I think this tale reveals how some people came to assume that laissez faire lending always maximized benefits to society. If a banker compares two different loans of the same type (i.e. both productive, or both non-productive) then its like the mayor using the same fraction for both pumpkins. He will award the prize correctly, i.e. laissez faire gets the right answer. I suspect you will find that the analysis you find AE in books will only ever be comparing two loans of the same type (correct me if I’m wrong).
Mick I think I can say this with confidence, and without fear of looking dumb, that you really need to work on your ability to clearly present what you are arguing. Much of your statements can be taken several ways which leads to alot of confusion. Most of your post seems nonsensical to me though.
Still the subjective theory of value pretty much refutes your entire conclusion here, if I understand what you are stating. It has been stated several times and you just glazed over it as if it were not important. Still I’d appreciate if you re-presented your argument more clearly. Try and keep your hypothesis to one sentence. Explain to us as if we were entirely economic ignorant, I’ll give you the benefit of the doubt since in reality it’s you who have preferred to have strong opinions on economics while willingly staying in a state of ignorance.
If most of it appears nonsensical, then I have little hope of explaining it better. If there are some specific aspects of my explanation that are defective then I may stand a chance, but you’d have to guide me as to which parts I should address. By the way, are you comfortable with basic algebra?
On a different note. You have said that all my research is just reinventing the wheel and concerns things that were resolved a hundred years ago.. and all I need to do is read the right Austrian books for the answers to all my questions. Can you tell me on which pages of which books does it demonstrate that the free market correctly maximizes total benefit to society when selecting between a loan to consume with a loan to invest? I will read it with interest.
You are missing the point. One of the key tenets of AE is that value is subjective. There is no way of knowing how to “correctly maximize total benefit to society”, as there is no way of measuring “total benefit to society”. You cannot assign numerical values to people’s preferences, because, as subjective value theory says, value is ordinal, not cardinal. This is presented in the first chapters of Man, Economy, and State, Human Action, etc, or, if you don’t want to read those, I would recommend Lilburne’s Austrian Economics comics, as they are easy to understand.
Until you take the time to correctly understand at least the basics of Austrian Economics, most people on this forum will not take you seriously.
there is no such thing as ‘maximizing total benefit’; but maybe as what you propose is interventionism…, the defects of interventionism need to be spelled out to you. see Rothbard MES Chap12a.
Isn’t that strange that such good invention will yield so miserable profit to society, that it cannot compete with single man and his house? How many people will find it useful then? How much will they be willing to pay for that product?
If you invent something useful, you’ll earn big profit. What you mention sure is not one such thing. Just because it has word “invention” or “improve” it does not mean it will be of some value.
If “A” is true, then the would-be entrepreneur would get the loan, or, if for whatever reason he’s denied the loan, he could run a start-up and get equity financing (issuing stock), or find a venture capitalist. The revolutionary innovation will find all the capital it needs precisely because of the profit motive.Thus, you would get A,B,C and A’,B’. If you want to create an entirely absurd situation, such that there are only enough savings in the economy for either the entrepreneur, or the guy who wants to extend his home, then the former will receive the loan by virtue of a higher rate of return.
Now, you completely ignored the argument I originally put forth, and I don’t blame you because it’s quite damning. But I would like to hear your response. If we follow your train of thought, then the government would not only have the right, but the “responsibility” to ban the production of high quality cars in order to preserve the steel for more “productive uses.” And, if we follow this train of thought some more, it seems that my income should be taken from me and given to my “more productive” next door neighbor.
This construct (hallucination) doesn’t jeopardize Austrian economics anymore than the absurd “what would prevent a capitalist from building a nuclear power plant right next to a school?” Or, “what would stop a capitalist from selling child slave labor on the market” does.
But I keep being told how AE has shown that individuals acting selfishly maximizes the benefit to the whole society. If the benefit to the whole society is not measurable then how could you possibly know what policies maximize it?
Sorry but its getting late - I will address the other recent posts later…
Bingo. Your still stuck in this mindset that we need policies to make things work. The point is we don’t need policies. You need to free yourself from the ideology that we must plan and manipulate the lives of every individual in society.
Another problem here is your desperate attempt at polarizing society/community from the individual. As if the individual had different needs than society. This is why your so confused on this topic. You think you have pointed out a flaw in our logic but all you have revealed is ignorance to the points we are making.
Society does not have needs, society does not think, society does not act. These things are only done by individuals. You cannot move the right hand of society, society does not go to the bathroom, society does not make a purchase. Only individuals do these things. Only individuals make up the apparatus of ‘society’.
It is entirely consistent for us to state that a new house is more of a benefit for ‘society’ as opposed to some arbitrary collective investment, like a park or new office tower. The reasoning is that when a house is purchased the needs/demands of the individual are being met. Society as a whole prospers when the needs of the bodies that make it ‘society’ are met specifically. Society is worse off when individuals choices of investment are arbitrarily taken from them and redirected on projects they did not want in the first place. Had they wanted a park or an office building they would have built one instead.
In other words, a good economy is one where the needs of the individual are met specifically. This implies that things are produced that people want.There is no way of predicting what a good or bad investment is. We can only quantify such things after human action has taken place, not before. We cannot measure the needs of an individual until after they have made their decision, then it becomes obvious. In other words, after a person purchases a toothbrush over shampoo it becomes obvious that they valued the toothbrush over the shampoo as a need.
Likewise we cannot quantify in advance, and on behalf of society(individuals), what are good project investments and what are bad. We can only pass these judgements after investments have been taken place. If the investment returns a large profit it becomes apparent that the project was a benefit to ‘society’. If the project returns no profit or bancrupts it than becomes apparent that society has rejected it.
Any attempt of measuring what is or is not a beneficial investment for society in advance is done as speculation. Such thoughts are made entirely arbitrary and are superficial. You can derive whatever odd mathamtical model you want. Your math cannot predict the needs/desires/demands of every man, women, child on earth.
Human Action, the book you reject as being too difficult to read, plainly explains this in the first 4 chapters. It is not difficult to read, one does not need a PHD to do so.
P.S. Something crazy is happening with formatting. That big parapgrah was suppose to be split up into 4. Sorry if it’s hard to read.
Take your time.
hey mick, where’s my 20X20 swimming pool? got a centrally planned policy for it yet? been waiting for months - it’s not going to happen! get it yet!
The problem here is that market is not cleared. There is a “surplus” of demand over supply. If people are coming to the bank and are denied loan because there is “no money”, but otherwise have all criteria satisfied, that means that interest rate has been set too low. The bank should realize this and raise the interest rate. Then the person with greatest chance of success and biggest potential profit would get the loan.
The original poster has put the market in the wrong state and from that confusion arises. Of course this can happen and does happen, when interest rate is set by administrative means.
My assertion makes no mention of any kind of intervention. I have proposed no “cure” for the problem. All I am trying to establish in this thread is whether or not a free market lending contains within it, a bias in favour of non-productive investment. If I am shown to be incorrect in my assertion then we need not even have any discussion of interventions. Is your position that I have made a mistake in my assertion? Or are you conceding that my assertion is correct, but that there is nothing that can be done about it without doing more harm than good?
What a bizarre claim. Sure, if two people suggested two different complex machines for manufacturing some good, it may be difficult to determine which will be best. But the claim made is not qualified that in any way. I will now tell you a true story. A friend of mine was on some committee of a sports club which had some sort of drainage/water-related problem (I’ve forgotten the details) in their sports field. One of the committee members suggested that the problem could be solved by paying a water diviner to come and find the source of the problem water. Apparently several other committee members were actually enthusiastic about the idea and my friend (who has a brain) had to work quite hard to dissuade the committee from going ahead with the plan. Are you seriously suggesting that the purchasing of the services of a water diviner could have been a good investment?
Free marketeers talk about the free market enabling people who are good at choosing what to invest in, to become rich investors, while the ones who are no good at choosing to go bust and end up doing something else… but if the task is impossible then we may as well choose by the toss of a coin.
No whats bizarre is your apparent claim of being omniscient. How do you know the service would have been a bad investment? Was it because your all knowing wise friend told you so? Perhaps he should handle your stock portfolio as well?
Do me a favor, go back and re-read my post. Don’t present a strawman but instead address my points line by line. This is the prime reason why I, and others, don’t take you very seriously. Your incapable of handling a direct debate, and instead prefer to use confusing structured arguments and talk past your opponent. At which case nothing gets resolved. It’s ironic because you were the one poking fun at my intelligence.
Based on your strawman you seem to be implying the following two points.
A) Individual investment is somehow different from society investment. Your still somehow confusing that society is an independent entity outside of individuals. This is highly fallacious.
B) Your basically admitting that you believe you are omniscient. This may explain your stubbornness in your discussions. In effect your pretending and tricking yourself into knowing which investments are not only good for yourself but apparently what is good for everyone else.
And yes, you are trying to plan society. Your passing judgement on other individuals investments making claims that they are not ‘beneficial’ to everyone else. In doing so you imply that something alternative or ‘better’ can be done for ‘society’ and that someone should make that happen.
From my life’s experience, I have observed the following: When two good scientists debate they will efficiently “zoom in” on the crux of the difference between them. Once this is reached they can either agree to differ, or realise that they need further research to resolve the issue, or (god forbid) one of them will actually change their opinion. If you look at the discussion between me and nirgrahamUK from the “why are bankers so rich” thread you will see this exact process in action. With you however, I never feel I can zoom in on our differences, it feels like you want to take our discussion down many new diverse paths all the time, like a kind of never ending tree structure. Note that my original claim comprises just three sentences. If you want to refute my claim how about actually referring to one of the three sentences. How about focusing on the issues. It feels to me that it is you who is avoiding direct debate.
In an effort to try and get back on track, could you help me by answering the question I posed to nirgrahamUK, i.e. “Is your position that I have made a mistake in my assertion? Or are you conceding that my assertion is correct, but that there is nothing that can be done about it without doing more harm than good?” at least then I might stand a better chance of seeing what you are getting at.
My lengthy post earlier directly addressed the premise of all 3 sentences. I won’t type it again. Look if you can’t deal thats fine. I took a risk on you in writing all that crap up and pulling references for you. Hoping you would respect me the least bit to read it. I see now quiet clearly that you are. Well lets see how did you put it…
Ya thats pretty much it. So basically with you its if someone writes a clear refutation, which has happened several times now, you strawman them and try to evade the point.
- You ignored NirgrahamUK’s post asking you to read MES Chapter 12. You have given no response that you actually have and I suspect you don’t intend to.
- You have ignored DD5 points entirely
- You are still ignoring Esuric’s points entirely
- You ignored my post which, like Esuric, DD5, and Nigraham further illustrates how your premise is broken.
Your not debating with any of us here. You seem to be talking to a wall and hearing half the words that we tell you. It’s not clever mick, we see right through the shallow tricks.
Also, in your three sentences you try to compare the benefit from the investee and the investor, A and B. Quantifying such things is fallacious, their benefit is different for each of them. They are not equal in benefit in any way shape or form. Your entire system is structured wrong because you don’t understand the marginal theory of value, or the subjective theory of value. In exchange you cannot compare trades equal as equal value or equal benefit. The benefits from each are different and can only be quantified by their own psyche. Your external attempt at measuring their benefits will only be done in error. We have begged for you to read some of these topics, you refuse.
Are you dismissing the marginal theory of value and implied subjective theory of value? You seem to be. Because of this addressing the individual points of your silly sentences are a waste of my time. Your entire premise is wrong. I have tried addressing this, you have happily evaded.
The problem isn’t your sentences, it’s your premise from which they were built. GO back and re-read my thread. Don’t reply to me untill you’ve read my post. My post, and others, proves that your premise of measuring benefit in any form is fallacious.
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“Unhelpful” to whom?
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In a free market, there can neither be “too much” consumption without enough investment to produce what’s being consumed, nor can there be “too much” investment without enough consumption to absorb the products of those investments. The free market is self-clearing.
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If not free-market lending (or anything else related to the market), then what/who decides about the most “helpful” allocation of capital? What’s is your suggested alternative?
Z.
Your lengthy post included a ludicrous claim which seemed pretty close to the crux of the difference between us - I explained why I thought it ludicrous, but you have entirely avoided addressing my objection… remember what I said about “zooming in”. That’s exactly what you are not doing.
Yes, I readily confess that I have ignored several posts by various people. Replying to every point in every post would quickly lead to my having to debate 100 different issues simultaneously. Life is just too short to respond to everything. I have been selective. I usually respond to the posts which are A) on track, B) clever, C) most challenging. I have ignored many posts which I consider to be flawed simply because I consider them flawed for uninteresting reasons.
I don’t see how anything I’ve said is at odds with either of these theories.