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jmherbener
ParticipantIt can be done through lowering the reserve ratio of money against money substitutes. Various methods can be attempted, but the key is generate confidence among bank clientele that redemption can be maintained with lower reserve ratios.
Mises discusses this point in The Theory of Money and Credit in chapters 2-4 of Part 3.
https://mises.org/sites/default/files/The%20Theory%20of%20Money%20and%20Credit_3.pdf
Interbank lending is one method. Another is improving the liquidity of securities markets. Often this will be done by the lobbying the state to provide guarantees. The state can also provide suspension of redemption temporarily. Under the National Banking System, central reserve city bank notes were given legal privileges by the state making them more suitable as a reserve held by city banks and country banks against their notes. This provided some flexibility in the reserve as a source of bank note inflation.
Rothbard discusses some of these techniques in his History of Money and Banking in the U.S.
ParticipantHere is Steve Hanke’s paper on 20th century hyperinflations.
http://www.cato.org/sites/cato.org/files/pubs/pdf/workingpaper-8.pdf
Here are a few pieces analyzing the end of the German hyperinflation:
https://mises.org/library/90-years-ago-end-german-hyperinflation
https://mises.org/library/hyperinflation-germany-1914-1923
Take a look at Bresciani-Turroni’s book on the German Hyperinflation, chapter 9 on Monetary Reform. He shows that a new Rentenmark was introduced as a redemption claim for gold marks.
In Zimbabwe, foreign currencies have been used as the Zimbabwe dollar’s value vanished.
https://mises.org/library/multiple-currencies-and-gresham%E2%80%99s-law-zimbabwe
ParticipantThe article at the link is criticizing neoclassical, mathematical demonstrations of the efficiency of the market economy. Austrian make the same criticisms. And then go on to show that the defense of the efficiency of the market economy does not depend at all on neoclassical models.
The only equal ground for negotiating contracts required by the market economy is the integrity of everyone’s private property rights. On the reason for animosity toward the market, take a look at Mises’s book, The Anti-Capitalist Mentality.
https://mises.org/sites/default/files/The%20Anti-Capitalistic%20Mentality_3.pdf
And Hayek’s article, “The Non-Sequitur of the Dependence Effect.”
http://www.mises.ch/library/Hayek_SEJ_Non_Sequitur_of_Dependence_Effect.pdf
It turns out that Sweden is not an exception to the laws of economics.
https://mises.org/search/site/sweden/library/mises-daily-147
ParticipantTechnological innovation requires capital investment which entrepreneurs determine by economic calculation. Entrepreneurs consider all the different lines of investment in all the stages of production and invest in that set of lines which they anticipate will prove to be the most profitable. But the profitability of each line of investment can be traced to its contribution to satisfying consumer demands.
So, the scenario would be: (1) Because of rising consumer demand for gasoline (and government restrictions on production and supply) the price of gasoline rises. The high price of gasoline makes investment in new technologies for producing oil more profitable. Entrepreneurs investing in fracking technology and then the drilling equipment and land rights, etc. They expand oil production capacity to the point at which they anticipate that the lower than otherwise price of oil and the higher than otherwise prices of drilling equipment and land rights, etc. will make further investment in oil production capacity unprofitable. The reason oil prices fall with increased supply is that entrepreneurs know that gasoline prices will fall with increased production and supply of gasoline from the increase production and supply of oil.
The costs of oil production by fracking are higher not lower than with other methods already in use.
http://www.businessinsider.com/saudi-arabia-can-hold-out-2015-1
What justifies investment in higher cost techniques of oil production is the higher price of gasoline. The innovations in fracking techniques made extraction of shale oil cheaper than with the techniques previously used, but even with the new techniques fracking costs are higher than methods already in use. That’s why they haven’t been adopted until now when the higher price of oil justifies their use.
http://www.marketplace.org/topics/sustainability/oil-man-who-figured-out-fracking
Even if for some reason the price of an input fell in the market, lowering costs of production of output, the new, lower price of the input depends on entrepreneurial demand which depends, in turn, on consumer demand for the output. For example, let’s say that demand for cigars vanishes causing tobacco prices to fall. The new, lower price of tobacco is still determined by entrepreneurial demand for tobacco, which is determined by, the now lower, consumer demand for cigars, cigarettes, and other consumer goods using tobacco as an input.
ParticipantThe turning points of the business cycle are notoriously difficult to anticipate. One might consult Mark Thornton’s skyscraper index:
ParticipantA person who thinks government-run schools are a model for colleges to emulate might be hard for you to convince along merely economic lines of argument.
You might, however, try a reductio ad absurdum. If it’s a good idea for the government to set the price of a college education at zero for students and then raise the funds to pay for the resources used to provide such education by taxing other people, then why not do the same thing for automobile production or tablet computers. If fact, if it’s such a great idea, then why not have the government provide everything for free by taxing everyone.
Links to several articles on public education can be found here:
ParticipantParticipantWhat needs to be kept in mind in tracing cause and effects throughout the economy is that the economy is a single system of production under the division of labor integrated by the structure of prices. The goal of the system of production is to economize the use of people’s resources in the satisfaction of their consumptive ends. When people’s consumptive demands change it sets in motion a reconfiguration of the entire structure of prices and production throughout the economy. Without government intervention, the process of the market generates the most efficient use of resources and build up of capital capacity possible.
Two factors have been at work in fuels.
First, the natural process of economic development has been at work. Worldwide consumer demand for gasoline has been increasing driving up gas prices. This cause alone would increases the profitability of gasoline production leading entrepreneurs to increase their demands for oil and other inputs which, in turn, would drive up oil prices and the prices of other inputs, which in turn would increase the profitability of producing more oil. If profitable enough, other entrepreneurs would invest in technological innovation to increase oil production and use of the new technologies would increase production and the greater supply of oil lowers its price which moderates the rise in price of gasoline, given the initial rise in demand for gasoline.
Second, government intervention has been at work. Governments have increased taxes on gasoline depriving entrepreneurs of the funds to expand production. They have also erected legal restrictions of further conventional oil production. Governments have also destroyed the capacity for conventional oil production in their wars over the last twenty years. The resulting artificially high price of oil has made investment in alternative technologies to circumvent convention production even more profitable. Entrepreneurs have responded with the fracking boom, vastly increasing oil production and lowering its price.
The reason gasoline prices have fallen is not because they are determined by oil prices, but because speculators anticipate profit from moving gasoline supplies from the future to the present in the wake of the greater future production of gasoline they anticipate. The increase supply moves along a given demand curve to clear the market at a lower price for gasoline. The (now lower) price of oil and other (now lower) input prices are still determined by that (now lower) price of gasoline.
ParticipantYou might try metaphors,
Mises referred to monetary inflation as the miracle of turning stones into bread.
https://mises.org/library/stones-bread-keynesian-miracle
Mises also used the metaphor of the master builder to explain why the build up of the economy’s capital structure set in motion by monetary inflation and credit expansion during the boom must end in liquidation of the malinvestments made in the boom and reallocation of resources back to a realizable capital structure during the bust.
https://mises.org/library/malinvestment-not-overinvestment-causes-booms
ParticipantPeople strive to economize their resources. Since the division of labor is more productive than self-sufficiency, everyone produces to satisfy the consumptive ends of others and has his consumptive ends met by the production of others. Voluntary (monetary) exchange among person is necessary to economize the use of resources for society-at-large. Within the market economy each person earns income by producing to satisfy the preferences of others and disburses his income to have his preferences satisfied by the production of others. As with any other disbursement of income, a person saves to satisfy his preferences, specifically, his time preferences. Savers lend to investors who borrow the saving to make economizing investments in producer goods. Saving, therefore, is part of the economizing character of the market economy.
Unlike saving, Fed money printing is not endogenous to the market economy. Instead, it is a condition produced externally to the economizing character of the market and impose upon it. Monetary inflation and credit creation, therefore, inhibit the economizing of saving-investing. For this reason, people will struggle against them to re-establish their time preferences both in the rate of interest and in the proportion of income they desire to save and invest. The details of this process are spelled out in Austrian Business Cycle Theory.
ParticipantYou are correct to point out that entrepreneurs cannot pay wages in excess of a worker’s marginal revenue product and therefore, legally mandated benefits to workers require entrepreneurs to lower non-legally mandated benefits. Workers are actually made worse-off in the bargain since they cannot obtain their preferred compensation package from entrepreneurs. Moreover, in an unhampered market, if an entrepreneur hires workers under difficult working conditions, say coal mining or standing in security lines, then he may be required to skew his total compensation package toward wages instead of other benefits in his effort to satisfy the preferences of his workers (if workers have a preference for non-difficult working conditions).
You might suggest to your friends to read William Hutt’s book on collective bargaining.
https://mises.org/sites/default/files/The%20Theory%20of%20Collective%20Bargaining_2.pdf
ParticipantHere are a few Financial Times stories criticizing Piketty’s data:
http://www.ft.com/intl/cms/s/2/e1f343ca-e281-11e3-89fd-00144feabdc0.html#axzz3LLtPo0lu
http://www.ft.com/intl/cms/s/0/c9ce1a54-e281-11e3-89fd-00144feabdc0.html#axzz3LLtPo0lu
And Alan Reynolds in the WSJ:
http://www.wsj.com/articles/alan-reynolds-why-pikettys-wealth-data-are-worthless-1404945590
ParticipantIn a libertarian society, private property rights are given the sanction of law. As a crime against private property rights, theft can occur as either the use or threat of violence or as fraud. Fraud occurs when a person substitutes something in the place of what he has agreed to exchange with another person. A counterfeit good is used to commit fraud. So, counterfeiting is illegal because it is implicit theft. Fraud, and thus implicit theft, would also occur if a person produced a counterfeit title of ownership to property and then traded it to someone else as genuine.
As you say, in a libertarian society people will choose what good they prefer as money. Whatever they choose, however, the production of that good will be regulated by profit, which in turn is generated by voluntary exchange of private property, just like that of any other good. Furthermore, money can be counterfeited in the same manner as any other good., The classic case is debasement of precious-metal coins passed off as full-valued. People could also choose to use titles of ownership to money as a medium of exchange. Bank notes or checking account deposits, for example. If these money substitutes are legally titles of ownership to money itself, then, they could be counterfeited by producing bank notes or checking account balances for which the issuer holds no corresponding money (i.e., fiduciary media).
In a libertarian society, entrepreneurs are free to try issuing fiat money in competition with other entrepreneurs producing commodity money and short-term loans as money substitutes in competition with other entrepreneurs producing money certificates. Success in the first case seems hopeless and in the second case extremely problematic. But those are questions of economic analysis and not private property rights.
To the extent that fiat money and fiduciary media are sustained in the market by legal privileges (i.e., legalized aggression against private property rights), then their issue entails unjust income and wealth redistribution. The legal privileges are the source of the theft.
ParticipantFor a short history of the Austrian school, take a look at Ludwig von Mises’s monograph:
Here is a short monograph on capitalism by Mises:
http://mises.org/library/capitalism
For a more extensive treatment of capitalism, take a look at Mises’s book Human Action, chapter 15:
ParticipantThere is a large literature in economics on so-called “hold up” problems. Here are a few pieces by Peter Klein:
https://mises.org/library/williamson-and-austrians
http://web.missouri.edu/~kleinp/papers/KI140-17-433-464–KLEIN-x.pdf
http://www.cec.zju.edu.cn/~yao/uploadfile/papers/p007.pdf
The basic point is that contracts can be tailored to mitigate hold-ups. Both employers and employees can use contractual terms to protect themselves against exploitation.
If your disagreement is not about merely factual aspects of the market, but ethical claims then there is an important distinction to make between different kinds of ethical claims: those concerning private property rights and those concerning the exercise of private property rights.
As long as the employer and employee abide by the terms of their contract, then the ethical claims of private property “rights” are upheld. The ethical claims about the “exercise” of a person’s rights are a further issue. To address that issue, a person must have a developed theory of ethics. For example, private property rights criminalize aggression against the legitimate property of another, but do not criminalize failure to “love one’s neighbor as himself.” Perhaps those whom you cannot convince have a different system of what ethical behavior is than you do. In particular, perhaps they hold that charging for insider information, so to speak, at a level that brings financial hardship to another is immoral although not a criminal violation of the other person’s private property rights.
Take a look at Murray Rothbard on this issue:
http://mises.org/sites/default/files/For%20a%20New%20Liberty%20The%20Libertarian%20Manifesto_3.pdf
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