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jmherbener
ParticipantYes, we’re using the term differently. Might I suggest that you take a look at David Gordon’s book on economics, Introduction to Economic Reasoning. Dr. Gordon is philosopher who understands and appreciates Austrian economics.
http://library.mises.org/books/David%20Gordon/An%20Introduction%20to%20Economic%20Reasoning.pdf
ParticipantAustrians write little about international trade as a separate topic because we claim that economic laws are universal. Comparative advantage, for example, applies to people within the state Pennsylvania as well as between people in Pennsylvania and Ohio or Pennsylvania and China. And capital investment tends to be allocated to the highest-valued projects wherever they may be located in the world. To investigate such issues, any standard treatise will suffice, like Human Action or Man, Economy, and State.
International trade, from our perspective, mainly addresses various arrangements of government intervention among different states. One state erects tariff barriers to imports from the territory of another state, for example. Or one state inflates its money stock relative to the money stock of another state. Such analyses tend to appear in articles on Protectionism or International Monetary Systems.
David Osterfeld is good on development economics, an area in economics that addresses some of the issues you raise. You might consult his book, Prosperity versus Planning. Here’s a sample of his work:
ParticipantFor an overview of the claims about China manipulating its currency, take a look at China’s Currency: An Analysis of the Economic Issues by Wayne Morrison and Mark Labonte. It’s available at google books. I don’t endorse their analysis, but they give a decent account of the claims and some historical background.
The basic claim is that the Chinese government has undervalued the renminbi (RMB) for the purpose of making Chinese exports cheaper for foreigners. The Chinese government accomplishes this, allegedly, by supplying RMB against dollars which suppresses the price of RMB in dollars. In other words, a dollar buys more RMB than before. The Chinese government then uses the dollars it acquires when it sells RMB to buy U.S. Treasuries which artificially increases the merchandise trade surplus China has with the U.S. (or, equivalently increases the U.S. merchandise trade deficit with China). American manufacturers complain that this puts their production at a competitive disadvantage compared to Chinese production.
ParticipantMises took the position that while it might be possible, in principle, to give a purely material explanation for human choice (and therefore, human action), no one has been able to do so up to now. And until someone gives such an explanation, we must treat human choice as not purely caused by material factors.
Take a look at the relevant sections of Human Action:
http://library.mises.org/books/Ludwig%20von%20Mises/Human%20Action.pdf
Rothbard took the stronger position that humans do have free will and argued against determinism.
Take a look at The Mantle of Science:
http://mises.org/rothbard/mantle.asp
Either position provides scope for human action and economics.
ParticipantWages are determined by the productivity of labor. A worker is paid the Discounted Marginal Revenue Product of his labor, i.e., the present value of the extra revenue his labor adds to a production process. If wages are lower in Vietnam than America it’s because labor productivity is lower there than in America.
If America established free trade with Vietnam, then American capitalist-entrepreneurs would invest in Vietnam . By raising the productivity of Vietnamese labor, the capital investment would move Vietnam wages up while American wages would not change (assuming no disinvestment in America). The equalization of wages would take time, so in transition American wages would remain higher than Vietnamese wages. The greater production of goods made possible by the capital investment implies that standards of living rise all around.
ParticipantThe free market exists in every voluntary exchange of private property. It has been, is now, and will continue to be the source of the world’s prosperity.
There are several Economic Freedom Indexes that have established a positive correlation between the extent of economic freedom and measures of prosperity across scores of countries.
http://www.heritage.org/index/default
There have been economies nearly free of state activity: some of the American colonies, some areas of medieval Europe, and so on.
August 3, 2012 at 4:46 pm in reply to: How does the Fed lower the standard of living of the Chinese? #16988ParticipantThe Fed makes a liquid market for Treasury debt by purchasing them from banks with the issue of dollars that banks then hold as reserves. The liquid market gives greater incentive to others, including foreigners, to buy and hold Treasury debt as an asset.
With the dollars earned from the sale of goods and assets they have produced, the Chinese people could either buy American goods or American assets, including Treasuries. If they buy assets, they are expressing their lower time preferences to earn the rate of return on their American investments. Technically, this lowers their standard of living, i.e., the consumer goods they enjoy, in the present, which they are willing to do to get higher standards of living in the future. Americans express their higher time preferences by consuming more goods in the present than if the Chinese were demanding present goods more heavily.
What’s been more common than the Chinese people buying Treasuries is that the Chinese government taxes the Chinese people to buy U.S. Treasuries. This lowers standards of living for the Chinese people in the present and in the future. The greater command the U.S. government has over resources then reduces the standard of living of Americans in the present (fewer consumer goods) and in the future (fewer investments in the capital structure).
I don’t think Americans get to consume without producing. It is true that whoever has the power to issue legal tender, fiat paper money can consume without producing. So the U.S. government can consume without producing by issuing fiat money. But Americans are not the beneficiary of this wealth transfer but its victims, along with foreigners.
ParticipantAs I understand it, the axiom that unreceived act is unlimited refers to the claim that one aspect of what it means for God to be infinite is that he exists as pure actuality lacking any potentiality. Therefore, He needs nothing to actualize His potential.
I’ve never heard the phrase “unlimited character of the free market” before so I’m unsure what it means. By it clearly cannot mean that the free market is pure actuality since the free market is merely part of the nexus of voluntary interactions among human beings.
Economists sometimes refer to the universal character of economic laws, but this refers to the conceptual meaning of human action and not actions themselves.
ParticipantPeople trade when there is a difference in value. Whether a consumer good, producer good, or money a difference in the value of something will result in trade away from lower-valued and toward higher-valued uses. As the good is arbitraged in this way its price will tend to become uniform.
If bread prices are lower in the countryside and higher in the city, then sellers will shift supply to the city and buyers will shift demand to the countryside. The price will fall in the city and rise in the countryside until no additional advantage exists in such arbitrage.
If wages are lower in one country and higher in another, then sellers of labor (workers) will move supply from the former to the later and buyers of labor (capitalist-entrepreneurs) will move demand from the later to the former. Wages will come together until no advantage exits in further arbitrage. Everyone benefits from the greater production of consumer goods made possible by the further extension of the division of labor. The greater production of goods will push their prices down generally, given no change in the money relation.
ParticipantThere are two issues involved. The first is the private property status of money substitutes. It’s clear how money certificates are consistent with private property. It’s not clear how fiduciary media are so. People hold (i.e., own) fiduciary media as part of a ready stock of medium of exchange and yet, simultaneously the un-backed portion is lent to other people to use as a medium of exchange. Rothbard thought fractional reserve banking, as it has been practiced, was fraudulent. Take a look at the following article to see the back and forth of the debate with free bankers.
http://mises.org/journals/qjae/pdf/qjae1_1_2.pdf
The second issue is what would happen on the market if all the legal privileges for fractional reserve banking were eliminated. Then demand deposits would be highly liquid assets and if banks wanted to stimulate customers to hold such balances by ensuring that the deposits serve as a medium of exchange, they would need to hold very high, if not 100%, reserves. Otherwise non-customers of the bank of issue would not accept the deposits as a medium of exchange. As you note, this view is taken by Rothbard. It was also the view of Mises and Salerno. Take a look at the following piece by Salerno.
ParticipantCantillon effects are disproportionate and non-synchronous changes in particular prices that are produced by a change in the money relation. When the money stock increases, the prices of some goods rise to a greater degree and the prices of other goods rise to a lesser degree and the prices of some goods rise sooner and the prices of other goods rise later. Because of Cantillon effects, increases in the money stock change the pattern of production in the economy.
These effects are named after Richard Cantillon who described them in his treatise, An Essay on the Nature of Commerce in General.
http://library.mises.org/books/Richard%20Cantillon/An%20Essay%20on%20Economic%20Theory.pdf
ParticipantConcerning your first question, take a look at Part 1 in Murray Rothbard’s A History of Money and Banking in the United States.
ParticipantThe Great Depression came as a result of the disruption of the world economy and destruction of the international gold standard in the First World War. For all its faults, the international gold standard did impose some fiscal and monetary discipline on countries. Governments that inflated their currencies to help fund their expenditures lost gold reserves to the more prudent countries and suffered booms and busts in the process of inflating the money stock and then deflating as they lost gold.
The period of suspension of the gold standard during and after the war gave states a taste of the power they could wield unfettered by the old monetary and fiscal constraints. But, they did concede that an international monetary system was conducive to, if not essential to, the restoration of international trade and the world economy. They constructed the gold exchange standard, established in the mid-1920s, to try to restore international trade while allowing exercise of their new powers of monetary inflation. Far from penalizing excessive monetary inflation, the gold exchange standard penalized lack of harmonization of monetary inflation among different governments. That is, its purpose was to foster a coordinated monetary inflation among the member countries. As they all inflated together in the latter half of the 1920s, they all went through the boom (and subsequent bust) together. Even so, the inflation was disparate in different countries and one by one states decided to abandon the gold exchange standard too.
The classic work to read on the international aspects of the Great Depression is Lionel Robbins, The Great Depression.
http://library.mises.org/books/Lionel%20Robbins/The%20Great%20Depression.pdf
ParticipantOne approach you might take is to read mainstream works. You could start with a principles level book like Mankiw’s, Principles of Economics. But introductory books tend to gloss over the core of mainstream economics, which is modeling. To get a treatment of that, you have to move to intermediate level works. You might try Snowden and Vane’s book, Modern Macroeconomics.
Another approach is to read critiques of the mainstream paradigm. Take a look at Murray Rothbard’s articles:
http://mises.org/rothbard/mantle.asp
Ludwig von Mises’s book, Human Action, has sections that critique the mainstream approach.
http://library.mises.org/books/Ludwig%20von%20Mises/Human%20Action.pdf
ParticipantAs I understand it, critical minimum effort theory is a model that has built into to its operation the result that population growth will outweigh capital accumulation per capita unless a certain threshold is met, which underdeveloped countries cannot normally meet.
I’m afraid that CMET, like Malthus’s theory, will prove inaccurate in predicting real economies. There are no constants in the relationships among variables in human action.
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