Human action help with Grayson Lilburne

Economics Economics Questions
1

Grayson has kindly agreed to help me and answer my questions in regard to Mises’ Human Action, this will probably be a long thread and anyone is allowed to post questions in regard to Mises’ Magnum Opus.

So here goes

I think it would be more convenient if we had a private conversation on this matter rather than clogging up the entire forum with the discussion. So just some quick questions off the top of my head dealing with earlier chapters

  1. The nature of praxeology
    Despite spending several chapters on the subject I still feel as though the praxeological method is defined rather hazily, so am I right in considering that the praxeological method involves the creation and utilization of imaginary constructs as to human society and action based upon the “praxeological law” which is that man acts in accordance with his value preferences, Is this correct? Is praxeology a greater and larger study in some respect?
  2. The leap
    Is there a reason why it seems as though Mises seems (to me) to jump from a meticulous dissection of all forms of exchange and creating a number of dichotomies (interpersonal, autistic, ECT.) he then seems to jump straight into the market society where all men automatically work for exchange with the universally accepted means of exchange? I feel as though its just a bit of a leap, not that its wrong.
  3. The placement of “the market”
    Is there a reason why Mises talks multiple times about the market before his section which is totally devoted on it? For instance it seems to me as though “The sphere of economic calculation” would be better placed after the market section once the true nature of the market is revealed?
  4. The ERE
    At the point where I’m at (Chapter 16) does the ERE ever reappear for analysis? I’m still at a bit of a loss for exactly the purpose that it served except the contrast of a sort of “Utopian economy” and the impossibility of the final state of rest in any but an imaginary construct
  5. Empirical evidence
    Am I right in thinking that Mises’ attack against empirical evidence being employed in economic analysis is that it can be fallacious because of the fact that variables cannot be tested and empirical studies ignore what really drives human behavior? While I agree with the basic premise I don’t understand why it can’t help to lead us to certain conclusions as long as we are primarily praxeological about our analysis. Isn’t this practically proved by the fact that Mises constantly sites how capitalism has improved the standard of living for all humanity and that much of Rothbard’s work was based off of empirical evidence?
2

“am I right in considering that the praxeological method involves the creation and utilization of imaginary constructs as to human society and action based upon the “praxeological law” which is that man acts in accordance with his value preferences, Is this correct? Is praxeology a greater and larger study in some respect?”

The constructs themselves are not based on praxeological laws. The constructs are a set of assumptions. They are mental tools which help us think through praxeological considerations and discover praxeological laws.

Is there a reason why it seems as though Mises seems (to me) to jump from a meticulous dissection of all forms of exchange and creating a number of dichotomies (interpersonal, autistic, ECT.) he then seems to jump straight into the market society where all men automatically work for exchange with the universally accepted means of exchange? I feel as though its just a bit of a leap, not that its wrong.

There is no such jump. Part 3 provides a transition from considering non-market action to market action by explaining what calculative action is, and how it differs from non-calculative action. Only after he has carefully spelled out that difference does he embark upon explaining how a market economy functions.

Is there a reason why Mises talks multiple times about the market before his section which is totally devoted on it? For instance it seems to me as though “The sphere of economic calculation” would be better placed after the market section once the true nature of the market is revealed?

You have to understand what economic calculation is before you can understand an economic system that is predicated upon it.

At the point where I’m at (Chapter 16) does the ERE ever reappear for analysis? I’m still at a bit of a loss for exactly the purpose that it served except the contrast of a sort of “Utopian economy” and the impossibility of the final state of rest in any but an imaginary construct

Yes, the ERE is used several times after that point. The ERE helps you think through the distinction between interest and profit, and helps you understand how non-ERE markets tend toward final prices.

Isn’t this practically proved by the fact that Mises constantly sites how capitalism has improved the standard of living for all humanity and that much of Rothbard’s work was based off of empirical evidence?

Mises’ statement is an illustration, not evidence. Rothbard’s empirical work is economic history, not economics.

3

“The constructs themselves are not based on praxeological laws. The constructs are a set of assumptions. They are mental tools which help us think through praxeological considerations and discover praxeological laws.”

Could you give me an example of full praxeological reasoning? Something I don’t understand is exactly how far praxeological laws run, for instance we have the praxeological axiom from which we can deduce our models, but then from here and using our models can we discover laws that are also praxeological? For instance if we reason it out and see that without money calculation is impossible would this then be a praxeological law? Or would this be catelectics? Also I don’t understand the difference between economics and praxeology.

“Mises’ statement is an illustration, not evidence. Rothbard’s empirical work is economic history, not economics.”

What do you mean illustration? Surely the point of providing the example of the fact that living conditions have improved under capitalism is meant to demonstrate Mises’ point, if empirical support cannot help to back up an economic claim then there is no point in including it. Surely Rothbard’s work on economic history in both “America’s Great Depression” and his work on banking was meant to give an example of the fact that the Austrian theory was correct.

4

Could you give me an example of full praxeological reasoning? Something I don’t understand is exactly how far praxeological laws run, for instance we have the praxeological axiom from which we can deduce our models, but then from here and using our models can we discover laws that are also praxeological?

When we use imaginary constructions to reason things out, we are still deriving conclusions from axioms. The imaginary constructions are just a set of assumptions which we use to isolate factors in our mind. To understand originary interest, we must distinguish it from profit. To help us isolate originary interest in our minds, we imagine a world in which there is no uncertainty, and thus no profit. We don’t really derive originary interest from the ERE; originary interest is a category of action, and can be derived from the definition of action simply by spinning out further implied definitions, even without any imaginary constructions; just as we can derive the laws of autistic exchange directly from the action axiom even without Crusoe thought experiments, even though the Crusoe thought experiment might be a helpful tool. Imaginary constructions are thinking aids, not premises.

What do you mean illustration? Surely the point of providing the example of the fact that living conditions have improved under capitalism is meant to demonstrate Mises’ point, if empirical support cannot help to back up an economic claim then there is no point in including it.

A geometry teacher might have his students see with measuring tape how the Pythagorean theorem plays out in the real world, as an illustration. That does not mean he’s treating the measurements as proof of the Pythagorean theorem.

Surely Rothbard’s work on economic history in both “America’s Great Depression” and his work on banking was meant to give an example of the fact that the Austrian theory was correct.

No. Rothbard used economic theory along with empirical data for the purpose of determining what caused what during the Great Depression. He did not approach the historical event as a “test” for the theory.

5

This is a very ‘greek’ (platonic) insight.

6

“When we use imaginary constructions to reason things out, we are still deriving conclusions from axioms.”

So then am I right in thinking that all of Mises’ entire examination of economics is derived from the axiom “man acts to bring about what he believes will be a more satisfactory state” and then from there he builds all else? Would then the statement “money is tool for calculation and exchange” be a case of a praxeological law? Or would it be nothing more than an assumption for certain events, a condition only true under certain circumstances for instance the above would be an assumption because it does not imply that people are necessarily exchange things or accept money for transactions. If however I said “When individuals use money as a means for satisfying tier desires money becomes a tool for calculation and exchange through the price level and profit and loss” just as when I say “a quadrilateral is an object where all sides have equal length” is not necessarily true, it is only true if the quadrilateral in question is a rhombus, and therefore the above is an assumption, but when I say “a rhombus has four sides of equal length” this is then a geometrical law.

Are these two cases comparable?

“A geometry teacher might have his students see with measuring tape how the Pythagorean theorem plays out in the real world, as an illustration. That does not mean he’s treating the measurements as proof of the Pythagorean theorem.”

So it is indeed a case of backing up a statement? Although it is not the reason behind it per se? For instance if the teacher were to do this and the two legs did not, when their squares were added together, equal the hypotenuse, then the teacher would look like a bit of an ass. So this is a case of it does indeed help to back up the statement made.

“He did not approach the historical event as a “test” for the theory.”

And what would Rothbard have done if his statistics did not match Austrian theory?

I’m sorry if I’m being difficult but this is what I’ve always wondered about the Austrian method. My feeling has always been that economics should be primarily logical/praxeological and then from there you attempt to validate your claims with empirical evidence. If the statistics do not match up with your theory consistently when all major elements are ideal then you’re doing something wrong.

7

Yes, laws that refer to economic calculation are only applicable to conditions in which economic calculation is present.

For instance if the teacher were to do this and the two legs did not, when their squares were added together, equal the hypotenuse, then the teacher would look like a bit of an ass. So this is a case of it does indeed help to back up the statement made.

If the teacher exhibited results that did not agree with the Pythagorean theorem, it would only demonstrate that the teacher made a mistake in measurement or in calculation, or that he is not in fact dealing with a right triangle in the first place. It would not refute the Pythagorean theorem.

And what would Rothbard have done if his statistics did not match Austrian theory?

If the data does not seem to demonstrate the playing out of a certain market mechanism described by economic theory, (assuming the data is correct) that would indicate that circumstances must have been dominated by another market mechanism (also described by pure economic theory)/set of factors, or the interplay of several market mechanisms/sets of factors. The economic historian uses data to determine which economic laws are most relevant in any given episode. If the economic historian discovers trustworthy data that show that after an increase in the supply of a certain good, the price for that good increased, instead of falling, that would not testify against the law of supply. That would instead be an indication that other relevant factors are at work, like perhaps a precipitous drop in the supply of another good for which the first good can serve as a substitute.

If the statistics do not match up with your theory consistently when all major elements are ideal then you’re doing something wrong.

The most historical data can do is give an economist a clue that perhaps he has performed fallacious reasoning in deriving the economic theorems he has been operating with. But even then, he must use discursive reasoning to catch the fallacy, and then to adjust his theory according to corrected reasoning. Say you went to geometry class tired, and, by making errors in logic, mistakenly derived from the axioms of geometry a faulty version of the Pythagorean Theorem that says that A squared plus B squared is actually C cubed. Then, through the course of measuring right triangles you found that the data did not match your theorem. That can be a clue that you had reasoned incorrectly in formulating the theorem. But it is not proof against your theorem. For all you know, you may be measuring incorrectly, or not dealing with right triangles. The historical experience is a clue, but it is not a replacement for correct reasoning. To truly be a geometer, you must not simply notice that A squared plus B squared in your experience generally equals C squared. To be a geometer, you must deductively derive that conclusion from the axioms of geometry. You must spot your error through discursive reasoning, and formulate the correct theorem through discursive reasoning.

8

I forgot to address this:

“Also I don’t understand the difference between economics and praxeology.”

Economics, in the stricter sense, is a synonym of catallactics. Catallactics is the subset of praxeology that deals with the market economy, which is the interplay of calculative actions in society.

9

Mr. Lilburne, if I may ask a question, I’ve never understood the distinction, within HA (of which, I’ve read about half) between objective and subjective economics.

For instance, Mises talks about time and capital and money as subjective concepts -they all exist as concepts only because they have reference to acting man. But then Mises talks about wealth and not just subjective wealth as in attaining ends but also material wealth which seems to be a wholly objective thing. Is there a tension between subjectivity and objectivity then in HA?

And two, is it just me or doesn’t economics seem to have a very existentialist flavor to it?

10

I don’t know what passages make you think Mises thinks of wealth as objective. Material things only constitute wealth if an individual subjectively esteems them to be useful.

What do you mean by an existentialist flavor?

11

“These grumblers do not realize that the tremendous progress of
technological methods of production and the resulting increase in
wealth and welfare were feasible only through the pursuit of those
liberal policies which were the practical application of the teachings
of economics.” (44)

“Those fighting for free enterprise
and free competition do not defend the interests of those rich
today. They want a free hand left to unknown men who will be the
entrepreneurs of tomorrow and whose ingenuity will make the life
of coming generations more agreeable. They want the way left open
to further economic improvements. They are the spokesmen of
progress.” (119)

So these passages suggest that Mises finds liberalism and economics a positive and objective good. Perhaps he is saying that it is an objective good from the fact that everyone’s subjective valuations are maximized but then, isn’t there an even more jarring dissonance between subjectivity and objectivity in HA/econ?

And by existentialist flavor -I think that heidegger, believed that being was=to the human person and his experiences and so his philosophy and metaphysics was focused on the acting person and was further reflected in his terminology like how something can be “at-hand” and etc. Isn’t this shockingly similar to Misesean econ?

12
13

“All he is saying is that capitalism and liberalism makes everyone richer”

That’s exactly my point -how can Mises claim that the subjective valuation of individuals (which can lead to a multiplicity of effects) always tends towards making everyone richer (a word which itself should be fully subjective and that doesn’t have to do with material wealth, yet seems to be taken objectively)?

So again, there must be some subjective-objective tension…or something?

14
15
  • What exactly does mises mean in the section on monopoly prices when he is talking about labor unions? He states that the labor unions end up restricting supply but that this does not lead to a monopoly rate, how is this possible? Surely a limiting of available supply leads to a monopoly wage rate? The only reasoning to his meaning is the idea that the union absorbs as much labor as possible as it gains power until the point where it can effectively restrict supply. In this way all those who are in “before the gates close” receive higher wage rates because at this point the labor union does not attempt to restrict supply any further than is already the case, that is to say supply is fixed at X which is the wage at which all workers will labor for, but none will work below X, in this way the new supply is X and no one can be supplied below this number, but at the same time the labor union will not attempt to go any further and cut supply beyond this number. It is as though the entire workforce now only consists of those individuals who are in the labor union.

Is this correct?

  • I don’t understand Mises’ conclusion in the chapter dealing with monopoly price. Why does he feel that it is impossible for it to emerge on a free market? Furthermore he seemed to admit openly in the section about territorial land monopolies that there was no way of opening them up to competition.
  • Why is it that Mises seems to totally disregard the idea of monopoly of demand? Simply because an individual buyer of something will not enjoy the same amount of a good if he had offered a higher price why does this matter? There is still an optimal amount of a product that the individual wants, and therefore if a monopoly of demand ensues he will only offer it until this optimal amount is achieved. Or is this indeed what Mises is saying to the letter? As he only values the consumer in question rather than the seller?
  • Is all that is to be gleaned from section 12 that “all prices effect all other prices”? What does Mises mean when discussing labor at the end of this section? Why is it that labor is needed to integrate the entire pricing system? Is this statement to do with wages or to do with making factors of production integrated into final products?
  • “Neither is the pricing process a form of distribution. As has been pointed out already, there is nothing in the market economy to which the notion of distribution could be applied.”

Does this statement mean that distribution in a market economy is not distribution per se? Merely an aspect of exchange which does indeed distribute out scarce goods and services? If not I don’t understand this statement

  • Am I right in considering at the end of the chapter Mises’ analysis that costs don’t mean anything because costs too are subjective value preferences? For instance if I buy a pin making machine it will be valued based upon what the individual who owns it subjectively values the machine at?
  • I don’t understand Mises’ definition of money. What is the difference between a money and a medium of exchange?
  • In Mises’ examination of money he seems to say there are two ways which money could have developed, either by forceful decree or by slow evolution through the market process. He seems however, to lean to the latter why is this?
  • I don’t understand Mises’ praxeological statement that money must have originally evolved from a point where the money in question had exchange value with everything else. While I bet this is what happened historically (although this is the exact opposite of what he was trying to prove) if a whole society decided to move directly from direct exchange to indirect exchange using a fiat currency then why would this be impossible rather than just unlikely?
  • When, in section 4 of chapter 17, Mises talks about miners he seems to act as if they do not affect the economy in the same way that those who receive new money first do, why is this the case? Or am I misinterpreting Mises?
  • Does Mises’ entire theory about demand/supply of currency imply that the market can never work very smoothly because prices will necessarily be uneven?
  • Can’t the demand and supply for money be predicted by entrepreneurs just like the rest of economic activity?
  • Does Mises imply that after the adjustment period is completed and monetary distribution returns to the comparative levels that they did before inflation that wealth and price structure will be necessarily changed forever? If so, is this beyond just normal fluctuations that occur with or without inflation?
  • I fear the effects of inflation, but in section 8 of chapter 17 Mises seems to me to go off the deep end. I mean why is it that the great majority of people would choose to abandon all cash savings should they realize the effects of inflation? I understand that in the United States the chance of anything but inflation is incredibly slim, yet this does not mean that I stop saving. Simply because the value of a currency is depreciating does not mean that it becomes useless or will become useless in future, it is merely depreciating at a certain rate which makes it less useful than it would otherwise be, this doesn’t mean that it becomes worthless although its value surly shrinks. So unless he is only talking about hyperinflation, what is Mises thinking in this section? If this is true wouldn’t the exact opposite be true if, say, the government enacted a policy of deflation and then it was realized? Suddenly wouldn’t everyone save indefinitely?
  • When talking about commodity credit (I’m just going to call the other “F” credit because I don’t want to have to spell out the word every time) and compares it to F credit he says that a bank can only lend the exact amount of its commodity credit if it has been entrusted with by its savers, but this can’t be true can it? Because in the case of demand deposits the bank cannot lend out commodity credit because of the act that then it is no longer redeemable and it is not commodity credit at all. This is exactly my problem with full reserve banking, it seems as though there would never be any money that banks could lend
16

fakename,

Praxeology and thymology are objective sciences concerning subjective values. Thymology can make make objective statements (though not with certainty) about the content of the ends of others. Given those ends, praxeology can help determine whether any means chosen are serviceable.

17

What exactly does mises mean in the section on monopoly prices when he is talking about labor unions? He states that the labor unions end up restricting supply but that this does not lead to a monopoly rate, how is this possible? Surely a limiting of available supply leads to a monopoly wage rate? The only reasoning to his meaning is the idea that the union absorbs as much labor as possible as it gains power until the point where it can effectively restrict supply. In this way all those who are in “before the gates close” receive higher wage rates because at this point the labor union does not attempt to restrict supply any further than is already the case, that is to say supply is fixed at X which is the wage at which all workers will labor for, but none will work below X, in this way the new supply is X and no one can be supplied below this number, but at the same time the labor union will not attempt to go any further and cut supply beyond this number. It is as though the entire workforce now only consists of those individuals who are in the labor union.

A monopoly price is, by definition, the result of a producer withholding some of his own stock. The labor which a union keeps out of a market is not part of “the union’s stock”, which it might otherwise sell on the market. The union does not own the labor which it locks out.

I don’t understand Mises’ conclusion in the chapter dealing with monopoly price. Why does he feel that it is impossible for it to emerge on a free market?

He does not say any such thing. According to Mises monopoly prices CAN emerge on a free market, although there is no way for any regulator to know what price would better serve consumers than the monopoly price, and as a rule (which means usually, not always) they are a result of government intervention.

Why is it that Mises seems to totally disregard the idea of monopoly of demand?

He does not say there cannot be a monopoly of demand. He says a monopoly of demand cannot result in monopoly prices.

Simply because an individual buyer of something will not enjoy the same amount of a good if he had offered a higher price why does this matter?

Restricting demand is not about holding out for a lower price. It is buying less.

There is still an optimal amount of a product that the individual wants, and therefore if a monopoly of demand ensues he will only offer it until this optimal amount is achieved.

That always occurs whether or not there is a monopoly of demand.

Is all that is to be gleaned from section 12 that “all prices effect all other prices”?

No.

What does Mises mean when discussing labor at the end of this section?

Market phenomena are mutually interdependent when they share non-specific factors. Labor is a highly non-specific factor which pervades the entire market. Therefore, labor makes all market phenomena mutually interdependent.

Why is it that labor is needed to integrate the entire pricing system?

Labor is not “needed to integrate the pricing system”. The pricing system is integrated because labor is a factor of production which is required in every production process.

“Neither is the pricing process a form of distribution. As has been pointed out already, there is nothing in the market economy to which the notion of distribution could be applied.”

Does this statement mean that distribution in a market economy is not distribution per se? Merely an aspect of exchange which does indeed distribute out scarce goods and services? If not I don’t understand this statement

The intention of market participants is not to distribute goods, it is to acquire profits and avoid losses.

Am I right in considering at the end of the chapter Mises’ analysis that costs don’t mean anything

Mises does not say costs “don’t mean anything”, he says they aren’t “independent of personal value judgments”

What is the difference between a money and a medium of exchange?

Money is a commonly used medium of exchange. If one kid, one time, exchanges trading card A for trading card B, only so that later he can exchange B for trading card C, trading card B is a medium of exchange, but it is not money, because it is not used as a medium of exchange by the market in general.

In Mises’ examination of money he seems to say there are two ways which money could have developed, either by forceful decree or by slow evolution through the market process. He seems however, to lean to the latter why is this?

I think “lean” is an understatement. As to why, what part of these 3 paragraphs, or the paragraphs which follow them, are not clear?

"There were authors who tried to explain the origin of money by decree or covenant. The authority, the state, or a compact between citizens has purposively and consciously established indirect exchange and money. The main deficiency of this doctrine is not to be seen in the assumption that people of an age unfamiliar with indirect [p. 406] exchange and money could design a plan of a new economic order, entirely different from the real conditions of their own age, and could comprehend the importance of such a plan. Neither is it to be seen in the fact that history does not afford a clue for the support of such statements. There are more substantial reasons for rejecting it.

If it is assumed that the conditions of the parties concerned are improved by every step that leads from direct exchange to indirect exchange and subsequently to giving preference for use as a medium of exchange to certain goods distinguished by their especially high marketability, it is difficult to conceive why one should, in dealing with the origin of indirect exchange, resort in addition to authoritarian decree or an explicit compact between citizens. A man who finds it hard to obtain in direct barter what he wants to acquire renders better his chances of acquiring it in later acts of exchange by the procurement of a more marketable good. Under these circumstances there was no need of government interference or of a compact between the citizens. The happy idea of proceeding in this way could strike the shrewdest individuals, and the less resourceful could imitate the former’s method. It is certainly more plausible to take for granted that the immediate advantages conferred by indirect exchange were recognized by the acting parties than to assume that the whole image of a society trading by means of money was conceived by a genius and, if we adopt the covenant doctrine, made obvious to the rest of the people by persuasion.

If, however, we do not assume that individuals discovered the fact that they fare better through indirect exchange than through waiting for an opportunity for direct exchange, and, for the sake of argument, admit that the authorities or a compact introduced money, further questions are raised. We must ask what kind of measures were applied in order to induce people to adopt a procedure the utility of which they did not comprehend and which was technically more complicated than direct exchange. We may assume that compulsion was practiced. But then we must ask, further, at what time and by what occurrences indirect exchange and the use of money later ceased to be procedures troublesome or at least indifferent to the individuals concerned and became advantageous to them."

if a whole society decided to move directly from direct exchange to indirect exchange using a fiat currency then why would this be impossible rather than just unlikely?

He doesn’t say it’s impossible, just that it is indeed highly unlikely, especially compared to a market-based evolution, and that even if it did happen at some point somewhere, knowledge of that incident would do nothing to further economic science.

When, in section 4 of chapter 17, Mises talks about miners he seems to act as if they do not affect the economy in the same way that those who receive new money first do, why is this the case? Or am I misinterpreting Mises?

You are indeed misinterpreting him. In the paragraph you’re referring to, he is explaining the reasoning of people who say that only in order to refute it.

Does Mises’ entire theory about demand/supply of currency imply that the market can never work very smoothly because prices will necessarily be uneven?

No; why would that be the case?

Can’t the demand and supply for money be predicted by entrepreneurs just like the rest of economic activity?

Money is one side of every exchange, so every entrepreneurial prediction of future prices entails a prediction about the demand and supply of money.

Does Mises imply that after the adjustment period is completed and monetary distribution returns to the comparative levels that they did before inflation that wealth and price structure will be necessarily changed forever?

Those two things contradict each other. Cantillon effects mean that the original comparative levels are never restored.

So unless he is only talking about hyperinflation, what is Mises thinking in this section?

When Mises talks about the “crack-up boom” or the “flight to real values”, he is indeed talking about hyperinflations.

Because in the case of demand deposits the bank cannot lend out commodity credit because of the act that then it is no longer redeemable and it is not commodity credit at all.

" the amount of money which its customers have entrusted to it." does not necessarily mean demand deposits. It could mean CDs and the like.

18

“Restricting demand is not about holding out for a lower price. It is buying less.”

Isn’t this not necessarily true? If demand decreases then this implies that consumers will not purchase at the previous price, this does not imply that they will not buy previous number of goods at the newly desired, lower, price. Therefore whether a decrease in demand will result in a decrease in supply available at the new price depends upon whether or not the firms selling goods have a better alternative?

For instance, if the buyers of A, are now paying price X from price Y then they will quite likely buy whatever amount of A they want so long as the price is reduced to X. For the firms their supply will only decrease if price X is so low that producing the old amount of A results in a net loss? As far as I can tell the only instance that the above is true is if we assume a state of perfect competition.

“Labor is not “needed to integrate the pricing system”. The pricing system is integrated because labor is a factor of production which is required in every production process.”

“Market phenomena are mutually interdependent when they share non-specific factors. Labor is a highly non-specific factor which pervades the entire market. Therefore, labor makes all market phenomena mutually interdependent.”

Could you expand upon these statements? Or at very least clarify what exactly is meant in this process of “integration”?

“You are indeed misinterpreting him. In the paragraph you’re referring to, he is explaining the reasoning of people who say that only in order to refute it.”

Does this imply then that in any society where the money supply increases that there will always be a misallocation of resources brought about by inflation if indeed those who bring in the increase in gold play the same effect as those who are given the newly printed bills?

“Those two things contradict each other. Cantillon effects mean that the original comparative levels are never restored.”

I didn’t know that Richard Cantillon (I assume it’s named after him) had something named after his work, although I have heard that in many ways it was indeed a precursor to the ABCT. So why would this be the case that they are never restored to previous levels? Is it because of the fact that those who first recieve the new money will have increased their material wealth so that their demands are necessarily changed? Or is it this culminated with the fact that the market is always changing and therefore there is no possible way that the two are even comparable?

“Because in the case of demand deposits the bank cannot lend out commodity credit because of the act that then it is no longer redeemable and it is not commodity credit at all.”

" the amount of money which its customers have entrusted to it." does not necessarily mean demand deposits. It could mean CDs and the like."

But in the case of demand deposits wouldn’t what I have said above be the case?

19

So capitalism and subjective valuations are not the same? I thought that the latter lead to the former. Please describe the differences between the two though, since I myself can’t find it in HA.

20

capitalism is where private people own the means of production and can do as they please with their money. As opposed to socialism, where they dont own it, or fascism/interventionism, where they are told what to do with it.

One can look around and discern by observation if a country is capitalist or not. What I mean is, it is a verifiable fact of reality.

subjective valuation is a theoretical answer to a theoretical q. what determines the price of things? Some say its subjective valuation, others that its the amount of labor invested in it.

Whatever the answer, it’s unrelated to what a praticular country chooses as its economic system. As proof, I offer that the world has seen all three systems [caplism fascism, commies] even though there is only one true answer to the q “what determines price?”

As for why doesn’t Mises differentiate, I guess because he assumed the difference was obvious.