The Glade 4.0

Anyone (Khross?) familiar with this guy: Herbert Gintis.

Came across a couple of book reviews and blog comments from him, and I enjoyed his acerbic, "a pox on both your houses" writing style. No idea if his actual points have merit, though.

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

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

So...not a fan. *grin*

Cool. Like I said, was just wondering.

Moreover, Federal regulations placed serious restraints on the ability of the GSEs to assume high-risk debt. Indeed, by definition these GSEs did not engage in subprime lending because their legal statutes prohibited them from issuing mortgages without substantial down payments and closely validated assurances concerning family income and wealth. Indeed, Fannie Mae and Freddie Mac began to recede from the forefront of mortgage lending when the housing bubble emerged in the years after 2003. Fannie Mae and Freddie Mac executives panicked when their positions in mortgage markets began to deteriorate, and they introduce questionably legal procedures ("expanded approval" for Fannie Mae and "A minus" for Freddie Mac) to recapture market share. But these efforts were basically unsuccessful because the GSE lenders were saddled with fixed-rate loan structures. The share of GSEs in the mortgage market faded rapidly in the latter years of the housing bubble.

Third, there is absolutely no empirical evidence suggesting that Woods' policy alternatives might work. There is considerable debate concerning the nature of credit crunches and the Austrian school story is perhaps in the running in explaining them (most economists think the Austrian explanation is bizarre and wrong-headed---Paul Krugman once compared it to the phlogiston theory in chemistry), but there is no support for the notion that an advanced capitalist economy would do better adhering to the gold standard and foregoing active monetary intervention. Moreover, there is widespread opinion among monetary economists, based on a century of experience in financial regulation, that an economic downturn is always a period of excess demand for liquidity, that the financial sector cannot supply such liquidity in a downturn, so the best monetary policy is to flood the economy with liquidity, to whatever degree is required to satisfy the demands of industry. This of course flies in the face of the Austrian theory that it is an excess of liquidity that leads to the downturn, but I believe the historical experience supports the conventional wisdom over the Austrian school.

The Austrian school has had many years to provide the evidence in favor of its model of the free market economy, and it has failed abjectly to do so. The Austrian school founders were notorious for their contempt for empirical evidence, claiming that economic principles are praxeological--self-evident and purely logical in principle, but subjective and highly complex in the human individual, and hence inaccessible to empirical analysis. This argument has little merit, in my estimation---I spend a good part of my time gathering and analyzing evidence concerning human (and other animal) behavior so as to better understand social dynamics and the realm of the possible in social policy. What the Austrians consider logical appears to the rest of the world (and most assuredly to myself) as the ponderous prejudices of free-market fundamentalists for whom science based on evidence is replaced by faith based on wishful thinking.

I think it likely that macroeconomics will not become scientifically presentable until we realize that a market economy is a complex dynamic nonlinear system, and we start to use the techniques of complexity analysis to model it. I present my arguments in Herbert Gintis, "The Dynamics of General Equilibrium", Economic Journal 117 (2007):1289-1309

It presents a case for laissez-faire capitalism based on Mises' praxeology, or rational investigation of human decision-making. It rejects positivism within economics. It defends an a priori epistemology and underpins praxeology with a foundation of methodological individualism and laws of apodictic certainty. Mises argues that the free-market economy not only outdistances any government-planned system, but ultimately serves as the foundation of civilization itself.

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

Cool. Like I said, was just wondering.

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

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

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.

That said, thanks for demonstrating something I've long suspected of you. Let me know when you join the U.S.C.P.

No, you weren't. You're trying to bait me by presenting economists you know I find problematic and lacking credibility. Indeed, the fact that you'd specifically ask me my opinions on a known pro-Marxist economist that's critical of the American private enterprise system amuses me to no end.

Come on RD ... Show me what you've got.

Hopwin:

Except you're not. I tried to explain to you how it worked and you kept telling me I was wrong. So ... if you want an explanation, those posts are still here on this forum.

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

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.

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?

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

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?

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.

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?

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.

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) 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?

Of course you don't but praxeology throws it hands up and says, "**** everything boils down to individual decisions so you can't know anything about what impacts the markets. All events are completely indepedent of each other."


Not according to praxeology anyways.


Agreed it is a horrible example, all economic hypotheticals short of full blown studies are. What is the point you are trying to make?


No. Should we?

Hopwin:

You obviously aren't interested in anything other than your preconceived notion of what praxeology happens to be.

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

...praxeology (that is, the study of human action and behavior)...

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

Also, fix your quote tags. Praxeology, as employed by Austrian School Economics, is nothing more and nothing less than the behavioral science of exchange. How people make transactions, why they make transactions, and trying to figure out how the complex system develops from the bottom up. It's not anything of the things critics contend it is. It is not a rejection of observable data, it's a rejection of meta-theories and meta-induction and political economics as practiced post-Keynes.

Apparently both of you need to fix your damn quote tags.

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

Also, fix your quote tags. Praxeology, as employed by Austrian School Economics, is nothing more and nothing less than the behavioral science of exchange. How people make transactions, why they make transactions, and trying to figure out how the complex system develops from the bottom up. It's not anything of the things critics contend it is. It is not a rejection of observable data, it's a rejection of meta-theories and meta-induction and political economics as practiced post-Keynes.

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

So then how does praxeology make the leap from individual actions to group action?

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

It doesn't. That seems to be the issue you're having here. The Austrians don't try to understand the economy in terms of group behavior. It tries to understand it in terms of micro-economic transaction. And, amusingly, it relies on empirical evidence to reach its conclusions. Perhaps, likewise, the biggest misnomer is that Austrian economists are of a single position on things. They're rather a bit more diversified internally than the external critics give them credit for being. It's really hard to discredit a group that isn't exactly a homogeneous echo-chamber.

In a more specific sense, von Mises used praxeology as the argument against the top down, heterodox mainstream approach to economics. His critique was precisely the critique Gintis tries to appropriate in his "book review" diatribe: you can't assemble an accurate behavioral model of economics by looking at it from "big picture". Individual behavior, choices, tolerances, etc. is all too atomistic. Likewise, and this is one of von Mises big critiques of how we are taught to look at economics, micro-economics assumes certain rules which are TRUE in the sense of the Law of Supply and Demand, but only true when you let exchange occur absent all the external dislocations in the supply and demand curves present in contemporary markets.

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.

Hopwin:

Because, ultimately, the economy happens at the level of he micro-transaction. You've played World of Warcraft right? Think about the market for Frozen Orbs, Runed Orbs, Crusader Orbs, and Primordial Saronites on your server. And, since it's EASIER to see the "government" (that is Blizzard) manipulations of this particular market, consider what happened to "fix" the values of these items. The Frozen Orb Trader, in fact, has probably done more to "regulate" the values of the various orbs than Shadow's Edge and limited frost availability has to drive up the price of Primordial Saronite.

In the real world, that's how supply and demand works. More to the point, all these "leading" indicators of some "national" economy that doesn't exist don't really mean anything. Nationwide unemployment still falls mostly flat, because it attempts to homogenize data from literally 10s of 1000s of job markets across this country. And why IBM isn't hiring (we can take IBM as 1 actor in this case) means exactly dick for why Bob's Local Pizza Shack isn't hiring 3000 miles away.

As for what happens and "empirical data" in the sense critics like to use it, Austrians reject the notion that aggregate markets are actually pattern prone "entities" unto themselves. Indeed, if any "macro-economic" patterns emerge, it is precisely because the market regulating the "economy" and "indicators" is a small enough group that you can reasonable expect to predict that group's behavior. In the case of the "managed economy" model for policy and heterodox monetarist and Keynesian economics, the government is a MUCH more manageable group to understand than 330 million individual people. And the more external pressure and deviations caused by government on supply and demand curves, the easier it becomes to see where government pressures are affecting micro transactions. But, even with all that, 9 times out of 10, I still can't tell you why Bob bought a Four-Two Smart Car. "Historical" data won't tell you what is going to happen in the future. It tells you what happened. If you want to figure the why's of what happened, you have two competing foci to deal with: government externalities and actual micro-transaction realities. It's EASY to see what the government does to the markets. It's not easy to see how Bob is going to behave within the confines of government regulation and manipulation. And it is absolutely fallacious to say, as all the pundits are currently saying, that we're going to see 16-18 months of jobless recovery from "this recession", when the pundits are only looking at the homogenized aggregation of government tracked numbers that register nothing real about the economy in the first place.

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

This is where I get lost. What is the value of examining every transaction on a micro-economic scale. Isn't that essentially psychology?

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

It's behavioral science. It is, indeed, the holy grail of behavioral science and behavioral psychology. If you can understand why an individual actor makes a choice; and if enough individual actors follow the same reasoning; then you might be able to build a predictive model. However, we can do neither of those things, yet. Rather, we can understand what they did, we can know what they did, but we can't predict future action based on past behavior. Nor, for that matter, can we account for all the external pressures on the individual actor.

Since you haven't played WoW, do you remember the Bazaar in Everquest?

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

So praxeology is the string-theory of economics? There seem to be patterns but the specifics elude researchers so they are hunting for god-particles in the form of individual actions?

Not so much, they introduced it right when I was in the process of quitting. Is there a real-life example?

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