Austrian School vs. itulip / FIRE

[FRED]

Re: Austrian School vs. itulip / FIRE

EJ writes in:

iTulip is in the forecasting business, not the pontification business, so we cannot afford an ideological orientation. We have to focus on ideas that work and discard those ideas that we learn over the years to be of little or no utility in the fulfillment of our mission.

iTulip draws from all schools of economic thought without prejudice, from Austrian, Keynesian, Georgian, yes even Marxist, and others.

Each school, like the individuals who launched and developed these myriad ways of looking economics, has strengths and weaknesses. None is perfect.

The concept of the FIRE Economy is powerful because it is predictive. In a keynote speech before the Building Owners and Managers Association International in Orlando last week, I credited Michael Hudson for the idea. Given the audience, it's not surprising that no one there appeared to know who he is.

Imagine lecturing a group of CRE industry leaders about the need to raise taxes on property and lower taxes on production, for the good of the nation and the world? But that's just what I did.

That's what iTulip is about. We see the world as bigger than ourselves and credit our members with the ability to do likewise, but we are at the same time rooted in passionate adherence to the principle of individual freedom and responsibility.

It's a tough row to hoe.

[BuckarooBanzai]

Re: Austrian School vs. itulip / FIRE

Imagine lecturing a group of CRE industry leaders about the need to raise taxes on property and lower taxes on production, for the good of the nation and the world? But that's just what I did.

That's what iTulip is about. We see the world as bigger than ourselves and credit our members with the ability to do likewise, but we are at the same time rooted in passionate adherence to the principle of individual freedom and responsibility.

Unfortunately there is a profound inconsistency between these two paragraphs. One cannot be "passionately adherent" to individual freedom while supporting any form of property tax. Freedom is supported by the three-legged stool of Life, Liberty, and Property. Property tax totally undermines private property, rendering the concept without meaning. Undermine property and you undermine Freedom.

This is not ideological, it is axiomatic.

[c1ue]

Re: Austrian School vs. itulip / FIRE

Property tax totally undermines private property, rendering the concept without meaning. Undermine property and you undermine Freedom.

You continue to ignore the work of Hudson and many others.

Government must have income in order to provide services to citizens.

These services aren't just overt activities like law enforcement, national defense, or welfare, but also include roads, schools, waste disposal, water supplies, and so forth.

The notion that removing property taxes somehow prevents the bad parts of government while preserving the good parts is ridiculous.

Secondly it has been conclusively shown that low property taxes only help the banksters and rentiers.

Even should you own a property free and clear without property taxes, ultimately your ownership can and will still be abrogated by other means, such as destruction of the community around you (see Detroit), privatization of previously public services (toll roads/bridges), privatization of law enforcement (see Eastern European corruption), and so forth.

[Serge_Tomiko]

Re: Austrian School vs. itulip / FIRE

Without the enlightenment we wouldn't have got to which point exactly? I don't remember reading anywhere about the Dark Ages being a great period to hang out in.

You obviously haven't been reading a lot of books then, particularly the ones that describe the few hundred years between the Dark Ages and the Enlightenment. Obviously, the point of my post was "we never would have had this madness of assuming materialism and hedonism are the dominant inclinations of man". Sure, if you think hedonism is the dominant value, then of course the Dark Ages were sort of a drag. But, myself and a few smart guys out there argue that the trivial pleasure you enjoy today will destroy civilization. Followers of the enlightenment made a deal with the devil, and now the devil is coming to collect what he is due.

[Ghent12]

Re: Austrian School vs. itulip / FIRE

You continue to ignore the work of Hudson and many others.

Government must have income in order to provide services to citizens.

These services aren't just overt activities like law enforcement, national defense, or welfare, but also include roads, schools, waste disposal, water supplies, and so forth.

The notion that removing property taxes somehow prevents the bad parts of government while preserving the good parts is ridiculous.

Secondly it has been conclusively shown that low property taxes only help the banksters and rentiers.

Even should you own a property free and clear without property taxes, ultimately your ownership can and will still be abrogated by other means, such as destruction of the community around you (see Detroit), privatization of previously public services (toll roads/bridges), privatization of law enforcement (see Eastern European corruption), and so forth.

The government used to derive all revenue from customs and postage--essentially use taxes. In fact, property taxes didn't exist in the United States until sometime in the 20th Century, according to the sources I've looked at.

Government needs income to provide services, sure. But the government receives too much tax income right now while providing services that are not even commensurate to its tax income, let alone its entire "budget." You of all people should understand the problem with government extracting property taxes and then subsidizing wind/ethanol/solar, not to mention the subsidies to the myriad of other state-sponsored monopolies or oligopolies.

[c1ue]

Re: Austrian School vs. itulip / FIRE

The government used to derive all revenue from customs and postage--essentially use taxes. In fact, property taxes didn't exist in the United States until sometime in the 20th Century, according to the sources I've looked at.

Quite correct. However, it should be noted that the US federal government offered no services regarding roads, utilities, regulation, or any number of other modern services in the 1700s and 1800s.

In a largely agrarian society, with defense (for federal) and local government (state governments), a purely excise based taxation system was more or less sufficient.

Or put in other terms: if you lived in a log cabin you built yourself; drove your produce to/from filthy towns on cow trails, and traded wheat and whisky for cloth - indeed you had no need to pay significant taxes because you received little or no benefit.

The same isn't true today.

Government needs income to provide services, sure. But the government receives too much tax income right now while providing services that are not even commensurate to its tax income, let alone its entire "budget." You of all people should understand the problem with government extracting property taxes and then subsidizing wind/ethanol/solar, not to mention the subsidies to the myriad of other state-sponsored monopolies or oligopolies.

The return to a largely property tax based system doesn't itself speak to the level of taxes. The actual overall impact may be greater or lesser than what is seen today.

However, the objective in focusing on property taxes is to spread out the tax burden more equitably.

The reality is today the rentiers pay far less taxes than they have for nearly a century.

The capital gains vs. income vs. property tax is an excellent example of this diverging trend.

Low property taxes also affect the poor and middle class far more than the wealthy due to its impact on asset prices.

Someone living in a fully owned $25 million house isn't impacted by mortgage fueled property price increases because there are few mortgages of any type at that level.

On the other hand, everyone else has been squeezed by industry sponsored mortgage subsidies and other government policies which have caused net residential property value to go from 80% of total US GDP in the '70s, to net residential property value having become 150% larger than US GDP today even despite a recent 25% drop.

That 2x overperformance? All FIRE.

[Sharky]

Re: Austrian School vs. itulip / FIRE

Unfortunately there is a profound inconsistency between these two paragraphs. One cannot be "passionately adherent" to individual freedom while supporting any form of property tax. Freedom is supported by the three-legged stool of Life, Liberty, and Property. Property tax totally undermines private property, rendering the concept without meaning. Undermine property and you undermine Freedom.

This is not ideological, it is axiomatic.

Thank you. I'm glad someone else here understands this important point.

You can't protect individual rights in a system that requires them to be violated.

[llanlad2]

Re: Austrian School vs. itulip / FIRE

You obviously haven't been reading a lot of books then, particularly the ones that describe the few hundred years between the Dark Ages and the Enlightenment.

You're quite right I obviously haven't been reading the modern day, poliitically convenient, revisionist view of the period which you speak of where the majority of the population wasn't getting wiped out by plagues, caught up in religious wars, subsistence farming, or just dying before the age of 40. But please enlighten me.

Obviously, the point of my post was "we never would have had this madness of assuming materialism and hedonism are the dominant inclinations of man".

Obviously if I'd read your text backwards I would have realised that the this in "we never would have had this madness of assuming materialism and hedonism are the dominant inclinations of man" actually referred forwards to something you hadn't stated yet and not backwards as I'd so stupidly assumed.

But, myself and a few smart guys out there argue that the trivial pleasure you enjoy today will destroy civilization. Followers of the enlightenment made a deal with the devil, and now the devil is coming to collect what he is due.

.

I say and some smart guy before me would agree that "you shouldn't blame others for your sins."
I am not in the least bit surprised that you and a few smart ass guys are arguing that the future is bad and we will deserve what's coming to us. This is what all political elites will be trumpeting if/when the SHTF in order to maintain order. It's exactly what Islamic fundamentalists in many countries espouse to their own people now to explain the predicament of the majority of their own people. "You're poor because of your misguided, materialstic ways, so join us"

[Sharky]

Re: Austrian School vs. itulip / FIRE

You obviously haven't been reading a lot of books then, particularly the ones that describe the few hundred years between the Dark Ages and the Enlightenment. Obviously, the point of my post was "we never would have had this madness of assuming materialism and hedonism are the dominant inclinations of man". Sure, if you think hedonism is the dominant value, then of course the Dark Ages were sort of a drag. But, myself and a few smart guys out there argue that the trivial pleasure you enjoy today will destroy civilization. Followers of the enlightenment made a deal with the devil, and now the devil is coming to collect what he is due.

Materialism and hedonism are not outcomes of the Enlightenment. In fact, they are outcomes of attempts to resist the Enlightenment, which was a period of reason. Materialism and hedonism are driven by emotion, not reason.

In a very real sense, the Enlightenment was responsible for creating civilization. It is the enemies of the Enlightenment and everything it represents who wish to destroy civilization (and one can argue that they have been quite successful, considering the 100M+ who they murdered in the 20th century).

Many anti-capitalist writers have attempted to distort the truth and portray life in pre-capitalist times as being much better than it actually was. In fact, utter destitution was rampant in Europe in the period before the Enlightenment. Roughly half of the people in 17th century England were unable to afford even a daily crust of bread. That time through the early 19th century was a period of guilds, enslavement, the corn laws, deep alcohol abuse and truly oppressive taxes. The people who view those times as superior to today are the enemies of the mind and of life itself -- they include the followers (direct or indirect) of philosophers such as Kant, Hegel, and their disciples.

[Mashuri]

Re: Austrian School vs. itulip / FIRE

I have a question for those (c1ue in particular) who presume to understand what the Austrian theory of economics is, have any of you actually read "Human Action" by Ludwig von Mises??

Sharky, you can get this book in many forms for free:

http://mises.org/resources/3250

Here is a great study guide by Robert Murphy that acts as a "Cliff's Notes" for the book:

http://mises.org/books/humanactionstudy.pdf

It's also available in ePub if you search a little.

Here's Rothbard explaining the fundamental difference between the Austrian method (Praxeology), which relies on deductive logic, and current mainstream economics which rely on positivism, trying to emulate the natural sciences:

http://www.lewrockwell.com/rothbard/rothbard38.html

FYI, the predominate Austrian view on currency is not a government controlled gold standard, but a free market on currency with no government involvement whatsoever. Most believe that gold would "win out" but that's for the market to decide.

[Sharky]

Re: Austrian School vs. itulip / FIRE

@Mashuri -- thanks for the links.

I mentioned the Praxeology aspect of the Austrian school earlier in this thread. Mises clearly either did not understand the field of ethics and morality, or consciously decided to side-step it with pseudo-science. That he claims to rely on deduction, while ignoring induction and pulling seemingly random (and therefore easily refuted) facts from thin air as the foundation for his system is further proof of its rationalistic foundations -- a definite red flag when it comes to economic theory.

Of course, positivism is just as bad (starting with its rejection of induction), if not worse, but that's a topic for another thread.

[Mashuri]

Re: Austrian School vs. itulip / FIRE

@Mashuri -- thanks for the links.

I mentioned the Praxeology aspect of the Austrian school earlier in this thread. Mises clearly either did not understand the field of ethics and morality, or consciously decided to side-step it with pseudo-science. That he claims to rely on deduction, while ignoring induction and pulling seemingly random (and therefore easily refuted) facts from thin air as the foundation for his system is further proof of its rationalistic foundations -- a definite red flag when it comes to economic theory.

You are right that Mises deliberately left out preaching any particular ethics and morality, because it had nothing to do with the study of economics. The purpose of "Human Action" was to explain the "is" and not preach the "ought", so to speak. On what basis, however, do you discredit praxeology as a "psuedo-science"? Starting with an axiom or "ultimate given" and deducing truth from it is an accepted and heavily used part of the scientific method. Otherwise, you could throw a good portion of mathematics out the window as "pseudo-science". There's nothing random about the truths he derives from one single main axiom: That humans act. If you accept that statement as true, then all conclusions deduced from that axiom must also be true. Read the link I provided by Rothbard. He gives a very good explanation as to why Mises used deductive logic over inductive. Here's a snippet -- but I highly recommend at least reading the whole article:

Friedrich A. Hayek trenchantly described the praxeological method in contrast to the methodology of the physical sciences and also underlined the broadly empirical nature of the praxeological axioms:

The position of man...brings it about that the essential basic facts which we need for the explanation of social phenomena are part of common experience, part of the stuff of our thinking. In the social sciences it is the elements of the complex phenomena which are known beyond the possibility of dispute. In the natural sciences they can only be at best surmised. The existence of these elements is so much more certain than any regularities in the complex phenomena to which they give rise, that it is they which constitute the truly empirical factor in the social sciences. There can be little doubt that it is this different position of the empirical factor in the process of reasoning in the two groups of disciplines which is at the root of much of the confusion with regard to their logical character. The essential difference is that in the natural sciences the process of deduction has to start from some hypothesis which is the result of inductive generalizations, while in the social sciences it starts directly from known empirical elements and uses them to find the regularities in the complex phenomena which direct observations cannot establish. They are, so to speak, empirically deductive sciences, proceeding from the known elements to the regularities in the complex phenomena which cannot be directly established. [17]

Similarly, J.E. Cairnes wrote:

The economist starts with a knowledge of ultimate causes. He is already, at the outset of his enterprise in the position which the physicist only attains after ages of laborious research.... For the discovery of such premises no elaborate process of induction is needed... for this reason, that we have, or may have if we choose to turn our attention to the subject, direct knowledge of these causes in our consciousness of what passes in our own minds, and in the information which our senses convey...to us of external facts. [18]

Nassau W. Senior phrased it thus:
The physical sciences, being only secondarily conversant with mind, draw their premises almost exclusively from observation or hypothesis.... On the other hand, the mental sciences and the mental arts draw their premises principally from consciousness. The subjects with which they are chiefly conversant are the workings of the human mind. [These premises are] a very few general propositions, which are the result of observation, or consciousness, and which almost every man, as soon as he hears them, admits, as familiar to his thought, or at least, included in his previous knowledge.

Basically, we have a big advantage when it comes to studying human behavior, like in economics, simply because we exist as humans. Our truths are self-evident.

The problem with induction is that you can only derive possible truths from it. This is quite necessary in subjects where truths are unknown, like in the physical sciences. Why use such imperfect logic, however, in a subject where the truths are already evident?

[Mashuri]

Re: Austrian School vs. itulip / FIRE

Here's a way to put it in layman's terms. Let's say you own and drive an automobile. You have a general knowledge of how it works but decide you want to understand it completely. You can:

A) Use only inductive logic and try to design and build a car like yours from scratch.

B) Use deductive logic and disassemble the already-built car you own.

C) Use a combination of the two, examining some parts from your car and then trying to induce what the other parts would be.

Which method will most accurately and efficiently teach you about your car?

[c1ue]

Re: Austrian School vs. itulip / FIRE

I have a question for those (c1ue in particular) who presume to understand what the Austrian theory of economics is, have any of you actually read "Human Action" by Ludwig von Mises??

I have read a number of parts, but I have never been able to stomach reading the entire thing.

I have, however, actually studied the Austrian school of economics via more or less objective academic studies.

Here's Rothbard explaining the fundamental difference between the Austrian method (Praxeology), which relies on deductive logic, and current mainstream economics which rely on positivism, trying to emulate the natural sciences:

Again, Rothbard is a dangerous vehicle by which to study anything - much as studying Nietzche via Hitler is dangerous. Both Rothbard and Hitler had specific agendas, and thus can not be relied on to provide objective understanding of the subject material.

Here's a way to put it in layman's terms. Let's say you own and drive an automobile. You have a general knowledge of how it works but decide you want to understand it completely. You can:

A) Use only inductive logic and try to design and build a car like yours from scratch.

B) Use deductive logic and disassemble the already-built car you own.

C) Use a combination of the two, examining some parts from your car and then trying to induce what the other parts would be.

Which method will most accurately and efficiently teach you about your car?

D) none of the above.

There is no individual alive who understands fully and can reproduce the entirety of any modern car.

And again, your entire series of comments fails to note what I wrote of earlier: that ALL modern theories of economics fail because of their inability to take into account the mental state of the human population as a whole.

A theory which specifically ignores the net human mental state is even weaker than all those which make a wrong assumption.

[Serge_Tomiko]

Re: Austrian School vs. itulip / FIRE

Materialism and hedonism are not outcomes of the Enlightenment.

Ok, then what does the enlightenment say about the ultimate standard of value of human behavior?

In fact, they are outcomes of attempts to resist the Enlightenment, which was a period of reason. Materialism and hedonism are driven by emotion, not reason.

hint: humans have emotions.

In a very real sense, the Enlightenment was responsible for creating civilization. It is the enemies of the Enlightenment and everything it represents who wish to destroy civilization (and one can argue that they have been quite successful, considering the 100M+ who they murdered in the 20th century).

It is absurd to say that civilization did not exist prior to the enlightenment. I can't think of anything remotely civilized that has occurred since the enlightenment. I don't really care about people getting murdered. People die. There is nothing you can do about it.

Many anti-capitalist writers have attempted to distort the truth and portray life in pre-capitalist times as being much better than it actually was. In fact, utter destitution was rampant in Europe in the period before the Enlightenment. Roughly half of the people in 17th century England were unable to afford even a daily crust of bread. That time through the early 19th century was a period of guilds, enslavement, the corn laws, deep alcohol abuse and truly oppressive taxes. The people who view those times as superior to today are the enemies of the mind and of life itself -- they include the followers (direct or indirect) of philosophers such as Kant, Hegel, and their disciples.

Just because you've read Ayn Rand doesn't mean you're a philosopher. And the rest of your "facts" are simply gross distortions.