Austrian School vs. itulip / FIRE

[Ghent12]

Re: Austrian School vs. itulip / FIRE

What you refuse to acknowledge is that there are many ways by which a person's actions can be influenced from the outside - in some cases controlled.

I think this is the heart of the disagreement, and you are incorrect in your assumption.

I do not refuse to acknowledge that a person's actions can be influenced from the outside. In fact, that is what I have been saying all along--that what you have been describing as "not conscious choices" are merely examples of people acting (making conscious decisions) while under social influences. You also make a distinction in this case which I consider unnecessary--that of control being different from influence. In the context of social interaction, barring actual physical controls like handcuffs, "control" and "influence" are the same thing with slightly different connotations. Influence is used in "lighter" cases, such as under the influence of alcohol or the influence of an older sibling. Control is used in "stronger" cases, such as under the control of the powers that be or controlled by the hand that feeds. In both cases the individual that is being influenced/controlled still makes conscious choices. Barring mindlessness, they still have a decision calculus and still act upon it even when their actions are influenced/controlled/manipulated by others. They are still using conscious thought, even if it sends them to the hospital or if the outcome has no apparent gain for themselves.


As for fashion, I see what you are saying now. However, you seem to be confusing the phenomenon. Fashion is the perception that others have towards you. No, you cannot choose for them to perceive you as fashionable--what you can do is attempt to understand the context, make a decision on how to dress based upon what you think their perception will be, and gage the reaction of people to your style. "Fashion" is an interactive perception-based phenomenon that cannot be chosen, sure, but it does not disprove the notion of conscious choice because conscious choices are made continuously with regards to fashion.

[Mashuri]

Re: Austrian School vs. itulip / FIRE

I don't see the compatibility because of the inflexible rule that anything an individual does, is solely their responsibility.

If I can demonstrate that the individual acts differently even given identical knowledge and motivations, then clearly there can be external factors to decisions.

Quite frankly this is exactly the kind of thinking that says that a person who falls for a con job (i.e. housing always goes up) is the only one at fault, when in reality it is an entire system which significantly promulgated that action.

The way to fix the problem isn't to blame the individual, though the individual certainly shares some blame.

The problem in the housing case is clearly a systemic one.

Thus to focus all on the mythical individual is wrong - the concept is wrong, and thus many solutions are going to be wrong.



Again, you assume that since you make the choices, that you are independent. But again, the reality is that you would not need to make the (all bad) choice between jumping, grabbing for the gun, or getting shot passively were it not for my overt action to hold a gun to your head.

So you can say you are independent all you want, but if my actions are the ones that put you in a no-win situation as I wished to, is this truly independence you are experiencing?

As I said, there is no point going any further unless you embrace independent action as reality. I'm curious to see what comprehensive economic theory you come up with.

[llanlad2]

Re: Austrian School vs. itulip / FIRE

As I said, there is no point going any further unless you embrace independent action as reality. I'm curious to see what comprehensive economic theory you come up with.

This whole thread may come down to semantics, and what is a conscious or unconscious decision. However I remember reading about this experiment which is summarised below (taken from wikipedia page on neuro marketing).

Coke vs. Pepsi

In a study from the group of Read Montague, the director of the Human Neuroimaging Lab and the Center for Theoretical Neuroscience at Baylor College of Medicine, published in 2004 in Neuron[2], 67 people had their brains scanned while being given the "Pepsi Challenge", a blind taste test of Coca-Cola and Pepsi. Half the subjects chose Pepsi, since Pepsi tended to produce a stronger response than Coke in their brain's ventromedial prefrontal cortex, a region thought to process feelings of reward. But when the subjects were told they were drinking Coke three-quarters said that Coke tasted better. Their brain activity had also changed. The lateral prefrontal cortex, an area of the brain that scientists say governs high-level cognitive powers, and the hippocampus, an area related to memory, were now being used, indicating that the consumers were thinking about Coke and relating it to memories and other impressions. The results demonstrated that Pepsi should have half the market share, but in reality consumers are buying Coke for reasons related less to their taste preferences and more to their experience with the Coke brand.

I would argue that people express a preference for Coke but are unconscious of why. So do they consciously prefer it? Are they behaving independently?

[Ghent12]

Re: Austrian School vs. itulip / FIRE

This whole thread may come down to semantics, and what is a conscious or unconscious decision. However I remember reading about this experiment which is summarised below (taken from wikipedia page on neuro marketing).



I would argue that people express a preference for Coke but are unconscious of why. So do they consciously prefer it? Are they behaving independently?

It appears that the people are reacting to a "feeling," an "intuition," or doing what "their gut tells them," when choosing Coke most of the time. Yes, they may have subconscious influence, but being influenced does not mean one is making a "non-conscious choice." Unless they chose Coke when they were sleepwalking...

[Mashuri]

Re: Austrian School vs. itulip / FIRE

It appears that the people are reacting to a "feeling," an "intuition," or doing what "their gut tells them," when choosing Coke most of the time. Yes, they may have subconscious influence, but being influenced does not mean one is making a "non-conscious choice." Unless they chose Coke when they were sleepwalking...

This is correct. The consciousness/awareness is on the means to the end and not the "why". I feel a preference for Coke but do not know why. I now have a goal that is to consume a bottle of Coke. I see two vending machines, one for Coke and one for Pepsi. I consciously take action (apply means) to achieve my goal by moving to the Coke machine, depositing my money and acquiring my Coke.

[llanlad2]

Re: Austrian School vs. itulip / FIRE

Very entertaining thanks for the link.

I have a question regarding economic rent. I don't really know how or to whom this question should be asked. The term economic rent seems to have a negative connotation. Is the implication that all forms of economic rent including charging interest on loans should be banned? Is there some other message that I'm missing?

Not banned, but the tax burden shifted back onto it and off income tax. See Post 39 in the current thread.

[c1ue]

Re: Austrian School vs. itulip / FIRE

I have a question regarding economic rent. I don't really know how or to whom this question should be asked. The term economic rent seems to have a negative connotation. Is the implication that all forms of economic rent including charging interest on loans should be banned? Is there some other message that I'm missing?

Economic rent is exactly like rent on a house - only applied to the wider range of economic activity.

Economic rent per se is not what is frowned upon by Dr. Michael Hudson, it is unearned economic rent specifically in the form of increases in land prices due to various forms of inflation.

The concept is that if you build a bridge, then it is reasonable for you to charge a toll to repay the price of building the bridge (as well as your capital investment, risk, etc etc).

However, if you own a house on the other side of the bridge which increases in value $100,000 because it is now accessible to all those job holders on the other side, that $100,000 is unearned economic rent. And in turn any income derived from said $100,000 increase in price as reflected in monthly house rental would also be unearned economic rent.

Hudson specifically calls out that increase in property value due to improvement - i.e. actually doing something like putting in a new building - should not be taxed, only the underlying land.

1. Is the goal of this to "close the wealth gap"?

It seems like a logical fallacy to say that:
A few families accumulated vast wealth during times of high capital gains taxes.
Therefore, high capital gains taxes do not hinder [economic] growth.

I'm not saying you're wrong, but that logic does not convince me at all.

No, the concept of higher property taxes is not specifically to punish the wealthy or take away their money.

The purpose is actually to make it difficult/impossible to earn income from passive activities like waiting for land values to increase. The net result is to force investment into higher yielding but riskier activities like building new companies.

The second purpose is to apportion the taxes to those who can pay. While it is true the 'wealthy' pay most of the taxes in the United States, it is equally true that the less wealthy pay far more of their disposable income than those with tons of money.

2. What is the goal of this specification?

I approach political/economic issues primarily from a philosophic perspective which has led me to mostly libertarian POV. So I have issues with property taxes in the sense that you no longer own your property, you rent it from the government. However, I can foresee situations where finite land and a growing population leads me to ethical problems. I'm also a pretty practical person and would readily agree (not that I have a real choice) to a less than ideal situation if it was an improvement over the current situation.

See above for goals. Also note that originally property taxes were the primary, nearly exclusive source of revenue for local/state governments. As this property tax income was attacked through various means including commercial real estate depreciation and later laws like California's Proposition 13, the local/state governments starting passing heavier income and sales taxes.

Dr. Hudson argues that this process shifted much of the tax burden away from the wealthy - who own a disproportionate amount of the land much as they own a disproportionate amount of the wealth - onto the lesser income classes.

3. No argument there.

Overall, these seem like somewhat minor changes anyway. This doesn't really seem to solve the problems we have with the present corporatocracy. I guess maybe #3 encompasses a lot of the corruption that leads to political/economic problems, but I think we need more than that. I think our monetary system is structurally flawed.

As I asked in an earlier post, I also don't see how changing the tax structure would change much. It seems like the extra cost of property taxes would just be passed along anyway.

The effects would likely be far greater than you can imagine. For one thing, property taxes don't translate into property rents very well - rents are a function of tenant income.

[c1ue]

Re: Austrian School vs. itulip / FIRE

I think this is the heart of the disagreement, and you are incorrect in your assumption.

I do not refuse to acknowledge that a person's actions can be influenced from the outside. In fact, that is what I have been saying all along--that what you have been describing as "not conscious choices" are merely examples of people acting (making conscious decisions) while under social influences. You also make a distinction in this case which I consider unnecessary--that of control being different from influence. In the context of social interaction, barring actual physical controls like handcuffs, "control" and "influence" are the same thing with slightly different connotations. Influence is used in "lighter" cases, such as under the influence of alcohol or the influence of an older sibling. Control is used in "stronger" cases, such as under the control of the powers that be or controlled by the hand that feeds. In both cases the individual that is being influenced/controlled still makes conscious choices. Barring mindlessness, they still have a decision calculus and still act upon it even when their actions are influenced/controlled/manipulated by others. They are still using conscious thought, even if it sends them to the hospital or if the outcome has no apparent gain for themselves.

Fair enough - I do agree that there are choices even when the choices are flawed and or skewed.

However, this doesn't detract from the original point: looking solely at individual's choices doesn't permit you to understand the higher context.

While an individual might buy a house in the 2005 boom because he made money and expects to make money, his choices are clearly flawed and the economic rational that the sum of his and all the other real estate bubble victim's choices do not yield a successful economic paradigm.

As for fashion, I see what you are saying now. However, you seem to be confusing the phenomenon. Fashion is the perception that others have towards you. No, you cannot choose for them to perceive you as fashionable--what you can do is attempt to understand the context, make a decision on how to dress based upon what you think their perception will be, and gage the reaction of people to your style. "Fashion" is an interactive perception-based phenomenon that cannot be chosen, sure, but it does not disprove the notion of conscious choice because conscious choices are made continuously with regards to fashion.

Yes, but again, looking at any single or even a small group of individual's choices - whether on the consumer or supplier side - does not tell you what 'fashion' is. Only by looking at the overall mood does the prevailing fashion arise, and in fact it is likely that the reasons for any choice are highly varied.

Nonetheless, there is still a 'look'.

As I said, there is no point going any further unless you embrace independent action as reality. I'm curious to see what comprehensive economic theory you come up with.

Be that as it may, the concept of the individual making rational choices thus enabling macro economic policy would appear to be as wrong as can be.

The markets aren't efficient even most of the time, much as individuals aren't efficient most of the time.

The markets aren't rational much of the time, much as individuals aren't rational all the time.

Thus how can any macroeconomic policy presuming uniform rational individual action possible be correct?

I would argue that people express a preference for Coke but are unconscious of why. So do they consciously prefer it? Are they behaving independently?

It appears that the people are reacting to a "feeling," an "intuition," or doing what "their gut tells them," when choosing Coke most of the time. Yes, they may have subconscious influence, but being influenced does not mean one is making a "non-conscious choice." Unless they chose Coke when they were sleepwalking...

Actually the Coke vs. Pepsi phenomenon is well understood in the marketing world.

Put simply, in the absence of a powerful defining symbol, sufficient repetition of a new symbol creates the new defining symbol.

In some cases it is also possible to replace the old one.

The reason why more people say 'Coke' vs. 'Pepsi'? Coke is bigger, it is older, and it has spent far more money on advertising and product placement.

After all, nobody drank Coca Cola except as perhaps a medicinal unguent 100 years ago.

Certainly spontaneous new symbols can also arise, but my point is simply that with sufficient money - the process can be made to work for a company.

We're seeing that right now with the bottled water meme. FARTS!

This is correct. The consciousness/awareness is on the means to the end and not the "why". I feel a preference for Coke but do not know why. I now have a goal that is to consume a bottle of Coke. I see two vending machines, one for Coke and one for Pepsi. I consciously take action (apply means) to achieve my goal by moving to the Coke machine, depositing my money and acquiring my Coke.

And yet your entire desire to drink a cola is artificial, as is your choice within the category of cola.

More importantly, does your 'conscious' desire to drink Coke mean Coca Cola is a more rational choice than Pepsi?

[llanlad2]

Re: Austrian School vs. itulip / FIRE

[QUOTE=Mashuri;189069]This is correct. The consciousness/awareness is on the means to the end and not the "why". I feel a preference for Coke but do not know why. I now have a goal that is to consume a bottle of Coke. I see two vending machines, one for Coke and one for Pepsi. I consciously take action (apply means) to achieve my goal by moving to the Coke machine, depositing my money and acquiring my Coke.[QUOTE]

It's not an not an independent choice. In fact someone else is responsible for your actions. The advertisers.
"Man can do what he wills but he cannot will what he wills"

[Mashuri]

Re: Austrian School vs. itulip / FIRE

This is correct. The consciousness/awareness is on the means to the end and not the "why". I feel a preference for Coke but do not know why. I now have a goal that is to consume a bottle of Coke. I see two vending machines, one for Coke and one for Pepsi. I consciously take action (apply means) to achieve my goal by moving to the Coke machine, depositing my money and acquiring my Coke.

It's not an not an independent choice. In fact someone else is responsible for your actions. The advertisers.
"Man can do what he wills but he cannot will what he wills"

Someone else may or may not bear some responsibility for my preferences and goals but I am still in full control of the means I take to achieve those goals. With the exception of pure external physical force, nobody can move my legs toward the Coke machine but me, etc, etc.

[Mashuri]

Re: Austrian School vs. itulip / FIRE

Be that as it may, the concept of the individual making rational choices thus enabling macro economic policy would appear to be as wrong as can be.

The markets aren't efficient even most of the time, much as individuals aren't efficient most of the time.

The markets aren't rational much of the time, much as individuals aren't rational all the time.

Thus how can any macroeconomic policy presuming uniform rational individual action possible be correct?

More straw men. You're conflating Austrian theory with a lot of mainstream theory. Where did I say it assumes efficient markets? As for rational, you still apply it differently. All that is assumed rational are the means applied to ends, from the point of view of the actual actors. All that means is that people take what they believe is the best course of action to achieve whatever it is they desire, regardless of why they desire it. I'll post a couple of quotes from Murphy's study guide that may help clarify things (emphasis added):

Praxeology does not concern itself with an idealized actor who has noble ends and knows the best means to achieve any end. On the contrary, praxeology takes an actor’s goals and his beliefs on how to satisfy them as the starting point of analysis. If people erroneously believe that a certain root possesses medicinal properties, it will command a price on the market. The economist must take people as they are to explain market phenomena.

Praxeology neither assumes that people have enlightened value scales, nor that they are omniscient in their pursuit of their aims. This stands in sharp contrast to the approach in mainstream economics, where authors quite explicitly assume that the agents in their models are superhuman calculators capable of solving complex optimization problems.

[Serge_Tomiko]

Re: Austrian School vs. itulip / FIRE

Aristotle, upon whose ideas the Enlightenment was based, said that "flourishing" was the standard of value. It seems to me that the ideas of the Enlightenment are well summarized by the phrase "life, liberty and the pursuit of happiness" -- none of which implies either materialism or hedonism.

1) You obviously have not read any writings by Aristotle about Ethics.
2) Aristotle's relevance to the enlightenment, at best, is his very brief discussion in Metaphysics regarding the innate understanding of humans regarding specific values. He noted this because different groups all had words for various values.
3) You obviously don't understand anything about the enlightenment if you think those three words summarize anything.

With respect to your last comment, you really don't seem to get it. But that's because you haven't really read any of the things you discuss. This is a pertinent aphorism given to us by Nietzsche.

Whether it is hedonism or pessimism, utilitarianism or eudaemonism - all these ways of thinking that measure the value of thing in accordance with pleasure and pain , which are mere epiphenomena and wholly secondary, are ways of thinking that stay in the foreground and naivetes on which everyone conscious of creative powers and an artistic conscience will look down not without derision, nor without pity. Pity with you - that, of course, is not pity in your sense: it is not pity with social "distress", with "society" and its sick and unfortunate members, with those addicted to vice and maimed from the start, though the ground around us is littered with them; it is even less pity with grumbling, sorely pressed, rebellious slave strata who long for dominion, calling it "freedom". Our pity is a higher and more farsighted pity: we see how man makes himself smaller, how you make him smaller - and there are moments when we behold your very pity with indescribable anxiety, when we resist this pity - when we find your seriousness more dangerous than any frivolity. You want, if possible - and there is no more insane "if possible" - to abolish suffering . And we? It really seems that we would rather have it higher and worse than ever. Well-being as you understand it - that is no goal, that seems to us an end , a state that soon makes man ridiculous and contemptible - that makes his destruction desirable .

The discipline of suffering, of great suffering - do you not know that only this discipline has created all enhancements of man so far? That tension of the soul in unhappiness which cultivates its strength, its shudders face to face with great ruin. its inventiveness and courage in enduring, persevering, interpreting and exploiting suffering and whatever has been granted to it of profundity, secret, mask, spirit, cunning, greatness - was it not granted to it through suffering, through the discipline of great suffering? In man creature and creator are united: in man there is material, fragment, excess, clay, dirt, nonsense, chaos; but in man there is also creator, form giver, hammer, hardness, spectator divinity, and seventh day: do you understand this contrast? And that your pity is for the "creature in man". for what must be formed, broken, forged, torn, burnt, made incandescent, and purified - that which necessarily man and should suffer? And our pity - do you not comprehend for whom our converse pity is when it resists your pity as the worst of all pamperings and weaknesses?

Thus it is pity versus pity.

But to say it once more: there are higher problems than all problems of pleasure. pain. and pity; and every philosophy that stops with them is naive.







It only sounds absurd because you aren't civilized yourself, as made clear by your statement that you don't care about people getting murdered.[/QUOTE]

[c1ue]

Re: Austrian School vs. itulip / FIRE

Someone else may or may not bear some responsibility for my preferences and goals but I am still in full control of the means I take to achieve those goals. With the exception of pure external physical force, nobody can move my legs toward the Coke machine but me, etc, etc.

You probably have heard the saying: "The greatest trick the Devil ever pulled off was to make the world think he doesn't exist".

The Marketing equivalent: "The greatest Marketing trick you can pull off is to make your customer think he has free will when choosing your product"

More straw men. You're conflating Austrian theory with a lot of mainstream theory. Where did I say it assumes efficient markets? As for rational, you still apply it differently. All that is assumed rational are the means applied to ends, from the point of view of the actual actors. All that means is that people take what they believe is the best course of action to achieve whatever it is they desire, regardless of why they desire it. I'll post a couple of quotes from Murphy's study guide that may help clarify things (emphasis added):

Praxeology does not concern itself with an idealized actor who has noble ends and knows the best means to achieve any end. On the contrary, praxeology takes an actor’s goals and his beliefs on how to satisfy them as the starting point of analysis. If people erroneously believe that a certain root possesses medicinal properties, it will command a price on the market. The economist must take people as they are to explain market phenomena.


Praxeology neither assumes that people have enlightened value scales, nor that they are omniscient in their pursuit of their aims. This stands in sharp contrast to the approach in mainstream economics, where authors quite explicitly assume that the agents in their models are superhuman calculators capable of solving complex optimization problems.

The problem with the Austrian school is that while it gives lip service to what you note above, its solution is to lock down the world in a Bronze Age economy.

In effect, it assumes the worst of everyone: that given the opportunity to cheat via fiat currency and or fractional reserve lending, that it must always happen.

Yet the presumption of guilt detracts from the foundation of civilization. This is the basis by which private ownership of guns is banned, by which warning labels appear on every conceivable product for every conceivable situation, by which the worst are conflated with the best, or especially the average.

Thus my critique stands: the Austrian school very much makes assumptions about the net mental state, only it assumes the most (criminally) efficient.

This also is wrong, and has huge negative ramifications for any society resulting from its implementation.

[Mashuri]

Re: Austrian School vs. itulip / FIRE

You probably have heard the saying: "The greatest trick the Devil ever pulled off was to make the world think he doesn't exist".

The Marketing equivalent: "The greatest Marketing trick you can pull off is to make your customer think he has free will when choosing your product"

Praxeology is compatible with your view. It's irrelevant if a person's will is free or somehow determined.

The problem with the Austrian school is that while it gives lip service to what you note above, its solution is to lock down the world in a Bronze Age economy.

In effect, it assumes the worst of everyone: that given the opportunity to cheat via fiat currency and or fractional reserve lending, that it must always happen.

Yet the presumption of guilt detracts from the foundation of civilization. This is the basis by which private ownership of guns is banned, by which warning labels appear on every conceivable product for every conceivable situation, by which the worst are conflated with the best, or especially the average.

Thus my critique stands: the Austrian school very much makes assumptions about the net mental state, only it assumes the most (criminally) efficient.

This also is wrong, and has huge negative ramifications for any society resulting from its implementation.

You're still projecting a lot of your own assumptions but I think I see where you're coming from. Austrian economists understand that power corrupts (or, more accurately, power attracts corrupt people). The things you praise so much like forced fiat currencies and armed rulers disarming their subjects has contributed to the dismantling of civilization and, particularly in the 20th century, some of the worst atrocities in human history. I'm sure you'll be able to get your noble, benign rulers some day, however, and keep them in power. Keep hope alive, my friend.

[c1ue]

Re: Austrian School vs. itulip / FIRE

Praxeology is compatible with your view. It's irrelevant if a person's will is free or somehow determined.

Actually, it is relevant because while Praxeology per se supposedly studies human behavior, praxeology as employed by the Austrian economists is carried out via studying prices.

I don't think I need to show how studying prices in and of itself is a false methodology, do I?

The things you praise so much like forced fiat currencies and armed rulers disarming their subjects has contributed to the dismantling of civilization and, particularly in the 20th century, some of the worst atrocities in human history. I'm sure you'll be able to get your noble, benign rulers some day, however, and keep them in power. Keep hope alive, my friend.

I find it amusing that you think I am praising fiat money.

I also find it amusing that somehow the dismantling of civilization has anything to do with a gold standard (or lack thereof).

Anyway, your multiple attempts to show that somehow the Austrian school of economics has either a grip on reality or any modicum of credibility with regards to solutions have been notably unsuccessful.