Redistribution within the Austrian camp

A question was recently raised about policies of redistribution within the Austrian approach to political economy.  This is a fundamental question and should be addressed.

I think it is important to stress that there is nothing within Austrian economics per se that would entail a rejection of a normative focus on income inequaity and the standard of living of the poorest of the poor.  In fact, one of our current graduate students --- Adam Martin --- is doing some serious thinking (and writing) on the topic of global justice and his first efforts are an immanent critique of the work of Thomas Pogge.   In my graduate course in political economy, we spend a considerable amount of time discussing the distributive justice literature found in Hayek, Rawls, Nozick and Buchanan.*

So in response to the question concerning redistribution I would stress the following:

1. Public policy is never a question of "fair division", but always a choice between a set of rules which engender a pattern of exchange and production.

2. There are endowments and individual choice incentives, and while we can "fix" unequal initial endowments we have not found a way to do so that does not impact adversly choice incentives.

3. The tendency within a market economy is for workers to get paid their marginal product.

4. The only way to increase real income is to increase real productivity, and the best ways to increase real productivity is through improvements in labor skill, additions to, and advancements in, capital investment, and enhancements in managerial practices and organizational structures.

5. The policy environment that raises the real income of the least advantaged in society is, in fact, one of economic freedom, and not one of redistribution.

The most important writings on the question of distributive justice within the Austrian school are, as usual, found in Mises, Hayek, and Kirzner.  In fact, Kirzner has written an entire book on the subject, Discovery, Capitalism, and Distributive Justice. Hayek's critique of 'social justice' in Law, Legislation and Liberty, and in particular his emphasis on catallactics and the non-teleological nature of the market economy is obviously on point.  And obviously, Hayek's concern that our atavistic moral sentiments conflict with the moral demands of the 'Great Society' is an important tension in the liberal project.  But I think Mises's discussion of Ricardo's Law of Association and the foundations of social cooperation is perhaps the most fundamental point of departure for the entire discussion.

Finally, one would be hard pressed to think about these issues without some appeal to moral theory and from a libertarian perspective perhaps the best expositions are to be found in Murray Rothbard and Robert Nozick.  David Schmidtz's Elements of Justice is also an extremely important contribution to the field.

My question in all of this, is what empirical arguments do you find most persuasive in challenging the prevailing opinion that social justice demands transfer of resources from the rich to the poor?

*In the October Freeman, Sudha Shenoy has an excellent discussion of Jeffrey Sachs's claim that the Nordic countries prove Hayek to be wrong on The Road to Serfdom thesis, and the idea that redistribution policies undermine economic growth and development.

Comments

[Steve Horwitz]

One of the most compelling arguments is that the market is already doing quite well by the poor, if not better than any redistribution would do in the long run. I posted some thoughts on this over at Liberty and Power:

http://hnn.us/blogs/entries/44568.html

The other element of an Austrian approach to redistribution, I think, is that "ought presupposes can." If social justice says we "ought" to redistribute, but in fact we cannot do so in a way that makes the poor absolutely better off (perhaps because redistributionist policies destroy the incentive to create the capital that increases the wages of the poorest), then the "ought" is irrelevant. Think of this as an application of Yeager's work on the contributions of social science to ethics.

If you're sufficiently interested, you might take a look at some remarks I gave on my campus about two years ago in response to a lecture on ethics and economic justice by an alum who is a Unitarian minister and social justice activist. It's pretty short.

http://myslu.stlawu.edu/~shorwitz/mackay06.htm

I'm not sure how distinctly Austrian any of this is, but it's sure good economics I think.

[matthew mueller]

Steven Horwitz makes a good point, and is similar to the main argument Professor Boettke has identified in the work of Mises --- that of "suitability analysis". Given the acknowledgment of commonly accepted ends (the utilitarian improvement of material wealth and welfare) the question then becomes one of means, or the practical application of desirable ends. Once the flaws of interventionism and socialism have been exposed, so the argument goes, the efficacy of capitalism will finally be vindicated as the most effective way of achieving utilitarian ends.

However, I have problems with some of the other points Boettke outlined in his post, namely, the natural tendencies of the market to coordinate demand and supply in a way that equilibrates market processes. Is the market really capable of diffusing completely or successfully valuable information that will enable workers to get paid their marginal product and allow the production of capital to generate greater productivity?

These assumptions in my view grant far too much to the natural abilities of the market process (or the Kirznerian entrepreneur). But is this not the main problem with the work of Ludwig Lachmann? How can we defend the free market if we are forced to acknowledge the reality of the dark forces of time and ignorance?

So I think progress in this area (progress being defined as the refutation of the prevailing view advocating wealth redistribution) can only be achieved by making assumptions that defy economic reasoning. There is no inexorable tendency in the free market to consistently improve the welfare of individuals in society.

[Peter Boettke]

Matthew,

Take a look at Lachmann's contribution to the Mises feitshrift --- it is on the question of distribution and the market economy.

I really think that the interpretation you are pushing for Lachmann (an interpretation admittedly that many in the Austrian camp push for) is actually a false reading. Lachmann understood systemic forces that are at work in market economies. He was against the idea that (a) we were in equilibrium, and (b) that we can know THEORETICALLY whether equilibrating or disequilibrating factors were the dominant factors in operation. But nothing in that says that there are not powerful equilibrating tendencies in market economies --- and those equilibrating tendencies are captured in the limit by the neoclassical optimality conditions.

To put this another way, the subjectivist tradition of Shackle and Lachmann makes vital contributions, but it should never displace our understanding the positive role that economic calculation plays in coordinating economic activities at any point in time and through time.

Any economics worth the name economics, must be able to discuss the systematic function of relative price adjustments. Failure to do so means that you move away from talking about economic phenomena in an economically sensible manner.

Pete

[dglesvic]

If taking from the rich to give to the poor doesn't reduce but increases inequality, it is immoral by the redistributionist's own standards, and there is no more question of social justice. The economic theory settles the moral as well as the economic issue.

So, let's pick up the discussion where we had left off.

Querist had asked:

“Lump-sum tax or income tax? If latter what is the rate? More detail is needed to evaluate the coherence of the argument.”

I had simply responded that his question was immaterial. Here's why.

None of the details of a redistribution change the fact that it consists of burdens and benefits, and that the market will compensate for them. The only question is whether it will under, fully, or over-compensate for them.

Whether the burdens and benefits are large or small, in lump-sums or spread over time, and at a 50 or 51% rate, the question is still the same: will the market under, fully, or over-compensate for them.

Since the question is the same, regardless of the details, the details are immaterial.

You can access the full theory by clicking on my name below, and then just a little way down the page you'll come to, clicking on Comments.

[Greg Ransom]

Kirzner's _Discovery, Capitalism, and Distributive Justice_ is a truly great book and deserves to be much more widely known.

[Steve Horwitz]

A second for Greg R's last comment. A much underappreciated work of Israel's.

[Vilfredo Pareto]

I think that we have to distinguish two interrelated questions:

(1) The first one is common: disequilibrating/equilibrating tendencies, with all the theoretical questions behind it.

(2) The notion of marginal productivity.

These two questions are interrelated since the notion of marginal productivity can be analytically defined and conceptualized only as an equilibrium construct. But further questions must be raised.
These further questions are due to the Austrian conception of capital: heterogeneous, multiple specificty, joint production, flow-input flow-output.
If we accept all these hypotheses, the question is :
How can we impute the creation of value to one particular (type of?)input when its "productivity" exclusively depends on the production plan (i.e. the capital combinations) into which it is integrated?
If the very same kind of good does not have the same productive efficiency in two different capital combinations, how can we even define (just define, not determine, which would be a still harder question) its marginal contribution to the output?
Further theoreticla difficulties abond if we take into account the "flow" conception of production.

I think that the notion of marginal productivity only applies when: (1) the production set is given (no discovery, no innovation); (2) capital is homogeneous; (3) constant returns to scale (the basic critic against Wieser's imputation); (4) equilibrium and (5) point input/point output.

Obviously, none of these conditions are met by the Austrian theory of capital. I have always thought that the concept of marginal productivity is politically powerful, but theoretically questionable if one doesnt accept strong hypotheses on production.

I may be wrong. I am waiting for your comments.
Have a nice day.

[dglesvic]

Again, with the details that don't change the fact that there are burdens and benefits, and the only question is whether the market will partly, fully, or over-compensate for them.

Can you never get to the point?

[Anon]

Dr Boettke

Please can you ban Mr Lesvic. He is out of his depth discussing grown-up economics. Perhaps you can send him off the sandbox to play.

His comments above reveal that he has no idea what lump-sum taxation is and he clearly does not fathom the seriousness of the questions that Pareto raises about Austrian capital theory.

Best wishes

A loyal reader

[matthew mueller]

Another interesting argument against wealth redistribution is to be found in Rothbard's The Ethics of Liberty. Rothbard correctly notes that one finds in Mises the best case for market capitalism. However, what if people continue to insist that government intervention is necessary, despite the powerful forces of the market? What if they ignore the benefits of capitalism and call for immediate equality? Well, according to Rothbard, the argument becomes a political one. No longer is one able to make his case for capitalism on utilitarian grounds, but is now forced to make a libertarian defense of individual liberty and private property. Most democrats have good reason to remain ignorant of economics.

[Peter Boettke]

Dear Mr. Parteo (I would much prefer a real name):

Excellent questions, but not as devastating to the theory of marginal productivity as you might believe. First, the question you raise, though not identical, is similar I would argue to the one that Alchian and Demsetz sought to solve in dealing with team production. So I would point you to their paper on that --- found in Alchian's Economic Forces at Work. Market mechanisms sort these imputations of value through the structure of production and the interconnectedness and intertemporal coordination ... we move from I, Woolen coat, to I, Pencil, to I, Car, to I, Computer ... as we get more and more complex processes of production.

Second, and this is a further elaboration on the market mechanism issue, of course in the world we are never at the limit theorems of optimal conditions, so the exhaustion theorem of factor pricing doesn't hold completely. But does that mean it needs to be rejected? I don't think so, what it suggests instead is that there are tendencies that market processes exhibit, but that there are always intervening changes that cause redirection, etc. What you have are filter processes at work --- in the area of factor pricing I would say those are opportunity cost and the marginal revenue product of the asset (labor, capital, etc.). We are postulating a price searching model (not price taking), and the supply curve for labor is a function of the opportunity cost of labor services, and the demand curve is a function of the marginal revenue product. In the limit, at any one point in time, the bidding process will push to that point where the opportunity cost and the marginal revenue product are equated --- the value of the marginal product will equal the wage rate paid. While we cannot say that in a market at any slice of time this is in fact the condition, we can say that markets left to their own devices will exhibit this tendency strongly. No worker will accept a job for a wage lower than their opportunity cost, and no firm will higher a worker for a wage greater than their marginal revenue product. Of course mistakes are made in labor markets, just as in any other factor market all the time, but the "beauty of the market system" is that such mistakes are 'detected and corrected' either by the entrepreneur in question, or more to the point OTHER entrepreneurs competing in the marketplace.

Pete

[dglesvic]

What, you're not going to burn me at the stake?

I'm insulted.

[Peter Boettke]

To Mr. Lesvic,

Why would I do that?

First, at least you use your real name in debate and also try to state propositions which people can either agree or disagree with.

Second, I have nothing but great respect for laymen who love the discipline of economics and the policies of economic freedom. I don't share your disdain for all of academic economics.

Third, I view Mises (and Hayek) as heroic figures historically, but I don't believe their choices (especially Mises's) were always prudent and the question one has to ask is whether more prudent choices in personal affairs could have been made without sacrificing the content of the message. In short, you don't have to be pushed outside of the establishment in order to be a consistent advocate of sound economic reasoning and the policies of laissez faire.

Fourth, I sense a genuine desire to learn economics from you, even though you have an initial skepticism. On the question of supply and demand and quantity supplied and quantity demanded, I would just point to my principles textbook (which I inherited from Paul Heyne), The Economic Way of Thinking. This book is, I would argue, the most quasi-standard textbook on the market that is consistent with Austrian economics through and through. It is published by a major publishing house --- Prentice Hall --- and it maintains the coordination theme throughout the discussion of micro and macro. This has little to nothing to do with me, and everything to do with Paul Heyne --- who told his readers that his approach was influenced by Hayek and Buchanan more than any other contemporary thinkers in economics. But relevant to your discussion this issue, the approach developed in that book for establishing supply schedules the approach is that of Wicksteed --- supply reflects the alternative demands for the good or service. This is the subjectivist approach.

Anyway, there are technical issues in economics which for many of the questions you want to address you need to study more closely. But for many issues the general picture you have from your self-study is probably sufficient for you to feel intellectual comfortable with your position.

However, I do think many laymen (and even some academic) Austrians make a huge mistake in understanding the link between the Austrian focus on subjectivism and market process, and the neoclassical focus on maximizing and equilibrium properties. The neoclassical model is NOT logically wrong. The mathematics of it are NOT confused. If the world was frozen, the optimality conditions would fall out from the situation so described in the model. In fact, Mises is clear in his endorsement of the equilibrium model (ERE). BUT, it is only the limit theorem when change has ceased, and the purpose of economics is to understand the processes of adjustment that emerge due to changing circumstances. The market exhibits strong tendencies in the direction of the world so described by equilibrum models of optimality, but we never get there because of change. Rejecting all of neoclassicsm is a mistake that cannot afford to be made by any economist, just as assuming a mechanical realization of the equilibrum properties destroys our ability to understand how real markets work.

Perhaps a great way to think about this with regard to Mises is to look at his discussion in The Theory of Money and Credit concerning the Quantity Theory of Money. Against monetary cranks, Mises would uphold the Quantity Theory, but against mechanical interpretations of the Quantity Theory, he stressed the non-neutrality of money and the disruptive capabilities of the inflation process through ragged relative price adjustments. Again, he didn't reject the principles of the quantity theory, but he interpreted them in a more sophisticated manner than a mechanical interpretation would produce. I would say that this is true of several principles of equilibrium states that were derived by the fundamental work of economic theorist during the neoclassical period of 1900-1950.

Pete

[leftist]

In the Boettke framework is involuntary unemployment possible?

[dglesvic]

Prof. Boettke,

That comment about burning me at the stake was not directed at you. Were the rest of the profession like yourself, I would certainly have to change my evaluation of it. But I still fear that you are more the exception than the rule.

I have just skimmed through your comments above, and can only respond preliminarily.

I submit, with Mises, of course, and with you as well, no doubt, that economics is a practical science aiming at practical and reasonable assumptions, and that inexorable chaos and the futility of human action is not one of them. To act, we must assume order in the universe, and, as economists, the interdependence of market phenomena, as Mises put it, or laws of the market, and, where there are violations of them, corrective action by the market. To deny that is to deny economics altogether, and purposeful human action with it.

Denial of the Invisible Hand, or tendency toward equilibrium, is not an option for economists. For they have no other way to explain the market process. If economics is to proceed at all, it must be from the assumption that the market tends toward equilibrium.

Before sending me off to the library, tell me at what point I have proceeded incorrectly.

The question, as Mises put it: would the poor be better off in absolute terms with the larger proportion of the smaller cake or smaller proportion of the larger cake.

Even if my theory, that they wind up with a smaller proportion of the smaller cake, collapsed, and we could no longer prove that redistribution made the poor poorer, couldn't we still make the other side prove that it didn't, that the larger proportion of the smaller cake was not smaller in absolute terms?

And do we really need to go to the library for that?

[Gilberto]

"Before sending me off to the library, tell me at what point I have proceeded incorrectly."

And this is exactly what is wrong with blog comments. A crackpot with no economic training deigns to ignore Prof. Boettke's suggestion of an excellent into text because he knows he - and he alone - is master of the TRUTH.

[Gilberto]

Boettke: "Fourth, I sense a genuine desire to learn economics from you ... On the question of supply and demand and quantity supplied and quantity demanded, I would just point to my principles textbook (which I inherited from Paul Heyne), The Economic Way of Thinking"

Lesvic:"Before sending me off to the library, tell me at what point I have proceeded incorrectly."

I wonder if Dr. Boetkee stands by his original view. I bet he does not allow that kind of dogmatic "I have no need to read anything" attitude from his first year undergrads in intro econ.

[Sergei]

I find it rather sickening to see a professional economists of Peter Boettke's stature 'sucking up' (for want of a better word) to an old fool who sees no reason why he should learn the basic analysis of supply and demand from the wonderful Heyne textbook.

Would that the degree of respect was in anyway reciprocated?

Shame on you Dr. Boettke. Prof. Horwitz had the right idea in earlier posts. More power to his elbow I say.

[Brian Pitt]

I do not remember which one of Mises' writings explicate this, but he avers that if agriculture were the sole method of caring for oneself and her family, then land redistribution would be a worthwhile policy discussion. However, with manifold opportunities to earn and learn in the twenty-first century (acknowledging that there are disparate ontological situations, which influences one's opportunity set), the interruption of the outcomes of the market structure by the political structure may be dangerous.

Btw, Mr. Lesvic, Thomas Sowell's "Affirmative Action Around the World" and "Knowledge and Decisions" are wonderful texts that explore the nature of redistribution sans the jargon of contemporary economics.

[dglesvic]

This comment is not directed to Prof. Boettke, who wouldn't need it.

As an emissiary of the public to the profession, and trying to create a bridge between the two, I am offering to meet you half-way, and then some.

But, if you won't even explain a simple thing like the difference between quantity supplied and supply, I have to doubt that you will ever meet me any part of the way.

This is your opportunity to either reach out to the public, or remain forever cloistered and irrelevant.

The choice is yours.

[dglesvic]

After examining Prof. Boettke's comments more closely, I think I understand what's at the bottom of this whole dispute.

"On the question of supply and demand and quantity supplied and quantity demanded," he said.

But that wasn't the question at all.

The question was of the difference between quantity supplied and supply.

Saying that I don't understand the difference between quantity supplied and supply is not saying that I don't understand the difference between quantity supplied and quantity demanded.

I've simply had my words twisted, and been held responsible for something I never said.

Others may insist that there is a difference between quantity supplied and supply, but I guarantee you that Prof. Boettke will never say that.

[Gustav]

""On the question of supply and demand and quantity supplied and quantity demanded," he said.

Saying that I don't understand the difference between quantity supplied and supply is not saying that I don't understand the difference between quantity supplied and quantity demanded"

To not understand one is to not understand the other. Please please please go look at an intro undegrad text and read the early chapters.

Dr Boettke has ignored the high opportunity cost of his time and gone well out of his way to try and educate you. Why not treat him with some respect and go look at the text he suggested you?

[Gustav]

"Others may insist that there is a difference between quantity supplied and supply, but I guarantee you that Prof. Boettke will never say that."

I assure you that Dr. Boettke says just that in his intro to econ classes and in his textbook.

Care to confirm this Dr B? I learnt my intro from you book so I hope you step up to the plate.

[dglesvic]

You mean to the guillotine.

[Steve Horwitz]

Mr. Lesvic's other mistake is claiming that "the invisible hand" and "a tendency toward equilibrium" are the same thing. I would argue that the properly understood Lachmannian position is that markets create unintended order (i.e. the invisible hand) but need not show a strict tendency toward equilibrium.

The irony of Lesvic's position is that it is NEOCLASSICAL economists who claim that general equilibrium theory is the equivalent of the invisible hand.

Now, having responded to our friend, at least indirectly, might I suggest that those who find him to be a problem simply ignore him. I find it as frustrating as others that he refuses to take up the suggestions we have made for further reading, and find it utterly silly that he thinks Pete would "never" say there's a difference between quantity supplied and supply. Go to the tape as they say - look in his textbook. You can't DO economics without that distinction.

[The Dirty Mac]

Lots of good comments here. Unfortunately, The Dirty Mac was a C student in Econ.

But the poorest of the poor are resorted to only as a fall back in the mainstream debate about inequality. The first line is essentially "the rich people make too much money." Its really hard to have productive debate when it is framed that way.

[Paul Mason]

Regarding Mr.Boettke's point-

"2. There are endowments and individual choice incentives, and while we can "fix" unequal initial endowments we have not found a way to do so that does not impact adversly choice incentives"

what about a 100% tax on rents on the unimproved value of Land, redistributed as an equal, per capita lump sum payment?

As I understand it neither would effect choices at the margin

[dglesvic]

Prof Horwitz,

First, from my book, then, my statement above, and then, from Prof. Boettke's statement above:

"Since there is always entrepreneurial error, and disequilibrating as well as equilibrating action in the market, its critics cite the possibility of the disequilibrating outweighing the equilibrating. It’s also possible that, if we get out of bed in the morning, we’ll get hit by a truck. But that doesn’t mean we shouldn’t get out of bed. Economics is not a science of possibilities, for anything is possible, nor, of certainties, for nothing is certain. It is a science of practical and reasonable assumptions, and the futility of action is not one of them.

Error doesn’t change the fact that the market tends to correct it, and nothing else could, that there could be no economic calculation and nothing but chaos without the market, that its tendency toward equilibrium, the Invisible Hand, is our only logical hope, and practical and reasonable assumption."

That was from my book, and this from my statement to Prof. Boettke above:

"I submit, with Mises, of course, and with you as well, no doubt, that economics is a practical science aiming at practical and reasonable assumptions, and that inexorable chaos and the futility of human action is not one of them. To act, we must assume order in the universe, and, as economists, the interdependence of market phenomena, as Mises put it, or laws of the market, and, where there are violations of them, corrective action by the market. To deny that is to deny economics altogether, and purposeful human action with it.

Denial of the Invisible Hand, or tendency toward equilibrium, is not an option for economists. For they have no other way to explain the market process. If economics is to proceed at all, it must be from the assumption that the market tends toward equilibrium."

Now, from Prof. Boettke's statement above.

"I really think that the interpretation you are pushing for Lachmann (an interpretation admittedly that many in the Austrian camp push for) is actually a false reading. Lachmann understood systemic forces that are at work in market economies. He was against the idea that (a) we were in equilibrium, and (b) that we can know THEORETICALLY whether equilibrating or disequilibrating factors were the dominant factors in operation. But nothing in that says that there are not powerful equilibrating tendencies in market economies --- and those equilibrating tendencies are captured in the limit by the neoclassical optimality conditions."

But those "powerful equilibrating tendencies" are immaterial if they're not dominant. It doesn't matter how powerfully Curt Shilling pitched if Alex Rodriguez still hit it out of the park.

It seems to me that he's trying to have it both ways, that Lachmann is both right and wrong.

So, if I may choose my Boettke, I'll take the one that agrees with me, thank you.

But what I would especially like you to note was that I didn't try to make things as tough but as easy for you as I could. I didn't send you out looking for my left-handed monkey-wrench, or pearl of wisdom, as it be, but put it up right here for you. Why wouldn't you do the same for me? You have those books and the relevant passages right at your fingertips. So why would you send me out after them when you could so easily put them up here for all to see. And that is what I challenge you to do, to put up or you know what.

In a million years you will not be able to do so. No author would put such a thing in his book. No publisher would publish it. They'd be laughed out of the business. And neither will Peter Boettke make a laughing stock of himself.

So I still guarantee you that he will never say that there is a difference between quantity supplied and supply.

[Peter Boettke]

Mr. Lesvic,

The best way to understand the difference is that changes in demand (supply) impact the entire demand (supply) schedule. As my income goes up, my demand for certain goods increases. But changes in the quantity demanded (supplied) are movements along a particular demand (supply) schedule and thus reflect the impact of a change in the price. As the price of beer falls, I consume more beer. Or, as the price of gasoline rises, I consume less gasoline.

So the easiest way to keep things straight is to say that when you use the term supply or demand and you are talking about increases or decreases it is the entire schedule and results because of non-price factors (income, tastes, etc.), but changes in quantity demanded or supplied are a function price changes.

I didn't really follow the first debate in which this distinction arose, but does this clarify the issues?

Pete

[Vilfredo Pareto]

Pete,
Would you buy more of Lesvic's books if their price fall?
Personally, I hesitate...
You talk about beer: I would rather buy beer barrels. Just to forget all this...
Perhaps Lachmann had ever this pseudo-debate in mind when he wrote it in 1956. His expectations are not falsified.
This blog becomes as poor (on an analytical POF) and sterile as the blog of the Mises Institute where we read everyday that market is good and government bad, with very "journalistic" arguments.Schopenhauer wrote that it is always impossible to discuss with one who doesnt accept the basic principles. Here we are. How can you talk about the internal functioning of a TV if one does accept the notions of electricity and electrons? I dont know.

[dglesvic]

Prof. Boettke,

This much is certainly clear: if you meant to imply that there was a difference between quantity supplied and supply, you certainly didn't come out with it in those words.

Are we to infer that difference from your words?

Of course not. You know as well as I do that there is no such difference.

OK, now, let's hear the chorus of outrage again.

[dglesvic]

Prof. Boettke,

Concerning the interactions of supply, demand, and price, here are the most relevant passages from my book. Can you find any fault with my treatment of the subject?

"The confusion of money prices with real costs led to the fallacy of mutual determination, that as the price of engineers went up the demand for them would go down, and as demand went down price in turn would go back down, that price determined demand and demand in turn redetermined price -- in a never ending cycle of the mutual determination and redetermination of price and demand.

And that was supposedly something only the benighted Lesvic could disagree with. Yet we find the whole Austrian School disagreeing with it, and particularly its founder, Menger, as reported by Larry White himself, supposedly a thoroughgoing Austrian, in The Methodology of the Austrian School Economists, P 8, and its current leader, Rothbard, in The Essential von Mises, P 48, condemning "this sort of ‘mutual determination’ methodology" per se and telling us that "the cause flows from consumer demand to the pricing of the factors of production, and in no sense the other way round."

But that isn’t exactly right either, for price does determine demand in a sense, determining, as Friedman and the others aver, the number of units demanded. But that doesn’t make for mutual determination, for price is determined not by the number of units demanded but by the intensity or height of demand for the marginal unit.

Imagine an isolated community with a supply of and demand for ten horses, and that half of them are lost to fire or disease, whereupon there will be a supply of and demand for only five horses. The price will be higher than before -- in spite of the fewer units supplied and fewer demanded -- because of the greater intensity or height of demand for the marginal unit.

The price determined by the height of demand for the marginal unit does not then come back and redetermine the height of demand for the marginal unit. For the high bidder outbids others, not himself, turning back their demand, not his own; and it is his, not theirs, which determines the final price of the marginal unit; and that which determines the uniform price of all the units of a homogenous supply. See Rothbard, Man, Economy, and State, P 102

So there is no never ending cycle of mutual determination. The intensity or height of demand for the marginal unit determines price, the price then determines the number of units demanded, and there it rests; for it is demand in the former and not at all in the latter sense that determines price."

[gustav]

"Why wouldn't you do the same for me? You have those books and the relevant passages right at your fingertips. So why would you send me out after them when you could so easily put them up here for all to see. And that is what I challenge you to do, to put up or you know what."

That would be a copyright violation.

"In a million years you will not be able to do so. No author would put such a thing in his book. No publisher would publish it. They'd be laughed out of the business. And neither will Peter Boettke make a laughing stock of himself."

Of course they would. Just go to the Boettke-Heyen book and check.

"So I still guarantee you that he will never say that there is a difference between quantity supplied and supply."

Are supply and quantity supplied the same Doc Boettke? Please let dopey old Lesvic know asap.

[Intro student]

"Imagine an isolated community with a supply of and demand for ten horses"

Demand slopes downwards. Qd is a negative function of price. Supply is perfectly inelastic at 10. Qd = Qs at a price of X.

"and that half of them are lost to fire or disease, whereupon there will be a supply of and demand for only five horses."

Oh dear. If only Lesvic would pick up an intro text. Demand has not changed. It is still a negative function of price. Supply has decreased (now perfectly inelastic at a quantity of 5).

Qd (5) = Qs (5) at a price Z (where Z is greater than X).

So, initially, Qd = Qs (supply is not equal to demand). Then S decreases, D is unchanged. Qd = Qs at a higher price.

Any intro student worth their salt would understand this scenario.

So Mr Lesvic, Please go read Dr Boettke's book. I am amazed that you stand here thinking you know more than trained professional economists like Prof Horwitz and Boettke when in reality you know less than an 18 year old kid who has read and understood the first few chapters of any intro college econ textbook.

"This much is certainly clear: if you meant to imply that there was a difference between quantity supplied and supply, you certainly didn't come out with it in those words.

Are we to infer that difference from your words?

Of course not. You know as well as I do that there is no such difference."

All this shows is that you have zero comprehension of what Prof. Boettke said.

I suggest we ignore Lesvic until he behaves like a diligent intro student and does his homework.

When he has grasped a basic unerstanding of intro price theory we should talk withhim again, but as Pareto said above, when he is happy to wallow in his own ignorance we cannot talk with him.

[Gustav]

I can hear a pin drop. Has Lesvic possibly gone down to Borders or the library to actually pick up a book and read it?

Look out! Flying pig (flying rather low) up-ahead.

More seriously though, Lesvic mentioned put up or shut up. Is than any real kind of response to a suggestion that he go look at a kiddie-level (no disrespect to intro students meant) econ text?

See you all at SEA

[dglesvic]

intro student:

Couldn't you make it any more incomprehensible than that?

You'll never get anywhere in the profession that way.

[dglesvic]

Gentlemen, and the rest of you:

Why do you need a curve to understand that quantity demanded goes down as price goes up?

What could you learn from geometric symbols that you couldn't learn from plain English?

Your challenge is not to hide behind convoluted phraseology and secret codes. We already know that you can do that. The challenge is to face me out in the open. And that we have yet to see. So however many laurels you bestow on yourselves, no cigar from any real economist.

[Anon]

Yes people. Lesvic has looked at a book. One minute he cannot distinguish demand from quantity demanded. The next he appears to grasp that quantity demanded is negatively related to price.

Presumably Lesvic now sees his error when he wrote: "Imagine an isolated community with a supply of and demand for ten horses, and that half of them are lost to fire or disease, whereupon there will be a supply of and demand for only five horses."

And presumably he sees why Prof Boettke and others do distuinguish between demand, quantity demanded, supply and quantity supplied despite Lesvic's ludicrous and ill-informed claim that "No author would put such a thing in his book. No publisher would publish it. They'd be laughed out of the business. And neither will Peter Boettke make a laughing stock of himself."

I particularly relish his considering himself a "real economist." He is really only here to get folk to visit his webiste and purchase his book. The wealth of comments on his site suggest we have all been visiting.

[Intro Student]

Mr Lesvic writes: "Let's say that in the hypothetical state of equilibrium engineers earned $50M/year and janitors $10M, and that we took $10M from each of the engineers and gave, let us say, $2M to each of the more numerous janitors, reducing the engineers' take home pay from $50M to $40M, raising that of the janitors from $10M to $12M, and reducing the differential between them from $40M to $28M. Since at the differential of $40M there was equilibrium between the supply of and demand for both engineers and janitors, at the differential of $28M there will be a relative oversupply of janitors and undersupply of engineers."

Presumably you mean quantity demanded and quantity supplied so why not say that. It is a ton of effort to translate your piece from Lesvic-speak into accurate-econspeak.

[dglesvic]

To Anon:

I still cannot distinguish between demand and quantity demanded, and still don't see my "error."

I have yet to see Prof. Boettke distinguish between demand and quantity demanded, and supply and quantity supplied, and still guarantee you that we will never see it.

To intro Student:

Where, precisely, in my piece, should I replace whatever words are there with the words quantity demanded and quantity supplied?

[Intro student]

"Why do you need a curve to understand that quantity demanded goes down as price goes up?"

Does demand go down as price increases?

"I still cannot distinguish between demand and quantity demanded, and still don't see my "error."

Obviously not. And here we all were thinking you'd actually read an econ text.

"I have yet to see Prof. Boettke distinguish between demand and quantity demanded, and supply and quantity supplied, and still guarantee you that we will never see it."

He does so clearly (at least to anyone who knows any economics - I guess that rules you out) in a post above. But you do not understand him. Would you write the econ program at gmu a large check if Dr Boettke does so or is guarantee not worth the paper its not printed on?

[fundamentalist]

"My question in all of this, is what empirical arguments do you find most persuasive in challenging the prevailing opinion that social justice demands transfer of resources from the rich to the poor?"

Cuba? But the fact that Cuba is so incredibly poor doesn't seem to change the arguments from the left. Neither logic nor empirical evidence seem to persuade them. They see social justice as a moral issue: justice requires redistribution of wealth regardless of the costs.

[dglesvic]

To intro student:

Why don't you quote Prof. Boettke saying what you said he did? Or are we just supposed to take your word for it?

To fundamentalist:

Whether economics should or shouldn't be empirical, it simply isn't. It starts out that way, but once you get past the basic axioms, it's all deductive.

You say that justice requires redistribution regardless of the costs.

Regardless too of whether it works or not, makes the poor richer or poorer, reduces or increases income inequality?

Is the greater fault with the world ignoring economics or with the economists not presenting it to them in their own language, is it with the indifference of the public to economics or hostility to it of the profession?

[Rafe Champion]

On the Nordic experience, the supporters never mention two of the most important factors in the mix, free trade and the work ethic. With those plus an ethic of care, private charity could have done all that the welfare state provides (all that helps I mean) and more efficiently as well.

[Yawn]

To Lesvic,

"The best way to understand the difference is that changes in demand (supply) impact the entire demand (supply) schedule. As my income goes up, my demand for certain goods increases. But changes in the quantity demanded (supplied) are movements along a particular demand (supply) schedule and thus reflect the impact of a change in the price."

That was Boettke earlier. Why not enroll in his intro class if you do not understand.

[Intro student]

There is no point quoting from the Boettke text on Qd and D (or Qs & S) Mr Lesvic. You'll only say that was Prychitko or Heyne and not Boettke. Why not just ask Boettke if he thinks there is a difference between D & Qd.

[High opportunity cost of time]

I'm saying this only once. But do all of you really have such a low opportunity cost of time that you think it worthwhile to quibble with this Lecsvic guy? To anyone with a modicum of economics knowledge it is clear that you are all correct on the simple intro price theory (demand, quantity demanded, etc) and he has no idea. But why do you think anything you say will educate him?

He thrives on the attention you all provide him. Please ignore him. You are generating massive negative externalities for readers of this blog by replying to him and counter-replying. Just ignore him as the good Professor Horwitz suggested a while back.

[dglesvic]

You all sound like Milton Friedman trying to run Mises out of economics.

From my book:

"Personal qualification is irrelevant to economics, for the issues are not personal but logical, not between men but ideas. And even if a new idea were wrong, exposing economic error and instructing the unlearned is what economists do. So, when they don't, it is only because they can't, because they could really find nothing wrong with a theory other than the fact that they hadn't thought of it themselves. So there is no better recommendation of a new idea than its exclusion from public, rational examination...

Since economics is a science of truth and error, not just truth, new ideas have value even if they're wrong, for understanding error is the same thing as understanding truth, and a new error an opportunity for a new truth, expanding the horizons of the science."

But apparently they don't make economists like they used to. If you read my essay, you'll see that those of a generation ago were concerned with the idea, not the man, and even those who disagreed with it, and not all of them did, attacked the idea, not the man.

There can not be the slightest doubt that if you could attack the idea, you would, and that your focus on the man rather than the idea is your tacit admission that it's right, for which I thank you, my mother thanks you, and my psychiatric social worker thanks you.

[dglesvic]

On the subject of Milton Friedman trying to run Mises out of economics, with my own ears I heard Murray Rothbard call the Chicagoans "swine."

You've accused me of being rude. But I never called you swine. So give me credit, because it certainly wasn't easy.

[Ludwig]

The reason nobody is attacking your theory Mr Lesvic is because it is unclear what the theory is. When you fail to distinguish between simple concepts like quantity supplied (demanded) and supply (demand) it is impossible to evaluate your arguments. What are you assuming about supply elasticities for example? Lump-sum taxes or ..... ?

The major physicists have to date ignored my theory that the universe is really a giant green paper bag. Obviously I am right, otherwise, as you say, they would tear my theory to shreds. I am much happier with your explanation for why they ignore my theory than the claim that they ignore me because my theory is too silly to attack or beause they have better things to do (write real journal articles, teach) or because I am obviously a physics 'no-nothing' who is not worth their time.

I though the folk above were trying to teach you the rudiments of price theory rather than attacking the man. I guess that until you see why you confuse demand and quantity demanded they will not even bother with your main idea.

[Ludwig 2]

"when they don't [attack an idea], it is only because they can't, because they could really find nothing wrong with a theory other than the fact that they hadn't thought of it themselves. So there is no better recommendation of a new idea than its exclusion from public, rational examination"

I have a theory that income-compensated demand curves slope upwards. If nobody on this blog attacks the idea and knocks it down then clearly it is correct. I'll write this on my intermediate micro test next week and if the Professor grades me down I'll tell him that Lesvic has access to superior wisdom and that he provided an argument proving my idea is correct. I wonder what the Prof. will say?

[Ludwig 3]

"And even if a new idea were wrong, exposing economic error and instructing the unlearned is what economists do. So, when they don't, it is only because they can't"

Is it because they can't or because you are not paying them anything to do so?

Much as my Profs love their students I'm pretty sure they would not show up for class and grade our papers/tests if they were not paid for it.

Supply, after all, is a positive function of price. I'm sure that for an appropriately large fee (Z), Dr Boettke would provide you (Mr Lesciv) with X hours of personal economics tutoring (Qs would be equal to X hours at a price of Z per hour, thereby earning himself a hefty producer surplus).

My final suggestion. Do please follow the good advice of the folk above and purchase the Boettke-Prychitko-Heyne text (maybe even steal it from a college bookstore!) and aquaint yourself with the basics of price theory. Then please come back for discussion with the grown-ups.

You are merely getting what any of the Profs here would say to a first-year student who refuses to read the text and persist with their own economic theories - namely, an admonition to read the assigned text, with failure to do so leading to a grade of F or D -

So currently, Lesvic has a very very very low GPA (not an attack on the man, but a fact. To increase his GPA he needs to study the assigned text).

People - no more exchanges of this kind with Lesvic please. We have all had the last word many many times and he is not listening (far too happy alas to sit smugly with his own ersatz price theory and confusions that are unacceptable for gorwn-up economics discussions).

Farewell.

[dglesvic]

Your condemnations of me are no less of Boettke, Hayek, Mises, Kirzner, Rothbard, and many more of the most renowned economists of our era.

First, Hayek:

I was “rude” for saying exactly what he had said, that redistribution was the “crucial issue” and that it would be “disingenuous” to avoid discussing it.

I was “rude” for interrupting your other discussions with this topic.

And now Boettke has just interrupted them with it.

So, Lesvics’s rude, Hayek was rude, and now Boettke is rude.

And, of course, you’re all perfectly polite.

I am utterly and totally incompetent, and to be read out of economics, because I cannot see any difference between quantity supplied and supply.

Boettke doesn’t see it either. You tell me that he does. But Boettke won’t tell you that. You say that he does so in some book, but won't provide the citation.

He certainly hasn’t done so here. He has been asked repeatedly to do so, and still hasn’t done it. What’s he waiting for?

So, until he acknowledges a difference between quantity supplied and supply, you’ve got to run him out of economics too.

And if Kirzner could see “keen intelligence” in this benighted Lesvic, he certainly gets the bum's rush too.

And, likewise, Laffer and High.

And if Lesvic, who couldn’t understand anything else, could understand Mises, there had to be have been something wrong with him, too. So, out he goes.

And what of all the others who wasted their time on a theory that wasn’t worth wasting time on? Rothbard and all the others? And what of those who even agreed with the theory, Block and the others?

Farewll to them all, Boettke, Kirzner, and all the rest, right along with Lesvic.

And whose left?

Yawn, Anon, intro student, High opportunity cost of time, and Ludwig.

I think Boettke, Hayek, Kirzner and I will somehow manage without you.

[dglesvic]

Your condemnations of me are no less of Boettke, Hayek, Mises, Kirzner, Rothbard, and many more of the most renowned economists of our era.

First, Hayek:

I was “rude” for saying exactly what he had said, that redistribution was the “crucial issue” and that it would be “disingenuous” to avoid discussing it.

I was “rude” for interrupting your other discussions with this topic.

And now Boettke has just interrupted them with it.

So, Lesvics’s rude, Hayek was rude, and now Boettke is rude.

And, of course, you’re all perfectly polite.

I am utterly and totally incompetent, and to be read out of economics, because I cannot see any difference between quantity supplied and supply.

Boettke doesn’t see it either. You tell me that he does. But Boettke won’t tell you that. You say that he does so in some book, but won't provide the citation.

He certainly hasn’t done so here. He has been asked repeatedly to do so, and still hasn’t done it. What’s he waiting for?

So, until he acknowledges a difference between quantity supplied and supply, you’ve got to run him out of economics too.

And if Kirzner could see “keen intelligence” in this benighted Lesvic, he certainly gets the bum's rush too.

And, likewise, Laffer and High.

And if Lesvic, who couldn’t understand anything else, could understand Mises, there had to be have been something wrong with him, too. So, out he goes.

And what of all the others who wasted their time on a theory that wasn’t worth wasting time on? Rothbard and all the others? And what of those who even agreed with the theory, Block and the others?

Farewell to them all, Boettke, Kirzner, and all the rest, right along with Lesvic.

And whose left?

Yawn, Anon, intro student, High opportunity cost of time, and Ludwig.

I think Boettke, Hayek, Kirzner and I will somehow manage without you.

[dglesvic]

Sorry for the multiple posting. That was an accident.

[Max]

"I am utterly and totally incompetent, and to be read out of economics, because I cannot see any difference between quantity supplied and supply.

Boettke doesn’t see it either. You tell me that he does. But Boettke won’t tell you that. You say that he does so in some book, but won't provide the citation."

Boettke referred you to the same book right?

But if all the great Austrians (and a jackass like Laffer0 do not see a difference between quantity supplied and supply, then yep - run them out of economics asap.

Incidentally, Steve Horwitz stated that Boettke would consider there to be a difference between supply and quantity supplied. So he can stay in economics, but the rest, assuming they stand with Lesvic can go.

[Intro student]

Mr Lesvic,

I have been very patient trying to tutor you in basic supply and demand. But I have to confess, you are tougher to tutor than the dumbest jock alongside me in my intro class (at least he owns the book and has glanced at it).

Have you ever considered that the reason why Kirzner et al replied to you politely is because they possibly saw you as a potential donor to the various Austrian economics endeavors?

What do you make of Prof. Horwtiz's statement that there is indeed a difference between Demand and Quantity demanded? Not to mention his doubts that Dr Boettke would deny any such difference? If I come across as rude, then I apologize, but you are a very frustrating guy (see the remarks about the intro class jock relative to you).

Here's a real economic problem for folk to ponder. Using a rational choice framework explain why Hayek et al would reply (and this in the days of snail mail) to Mr Lesvic.

Also, is it possible to pass (let alone get an A grade) Dr Boettke's intro econ class while denying any difference between demand and quantity demanded (or supplly and quantity supplied)? Please tell us Dr Boettke - a simple yes or no will suffice.

[Holy cow Batman!]

Lesvic - "So, until he [Boettke] acknowledges a difference between quantity supplied and supply, you’ve got to run him out of economics too."

Boettke (way way above) - ""The best way to understand the difference is that changes in demand (supply) impact the entire demand (supply) schedule. As my income goes up, my demand for certain goods increases. But changes in the quantity demanded (supplied) are movements along a particular demand (supply) schedule and thus reflect the impact of a change in the price."

I guess Boettke can stay. And economics is much the better for it.

What does Lesvic not understand about Boettke's remark? Note that Boettke uses the word "difference".

The ball is in Lesvic's court? Incidentally, has anyone other than intro student actually been to Lesvic's site? He charges 20 bucks for his book? I'd wager that quantity demanded is zero (but I'm a cheapskate). Any chance of a free book Lesvic?

[Stop Press: Kirzner allowed back into Economics]

Steve Horwitz provided an example from Human Action of Mises distinguishing between demand and quantity demanded.

Here is Kirzner (Market Theory and the Price System 1963)

p. 79: "The demand curve is the graphic representation of a very important graphical tool ... The economic theorist [asks himself] ... what effect a given change in its price will have upon the quantity of commodity demanded by a consumer [all else equal] ... By abstracting in this way from the effects of other factors, the economist is able to extract a simple relationship between its [the goods] market price and the quantity of a good that a consumer will buy. The demand curve depicts this relationship graphically"

Classic text. Prof Kirzner clearly distinguishes between quantity demanded and demand.

Boettke, Horwitz, Mises, and now Kirzner are back in economics rather than outside with Lesvic.

This is my final post on this subject. Lesvic does not want to learn so I shall waste no more time on him.

Sincerely

Intro student.

[dglesvic]

Max:

Right or wrong, you're honest enough about running all those great Austrians out of economics, and I give you credit for that.

Intro:

That's right, I have never considered the possibility that Kirzner was a whore.

As for Hayek, just to set the record straight, his letter to me was just a courtesy, and did not get into the theory. While expressing "sympathy with the general approach," he explained that he was too busy with other matters to go into it at that time. And I never heard further from him.

But my reliance upon him rested elsewhere, upon his statement that this was the crucial issue and that it would be disingenuous to avoid discussing it.

Does that mean that he was disingenuous for not discussing it with me? No. I don't know his circumstances, nor of any other individual. So I can't pass judgment on particular individuals. But I can pass it on a whole community of economists, and say that it is disingenuous for a community as a whole to be avoiding the issue.

I am in complete sympathy with your asking Prof. Boettke for a simple yes or no answer about quantity supplied and supply.

I'd like to see that too.

Holy cow Batman:

For you the price is double.

Intro:

Kirzner simply says that there is a relationship between price and quantity demanded. How do you get a difference between quantity demanded and demand out of that?

I'm afraid I don't see Kirzner as you do.

I certainly don't see him as a whore.

[dglesvic]

One correction:

As I had already pointed out, demand can be understood in two different ways, as quantity demanded and intensity or height of demand for the marginal unit.

But the original question was of a supposed difference beween quantity supplied and supply.

Why confuse the issue with demand?

But enough of this. I'm going to stop playing with you. Here's why there is no difference between quantity supplied and supply.

There is no such thing as a supply without a quantity. Without a quantity, there is no supply. If there is a supply, there must be a quantity supplied. So you're telling me that there is a difference between quantity supplied and quantity supplied, and that if I can't see it, you can heap contumely upon a better man, and avoid your greatest challenge and opportunity as economists and libertarians.

[Misesian Avenger]

My goodness. Now I see what my correspondent meant about this Mr Lesvic fellow. And yes, he really is out of his depth playing at economist with the adults isn't he?

[Friedman's monetary helicopter]

I wonder how Lesvic would explain the consequences of a price set above market-clearing price without making use of quantity demanded and quantity supplied?

No doubt he'd say (in his glorious ignorance) that supply exceeds demand.

Yet, if supply exceeds demand then there is no such thing as a market-clearing price.

Lesvic does not understand what we (the rest of us mean) when we say supply or demand. His is using it in the bonehead War-Street Journal, MSNBC, National Review, kook libertarian newsletter know-no-econ other than silly slogans sense.

And I'm disgusted by what you say about Israel Kirzner, so please get back under your stone.

[Laughing at Lesvic]

Where is the better man BTW, I have a nice cold bucket of contumely to pour over him!

[Ayn in the rear]

"and that if I can't see it, you can heap contumely upon a better man, and avoid your greatest challenge and opportunity as economists and libertarians."

You silly Austrian kids do not see it do you? Lesvic really truly thinks that he is a genius from whom economics is running away in terror.

[Rafe Champion]

Will the people who are jousting with Mr Lesvic please address these questions: Why are you using pseudonyms and what do you think you are achieving by the protracted debate? Please don't post a reply, just think about it. If you think I would be interested in the answers, mail [email protected]

The way things are going you are putting pressure on the moderators to switch off the comments again, which would detract great deal from the value of the site.

[Anon]

Rafe, why use a pseudonym? I plan to apply to grad school soon and do not want anyone googling me and finding anything about my politics or pro-Austrian views.

Why argue with Lesvic? Possibly to teach him some basic economios. Why on earth would the moderators switch comments off? The debate is relatively civil and on an economics topic. Or are you just worried that a blowhard like you will not have another outlet for sounding off?

[Intro student]

Why am I 'jousting' (as Rafe C) puts it, with Lesvic? Basically to hone my debating skills and put my intro micro (course not over yet and test still to come) knowledge to the test.

So a question for Rafe. Who has the better of th debate over supply and demand to date? Also, please note that Profs Horwitz and Boettke have taken part in this dicussion to date.

I largely agree with anon above (except for when he calls you names. I enjoy your comments and have learned stuff from them). The debate is fairly civil so far (Lesvic's contributions aside) and is on topic. And it was Lesvic who deigned to lecture all and sundry on basic price theory initially and repeatedly told Dr Horwitz to stop discussing Lachmann and Kirzenr and to start talking about Lesvic and his 'important' ideas. I do not see what your problem is.

I just think Lesvic does not like to be told he is in error by an 18 year old college student. He has almost as much contempt for me as he appears to have for my Professor.

[Intro student]

Incidentally, what on earth is contumely? I far prefer econ to english and am too lazy (at least at this time of night - taking a break from studying) to look it up in a dictionary.

On vocabulary I can probably learn from Mr Lesvic. He can learn on econ though from me and the profs.

[dglesvic]

From A Review of Economic Doctrines by T.W. Hutchison, Pp 1,2

“On 31 May 1876 the Political Economy Club of London held ‘a grand dinner and a special discussion’ (as Jevons described it), in honour of the 100th anniversary of the publication of The Wealth of Nations. Mr. Gladstone was in the chair. The company was representative, in the most distinguished way, of politics, learning, the city, the civil service, and the aristocracy…and comprised a social and intellectual blend remarkable even in the England of that period…it was the political heavyweights, rather than the academic economists, who dominated the occasion…in those days there were not the same gulfs in understanding, terminology, and approach, between these two categories, that were to open up in subsequent decades… Professor, banker, and Cabinet Minister still approached the subject with, to a large extent, a common language…That the gulf was opening up by 1885 may be deduced from Sidgwick’s remark about a meeting of the Club: ‘The bankers came to the front. It is an exaggeration to say that they know no political economy. I think they read Mill some time ago, and look at him from time to time on Sundays.’…Such comments would hardly have been possible while the figure or spirit of Ricardo still dominated the Club.”

Ricardo was the purest amateur, having retired from business to devote himself to economics. And it was the spirit and especially the language of Ricardo and the other amateurs that characterized that most golden age.

It was not a language imposed on them by “experts” but by themselves on the “experts.” And it was not an obstacle to learning but a tool of it, the language of men who would greet the beautiful new words of our intellectual emperors today not with reverential awe but skepticism; and certainly not be their favorites, but lonely and despised misfits and outcasts, and no less the leaders of intellectual progress and enlightenment.

Since it was the “academic economists” who created the gap, it is they who must close it, if they would aspire to anything more than cloistered irrelevance, they who must conform to the language of the laymen, and not the other way around.

[dglesvic]

Pardon me. I should have said "created the gulf."

[TGGP]

Geme Expression has a good post (itself sparked by a good Overcoming Bias post) on why it is so important to know the simple math of a subject rather than relying on verbal explanations:
http://www.gnxp.com/blog/2007/11/simple-math.php

Lesvic, didn't you used to have a contest where you were going to award someone who could point out flaws in your book? What happened to it? The internet archive shows there used to be comments, but it didn't archive any of those comments.

[dglesvic]

I used to offer a US $20 gold coin prize for refuting the theory, but, no more. Sorry.

[Paul Mason]

I confess I am skimming the tussle with Mr. dglesvic so I may have missed a short comment on my first post. Is it really so insubstantial as to merit no reply?

[dglesvic]

Thank you, Mr. Mason.

[dglesvic]

Thank you, and now prepare yourself for the onslaught of the 18 year-olds.

[Anon]

"what about a 100% tax on rents on the unimproved value of Land, redistributed as an equal, per capita lump sum payment?"

I favor Paul Mason's suggestion though he might want to look at one of Rothbard's attacks on the single tax. I'm not sure what I make of Rothbard's arguments.

[dglesvic]

With real economists, new ideas come first, but, with the professionals, apparently, they don’t even come last. We have had the promise here of a discussion of redistribution. The promise has not been fulfilled. There has been little other than a discussion, if you can call it that, of the difference between quantity supplied and quantity supplied, and the fitness of one D.G. Lesvic to ask questions.

You’re either up to the challenge of a new idea or you’re not. Which is it going to be?

And you’re either going to hide behind curves and cryptic terminology, or face the challenge out in the open. Which is it going to be?

To move ahead, we must return to the language of the founders and pioneers and greatest creative thinkers and benefactors of the science, the original and still only proper language of plain English, plain English.

Why do you need a curve to understand that quantity demanded goes down as price goes up?

What could you learn from algebraic or geometric riddles that you couldn’t learn from plain English?

Isn’t the shortest distance between two points a straight line?

Why follow a curve rather than going straight to the point?

Words by themselves have meaning. Curves do not. They have meaning only after they have been explained through words. Why translate from words into curves, and then from the curves back into the words?

“Simply to develop economics verbally, then to translate into logistic symbols, and finally to retranslate the propositions back into English, makes no sense and violates the fundamental scientific principle of Occam’s razor; which calls for the greatest possible simplicity in science and the avoidance of unnecessary multiplication of entities or processes.” Rothbard, Man, Economy, and State, P 65

What is the purpose of needless complication other than to conceal the fact that you have nothing to say?

“What could easily be explained in a few sentences of mundane speech was expressed in a terminology…unfamiliar to the immense majority and therefore regarded with reverential awe.” Mises

I’ll be awestruck by plain English and forthright economics.

[dglesvic]

Pardon me again. I meant to say the only proper language of the science, plain English, not the only proper language of plain English, plain English

[Gerald Lee]

"I really think that the interpretation you are pushing for Lachmann (an interpretation admittedly that many in the Austrian camp push for) is actually a false reading. Lachmann understood systemic forces that are at work in market economies. He was against the idea that (a) we were in equilibrium, and (b) that we can know THEORETICALLY whether equilibrating or disequilibrating factors were the dominant factors in operation."

Can one safely make any statement about the consequences of entrepreneurship without knowing whether the disequilibrating or equilibrating forces prevail? Moreover, without knowing which prevails how could one in principle even identify equilibrating entrepreneurship? Austrian economics seems stuck at an impasse (as Karen I. Vaughn argued in her book).

[dglesvic]

To Gerald Lee:

To revisit this for you, first, from my book:

"Since there is always entrepreneurial error, and disequilibrating as well as equilibrating action in the market, its critics cite the possibility of the disequilibrating outweighing the equilibrating. It’s also possible that, if we get out of bed in the morning, we’ll get hit by a truck. But that doesn’t mean we shouldn’t get out of bed. Economics is not a science of possibilities, for anything is possible, nor, of certainties, for nothing is certain. It is a science of practical and reasonable assumptions, and the futility of action is not one of them.

Error doesn’t change the fact that the market tends to correct it, and nothing else could, that there could be no economic calculation and nothing but chaos without the market, that its tendency toward equilibrium, the Invisible Hand, is our only logical hope, and practical and reasonable assumption."

This is from my statement to Prof. Boettke above:

"I submit, with Mises, of course, and with you as well, no doubt, that economics is a practical science aiming at practical and reasonable assumptions, and that inexorable chaos and the futility of human action is not one of them. To act, we must assume order in the universe, and, as economists, the interdependence of market phenomena, as Mises put it, or laws of the market, and, where there are violations of them, corrective action by the market. To deny that is to deny economics altogether, and purposeful human action with it.

Denial of the Invisible Hand, or tendency toward equilibrium, is not an option for economists. For they have no other way to explain the market process. If economics is to proceed at all, it must be from the assumption that the market tends toward equilibrium."

This was Prof. Boettke's statement, to somebody else:

"I really think that the interpretation you are pushing for Lachmann (an interpretation admittedly that many in the Austrian camp push for) is actually a false reading. Lachmann understood systemic forces that are at work in market economies. He was against the idea that (a) we were in equilibrium, and (b) that we can know THEORETICALLY whether equilibrating or disequilibrating factors were the dominant factors in operation. But nothing in that says that there are not powerful equilibrating tendencies in market economies --- and those equilibrating tendencies are captured in the limit by the neoclassical optimality conditions."

Here was what I said in turn:

But those "powerful equilibrating tendencies" are immaterial if they're not dominant. It doesn't matter how powerfully Curt Shilling pitched if Alex Rodriguez still hit it out of the park.

It seems to me that he's trying to have it both ways, that Lachmann is both right and wrong.

So, if I may choose my Boettke, I'll take the one that agrees with me, thank you.

Mr Lee, You are really saying pretty much what I said, in effect, that, without the assumption of a tendency toward equilibrium, there is no economics. I would go further. There is no human action. In a chaotic universe, there could be no purposive human action. We could only lay down and die. To live, we must act, to act, assume order in the universe. The fact that we can act and succeed proves that there is not inexorable chaos but order in the universe. And how else to explain it other than by the tendency toward equilibrium, or, as Smith called it, Prof. Horwitz to the contrary notwithstanding, the Invisible Hand.

[Gerald Lee]

Sorry Mr Lesvic, but my question was meant for Peter Boettke, and the other thoughtful folk who have posted on the Lachmann-Kirzner debate. I'm not interested in your blather or your thinly disguised attempts to promote your book. And I agree with what Dr. Horwitz said about equilibrium and the Invisible Hand.

"But those "powerful equilibrating tendencies" are immaterial if they're not dominant."

Lachmann's question is how would we even know?

[dglesvic]

Oh, I didn't get that Lachmann business exactly right. I wasn't wrong, just not exactly right.

Though there be disequilibrating as well as equilibrating action in the market, here, exactly, is why the market tends toward equilibrium, not disequilibrium.

It tends toward a final state of rest. That could not be disequilibrium. The market would never rest at disequilibrium, only at equilibrium. Tending toward the final state of rest, it tends toward equilibrium.

[Gerald Lee]

But why does the market tend towards a final state of rest? Anyhow, tendency is a weasel-word.

[dglesvic]

And here's another thought, from this. The more confused the economist, the more complicated the economics. When it's right, it's simple.

Lesvic's Law: economics is a simple science, and, if it isn't simple, it isn't economics.

That doesn't mean that the chains of reasoning are never lengthy and complex, but that they're all comprised of simple elements, that can be explained in simple terms. And, if they're not worth the bother of explaining in simple terms, they're not worth the bother of trying to understand them.

And to the good folks running this site. Don't worry about the personal attacks upon me. To me, they're the same thing as telling me that I'm right.

[dglesvic]

Here's the answer to your question, Mr. Lee.

Oh, sorry, I forgot that you didnt' want to hear from me.

[Gerald Lee]

Okay folk, I'm out of here. if Lesvic wants to dominate the comments and the discussion let him. I'll hope for a post by one of the Professors' on the Lachmann-Kirzner debate rather than Mr L's temper tantrums, foot-stamping, and certainty that he is the holy one.

Adios.

[Gerald Lee]

This question is for anyone other than Lesvic. I think the Lachmann-Kirzner dispute (more accurately, any potential resolution of it, is crucial for the future of the Austrian approach to economics).

Peter Boettke wrote: "I really think that the interpretation you are pushing for Lachmann (an interpretation admittedly that many in the Austrian camp push for) is actually a false reading. Lachmann understood systemic forces that are at work in market economies. He was against the idea that (a) we were in equilibrium, and (b) that we can know THEORETICALLY whether equilibrating or disequilibrating factors were the dominant factors in operation."

Can one safely make any statement about the consequences of entrepreneurship without knowing whether the disequilibrating or equilibrating forces prevail? Moreover, without knowing which prevails how could one in principle even identify equilibrating entrepreneurship? Austrian economics seems stuck at an impasse (as Karen I. Vaughn argued in her book).

Please Mr Lesvic, do not jump in again this time. Let other folk have a chance why not?

[From the Mises blog comments sections]

Looks like the Lesvic curse has now arrived here. From Mises blog comments.

"Just one thought at this moment, the supposed disconnect between economics and morality.

To the contrary, the economic demonstration that redistribution does not reduce but increases inequality demonstrates, not just that it is immoral, by the Left's own moral standard, but the ultimate unity of economics and morality.

I am 75 years old, and for fully half my life have been trying to get libertarians and Austrian School economists to discuss this, but, to no avail.

I have spent thousands of dollars advertising the idea in libertarian journals, currently in Liberty, under Calling All Economists, and my web site, Intellectually Incorrect at intinc.org, have offered valuable prizes for refuting the idea, have begged my betters for guidance, and been completely ignored.

Think of that, having to pay for attention to such an issue, offer prizes in connection with it, and still unable to even ripple the surface.

But perhaps God will grant me nine lives, like a cat, for apparently it will take all of that to get through to libertarianism and the Austrian School.

DG Lesvic"

How about spending some of that $$$ on basic economics tuition pops?

[Modesty]

From Lesvic's own blog. He is sooooooooooo modest.

"Please, boys, don't think of me as arrogant, just smarter than everybody else.

Posted by: D.G. Lesvic | October 20, 2007 at 05:56 AM "

[dglesvic]

That's right, I have been spending half of my 75 years trying to get Austrians to discuss these most vital issues, and have found no forum for it, until now. And that is why, whatever my disagreements with Prof. Boettke, and quarrels with Prof. Horwitz, as far as I am concerned, they are the best men in economics.

[Rafe Champion]

Turning from the value-free aspect of distribution to the question of justice, it is interesting to see how Plato shifted the traditional individualistic concept of justice (proper treatment of a person ) to the collectivist concept of the healthy organic state. Part of that package was the myth that individualism is opposed to altruism and collectivism equals unselfishness. http://www.the-rathouse.com/popshorterOSE6.html

Then that collectivist concept was shifted some more to take on the socialist sense of equal shares. First make justice a collectivist concept and then make it totalitarian. And call it liberalism!

[dglesvic]

Interruption Warning: Lesvic again!

But what if collectivism, socialism, and redistribution don't reduce but increase inequality? Where is the justice in that?

[Paul Mason]

Thank you Anon. it's fun playing mousey-chasey among the trumpeting elephants isn't it.

Would you be so kind as to point me to the Rothbard comments you referred to.

thanks again

[Anon]

For Paul Mason - The Rothbard comments can be found in Man, Economy, and State; Power and Market (I think), and then he has an article in the Freeman that is reprtinted in the Logic of Action.

Anything by Rothbard on the single tax will have his general line. Sorry I can't be more specific (page numbers etc).

[Bob]

Paul Mason and Anon,

Try this link for Rothbard on the single tax:

http://www.mises.org/rothbard/georgism.pdf

[dglesvic]

You have all been missing the point. My inability to see the difference between quantity demanded and quantity demanded is immaterial. You can see it. So, while I can’t proceed with the analysis, you can. And it doesn’t matter whether or not you could ever convince me that I was wrong. You don’t have to convince me. You just have to convince yourselves.

When Hayek said that it would be disingenuous to avoid discussing this, he didn’t add, unless you have a good excuse for it. He just said that it would be disingenuous, period.

So there are no excuses.

Apparently, though, there is still the obstacle raised by Lachmann, and that has brought not just this discussion, but all of Austrian economics to an impasse, as Karen Vaughan described it. Here, again, the Lachmann conundrum.

Since there is disequilibrating as well as equilibrating action in the market, there is the possibility that the disequilibrating will outweigh the equilibrating, and the market will tend toward disequilibrium rather than equilibrium.

That would bring not just Austrian economics, but life to an impasse.

There are two steps to getting past it, the practical and the theoretical.

As a practical matter, you cannot allow the science of human action and life, any more than life itself, to be ruled by possibilities. For anything is possible. It’s possible that the world will blow up in our faces at any moment, and that all of our actions will be futile.

It’s the same thing in the science of life, as in life itself. It’s possible that everything we think we know is wrong. But such a possibility doesn’t bring economics to an impasse, any more than life. Despite the possibility of failure, we must act, and, to act intelligently, analyze our action as best we can.

Economics is not a science of possibilities, for anything is possible. Nor is it a science of certainties, for nothing is certain. It is a science of practical and reasonable assumptions, and the futility of human action and of the science of analyzing it are not among them.

Without possibilities and certainties, what is left in economics? Tendencies.

Our Mr. Lee had called that a weasel word. But there is no other for us. While, by itself, a given causal factor would bring about a certain result, in the real world, it is never by itself. There are always other factors that by themselves would bring about different results. So all you can say about any of them is that they tend toward certain results.

Given that the market tends toward a final state of rest, it must tend toward equilibrium, for it would never rest at disequilibrium.

[Gerald Lee]

Once again, Mr Lesvic goes out of his way to totally miss the point. Whether or not Lachmann or Kirzner are more near right will have an important impact on the type of government policies we may or may not favor. Lachmann's point about subjectivism and expectations is very important.

You are very brave in jumping from the pure logic of choice as it applies to one actor to applying the analysis in the aggregate. I think Hayek's discusses this problem in his classic 30's essays on knowledge (the 37 paper for example?)

[dglesvic]

Welcome back, Mr. Lee, but, at the risk of inducing more apoplexy, I have no idea what you're talking about.

[dglesvic]

Sorry. I got mixed up again, in the essay just above, and said quantity demanded when I meant to say quantity supplied.