"A priori quiz"

Which of the following do you consider true a priori?

  1. Whenever two people A and B engage in a voluntary exchange, they must both expect to profit from it.
  2. Whenever an exchange is not voluntary but coerced, one party profits at the expense of the other.
  3. Whenever the supply of a good increases by one additional unit, provided each unit is regarded as of equal serviceability by a person, the value attached to this unit must decrease.
  4. Of two producers, if A is more productive in the production of two types of goods than is B, they can still engage in a mutually beneficial division of labor.
  5. Whenever minimum wage laws are enforced that require wages to be higher than existing market wages, involuntary unemployment will result.
  6. Whenever the quantity of money is increased while the demand for money to be held as cash reserve on hand is unchanged, the purchasing power of money will fall.

I have some reservations about a couple, curious to see how many people will accept all 6.

PS: statements are from “Economic Science and the Austrian Method”, by Hans-Hermann Hoppe.

They look right to me. What issues did you have?

1

though all of them are real close

A priori true.

Not a priori true. It would be a priori true to say that “When an exchange is coerced, one party (the coercer) expects to profit and the other party (the coerced) does not expect to profit”.

A priori true. (The proviso between the commas is unnecessary, because that is the definition of “a good”.)

Awkward wording and too vague. It would be a priori true to say that “Even if A is more productive than B at producing both X and Y, they can still engage in a mutually beneficial division of labor, with A producing X and B producing Y, provided A has a higher comparative advantage over B at producing X than he does at producing Y.”

A priori true. As long as the statement is not taken to be a prediction in the teleological sense, but one that is true whenever all other things are equal (i.e. it is a ceteris paribus statement).

A priori true, ceteris paribus. This is just the law of supply and demand applied to money.

cheater. you cant change the sentences up to make them a priori true

Wouldn’t you say that is what Hoppe meant? That it is implied in the statement that the coercer expects to profit at the expense of the coerced?

I don’t see how Hoppe’s wording is awkward and vague. You are both saying the same thing.

Whenever minimum wage laws are enforced that require wages to be higher than existing market wages, involuntary unemployment will result.

Tehnically not always true.

  1. Is true

  2. Is true so long as we ignore the outcome in the future

3, 4, 5, and 6 depend upon other factors which are not specified within the premise, but they are all likely be true.

i dont think 2 is true because someone can force A and B to trade something meaningful to them and worthless to the other.

^

Then one would be forced and the other would be voluntary.

meant to say each other.

a doctor is forced to trade his xray machine and a farmer is forced to trade farm equipment.

*edit

better yet, trade wives or childs.

… Well does person A want to trade his wife for person B’s? Is person B’s wife hotter or something? If not then person C is benefiting from the expense of A and B. It deals with who is being coercing and who is coerced rather than who is generally involved.

  1. Whenever two people A and B engage in a voluntary exchange, they must both expect to profit from it.

True a priori, as by definition one would not engage in the exchnage voluntarily unless one valued the good gained more than the good lost.

  1. Whenever an exchange is not voluntary but coerced, one party profits at the expense of the other.

True a priori, as if the victim had valued the good he obtained more than he valued the good he lost, that would have been a voluntary exchange by definition, not a coerced exchange. Therefore, in a coerced exchange, it must be the case that the victim did not value the good obtained more than the good lost.

  1. Whenever [one person’s] supply of a good increases by one additional unit, provided each unit is regarded as of equal serviceability by a person, the value attached to this unit must decrease.

Not true a priori, as it depends on the value scale of the person in question. For example, a person could have nothing on their value scale but chickens. Hence, no matter how many chickens he accumulates, getting another chicken never drops below anything else on his value scale, because there is nothing else on his value scale. That said, in all normal circumstances, the law of diminishing marginal utiity is a highly probable a posteriori claim, as typically (I want to say always, but it’s still a posteriori) people do have several things on their value scales, such that when the top value is satisfied, what had been the second highest value moves into the first rank, and so another unit of the item that had been in the first rank become less valuable than it had been.

  1. Of two producers, if A is more productive in the production of two types of goods than is B, they can still engage in a mutually beneficial division of labor.

Add “provided that A is not equally good at producing both goods, and B is not equally good at producing both goods,” and that’s true a priori, since the only case in which there cannot be mutually benefical exchange is if neither party is better at producing any one thing than they are at producing anything else, as then neither party can outsource production of what they’re worst at to focus on what they’re best at.

  1. Whenever minimum wage laws are enforced that require wages to be higher than existing market wages, involuntary unemployment will result.

Add “provided demand is elastic from the market price to the fix” and this is true a priori (understanding that it need not be an absolute increase in unemployment, but only higher unemployment than otherwise would have existed), as fixing the price of X above the market price decreases quantity demanded and (eventually) increases quantity supplied, resulting in an unsold surplus.

  1. Whenever the quantity of money is increased while the demand for money to be held as cash reserve on hand is unchanged, the purchasing power of money will fall.

You can say a priori that if the supply of a goods increases, and quantity demanded remains unchanged, either the price will fall or there will be an unsold surplus, but I suppose the claim that the former will occur rather than the latter rests on the a posteriori knowledge that unfettered markets will tend to clear (i.e. unsold surplus won’t last long and the price will fall).

touche. i dont know why i was not including that C was the beneficiary of the transaction.

I’m sure that’s what he meant, but that’s not what he said. Just adding the words “ex ante” after the word profit would be sufficient to make his statement true, but my rewording is clearer.

His point is that absolute advantage is not necessary, merely comparative advantage. My adding the word “even” makes it clearer. His word “still” is headless without the word “even”, and hence awkward. Also, Hoppe’s statement itself does not say there is any comparative advantage… If I am exactly 3 times better than you at producing X and exactly 3 times better than you at producing Y, neither of us can benefit through trade, and we might as well both produce our own X’s and Y’s.

This is nitpicking, but I’m guessing that’s what the OP wanted - a thorough dissection of the statements as they are.

The Law of Diminishing Marginal Utility is derived from the Action Axiom and a priori true. Man acts to alleviate felt uneasiness, using given means to achieve a desired end. If man acts to alleviate one felt uneasiness before he acts to alleviate another one, it is because he values the alleviation of the former uneasiness higher than that of the latter. So, granting a stock of homogenous goods, if a person uses one of said good, it is toward an end, whose successor end must be of relatively less importance to the actor. It follows then, that the 6th unit of a homogeneous stock of goods would be put towards a more highly valued end than that of the 7th unit of said stock of goods.

Say’s Law - basically that without price controls, the aggregate production of goods signifies the adequate aggregate demand to consume said goods, because man produces because he wants to consume.

I agree that yours is clearer, but I’m still reading his as the same meaning as yours. I mean, it’s possible someone could read it that the coerced expects to profit at the expense of the coercer, but I think that would be a fault of the reader and not a fault of Hoppe.

If a doctor is 3 times better at typing and at diagnosing patients than his secretary, he still benefits from hiring her and engaging in trade. I might be missing something in what you are saying.

No, that was only a secondary point. My main point is that the statement is false without the addition of the words “expects to”. He says these words in his first statement, but in the second statement they are absent. It is easy to think of examples where Hoppe’s statement as it is is wrong. Suppose I use coercion to steal your TV. We can say a priori that I expect to profit (because otherwise I wouldn’t have bothered), and that you do not expect to profit (otherwise, you would have just given me the TV).

But suppose I get the TV home and then due to an electrical fault, the TV catches fire and burns my house down. Now I regret making the exchange. I did not profit from making the exchange, despite my expectation that I would. And you breath a sigh of relief, because due to the theft, it wasn’t your house that burnt down. You profited from me stealing your TV, despite your expectation that you would make a loss.

This is what I mean by “profits ex ante”. I (the coercer) profited ex ante and you (the coerced) had a loss ex ante. But you profited ex post, while I had a loss ex post. When it is not specified whether someone is talking about ex ante profits or ex post profits, the statement becomes ambiguous, and in fact usually when people say profits they mean profits ex post, which makes it even more important to specify when you mean ex ante.

Is that clearer?

No that is incorrect. The whole point of the classic doctor-secretary example is that the doctor is a lot better at diagnosing patients than the secretary, while the doctor is only a bit better at typing than the secretary. This difference is what gives rise to the possibility of gains from trade.

If you do the math, you can see there is one circumstance when there is no possibility of a gain from trade. Suppose you can produce fish at 3 fish per hour and apples at 12 apples per hour. Like the secretary, I am less productive at both: I can only produce fish at 1 fish per hour and apples at 4 apples per hour. 3/1=12/4=3, so there is no comparative advantage here, unlike the doctor-secretary example. If we both spend 5 hours producing fish and 5 hours producing apples, between us we will have produced (15+5)=20 fish and (60+20)=80 apples. Usually by dividing labor, we would be capable of producing between us >20 fish and >80 apples, but the way this example is constructed, there is no way we can do that. If I spend the full 10 hours producing fish and you spend 3 hours 20 minutes producing fish and 6 hours 40 minutes producing apples, we will have (10+10)=20 fish and (80+0)=80 apples. There is no overall gain to be had from engaging in trade and a division of labor.

An excellent video explaining the law of comparative advantage is here:

Thank you, everyone!

The point of the exercise was to demonstrate how Austrians use models to prove their a priori statements.

Unlike most other economists, no numerical simulations were run, but I would say that something that can be called abstract simulation happened in mind of everyone who tried to reply. You probably tried to envision what choices all the persons involved had, and how they would rationalize their choice. It’s a simulation that compresses all possible (probably infinite) specific executions into a few classes of executions - e.g., instead of all possible exchanges for use case 1, you probably considered just 3 classes - when both persons expected to benefit, when only one expected to benefit, when none expected to benefit. Do you agree?

Oh, and my objections to the items in OP:

  1. Whenever two people A and B engage in a voluntary exchange, they must both expect to profit from it.

No complaints.

  1. Whenever an exchange is not voluntary but coerced, one party profits at the expense of the other.

“Expects” is missing (though as some of you said, it’s probably implied).

  1. Whenever the supply of a good increases by one additional unit, provided each unit is regarded as of equal serviceability by a person, the value attached to this unit must decrease.

What if the supply increased to some threshold, which now enables some new action? E.g., with one box I couldn’t get out of the hole, so my best use for it was as a chair to sit on. With the second, though, I can stack them, and get out.

  1. Of two producers, if A is more productive in the production of two types of goods than is B, they can still engage in a mutually beneficial division of labor.

If their productivity in two types is exactly proportional, they cannot gain anything by trade. If you say that in real life nothing ever is exactly proportional, I will say that in real life transactional costs are never exactly zero.

  1. Whenever minimum wage laws are enforced that require wages to be higher than existing market wages, involuntary unemployment will result.

I think I can come up with a counter-example, when the wages will rise without anyone getting fired. The basic idea is to have initial state with high enough price/cost margin for all producers or low enough elasticity for their products, so that they will prefer to raise wages rather than reduce production (which will result from firing workers).

  1. Whenever the quantity of money is increased while the demand for money to be held as cash reserve on hand is unchanged, the purchasing power of money will fall.

No complaints.

Minarchist,

This is incorrect. The law is indeed a priori. It doesn’t require the person to have more than one good on their value scale. (And even if it did, this would not mean it is no longer a priori… it would just mean that an extra assumption needs to be made to make it true). Other goods are not relevant at all. The law is that he will value an (n)th unit less than he values the (n-1)th unit. This is because the goal he will achieve by having the (n-1)th unit is higher on his value-scale than the goal he will use the (n)th unit to achieve.

While this is true, I think it is covered by the ceteris paribus assumption and doesn’t need to be stated as an additional proviso. If demand is indeed elastic between the market price and the fix, then that tells us that all other things won’t be equal when the fix is introduced. Employers cannot employ the same number of people at a higher price, unless they devote a higher proportion of their outgoings to labor than they are now, and hence spend less on non-labor. This violates ceteris paribus, because employers would be changing their spending habits at the same time as the fix is introduced. In other words, it is part of ceteris paribus that the total amount spent by all employers on labor won’t change when the fix is brought in, and hence if they are paying each person more, they must be employing fewer people.