I’ve been reading abit from www.perfecteconomy.com (the site could use some revamping so it is easier to read, but I suppose bear with it?), I’m also very new to Mises and the Austrian school. I was wondering what the opinion is of people here regarding the mathematically perfected economy. Right away I understand that the Austrian school rejects the idea of math being used as a model for human action- and the negative view of interest Mike Montagne holds. If anything it looks like an interesting debate.
The economy is a computer, not an equation. It keeps going because new data keeps getting fed into it by nature.
After a quick read through the website, I inferred that the author does not understand that people value money differently depending on time as they value everything else differently depending on time. For most people, money received now has a higher value than money received in the future. If I loan money to a bank, I expect to be paid back, bank pays me usury, more money in future as the bank is using that money and I am not. Similarly I am willing to pay a HIGH USURY 28% per year on credit cards as I value this money now a lot more than money I will make in future.
Usury is the only way entrepeneurs can make economic calculation where the entrepeneur trades current money for future gain.
More importantly, usury is a perfectly moral and agreeable exchange between lenders and debtors. Eliminating this will only make those parties worse off.
Another way to put it is that the economy is a process, not a state. There’s no “end” that an economy can reach and then stay there.
Socialists fetishize stasis. You see it even in their view of the environment. They have a cogntive handicap that renders them unable to understand dynamic systems, and are pathologically uncomfortable with most things that change for reasons they cannot preceptually grasp, or too fast for each step to be individually comprehended.
Speaking as a software engineer, computers run on equations.
Speaking in regard to the design of a monetary system and to perfecting a monetary system, the issue is not what humans do within them, but what limitations and obstructions they may or may not impose upon what humans can do, subject to the extrinsic system.
Thus if the currency is debt subject to interest, a circulation must be maintained to service the debt. There is no hinging upon a human decision, because if the subject humans fail to meet the requisites imposed upon them, they lose their very opportunity to pursue prosperity.
So they must maintain a circulation.
But so much as they must maintain a circulation by re-borrowing whatever they pay against principal and interest obligations as subsequent sums of debt, increased so much as periodic interest… then the sum of debt multiplies by ever greater increments of ever greater sums of periodic interest on an ever greater sum of debt, until ultimately a sum of debt exceeds their capacity to service debt and sustain the commerce necessary to do so, and the system fails.
So too, we can readily solve that equation for inherent, irreversible multiplication of debt, because the sole agent of the multiplication is interest.
Likewise, if inflation and deflation are defined respectively as increases or decreases in circulation per the wealth the circulation is intended to represent [or whatever], we readily solve inflation and deflation only by maintaining a circulation which at all times is equal to the current value of the wealth.
The only way to do that is to introduce only just so much circulation as will sustain or is equivalent to the wealth; and to pay the resultant obligation at the rate of consumption or depreciation (which are to be understood to be equal).
So likewise we can readily solve inflation and deflation, irrespective of any possible influence of human decision, because the matter is resolved by mathematic solution of the definitions.
Our final class of problem imposed by a monetary system is systemic manipulation of the cost or value of money or property. Because a system engenders any such manipulation only by the vehicles of inflation, deflation, or interest, thus we have already solved this class of problem because we have eradicated interest and solved inflation and deflation by our further schedule of payment.
This is mathematically perfected economy.
No, they run on computations. It takes very sophisticated software to solve equations on computers.
The only desirable exchange between producers is to exchange equal measures of production for the production of others.
You haven’t justified usury, which is coercive cost attached to our promises to pay each other. Instead, you have proven you’re the cause of failure under multiplying debt.
Moreover, the “entrepreneur” cannot as you assert, be trading current money for future gain: Against the hope of succeeding, the entrepreneur is coerced to take on an obligation which can only multiply debt in proportion to the circulation until inevitable collapse – which makes “future gain” ever less possible, and ultimately impossible.
ABOUT INTEREST, KEY TO THE CYCLE OF USURY: ‘IT’S THE INTEREST, STUPID, IT’S THE INTEREST’
Even ignoring his methods, this guy is completely wrong.
“Austrian Economics” — a purported discipline which itself does not even claim to solve the problems before us, and which in fact advocates the very things which are the cause of our problems… namely, “interest,” and unearned gain.
Let me ask everyone something:
“Inflation” and “deflation” are defined respectively as increases or decreases in circulation per related production. That is, the proper/traditional definition of inflation is an increase in circulation per the very things for which so much currency was introduced to circulation. It has always only been theoretical that “inflation” caused increasing prices. In all the pseudo sciences of purported “economics,” there is no proof and no formal theorem which establishes that “inflation” engenders increasing costs.
So, before I ask my question, let me say first that I can and have proved this unqualified proposition wrong; and that the story of my first spewing forth of the inadvertent contrarian proposition best puts the questions at hand in their deserved context, because they are the very questions every student, the teacher, and their teacher before and so forth should have asked.
Please commence to ignore.
Computations are equations. So too do equations represent the functions of monetary system.
That is just silly. The most desirable exchange is that is which both parties desire what they are getting more than what they are giving. When I bought my car, I desired the car more than the money I exchanged. The dealer, on the other hand, desired my money more than the car. Since the value of any good is strictly (and demonstrably) subjective, how can there possibly be “equal measures”?
Usury/interest is simply compensation for my allowing you to use my money for a fixed time. During that time, I have deprived myself of its use. If you borrow $1,000 from me and agree to pay back $1,110 in a year, that extra $100 is the compensation for the year I spend unable to use my $1,000.
Leave it to an Austrian to lecture a software engineer not only on how computers work, or what they process, but on software they have written which does just what you say cannot be done or they do not understand, and which you yourself obviously do not understand.
Visit our pages and download the source code to models I provided the Reagan Administration in 1983 which accurately projected by the very comprehensible process I described… the very debt we have accumulated to this moment.
When you’re ready to come down from your high-chair, refute the math, or the fact it projected the accumulation of debt it did.
Until you do that, you offer no understanding but pomp.
And so, what do you claim Austrian “Economics” solves?
You don’t even know what money is.
Money is not gold. Money is not notes. Money is any commodity used in an indirect exchange.
Any commodity, even those used as money, will become less valuable as supply increases. This is what causes inflation. If the supply of chewing gum increase each stick will exchange for less money. And inversely, if the supply of money increases each unit of money will exchange for fewer sticks of gums. If everything seems to be getting more expensive relative to money, it is really money that is becoming less expansive(ie valuable).
Also then, how to do you refute the proposition of a singular solution to inflation and deflation, or perpetual multiplication of debt by interest?
No, no, no. You don’t know what money is if you restrict it to your definition. Money is also the units of a monetary system; and the rule is that it is not an increase in “money” which is inflation, but an increase in money/circulation per the wealth the circulation is intended to represent.
Of course, as Austrians never abide by rules or definitions, we can see why this discussion has degenerated to your standard.
I’ve actually still haven’t been given a satisfactory reason as to what is wrong with deflaion and why there needs to be a “solution”. Deflation is a good thing.
Thats your own personal definition. It doesn’t hold water.
If the money is inflated more quickly than production increases there will be an increase in price levels. If money is inflated more slowly than the increase in production there will be a decrease in price levels. But under both conditions the money supply is increase, thus inflating.
Many people incorrectly equate general price increases with inflation, you are doing so to a lesser a degree.
Of course, most Austrians oppose government currencies and endorse free market money: letting individuals choose the conditions of their exchanges. That system would completely obsolete your entire theory.
Oh, so because you can’t refute solution, deflation is a good thing?
And you need help answering to that question?
What if there was no money suddenly, and yet we have all these debts to pay in money? That’s just fine, because you don’t see the problem?
It’s just fine, because you don’t see the problem of ever less money all the while competing to service ever greater debt, while at the same time, more of every unit of currency is dedicated to servicing debt, versus sustaining the commerce which is compelled to service the debt or fail?
Well, we should all really be impressed.
Deflation is seperate from price decreases. Even a gold standard would be inflationary if newly mined gold was added to the money supply more quickly than gold was consumed by production.
If we had a free market and gold became prohibitively scarce then substitutes would be used, like silver or copper or platinum. In fact, the use of substitutes would ensure that gold never became prohibitively scarce. There would be no “money supply.” Things of like value would be exchanged for things of like value. Value is stored in every commodity.
As usual, the problem is government. Abolish legal tender laws.