I guess its easier than debating him.
So is this the new counter argument? Understand the position you’re attacking. It’s simply really.
Either way, I haven’t heard neoclassical actually respond to the myriad of substantive posts attacking his position. He continues to repeat that individuals cannot be fooled by the arbitrary manipulation of prices by a central monetary authority, but this ignores the very function of prices, and the point of capitalism/private property.
There is a big difference between someone who is critical of AE, but has done their homework, of which many here respect, and someone who’s just googled a few webpages on capital theory, and attempted to critique it, exposing their misconceptions along the way. This criticism would apply to both of you.
Uhm, what? Are you using David Friedman as proof that this community equally respects non-Austrian thinking?
Know what would be truly considered doing your “homework”? Trying to debunk cardinal utility as David Friedman substantiated it: http://en.wikipedia.org/wiki/Von_Neumann%E2%80%93Morgenstern_utility_theorem. Other than that, you’re just ideologues basking in your own almighty infallibility.
This is substance.
This isn’t.
lololol
Just as a disclaimer, I’m not necessarily speaking for others with the following argument. But you’re making a very common mistake. And it’s a mistake that some Austrians make too. You’re assuming a tremendous amount of intelligence on behalf of the individual entrepreneur. What makes an economic system “intelligent” is not so much the intelligence of it’s individuals (I would say this plays a supporting but much, much smaller role) but rather the process of weeding out those who’ve made bad decisions and maintaining those who’ve made good decisions, i.e., simple profit and loss. Just as natural selection chooses those fit for the environment and weeds out those not, so does the process of profit and loss. And profit and loss is simply a function of the desires of consumers. The consumers create the environment that entrepreneurs must conform too. And once again, it’s not so much that entrepreneurs consciously grasp the best direction to go in; rather, it’s more often a hunch, or a guess, or an impulse and sometimes that guess or impulse is rewarded, but not because of individual intelligence.
Thus, entrepreneurs are really not that intelligent in their forward looking behavior. Half of the businessmen I’ve known had horrific ideas. Simply no clue about what would be profitable or not. And I would say this is how most entrepreneurs are. But what matters is that the good ideas are rewarded and the bad ones are punished. And what determines this? The filtering back of money through complex networks of buyers and sellers on the basis of the demands by consumers. So what happens when the money filtering back becomes disconnected from the consumers? Naturally, different types of businessman are selected or rewarded. Businessman that would normally go out of business. A disconnect develops and this is the seed of the cycle.
I would suggest reading Armen Alchian’s evolution paper.
One guy? good response.
edward_1313, you and I are in basic agreement that the economy resembles a selective process of Hayekian self-organization, with profit/loss signals indicating fitness.
I don’t attribute omniscience to any businessman, but I also don’t attribute idiocy, either–especially systematically wrong decisions. Once again, as a complex adaptive system, one cannot forget adaptation: learning not to make “malinvestments” due to a “lowered short-term interest rate.”
Are we required to respond seriously to an attack on character? I mean did you expect a serious response? Also are you implying Esuric has not made any significantly insightful posts? =D
Esuric, I fully agree with your classification.
The problem? You don’t apply the same criticism to your Austrian pals here.
I particularly like the claim that we accuse you of having insufficient knowledge of Austrian Economics, and that if you had greater knowledge of Austrian Economics you’d fall for it. But, this isn’t the claim at all. We are accusing you of having insufficient knowledge of Austrian Economics to critisize it, because insofar as this thread is concerned your criticism hasn’t really presented the Austrian case well.
I’m sure that if I argued that Keynesians proposed high fiscal stimulus regardless of the nature of the depresion you’d say that I really had no idea what I was talking about (because, such a claim would be entirely wrong). It wouldn’t be fair of me to accuse you of claiming that if I knew Keynesian economics better I wouldn’t disagree with it. The argument would be that if I knew Keynesian economics better my arguments against it would be much stronger, because I would actually address what Keynesian economics has to say.
To me, accusing us of holding Austrian Economics as the end-all be-all and that you are too ignorant to accept is is a sign of frustration and suggests that you are really not interested in the substance of our criticism (well, this last part is also shown in various other actions, including responses to very good posts by responding with something completely irrelevant, or some random quote from some paper you just read).
I don’t attribute omniscience to any businessman, but I also don’t attribute idiocy, either–especially systematically wrong decisions. Once again, as a complex adaptive system, one cannot forget adaptation: learning not to make “malinvestments” due to a “lowered short-term interest rate.”
What you propose is tantamount to having entrepreneurs, and all market agents alike, completing stopping meaningful and purposeful action because of the possible threat of malinvestment. It ignores that even despite an entrepeneur knowing and accepting Austrian theory, an entrepreneur might still believe he can reap profit before the bubble pops. Or, perhaps, he can survive the bubble thanks to his superior product (as many entrepreneurs have done). Not all investment during a period of credit expansion is malinvestment, and this is what your argument presupposes.
Jonathan, I don’t believe any investment is malinvestment.
Jonathan, the primary problem is that I don’t advocate your beliefs, hence my rejection of them appears insufficiently supported, even though it is not.
This is simply two worldviews colliding without resolution.
NeoClassical,
As Jonathan stated, we are not concerned with the fact that you disagree. We are concerned that you have mis-represented the Austrian position in your critique’s. It has nothing to do with whos right and whos wrong at that point, it has to do with representing each argument correctly.
How many different ways do we need to word this?
But in a sense, you really are! You just don’t realize it.
Yes, but your misunderstanding what adaptation means! Adaptation does not mean adaptation on the basis of individual awareness. It meas that the system adjusts to new environmental pressures (the consumer’s desires) by means of the selection process, which in an economy is carried out by means of monetary exchanges at agreed upon prices.
Let me give an example to make it very clear. You would never argue that various species, or their genes, are able to sense and therefore gravitate towards their current environmental pressures, right? The mutations or changes in their genes are, more than anything, random (at least as far as our knowledge is concerned). What makes the system adaptable is not that collections of genes ‘feel’ their way towards new environmental pressures, but that those species which are fit reproduce and those which are not die out.
Now, you’re probably thinking something like, “but human beings are self-aware, so that we can grapple towards the selective pressures!” But this is an easy mistake that’s a product of our own consciousness. It leads many to think that the adaptable properties of the economy are due to the conscious adjustment of individuals (note that I’m not saying individuals don’t act, just that the bulk of adaptations in the system are not due to some men suddenly seeing a light bulb go off in their head). Once you enter this realm your pre-supposing that individuals have some sore of access to the selective pressures independently of the money receipts they receive.
So like I said, I know you think you’re not assuming too much on behalf of entrepreneurs, but you really are.
Neoclassical,
Jonathan, I don’t believe any investment is malinvestment.
Be that as it may, you are critisizing Austrian theory, so what you believe is only relevant (as far as the current debate in this thread goes) when directly addresses what you’re critisizing. “I don’t believe any investment is malinvestment” doesn’t really say anything in regards to whether or not Austrian theory ignores rational expectations.
I’ve been avoiding calling you a troll for quite some time, because unlike most trolls you do know what you are talking about (when you want to be serious). I hope, rather, you take this as constructive criticism. It’s unproductive to respond to criticisms of your positions with completely irrelevant factoids.
Jonathan, the primary problem is that I don’t advocate your beliefs, hence my rejection of them appears insufficiently supported, even though it is not.
No, the primary problem is obviously that you automatically reject what you read, and so instead of assimilating it you make up some straw man (or maybe you don’t read it all, and instead believe that you think it will say). So, the secondary problem is that the ideas you are rejecting are not Austrian. You are straw manning Austrian theory, and when we correct you you decide to simply respond with some irrelevant factoid, or just start another topic. You are avoiding the issue at hand.
I am only assuming a trial-and-error process filtered by a selective process. You seem to be asserting that entrepreneurs can be tricked systematically; that removes any evolutionary adaptation.
Oy…I don’t know why I try. When entrepreneurs are tricked systematically that means that they’re being selected by environmental pressures different from, and which conflict with, the ‘natural’ environmental pressures. The essence of the cycle is that there are conflicting environmental pressures; the consumers on the one hand, and the injections of fiat money on the other. It has nothing to do with evolutionary adaption breaking down; that process has remained completely intact. It’s simply adaptation towards a direction not compatible with the natural direction.