Author Topic: Why I am an Austrian Economist [BLOG POST]  (Read 8100 times)

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Offline Vizzini

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Theories like this don't take human nature into account. If everyone could check their egos long enough to test out Austrian economics in practice, I suspect it would prove to be quite a mess. That's not to say that we couldn't use more of its wisdom in our system, but in its pure form it would cause depressions like we've never seen.
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Offline jae208

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I wasn't attempting to debunk the full article.... just one point in it.   The article V pointed me at gets so lost and turned around that it is more of a "trap" that gets people lost in irrelevant details.


Maybe because it wasn't really intended for an average audience?

This kind of reminds me of the people who don't understand evolution and global warming and as a result just choose to dismiss it instead.

As someone else stated previously maybe austrian is only a part of the whole but not the full explanation. I mean we needed the Keynesian portion as is evident with Bitshares becoming inflationary.
« Last Edit: January 05, 2015, 11:15:24 pm by jae208 »
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Offline santaclause102

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@delulo: no it is not a grammatical error :)
Thanks, sometimes I am note sure. I would have expected the expression "as much depended on ... as on...".

Offline toast

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Quote
For example, drawing the conclusion that using coercion or economic slight of hand to force a trade would be beneficial for society as a whole. Based upon the violation of the Golden Principle I know there has been a mistake made in the economic reasoning and can begin my search for it.
It is a logical fallacy to mix normative statements (The golden principle. By "normative statement/principle" I mean a sentence that states how things "should" be) with theoretical analysis: Your logic goes like this: Because a normative principle was violated the theory must be wrong. I could see how the argument could be safed if we turn the golden principle into a thesis that states a causal relation. It could go like "violating the golden principle produces inefficiencies that are defined as...".   

Thanks, this had really bothered me and I couldn't formulate it properly. It's part of the point I made a few posts prior - this blog post seems confused about what point it is trying to make.
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Offline carpet ride

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Great debate... and yet it's with the same people that already know about Bitshares.

Good point.  How do we expect to get the new readers involved?  Downloads of clients may not be the only way to count greater involvement


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Offline bubble789

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@delulo: no it is not a grammatical error :)

Offline santaclause102

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Founders of major crypto-currency projects depend as much on economics as they do technology
Is that a grammar error?

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It almost seems like math is a fancy “appeal to authority” because if you cannot follow the math most people assume it is accurate, representative, and authoritative in its conclusion.
This is my observation too. This worshipping of math that is confused with "objectivity" can be observed in other areas of contemporary culture too: a "mathematically proven" currency and the general public that equates mathematics with science. The latter is faulty and there is not much room to disagree: With math one can only express things differently (solving an equation for example). This way it is possible to show that my premise equals my conclusion since I transcripted my premise into my conclusion via math. Math without premises has nothing to do with science and math is used to disguise the relevance of the premises (especially in economics). The cultural/historic/philosophical reason for this is a desire for certainty (=fear) that has been satisfied
by religion for a while. Math has taken on the role of religious texts in popular culture and partly also in science today. Religious texts were rarely understood but believed in (during the middle ages and before Luther the bible was only available in Latin which no one expect the clerks understood). I am not saying math is useless. It is highly useful in expressing thing more precise but the public perception about what math is and can do is misguided which also influences the role of math in science.

Quote
For example, drawing the conclusion that using coercion or economic slight of hand to force a trade would be beneficial for society as a whole. Based upon the violation of the Golden Principle I know there has been a mistake made in the economic reasoning and can begin my search for it.
It is a logical fallacy to mix normative statements (The golden principle. By "normative statement/principle" I mean a sentence that states how things "should" be) with theoretical analysis: Your logic goes like this: Because a normative principle was violated the theory must be wrong. I could see how the argument could be safed if we turn the golden principle into a thesis that states a causal relation. It could go like "violating the golden principle produces inefficiencies that are defined as...".   

Quote
considered voluntary trade to always increase the total wealth of society where “wealth” is measured as the cumulative perceived value of all parties.
I'd say that that would be entirely true if all goods could be made private goods AND if there was perfect enforcement of property rights AND if there would be no monopolies on any goods that can hardly be substituted (= barriers to entry stay low to acquire any good to challenge monopolies). 

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If my girlfriend values a purse only because it is rare
Couldn't that be translated to "She values the purse only because it has a high price". I'd say that other people's actions can effect the price of your property but not the utility of the property (excluding a high price as one form of utility).

I agree to disagree on the value as objective or defined by the amount of work put into the good. As people always use Marx as a reference for work input based theory of value: Contrary to mainstream perception, Marx was quite on your side with his analysis on the value of goods. Marx viewed the value of a good as the average value perceived by individuals relative to the perception of other individuals. He was influenced by authors that had a sole work input based value theory so that was the (formal) framework he described his theory which does confuse things. What he did was to alter the basic work input value theory by saying that the work put into a good only has value if there is sufficient demand for it and if the work put into it was efficient. Now that is not the best / direct way of expressing a theory but it makes clear that the such reference is not valid.  What I observe is that critical marxist scholars dismiss the value of libertarian perspectives and libertarians dismiss the value of the analytic work of Marx. Much of that is because stereotypes of the theories are used and a fear and social pressure drive group/camp thinking.

Using the word "communism" like this
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Once you start down this path you lay the foundation of communism.
is a logical fallacy similar to a "call to authority". This one works the opposite way, it is a call the a "commonly perceived evil". Instead you could quickly describe what you mean by "communism", for example "the externalization of costs".
« Last Edit: January 04, 2015, 10:08:34 pm by delulo »

Offline hpenvy2

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Great debate... and yet it's with the same people that already know about Bitshares.

Offline arhag

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When she finally does trade it for something else the result is an increase in perceived value to both parties.

An increase in perceived value after potentially a significant drop in the perceived value of the purse due to the voluntary trade of third parties. The net result could still be a decrease in perceived value of the purse, which you seem to brush over quickly.

Anyway, your argument seems to be that it doesn't matter that her perception of the value of the purse dropped because nothing was physically done to the purse (which is the extent of her property rights).


The whole idea that voluntary trade always increases the wealth of the society is very questionable.

You define "wealth" as the "the cumulative perceived value of all parties." I don't think you mean to say it this way, because "cumulative" implies summation to me which is counter to the principles you say you value in the same post:
  • Austrian economist's "founding principles forbid the use of mathematical operations on value in almost all circumstances."
  • "You cannot compare value judgements among multiple people."
  • "A price (exchange rate) is only valid the instant it happened and only for the parties involved."
To make this more clear I am afraid I am going to have to introduce variable and equations :P. Actually, just for you, I will abuse the hell out of mathematical notation. Plenty of set theory but I am afraid no calculus in this post ;).

A natural interpretation of the vague English statement "cumulative perceived value of all parties" at time T would be W(T), where:
  • You ask party H at time T to put a price P(H, T) on all the goods/services of society of which they are a property rights owner (or otherwise control).
  • W(T) =  ∑ P(H, T) ∀H ∈ {humans on the planet}.
This can't be what you mean since this is going against the bullet point principles above that you said you value in the post.

So, the other interpretation could be that any voluntary trade between parties H1 and H2 occurring at time T* satisfied the following statement: Ǝε > 0, ∀H ∈ {humans on the planet} P(H, T* + ε) ≥ P(H, T* - ε). I think with this interpretation it might be fair to say "voluntary trade always increases the wealth of the society" (then again there are all kinds of irrational people) but that is only because ε can be made really small so that the information of the trade doesn't have enough time to propagate to other parties. On the other hand, the statement would not necessarily be true if we changed the interpretation to something more reasonable like the following:
  • E(T1, T2) = {all trades occurring between time T1 and time T2}.
  • H(T1, T2) = {all parties involved in the trades that are members of the set E(T1, T2)}.
  • Given any set E(T1, T2), ¬(ƎH* ∈ {humans on the planet} such that H* ∉ H(T1, T2) ∧ P(H*, T2) < P(H*, T1)) (Ǝε > 0, ∀E* ∈ E(T1, T2), (H*,T*) ∈ {(H,T)|(H ∈ {humans on the planet}) ∧ (T1 ≤ T ≤ T2) ∧ (H is a party involved in trade E* that occurred at time T)} P(H, T* + ε) ≥ P(H, T* - ε)).
The counterexample to the interpretation above is your girlfriend's purse example. But again, it seems that you don't really care whether or not "voluntary trade always increases the wealth of the society" is true as long as it is true that "voluntary trade never harms a third party or their property." Of course then the question is what is "harm" anyway? But I think the purse example slightly clarifies the definition since even though her perceived value of the purse dropped because of the actions of third parties, you do not consider it "harm" because the actions of the third party did not in any way physically damage the purse.


Finally, however you define "wealth of society" and whatever your thoughts may be on the validity of the statement "voluntary trade always increases the wealth of the society," you don't seem to be addressing how physical harm can eventually come to a party in the future due to the voluntary trades by third parties. I am thinking of tragedy of the commons situations here where each short-sighted rational actor does voluntary trades that benefit them at the moment but build up into a situation that makes everyone (but especially those who did not profit from the short-sighted actions in the present) far worse in the future (due to loss of natural resources for example). And these cases can lead to what I consider physical harm (e.g. pollution of the atmosphere with toxic chemicals, or deaths from starvation due to the depletion of natural food sources from say overfishing or soil degradation), even if that physical harm is indirect and not as straightforward as an aggressor murdering someone directly. Privatizing everything so that there are no commons is neither feasible from a technical and logistical standpoint, nor does it even solve the problem because the rational actor may conclude that the negative effects won't happen until after he is long dead and no longer cares about the state of the planet (let's also assume he has no children or young people who he loves and empathizes with). Is this not a situation in which we need some kind of objective value (a consensus value made up for each person's subjective value weighted in some manner) of the commons in order to make economic and political decisions about how to use the resources? I think trying to determine how resources should be allocated in matters concerned with the commons strictly through voluntary trade (in a IMO misguided attempt to respect idealistic principles) can lead to actions that nearly everyone agrees is worse than resource allocations determined through consensus processes that may violate principles of non-coercion and strictly voluntary trade. You may call this "ends justify the means" thinking, but at the end of the day aren't we all trying to make the world a better (better is of course subjective and you need to accept that people will have different weights in their definition of better for aspects of society such as health of the populace, sustainability of the society, the degree of coercion imposed, etc.) place to live in?
« Last Edit: January 04, 2015, 11:41:38 am by arhag »

Offline toast

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Put another way. Your point is really that the conclusions drawn by mainstream economists call for aggression in the name of the common good based on their models. These push us towards local maxima, but are necessarily not global maxima because they are not our libertarian utopia where we've maximized perceived value across all individuals.

This has little to do with the breakdown of the techniques austrians and non-austrians use, which is the topic of vitalik's linked paper. Just about the only prescriptive point he makes is the one about negative externalities of a voluntary trade. If responding to that point is the putpose of this post then maybe you could add "(part 1)" to the title.

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« Last Edit: January 04, 2015, 11:19:54 am by toast »
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Offline toast

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I read this again. I think people will use this blog post to attack BTS.

My opinion is that it reads like "I don't understand what the not-an-austrian guy said" and "I wish reality was how I wanted it to be". You did nothing to show why your perspective is the correct one, you showed why you *want* it to be that way, in a way that perfectly fits what the not-an-austrian guy is countering in his article.

Using calculus doesn't mean you've gone too far and detached yourself from reality, and absolutely doesn't mean any conclusions you derive go against the principles of freedom.
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Offline CLains

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I don't understand why you have to measure value objectively to come to that conclusion; isn't it just tragedy of the commons again? That seems to be a problem with ego rationality in relation to integrated action, the same as occurs in voting and everything else.

For instance, all fishermen agree that the most valuable thing is fishing in a sea of plenty, and yet through each trade they diminish that value: in this case it is evidently the same value, as each fisherman values his own gain relative to the loss of fish in the sea, so "loss of fish in the sea" seems to be a negative value that has an inter-subjective constancy to it.

Offline eagleeye

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Yea, just chop out that part please.  Not a very good article either to begin to justify the comments.

I still don't understand why you're an austrian economist and I read it fairly closely.

I am an Austrian economist because it is the only branch of economics that is consistent with the principles of freedom. This means that it is the only branch of economics that I feel holds the keys to securing the life, liberty, and property of all. Economics matters, invest accordingly.

Austrian economics is the best we have so far but we needed Keynes and his Keynesianism and you have proved it with your inflation of the money supply (inflation of bitshares).  You must understand that this will become a UN currency or global currency.

Dan from all the people I have ever talked to I have the highest respect for you, never forget that.  I believe you can do great things, things all which your vision desires

**UPDATE** for bitmarket

I agree with what your saying but as Dan has taught me Crypto Currency is an ecosystem it is not about destroying one or another, it is about beating one or another, but the pie will be expanding and getting bigger and bigger and so the slices will be getting bigger and bigger.  I thought Vitalik was the smartest but now it is truly bytemaster.
« Last Edit: January 04, 2015, 09:39:45 am by eagleeye »

Offline bitmarket

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I don't think you have insulted Roger Ver and Erik Vorhees yet.  Perhaps you can call their wives fat in your next blog post and then all influential bitcoin leaders will be motivated to see bitshares fail.

Your seriously killing me right now.

I took out the criticism of their economic perspective out of respect for your opinion.   I certainly tried very hard to attack the ideas and not the people, but obviously not everyone is able to separate an idea from their ego and thus could see this as a personal attack.

I could actually tell you were trying. I suffer from the same.... I am going to call it "I would rather be right than happy" syndrome as you, that is why it is so easy for me to spot.  It is actually quite ironic given the post on subjective value.

I know you are right in that you attacked the argument.... but without understanding the normal persons perspective and how they value their ego, you won't be happy. In this case happy means getting the support of the entire bitcoin community so they are cheering for us in the same way they are cheering for open bazaar or Maidsafe. 

Our technology is better.... We are right... but far too many people would rather see us fail because of this problem.

I think you are the smartest guy in crypto, but you are holding yourself back a lot with this little people skills thing.

I certainly do not mean to be condescending but if you own this learning, and make this correction in your mindset, instead of begrudgingly changing your post out of "respect for my opinion" you will notice the difference immediately.   It will feel like the tide has turned and all of a sudden bitshares is swimming with the current.

Btw, I think Vitalik is like us and won't even think there was an insult in what you said, but his legion of loyal followers will think your a dick and cheer our demise and not our success.
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Offline bytemaster

Yea, just chop out that part please.  Not a very good article either to begin to justify the comments.

I still don't understand why you're an austrian economist and I read it fairly closely.

I am an Austrian economist because it is the only branch of economics that is consistent with the principles of freedom. This means that it is the only branch of economics that I feel holds the keys to securing the life, liberty, and property of all. Economics matters, invest accordingly.
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