Tuesday, February 14, 2012

Are Human Desires Unlimited or Unsatisfiable?

It is often asserted that "human desires are unlimited", and that this alone makes any concept of persistent economic equilibrium purely hypothetical and imaginary. But is this an accurate picture of human psychology? It would seem to suggest that at any given moment each of us entertains a set of clearly specifiable desires, such as the desire for apples or the desire for iPads, which, upon being satisfied, give way to a new set of this kind, and so on ad infinitum.

It seems to me that it would be more accurate to say that each of us permanently entertains a limited and largely unchanging number of vaguely specifiable desires associated with particular, oftentimes overlapping sensations and values of material, intellectual, moral, aesthetic, or interpersonal nature (power, love, belonging, gratitude, knowledge, the comfort of living space, culinary pleasure, visual pleasure, etc.), the point being that none of them can ever be really satisfied. Thus, as I see it, it is not the case that as the civilization progresses, more and more of our desires are being satisfied, only to give way to new ones, but that our essentially unchanging desires are being satisfied more and more effectively.

This observation, incidentally, appears to me to provide yet another avenue for making a cogent analytical distinction between Hayek's "knowledge problem" and Mises' "calculation problem".

If the "knowledge problem" is to be applicable to genuine concerns of economic theory, it needs to be restricted to what is logically (even if not practically) knowable. Hence, as I see it, it is applicable to the putative central planner's knowledge concerning the supply of consumer goods, producer goods of various orders, and the available technological possibilities (since this kind of knowledge constitutes a finite set of data), but not to his knowledge concerning consumer desires (since, as I argued above, these can be satisfied in a literally infinite number of ways, thus being infinitely translatable into desires for specific consumer goods, and the infinite is necessarily unknowable to any finite mind).

This, in turn, implies that if in a given economy only one will acts with respect to the disposal of producer goods, then, even if the finite mind behind it knows everything that is logically knowable to it, it is still bound to lack any intersubjective benchmark for assessing the extent to which its decisions satisfy the desires of the consuming public as compared with the extent to which they could be satisfied by the decisions of all those who would be eager to acquire the available factors of production and use them in an entrepreneurial manner were it not for the central planner's prohibition.

In other words, the calculation of profits and losses in the free enterprise system allows us to determine how closely we approach a literally infinite horizon. In view of the above, and given that any sufficiently advanced ability is indistinguishable from magic, I guess the reports of the magic of the market have not been greatly exaggerated.

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