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.
That is not an economic model or prediction of utility for the purpose. It will remain to be understood what happens to all other prices and production when this single adjustment is made. In addition, the question arises why the price is being adjusted. For example, what decisions were made and what conditions changed, either actually or by way of changes in understanding, which caused the prices to change?
Besides, your example is in reference to the law of supply and demand.
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...
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?
Thanks for your remarks teageegeepea.
There is a difference between modeling and manipulating.
To model, is to create a framework that describes something.
To manipulate is to choose one or more elements among the known attributes of the model which can be controlled and then use that to coercively accomplish goals; then set the model up to "show good things are happening" based on the all wise management of the modeled system by the managers.
You note "a significant degree of accuracy". The point is that the degree of accuracy that can be attained is insufficient for the purpose.
Thanks nateemmons. I appreciate the distinction being made.
My reason for mixing is the centrality of private property and the consequent violation of property rights, using the standard of theft or fraud, that follows manipulation of currency, favored business license or heavy taxation for the purpose of redistribution. My interest in the school of thought is less theoretical and more practical application; i.e. how the body of knowledge affects the decisions by government that we then have to live with.
The problem I have here is the ganging up on the ...
Austrians believe that modeling for purposes of prediction is fruitless. Modeling for the purpose of control is unethical and oppressive because property rights are violated.
Other economists believe they can successfully model and manage an economy. They deal in numbers without taking into consideration human action at a level that has explanatory power. Monetarists, Keynesians, etc. ignore human action and generally treat the notion as unimportant. Austrians claim human action cannot be modeled, but knowledge of human action is required in order to mo...
Human action can indeed be to some measure predicted.
For instance, if I conducted an experiment with 100 people wherein I presented each person with the opportunity to place their bare hand on a red hot burner on a stove, including leaving it there for one minute, I predict 100% would say no. I could even model that experiment.
However, this kind and degree of predictability is meaningless in the context of economic modeling.
What if the person who is being presented with the choice in the Allais Paradox just lost their mother to death, as well as losing...
Austrians recognize that there is an unquantifiable variable in economics, namely human action, which heavily influences economic outcomes. You want to insert an arbitrary (estimated) variable value, i.e. probability estimate, in a model to account for something that Mises claims cannot be accounted for based on experience and historical fact.
Since you seem to believe that the variable value can be known and quantified for modeling purposes, what is it? What are the attributes of the variable collection which represent human action in economics?
Mises cla...
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 wh...
According to the about page, this group holds mathematical modeling in high esteem. A central idea being that the mind itself, individually and, by extension, groups of minds, can be mathematically described and modeled.
I would be interested to hear how one claims to correlate the results of a model to the workings of the mind. It sounds to me more like the result of industrious researchers mixed with computing power which is sufficient for the task of repeatedly tweaking a complex model until the product resembles an observed reality. Afterward, chos...
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.