JonBostwick: The methodology of Austrian economics is praxeological a prioris.
The methodology of Austrian economics is praxeological a prioris.
Actually the methodology of Austrian economics is a mix of praxeology, positivism and historicism.
'It is difficult to imagine any normal person wishing to meet Marx for a third time.' - Alexander Gray, The Socialist Tradition
Any government intervention hurts the market because it changes the outcome of actors' decisions in favor of whatever goal the political elite pursues.
If I hear not allowed much oftener; said Sam, I'm going to get angry.
J.R.R.Tolkien, The Lord of the Rings
mickanomics:Say that consumer groups are regularly and increasingly flooded with complaints about their service. Say that almost all the potential suppliers and distributors have signed long term exclusivity deals, say that the same market sector in other countries have multiple competing companies and appear to get the same service better and cheaper... now how about a bit of intervention?
If you have this you should be looking at the barrier to entry the government set up for this market, because that's where your problem is.
Anarchist Cain: Actually the methodology of Austrian economics is a mix of praxeology, positivism and historicism.
Ha?
mickanomics: As I understand it, Austrian economists generally believe that markets should be allowed to operate without government intervention (please correct me if I'm wrong). In that case, I would like to get opinions on an essay I have written on the non-optimality of free markets here.
As I understand it, Austrian economists generally believe that markets should be allowed to operate without government intervention (please correct me if I'm wrong). In that case, I would like to get opinions on an essay I have written on the non-optimality of free markets here.
From somebody who doesn't really "do economics" but instead does actual business and marketing, I'll let you in on a little trade secret we like to keep in our inner circles - Every company is a monopoly, or at least every successful company.
No two companies are going to compete on the same product, and if one company does try, you're right, the probability is that they will be eliminated. But this isn't really what markets are about. Looking at it from a consumer's perspective, why you would you want to buy one identical (or almost identical) products from two or more sources? There's no added benefit to this. You could say they compete down the cost, but that's essentially making a monopoly in its own right. In natural markets, companies are going to try to occupy a space (some will go for the low markets, others towards the high) this isn't a secret and it doesn't really say much about the efficiency of markets.
If anything, it should be considered that two companies producing one identical product would be inherently wasteful. Yes?
existence is elsewhere
Ok, how about this: A brilliantly run, super efficient company X achieves complete dominance of a product that naturally sells in supermarkets (nobody is complaining, they thoroughly deserved their position). Years later the brilliant manager retires and a new manager comes in who is not nearly so good. The company starts to become inefficient. So much so that other companies (that were not as good as the original company X but are better than the now-inefficient one) are keen to enter the market. Unfortunately they find that X has made long term exclusivity contracts with all the supermarkets. You are a the government minister in charge of "free trade" and you receive a complaint from the other companies who want to enter the market. What do you do?
mickanomics: Ok, how about this: A brilliantly run, super efficient company X achieves complete dominance of a product that naturally sells in supermarkets (nobody is complaining, they thoroughly deserved their position). Years later the brilliant manager retires and a new manager comes in who is not nearly so good. The company starts to become inneficient. So much so that other companies (that were not as good as the original company X but are better than the now-inneficient one) are keen to enter the market. Unfortunately they find that X has made long term exclusivity contracts with all the supermarkets. You are a the government minister in charge of "free trade" (presumably if you are an Austrian then you do precisely nothing ) and you reive a complaint from the other companies who want to enter the market. What do you do?
Ok, how about this: A brilliantly run, super efficient company X achieves complete dominance of a product that naturally sells in supermarkets (nobody is complaining, they thoroughly deserved their position). Years later the brilliant manager retires and a new manager comes in who is not nearly so good. The company starts to become inneficient. So much so that other companies (that were not as good as the original company X but are better than the now-inneficient one) are keen to enter the market. Unfortunately they find that X has made long term exclusivity contracts with all the supermarkets. You are a the government minister in charge of "free trade" (presumably if you are an Austrian then you do precisely nothing ) and you reive a complaint from the other companies who want to enter the market. What do you do?
Those are quite a lot of qualifiers.
It all really depends on the product and the ability of networkers to network. If there's one grocery store in town only receiving apples from one company that is now going sour - delivering rotten apples and the like - it seems likely that the grocery store would simply find another apple farm to use. About the long term contract, this isn't really a realistic view of many contracts. Usually, there are extra clauses that prevent such a grocery store from being so tied up.
It just doesn't seem that realistic, to be honest with you. Moreover, I think it might have more to do with contract law then actual economics - as a grocery store getting rotten apples will try to find a substitute no matter how close the two companies are.
mickanomics:The company starts to become inefficient. So much so that other companies (that were not as good as the original company X but are better than the now-inefficient one) are keen to enter the market.
What do you mean by "inefficient"? Lower quality? Higher prices? I'd expect that would be enough to cancel the contract.
mickanomics:You are a the government minister in charge of "free trade" and you receive a complaint from the other companies who want to enter the market. What do you do?
Nothing. Either the supermarkets cancel the contracts when they're threatened with losses or the competitors outbid the monopolist if they really want to enter the market. Either way, the market sorts itself out.
However, this a highly implausible scenario. What are the chances of one company to have exlusive contracts with thousands of chains and individual retailers across the country?
In real life, it's quite the opposite: complaints arise when competitors are actually losing to the natural monopolist and instead of finding new ways to compete they want the government to keep them aflot by restricting competition (in other words, bail them out). Standard Oil had lower prices and so did other companies in various antitrust cases. Who suffers? The consumers who have to pay higher prices than they would have with unrestricted competition. Does the market become more efficient? Obviously not.
mickanomics: Am I right in thinking that a summary of the dispute between us is that you (this forum) are saying * there are never any interventions ever that could help a market where as I am saying * there are some interventions sometimes that could help a market
Am I right in thinking that a summary of the dispute between us is that you (this forum) are saying
* there are never any interventions ever that could help a market
where as I am saying
* there are some interventions sometimes that could help a market
The role of law is to resolve disputes, period. In a free society (meaning there is no one government over an area that has a monopoly on law), how would any of your dictates be enforced?
At most, 5% of the population would need to stop complying to bring down the government.
I. Ryan: Anarchist Cain: Actually the methodology of Austrian economics is a mix of praxeology, positivism and historicism. Ha?
What? From positivists we get timeless objective laws, and from historicists we get methodogolical dualism.
Spideynw:The role of law is to resolve disputes, period. In a free society (meaning there is no one government over an area that has a monopoly on law), how would any of your dictates be enforced?
I would say that the question of intervention is not applicable to anarchists. It is only a question to those who believe in some form of state.
Spideynw: Am I right in thinking that a summary of the dispute between us is that you (this forum) are saying * there are never any interventions ever that could help a market where as I am saying * there are some interventions sometimes that could help a market
Well, to be fair, what I'm saying is that you cannot a priori know for certain that interventions would always be bad. First, it's a value judgment. Second, it's just not apparent a priori.
That said, given millions of case studies and the probability of outcomes considering public choice theory and information emergence, it's a much safer bet to say that no interventions ever would be better than routine interventions often, yes. That's my educated estimation.
mickanomics:Ok, how about this: A brilliantly run, super efficient company X achieves complete dominance of a product that naturally sells in supermarkets (nobody is complaining, they thoroughly deserved their position). Years later the brilliant manager retires and a new manager comes in who is not nearly so good. The company starts to become inefficient. So much so that other companies (that were not as good as the original company X but are better than the now-inefficient one) are keen to enter the market. Unfortunately they find that X has made long term exclusivity contracts with all the supermarkets. You are a the government minister in charge of "free trade" and you receive a complaint from the other companies who want to enter the market. What do you do?
You're just once removing the competition factor from this equation. New supermarkets that can make agreements with the new companies will out compete the old supermarkets.
In going back and looking at your list of factors that might make you want to intervene in the market, I thought of several companies that met your criteria (at least in my area). Phone, cable, and electric are a few. Might you guess what they all have in common?
Your multi-armed bandit problem, while an interesting brain teaser, does not scale to a market. It assumes the fungability of the payouts, or at least possibility of objectively measuring the payouts. Most goods on the market are not fungable, and no good's value can be objectively measured. What if, rather than dollars or tokens, the machines paid in cars? Which would be more preferable, ten Kias or one Rolls? Two Mustangs or one Z4? Rather than cars, what about works of art? Your agument ignores one basic fact - when comparing non-fungable goods, value is always subjective.
mickanomics: Ok, how about this: A brilliantly run, super efficient company X achieves complete dominance of a product that naturally sells in supermarkets (nobody is complaining, they thoroughly deserved their position). Years later the brilliant manager retires and a new manager comes in who is not nearly so good. The company starts to become inefficient. So much so that other companies (that were not as good as the original company X but are better than the now-inefficient one) are keen to enter the market. Unfortunately they find that X has made long term exclusivity contracts with all the supermarkets. You are a the government minister in charge of "free trade" and you receive a complaint from the other companies who want to enter the market. What do you do?
The government never, ever, under any circumstances, ever, has ever any reason to ever interfere in a market. No matter what scenario you concoct that seems to imply otherwise. No governmental decision can ever match the cumulative, aggregate decisions of millions of people acting in their own individual self interests. The proper government's sole role is to protect individual rights and settle contract disputes.
In the example above, either the supermarkets can buy out of their contracts, or the companies could sell directly to customers, or through boutiques, or over the internets..half a dozen half competent lawyers can find a way around just about any contract in a week or so..well the possibilities are endless. The only thing that will assuredly not be worthwhile to try in this situation is any mandate by a 'minister of free trade' to arbitrarily suspend contract law, threaten one of the foundations of a free market (the enforcement of contracts) and violate people's rights by threat of force.
If anyone on this forum thinks that maybe, in some cases, sometimes, it might be okay for a government to reach in to a market and twist things around to make it more 'fair' then maybe you should read some economics books for comprehension. I'd recommend some of the many available on this site, along with George Reisman's Capitalism and Hazlitt's Economics in One Lesson.
"We must not let our rulers load us with perpetual debt. We must make our election between economy and liberty or profusion and servitude." - Thomas Jefferson
Wilmot of Rochester:what I'm saying is that you cannot a priori know for certain that interventions would always be bad. First, it's a value judgment. Second, it's just not apparent a priori.
An insight that is known to be true in every case is not automatically 'a priori' knowledge. In fact many philosophies object to even the idea of a priori knowledge. Maybe it is a value judgment, but there are certain value judgments which men must hold in common in order to live together in a free society.
I don't have to have any a priori insight to know that the initiation of force against an individual is always, in every situation, wrong and evil.
mickanomics: You are a the government minister in charge of "free trade" and you receive a complaint from the other companies who want to enter the market. What do you do?
What would you have them do, void a voluntary contract? That cure would be by far worse than the disease. It would mean the destruction of the concept of contract.
This is an example of static thinking. You can't allow the government to selectively void contracts and expect everyone to continue acting as they did when contracts were still absolute. If the government's solution is an assault on commerce, it will result in a decline in commerce; the pro-commerce motives of your intervention are irrelevant.
Wilmot of Rochester:Well, to be fair, what I'm saying is that you cannot a priori know for certain that interventions would always be bad. First, it's a value judgment. Second, it's just not apparent a priori.
Yes, you can.
People act to relieve uneasiness. Regulations prevent people from acting to relieve that uneasiness. You can't disagree with this unless you wish to employ some system of objective value, and all the problems that come with them.
Rochester:From somebody who doesn't really "do economics" but instead does actual business and marketing, I'll let you in on a little trade secret we like to keep in our inner circles - Every company is a monopoly, or at least every successful company. No two companies are going to compete on the same product, and if one company does try, you're right, the probability is that they will be eliminated.
February 17 - 1600 - Giordano Bruno is burnt alive by the catholic church. Aquinas : "much more reason is there for heretics, as soon as they are convicted of heresy, to be not only excommunicated but even put to death."
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