Hang in there, fellas. It's all about distinctions.
SteveKeen:I would hope this point would be accepted here, because it then means that while the "100% Say's Law" argument is strictly wrong, maybe a "99% Say's Law" is OK.
Mr. Keen, please define what you mean by these terms.
1) 100% Say's Law
2) 99% Say's Law
SteveKeen:The distinction that a theory of value then brings is to this issue as to whether the M--C--M+ circuit is temporary or permanent, not as to whether it exists at all. The difference then becomes one of degree: entrepreneurial profit is seen essential to capitalism from an Austrian point of view, but also as temporary in duration. Marx sees the M-C-M+ circuit as essential to capitalism too, but as permanent.
Mr. Keen,
I don't follow this distinction, specifically the "permanent" aspect. What is meant by "permanent"?
It's intriguing that the quote you cites notes that Schumpeter was just 2 years younger than Mises, and that Schumpeter is not an Austrian because he rejects praxeology, which Mises instituted.
So it could be suggested that Mises and Schumpeter were rivals about how the subjectivist approach to economics should be developed, and Mises wanted to take it down the introspective, non-observational path whereas Schumpeter wanted to take it towards observation. Within the Austrian community, Mises won out, but in the rest of the economics community, versions of an empirically based philosophy won out.
My perspective on this is that Mises with praxeology took the Austrian approach down a dead end (remember that the Austrian school didn't originate with Mises--let alone Rothbard--but with Menger back in the 1870s-80s). In this sense, Marx did the same with the labour theory of value (seein Marx as the continuance of the Classical school of economics that began with Smith and even, arguably, Quesnay). But it is possible to construct an approach to economics from a subjectivist perspective that rejects praxeology, and to develop one from Marx's objectivist approach that rejects the labour theory of value.
In other words, I think that saying that because he rejects praxeology Schumpeter is not a descendant of the Austrian school is a bit like saying that because I reject the Labour theory of value I am not a descendant of the Classical School. In fact I would argue that I am, and have improved the Classical approach by rejecting part of Marx's analysis that is clearly nonsense.
Ditto Schumpeter: I see his embrace of an observational approach to economics as far superior to praxeology--though there's much more to good scientific methodology than Popper alone (I suggest you read at least Kuhn, Feyerabend and Lakatos to see how it has developed over time).
forgotten about Say's law then, eh?
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
I'll take a perspective from mish's excellent comment.
Assume for argument's sake that I am a miser and a misanthrope. My ambition in life is to spend less than I earn over my entire life, and therefore I will die with an accumulation of unspent money. As a misanthrope, I decide to leave my money to another miser, who will behave as I did during my life.
Since my demand will be less than my supply, at the level of the entire economy, demand will be less than supply. Therefore my existence violates Say's Law.
But Say's Law only works as an explanation of what happens at the level of the economy if it is obeyed 100%. As soon as you posit the existence of misers, Say's Law ceases to hold as a Law about the nature of the economy as a whole, and there can be insufficient aggregate demand.
SteveKeen: Assume for argument's sake that I am a miser and a misanthrope. My ambition in life is to spend less than I earn over my entire life, and therefore I will die with an accumulation of unspent money. As a misanthrope, I decide to leave my money to another miser, who will behave as I did during my life. Since my demand will be less than my supply, at the level of the entire economy, demand will be less than supply. Therefore my existence violates Say's Law.
everything that the miser does demand from the market comes from the prior production of others, 'supply'
everything that others in the market demand from the miser, come from the prior production of the miser, his supply.
SteveKeen:In other words, I think that saying that because he rejects praxeology Schumpeter is not a descendant of the Austrian school is a bit like saying that because I reject the Labour theory of value I am not a descendant of the Classical School. In fact I would argue that I am, and have improved the Classical approach by rejecting part of Marx's analysis that is clearly nonsense.
Above you argue that Mr. Schumpeter WAS an Austrian. Now you equivocate and claim that Schumpeter was merely a descendant.
You are already changing the facts of your argument and we've only just begun. For this reason and others, I can see that this conversation is going nowhere fast. Therefore I'm finished. Best of luck to you.
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NirgrahamUK,
Sorry, I should have made myself more clear. What I meant was that I do not accept free will or determinism alone but rather together. That the system at times limits the choice by which individuals can make but individuals still have the free will to choose amongst the choices they have, hence compatibilism.
I’d also be interested in further discussion on Meth Holism and Meth Ind. We’ll save it for another topic. But just briefly, like most things it seems that both sides take the extreme view on a matter when really the ‘truth’ is somewhere in the middle.
I’ll have a look at regression theorem.
As to your last point I’ll add my part when I have the time (running late atm). One point I will say is that if we look at Keynes quote we can see money being a store of value because it provides insurance for an uncertain future. The more uncertain the future seems the more likely we are to store wealth in the form of money, i.e. are liquidity preference increases.
You state that money can be a store of value in Say’s Law. But if we consider what Say said money can only by a medium, unless I have misread it, I am fairly sure he stressed that money is nothing more than a medium of exchange and nothing more… I assume that by store of value, you are referring to a deferment of present consumption for future consumption (time preference)? I don’t think this is compatible with hoarding money due to pessimistic expectations of the future. We are certainly deferring payment but it’s not due to the market time preference (natural rate of interest) but because the very system in which we are engaging in is breaking down.
---
NirgrahamUk in a reply to Keen said:
The point that Keen and I are trying to make is that there are a group of people within the capitalist system whom supply more then they demand. They wish to make the gap between their supply and demand as wide as possible so that they are not equal. So whilst I agree that people supply commodities (e.g. Labour) because they wish to consume, but this does not mean that the amount they supply is equal to the amount they wish to consume.
Say suggests that we do not wish to hold any commodity longer than we need to for fear of losing value. But I don’t agree with this. Money makes this situation even worse as it allows us to stop half way and hold it, as we can see in regards to the liquidity preference.
This whole debate comes down to whether our supply of a commodity is equal to our demand to consume other commodities (or that we defer present consumption for future consumption). What I find interest is whether in the long-run we can say that these are equal, that demand and supply are equal. My guess is no.
Austroglide: SteveKeen:In other words, I think that saying that because he rejects praxeology Schumpeter is not a descendant of the Austrian school is a bit like saying that because I reject the Labour theory of value I am not a descendant of the Classical School. In fact I would argue that I am, and have improved the Classical approach by rejecting part of Marx's analysis that is clearly nonsense. Mr. Keen, Above you argue that Mr. Schumpeter WAS an Austrian. Now you equivocate and claim that Schumpeter was merely a descendant. You are already changing the facts of your argument and we've only just begun. For this reason and others, I can see that this conversation is going nowhere fast. Therefore I'm finished. Best of luck to you.
This does not follow from what keen has said. Keen is saying that he is a classical economist but rejects LTV. He is saying that Schumpeter is an austrian but rejects praxeology etc.
I think that the Austrian school is a lot more than Mises, Hayek and Rothbard. I realise too that this particular branch seems to reject a lot of Hayek as well. There are some significant insights from the Austrian school such as from Lachmann, Shackle (i was wrong to suggest he was a Post Keynesian earlier). O'Driscoll and Rizzo. If it isn't apparent, I think the most interest aspects of the Austrian School are those that view the market as dynamic and complex system (complexity theory, spontaneous order) and there are most definitely a lot of Menger, Mises and hayek in there too! But of course they are just as guility of rejecting complexity theory as the Rothbard branch (and Bohm-Bawerk).
well, compatabilism has a definite meanign that you can look up. so if you make your own ad-hoc definition you can plan on losing arguments.
only people act, institutions dont. so thats meth ind for the win.
good, I would recommend regression theorem to anyone interested in economics.
of course any money is not merely a medium of exchange that itself has no store of value. this is impossible. it owuld not be an accepted party to an exchange if the part receiveing it did not percieve it as a transfer of value to his person. to be a good medium of exchange it must have the subjective appearance of being a value store. you fall into fallacy when you try to dictate that out. it makes no sense.
mash:the point that Keen and I are trying to make is that there are a group of people within the capitalist system whom supply more then they demand. They wish to make the gap between their supply and demand as wide as possible so that they are not equal. So whilst I agree that people supply commodities (e.g. Labour) because they wish to consume, but this does not mean that the amount they supply is equal to the amount they wish to consume.
This is because you both dont understand that law. of course, a show maker supplies way more shoes than he himself demands, he also demands way more bread htan he supplies. this is trivially true for every business i can think of. if you thought say's law said that shoemakers demand as many shoes as they supply then you are completely wrong.
says law says that the shoemaker offers shoes, so that he can demand other things, such as bread.
and the bread maker supplies bread so that he might buy things such as shoes.
now, the shoes the shoemaker supplies constitute the shoemakers demand for other goods.
the shoemakers real demand is limited by his supply of shoes.
are you beginning to understand Say's law? I hope so.
mash:I think that the Austrian school is a lot more than Mises, Hayek and Rothbard.
mash,
For a theoretically rigorous exposition of, exactly, what does and what does not legitimately constitute "Austrian" economics, I refer you to Rothbard's "The Present State of Austrian Economics".
If you wish your understandings to be clear, it is essential that you be familiar with the distinctions presented by Rothbard. Without such familiarity, your knowledge of Austrian economics will be but a haze.
Austroglide:You are already changing the facts of your argument
Not the first time he has done it in this thread.
I was hoping for more drama, but I think Mr. Keen showed us too little, too fast.
Although the miser and misanthrope as saver was another nice dig against capitalism, it rested in an argument by Steve Keen that indicates a failure to understand Say's Law.
What a glorious debate we could have if we replaced misplaced class envy with real knowledge and understanding...
If you find something evil that wobbles, push it. - Gary North
mash:This does not follow from what keen has said. Keen is saying that he is a classical economist but rejects LTV. He is saying that Schumpeter is an austrian but rejects praxeology etc.
If Mr. Schumpeter is an Austrian by dint of the fact that he's a subjectivist, then so too is the entire corpus of neoclassical economists.
If, instead, Mr. Schumpeter is an Austrain by dint of the fact that he adheres to marginalism, then so too is the entire corpus of neoclassical economists.
This is absurd.
liberty student:Not the first time he has done it in this thread.
Indeed. It is impossible to hold a conversation with someone whose definitions are subject to abrupt change, and also with someone who insists upon thrusting before you a constant stream of new arguments for you to analyse in a process of infinite regress ("No, no...to understand what I REALLY meant, you should read THIS"), where the subject of conversation is constantly changing and therefore always beyond one's grasp. Exasperating and a ridiculous waste of time.
Compatiblism: The claim that people’s actions can be freely chosen and also at the same time determined by physical laws.
Which is in line with what I have been saying . Having reread what I wrote I can understand why it looks like I have created my own ad-hoc definition. Let’s move on from this point though, as it is not adding to the subject at hand.
I don’t doubt that people act. But people’s actions are influenced by the institutions which they belong.
Onto Say’s Law:
Perhaps the most famous quote from the chapter:
It is worth while to remark, that a product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value. When the producer has put the finishing hand to his product, he is most anxious to sell it immediately, lest its value should diminish in his hands. Nor is he less anxious to dispose of the money he may get for it; for the value of money is also perishable. But the only way of getting rid of money is in the purchase of some product or other. Thus, the mere circumstance of the creation of one product immediately opens a vent for other products.
A person will produce a particular commodity because they wish to consume (I don’t deny this). There is also no desire to hold a particular commodity longer than it needs to be held “lest its value should diminish in his hands”, this is represented by the C- - M- - C’ circuit. Now if you look at the liquidity preference (which you have not directly responded too, I would certainly like to hear your thoughts on that) we see someone who wishes to hold onto money despite the risk of it losing value... This later point is an expectation of what may occur in the future. Say assumes it to be absolute.
This is also apparent in the notes on the chatper:
34. Even when money is obtained with a view to hoard or bury it, the ultimate object is always to employ it in a purchase of some kind. The heir of the lucky finder uses it in that way, if the miser do not; for money, as money, has no other use than to buy with.
Which is C- - M- - C’
of course any money is not merely a medium of exchange that itself has no store of value. this is impossible. it would not be an accepted party to an exchange if the part receiveing it did not percieve it as a transfer of value to his person. to be a good medium of exchange it must have the subjective appearance of being a value store. you fall into fallacy when you try to dictate that out. it makes no sense.
Fair enough. It seems to me that we are talking about two different concepts of ‘store of value’. I think that money is an end to itself, but as I understand you reject this. Is this correct?
Say on the matter: “money performs but a momentary function…”, “Money is the agent of the transfer of values…” finally from the quote before “’… the value of money is also perishable
This is because you both don’t understand that law. of course, a show maker supplies way more shoes than he himself demands, he also demands way more bread htan he supplies. this is trivially true for every business i can think of. if you thought say's law said that shoemakers demand as many shoes as they supply then you are completely wrong.
As the Say’s quote states: individuals have no desire to hold onto a commodity longer than they need to. Why then would someone over produce on a commodity if they do not desire to exchange it for another commodity, either in the future or the present.
I accept that a show maker will supply more than he demands and will demand more bread than he supplies. But this does not mean these are equal. Say states himself that there is no desire to hold money or to hold a commodity which you do not desire. Therefore supply and demand either have to be equal or at least close to being equal. I have given you one reason why someone would hold onto money and not consume. Which means that what the person has produced has supplied is not equal to what they demand. Which means they have put more into the system than they have taken out.
Now the M- - C - - M+ suggests that some people desire to invest money into the production of a commodity with the intention of receiving greater returns in the future. They don’t produce with the intention to consume, but to draw greater wealth. And money is a representation of wealth, it is a store of value. Which means that money can be an end to itself (the motivation which I mentioned in a previous post). A large part of the circuit IMO represents the behaviour of firms within the market more so than individuals. But of course if we assume that firms don’t make chooses but individuals then, individuals in the market have this particular desire.
I have this feeling that you are arguing elements of Walras’ Law. I’ll have to look more into this.
One important point in case I am misinterpreted. I understand that Say’s law allows for an oversupply of one commodity is possible but that a general glut is impossible. Of course I don’t accept that a glut can occur only because of violent means (exogenous shocks) but that the individual expectations are based on flimsy foundations (uncertainty of the future) and that the market is a dynamic, complex system (complexity theory).
Liberty student,
I think you will find that keen is supportive of capitalism and prefers the free market
My views are that the market is but one period of the economic system which started when trade between two individuals began. I don’t have any preference for one system over another, although I certainly believe that the market system is better than any other system we have had or that people propose. I am also a lot more supportive of the free market than you think. Of course I also think that it isn’t perfect but because I hold onto the uncertainty of the future paradigm and elements of Hayek I am also aware that it is impossible to fix the system (my perspective on the market is a lot more complicated than this but I am time constrained atm)
Now I have missed two classes because of this discussion lol. So I badly need to head off. I’ll try and find some articles on the regression theorem. If you could link some that would be great. I will also read the article linked by Austro. Of course I am skeptical of anyone who wishes to define whom is and isn’t apart of their research program. A similar attempt was made by the Post Keynesian, Paul Davidson.
I am also unsure when I will be able to get back and reply as I will be busy the next few days.
mash:Liberty student,I think you will find that keen is supportive of capitalism and prefers the free market
Where will I find this?
mash:My views are that the market is but one period of the economic system which started when trade between two individuals began.
The market is a system, not a period.
mash:I don’t have any preference for one system over another, although I certainly believe that the market system is better than any other system we have had or that people propose.
So you believe it is better, but you don't prefer it.
mash:I am also a lot more supportive of the free market than you think.
What is "supportive"? You just said you believe it is better, but you don't prefer it, but you are supportive of it.
mash: Now the M- - C - - M+ suggests that some people desire to invest money into the production of a commodity with the intention of receiving greater returns in the future. They don’t produce with the intention to consume, but to draw greater wealth. And money is a representation of wealth, it is a store of value. Which means that money can be an end to itself (the motivation which I mentioned in a previous post).
Now the M- - C - - M+ suggests that some people desire to invest money into the production of a commodity with the intention of receiving greater returns in the future. They don’t produce with the intention to consume, but to draw greater wealth. And money is a representation of wealth, it is a store of value. Which means that money can be an end to itself (the motivation which I mentioned in a previous post).
This paragraph reeks of equivocation (money and wealth). You suggest that some people desire to invest with the intent of recieving greater monetary returns. Fair enough. However, you then state that they don't produce with the intention to consume, but to stockpile wealth; you suggest that money can be an end in itself. This is where I take umbrage.
First, you realize that money is simply a representation of wealth. It is a store of value precisely because it can be used to purchase C, which is real wealth. By suggesting that some people seek M as a store of value, and at the same time as an end in itself, is a contradiction. If individuals wanted M as an end in itself, its function as a store of trade value for C would be irrelevant.
It seems to me that these very individuals that you propose invest in C to gain M+ do so in order to increase their relative return in terms of C. It's simply an example of an individual with a lower time preference.
I don't find the M-C-M or C-M-C circuits to be profound or helpful. It seems to be resulting in more confusion than clarity. I liked what was said earlier, that the M+ circuit resulting from M - C - M+ is just a part of a higher order C - M - C chain.
“Elections are Futures Markets in Stolen Property.” - H. L. Mencken
And I see Mises's approach as far superior to positivist-"empiricist" economics. See how easy that is? BTW I've read them and nothing in them really touches on any of Mises's own arguments. To say Mises took an "introspective" path is to misunderstand him, and interpret him as though he were Descartes. I suggest you read Roderick Long's book on Wittgenstein to ameliorate this misunderstanding of him.
To darkness I condemn you...
zefreak:I don't find the M-C-M or C-M-C circuits to be profound or helpful. It seems to be resulting in more confusion than clarity. I liked what was said earlier, that the M+ circuit resulting from M - C - M+ is just a part of a higher order C - M - C chain.
lol, indeed! arguments by alphabetti spaghetti dont resonate with me either.
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