The Glade 4.0

To what end?

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Hopwin:

Lots of reasons.

1. The vast majority of economic activity still occurs at the level of individuals trading with individuals.
2. There's no real way to determine whether or not big box retailers are a net positive or net negative without researching the micro-economic systems they impact.

I mean, what answer do you want? All of your questions seem to be stemming from the idea that "it's not what all these people who claim to understand economics" do ...

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Well here is my disconnect, if praxeologists maintain that essentially macro-economics is a myth why bother to understand individual economics. If I am able to perfectly understand why Khross bought and subscribed to WoW what good does it do me if I say his decision making cannot be applied to economic decisions as a whole nor to future or past actions taken by Khross?

Am I going to micro?



I am just trying to figure out why the school exists, what their intent is, why are they studying transactions? What knowledge are they gaining and to what end?

Macroeconomics acknowledges in 101 that it is a generalization and simplification of market economies that tries to attempt to identify trends in economies based on historical data. It accedes its imperfections upfront.

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Because you're using two different definition of macro-economics without realizing it. In the sense that there IS a global economy, or a nation-state, or trade between individual actors in nations-states, or limitations on natural and intangible resources, there is a macro-economy. However, that system, that "Economy" (with a Big E) that Paul Krugman or Tyler Cowen are always discussing isn't the actual macro-economy. It's actually a very small, very local, very specific micro-economy made up of an intrinsically limited set of actors. Rather being the actual aggregation of all individual transactions in whatever arbitrary "grouping" you want (nation, state, West/East, etc.), it's actually the micro-economy of government and regulatory agencies (which includes private regulatory agencies like the NYSE and NASDAQ). More importantly, in the era of political economy, understanding how and why individuals do what they do is part of figuring out where coercion and non-internal pressures on placed on the system.Because a single purchase doesn't constitute significant data. And, to a degree, this is a problem with micro-economics as it's taught now, too. For the most part, people just don't have a good idea as to what constitutes meaningful data. I blame this mostly on Statistics as it's been taught for the last 25 years. A poll representative of the entire population of the U.S. with a SD of +/-5% only takes a random sample of ~1250 people. So, obviously, when it comes to everything else, people think that a sample of 1250 people is awesome for everything. Except, the homogenizing element of statistics assumes that differences between actors are so trivial that you account for all reasonable (that's a subjective word) behavioral permutations in a sample that small.That depends on the individual economist. Austrian Economics isn't a uniform group of researchers with similar goals. Indeed, it seems that your problem is the non-homogeneity of things in general. Since the "group" isn't a group in any sense you are using it. The similarity ends at using von Mises methods and models for researching economic behavior. Everything beyond that is superfluous and related to other issues that aren't really about economics in the sense you want to discuss them.And, yet, people make policy affecting the lives of billions of people on a system that attempts to identify trends in economies based on historical data at levels so far removed from HOW the individual personal interacts economically as to be useless. Hence, von Mises' critique of Keynes and political economy as taking the power of exchange away from the individual.

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That makes perfect sense.

I agree with that as well. But doesn't praxeology have the opposite problem of focusing on individual transactions at the expense of group patterns and behaviors? Like seeing the tree but not noticing its part of a forest?

Do any of them try to expand the methodology to create predictive models?

Agreed again. So is the main draw of praxeology the fact that it rejects Keynesian economic theory (and supports that rejection empirically)?

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Not so much as you might think. Let's say we use an individual store: WalMart_001 (this is some random WalMart not the first store). We can monitor the shopping behavior of the people who frequent that store. What we can't do, however, is control for the shoppers that visit from other communities or are one time shoppers, etc. So, we can say, with some confidence, that people in this particular store are unwilling to buy Product Y at Price Point A. But if we lower the Price Point and sales go up, then we can get a marker for behavioral change based on that change in price point. Which is basically, a simple demand curve analysis and basic microeconomics. Mainstream macro-economics wants to argue that because this worked in WalMart_001, it will work in all WalMarts with similar demographics. Except, again, this is homogenizing things you really can't. If it works in 999 out of 1000 stores, there's still no guarantee it will work in store 1000.Sometimes, but the predictions are based on the notion that political economy generally constitutes a specific micro-economy of its own. von Mises and Rothbard and Hayek all firmly rejected a lot of the predictive modeling on the grounds that it doesn't work. You can't control for all variables in the system, so it's bit like predicting the weather. Only, we know a lot less and can control for a less in complex economic systems because there are subjective behavioral components.Praxeology isn't limited to economics. It's basically von Mises's word for behavioral science: the how and why of people's individual actions and choices. It's not limited to trade. The main draw of Austrian Economics is that it rejects the idea you can predict the behavior of the individual from the bigger picture you get from all the government provided statistics. Perhaps the single most cohesive point of belief among all Austrians is that they reject the notion that arbitrary shifts in the supply/demand dynamic (from government agencies) increases economic freedom.

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Doesn't that throw the baby out with the bath water though? For example if you lower the price on good X but it only results in more people buying the product 999 out of 1000 times that doesn't make the premise illegimate right? (apologies again if I am missing something). I agree with the concept that we tend over-aggregate market results but to me that just means we need to break markets/shoppers down more finely.


Isn't that what regression attempts to resolve in the mathematical models?


What I am getting from that statement then is that the accepted economic model believes that governmental interference in markets results in improved market health?

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Well, see, that's the point. Breaking Markets and Shoppers down more finely means researching micro-economics and micro-economic transactions. The inductive process that creates macro-trends and super-trends from how a specific market or group of sufficiently similar shoppers behave are not necessarily or even remotely applicable to all other shoppers. Hence, the Austrian school focuses on legitimate micro-economic research (for the most part).Except it doesn't work in economics. The mathematical models that Paul Krugman uses has us entering a protracted growth period, while he himself consistently suggests that not enough government capital has been leveraged against private debt. Strictly speaking, the government already infused the economy with more money than mainstream models account for, hence all the hemming and hawing. The system itself, particularly when it starts introducing new anxieties and shifts into individual behavior, doesn't conform, except retroactively, to the models they're trying to use.You're being reductive here, but, yes, a basic contention of mainstream economics is that government interference and manipulation of the economy is a good thing. Indeed, it is precisely Keynes's notion of the "Managed Economy" that's driven most "macro-economic" trends for the last century.

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But to what end if you can't kick it up a level to draw conclusions? I think what I am struggling with in this concept is this:
Walmart001 sells X quantity of X good at X price. Does that mean that for that Walmart that price point can be said to be optimal or do Austrian economists insist on taking it down further to shopper001 at Walmart001 will buy X quantity of X good at X price?


If you pull personal biases out of the methodology would it still fail?

Guilty as charged I am being reductive because all of the texts I read in college maintained that governmental intervention should be sparse and limited in scope to reducing negative externalities.

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I think your frustration here is that you keep trying to attach Austrian to everything. Micro-economics is pretty much settled. There's all sorts of things we're still learning, but for the short, sweet, simple version of everything: the Law of Supply and Demand is true. The optimal price for Walmart001 may not even be Price Point X. X might just increase demand. As for understanding Shopper001, that's pretty awesome. We do that, too. There's the intangible Desire Principle (see Jacques Lacan) at work in this "equation" as well. It's complex.Yes, because the assumption that government spend contributes to GDP is false.Limiting negative externalities is a bad thing. Without negative externalities, markets can no longer naturally correct anomalies or solve legitimate problems with regards to goods and service.

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But my contribution to GDP excludes my taxes correct?


By definition markets cannot correct negative externalities. The effects are imposed upon parties not involved in the transaction.

Stupid example: Air pollution from a coal plant in Eastlake Ohio is drifting into Pennsylvania who is not purchasing the power.

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No, it does not.Markets can correct negative externalities. Indeed, they do all the time. California, the State, is a pretty good example. Since they don't want to deal with the pollution from coal fired electricity, they important their electricity.Yes, but the people in Pennsylvania have legal options, particularly civil courts, that can help exert pressure back on Eastlake. Or, as is more reasonably the case, Western Pennsylvania stops doing business with Eastlake.

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I think his point is that the courts exist outside of the market.

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville

Nothing exists outside of the market.

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I figured that would be your response and I understand exactly where you're coming from but I think that argument is a bit down the road for this thread - also I would state the introduction of force deliniates market activity from other.

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville

All forces that impact decisions and outcomes are part of the market yes.


I had the wrong definition in mind. GDP is Y = C + I + E + G

where
Y = GDP
C = Consumer Spending
I = Investment made by industry
E = Excess of Exports over Imports
G = Government Spending

If it is a measure then Government Spending should be included, real spending at least, not deficit spending.


Poor example, what you are saying is that California doesn't want to deal with the pollution so they export the pollution (by importing energy) to the people of New Mexico by way of the pollutants blowing in from Nevada, Arizona.



Western Pennyslvania has no business with Eastlake, it is a residential community with a power plant in North-Central Ohio. With that said taking them to court is government intervention. So I guess I should point out that government intervention in my economic theory exists in the form of regulation, not direct economic participation.

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Your definition of what constitutes trade is problematic here. When I say nothing exists outside of the market, I mean, quite literally, nothing exists outside of the market. The contemporary definition of commodity is insufficient to the task. Ironically, it would be the materialist (that is Marxist) definition of commodity that most applies. There are all sorts of markets in place, very economic in behavior and their systems, that do not rely on the exchange of goods, services, or currency in any sense tangible to the models used by heterodox mainstream economists.This is just a modified Keynesian model that includes the major Monetarist revision. It's not exactly accurate. GDP, in any real sense, is the real value measure of productivity in a nation during a year. The benchmarks you're using assume two things: 1) that consumers spend all "wealth" they acquire, 2) that investments realize wealth production immediately. We can still discount government spending, almost entirely, because the Government is still a deleterious actor. The Government destroys wealth. In fact, a Government MUST destroy wealth, or it will cause even bigger problems than it already does under the Managed Economy model.You can include government spending, because governments aren't wealth generating industries. The "money" they have, in any sense they engage in real spending, doesn't actually create anything of value. Even infrastructure produced through tax dollars fails to positively attribute to any given years GDP. Rather, government spending on infrastructure merely maintains the mechanisms by which productivity is already achieved.If you truly believe this argument is valid, then it's self negating. The environmental system isn't quite so discrete and the thermal heat islands in Colorado consequently decrease the amount of moisture available for rainfall in California. The market corrects for negative externalities all the time. These corrections, however, simply don't have the palpable immediacy of fines and wealth redistribution through force. More to the point, the Welfare Economists notion that negative externalities are unavoidable by anything third party is ridiculous.

To go back to your Eastlake example, the people of Pennsylvania trade with Eastlake all the time. Unless something's changed since the last time I did a serious audit of regional markets, Pennsylvania still exports significant amounts of regional foods and products into Ohio (mostly along Ethnically similar lines). Of course, the same is true of Ohio. This also applies to fresh produce and incidental travel and tourism (which isn't to be discounted at all). Nor, for that matter, does it deal with the converse problem of steel foundries (now mostly defunct) in Western Pennsylvania sending its own pollution the other way. And, even then, the market still takes measures to correct itself. For instance, Bethlehem Steel and American Steel moved their foundries out of Pennsylvania in the 60s and 70s; they were relocated to sparsely populated areas in the South (or off shore). Which, theoretically, just moved the pollution production. However, there are material benefits to everyone directly and tangentially involved in the situation.

A better example, in the sense you're using the term, would be the Deepwater Horizon Oil Spill. Obviously, Florida, Mississippi, Alabama, Texas and Louisiana, being the closest areas with shoreline to the spill site, are the most effected. It is, by all accounts, a negative externality because the original transaction is between BP and the U.S. Department of the Interior. However, we can't extricate individual demand for oil from the viability of the platform and its reason for existing. It's just not that simple. The various local economies "devastated" by the spill have market leverage against BP (they don't buy its petroleum products); they have legal market leverage (civil sanctions); etc. More to the point, they buy the products BP produces and employs them in their gain.

Consequently, the notion of negative externalities in any sense you're using them is hogwash. While various micro-economies may be discrete in any practical sense, almost none of them are in any real sense (oh the glories of globalization). Moreover, negative externalities rely more on the notion of social costs than they do material costs. This makes them a tool of political economy (indeed a currency in politics).Except it does, and the courts still don't technically constitute government intervention. It's binding arbitration in a sense. Western Pennsylvania has decided Eastlake is producing harm and seeks recompense. The government services (a system of arbitration) still require that Eastlake and Western Pennsylvania reach a civil agreement on the matter. The introduction of force, that is the government's compulsion to force both parties to honor whatever binding agreement is reached, stems from the fundamental realities of contract law.

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I thought I was agreeing with you on this. Are you saying we aren’t? I didn't define trade nor am I discussing trade. Anything that impacts decisions or outcomes is part of the "market".


1) & 2) The underlying assumptions conform to GAAP procedures though. The wealth is not realized as part of GDP until it is actually realized in capital gains or spending. This creates problems in that you cannot take a current pulse of the economy since the contributions you are seeing to GDP may be investments or earnings from 5 years ago.

What about employees of the government? Tangible things created/maintained such as tanks, trucks, highways, ships, airports, agriculture, mineral extraction, etc. Surely those contribute to economic growth.


Let's call infrastructure what it is, a subsidy for the private economy. Without roads and airports to facilitate commerce the economy would crash tomorrow. There are however other, more effective, mechanisms to facilitate this in the private sector (selling toll-roads to private investors).

Such as?


I don't understand what you are basing this on? Not every transaction has negative externalities, nor have I seen that assertion made anywhere. However, they do exist as illustrated with the example below.


The weather patterns move west-east so western Pennsylvania was polluting eastern Pennsylvania. Back to your other example though, if PA stopped exporting to Eastlake it would hurt PA not Eastlake. All of the goods produced in PA are readily available elsewhere (except Yuengling which is not available in Ohio at all).

Again I am saying that legal market leverage are governmental intervention and the only acceptable form.


Is health care a social cost now? (seriously asking since your definitions do not mesh with my own)


That would be governmental intervention, without the mechanism in place there would be no resolution to this problem in the market.

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Hopwin:

I'm not sure you fully understand the arguments you're making; inasmuch as it seems, at least to me, you are making arguments largely dependent on questionable schools of post-World War II economics without realizing it. So, I'll go back and ask a few questions?

What do you know of materialism?

What do you know of Welfare Economists?

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Madonna = material girl. People who seek to validate their existence through possessions.


I have never heard this term before this thread.

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Sadly, that definition is not applicable to this thread or discussion. The simplest way to explain Materialism, in the sense of Marx and Hegel, is that everything is a commodity. In contemporary economics, it's part of the notion that everything is in trade, can be traded, will be traded. And how those exchanges take place matter.
I see. That explains a lot of things, seeing as you're making arguments which define that particular school without realizing what you're discussing.

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That concept makes sense.

Expand please, that is cryptic to the max.

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