i can think of lots of problems some austrians would have with that statement.
roy cordato and others would take issue with the implication that we can define what it means to “improve on a market outcome” (he would argue that efficiency is about individual goal seeking and not some sort of value maximization as my statement might imply).
rothbard would probably take issue with the notion that some markets are special and require government intervention to correct their “failings” (though he would also agree with cordato that it is difficult/impossible to define “market failure” meaningfully).
those are a couple i’m thinking of. i’m sure there are others.
now i am not sure what this strange quiz is supposed to show. that i can guess which austrian critique flic thinks are most relevant for my statement? okay. i guess that proves something, but i’m not sure what.
but before you take upon yourself to grade my performance, let me make me make 2 things clear. first, the statement you quoted was not my assessment of how some modern austrians interpret the conclusion of the calculation debate (i wouldn’t attempt to make such a summary). second, I never claimed to be an “expert” on austrian economics. my handle is “student” after all and part of why I hang out here is to learn more about some of the interesting thinkers that call themselves “austrian”.
if you think there is something i am missing about the calculation debate, I am all ears. but i really don’t appreciate your current attitude.
I think you may have been trying to be too clever, but I was referring to SL, student and EIT. They constantly have something to say about Austrianism, even though it has never been apparent they understand what it is they are criticizing in the first place.
They won’t define what Austrianism is, or if they do, it is an unsourced strawman, and then they proceed to critique that caricature.
Thankfully, most here have realized what a pointless endeavor discussing with these sorts are, and have passed beyond it. You are a clever guy, you might be wise to do the same.
The topic I was referring to was calculation. The only way government intervention could improve the market economy is by accident. My assertion is that this is a generally accepted argument, and a shared view amongst many modern Austrians. That this position implies a lengthy understanding of several key foundational austrian topics.
flic, this was your big reveal? talk about a let down. yes, i’ve heard this argument before (in fact this reminds me of a conversation i had with esuric here). but i don’t think that notion is excluded by statement AT ALL. nor do I think it is the only way an austrian can interpret can interpret the implications of the calculation debate (as indicated earlier with the hayek example).
let’s revisit the question i asked.
the question then becomes whether moderate government interventions could improve on market outcomes in select cases.
i only said that the question then becomes whether the government could improve market outcomes. how does what you said contradict this question? you seem to believe that the “austrian” follow up is “yes it is possible, but only by accident so not likely”. in no way does my question preclude this potential response.
i just don’t believe this is the only or even the primary follow up an austrian would have to my question. like I said, i think they would be more upset by the notion that market failure can be meaningfully defined in the first place, let alone that they can be corrected once they are defined.
Indeed, and when you intervene universally you undermine that.
I’m not asking you to go appeal to authority to attempt to discredit the calculation argument. Whether it’s right or wrong is besides the point. I’m just point out the fact that your presenting an argument which operates in conflict with a fairly standard Austrian position. Int his case, the calculation problem specifically.
It was meant to show that you were oblivious to certain positions of the Austrian school. Positions that are fairly standard amongst modern Austrian economists, not that it’s not debated but still. That the calculation problem was oblivious to you when considering government intervention as a potential positive method.
I understand that, but when you make comments like the following.
Your passing judgement which is going to beg for a response.
Why would a seller – who supposedly knows he’s selling a $1,000 lemon – stubbornly insist on a peach-like price of $2,000 for his car? He’s likely to be aware of the risk-adjusted calculation of his (asymmetrically info-challenged) buyers and probably agree to let it go for $1,500. Moreover, if all sellers demanded peach-like $2,000 and all buyers played it safe by assuming lemons and only offered $1,000, then no sale occurs. If the cost of such an outcome is more than $500 for each side, then both sides would gain by trading at $1,500.
It was meant to show that you were oblivious to certain positions of the Austrian school. Positions that are fairly standard amongst modern Austrian economists, not that it’s not debated but still.
flic, your “quiz” in no way demonstrated i was unaware of that argument any more than then fact that you didn’t mention the notion that some austrians believe market failure lacks a coherent meaning (or that mainstream welfare economics more generally is deficiant) is evidence that you were ignorant of those arguments.
plus, as i illustrated with the link in my previous posts, i have had similar discussions with other posters. so i am fully aware that some people think that the calculation debate precludes any and all beneficial government action. and the way i phrased my initial statement didn’t preclude that possibility.
i think the problem is that you misunderstood my statement, not that i misunderstood austrian economics.
I understand that, but when you make comments like the following.
Your passing judgement which is going to beg for a response.
umm if you scroll back, you will see that that quote comes after you accused me of not understanding austrian economics and insisted on holding a quiz to demonstrate the fact.maybe if you don’t want me to pass judgement on your knowledge of austrian economics, you shouldn’t try to pass judgement on mine?
over all, i’m glad with the way things turned out. i passed your quiz and i’m sure everyone on this board will be reasonable and fair minded enough to see that fact. so my day can only keep going up from here, right?
Ofcoarse we can’t expect you to admit the mistake.
Though the sequence of posts above are fairly convincing…
irrelevant. You’ve made plenty of judgemnetal comments like that in the past. And whether you said it before, or after our dialogue begun is still irrelevant. The fact that you said it at all is pertinent to the point that your quick to pass judgement, before fully understanding the oppositions position, and countering critique’s.
Despite the fact you hadn’t a clue as to what I was referring to untill after I told you?
At any rate the quiz wasn’t for you, it was for others who read the forum. A demonstration is all. Thx
Despite the fact you hadn’t a clue as to what I was referring to untill after I told you?
haha and if you asked me to guess an integer between 1and 10, i doubt i would pick the one you were thinking after 2 guesses.
as i noted, there were a lot of ways different ways austrians could respond to my question and I picked what i felt was the more likely (and maybe more important criticism).
i have indeed heard of the argument (and offered an example of thread with a simiar discussion) and i’m sorry if you don’t believe me.
sorry…but not too concerned.
PS*
The fact that you said it at all is pertinent to the point that your quick to pass judgement, before fully understanding the oppositions position, and countering critique’s.
said the pot to the kettle. after one sentence you were ready to string up for not knowing what i was talking about. i at least went through an entire post before i called your momma into it.
anyways, if my judgements are “too quick” i apoligize.
Are you trying to downplay the significance of the calculation argument now? Only so many ways to save face.
I’m sorry this all ended up coming out on you, I hope you don’t take offense to all of this. If your not too concerned about it then I won’t feel as bad. =D
um, no i’m not? i explicitly pointed out that other people made the argument before you and that I am familiar with it. I just don’t agree that it is the only or even best interpretation of the conclusion of the calculation debate.
haha look, if you want to keep pretending like you “proved” something that’s fine. I think anyone reading this thread will see my point exactly.
The problem is that mainstream neoclassical economists have a very narrow and incomplete understanding of asymmetric information. Asymmetric information is not a problem arising out of capitalism or a failure of the price mechanism, but rather it’s the inevitable result of human interaction in general. The market attempts to remedy this problem by creating dynamic and responsive social institutions, such as the price mechanism.
The problem is, according to many New Institutional economists, that the price mechanism is not efficient “enough” (according to them), and they come up with these scenarios where mutually beneficial exchange is impossible in the face of asymmetric information (EG Akerlof’s “market for lemons”). This is why the phrase “asymmetric information” has become synonymous with the failure of capitalism/price mechanism and why individuals, like the OP, believe that this single phrase somehow constitutes an entire argument in itself. What is never mentioned, though, are the billions of mutually beneficial transactions that take place every single day in the presence of asymmetric information thanks to the price mechanism and other capitalistic institutions.
Of course, this argument is only a reactionary outcry to the fact that Hayek and Mises not only entirely refuted communism with the calculation argument, but government intervention in general. Let’s look at another example. Stiglitz made an argument in favor of low interest rates in order to reduce adverse selection and moral hazard. Essentially, the most risk-prone borrowers are willing to pay any interest rate and will actively seek out loans in order to chase high returns (risky ventures) and thus are most likely to be selected by lenders (that are unaware of this fact). The problem occurs when most of these risky ventures fail and when the borrowers are unable to pay back the lenders, causing severe financial problems. Therefore, according to this argument, low interest rates are desirable.
But is this argument actually valid, and will it reduce asymmetric information? Of course not. Even if we accept this argument, there is still a problem with inter-temporal coordination. We’re merely replacing one problem with another, much larger problem. Entrepreneurs will be entirely unaware of consumer’s preferences for future goods and will therefore invest and allocate capital in inefficient combinations, yielding immense macroeconomic problems. Never mind the fact that bankers are supposed to identify risk and hedge.
What is never mentioned, though, are the trillions of mutually beneficial transactions that take place every single day in the presence of asymmetric information thanks to the price mechanism and other capitalistic institutions.
as i noted previously, that little “and other capitalistic institutions” is an important addition that you neglected to include in your previous post.
you can argue that there may be voluntary solutions to problems of asymmetirc information, but the fact is that the price system itself is not the solution. indeed, the price system becomes the “victim” of these problems in the sense that if these problems are strong enough and go unresolved it can no longer do its job of allocating resources.
but this is turning into a very slippery conversation. first EIT’s thought was restricted to the calculation debate (which centers around the price mechaisnism) and now we’re starting to move into discussing any and all voluntary solutions to problems that may interfere with the price system?
not sure i want to go down that road personally. so at this juncture i think it is enough to say that EIT’s intuition was correct and that there are issues that may interefere with the functioning of the price system (though as I mentioned earlier I don’t think this refutes austrian insights from the calculation debate). and if one just doesn’t feel comfortable leaving it at that (i know it makes me feel like a dirty neoclassical just typing it), one can point EIT toward this or that anarchist argument in favor of voluntary solutions to this or that problem.
PS* i think its funny how its implied that i don’t realize that there are voluntary solutions to asymmetric information problems when i am the one that noted the possibility in the first place (after esuric’s fumble on the relevance of asymmetric information to the functioning of the price system). kinda strange, huh?
about 1], the market for lemons. The price system has indeed done its job. It has told the crooked salesmen that they cannot foist off suspect cars on a discerning public. And if they want to sell cars they better give a decent guarentee.
I mean you are saying [as I understand it] that if no one wants to buy rotten eggs at ten dollars an egg, but the egg people insist on that price, that the price system has not done its job. The entire market for rotten eggs has collapsed, all thanks to that silly reliance on an inadequate price sysytem.
I think it’s important to note that Mises and Hayek did not object to the emergence of certain institutions that compete amongst themselves and which operate within the price mechanism and markets, such as financial intermediaries and various ratings agencies. The calculation argument does not say, “only prices are useful.” It says, in its most simplistic form, that we need accurate and undisturbed prices that reveal true subjective values and tacit information in order to achieve a rational economic order. This is why government intrusion, which is inherently ad hoc and arbitrary, is necessarily self-defeating and destructive (the government is structurally defunct when it comes to economic matters). It’s also why governments can’t use “rules of thumb” in order to plan the economy, as the OP suggested, and why arguments that include asymmetric information and “conflicts of interests” can never justify government intervention (in fact, they only support the argument made by the Austrians). Again, and I find myself saying this a lot these days, but just because the market is imperfect does not necessarily or logically mean that government intervention is appropriate (the very point of this thread before it got derailed).
