Israel Kirzner and Ludwig Lachmann are two very prominent theorists associated with the modern Austrian school of economics. Both are very insightful, creative, and thought-provoking. Both have very distinct, clearly articulated views on the nature of the market process, which are fundamentally opposed to each other. Moreover, as far as I'm concerned, the view of each of them contains elements which are fundamentally opposed to each other as well.
Kirzner, for all his talk about the dynamic and change-oriented nature of the market process, effectively expunges from his analysis the most crucial element of entrepreneurial decision-making - namely, exercising judgment under conditions of uncertainty. Kirznerian entrepreneurs deal with ignorance (synchronic uncertainty), but not with diachronic uncertainty (the "unknown unknowns" of future market conditions), which is the source of both entrepreneurial profits and, equally importantly, entrepreneurial losses. Kirzner's theory of entrepreneurship cannot account for the latter and cannot demonstrate that they are outweighed by the former, and thus fails to establish a logically cogent proof of the existence of a market tendency towards equilibrium.
Lachmann, on the other hand, for all his talk about the heterogeneity, complementarity and multi-specificity of capital, as well as the temporal dimension of the capital structure of production, espouses the view that we live in a "kaleidic" world, where consumer preferences, the supply of consumer and producer goods of various orders, and technological possibilities constantly change, rendering the future essentially unpredictable, which I find incompatible with the possibility of bringing any capital good, let alone a full-fledged capital structure, into existence in the first place. This is because the production and utilization of capital goods presuppose their necessarily time-consuming assembly and successful deployment, which in turn presuppose a requisite, even if minimal, degree of preference stability and correctness of entrepreneurial foresight, neither of which can exist in a genuinely kaleidic world.
In sum, it is interesting to note that in an attempt to address a thoroughly realistic phenomenon of the market process, each of the abovementioned distinguished economic theorists created his own very insightful, but fundamentally unrealistic vision of economic reality, veering too far either in the direction of the neoclassical epistemological Panglossianism or in the direction of the historicist epistemological nihilism, while, perhaps unwittingly, abandoning the original Mengerian research paradigm, focused on, to quote Klein and Foss, "entrepreneurial action under uncertainty, investment, real prices, and the resulting profits and losses".
Monday, July 30, 2012
Monday, July 2, 2012
A Praxeological Proof of Political Opportunism?
According to the Ricardian Law of Association, specialization and division of labor increase productivity. From this it follows that any given field of professional activity will be dominated by specialists.
Franz Oppenheimer's distinction between the economic means and the political means, combined with the insights provided by the Ricardian Law of Association and the Austrian theory of entrepreneurship, suggests that whereas the economic means will be utilized most successfully by those capable of combining heterogeneous capital goods so as to produce the final goods that will harmonize with the uncertain future wants of the consuming public, the political means will be utilized most successfully by those capable of creating and wielding institutionalized violence, aggression, and coercion.
Now, let us assume for the sake of the argument that there is nothing inherently contradictory in the notion that one's liberty can be violated to one's own prudential or moral advantage, and, thus, that there is nothing inherently contradictory in the concept of a benevolent despot.
However, in view of all of the observations made in the previous paragraphs, the concept in question, even if logically coherent, at the same time seems logically constrained to denote an empty set. After all, just as someone who can operate profitably both on the gold market and on the silver market should be thought of as a better precious metals specialist than someone who can operate profitably only on the gold market, someone who can wield coercion both for the supposed good of his subjects and for his own private advantage is more specialized in using the political means than someone who can use them only for the former purpose.
In addition, even in our scenario of relaxed moral assumptions, achieving good results does not require initiatory violence - persuasion and charity are equally effective in this context, if not more so. In order to achieve opportunistic gains, however, a politician needs to resort to some form of initiatory violence, be it naked coercion or fraud. In other words, the political means are particularly well suited to advancing opportunistic, not benevolent behaviour.
In sum, in view of the praxeological nature of the political means and the praxeologically necessary consequences of the Ricardian Law of Association, for every would-be politician who sincerely believes that he is well suited for the role of a benevolent despot, there will be a far more effective politician concerned exclusively with his private gain, and the latter will always outcompete the former in the realm of power-seeking. Thus we get a purely logical proof of the conclusions of the Public Choice literature.
Franz Oppenheimer's distinction between the economic means and the political means, combined with the insights provided by the Ricardian Law of Association and the Austrian theory of entrepreneurship, suggests that whereas the economic means will be utilized most successfully by those capable of combining heterogeneous capital goods so as to produce the final goods that will harmonize with the uncertain future wants of the consuming public, the political means will be utilized most successfully by those capable of creating and wielding institutionalized violence, aggression, and coercion.
Now, let us assume for the sake of the argument that there is nothing inherently contradictory in the notion that one's liberty can be violated to one's own prudential or moral advantage, and, thus, that there is nothing inherently contradictory in the concept of a benevolent despot.
However, in view of all of the observations made in the previous paragraphs, the concept in question, even if logically coherent, at the same time seems logically constrained to denote an empty set. After all, just as someone who can operate profitably both on the gold market and on the silver market should be thought of as a better precious metals specialist than someone who can operate profitably only on the gold market, someone who can wield coercion both for the supposed good of his subjects and for his own private advantage is more specialized in using the political means than someone who can use them only for the former purpose.
In addition, even in our scenario of relaxed moral assumptions, achieving good results does not require initiatory violence - persuasion and charity are equally effective in this context, if not more so. In order to achieve opportunistic gains, however, a politician needs to resort to some form of initiatory violence, be it naked coercion or fraud. In other words, the political means are particularly well suited to advancing opportunistic, not benevolent behaviour.
In sum, in view of the praxeological nature of the political means and the praxeologically necessary consequences of the Ricardian Law of Association, for every would-be politician who sincerely believes that he is well suited for the role of a benevolent despot, there will be a far more effective politician concerned exclusively with his private gain, and the latter will always outcompete the former in the realm of power-seeking. Thus we get a purely logical proof of the conclusions of the Public Choice literature.
Friday, June 22, 2012
A Sociological Argument for the Validity of ABCT
The validity of any given theory is often thought to be dependent on: 1) its logical coherence, i.e., its derivation from self-evident axioms and its construction according to the proper rules of logical deduction, and 2) its correspondence with the facts of reality.
The Austrian Business Cycle Theory (hereafter ABCT) is well-renowned for the emphasis it attaches to logical precision of the arguments, axioms, and deductions it is built on, and its predictive track record is unparalleled as compared with the so-called "mainstream" theories of the same phenomenon (see here and here).
Hence, one would have thought that ABCT merits the closest examination and intellectual scrutiny in the standard academic forum of peer-reviewed journals. It is the case, however, that it receives practically no attention in the journals which are not themselves Austrian-oriented. The attention from those prominent "mainstream" academics that it did manage to generate manifested itself in the form of popular articles and blog entries (see here, here, here, and here), all of which contain a poorly researched, strawman version of the theory they aim to criticize (as evidenced here).
In view of the above, only two conclusions suggest themselves: either the abovementioned academics are poor scholars in the sense of lacking the requisite intellectual skills to understand and critically evaluate ABCT in a professional manner, or they are poor scholars in the sense of lacking the requisite intellectual integrity, i.e., they do not even try to understand the theory in question, or they do understand it, but choose to willfully mischaracterize it.
Now, if either of the above conclusions is correct, then, given the fact that the exponents of ABCT do devote a lot of space in their peer-reviewed journals (see, e.g., here, here, here, and here) to a thorough intellectual examination of the theories and arguments of their intellectual opponents (even thought the latters' respect for the precision of logical deduction and their predictive track record compare unfavourably to those of the ABCT theorists), it has to be assumed that the exponents of ABCT are better scholars (in both of the dimensions listed above) than their "mainstream" counterparts.
And since, by definition, better scholars produce better theories, it has to be concluded that the preceding considerations of the sociology of academia make it more likely that it is ABCT rather than any of its "mainstream" alternatives that provides the correct explanation and analysis of the phenomenon of business cycles.
The Austrian Business Cycle Theory (hereafter ABCT) is well-renowned for the emphasis it attaches to logical precision of the arguments, axioms, and deductions it is built on, and its predictive track record is unparalleled as compared with the so-called "mainstream" theories of the same phenomenon (see here and here).
Hence, one would have thought that ABCT merits the closest examination and intellectual scrutiny in the standard academic forum of peer-reviewed journals. It is the case, however, that it receives practically no attention in the journals which are not themselves Austrian-oriented. The attention from those prominent "mainstream" academics that it did manage to generate manifested itself in the form of popular articles and blog entries (see here, here, here, and here), all of which contain a poorly researched, strawman version of the theory they aim to criticize (as evidenced here).
In view of the above, only two conclusions suggest themselves: either the abovementioned academics are poor scholars in the sense of lacking the requisite intellectual skills to understand and critically evaluate ABCT in a professional manner, or they are poor scholars in the sense of lacking the requisite intellectual integrity, i.e., they do not even try to understand the theory in question, or they do understand it, but choose to willfully mischaracterize it.
Now, if either of the above conclusions is correct, then, given the fact that the exponents of ABCT do devote a lot of space in their peer-reviewed journals (see, e.g., here, here, here, and here) to a thorough intellectual examination of the theories and arguments of their intellectual opponents (even thought the latters' respect for the precision of logical deduction and their predictive track record compare unfavourably to those of the ABCT theorists), it has to be assumed that the exponents of ABCT are better scholars (in both of the dimensions listed above) than their "mainstream" counterparts.
And since, by definition, better scholars produce better theories, it has to be concluded that the preceding considerations of the sociology of academia make it more likely that it is ABCT rather than any of its "mainstream" alternatives that provides the correct explanation and analysis of the phenomenon of business cycles.
Thursday, June 14, 2012
Szkoła Austriacka a matematyka w ekonomii
Jedną z najważniejszych przewag konkurencyjnych Austriackiej Szkoły Ekonomii jest to, że posiada ona solidne podstawy filozoficzne (wywodzące się z klasycznej tradycji dedukcyjnej, będącej esencją dociekań naukowych), a tylko posiadając te podstawy można uniknąć z jednej strony zabobonu scjentyzmu, a z drugiej strony zabobonu intuicjonizmu.
Na bazie tych podstaw ASE podaje solidne argumenty na temat tego, gdzie matematyka znajduje zastosowanie - np. w rachunkowości, historii gospodarczej (statystyce), ubezpieczeniach od zjawisk podlegających deterministycznej czy probabilistycznej regularności, itp. - a gdzie nie znajduje - np. w większości teorii ekonomii (choć i tam może pełnić pomocniczą funkcję ilustracyjną, tak jak np. w niedawnym artykule Hulsmanna o strukturze produkcji).
Teorie zbudowane przez ASE mają też oczywiście swoje empiryczne ilustracje (nie "konfirmacje"), tak jak ma je każda logicznie spójna teoria wychodząca od prawdziwych przesłanek. Guru główonurtowej matematycznej ekwilibrystyki, Samuelsonowi, do późnych lat 80-tych wychodziło z jego modeli, że Związek Sowiecki wyprzedza Amerykę (tak jak wcześniej podobnie wychodziło takim hołubionym w profesji praktykantom matematyki w ekonomii, jak Taylor, Lange czy Lerner), podczas gdy Mises 80 lat wcześniej udowodnił na bazie czysto werbalnej, logicznej dedukcji, że nie może istnieć nic takiego jak racjonalnie alokująca zasoby gospodarka centralnie sterowana, a jego pochodzące z tamtego czasu opisy tysięcy fabryk wytwarzających leżące potem odłogiem półprodukty brzmią niemal profetycznie.
Podobnie setki sowicie opłacanych ekonometryków z ich setkami pieczołowicie konstruowanych modeli podsuwały w 2005 roku Bernankemu raporty, z których wyczytywał on potem publicznie, że "fundamenty gospodarcze są silne" i "nie ma ryzyka recesji", podczas gdy Austriacy, korzystający z opracowanej ponad 90 lat wcześniej czysto dedukcyjnej i niematematycznej teorii cykli koniunkturalnych, wiedzieli, że są one nadzwyczaj słabe i że recesja jest nieunikniona.
Kompilacje stosownych cytatów można znaleźć tutaj i tutaj.
I wreszcie - o skuteczności przedsiębiorcy na rynku nie decyduje zaplecze matematyczne, tylko - jak to opisują Austriacy - nieformalizowalna i nawet niewerbalizowalna umiejętność przewidywania niepewnej przyszłości, intelektualna empatia umożliwiająca danej osobie rozumienie potrzeb konsumentów i ich wydajne, często innowacyjne zaspokajanie, wiedza tymologiczna, verstehen - coś, co posiadał Carnegie, Walton czy Jobs, a nie Gauss, Euler czy Pitagoras.
Podsumowując, nie widzę powodów, żeby nie przyjąć wersji, zgodnie z którą tzw. "ekonomiści matematyczni" to osoby, które wiedzą, że nie mają wystarczającej inteligencji numerycznej, żeby zostać matematykami czy astrofizykami, ani też wystarczającej inteligencji technicznej, żeby zostać przyrodnikami, a mimo to w ramach wrodzonej większości domniemanych "intelektualistów" pychy próbują epatować "śmiertelników" swoją matematyczną kabałą, choć logicznych argumentów na rzecz owocności takiego epatowania nie bardzo widać.
Na bazie tych podstaw ASE podaje solidne argumenty na temat tego, gdzie matematyka znajduje zastosowanie - np. w rachunkowości, historii gospodarczej (statystyce), ubezpieczeniach od zjawisk podlegających deterministycznej czy probabilistycznej regularności, itp. - a gdzie nie znajduje - np. w większości teorii ekonomii (choć i tam może pełnić pomocniczą funkcję ilustracyjną, tak jak np. w niedawnym artykule Hulsmanna o strukturze produkcji).
Teorie zbudowane przez ASE mają też oczywiście swoje empiryczne ilustracje (nie "konfirmacje"), tak jak ma je każda logicznie spójna teoria wychodząca od prawdziwych przesłanek. Guru główonurtowej matematycznej ekwilibrystyki, Samuelsonowi, do późnych lat 80-tych wychodziło z jego modeli, że Związek Sowiecki wyprzedza Amerykę (tak jak wcześniej podobnie wychodziło takim hołubionym w profesji praktykantom matematyki w ekonomii, jak Taylor, Lange czy Lerner), podczas gdy Mises 80 lat wcześniej udowodnił na bazie czysto werbalnej, logicznej dedukcji, że nie może istnieć nic takiego jak racjonalnie alokująca zasoby gospodarka centralnie sterowana, a jego pochodzące z tamtego czasu opisy tysięcy fabryk wytwarzających leżące potem odłogiem półprodukty brzmią niemal profetycznie.
Podobnie setki sowicie opłacanych ekonometryków z ich setkami pieczołowicie konstruowanych modeli podsuwały w 2005 roku Bernankemu raporty, z których wyczytywał on potem publicznie, że "fundamenty gospodarcze są silne" i "nie ma ryzyka recesji", podczas gdy Austriacy, korzystający z opracowanej ponad 90 lat wcześniej czysto dedukcyjnej i niematematycznej teorii cykli koniunkturalnych, wiedzieli, że są one nadzwyczaj słabe i że recesja jest nieunikniona.
Kompilacje stosownych cytatów można znaleźć tutaj i tutaj.
I wreszcie - o skuteczności przedsiębiorcy na rynku nie decyduje zaplecze matematyczne, tylko - jak to opisują Austriacy - nieformalizowalna i nawet niewerbalizowalna umiejętność przewidywania niepewnej przyszłości, intelektualna empatia umożliwiająca danej osobie rozumienie potrzeb konsumentów i ich wydajne, często innowacyjne zaspokajanie, wiedza tymologiczna, verstehen - coś, co posiadał Carnegie, Walton czy Jobs, a nie Gauss, Euler czy Pitagoras.
Podsumowując, nie widzę powodów, żeby nie przyjąć wersji, zgodnie z którą tzw. "ekonomiści matematyczni" to osoby, które wiedzą, że nie mają wystarczającej inteligencji numerycznej, żeby zostać matematykami czy astrofizykami, ani też wystarczającej inteligencji technicznej, żeby zostać przyrodnikami, a mimo to w ramach wrodzonej większości domniemanych "intelektualistów" pychy próbują epatować "śmiertelników" swoją matematyczną kabałą, choć logicznych argumentów na rzecz owocności takiego epatowania nie bardzo widać.
Wednesday, May 16, 2012
On Social Rights: or, a Fiction Serving a Fiction
The adherents of collectivized ethics claim that "social rights" trump individual rights. Hence, on pain of logical inconsistency, they have to admit that the "social system" is supposed to serve "society", not any particular individual. This conclusion, when read without committing the fallacy of conceptual realism, says that a fiction should serve another fiction. No wonder that the benefits of shaping interhuman relations along these lines are wholly fictitious as well.
Monday, May 14, 2012
The Structure of American Financial Statism
Almost all of the highest ranking regional US central bankers (i.e., political commissars in charge of central planning of interest rates and money supply) are at the same time chief executives of various commercial banks. In other words, the shape of the modern banking industry is that of macroeconomic communism combined with corporate favouritism - the very antithesis of laissez-faire capitalism. Thus, whoever claims that the recent financial crisis (or, for that matter, any financial crisis of the last 100 years) has anything even remotely to do with laissez-faire capitalism is either a perfect victim of statist propaganda or a cynical beneficiary of the status quo. Tertium non datur.
Tuesday, May 1, 2012
A Brief Comment on Ron Paul vs Paul Krugman
Here is a link to the discussion. My overall impression is that Ron Paul did very well, much better than his opponent (and here I'm talking just about style, not substance). While he could have talked about the capital structure, intertemporal coordination of production, and malinvestments, he talked instead about the destruction of private American savings and the Fed as an inexhaustible source of funds for political spending (especially welfare and warfare spending). Thus, he addressed genuine concerns of a lay audience while remaining intelligible to it. Krugman, on the other hand, produced nothing except for unsubstantiated statist platitudes.
As for my few bits of friendly criticism, if I were in Ron Paul's place and had his quickness of mind, I would not bring Friedman into the debate at all, but if I happened to mention him, I would not shirk from agreeing that he was indeed a "leftist" (or, to use a much more meaningful word, a statist) on monetary issues. I would use this as an opportunity to introduce von Mises as an example of a full-blooded monetary free-marketeer, and demonstrate that the pop-intellectual discourse is chock full of elementary semantic confusions.
I would also immediately counter any mention of "fiscal stimulus" with a few concise but pithy remarks concerning the fact that siphoning funds from the free market, i.e., that sector of social relations which is the sum total of mutually beneficial interpersonal transactions, guided by price signals and disciplined by the threat of incurring losses, and transferring them to the state apparatus and its clientele, i.e., that sector of social relations which is insulated from the profit and loss system and beneficial only to the transferees, can only lead to plunging the economy further into the quagmire of parasitic attitudes, calculational chaos, and prolonged investment uncertainty. Of course, if I were Ron Paul, I could actually make that concise and pithy.
Finally, I'm confident that Krugman will try to use this very short exchange of words with Dr. Paul as a pretext for not debating any other Austrian economist in the future (including especially Bob Murphy). For all his erudition and competence, I doubt that Ron Paul cares to know all the ins and outs of contemporary academic economic jargon, which makes Murphy, an academically trained "dismal scientist", an even more dangerous debate opponent for Krugman, capable of effectively preventing the latter from being able to hide behind the veil of sophistical econobabble. This, of course, is not to say that Ron Paul's performance in this debate was any less formidable. All in all, I believe that this brief exchange provided yet another illustration that the Austrians have the Keynesians on the run, and the fact that they seem to be getting more and more opportunities to demonstrate this is a hopeful sign.
As for my few bits of friendly criticism, if I were in Ron Paul's place and had his quickness of mind, I would not bring Friedman into the debate at all, but if I happened to mention him, I would not shirk from agreeing that he was indeed a "leftist" (or, to use a much more meaningful word, a statist) on monetary issues. I would use this as an opportunity to introduce von Mises as an example of a full-blooded monetary free-marketeer, and demonstrate that the pop-intellectual discourse is chock full of elementary semantic confusions.
I would also immediately counter any mention of "fiscal stimulus" with a few concise but pithy remarks concerning the fact that siphoning funds from the free market, i.e., that sector of social relations which is the sum total of mutually beneficial interpersonal transactions, guided by price signals and disciplined by the threat of incurring losses, and transferring them to the state apparatus and its clientele, i.e., that sector of social relations which is insulated from the profit and loss system and beneficial only to the transferees, can only lead to plunging the economy further into the quagmire of parasitic attitudes, calculational chaos, and prolonged investment uncertainty. Of course, if I were Ron Paul, I could actually make that concise and pithy.
Finally, I'm confident that Krugman will try to use this very short exchange of words with Dr. Paul as a pretext for not debating any other Austrian economist in the future (including especially Bob Murphy). For all his erudition and competence, I doubt that Ron Paul cares to know all the ins and outs of contemporary academic economic jargon, which makes Murphy, an academically trained "dismal scientist", an even more dangerous debate opponent for Krugman, capable of effectively preventing the latter from being able to hide behind the veil of sophistical econobabble. This, of course, is not to say that Ron Paul's performance in this debate was any less formidable. All in all, I believe that this brief exchange provided yet another illustration that the Austrians have the Keynesians on the run, and the fact that they seem to be getting more and more opportunities to demonstrate this is a hopeful sign.
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