Economic Calculation Problem Debunked!??

Economics Economics Questions
361

When money itself is controlled by the government - this cannot possibly be considered an argument against capitalism.

That’s another misconception. The Federal Reserve Act was not created by any government actually, show me the reasoning for this, I don’t understand … Where is capitalism not a system of subjugation?

http://en.wikipedia.org/wiki/Money_Trust

Here’s another quote from Woodrow Wilson..

In 1913 Woodrow Wilson wrote, “If the government is to tell big business men how to run their business, then don’t you see that big business men have to get closer to the government even than they are now? Don’t you see that they must capture the government, in order not to be restrained too much by it? Must capture the government? They have already captured it.”[81]

http://en.wikipedia.org/wiki/Revolving_door_%28politics%29
http://en.wikipedia.org/wiki/Regulatory_capture

At a January 2010 hearing of the House Committee on Oversight and Government Reform, U.S. Representative Marcy Kaptur told former president of the New York Fed and current Secretary of the Treasury, Timothy Geithner, “A lot of people think that the president of the New York Fed works for the U.S. government. But in fact you work for the private banks that elected you.”[42]

So, could you let me know of how the Misesian model seeks to reform economics? And show me in what way is it effective and how would it actually effect me?

Defining Capitalism.. —Seems to me that you misunderstand what the game’s about auctionguy10. Also, it seems the Federal Reserve is indeeed the child of Capitalism . . The Federal Reserve was just another attempt at reforming a corrupted Capitalist’s economy. Even though the U.S. Treasury receives most the profits at the end of the year, does not make the system non-Capitalist. . Capitalist Economics holds true to its nature, despite Political variations, it seems.

http://en.wikipedia.org/wiki/Capitalism#Democracy.2C_the_state.2C_and_legal_frameworks

Capitalism begat the Federal Reserve..
http://en.wikipedia.org/wiki/History_of_the_Federal_Reserve_System

The chief of the bipartisan National Monetary Commission was financial expert and Senate Republican leader Nelson Aldrich. Aldrich set up two commissions — one to study the American monetary system in depth and the other, headed by Aldrich himself, to study the European central-banking systems and report on them.[5] Aldrich went to Europe opposed to centralized banking, but after viewing Germany’s banking system, he came away believing that a centralized bank was better than the government-issued bond system that he had previously supported. Centralized banking was met with much opposition from politicians, who were suspicious of a central bank and who charged that Aldrich was biased due to his close ties to wealthy bankers such as J.P. Morgan and his daughter’s marriage to John D. Rockefeller, Jr.[5]

In 1910, Aldrich and executives representing the banks of J.P. Morgan, Rockefeller, and Kuhn, Loeb & Co., secluded themselves for 10 days at Jekyll Island, Georgia.[5] The executives included Frank A. Vanderlip, president of the National City Bank of New York, associated with the Rockefellers; Henry Davison, senior partner of J.P. Morgan Company; Charles D. Norton, president of the First National Bank of New York; and Col. Edward House, who would later become President Woodrow Wilson’s closest adviser and founder of the Council on Foreign Relations.[6] There, Paul Warburg of Kuhn, Loeb, & Co. directed the proceedings and wrote the primary features of what would be called the Aldrich Plan. Warburg would later write that “The matter of a uniform discount rate (interest rate) was discussed and settled at Jekyll Island.” Vanderlip wrote in his 1935 autobiography From Farmboy to Financier :

How is capitalism not inevitably centralized? How is the free market not utopian?

http://en.wikipedia.org/wiki/Free_market

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The reasoning for this? its in the same link you provided. The federal reserve act was proposed by congress and signed into law by the President of the united states. If the president signs something into law that means its not created by government? What? huh? WHO!?! I dont get it. The government had a direct hand in creating it.

Capitalism is the opposite of subjugation since it can only exist through voluntary agreement.

Woodrow wilson makes a good point there- but you miss the problem. When some institution has power over everyone else- and can redistribute wealth however it pleases and set up barriers to entry in the marketplace- of course everyone is going to try to get a piece of the pie. Every political leader is bought and sold, so why is that a case to HAVE political leaders? They have rights and powers other people don’t- that is the root problem.

The complaint is that the government can be bought and sold. So why have a government? They will all be bought and sold- the problem with governments is that they operate only through force- which is why everyone wants to gain control over that force.

Proponents of the free-market never said that violence will dissapear from the earth and people won’t try to gain from another- its simply the only way people can deal with each other peacefully. A method outside of the free-market implies violence. Nothing you showed me tells me that the Federal Reserve was begat from a capitalist system- completely the opposite.

There’s plenty of free articles(and books even) on this website about Austrian economics and how policies that are anti-market get to your day to day life. You have to be a bit more specific than that.

363

You really are grasping at straws aren’t you? I would prefer it if you presented the material so we can discuss anything you are actually talking about. Otherwise this discussion is useless, and I’ll just have to dismiss everything you are saying for the time being b/c it makes no sense whatsoever. What are you actually talking about?

364

Capitalist Economics holds true to its nature, despite Political variations, it seems.

What is the true nature of Capitalism?

I always wanted to know.

365

The Capitalist philosophy sounds all well and good.. True nature remains to be seen.–>

The essential nature of capitalism is social harmony through the pursuit of self-interest. Under capitalism, the individual’s pursuit of his own economic self-interest simultaneously benefits the economic self-interests of all others. In allowing each individual to act unhampered by government regulations, capitalism causes wealth to be created in the most efficient manner possible which ultimately raises the standard of living, increases the economic opportunities, and makes available an ever growing supply of products for everyone. The free-market operates in such a way so that as one man creates more wealth for himself, he simultaneously creates more wealth and opportunities for everyone else, which means that as the rich become richer, the poor become richer. It must be understood that capitalism serves the economic self-interests of all, including the non-capitalists.

This isn’t flawed, sociologically? I suppose, maybe, maybe not. Capitalism can remain doable in a monetary-market system? Under capitalism, what about when the individual’s pursuit of his own economic self-interest does not simultaneously benefit the economic self-interests of all others? becoming the political paradigm of those holding most the capital?

Theoretically, economic self-interest could out-compete the monetary-market system.

True capitalism must be open sourced creation of wealth for one’s self . . Monetary-Market systems don’t manage open source creation of wealth for one’s self and in the process everyone else very efficiently. It’s the part that ensures concentration of wealth into the hands of the few by not being open sourced.

366

Let’s look at your claim that its a misconception that the Federal Reserve was created by government. The Federal Reserve act was legislation formed by congress and President Woodrow Wilson of the United States signed it into law. That makes it a creation of the Government. What about this doesn’t make sense? Without government action there would never have been a Federal Reserve bank.

I see that your main issue is that you don’t like to see big business interests colluding with government(considering the quotes you picked out). So I can ask you simply, why do they want to control the government? Isn’t it because the government has powers that the business doesn’t normally have?

367

Eirmos doesn’t understand what your getting at. He’s still thinking on behalf of the hivemind. He doesn’t understand that “capitalism” is just a natural state of affairs when aggression is absent.

All other economic systems only seek to alter and change the natural state of affairs.

368

Let’s look at your claim that its a misconception that the Federal Reserve was created by government. The Federal Reserve act was legislation formed by congress and President Woodrow Wilson of the United States signed it into law. That makes it a creation of the Government. What about this doesn’t make sense? Without government action there would never have been a Federal Reserve bank.

I see that your main issue is that you don’t like to see big business interests colluding with government(considering the quotes you picked out). So I can ask you simply, why do they want to control the government? Isn’t it because the government has powers that the business doesn’t normally have?

The President signed a piece of paper.. That doesn’t mean the Government created it. . You missed all the details, hence I was a little harsh on you.

So you ask: Why would big business interests want to control the government? I would say they want to be able to continue to sell goods and services for profit, so they use means to suppress and disparage others, while making life impossible for those who (in spite of) actively promote scientifically sound or superior alternatives. . If it’s b/c the government has powers that the business doesn’t normally have, then it’s driven by the desire for money-profits.. It’s b/c they need an unfair advantage to survive, greed, monopolization, domination of the market.. Some of the free market stuff makes sense, but it’s a little too bold b/c it falls short in the scientific aspect.

Is Government to blame? Yes somewhat, but definitely not even close to entirely . I’m not saying Government can solve all of our problems, but they can regulate themselves more like a scientific institution than an institution which only tells everybody what they can and can’t do, based on which interests had more money to persuade. .

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Eirmos doesn’t understand what your getting at. He’s still thinking on behalf of the hivemind. He doesn’t understand that “capitalism” is just a natural state of affairs when aggression is absent.

All other economic systems only seek to alter and change the natural state of affairs.

Big Banks and Business has for as far as I can tell, always controlled the government. The Federal Reserve was planned by private and powerful businessmen.

370

The Federal Reserve was planned by private and powerful businessmen.

Legal tender and monopoly supply = a market failure ? Really ?

371

That may or may not be true. It’s besides the point however.

372

Legal tender and monopoly supply = a market failure ? Really ?

.. I would listen to this, and go through the book later when you get a chance: The Creature from Jekyll Island . . I listened to this awhile back, not sure if this is the same exact talk, but seems about the same.

http://www.youtube.com/watch?v=lu_VqX6J93k

These are roughly the same talk..

http://www.youtube.com/watch?v=KAoDUZ1cW6I

I think that testing is necessary, to show what is market failure, vs market success.. And then determine how valid a judgement, whatever was the measurement of success . . Determining the actual market that is required.

How would a Monetary-Market System not become the eventual legal tender and increasingly-monopoly supply? That I cannot see ever happening, and I don’t remember ever seeing it.. You cannot combine a Monetary-Market system w/a Science-based regulatory institution for the purpose of serving the public and not get corruption such as regulatory capture to protect Wall Street interests.

I see what you mean by getting rid of government, not the Market, and see what happens, however, I don’t see how the Market would not become the Government and self-centralize itself.. Capitalism being a self-centered model, seems an intrinsic factor for Market Failure. .

373

Capitalism is not self centered, it is flat and thrives on cooperation.

374

Whether you believe it’s necessary or not is irrelevant my good friend. We are incapable of accurately testing where there exists no constants. Furthermore, accumulated data as a result of various empirical studies are useless when we abandon reason that can help us interpret these results.

We would be just as lost as the empiricists that tries to scientifically analyze why on the one hand flipping a coin 10 times lands heads 80% of the time but in other occurrences the probability changes randomly. Absent reason(logic) the data we mine from such testing sends us into circles of absurdities.

(Example = Modern climatologists who for the life of them cannot predict tomorrow’s weather but somehow claim to predict our impending doom 100 years from now)

The problem here is that your subjectively elected criteria of what is market success and what is market failure differs from other people. On the market there is not necessarily successes and failures. The market just is, it’s not a matter of right and wrong or success and fail. A product may die out or its growth may stifle. Depending on the parties involved and the goals of various individuals those situations could be both failures and successes. For some people it may be a success, for others it may be a failure.

When we are discussing the subjective opinions of individuals it becomes an impossibility to create a standard criteria of what is success or fail. Zealous attempts to follow the road of statistician will always be met in vain as long reason is ignored. We can only proceed down the road of extreme arrogance when we try to pretend to know what is a success or a failure. For some individuals the closure of a factory could be a success, for others a failure.

Now this does not mean I think we should abandon testing. The continued and unhealthy existing trend to polarize apriorism from a posteriori comes at a detriment to all forms of science, economics included. Testing is not done in place of reason, and vise versa. The two are used juntos.

I say this because you exhibit a desire to data mine where data mining would be counter-productive, meaningless and incoherent. Like a scientist trying to analyze the probability between heads and tails in a coin toss. 100 years of testing and he still hasn’t found a trend. Such testing is futile.

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The problem here is that your subjectively elected criteria of what is market success and what is market failure differs from other people. On the market there is not necessarily successes and failures. The market just is, it’s not a matter of right and wrong or success and fail. A product may die out or its growth may stifle. Depending on the parties involved and the goals of various individuals those situations could be both failures and successes. For some people it may be a success, for others it may be a failure.

–“Subjectively elected criteria” is a hallmark of the Monetary Market System (creates economic bias where such bias is counterproductive), whether that has anything to do w/Free Market or Capitalism or not, it is the case. Remove subjectively elected criteria and there is still decision making. The idea is for decisions to be arrived at by the Scientific Method.

Polarizing reason from empiricism, it is the Monetary Market System that polarizes opinions. . And opinions aren’t necessarily scientific facts. Success and failure concerning the economics of a market cannot be the result of opinion. . If it is, then it’s not really a scientific observation of economics (but opinion). . Empiricism is an important aspect concerning the nature of Scientific Method.

http://en.wikipedia.org/wiki/Blind_experiment
http://en.wikipedia.org/wiki/Meta-analysis

The most severe weakness and abuse of meta-analysis often occurs when the person or persons doing the meta-analysis have an economic, social,or political agenda such as the passage or defeat of legislation. Those persons with these types of agenda have a high likelihood to abuse meta-analysis due to personal bias. For example, researchers favorable to the author’s agenda are likely to have their studies “cherry picked” while those not favorable will be ignored or labeled as “not credible”. In addition, the favored authors may themselves be biased or paid to produce results that support their overall political, social, or economic goals in ways such as selecting small favorable data sets and not incorporating larger unfavorable data sets.

If a meta-analysis is conducted by an individual or organization with a bias or predetermined desired outcome, it should be treated as highly suspect or having a high likelihood of being “junk science”. From an integrity perspective, researchers with a bias should avoid meta-analysis and use a less abuse-prone (or independent) form of research.

The trend for flipping a fair coin is 0.5 probability squared for each consecutive coin flip.. The odds are always 0.5 heads 0.5 tails for each coin flip.. It doesn’t matter if you got 100 heads in a row.. On the 101st coin flip the odds are still 0.5 for getting another heads. However, probability becomes increasingly less for deviation from the 1:1 trend, so actually odds exponentially decrease when the 1:1 ratio is deviated from, but there are outliers..

Over time, the trend completely evens out to 1:1. That is reality.. But yes, just saying well 80% of ten coins were tails so that must be a universal trend, is false.

Flip 4 coins: it is 1:16 that you get all heads, 1:16 that you get all tails, 4:16 you get 3tails1head, 4:16 3heads 1tail, 6:16 you get 2tails 2heads . Try doing 16 flips, see how many times the result is all heads out of 16.
http://www.random.org/coins/

When we are discussing the subjective opinions of individuals it becomes an impossibility to create a standard criteria of what is success or fail. Zealous attempts to follow the road of statistician will always be met in vain as long reason is ignored. We can only proceed down the road of extreme arrogance when we try to pretend to know what is a success or a failure. For some individuals the closure of a factory could be a success, for others a failure.

Now this does not mean I think we should abandon testing. The continued and unhealthy existing trend to polarize apriorism from a posteriori comes at a detriment to all forms of science, economics included. Testing is not done in place of reason, and vise versa. The two are used juntos.

I say this because you exhibit a desire to data mine where data mining would be counter-productive, meaningless and incoherent.

I will keep this in mind, if you’d like to go into more detail about that, be my guest, sounds interesting. . B/c that seems to fly in the face of many things.. The whole not knowing market success from failure.. Capitalism is supposed to benefit the individual and also everyone else, even non-Capitalists . So to an extent, if one sees a failure where another sees success, then I suppose causality kicks in eventually and benefits the ones who had a negative perception of the incident, more or less?

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The type of monetary or economic system is irrelevant to the fact that individuals hold different subjective opinions. There is no objective criteria or standard for what is a success or failure.

That is precisely the point. It’s not scientific at all.

Correct and any attempt to assign an instance where there was a “Success” or a “Failure” as classified by your own set of critieria is nothing more then an elaborate opinion. It’s not science at all. Any one can set the criteria and variables to look for.

So when you try to analyze what is a success or a failure your not being scientific. Your just expressing an opinion.

That it is. It’s application however is different in nature than it is with social sciences. As stated above, we cannot test where there exists no constants.

I made a reference to the coin metaphore for a reason. There are scientists who argue that we must prove the ratio of heads to tails by perpetually running tests. I am a scientist asking us to use logic that will deliver us to the same conclusion while saving an enourmous amount of time. My reasoning will also help you interprit your test results better then the extreme empiricist.

This is called praxeology. It is the most fundamental, most basic, tenant of Austrian Economics. To an Austrian the very idea of Capitalism is defined from it.

It all depends on what the ends sought are. I am no mind reader so I cannot say.

377

Capitalism is not self centered, it is flat and thrives on cooperation.

Could you show me more what you mean?

From my quote earlier on Capitalism, “The essential nature of capitalism is social harmony through the pursuit of self-interest.. Under capitalism, the individual’s pursuit of his own economic self-interest simultaneously benefits the economic self-interests of all others”

It doesn’t seem evil or anything, but it just seems a bit out of balance to me.

378

EIRMOS,

Your posts are all over the place almost to point of being incoherent. Forget capitalism for a second and actually deal with the topic of this thread.

Solve the Economic Calculation Problem.

How would you solve the problem of ordering your society so that it functions without private ownership and without money?

If your alternative to capitalism has as many or more flaws compared to capitalism, then even with all its flaws capitalism is still the winner.

You actually have to propose something better. And don’t waste your time arguing for the end result, tell us HOW your alternative works.

379

I don’t understand. Balance of what? Show me a person performing a supposed selfless act and I’ll show you someone acting in his own self-interest.

All acts are selfish. All.

380

EIRMOS wrote :

Capitalism is not self centered, it is flat and thrives on cooperation.

Could you show me more what you mean?

Capitalism allows us to benefit ourselves by benefiting others. This ussually requires cooperation from countless different market actors many of which remain unrecognized. From a simple pencil to a complicated automobile, the process from production to consumption involves numerous cooperative exchanges between the market actors. The actor at the start of the process, e.g. miner, is as neccessary as the one in the middle, e.g. assembler, as is the one at the end, e.g. consumer. It’s a chain based on hand holding, not fist fights.