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Swimmy comments on Awful Austrians - Less Wrong
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Comments (88)
I understand this point, but the presupposition has a purpose beyond itself. It is not intended to exist as a statement of truth which cannot be refuted. Its purpose is to acknowledge the lowest step in the Austrian analysis for which we can describe our understanding. That point is the touchstone for what we cannot know and for that which we cannot go beyond because of the nature of the things in question.
The Austrian view observes certain outcomes which can be quantified and then works backward through regressions to describe what we can know about why these observed and knowable outcomes are indeed the outcomes.
In essence, the claim being made in the Awful Austrians piece is that the theory should not claim to not know or be incapable of measuring anything in the regression toward the foundation of the thought, else the measurable conclusions should be disdained.
The implication then is that these things described by the presuppositions can indeed be measured or quantified, or else that they are irrelevant to the question and something else is the correct next measurable regression in the theory.
For instance, as a Public Choice libertarian, do you recognize the mathematical and logical truth that when inflating a costless money supply, if everyone receives the new money on the same day, then inflation serves no purpose? If you do, step back through the regressions from this level until you discover some part of the theory that is unsustainable. If that point is at the presuppositions which in essence are describing what cannot be known, then where is your argument?
The presuppositional construct is a method of attaching symbols to concepts regarding which we can only see the shadows. The evidence they reject is that which irrationally claims to confirm or disconfirm their starting point, not the following layers of theory which exist within our quantifiable apprehension.
And, come to think of it, no, I do not agree that the inflation example is a mathematical and logical truth, unless one assumes self-interest to actually mean selfishness. Otherwise, a banker may say, "I love all you little goofballs so much, I'm not going to raise the interest rate the full price of inflation. Go ahead and have some of my mone." Then the inflation would have an effect.
But if self-interest is selfishness, then it's not an unknown variable, and I can think of many experimental results to confirm or disconfirm it.
Swimmy, I think perhaps you are not following the argument regarding inflation.
If one created a simple model wherein everyone had x currency units today, and then tomorrow an additional quantity of costless new money was created, such that each person had 2x currency units, then inflation would serve no purpose. Each person's purchasing power would be unchanged.
What is the mathematical and logical error you see in that model?
Prices have to change as well. The prediction that producers will change their prices is based on the selfishness assumption.
Nominal debts and nominal savings both decrease.
In the example there are no debts. Savings in money terms are the dollars held, therefore the savings rate is unchanged. Savings in corn or cattle are unaffected by the change in money quantity.
Prices change based on the law of supply and demand.
Consider Bernanke’s recent comments about the control the Fed has over the economy.
“Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”
(Ben Bernanke, “Deflation: Making Sure ‘It’ Doesn’t Happen Here” [Remarks before the National Economists Club, Washington, D.C., 21 November 2002])
The law of supply and demand is based on the selfishness assumption. Yes there is an argument that even upward-sloping demand curves will eventually slope downwards, but I can always find some margin or theoretical example for which it's not true over some interval.
Why would the law of supply and demand not rest on marginal utility, rather than selfishness? Just because I have a selfish desire doesn't mean that I can satisfy the desire. Utility and means mix together with self interest to render choices regarding use of scarce resources.