What’s the argument here over?
If you reject the static analysis of the market, then it becomes apparent that you cannot ever identify any such phenomenon as monopoly price. Burning crops proves nothing.
And what do you mean “not exact science”. Are you implying that there is science, although not so exact, in determining monopoly prices? What else or other demand responses can this science determine? Can the government apply this "science.. Econometrics perhaps?
If you reject the static analysis of the market, then it becomes apparent that you cannot ever identify any such phenomenon as monopoly price. Burning crops proves nothing.
How so?
And what do you mean “not exact science”. Are you implying that there is science, although not so exact, in determining monopoly prices? What else or other demand responses can this science determine? Can the government apply this "science.. Econometrics perhaps?
I’m talking about economic history. Economic history is not econometrics. Econometrics is about trying to establish economic theory through economic data. Economic history is about trying to discover the causal relations of what happened in the past using a priori economic theory. Mises’ a priori economic theory defines what a monopoly price is, and what can conceivably cause it. Economic history brings to bear data, the specific understanding, and all of economic theory to try to discern whether a monopoly price has occurred in the past.
Do you still cling on to your original claim that burning crops must constitute a monopoly price in a free market?
Well, you implied that there is some method, although imperfect, by which you can detect a monopoly price. Econometrics is pseudo-science, which I doubt you’ll disagree with, and economic history is hopeless in this task of revealing the monopoly price. So I still ask you to reveal your method by which you can identify the monopoly price in the free market.
I wouldn’t use the word “cling”, because that usually implies an irrational desire for something to be true. But, yes I think burning crops in a free market would indicate a monopoly price situation.
It follows then, that you MUST reject the possible outcome of entrepreneurial error regarding the burning of crops. It is not possible, according to your line of reasoning here, that such destruction can yield less revenue then the alternative. I don’t know how you’re possibly going to substantiate that claim. Or perhaps you won’t and argue for a monopoly price where revenue is less then the non-monopoly price.
To try to determine the existence or non-existence of a particular monopoly price: the method of economic history: using a priori theory and the specific understanding (verstehen) to interpret historical data.
To formulate the concept of a monopoly price: pure praxeological reasoning.
The ERE is also a concept formulated by pure praxelogoical reasoning. That does not necessarily prove that it exists, nor does it have to for it to remain a useful mental concept. But you claim that the monopoly price exists in a free market not in some mental imaginary state but in a real state (burning of crops example).
You’re not making your case here at all.
Right, my characterization was not sufficient. Burning crops by itself cannot by itself be an indication of a monopoly price. It also must be that the demand curve really was inelastic at that particular point, and that the restriction of supply really did raise the price, and thereby net revenues, both higher than they otherwise would have been.
I didn’t say praxeological reasoning establishes the existence in the living world of monopoly prices. I said that only economic history can (and it can only do so tentatively).
Great, but since you can’t praxeologically reason your way into determining demand curves; neither ex ante, since that would mean you posses omniscient qualities, nor ex post, since that would be having knowledge to events that never took place (the alternative market outcome for not burning the crops), you cannot establish the existence of the monopoly price in the free market.
All you can say about the farmer is that he acted in his best self-interest to maximize his profits to his best ability. The burning of crops becomes like another entrepreneurial decision in the production process before the final output. If he had known better, he would not have over produced and squandered scarce resources. The burning of crops is a problem of inefficiency and entrepreneurial error, not monopoly price.
Great, but since you can’t praxeologically reason your way into determining demand curves; neither ex ante, since that would mean you posses omniscient qualities, nor ex post, since that would be having knowledge to events that never took place (the alternative market outcome for not burning the crops), you cannot establish the existence of the monopoly price in the free market.
Not with praxeological certainty. But you can’t praxeologically reason your way to determining that any historical chain of causation or phenomenon really occurred. That doesn’t mean you abandon the inexact science of economic history altogether.
The burning of crops is a problem of inefficiency and entrepreneurial error, not monopoly price.
The burning of crops is mediately caused by entrepreneurial error, but it is immediately caused by the farmer seeking a monopoly price.
What he seeks in his mind is irrelevant to what the result is. You can’t possibly be trying to substantiate the existence of monopoly price by what the farmer seeks. right?
Ludwig von Mises, one of leaders of the Austrian School of Economics, had advocated the theory consumer sovereignty:
“The economic foundation of this bourgeois system is the market economy in which the consumer is sovereign. The consumer, i.e., everybody, determines by his buying or abstention from buying what should be produced, in what quantity and of what quality. The businessmen are forced by the instrumentality of profit and loss to obey the orders of the consumers, Only those enterprises can flourish that supply in the best possible and cheapest way those commodities and services which the buyers are most anxious to acquire. Those who fail to satisfy the public suffer losses and are finally forced to go out of business.” (The Economic Foundations of Freedom).
On other hand, Murray Newton Rothbard, american economist dean of the Austrian School of Economics, criticized this theory:
"The term “consumers’ sovereignty” is a typical example of the abuse, in economics, of a term (“sovereignty”) appropriate only to the political realm and is thus an illustration of the dangers of the application of metaphors taken from other disciplines. “Sovereignty” is the quality of ultimate political power; it is the power resting on the use of violence. In a purely free society, each individual is sovereign over his own person and property, and it is therefore this self-sovereignty which obtains on the free market. No one is “sovereign” over anyone else’s actions or exchanges. Since the consumers do not have the power to coerce producers into various occupations and work, the former are not “sovereign” over the latter.
[…]
[…] suppose producer A withholds his labor or land or capital service from the market. For whatever reason, he is exercising his sovereignty over his person and property. On the other hand, if he supplies them to the market, he is, to the extent that he aims at monetary return, submitting himself to the demands of the consumers. In the aforementioned general sense, “consumption” rules in any case. But the critical question is: which “consumer”? The market consumer of exchangeable goods who buys these goods with money, or the market producer of exchangeable goods who sells these goods for money? To answer this question, it is necessary to distinguish between the “producer of exchangeable goods” and the “consumer of exchangeable goods,” since the market, by definition, can deal only in such goods. In short, we can designate people as “producers” and as “consumers,” even though every man must act as a consumer, and every man must also act, in another context, as a producer (or as the receiver of a gift from a producer).
Making this distinction, we find that, contrary to Hutt, each individual has self-sovereignty over his person and property on the free market. The producer, and the producer alone, decides whether or not he will keep his property (including his own person) idle or sell it on the market for money, the results of his production then going to the consumers in exchange for their money. This decision—concerning how much to allocate to the market and how much to withhold—is the decision of the individual producer and of him alone.
Hutt implicitly recognizes this, however, since he soon shifts his argument and begins inconsistently to hold up “consumers’ sovereignty” as an ethical ideal against which the activities of the free market are to be judged. Consumers’ sovereignty becomes almost an Absolute Good, and any action by producers to thwart this ideal is considered as little less than moral treason. Wavering between consumers’ sovereignty as a necessary fact and the contradictory concept of consumers’ sovereignty as an ideal that can be violated, Hutt attempts to establish various criteria to determine when this sovereignty is being violated. For example, he asserts that when a producer withholds his person or property out of a desire to use it for enjoyment as a consumers’ good, then this is a legitimate act, in keeping with rule by the consumer. On the other hand, when the producer acts to withhold his property in order to attain more monetary income than otherwise (presumably, although Hutt does not state this, by taking advantage of an inelastic demand curve for his product), then he is engaging in a vicious infringement on the consumers’ will. He may do so by acting to restrict production of his own personal product, or, if he makes the same product as other producers, by acting in concert with them to restrict production in order to raise the price. This is the doctrine of monopoly price, and it is this monopoly price that is allegedly the instrument by which producers pervert their rightful function."
Rothbard advocated “right of cartels” saying that “consumers would prefer lower prices; they always would. In fact, the lower the price, the more they would like it. Does this mean that the ideal price is zero, or close to zero, for all goods, because this would represent the greatest degree of producers’ sacrifice to consumers’ wishes?”
If a producer wants to burn half his coffee crop in order to extract more revenues from his customers, Rothbard has no problem with that outcome:
"We can visualize, for example, the case of a coffee cartel burning great quantities of coffee.
[…] Clearly, the production of the total quantity of coffee itself has proved to be an error, and the burning of coffee is only the aftermath and reflection of the error. Yet, because of the uncertainty of the future, errors are often made. Man could labor and invest for years in the production of a good which, it may turn out, consumers hardly want at all. If, for example, consumers’ tastes had changed so that coffee would not be demanded by anyone, regardless of price, it would again have to be destroyed, with or without a cartel.
Error is certainly unfortunate, but it cannot be considered immoral or antisocial; nobody aims deliberately at error." (Man, Economy and State).
All action is goal-seeking behavior. So of course goals sought are important for praxeological distinctions.
Motive cannot prove the existence or validity of a monopoly price. I don’t know why you’re insisting on this. I think you understand this doesn’t prove anything.
The farmer could have changed his preferences between leisure and labor during production and the result would have been the same; less crops. Since the act of burning of crops is, by your own admission, not a proof for anything except some motive, then you will have it now that everybody withholding some part of their labor or resources is engaging in monopoly price.
Now you tell me, exactly what is the quantity of labor and how much of my personal resources must I submit in order to not qualify as earning a monopoly price? Never mind that you can’t establish by any method the actual demand curves, which are themselves, mental constructs. But also, the whole concept becomes absurd once you realize that the answer to the question, from the consumers point of view, is 24/7 around the clock.
Intent matters. For example, see how Mises’ argument that the wage rates that result from labor-union policy are not monopoly wage rates hinges on the contrasted intentions of labor unions and of monopolists…
It is customary to characterize labor-union policies as monopolistic schemes aiming at the substitution of monopoly wage rates for competitive wage rates. However, as a rule labor unions do not aim at monopoly wage rates. A union is intent upon restricting competition on its own sector of the labor market in order to raise its wage rates. But restriction of competition and monopoly price must not be confused. The characteristic feature of monopoly prices is the fact that the sale of only a part p of the total supply P available nets higher proceeds than the sale of P. The monopolist earns a monopoly gain by withholding P - p from the market. It is not the height of this gain that marks the monopoly price situation as such, but the purposive action of the monopolists in bringing it about. The monopolist is concerned with the employment of the whole stock available. He is equally interested in every fraction of this stock. If a part of it remains unsold, it is his loss. Nonetheless he chooses to have a part unused because under the prevailing configuration of demand it is more advantageous for him to proceed in this way. It is the peculiar state of the market that motivates his decision. The monopoly which is one of the two indispensable conditions of the emergence of monopoly prices may be–and is as a rule–the product of an institutional interference with the market data. But these external forces do not directly result in monopoly prices. Only if a second requirement is fulfilled is the opportunity for monopolistic action set.
Without reference to motives, you cannot even distinguish whether a street singer that nobody happens to pay is a producer (albeit a failing one) or a consumer.
motive has nothing to do with the result or even if the goal is realistically attainable. The argument you’re making is not relevant. Neither is the quote by mises relevant to the argument.
You are overlooking a major contribution by Rothbard here.
motive has nothing to do with the result or even if the goal is realistically attainable.
Motive has everything to do with the quality of praxeological phenomena. Considering action without reference to motive is not considering action at all; if anything, it might be considered behaviorism.
You are overlooking a major contribution by Rothbard here.
I’m not overlooking it; I just don’t accept it.
Who’s arguing against something like this. Certainly not me.
Yes, because something along the line of “the farmer seeks or is motivated for monopoly so there is monopoly price” . Not only is it a baseless assertion, which you can never prove, but even if it were true, it doesn’t prove that he is ever achieving it or that it is something that is even achievable in theory. I’m usually impressed by your argumentation, but in this particular case, I’m really surprised that this is the level of argument you’re bringing forward.