Economics Questions

Re: Mulling over a prerequisite for "apodictic certainty"

Jon Irenicus — Tue, 17 Jun 2008 21:41:21 GMT

Exactly - and it saves the law from being "refuted" by any irrelevant changes.

-Jon

Re: Mulling over a prerequisite for "apodictic certainty"

Zlatko — Tue, 17 Jun 2008 21:36:47 GMT

The phrase "all other things being equal" or in latin "ceteris paribus" is a phrase that is used a lot in economics. It's just an easier way of saying "If A, then B, holding all other factors influencing B constant"

"Things" here can easily be substituted for "influencing factors", but since in reality anything can influence the relationship between two things, then it's not vague to say "all other things" for we really do mean all other things other than those we have explicitly mentioned.

Re: Mulling over a prerequisite for "apodictic certainty"

JAlanKatz — Tue, 17 Jun 2008 20:03:36 GMT

Dynamix:
It may sound like a minor quibble, but I'd like to replace Mises' "other things being equal" to "all relevant calculations not having changed." The word "things" seems very vague. "Things" change all the time. But if we say instead that we should be specifically emphasizing economic calculations, then his claim makes more sense to me.

Well, yes, things do change all the time. This saves you from the possibility of someone suggesting some sort of empirical "disproof" to this claim. I read "other things being equal" as suggesting that we compare hypotheticals. In other words, at time t, demand can either drop or not. In hypothetical 1, it does drop. In hypothetical 2, it doesn't drop. Now we conclude, apodictically, that the price in hypothetical 1 will be lower than the price in hypothetical 2. It's certainly possible that both prices will be higher than they were at time t, because of other things that happened. What's important to us is the difference between the two hypotheticals.

Your formulation seems to suggest something different to me. It seems you aren't using hypotheticals, but rather sticking to one timeline, as it were, and asking that the price actually drop, assuming no other factors that influence the price have both changed and been taken into account, hence your use of calculations. Of course, any factor can theoretically influence the price, including mood, so your use of calculation seems a bit limiting. Logically, my objection to your formulation is that you have now put yourself in a position where, if any relevant calculation does change, you can't tell us anything, whereas Mises still has something to say.

Re: Mulling over a prerequisite for "apodictic certainty"

fsk — Tue, 17 Jun 2008 19:35:12 GMT

Minimum wage laws, paradoxically, affect the poorest people the hardest.

There is another side-effect you missed. Suppose I can sell hamburgers for $2 each if I could hire someone for $5/hr, with a labor cost of $0.50 per hamburger and raw materials cost of $0.50 per hamburger. I am barred from hiring somone for $5/hr; the minimum wage is $10/hr. People are still going to eat hamburgers. I can then profitably hire someone for $10/hr and charge $3 per hamburger, for the same profit margin (cost of $1 in labor, $0.50 in raw materials; my profit margin is still 50%).

The minimum wage law drives up salaries, but it *ALSO DRIVES UP PRICES*. The cost of the minimum wage law is borne by the worker who can sell his labor for $5/hr but not $10/hr. The cost is also borne by people who pay a higher cost for goods and services.

As another example, the Screen Actor's Guild (SAG) has a minimum wage of $700+ per day for an actor. Most actors are on the bottom end of the wage scale. This means that most actors spend large quantities of time unemployed, but earn a decent rate when they are lucky and find a job. Instead of finding steady employment for $100-$200 per day, actors are mostly unemployed instead. The minimum wage rule makes it hard for new actors to break into the industry. An employer isn't going to risk hiring an unknown actor, because he has to risk at least $700 to hire them; hiring an unknown actor for only $100 is much less risky.

Mulling over a prerequisite for "apodictic certainty"

Dynamix — Tue, 17 Jun 2008 18:47:49 GMT

Mises said in Human Action, pp.117-118:

Praxeological knowledge makes it possible to predict with apodictic certainty the outcome of various modes of action. But, of course, such prediction can never imply anything regarding quantitative matters. Quantitative problems are in the field of human action open to no other elucidation than that by understanding.

We can predict, as will be shown later, that--other things being equal--a fall in the demand for a will result in a drop in the price of a. But we cannot predict the extent of this drop. This question can be answered only by understanding.

[Emphasis mine.]

It may sound like a minor quibble, but I'd like to replace Mises' "other things being equal" to "all relevant calculations not having changed." The word "things" seems very vague. "Things" change all the time. But if we say instead that we should be specifically emphasizing economic calculations, then his claim makes more sense to me.

For instance, if X values Y's labor to the tune of $7/hr, and the minimum wage goes up to $9/hr, we can predict that X will fire Y "if relevant calculations have not changed." This seems like a better formulation to me.

I bring this up because I want more precision in the predictions I make to "outsiders."