions employed in the hypothetical-deductive procedures of orthodox (neoclassical) economics. To be sure, Mises would have insisted that all of the lasting discoveries of the classical and neoclassical economists in the realm of pure theory were in fact results of the method described by praxeology; but this was by no means the acknowledged procedure of those schools of thought. Neoclassical economics regards even its most fundamental "laws" as contingent or "probable." Indeed, many of its modern theorems are based upon patently
false assumptions, some selected for their alleged predictive capacity and all subject to empirical testing and falsification. The fundamental "laws" of praxeology are, in contrast, held by it to be universally valid. They hold with
"apodictic certainty."

Mises was heavily influenced by Max Weber as well as by Kant. It was from Weber that Mises took the notion of purposefulness which he made the starting point of praxeological analysis. Mises also adopted Weber's emphasis
upon methodological individualism and his insistence upon the necessity and possibility of an entirely value-free (wertfrei) science of human action. Using these notions, Mises refined Menger's development of the subjective theory
of value.

Mises' extended application of praxeological subjectivism may be viewed as a limited version of the doctrine of epistemological subjectivism or idealism:
it maintains that within the realm of human action, there are phenomena—
in particular, market phenomena—that exist only by virtue of the consciousness
of purposeful individuals. Thus, value, wealth, profit, loss, and
cost are products of human thought, having no "objective" or extensive foundation.
One cannot imagine their existence or conceive their alteration, except
in connection with acts of valuation and choice.19 (I shall have occasion
to insist upon the consistent application of this subjective doctrine later on

Praxeology and Understanding • 23
in this article.) Thus, to explain market phenomena in a manner consistent with its subjectivism, praxeology refers to acts of valuation and choice. However, praxeological subjectivism is also value-free or nonnormative:

[It] does not pass judgment on action, but takes it exactly as it is, and it
explains market phenomena not on the basis of "right" action, but on the
basis of given action. It does not seek to explain the exchange ratios that
would exist on the assumption that men are governed exclusively by certain
motives and that other motives which do in fact govern them, have no effect.
It wants to comprehend the formation of exchange ratios that actually appear
in the market.

Praxeology is also distinct from psychology. Although it explains market phenomena in terms of individual purposefulness, it does not seek to identify the motivations, thoughts, and ends that give rise to particular purposes and choices. The inability of the praxeologists, as "pure theorists," to identify the ends of acting individuals also prevents them from constructing categories oi "economic" and "noneconomic" action. Moreover, it prohibits them from
passing judgment on the appropriateness of individual choices. Because praxeology does not judge actions, it is also not in a position to regard any act as "irrational." It recognizes that all acts of choice have meaning to the individual
choosers in terms of some goal or purpose, however peculiar or ephemeral, that directs their actions: "The idea of an action not in conformity with needs is absurd. As soon as one attempts to distinguish between the need and the action and makes the need the criterion for judging the action, one leaves the domain of theoretical science, with its neutrality in regard to value judgments."

This application of subjectivism freed praxeology from psychological or normative assumptions and made it the analysis of the "pure logic of choice." Through it economics could become a means for the discovery of universal truths. Subjectivism was not wanted for its own sake, but as a means toward the Austrian quest for elements of necessity within the sequence of social events.

In comic strips the person on the left always speaks first. - George Carlin

In summation, stuff happens because people are motivated by stuff and we don't really know what it is. What happened yesterday or today has no impact on tomorrow. It is a rejection of macroeconomics as a whole and embrace of super-microeconomics.

Facism is not a school of thought, it is a racial slur.

1. There was contagion across international borders.

There was a correlation between how long a country stayed on the gold standard and how severe its economic downturn was.

Both are undeniably true, which is why you didn't really deny them.

Facism is not a school of thought, it is a racial slur.

Yes, in a nutshell, but that's not a rejection of observational data. Rather, it is precisely the rejection of macroeconomics, and consequently, moves economics back into the realm of science instead of inductive theory manipulation. However, your last post actually contradicts your first post. Philosophical empiricism does not necessarily embrace empirical data; nor, for that matter, did von Mises reject empirical data. What he rejected was macro-level induction and meta-theories based on aggregate results when the micro-motivations were not known.

For example, what cell phone do you own?

In comic strips the person on the left always speaks first. - George Carlin

a) How is it contradictory?

b) If you throw out macroeconomics then you are saying there are no patterns or predictability within the markets. If everyone is motivated individually and buys a loaf of bread today for $1.50 then you cannot predict that tomorrow people will still pay $1.50 because every individual's motivation can change unpredictably.

c) Blackberry Curve.

Facism is not a school of thought, it is a racial slur.

The rejection of induction is not the rejection of what actually happened. For example ...

Hypothetical Day A: The Dow goes up 1000 points.
Hypothetical Day B: The Dow goes down 1100 points.

Stock Exchanges are actually really good places to prove von Mises's point about praxeology by the way. We know what happened. The Dow moved one direction one day and one direction the other. Why did it happen?That's absolutely true. Markets exist in quantum states, more or less. You can measure where the market is, but you can't measure where it is going, because you can't predict what it is going to do based on what it has done. And predictability has NOTHING to do with empiricism.
Why did you buy your Blackberry Curve? How much did you pay for it? Would you buy it again? Can I answer these questions from Blackberry's Quarterly report?

In comic strips the person on the left always speaks first. - George Carlin

a) Nothing from what you presented. You must take into the externalities, Day B: GE discovered a fatal flaw that causes all of their jet turbines to spin-off jets in mid-flight. Therefore you can say that when GE discovers scenarios such as above the DOW will fall.

b) You can predict that when A) happens then it results in a price change upward or downward.

Classic example from Foxtrot: If you buy gold and the next day a gigantic pirate treasure hoard of gold is found then the price goes down.

c) My old phone broke. It was $99. Probably not. Point of clarification, why I bought it or what is driving sales of the Blackberry Curve overall?

Facism is not a school of thought, it is a racial slur.

Externalities are not quite so simple. You can guess the DOW will fall. However, what GE secures a patent on quarternary optical computing in the same 24 hour window? How much do you know about GE's subsidiaries? What is their news like? What happens if a purchasing agent for GE's Corporate Reinsurance Division accidentally misorders something by 3 orders of magnitude? Do you know all of these externalities?

b)No you can't predict it all. You can guess in more or less educated forms, but you will never reach any level of predictability.

That's actually a horrible example for the law of supply and demand. It assumes that knowledge of the supply shift is universal. It also assumes that the shift in supply actually affects consumer accessible markets. The reality is far more complex, because governments and their policies and any number of external market influences exist outside the scope of normalized individual behavior.

Why you bought it ...

In comic strips the person on the left always speaks first. - George Carlin