Austrian School vs. itulip / FIRE

[DSpencer]

Re: Austrian School vs. itulip / FIRE

Regarding the collection of property taxes vs. income taxes:

Ignoring the moral questions for now and starting with what I see as Hudson's perspective that the tax burden should be shifted back to the "rich" (rentier, producer, employer class) and away from the "poor" (renter, consumer, employee class). Would changing the tax structure actually accomplish anything? In this scenario wouldn't the rent simply be raised to pay the property taxes and shifted back to the wage earners?

This is one of the biggest problems I see with policies designed to mold the economy. They always require additional intervention to make them work with unintended consequences along the way. This is how I see the US today with the additional problem that many of the policies are created by special interests to benefit themselves.

[ST]

Re: Austrian School vs. itulip / FIRE

Regarding the collection of property taxes vs. income taxes:

Ignoring the moral questions for now and starting with what I see as Hudson's perspective that the tax burden should be shifted back to the "rich" (rentier, producer, employer class) and away from the "poor" (renter, consumer, employee class). Would changing the tax structure actually accomplish anything? In this scenario wouldn't the rent simply be raised to pay the property taxes and shifted back to the wage earners?

This is one of the biggest problems I see with policies designed to mold the economy. They always require additional intervention to make them work with unintended consequences along the way. This is how I see the US today with the additional problem that many of the policies are created by special interests to benefit themselves.

I have to read that Hudson article, but I don't think this is a rich/poor issue. Housing prices are determined by monthly income so the effect would be to reduce the housing price and increase the tax portion - in other words decrease the debt portion. The psychological problem now is that people have viewed a house as an investment since 1980, but for 200 yrs prior it wasn't. It just paces inflation and that's how it should be. Housing bubbles bring down economies. This is but a small issue within the larger framework of an asset bubble based economy and its ramifications. The interim period surely would be difficult in going back, but the thing to recall is why/how were nations affluent and why - they weren't ever affluent under the taxation and money as debt system we currently have.

[FRED]

Re: Austrian School vs. itulip / FIRE

...and fire services can easily be provided for on a private basis. But I am willing to accept the premise that those can be publicly funded.

We have gotten into this argument about fire fighting with our fundamentalist libertarian friends in the past. The actual real world history of fire departments in the US, the UK and other countries is that the first fire emergency companies were private. They were paid for by insurance companies to protect property. What happened was that the fire crew responded to a fire in one home that was insured by Insurance Company X but the adjacent houses were not. The adjacent houses caught on fire and the whole block burned down. Competing fire departments fought over a water supply, if there was one available. To end the madness insurance companies banded together to prevail upon towns to finance the development of a reliable water supply for fire fighting and ensure that all building fires were responded to.

That's the actual history.

Not every service lends itself to private ownership. Fire emergency service is a prime example of one that doesn't.

[c1ue]

Re: Austrian School vs. itulip / FIRE

Good heavens-- where did I suggest that there shouldn't be taxes? I am willing to accept that some taxes must be paid to ensure the integrity of borders at the very least, along with a few other accoutrements of public welfare such as roads. Police and Fire services? Mankind existed without organized police forces well into the 19th century (and in many places into the 20th century) so we could argue about that; and fire services can easily be provided for on a private basis. But I am willing to accept the premise that those can be publicly funded.

So now the question is-- if we assume that taxes are necessary, what are the MORAL forms of taxation? Well, I can tell you which forms of taxes are IMMORAL-- and those are property taxes and income taxes. I can't believe I have to keep explaining why they are immoral, but here goes.

Property taxes destroy the concept of private property. They are immoral and inconsistent with free enterprise-- or to restate, they are consistent only with socialism. This should be obvious on its face to anyone who gives it even a moments thought.

Income taxes destroy the notion of liberty; if you pay income taxes, you are a slave to the government. They get paid first; you get paid second. You do not have control of the fruits of your labor, just like a slave does not have control over the fruits of his labor. Again-- completely obvious to anyone who bothers to think about this.

What are the moral forms of taxation? Those taxes which can be freely avoided-- namely, excise taxes. These are perfectly adequate at generating tax income, worked perfectly well for 150 years as the sole source of tax revenues for the Federal gov't, and are consistent with a free enterprise system.

So you're not against taxes, so long as they are taxes you can avoid.

Let's examine your premise in detail.

http://www.taxpolicycenter.org/brief...rs/revenue.cfm

From this link, a historical look at the sources of federal government revenue from 1950 to 2008.

Note that Excise taxes today account for only 3% of all revenue by the Federal government. This is down from roughly 20% in 1950.

Actual revenue from Excise taxes in 2008: $67.3 billion
Actual revenue from Excise taxes in 1950: $7.55 billion

Money authorized by the Federal-Aid Highway Act to build the National Highway System in 1956: $25 billion

Money spent in 2008 by the Federal Highway Transportation system: $40.585 billion.

So under your system, the federal highway system could never have been built, and in fact would be almost impossible to maintain much less all of the other federal actions - even excluding Defense, Social Security, Medicare, and what not.

WHY IS THIS SO DIFFICULT FOR PEOPLE TO UNDERSTAND?

Clearly it isn't hard to understand that your views are ideological and not practical.

Incidentally, Michael Hudson is a Marxist and is thus utterly worthless to anyone who cares about free enterprise. Really, it mystifies me why he gets any traction here. Marxism is nihilism, and is morally reprehensible. Hudson, consequently, is reprehensible.

And again, you still cannot seem to understand the difference between and economist in the Karl Marx framework with a politician in the Lenin framework.

Another key point you cannot seem to comprehend is that the government can and will obtain revenue for its own needs. The shift away from property taxes just meant government raised income and sales taxes.

Even were the laws of the US changed via some magical act such that all taxes would only be excise, the immediate effect would be that everything would become excise taxable, and the rates would go up.

But keep on trucking.

[Mashuri]

Re: Austrian School vs. itulip / FIRE

I understand his reasoning, but I also think he was mistaken; morality has everything to do with both economics and human action.




Mises seems to have fallen into Hume's is-ought trap. However, the "ought" need not be preached; it can be observed, and even predicted.

It's not a trap if one deliberately leaves out the "ought". Mises wrote plenty of material covering his ideas of how things should be done. That wasn't the scope of "Human Action", which was to explain human economic behavior regardless of their differing moral values. Mises even goes to great lengths explaining why in the book.

EDIT: I want to elaborate a little further. Mises was not outright rejecting morality's role in human behavior. He was merely avoiding interjecting any particular morality into his theory, as it would be exclusive to other forms of morality which naturally fall into the scope of economics. His purpose was to form a theory that encompassed all morality.

It's a pseudo-science because it starts with a pseudo-axiom, from which it makes rationalistic pseudo-deductions.

How is it a psuedo-axiom? True or false: All individuals engage in conscious actions toward chosen goals. If answering "false" leads to absurd real-world conclusions, which it does, then you have yourself a real axiom that applies to the real world.

Math is different because it can remain 100% abstract. Economics, on the other hand, needs to be anchored to the real, concrete world if it is to be useful.

Math is applicable to the real world. Ask any engineer or physicist.

Rothbard defines action as purposeful behavior. While humans do engage in purposeful behavior, they also engage in non-purposeful behavior; they are also often driven as much by irrationality (emotion, faith, etc) as rationality. Trying to derive economic truths from the observation that humans act is no more useful than looking at the fact that humans buy things, or dance, or fly in airplanes.

You misunderstand rationality here. The only non-rational behavior is reflexive (fight/flight response, for example). Everything else is a conscious choice. For example, if Mr. Doomsday wears a tin foil hat because he believes "The Man" would otherwise be reading his thoughts, he is, from his personal point of view, behaving rationally. He felt a dissatisfaction with the idea of mind-reading and made a conscious, rational choice to fabricate and wear a tin foil hat. Whether or not his beliefs are misguided is irrelevant. You see, a person making a choice to dance, buy things, fly airplanes, etc, is indeed purposeful behavior. They are all taking action in order to change their current situations into ones that they individually believe will be of higher value to them.

To me, this demonstrates a huge misunderstanding of both induction and human behavior. As before, he appears to have fallen for Hume's nonsense.

Induction typically needs to happen in controlled environments to be useful. This is why the physical sciences conduct experiments in labs with the purpose of eliminating as many (preferably all) variables as possible. If you want to see how water reacts with iodine, for example, would you get better results by mixing pure iodine with pure water in a test tube or by pouring some contaminated iodine in the ocean? Attempting to glean economic theory by gathering statistics and reading history is equivalent to the latter example. Everything is a variable and there is a near infinite amount of information you do not have. This is why history is a terrible tool for induction, as it can be (and has been) used to "prove" any theory desired. All one has to do is mine which information supports their theory and ignore the rest (assuming it's available at all). Mises' approach is to come up with a solid theory based on something known to be true and, at best, history / current events can be viewed as to how it fits with said theory.

Induction is not "imperfect logic," and it can be used to determine actual truth, not just possible truth. For example, the truth that all men are mortal can only be arrived at inductively.

I never said induction couldn't result in truths but you cannot deny that it is imperfect. If it were perfect then it would result in true conclusions 100% of the time. Does it? Induction is very useful but deduction is the only method that, assuming the premises are true, will garner true results 100% of the time. The ultimate premises are arrived at inductively, so it's very important to have as solidly true premises as possible, like those of an axiom.

EDIT: BTW, "All men are mortal" is an axiom because it cannot be proven until every last man actually dies. We accept it as an axiom because denying it results in absurd real-world conclusions.

[Mashuri]

Re: Austrian School vs. itulip / FIRE

Deduction doesn't build semiconductor factories from which microcontrollers come which handle modern fuel injection systems.

Deduction doesn't fabricate the gigantic tempered steel springs which constitute the suspension.

Deduction doesn't create the lead acid batteries, nor the numerous forms of wiring linking various electrical and mechanical systems together.

What your example fails to take into account is that the automobile of today is the tip of the pyramid of generations of work. Deduction won't reverse that, even mechanical copying is non-trivial for companies much less a single individual.

I'm highlighting this as the primary example that you are incapable of comprehending my writing. Others don't seem to be having this problem. Re-read my posts or give it up.

[c1ue]

Re: Austrian School vs. itulip / FIRE

You misunderstand rationality here. The only non-rational behavior is reflexive (fight/flight response, for example). Everything else is a conscious choice.

So the behavior of the German people under Hitler was a conscious choice?

The mass suicides under cult leaders is a conscious choice?

The seasonal variations in ladies' fashions is a conscious choice?

I disagree.

I'm highlighting this as the primary example that you are incapable of comprehending my writing. Others don't seem to be having this problem. Re-read my posts or give it up.

And I wrote out all that was wrong to show that your thought experiment example is a terrible one.

Induction and Deduction have nothing whatsoever to do with understanding modern complex devices.

While theoretically there are some polymaths out there that can comprehend all the parts of a modern automobile, none of them will gain it via disassembling said vehicle.

They would gain it via external learning.

[Mashuri]

Re: Austrian School vs. itulip / FIRE

So the behavior of the German people under Hitler was a conscious choice?

Yes. Hitler affected many of their beliefs and they all consciously took action based on those beliefs.

The mass suicides under cult leaders is a conscious choice?

Yes. The cult leaders affected their followers' beliefs and they all made conscious choices based on those beliefs.

The seasonal variations in ladies' fashions is a conscious choice?

Those are the results of many individual conscious choices, yes.

I disagree.

I may be able to influence your beliefs and even change your priorities, but it is still under your own volition how you choose to act on those beliefs and priorities. Action always happens at the individual level.

And I wrote out all that was wrong to show that your thought experiment example is a terrible one.

Induction and Deduction have nothing whatsoever to do with understanding modern complex devices.

While theoretically there are some polymaths out there that can comprehend all the parts of a modern automobile, none of them will gain it via disassembling said vehicle.

They would gain it via external learning.

Then this still applies: You are incapable of comprehending my writing. Others don't seem to be having this problem. Re-read my posts or give it up.

[Ghent12]

Re: Austrian School vs. itulip / FIRE

So the behavior of the German people under Hitler was a conscious choice?

The mass suicides under cult leaders is a conscious choice?

The seasonal variations in ladies' fashions is a conscious choice?

I disagree.

I am afraid that you have really lost me on this one. Things like involuntary twitches or sleepwalking are not conscious choices. What you seem to imply is that any influence into someone's decision calculus makes that person unaccountable for their actions--that the influence is responsible and not the individual that actually chose to act on that influence. That seems to be an absurd position that leaves the very notion of personal responsibility as some unbearable burden that the child-adults of today cannot be trusted with. Please let me know if I am misunderstanding you.

[c1ue]

Re: Austrian School vs. itulip / FIRE

I am afraid that you have really lost me on this one. Things like involuntary twitches or sleepwalking are not conscious choices. What you seem to imply is that any influence into someone's decision calculus makes that person unaccountable for their actions--that the influence is responsible and not the individual that actually chose to act on that influence. That seems to be an absurd position that leaves the very notion of personal responsibility as some unbearable burden that the child-adults of today cannot be trusted with. Please let me know if I am misunderstanding you.

Not correct.

My examples encompass a number of outcomes which are, in order:

1) Hitler and the German people: the undertaking of a long series of actions for which individual Germans of the time, who are still alive today, cannot understand why they did it.

If indeed these were 'conscious' decisions, why then do all these people fail to understand what they personally did at that time? I've seen any number of interviews, as well as spoken with many Germans, who even a few years after the fall of Nazi Germany were unable to verbalize just why they participated in that movement. Note that this doesn't just encompass the heady fun part of the German Renaissance, but also the nasty being firebombed by Americans and rolled under by Russian tanks part.

Why indeed were even Jews not directly in the concentration camps - such as those Jewish soldiers awarded the Iron Cross - not speaking out against that very behavior? There are examples where such individuals moved to concentration camps because while they themselves were exempt, their families were not.

Clearly then there is something beyond so called independent, rational, conscious thought at work here. The mania during a bubble is little different - it isn't that the facts are different, it is that everyone only seems to focus on the positive.

2) Cult leaders and mass suicides: Again, if an individual is truly self aware, how then does suicide benefit them? Even if there is some promised reward beyond death, how then does this apply to others like their children? The point again is simple: there is something beyond mere individual volition at work.

3) Fashion: while there are recognized leaders in fashion, there is no such thing as consensus. Rather somewhere in the interaction of social and professional ties, consensus appears to emerge via concurrent development.

Who then drives 'x' fashion this season vs. 'y' fashion the next? And if there is no clear leadership, how then can the individuals determine what fashion is (or is not)?

All 3 examples are intended to show that the true independent volition is largely a myth.

We are, for the most part, a product of that which surrounds us. And if so, then truly independent thought is quite difficult and rare. And conversely, there is such a thing as a net mental state which drives human behavior.

Another excellent example I see comes from Japan. In Harajuku, there are groups of Japanese who dress up in outrageous costumes and hang out in the side streets. 10 years ago, a big fashion among young girls was to get super tanned (i.e. orange or black), wears skimpy pastel halter tops and shorts, and wear truly gigantic solid heels (i.e. 7 or even 9 inches). I could give numerous more examples, but the amusing anecdote is this: in each grouping - every individual is clearly subscribing to a specific fashion sense despite being a 'rebel' compared to the 'typical' Japanese.

Or in other words, they're rebels like all their friends.

Yes. Hitler affected many of their beliefs and they all consciously took action based on those beliefs.

You describe what happened, but not why. For these people, as I note above, cannot themselves explain why. If the individual who undertakes the action cannot explain why, then how is it truly 'their' decision?

Yes. The cult leaders affected their followers' beliefs and they all made conscious choices based on those beliefs.

Again, you describe what happened in the finest non-Austrian sense, but not why. To glibly pass off these individual's actions as being fooled by some charismatic person is not correct because there are plenty of cult leaders who fail to accomplish the same thing, or even lesser degrees of sacrifice.

Those are the results of many individual conscious choices, yes.

Clearly you don't spend much time around women. Because they don't have a conscious flow chart that says, it is 2011, therefore 'x' fashion is hot. You seem to think that it is individual's choices which drive fashion, when in fact it is something else driving the individuals.

This is completely wrong because the fashions made available are made BEFORE purchases occur; at the same time the leaders in fashion regularly 'miss' the 'fashion of the season' thus cannot be said to be themselves driving fashion.

I may be able to influence your beliefs and even change your priorities, but it is still under your own volition how you choose to act on those beliefs and priorities. Action always happens at the individual level.

This is what every libertarian loves to think - that they, like lamp posts, stand alone in the night.

And equally as with libertarians, this is wrong. While there are individuals who are truly unfettered by other's (and their own) expectations, the reality is that most of us are affected and act in ways which both others and our own training dictate.

Then this still applies: You are incapable of comprehending my writing. Others don't seem to be having this problem. Re-read my posts or give it up.

Others let you slide with your failure to directly contribute to the discussion. Posting up links doesn't constitute discussion, but then again you really aren't interested in discussion.

You're primarily interested in being right.

[DSpencer]

Re: Austrian School vs. itulip / FIRE

To end the madness insurance companies banded together to prevail upon towns to finance the development of a reliable water supply for fire fighting and ensure that all building fires were responded to.

That's the actual history.

Not every service lends itself to private ownership. Fire emergency service is a prime example of one that doesn't.

Not really wanting to start a lengthy debate on this topic as optimization of the firefighting structure is among the least of my concerns, but I can't help but be confused by this post.

So private companies created emergency fire services, the newly created services had problems, so they financed the development of reliable water supplies to ensure that all building fires were responded to. And this proves that private fire emergency services were a failure?

[c1ue]

Re: Austrian School vs. itulip / FIRE

In the spirit of the economic discussion, here is an interesting paper which looks at the Marxist economic school and the neoclassical economic school, with some Veblen thrown in, and compares/contrasts.

http://bnarchives.yorku.ca/310/02/co...of_capital.pdf

Some key concepts:

1) the Marx labor theory of value and the neoclassical utility theory of value (the latter of which the Austrian school is a subjunct of) both operate under the theoretical concept of a base unit of value.

Marx defines it via Labor; the economy operates via Labor creating products, the difference between said Labor's requirement for living and output being what Capital expropriates in order to derive profit as well as maintain operations.

Neoclassical economists define value via utility, however the operation if 'utils' in the economy is equally indirect and unobservable with Capital still being an amorphous generic mass

2) Bringing in the ideas of Veblen - who attempted a synthesis of Marx's ideas with the vastly different economies of the Gilded Age. Veblen introduces the idea of assets - not money or cash flow or profit per se but concrete value producing tangible objects/entities.

3) Introduction of Castoriadis as a bridge to Nichan and Bitzler's modern analysis of economics - Capital as Power.

"The criterion of valuation is the proto-value that forms the basis of justice: "Democrats identify it with freedom, supporters of oligarchy with wealth, or with noble birth, and supporters of aristocracy with virtue."

...

The proto-value (axia), of the community, as the basis for valuation, orders the distribution of the social product. Those deemed worth according to the society's criteria - whether virtue, wisdom, or god's grace - get access to more of the social product.

...

What then is the axia of capitalism? What serves as the proto-value that determines valuation in capitalist societies? ...
Veblen offers a partial answer to these questions in both articles of "on the Nature of Capital": control.

...

A community's assets, Veblen claims, even those produced and employed by an individual, depend upon the entire social order within which that individual lives and acts.

Note how this last Veblen view is consistent with Dr. Michael Hudson's views on infrastructure improvements and property values

[c1ue]

Re: Austrian School vs. itulip / FIRE

Not really wanting to start a lengthy debate on this topic as optimization of the firefighting structure is among the least of my concerns, but I can't help but be confused by this post.

So private companies created emergency fire services, the newly created services had problems, so they financed the development of reliable water supplies to ensure that all building fires were responded to. And this proves that private fire emergency services were a failure?

Close, but incomplete.

Fire fighting was the delivery of product, but the financing was an insurance function. Kind of like doctors vs. health insurance companies.

As private firefighting was not a net positive - due to competing fire fighting delivery mechanisms interfering with each other as well as uninsured houses starting city-wide blazes that burned up insured houses as well - the insurance companies pushed for the creation of firefighting water supply as well as standardized public service for fire fighting.

So fire fighting as a competitive service failed, but this doesn't mean a monopolistic but private fire fighting company cannot equally succeed.

From the insurance company's perspective, however, a public enterprise is better because the alternative to a private firm's service is a fire, and any fire threatens far more damage to the insurance company as well as collective home owners. This does, however, mean that the private fire fighting company must then always serve customers in their area of responsibility, and in turn means they should be compensated. In this case, either this becomes a public good and controlled as a utility, or laws are passed such that exorbitant fees can be charged by the fire fighting company for its service, which in turn conflicts with the insurance company's profit stream.

In retrospect the development of municipal fire fighting services is deterministic given this sequence of events.

[DSpencer]

Re: Austrian School vs. itulip / FIRE

I have to read that Hudson article, but I don't think this is a rich/poor issue.

It's not a rich/poor issue?



"In reality, alas, we can’t all be rentiers. Just as, in Voltaire’s phrase, the rich require an abundant supply of the poor, so too does the rentier class require an abundant supply of debtors."

Housing prices are determined by monthly income so the effect would be to reduce the housing price and increase the tax portion - in other words decrease the debt portion.

If housing prices are determined by monthly income then shifting the tax burden away from income and onto property would increase housing prices, right?

I think that separating people into two groups that seem to consist of The Monopoly Guy and Blue Collar Joe is greatly over-simplifying things. I can't even determine which group I would place myself as I rely on my wages for the vast majority of income but also have a reasonable income, some savings/investments and hope to transition into a "rich guy" at some point.

Overall, I found the Hudson article to be a valuable summary of the housing situation. (thanks for the link, FRED). I'm just nervous about what his solutions would be. Maybe someone can enlighten me on that subject.

[c1ue]

Re: Austrian School vs. itulip / FIRE

I'm just nervous about what his solutions would be. Maybe someone can enlighten me on that subject.

A short summary:

1) Shift taxes off labor by shifting them from income to property and capital gains, because the vast majority of wealth in the US is still in the form of property. Secondly that the notion of high capital gains taxes hindering growth is a fallacy - 90% capital gains taxes in the turn of the century still let the Rockefellers, the Carnegies, and so forth accumulate vast wealth.

2) More specifically, shift the taxes from just simple property, to the land portion of property. In other words, you pay only on the value of the land but not on the improvements on it (house, water well, whatever).

3) Enforce the laws on the books. Banksters in jail.