Three Truths Counter-indicated by Praxeology

Economics Economics Questions
1

Hi,

I would like to start discussions on three premises that I believe form the real impasses to fundamental advances in economic science.

Be it resolved:

  1. The ‘polynomial factoring problem’ is irrelevant to quantification of general economic optima, i.e.: there exists one polynomial expression for general optimality (via multi-dimensional hyperbolae) that can always be factored in mathematically closed form. A mathematical development of this polynomial requires six algebraic steps; and will be supplied to anyone open to a discussion.

  2. This polynomial can be used to abstract manufacturing sectors’ technical parameters and household sectors’ utility parameters from published input/output data. These parameters are remarkably stable in time; and their changes are indicative of technical growth, the impact of government policies, etc. As evidence on this point, I would offer a study on 11 years of consistently defined I/O data from the UK ONS. The I/O data are in 12 x 12 matrices, so the utility parameters behind these observations are derived by 11 x 12 solutions to polynomials of the 12th degree.

  3. The ‘socialist computation’ or ‘’ problem was solved in the 1970’s – well before Hayek’s failed attempt, or the aborted Angora Project at GMU. To instantiate this claim, I offer a desktop prototype that represents the global economy in terms of three 5 x 5 I/O matrices. This structure can be initiated with any physical exchanges, and the program will compute the prices and parameters for which the hypothetical data are optimal. The model can then be stimulated with any combination of changes to its parameters or state variables, and it will enact the transit to its new general economic optimum. This transit is presented in terms of the continuum of all the disequilibrium prices and chaotic states by which the structure discovers its new, unique, optimal state. The model’s code is open-sourced, so it can be readily established that the economic actors operate with nothing more than limited, local knowledge, and on the verge of an unknown future. The new optimum is never computed because it cannot be computed except by allowing its emulation of economic causality to play out.

I wish to argue for the affirmative in each of these assertions.

Incidentally, this submission has a bet associated with it: the under/over is that, for every Austrian economist willing to look at the evidence, there will be six Austrian economists who will present a praxeological case as to why the evidence offered must be a priori a fraud, a delusion, or irrelevant.

Though I have the ‘over’ side of this bet, I would be more than pleased to lose it. I remain an Austrian insofar as I believe that the general economic optimum should be the center of economic thinking: it is axiomatic that the economic order must continue in flux until every sector agrees as to the price of every commodity; and perfectly sound and socially important science flows from this premise. Praxeology works in this instance because the condition of economic stasis is co-definitional with the general economic optimum; and mere reason is sufficient for working out the consequences of a definition.

But reason is limited to consideration of the data brought to it: it cannot tell us if something important is being left out of consideration. When the asserts that general optima cannot be quantified owing to polynomial factoring, it must be with the realization that it is stating a ‘general negative’, and that such statements are beyond proof because the totality of possibilities being negated is beyond enumeration. A general negative is therefore only part of civil discussion if it is offered as an invitation to refutation by counter-example.

Having been made aware of the counter-example as an undergraduate, and having since learned that it has been fought-off by the Austrians on a priori, praxeological grounds for more than forty years, I am now embarrassed that my profession disgraces the larger Libertarian, neo-conservative movement which I otherwise support. Libertarian economics begins with a commitment to reason and evidence, and proceeds to von Mises’ “miracle of the market” as the only possible explication of economic causation. And, when confronted with a perfectly sound, mathematically determined rendering of that “miracle”, our side’s response has been to hound the mathematician out of academic life with our pro forma accusations of Nazism and sexual deviancy.

I hope this submission will receive some serious consideration. The general optimum’s categorical resistance to quantification is, after Piltdown Man and N-rays, perhaps the greatest intellectual fraud of the Twentieth Century; and therefore the greatest remaining to be exposed. The religious fervor of its defense now approaches that which once favored a geocentric universe. And the heterodox guys are on to us. I therefore urge a full intramural airing of the three premises I hereby nail to the door of Austrian economics.

Mabel

2

Is this Victor Aguilar?

3

This has nothing to do with Aguilar. My authorities are addition, subtraction, multiplication, and division. Once again, anyone here willing to do the math?

4

I’m guessing he’s talking about http://www.sfecon.com

I can’t really make heads or tails of the site, though my knowledge of the mathematical side of economics is slim-to-none. The authors do not appear to be native english speakers.

5

Grant,

You are right. I am talking about the SFEcon models – and the mathematics there are intense.

Might I suggest that the complexities of economics are also intense? - otherwise they would have been penetrated in the 19th Century when the general economic optimum was formulated.

But you do not have to be a genius at applied math to appreciate whether or not it has led to a correct result, anymore than you have to be an automotive engineer to drive a car. I am sure you have at least sampled video games even though you are perhaps not an expert in kinetics, optical projection, or the mathematics of emulation. You know these disciplines map into the real world because the instruments they create are realistic.

Once again, I am asking you to test the Austrian faith as regards the categorical impossibility of quantifying general equilibrium against a mathematical development of six algebraic steps. This requires little more spatial imagination than proving the Pythagorean Theorem.

Then I am asking you to consider an empirical case in which utility parameters have been calculated and found stable over a lengthy period. The mathematical sophistication required here rises to the level of ordinary least squares.

Finally, I challenge you to operate a simple instructional game and merely observe that it puts boxes of numbers together in relations that the economics profession has long concluded are beyond humanity’s ability to conceptualize.

I do not know how any less could be asked of Austrian economics in the way of defending its views.

I note that two Austrians have now registered reasons not to take up the defense. Four more and I win my bet.

Mabel

P.S.: Three years ago I directed my career to , moving from in order to meet the SFEcon guys personally as preparation for my doctoral thesis. They are all Americans by birth. The over-representation of Germanic ancestry is an accident, and the charge of anti-Semitism is convenient right-wing baloney. My mentor at SFEcon happens to be Jewish; and my ancestry is Chinese.

6

After reading this post, goes off to grab the aspirin. Math was never my strong suite. :slight_smile:

7

Actually, reading this made me believe someone took English classes from Keynes himself.

But more seriously:

@Mabel:

“Once again, I am asking you to test the Austrian faith as regards the categorical impossibility of quantifying general equilibrium against a mathematical development of six algebraic steps. This requires little more spatial imagination than proving the Pythagorean Theorem.”

You are so smart. Send me your files. darkhty@email.com

I can’t vouch to making good use of your files if your writing is an indication of how clear your mathematics are. At any rate, I’m certain someone as smart as you knows what KISS stands for in regard to software engineering.

8

Mabel,

I am not an “Austrian”, nor any sort of economist. I do understand regression techniques such as least squares, three-dimensional computer graphics and some of kinematics. I am an engineer.

I may not understand Hayek’s and Mises’s points entirely, but I think you are miss-representing their views. I don’t believe either said that the mathematical calculation of the general equilibrium is in itself impossible. I believe Hayek’s point was that it was impossible to gather the necissary information to do this calculation. Both Hayek and Mises also seemed to stress that the economy is never really in equilibrium to begin with, which is hard to deny.

I don’t think its correct to say praxeology somehow indicated that general equilibrium calculation was impossible. The fact that praxeology cannot aid in any such of calculation is true, but that does not make such calculations impossible. Mises stressed that models are just that, models. They aren’t the real thing, but that does not mean they do not have their uses. Obviously improvements in economic computations could have benefits to both government and private industry, and it would seem to me that a significant improvement in such things could be used to great effect and profit in the marketplace. So I do not see how SFEcon’s work, assuming it works as is claimed, would in any way invalidate Austrian economics.

Of course, the use of mathematical models, or any investment strategy, becomes less profitable and less meaningful as other investors begin to utilize it as well. Mises pointed this out, but in doing so I do not think he meant to suggest that such models are useless in the practical sense. It is just that they cannot point out the basic mechanisms that cause markets to function in such a fashion in the first place. Praxeology is uniquely suited for this goal, and uniquely unsuited for economic calculation.

Mises did not consider such models to be a part of economics due to the definition of what economics was to him, but that does not mean he discounted them to the point of total uselessness.

9

I think people here should give their email to Mabel. I started reading the first paper and although I did not come to a conclusion yet (I have to check many terms first), the curve itself seems to make sense. I am skeptical to its application regarding a world made of many unpredictable factors, but all things being equal this could be used to explain some relationships if the language could be toned-down a little so people can understand faster.

10

I am not an expert, but isn’t this a straw man? Is there any such Austrian claim? To me it is obvious that you can compute equilibrium given all the equations. (However, the equations may not be discoverable in practice, but thats not the point is it?)

Mises in “Socialism”:

“…it is quite easy to postulate a socialist economic order under stationary conditions. We need only avoid asking how this stationary condition is achieved. If we do this there is no difficulty in examining the statics of a socialist community. All socialist theories and Utopias have always had only the stationary condition in mind.”

11

Hi,

I appreciate your allowing that you are not an expert; but let us hope that the Austrian Institute is sufficiently well populated by people who are confident enough in their expertise to keep us on track.

I do assert that the impossibility of quantifying the general equilibrium is subsumed throughout economic science, whether orthodox or heterodox. I intuit that our disconnect is over what is meant by a ‘general equilibrium’.

A physical equilibrium is indeed computable if we know all the economy’s production and utility tradeoffs. This is a state in which everything being used-up by current production comes to be exactly replaced by that production just at the moment when all markets clear. And, of course, any such state can be made to disclose its associated relative prices via a solvable set of linear simultaneous equations.

Your post, especially the von Mises quote, indicates the dynamic context in which all this must be considered, viz.: the physical equilibrium state I have described is not stable in time because any number of such states are possible for any given set of production and utility tradeoffs. Physical equilibrium in this sense cannot therefore define economic order because it entails nothing to inhibit the economy from bouncing around among the limitless number of physical equilibria implicit in any set production and utility tradeoffs - which, we agree, are themselves changing with time.

Equilibrium is therefore more than physical equilibrium defined above, which I think is how you are defining the term. The economic steady-state is, I assert, the unique physical equilibrium that is also a general economic optimum. The general economic optimum is the unique physical equilibrium in which every economic sector values every commodity at the marginal cost of producing that commodity. I formulate the central tenet of the Austrian school as being that, until such a state is achieved, the economy must remain in flux.

To define the general economic optimum further, please reconsider the physical equilibrium defined above. At any physical equilibrium we can presume to know 1) where every economic sector is on its production function (i.e.: how much of each commodity it is using) and 2) every commodity price. We can, therefore, presume to know every sector’s marginal product with respect to every commodity. Knowing prices and marginal products, we can formulate values of marginal product: the price at which a sector can sell its product, times the marginal product of an input commodity.

When (and only when) all the values of marginal product in a sector-versus-commodity array equal the price of the respective commodity, then the system is presumably in stasis and will have no reason to change (for so long as its underlying structure of production and utility tradeoffs remains constant). This is the unique, steady state that I refer to as ‘equilibrium’ or ‘the general optimum’.

While I understand that the general optimum’s definition is perhaps challenging, I hope my summary is sufficient to indicate that its quantification entails simultaneous solution to a set of equations each having degree N, where N is the order of the sector-versus-commodity array with which the economic order is described. I believe everyone who has ever become an economist has professed that such a state cannot be quantified for a sector-versus-commodity array having more than two or three rows and columns. This is because of the computational issues arising when solving equations of degree 3 or greater: cubic equations are a mess; quartic equations are all but impossible; and, beyond that, solution is hopeless. These are the ‘polynomial factoring problems’ to which I refer.

At present there are perhaps a few score of economists who accept that there exists one polynomial expression for the general economic optimum that can always be factored, irrespective of the order of the economic array. To my knowledge, not one of these economists is an Austrian; and a great many Austrians have informed me as to why the math ‘just has to be wrong’ on praxeological grounds.

I believe your quote has von Mises subsuming that a ‘socialist’ or ‘economic command’ dynamic is unthinkable. And my understanding of things Austrian is that the reasoning behind his conclusion follows from the impossibility of formulating the general optimum owing to polynomial factoring. If the ‘socialist computation’ or ‘’ problem were solvable in von Mises thinking, I do not see how he could have concluded on the “miracle of the market”. If Hayek had successfully reformulated the nature of understanding so as to permit something in the way of a solution, then he would not have concluded on the “spontaneous ordering of markets”.

In any case, the SFEcon system I offer for consideration is an utterly dynamic, disequilibrium portrait of economic adjustment in which economic order is held together in decaying orbit around whatever general optimum is implicit in a set of parameters describing production and utility tradeoffs. These parameters are 1) calculable, and 2) expressive of continuously decreasing marginal utility.

Best wishes,

Mabel

12

Hi Grant,

I hope my response to the post above adequately disposes of your question as to the Austrian school’s assertion that the economic dynamic is indescribable in quantitative terms. If we agree that von Mises and Hayek did not offer an engineering dynamic model of economic adjustment as they described it, then I will subside – so long as we also agree that their failures are not to be taken as prohibiting someone else’s having accomplished the task.

I accept that your larger point, about gathering enough timely information to calculate the equilibrium, is a central issue – but one which is separate from whether or not the (optimal) equilibrium can be calculated at all. I believe the reasoning goes like this:

even if the general economic optimum were quantifiable, there is no way to focus the information necessary for the computation in time to usefully direct the economy toward the optimum’s realization; and

there is, in any case, no possibility of any central authority acquiring the coercive power to coordinate all the individual economic actors’ activities in service to the optimum, even if such were knowable in a timely fashion.

I would, however, submit that placing these admittedly valid, characteristically Austrian, conclusions at the center of economic thinking is needlessly hostile to the development of economic science. Indeed, it creates a tautology by which economics can never be scientific. It is analogous to traditional culture’s presentation of Intelligent Design as science - where it would be sufficient to simply assert that we cannot (and therefore might never) understand evolution in mechanistic terms.

I suggest that Hayek struck out in the right direction with his re-considerations on the nature of knowledge itself. These have given rise to the disciplines of fractal design, complexity, chaos theory, etc. – fields where SFEcon is welcome. In these fields ‘order’ emerges from the simple actions, having nothing to do with the emergent, of myriad elements. ‘Understanding’ occurs in terms of building an objective (usually mathematical) mechanism that actuates what the fractal elements do, and observing the emergent in what the overall mechanism does.

Clearly, the economic machine’s emergent is the general economic optimum implicit in its production and utility tradeoffs; and the fractals of economic systems are elements of its input/output array. What these fractals do constitutes our knowledge of economic causality. Whether or not we have the fractals’ identity right is indicated by whether or not the general optimum emerges from the mechanical embodiment of this knowledge.

I believe it is fair to say the Austrian school generally holds that, because Hayek did not discover the mechanism he envisioned, this vision is beyond realization. (Citations supplied if needed.)

As an engineer conversant with modeling philosophy, you could perhaps advance our discussion here by examining the prototype I offer as a demonstration that Hayek’s vision has been realized, and the ‘socialist computation problem’ is thereby solved. Drop me an email with a private return e-ddress, and I will attach the prototype to my reply.

Best wishes,

Mabel

13

Madame,

It seems obvious that you don’t consider economics to be a science yourself as a perfectly sound and logical statement, such as the one you critique above, could never really be unscientific as it is based on, in you words: “admittedly valid” and utterly incontrovertible evidence. That is: the real world. People are not fractals, fluids, particles, atoms, compounds, even if they are a part of us. You do not know and cannot define in any mathematicaly constant way the constantly changing value scale of people, and as utility is what is measured by this value scale how could anyone ever hope to try to definite in any general way? Utility is more than just cost and price. What of all the completely unquantifiable aspects of utility which come from completely psychic effects? To quote Rothbard: “the frantic and vain attempts to measure intensive psychic magnitudes in psychology and in economics would disappear if it were realized that the very concept of measurement imples the necessity for an objective and extensive unit to serve as a measure. But the magnitudes in consciousness are necessarily intensive and therefore not capable of measurement.”

14

Why should conclusions about definite limits – of either the scope of the truths calculable via economics, or the knowledge attainable by men – make economics unscientific?

Mathematics, via Kurt Gödel’s Incompleteness Theorem, is aware of its own limits – i.e. it is provable (using mathematics) that there’re things which mathematics cannot prove.

In physics, it is accepted that you can’t view something with any clarity below the atomic level (because of the definite limit in size of any physical instrument made to view the subatomic). It’s also accepted that you can’t exceed the speed of light.

Are mathematics and physics not to be regarded as scientific? (Note that I’m using scientific in the general sense (truth) and not the more modern sense implied by the physical sciences).

I’m not sure which of these best addresses your point; perhaps because you seem to be writing in an intentionally cryptic way (this isn’t an ad hom - it’s a point that will hopefully lead to clearer future discussion).

15

I think you might be referring to the Hayekian paradigm of Socialist Calculation. Hayek makes it a problem of scope - a socialist commonwealth cannot perform rational economic calculation because of the sheer amount of information involved.

Mises, who first formulated an argument against calculability within socialism, didn’t argue that it was a problem of scope, but one of the fundamental impossibility of deciding upon a best course of action for the production of anything in a system with no working capital goods market, i.e. how does one decide how to produce something efficiently if one cannot account for the costs of different methods of doing so?

More is available here - an absolutely fantastic explanation of the SC debate:

I’m sorry if the above fails to address your point; it really wasn’t very clear just how the problem was settled in your mind.

16

I’m inclined to agree with the above assessment of your discussion of the solvability of general equilibrium. I can’t recall reading, in my studies of Austrian Economics, anything describing general equlibrium as theoretically unsolvable for a given point in time.

I think that Austrians would readily agree that given the the right knowledge, general equilibrium could be “solved.” The Austrian view, as I understand it, has simply been that because general equilibrium is only valid for a static moment in time, it’s a rather trivial thing to have solved.

Perhaps I’m wrong - I am not an economist (by any stretch).

17

Markara,

As to whether or not I consider economics to be a science, I accept Nelson’s estimate in his Economics as Religion: at present ‘economics’ is mere pseudo-scientific imagery in the service of a self-sufficient system of values, whether the Libertarianism of Chicago or the Progressivism of the two Cambridges (one in , one in ).

Economics as we have it is the Scholasticism of our materialistic age – a baffling circuit of unexamined assumptions and pre-ordained conclusions. I find economics’ subject matter interesting for the potential it holds for doing better.

As to your argument as to why this is not going to be possible, first allow me to supply you with an authority higher than Rothbard: I have (in print, and by a tenured professor OF ECONOMICS) the substance of your argument against the possibilities adduced by SFEcon attributed to His Holiness Paul VI. So what? Urban VIII had his a priori reasons for asserting that Galileo, aided by his telescope, was not really observing moons revolving around Jupiter. Are the moons there or not?

Is the economy there are not? Do we not observe it in terms of the order it presents to us? Having observed order, does not the scientist obligate himself to explain it in terms of some self-evident generalization? Was Hayek a fool insofar as he invested as much as he did in attempting a formal, scientific explanation for the order he acknowledged as present?

I believe your argument exposes what I would like to address as the reductionist fallacy in Austrian thinking, which I understand as follows:

The macroeconomic order we observe appears to us in terms of a closely realized tendency to an equilibrium.

We intuit that this equilibrium is fairly stable because it is also a unique optimum characterized by every sector’s marginal value for every commodity equaling the commodity’s marginal cost of production.

We are comforted in this conclusion because the atomistic elements of the economic system can be trusted to do their part in bringing this overall, equilibrium-with-optimality about, i.e.:

individual firms, pursuing maximal profits, will themselves tend to perform at the point where their marginal revenues equal marginal costs; and

individual households, seeking to equate marginal utilities of their leisure and their labor, will also operate where marginal revenues equal marginal costs.

This explanation of overall all economic order and stability, though correct, cannot be given an objective demonstration because there are so many individual firms and households that there is no practical way to estimate all their separate utility functions.

Baloney feathers. Individual firms do not operate where marginal revenues equal marginal costs (and it is, in any case, unreasonable to have ever supposed that they would). And (as you quite properly point out) people have yet to show any evidence of operating on the basis of any sort of utility function. (Overwhelming citations available on request.)

Moreover (and of supreme importance to my thinking) the explanation of economic order in terms of a tendency to the general economic optimum has been properly demonstrated without ANY references to how individual firms or households behave. This is because the proper unit of macroeconomic analysis is not the firm, but the various economic sectors composed of many firms producing the same product:

However the individual firms within a sector might compete (usually an amalgam of product differentiation, service, etc. – seldom purely prices,) we can be sure that placements of capital among sectors will be based solely on maximal returns because this is how capitalists balance their investment portfolios.

What this means to the individual firms or households within sectors is therefore irrelevant to understanding overall economic order.

Having solved the polynomial factoring problem, SFEcon can abstract the production and utility functions of economic sectors from their gross behavior, without reference to the individual firms or households making up the sectors.

So your objection to computing people’s utility functions might or might not bear on the point I am trying to make. If your prohibition is on behalf of describing individual persons in terms utility tradeoffs, then I agree. I believe all the empirical data supports us; and the causal reasons you give as to why this is so are as good as anyone’s.

But if you are extending this generalization to assert that household sectors, representing whole social classes, cannot be identified in terms of their utility tradeoffs, then I am prepared for battle with both data and logic. The choice of weapons is yours.

Any takers?

Mabel

18

Hi Dan,

Sorry about being cryptic – will try to do better.

I agree that the wisest science is aware of its inherent limits; and that such limits are always and necessarily part of this science game. My brief with economics is that it acknowledges limits that aren’t there, and can get pretty unpleasant in asserting that they are there.

As for what makes a science, I rely on Galileo: “Demonstration is the essence of science.”

The demonstration of economic science that I would find satisfying would begin like this:

I will provide a snapshot of a hypothetical economy that is out of equilibrium, and therefore unstable. Our hypothetical economic universe will consist of just three sectors: two profit-making generic industrial sectors, and one household sector that receives the profits, while working for wages in order to provide for all of its consumption.

I will supply a 3x3 input-output array giving you the physical rates at which each sector is currently consuming each of the 3 commodities produced by the 3 sectors.

I will supply the price of all 3 commodities, the current rate of interest, the household’s level of savings, and the amount of these savings currently invested with each of the two generic sectors.

Finally, I will supply a production function for each generic sector, and a utility function for the household. These functions will describe continuously decreasing marginal utility at every point; so each will present 3 degrees of curvature. You may consider these functions to be fixed throughout the demonstration.

I then challenge you to present to me with the continuous succession of disequilibrium states by which this system comes to organize itself around the general economic optimum implicit in its production and utility tradeoffs.

This would entail the time-series of each price, each element of the input-output array, and each component of saving and investment.

I would like you to constrain your demonstration so as to honor both conservation of mass and of money.

A sector’s output rate must be specified by its intake of commodities and the shape of its production function; commodities cannot be consumed until they are produced; and excesses of supply over demand must be carried-over from period to period.

Savings and investment can only adjust in response to actual financial flows arising from the prices and physical commodity flows of the moment.

The final state I would like to see would have 1) supply and demand equal for each commodity, with clear markets, 2) general equilibrium prices, and 3) values of marginal product equal to marginal costs of production at each cell in the input-output array.

I submit that, with a handful of embattled and beaten-down exceptions, everyone calling himself an economist believes that such demonstrations are categorically impossible. If I am wrong, give me some names.

At anyone’s request I will supply such a demonstration. I can also present the same demonstration for an input-output structure of theoretically any dimensions, and for a world described by the interaction of any number of such structures. If you know economists who will even examine such claims, give me some names.

Now that you know what I mean by a description of economic equilibrium (i.e. stable because optimal) I challenge you to revisit your assertion that the expression of general equilibrium for one moment in time is trivial.

Consider an optimal momnet, and give me ANY numerically specific expression for the general economic optimum for the 3x3 structure described above.

Start with any non-zero elements you want in your 3x3 input-output array, and any interest rate. Compute general equilibrium prices.

Then use this information to determine the shapes of production and utility tradeoffs for which this state is optimal, i.e.: marginal revenues equal costs at each cell of your matrix.

This problem is, in principle, solvable because it involves simultaneous solution to three polynomials of the third degree, and such polynomials can always be factored. But I have never had an econ professor step up to this challenge – even after I showed him numerical examples of the challenge having been met by non-economists.

When you see what is involved in this elementary demonstration, then consider the difficulties of solving the same problem for input-output matrices of order greater than three. This is where polynomial factoring is asserted as an outright prohibition of quantitative expression. Again, I can supply as many numerically specific counter-examples as it would take to win the argument – if economics were a science.

Finally, on your question about the socialist computational problem: I believe von Mises said the operative difference between socialism and capitalism is whether or not you have a stock market. So I submit that the critical question is whether or not a regime of economic command can ever have the knowledge required to effectively co-opt the capital markets’ function of allocating capital among economic sectors.

If you credit my earlier assertions about what is mathematically possible in the way of describing economic sectors through the lens of general optimality, then I think it is clear that the critical knowledge is available. Regimes of state capitalism or market socialism can consolidate ownership of their nation’s asset portfolio, and optimally distribute capital among their assets without the experimentation of free financial markets.

The data I describe have already been calculated for several nations – capitalist and communist – and have been exploited for private profit. There are already scholars in and who are actively developing the socialist possibilities I have outlined.

I earnestly suggest we formulate a response that is more respectable than “math is hard” or “SFEcon is anti-Semitic”.

Best,

Mabel

19

Mabel, can your models predict which new product will be brought to the market and be profitable (and how profitable) next, thereby upsetting the economy’s march towards equilibrium? I could use that information for “private profit.”

20

Mabel,

I am not sure it is correct to say that Hayek and Mises “failed” to perform economic calculations, as much as they did not try to perform them at all. For Mises, economics was a branch of praxeology, and praxeology is rather unsuited for economic calculations. It is simply the wrong tool for the job, and would be like trying to use classical physics in the field of biology. Mises does not renounce all uses of calculating equilibrium in Human Action (p. 245), but rather stresses the limitations of that approach. Mises regards even models based off a (make-believe) economy in complete equilibrium to be useful in a limited sense. So I would agree with you that the calculations you speak of could be very useful to economics, but I do not believe the work by Mises and Hayek contradicts this in any way. Newer Austrians may have said what you claim, but I’ve not read them.

I’ll PM you with my email address, but I’m afraid I won’t be much help. I have no clout with the LvMI, nor any other economist. And I really don’t have much time to try to understand a subject which is very foreign to me. I am not even familiar with the structure of equilibrium models, or what levels of abstraction they operate at.

I don’t even know if there are any economists from LvMI who read these forums (although hopefully there will be). I think you may be barking up the wrong tree if you are trying to sell equilibrium models to Austrians, though.

dchernik,

I’m sure a great many people could use better economic prediction. As I’m sure you know, there is enormous amounts of work being put into just that. The fluctuations of markets provide profits to those who can predict them, and as Mises and Hayek pointed out, profit motives serve as the motivator for entrepreneurial activity for those with the knowledge to act on it. I hope SFEcon is not trying to suggest their system, if its as robust as you suggest it might be, justifies involuntary socialism, when the very mechanisms and motives for the creation of predictive models comes from and benefits the market itself.

However, I don’t think its currently possible to gather the data needed for exhaustive economic prediction.