Economic Calculation --- The Austrians' Failure

[Agnapostate]

I have tried. I have even gone through the web you have pointed me (btw, the home page of anarchysm goes to a dead link, you may want to repair that since it gives a horrible impresion).

Mainly I have found in that page capitalism bashing, and very little constructive. Is anarchysm capable of defining itself on its own, or does it needs capitalism?

But you've not developed any specific criticisms pertaining to the economic calculation problem?

 

[hugolp]

But you've not developed any specific criticisms pertaining to the economic calculation problem?

I have told you repeteadly I dont understand how the system you propose works, therefore I can not give any opinion on it.

 

[Paulitician]

It's been a long time since I posted on here, but this topic caught my interest.

Have Austrians lost the calculation debate? Depends on what you think the debate is all about. To me, it's about the failure of central economic planning. So I think they've clearly won it and beaten its dead horse. The only thing I've think they've lost is their ability to keep up with the times, and a sense of open-mindedness. IDK, I think there is a perversion of language where anything the government does or is involved in is "socialism" and to use the economic calculation argument in some of these cases is not totally valid. And as you mention, they fail to even address other types of "socialisms." I think there are some great insights you can gain from the economic calculation argument, and interesting applications for it--I'm just not so sure about the scholarship in that area nowadays.

 

[tmosley]

ITT Shaka returns.

 

[silverhandorder]

No you have not solved the economic calculation problem. People that come up with ideas are not reimbursed. What happens then is that the entire equation for the cost of production of the goods is wrong.

If I can not own property or work on my own terms I am taken out of the competition and there is no way you can set the real price of the good.

 

[Pennsylvania]

Seems to me this breaks down, once again, to subjective value vs. objective value...

Which do you accept and why? Exploitation theories depend upon objective value, which Austrian economics rejects. "Calculation" is another way of saying "determining objective value", that is, value based on labor or some other characteristic of an item's history. This approach is counter-intuitive, impossible, and ultimately useless when compared to subjective value based on situational utility.

Secondly, do you accept any form of property rights? Certainly you might say that you accept "possession". In which case you would be the possessor of your own home until you left it to labor in the field that day, at which time the home would no longer be yours, but would be left to the caprices of any traveller who may wish to homestead it.

Third, when you say that you wish to expropriate property from private individuals, it begs the question, who will receive it? Should an aboriginese australian be entitled to a land estate in minnesota? Please define your collective...

 

[Deborah K]

But you've not developed any specific criticisms pertaining to the economic calculation problem?

What is your opinion of the "boom-bust" cycle? What do you think causes it? The reason I ask is because I consider that cycle to be a big part of the problem. Also, what is your opinion of fiat currency and fractional reserve banking?

 

[newbitech]

I posted this commentary at one or two other places, but was hoping to hear feedback from those explicitly devoted to Austrian economics. Anyway, an early objection to the inevitable failures of central planning that the self-described socialist USSR had embarked upon on the basis of its failure to incorporate dispersed knowledge and a condemnation of the party dictatorship that state "socialism" involved is found in Peter Kropotkin's 1919 postscript to Words of a Rebel, which was published the year before the publication of Mises's 1920 Economic Calculation in the Socialist Commonwealth. As Kropotkin wrote:



The entire libertarian approach went virtually ignored by the Austrian school (Mises did devote an irrelevant cutting remark to Proudhon in his essay without actual argument), which placed focus on central planning mechanisms and procedures on account of the emergence of them in the economic structure of a country which was to later become a superpower of the world. That was their first failure.

Secondly, democratic market socialists have progressed beyond the mere punch in the gut that the development of the bureaucratic Lange model presented to Mises and have utilized Hayek's insights into dispersed knowledge problems to form a sound basis for advocacy of a decentralized market economy reliant on workers' ownership and management and in some cases a stakeholder economy, with Theodore Burczak in particular being integral in the development of "post-Hayekian" socialism, which even major Austrian scholars have admitted is serious. With the absence of any major Austrian argument against dispersedly planned socialism (with Mises incorrectly dismissing much of it as "workers' syndicalism," which he regarded as a form of capitalism), and the more recent development of adaptation of Hayek's insights by market socialists, have the Austrians now truly lost the economic calculation debate?

ok, what? I barter goods and services. I really think ALL of these different "schools of economic thought" would do themselves a favor to go study some applied physics and maybe even a little bit of quantum mechanics starting with the Schrödinger equation.

There is a serious viscosity problem when trying to analyze and compare micro-economics to macro-economics. An individuals micro-economic view will always be more viscous than the macro-economic reality. This large built in "shear" seems to never be accounted for appropriately by ANY economic philosophy.

I think that shear is what you are attempting to describe as the failure of the Austrian school. All anyone seems to agree on is that central economic planning is not a viable solution on the micro-economic level. Well whatever, I think any macro-economic philosophy will fail for any given micro-economic reality all the way up until the point that an individuals micro-economic reality approaches the capacity of the economy as a whole. This is what creates the desire for humans to look for and achieve economic "success".

As far as the Schrödinger equation, the measurement problem infects all philosophies of understanding where math is applied. To make matters even more incoherent and "fuzzy", we introduce an additional unpredictable and "random" variable in human decision making. That is to say, that humans irrational decision making will further distort any measuring device that attempts to find the difference between the micro-economic desires and the macro-economic realities and vice versa.

The more we attempt to observe and measure human economic decision making at the micro and macro levels, the less confident we are in the precise realities of those systems of decision making.

How are the probabilities converted into an actual, sharply well-defined outcome?

So my conclusion is that on the one hand, you have fractal geometry which gives rise to very precise yet fundamentally flawed conclusions about trends at every economic level. On the other hand, we have praxeolgy, which is pretty good about reminding us that humans can suddenly become irrational and that markets will create unpredictable outcomes at unpredictable times but absolutely sucks for creating a system to generate profits consistently for any given time horizon, the goal of everyone's macro and micro economic decision making.

I know I didn't address your question directly, because honestly I find getting too deep into these types of questions to be counter productive to my personal goals. The more I analyze and study all these different philosophies, the more detached from reality I seem to get. And I always come back to the simple conclusion that any economic decision I make will always be based on the free exchange of goods and service between individuals, and really that is all that matters to me.

 

[wizardwatson]

To me economic calculation problem means, there is no one who is better informed what to do with what's mine than me. I'm still not sure after reading half this thread, what it is OP wants to debate or here thoughts about.

As far as decentralized communities, well isn't that kind of what we have? Where the state dominates, the real economy ( aka real 'market' ) functions via the black markets.

What I envision as an ideal transition away from statism would be a return to sound money, where we decentralize the reserves and also use land as backing for currency, thus preventing these 'small decentralized communes', from being ravaged by tsunami's of foreign capital meant to confer arbitration advantage within the local economies when pricing abnormalities occur.

The same way the 'economic calculation problem' makes it hard for anyone else to run an individuals life, it also makes it impossible for any 'human' theory about the best 'system' to implement to ever gain wide acceptance without statists ramming it down our throats.

It's not a 'new' system we need. We have law, what else do we need? What we need is a stripping away of unnecessary parts. We don't need anarchy, we need exactly and only as much government as is necessary in a particular situation. We don't need to trash the Constitution, we need to get rid of all the crap we added to it, or that it started with that is/was wrong.

Anyway, I'm ranting. Main problem I see with 'decentralized social communes' is what holds it together as such? Nature right? So the only way in my mind such a system were to exist is if it were consistent with natural law. Natural law exposits itself within human relations via the science of justice, also known as the legal system. The law, by definition, is not supposed to be subject to the wills and whims of men. So main problem with me understanding your point, is this:

What else besides the law do you need? What type of pact or glue or constitution is going to form the basis of this new type of community that does not already exist?

 

[brandon]

//

 

[Pennsylvania]

I'm actually really glad you showd up, Agnapostate, because you're right about how very little attention has been payed by the Austrian school to people like Bakunin/Kropotkin, Proudhon, Chomsky, etc, as if Marx was the only socialist philsopher to ever exist (although I hesitate to call Proudhon a socialist). I'd personally love to see more discussion between these groups and Austrians, and amonst those groups themselves.

The only well-known critique (itself only an essay) of any of these schools of thought done by an Austrian philosopher was Rothbard's The Death-Wish of the Anarcho-Communists

 

[Deborah K]

Maybe I'm just too ignorant or naive to understand but doesn't all of this stem from the health of financial markets? And don't these markets get their money from loans? Isn't the banking system the root of all of this? I mean, how can you argue about capitalism vs. socialism in the market without first discussing the control of the banking system? My pea brain can't comprehend how any of this really matters as long a there are booms and busts.

Someone explain it please?

 

[Andrew-Austin]

I personally advocate the abolition of markets and the establishment of horizontal confederations of decentralized collectives and communes managed through participatory, bottom-up direct democracy, i.e. the traditional anarchist vision, specifically anarchist communism according to my preferences. But as a relatively non-sectarian libertarian, I'm partial to all forms of legitimate socialism.

So the good old collective would have to vote on everything regarding every resource in order to just begin working or utilizing these resources? Sounds like the type of formula that would quickly end up with people dieing.

Mere exchange is not a sufficient condition for a market to exist. Any complete market must incorporate the development of prices based on competitive exchange patterns. Mere cooperative exchange certainly isn't sufficient.

There is no 'complete market', there are just markets. People trading goods = a market. If I trade a fish I caught for a hammer some guy forged, I am assigning value. The hammer is competing with the value of everything else I could possibly exchange the fish for, including the fish itself. When people do shit like this it is a market.

It's just that I believe not only that market power will inevitably be so extensive in a capitalist economy that the orthodox firm will be afflicted by dispersed knowledge problems that a consistent Hayekian would object to

You mean monopolies would form? Are you familiar with the Austrian theory of monopolies?

Since the financial class consists of a small and elite number, they'd find themselves six feet under if they tried to violently resist the vast majority who came to dispossess them. It's all a numbers game, so you'd be the one to be shot.

Why did you bring up the financial class when responding to him? Everyone owns something. If by "means of production" you mean resources, everyone owns resources. And the thing about 'collective ownership' is, individuals would own nothing. You say everyone owns everything, but really that is just the same as saying no one owns anything. I could come across an apple tree and grab an apple to eat, just because I was hungry, but I would not be consulting the collective as to how the apples are to be distributed. So instead of filling my stomache, I have to wait around for the collective to decide if I can eat it. Seeing as how no sane person not already subscribed to this religion would want to revoke all rights to ownership they have, your anarcho-socialist collective would indeed be in the minority.

By the way Agnapostate you are better off going to the mises.org forum for a technical debate. People there do happen to be more familiar with Austrian economics.

 

[newbitech]

Agnapostate you are better off going to the mises.org forum for a technical debate.

yeah, I agree if he is trying to prove or disprove theory. But if he wants to find out what people think about the realities of the outcomes of these theories, he'll probably get a lot more meaningful data points here, a better statistical sample as slanted towards the "Austrian School" as that may be.

Don't get me wrong, I think it's healthy to get involved in these types of debates because they uncover realities that help all of us in our decision making. I just think the problems we are facing aren't as technical as some of the philosophers and wanna be philosophers would like to make them out.

What is important to me and I think most people is that the conclusions match up to the reality, no matter how those conclusions are formulated. The reality being what is observable and measurable. If I have to spend a lifetime developing and economic philosophy that only works, some of the time, then I don't think its worth it to pursue that route. I just need something that works most of the time. On the rare occasions that failure happens, hopefully I have mitigated the consequences during the successful times. If not, then I may reconsider my approach for future decisions. That's just me tho.

If I am wrong, then its my problem, but if I am right its all of you's problems. Unless you are running a business subject to the laws in America these days, then the opposite seems to be true.

 

[silverhandorder]

There really need to be no technical debate. What he advertises fails miserably in 3rd world countries. He basically wants the industry to be converted to co-ops. That is where workers make all the decisions of how to run the factory. They barely survive in countries like Argentina while their counterparts do much better in comparison.

 

[ARealConservative]

ITT Shaka returns.

sadly, they are different people

 

[tmosley]

sadly, they are different people

I can't believe it's not Shaka.

A post referring to some failure of the Austrian school, a demand to speak with random people on a forum and pretend that they are Austrian scholars, bloated diction to the point of incomprehensibility; the only thing missing is a link pimping his book/site, or some sort of comment about "axiomatic" economics.

 

[Bman]

Since the financial class consists of a small and elite number, they'd find themselves six feet under if they tried to violently resist the vast majority who came to dispossess them. It's all a numbers game, so you'd be the one to be shot.

If this was true at all, a lot more people would be shot than we currently see. You'd have to indoctrinate people into your belief for this to have any chance, and you would completely be ignoring praxeology.

No, but any legitimately free market will necessarily be socialist in nature and maintain the public ownership and management scheme that I mentioned. A capitalist market will inevitably be characterized by restrictive barriers to entry that slap "freedom" in the face, especially without the expansive government structure required for sustainment purposes.

Only if we allow government to become involved with markets in the first place, which it is , which is your first mistake when you use the word Free Market. Free Market =! Government. Your conclusion is incorrect, you do not understand the proper use of the term free market.

This was the only part of your post truly relevant to the socialist calculation debate, though it's still somewhat disconnected, especially considering that you've chosen to cheerily ignore the answer to the question you asked. The point here is that competitive barter and exchange is not the standard arrangement in collectivist or communist economic structure; public provision of goods and services in compensation for labor input is.

Democracy can be good, it can be bad. The problem is knowing where a democratic process is needed and where it is not. A direct democracy is a bad thing. For instance all the right handed people may decide to vote that all the left handed people should have to do twice the amount of work. Or we can go down the list. In all honesty a direct democracy will end up as slavery for someone else. If we are to take a walk down the road of having government we have to recognize that there are certain things government cannot touch. One of those things should be markets. Now you have your democracy through peoples ability to decide without force were their money should be applied. Nothing survives that the people do not want.

 

[wizardwatson]

Maybe I'm just too ignorant or naive to understand but doesn't all of this stem from the health of financial markets? And don't these markets get their money from loans? Isn't the banking system the root of all of this?

I think personally that it is the main aberration in the system. So a resounding yes from me.

I mean, how can you argue about capitalism vs. socialism in the market without first discussing the control of the banking system? My pea brain can't comprehend how any of this really matters as long a there are booms and busts.

Someone explain it please?

Forums are never about action it seems unless the action is already there pushing the agenda on the forums. Trying to use forums to get people refocused on actual action items, I've found to be nearly futile.

Instead of discussing/educating about local banking, alternative currencies, food co-ops and local agriculture, homesteadable land, education in law, etc., we're still stuck on explaining that statism and centrist thinking are both old and generally not good. And many who fancy themselves free-thinkers are content to spend endless hours mish-mashing back and forth half-formed adolescent thoughts about what this system vs. that system, or this worldview vs that, or this metaphysical view vs that means, on these forums.

Instead of educating themselves towards action, they educate themselves towards inaction.

The only time I think it's proper to debate theory, is when you are proposing some kind of actionable item where current theory or 'ways of thinking' are in a state of conflict with the actionable item. In that vein I maybe see what the OP is trying to do, but still unsure really of his aim.

Anyway, that's my half-formed adolescent explanation of it.

 

[Agnapostate]

I can't believe it's not Shaka.

A post referring to some failure of the Austrian school, a demand to speak with random people on a forum and pretend that they are Austrian scholars, bloated diction to the point of incomprehensibility; the only thing missing is a link pimping his book/site, or some sort of comment about "axiomatic" economics.

Here, you might like this.

So he thinks I'm you, while you think he's me. Maybe you two are the same person?