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bob.murphy.ancap
ParticipantDaniel,
You have been extremely courteous and so I want to reciprocate by saying I appreciate your comments, and I realize you are just trying to avoid repetition of what you take to be a common misconception among economists, even free-market ones.
However, having said all that, I think you came into this lecture “looking for a fight” and found what you wanted. 🙂
After reading your complaints about my treatment, I went back and listened to most of my lecture. Here’s what I found:
5:30 I say that the modern economist gets it wrong when he says what “Say’s Law” is.
6:25 I tell the listener we are going to let Say make his case in his own words, without putting a modern spin on it through the prism of other economists.
7:05 I show how Say is responding to the common misconceptions among merchants about the cause of recessions. This includes the worry that there is a scarcity of money.
9:00 I literally quote Say when he writes “You say you only want money; I say you want other commodities…”
16:00 – 18:00 I summarize Say’s overall point as being that *general* overproduction is impossible; no, that is what prosperity is.
** Thus far, I can’t see how you could possibly complain that I’m misinterpreting what Say’s point was. This is especially so, since I literally quote extensively from him and just paraphrase his words. I repeated many of the points you yourself made above, when you were trying to show what Say was saying, in contrast to (what you took to be) my erroneous interpretation. **
21:25 Now, at this point, I proceed to talk about how subsequent economists have interpreted Say.
By now, I think the only possible point of disagreement between us, is that you think I incorrectly said that John Stuart Mill said that Say would be unequivocally right in a barter economy, but not “mathematically foolproof” right in a monetary economy, at which point we would need more than accounting to show him right.
However, you also conceded that maybe I could find JS Mill saying exactly this point, and you weren’t going to make it count because Mill wrote all sorts of stuff.
I hope you can see why I don’t think it’s worth proceeding at this point, if you are admitting that even if I find JS Mill literally writing what I said his position was, that you aren’t going to accept that as valid.
(Again, I know tone of voice is hard to convey in print, so I’m saying the above in a perfectly pleasant tone. 🙂 )
ParticipantHere are some links on this general topic:
My general perspective is that the government is making health care artificially expensive, and so people “need” health insurance.
An important thing to realize is that the ACA situation was not stable. I.e. it’s not simply that libertarians are whining about “stealing from rich people” but hey, Jimmy Kimmel’s kid could get treated. That system was collapsing and the Republicans ironically did Obama a favor by tweaking it, so now the problems will be blamed on them.
ParticipantThe standard way to model risk aversion mathematically is to have DMU from additional amounts of money (or wealth). For example, if your utility from wealth is U = SQRT(W), then you would be risk averse. Note that you would get more utility from a certain $1000 in wealth, rather than a 50% chance of $500 and a 50% chance of $1500, if we assume you act to maximize the expectation of utility.
If you want to see more on this, the Wikipedia article is a good place to start:
https://en.wikipedia.org/wiki/Expected_utility_hypothesis#Risk_aversionParticipantHi Jon,
Sorry for the delay…have been traveling a lot.
Rothbard in his history of economic thought (Part II) refers to James Mill as a Lenin in search of his Marx; he picks both Bentham and Ricardo for this role. Starts at page 71 here: https://mises.org/sites/default/files/Austrian%20Perspective%20on%20the%20History%20of%20Economic%20Thought_Vol_2_2.pdf
3.1 James Mill, the radicals’ Lenin
James Mill (1771-1836) was surely one of the most fascinating figures in the
history of economic thought. And yet he is among the most neglected. Mill was
perhaps one of the first persons in modern times who might be considered a
true ‘cadre man’, someone who in the Leninist movement of the next century
would have been hailed as a ‘real Bolshevik’. Indeed, he was the Lenin of the
radicals, creating and forging philosophical radical theory and the entire philosophical radical movement. A brilliant and creative but an insistently Number 2
man, Mill began as a Lenin seeking his Marx. In fact, he simultaneously found
two ‘Marxes’, Jeremy Bentham and David Ricardo. He met both at about the
same time, at the age of 35, Bentham in 1808 and Ricardo around the same
date. Bentham became Mill’s philosophic Marx, from whom Mill acquired his
utilitarian philosophy and passed it on to Ricardo and to economics generally.
But it has been largely overlooked that Mill functioned creatively in his relationship
with Bentham, persuading the older man, formerly a Tory, that
Benthamite utilitarianism implied a political system of radical democracy.
David Ricardo (1772-1823) was an unsophisticated, young, but retired wealthy
stockbroker (actually bond dealer) with a keen interest in monetary matters; but
Mill perceived and developed Ricardo as his ‘Marx’ in economics.ParticipantHi Jon,
I’d like to review exactly what I said before answering you. If you can easily find them, can you give me the time stamps when I said this? But if it would be a pain, don’t worry about it, I can find them too.
(Either way, I’m about to go to Europe for a week; I can give you an answer when I get back.)
ParticipantDaniel,
I am very aware that there have been distortions of what “Say’s Law” means, in going from his actual view to the 20th century understanding. Probably the best example of this is Keynes’ version of it (which he then easily knocked down).
I am about to leave for a week in Europe, so in the meantime can you point to the specific time markers in my lecture where you think I said something that is false? I’m not being defensive, I just want to efficiently get to the bottom of our different interpretations.
ParticipantHi Jon,
OK yes, if I said “for any given utility function” then that is obviously not true. For example, if you got 0 utility regardless of how much wealth you had, then you can’t get an infinite amount of expected utility.
What I was trying to get at (and apparently fumbled the point) is that it doesn’t truly solve the original paradox to introduce risk aversion.
ParticipantThanks everyone for your interest and enthusiasm. You should be seeing an initial batch of new lectures (for Part II) in May, and then a flood in June.
Aaron hmm I hadn’t planned on doing a whole lecture devoted to perfect competition, but I think some of that will come out in the Socialist Calculation Debate discussion. I’ll make a note to make sure I say something about it.
January 1, 2017 at 11:06 pm in reply to: The Impact of Technology on Böhm-Bawerk's Interest Theories #21644ParticipantInteresting questions!
Regarding BB’s claim: It’s a little tricky to see his point, but the *reason* an hour of 2017 labor is more physically productive than an hour of (say) 2027 labor, is that the former can be invested in a 10-year process. That means it can be integrated into a 10-year process of capital accumulation. So e.g. if you want to get water from the stream into your house, a short process is to cup your hands. A much longer process is to go make a shovel, then dig a trench, then build a bucket, etc.
So, you are setting up a false dichotomy between BB’s view and Tom’s observation that labor is more physically productive in the future. The *reason* it’s more physically productive is that workers augment their labor with more capital equipment. It is the very process BB was describing.
But you *have* made me stop and think about maybe describing his position a little more carefully, because I totally get what you’re saying. In isolation, there’s an obvious sense in which a marginal labor hour today is less productive than one in 2027.
* * *
On your other point, yes that is standard stuff in this literature. In fact Schumpeter went so far as to argue that capital would accumulate until interest rates hit zero. Mises criticized him for saying this (in Human Action). These links show you what I mean:
https://www.google.com/#q=schumpeter+zero+interest+rateParticipantThanks for the kind words! I will definitely have Part II up by this summer, but I really don’t want to promise anything more definite than that. I love researching and creating these lectures too, but it’s pretty time consuming and it always ends up taking longer than I initially anticipate.
ParticipantHi John,
Sorry for the delayed response, I forgot to set up my profile here.
Let me first point you to some general resources (all free) that I think you are going to want to digest (over time), because they will give you a bigger picture. It sounds like you are misunderstanding a few critical concepts and that’s confusing you on particular applications.
This YouTube lecture explains banking. Make sure you watch the part where I go through a bank’s balance sheet.
In this book, my co-author and tried to explain fractional reserve banking as simply as possible, but without sacrificing rigor.
http://consultingbyrpm.com/uploads/HPBRW.pdf
Pay particular attention to chapters 5, 6, 7, 8, 12, 14, and 16. If you take the time to read those chapters (most are pretty short), you will probably have just about all of your questions answered.Then if you *really* want to step up your game, you can check out my study guide to Mises’ Theory of Money & Credit:
https://mises.org/library/study-guide-theory-money-and-credit
However, that’s much harder than the first two things I said.Now, for quick answers to your specific questions:
1) You need to distinguish between “loan banking” and “deposit banking.” We cover that thoroughly in *How Privatized Banking Really Works* (linked above). Short answer: Even with 100% reserves, a bank could still act as a credit intermediary. It could have time deposits, where the depositor knows he can’t touch his money for a certain period. Or, the bank could sell Certificates of Deposit (CDs) yielding a certain interest rate, in order to raise funds that it lends out to borrowers.
In contrast for true demand deposits (checking accounts), the bank would have to charge a fee to the owner, for the services the bank provides. This is because the bank can’t lend out that money.
3) No, a 100% reserve bank isn’t susceptible to a bank run.
4) Well, even during the Great Depression, when thousands of banks went down, it wasn’t merely “contagion” or “panic.” I point out in my book on the Great Depression
https://www.amazon.com/Politically-Incorrect-Guide-Depression-Guides/dp/1596980966/
…that the banks subject to runs typically were poorly run, and so the public had good reason to think their money was in jeopardy.Having said that, by its very nature fractional reserve banking makes a bank susceptible to a run.
5) Central banks don’t cause boom-bust cycles in the Austrian view, it’s more accurate to say the creation of unbacked credit does. However, in practice central banks exacerbate the problems by weakening the market’s normal defense/limitation on the issuance of new credit.
Try this video around 12:00, I soon start talking about banking:
6) I haven’t really thought about it, but note in this paper they use “standard” metrics and argue that empirically the Fed has failed:
http://object.cato.org/sites/cato.org/files/pubs/pdf/WorkingPaper-2.pdf7) Look, in your personal life, if someone writes you a personal check for $200, do you walk around with the check for a few months? Probably not. You probably deposit that into your bank asap.
By the same token, if you get paid by a paper note issued by a bank that you aren’t familiar with, you probably aren’t going to hold onto that for months. You are going to quickly deposit it with your bank (or go to a branch of the bank that issued the note and turn it into gold).
ParticipantGreat question Aaron, and good thoughts Daniel.
Well, if you pull up the PDF of Menger’s *Principles* book:
https://mises.org/sites/default/files/Principles%20of%20Economics_5.pdf
…you can search for “Turgot” and see that Menger cites him several places, but in particular if you look at Appendix D you can see him credit Turgot but then say that only later German writers really got closer to the truth.Here’s what Hulsman says:
https://mises.org/blog/carl-menger-founder-austrian-school
“The writings of Smith and Ricardo were overwhelmingly successful in the Anglo-Saxon countries, and had made great inroads on the European continent. The French Revolution had shifted the center of economic research and learning from the Continent to Britain. The Napoleonic era was particularly effective in suppressing the classical-liberal movement on the Continent. Public attention naturally shifted to Adam Smith, the patron saint of the still-vigorous British branch of the movement. Smith became the main authority on economic theory, displacing Quesnay, reducing Turgot to a footnote, and condemning Condillac to oblivion.”So you can see that in Guido’s view, people knew Turgot, but barely.
If you want to see for example what did Turgot do “wrong” (from our POV) here is Rothbard:
“While there is an unfortunate “real cost” flavor about Turgot’s treatment of cost, and he called the cost of a product its “fundamental value,” he comes down generally to a rudimentary version of the later “Austrian” view…”
Turgot then unfortunately goes off the subjective-value track by adding, unnecessarily, that the terms of exchange arrived at through this bargaining process will have “equal exchange value,” since otherwise the person cooler to the exchange “would force the other to come closer to his price by a better offer.” It is unclear here what Turgot means by saying that “each gives equal value to receive equal value”; there is perhaps an inchoate notion here that the price arrived at through bargaining will be halfway between the value scales of each.”
So I just grabbed two passages from Rothbard where he admits that Turgot didn’t quite have value theory correct (from our POV), and that’s of course from an essay titled “The Brilliance of Turgot” so you know Rothbard was doing his best to show the beauty of the analysis.
You are not going to find any idea in economics where it started with one person, period. There are always going to be earlier writers who were groping around it. Even so, the only time I have ever seen something definitive like this is when Schumpeter said of Menger that he was no one’s pupil.
I.e., the one person I’ve heard singled out as truly original, was Carl Menger and what he did in his 1871 book.
ParticipantThanks for the kind words, and thanks for your help guys in making this accessible for people.
ParticipantHi pacopasa,
I’m not exactly following what you are saying here. If you have a specific question can you try rephrasing?
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