Political Theory

Re: The Austrian School, the State, the Market, and Compulsion

nhaag — Fri, 05 Sep 2008 16:30:30 GMT

My answer would be, how can society determine value in the first place? The whole point that austrian theory makes, starting with Menger, is that value is a totally individual, hence subjective evaluation. Value at its core is based on what an individual values at a specific time.

Society is, at best, a convenientent category for individuals that, at best, might hold some common goals. Society is not an entity that exists outside of our minds. Thus it is a pure convenience of human rationalistation. Value on the other hand is based on real humans. Real individuals that, at any given time make decisions that show what they value most, at the time they make the decision. Groups can not decide, they are categories, individual human beings decide. And, they decide on what they value most, at the time the decission is made.

If there was a thing, as the german state philosophers (Hegel, Fichte, Schelling et. al) claimed, called Volksseele or Zeitgeist, than it would contradict the freedom of the individual. - which was exactly what those frederician philosophers tried to prove-. Yet, no one has been able to show the existens of such phenomena, so they do not exist if you have an empirical understanding about sciene, and they do not exist as well,if you tend toward the logical understanding of science too, because they can not be logically derived fraom any know axiom to date.

Values what a single human being thinks it is valuable. If a bunch of folks believe that certain tings are valuable for all of them, so be it. But value is never derived from a group think approach. Value is subjectiv.

After all, that is my humble opinion

Re: The Austrian School, the State, the Market, and Compulsion

Jon Irenicus — Fri, 05 Sep 2008 14:48:32 GMT

Depend on them? No. The monetary systems depend on the markets to even arise to begin with. A state can only then latch itself on to the whole process. The causality is the reverse. Markets expand in proportion to how widely the medium of exchange is used, but with no real account of money arising by fiat, there is no reason to assume it did not or cannot arise out of barter free market economies. If your argument is that money's birth (or existence) requires a state (itself false), and that markets can only arise because of this, then I see no reason to accept it at all. People will trade, state or no state, to fulfill their wants, and insofar as it is convenient, they will adopt a medium of exchange. All a state can do, should it intervene, is bias the choice of the commodity. There are many sources on the LVMI website documenting the history of private banking and money creation.

-Jon

Re: The Austrian School, the State, the Market, and Compulsion

david skelton — Fri, 05 Sep 2008 09:33:53 GMT

Yes how does society regulate value? In theory or in practice? Is value base on time spent in creation? Or is it based on energy? Or is it truly a fiat-whatever value I put on soemthing that I want/need becomes the standard and so forth the next person in the exchange?

Are not some things just valuable because we love them,,or for other intrinsic reasons. So for ie the Rainforest has x value because of it's beauty/uniqueness or attributes to our Environment.

Re: The Austrian School, the State, the Market, and Compulsion

mattch — Fri, 05 Sep 2008 08:47:14 GMT

Jon Irenicus:

The US is a bad example. Its current system was originally linked to a commodity system, whence it evolved. And anyway, why should I suspend "disbelief"? There has been no good argument so far to the effect that a fiat system can simply arise de novo. Whether or not demand for tribute or its sheer marketability made gold the chosen commodity, Mises's arguments apply.

It's perfectly reasonable for an economist (and this would quite possibly have been von Mises's reaction, who always argued that economics should be radically indifferent to the past) to shrug, and say: Money simply evolves from a commodity of value. And who cares where this value comes from?

But this is a forum about political theory. There is a common assumption that free markets depend on monetary systems that evolve from systems of free exchange. And this assumption of freedom has implications for political theory and practice. I'm interested in the implications if we start to question these assumptions of freedom, and I'd like to discuss them here.

If you're not interested, or don't see the point, that's fine.

Re: The Austrian School, the State, the Market, and Compulsion

Anonymous Coward — Fri, 05 Sep 2008 08:03:06 GMT

Hmm...

The property value is determined by the currency and the currency value is determined by the property value?

What would keep them from debasing the currency by inflating the property value to ensure 'price stability'?

Re: The Austrian School, the State, the Market, and Compulsion

david skelton — Fri, 05 Sep 2008 07:37:48 GMT

Thanks for the response and info on Greshams Law. Im guessing that the point would not be that the "land" would be actual "legal tender" that the electronic money "stood for"-but more along the line of the electronic money being the legal tender (ultimately the only legal tender left). The property value (of the set aside land) would set the limit of how much electronic money would be allowed to be produced.

World monetary system from my perspective is one in which all "soveriegn nations" et al would subscribe for the benefit of internal and external commodity exchange-the one legal tender.

Re: The Austrian School, the State, the Market, and Compulsion

JonBostwick — Fri, 05 Sep 2008 07:09:29 GMT

mattch:

JonBostwick:

He was argueing that it is created by decree. That governments tax an item, which gives it value, which causes people to use it as money.

Of course, anything exchanged has value. So he still hasn't explained why people choose items with fiat value over items with true market value for use as money.

There's a proverb: "Only two things in life are inevitable: Death and Taxes"

Wouldn't the inevitable (and therefore universally desired) taxed item command universal acceptance in exchange?

M.

You beg the question, then why aren't coffins money?

Water is universally desired, but its not used in indirect exchange. Money does not come in existance because of universal desire.

Re: The Austrian School, the State, the Market, and Compulsion

Jon Irenicus — Thu, 04 Sep 2008 22:50:13 GMT

The US is a bad example. Its current system was originally linked to a commodity system, whence it evolved. And anyway, why should I suspend "disbelief"? There has been no good argument so far to the effect that a fiat system can simply arise de novo. Whether or not demand for tribute or its sheer marketability made gold the chosen commodity, Mises's arguments apply.

-Jon

Re: The Austrian School, the State, the Market, and Compulsion

Knight_of_BAAWA — Thu, 04 Sep 2008 21:21:09 GMT

Anonymous Coward:
I'm not too sure I would take some pet theory of a historian on the creation of a money system over Mises' theory based on your main objection that he never gave a concrete example of this happening while the historian's pure speculation on the subject also fails this test. Unless, of course, you can present hard evidence of this ever having happened.

More than likely the conquered tribe just assimilated the pre-existing monetary system of the other tribe and this was seen as the 'creation event' of money in this society.

Even assuming that it happened once or twice, that still would mean that he's got a tiny sample size and projecting that for all. I think we can see the problem in that.

Re: The Austrian School, the State, the Market, and Compulsion

Byzantine — Thu, 04 Sep 2008 19:38:58 GMT

mattch:

Wouldn't the inevitable (and therefore universally desired) taxed item command universal acceptance in exchange?

How does something get value from being taxed? Rather, the government is taxing the value. If an item had no value from which to derive taxable revenue, government wouldn't tax it.

The phenomenon is actually the opposite: if you want less of something, tax it.

Re: The Austrian School, the State, the Market, and Compulsion

mattch — Thu, 04 Sep 2008 17:58:49 GMT

JonBostwick:

He was argueing that it is created by decree. That governments tax an item, which gives it value, which causes people to use it as money.

Of course, anything exchanged has value. So he still hasn't explained why people choose items with fiat value over items with true market value for use as money.

There's a proverb: "Only two things in life are inevitable: Death and Taxes"

Wouldn't the inevitable (and therefore universally desired) taxed item command universal acceptance in exchange?

Re: The Austrian School, the State, the Market, and Compulsion

mattch — Thu, 04 Sep 2008 17:17:49 GMT

Jon Irenicus:

Which history books would these be, exactly? Because so far, you're the one telling fairy tales. You still have not addressed the problem I mentioned, nor have you addressed JonBostwick's challenge of explaining the emergence of money in areas free from the payment of tribute. Why would the market be limited to a few sheep? Humans have multiple needs, meaning there will be multiple goods exchanged at any given time. Whether or not a commodity is valued because the intervener demands payment in it, the problem remains. The issue is not so much compelling individuals to pay tribute in a given commodity - that is easy. The difficulty lies in setting it up to begin with, independently of a barter system; demanding tribute simply means forcefully providing a service in exchange for a given commodity. It's still within the context of barter, and thus under Mises's theory.

-Jon

Jon,

Let me try another tack.

My contention is that monetary value can plausibly be derived historically from a coercively imposed value (fiat) rather than a pre-existing exchange value.

Look at the US monetary system: Money is created by banks delivering debt-based securities to the FED in exchange for cash balances. Not just any old securities, but mostly securities guaranteed by future government tax revenues. Securities that must be purchased using cash balances held by the banking system and originating from the FED. Tax revenues to be extracted coercively by the government, and to be paid with cash balances held by the banking system and originating from the FED.

Of course, it's the same thing dressed in a suit! Now I suspect you, I and a lot of other participants in this thread are attracted to the idea of commodity money precisely because it seems to offer the possibility of escaping from this cycle of coercion and dependency. But I'm trying to suggest that this cycle might have been there all along - and might even be at the root of commodity money systems. Suspend your disbelief for a moment, and imagine that what I claim were true - what would be the implications?

Re: The Austrian School, the State, the Market, and Compulsion

mattch — Thu, 04 Sep 2008 15:57:31 GMT

Anonymous Coward:

Yeah, I have to concur that it is a fairy-tale.

The biggest problem I have with it is that it assumes there was no division of labor or mutually beneficial exchange (barter) within either tribe before this commodity fiat money was introduced.

Everyone mines their own copper, smelts it and makes their own weapons while also making their own armor and growing all their own food and clothing, that seems highly unlikely.

The next assumption is that neither tribe were plagued with the double coincidence of wants problem so never needed to establish money prior to the taxes which is a bit more likely for the most primitive tribes.

I'm not too sure I would take some pet theory of a historian on the creation of a money system over Mises' theory based on your main objection that he never gave a concrete example of this happening while the historian's pure speculation on the subject also fails this test. Unless, of course, you can present hard evidence of this ever having happened.

More than likely the conquered tribe just assimilated the pre-existing monetary system of the other tribe and this was seen as the 'creation event' of money in this society.

I have to concede that you have a good point. Logically some kind of division of labour would have had to have existed within these communities prior to the process I describe, to account for their material level of culture.

However, I am not convinced that this necessarily contradicts my argument.

Firstly, it's not absolutely necessary that this division of labour would require barter, or even an exchange of goods at all, which I would take to imply a concept of individual ownership and an individual perception of interests. Within a primitive tribal organization it's possible to imagine a division of labour on the basis of a communal arrangement - the community basically operating as an extended family group.

Secondly, even if such an exchange of goods did occur, this is only required to sustain the necessary level of material culture. The process I describe could still take place, and the resulting system could not be said to have evolved directly from a barter system. Albeit that a barter system would exist in parallel, and these systems would probably merge quite quickly in practice (which is kind of what you suggest in your last sentence).

I'd concede that neither theory can be demonstrated directly, and that we could only reason by analogy from primitive tribal systems of which we do direct knowledge.

An objection that you don't mention directly, is the case where the community in question did not have direct access to some required good (metal or metal ore would be the obvious historical example). Given the level of material culture we are talking about this seems quite plausible. Here I would have to concede that exchange of goods - at least between communities - would be absolutely necessary. I could even imagine that such exchanges could even trigger a process with an outcome similar to that I described, in that competition for such a resource might cause B to extort the required resource from A, the remainder of the process following similar lines to before (but starting with a recognized exchange value) .

Monetary systems show an extraordinary affinity to metals. I don't think arguments of fungibility, durability and convenience entirely explain this, as a number of primitive metal currencies have been very unwieldy. Interestingly, the form of a number of these currencies were standardized in the shape of weapons.

Re: The Austrian School, the State, the Market, and Compulsion

Jon Irenicus — Thu, 04 Sep 2008 14:15:14 GMT

Which history books would these be, exactly? Because so far, you're the one telling fairy tales. You still have not addressed the problem I mentioned, nor have you addressed JonBostwick's challenge of explaining the emergence of money in areas free from the payment of tribute. Why would the market be limited to a few sheep? Humans have multiple needs, meaning there will be multiple goods exchanged at any given time. Whether or not a commodity is valued because the intervener demands payment in it, the problem remains. The issue is not so much compelling individuals to pay tribute in a given commodity - that is easy. The difficulty lies in setting it up to begin with, independently of a barter system; demanding tribute simply means forcefully providing a service in exchange for a given commodity. It's still within the context of barter, and thus under Mises's theory.

-Jon

Re: The Austrian School, the State, the Market, and Compulsion

liberty student — Thu, 04 Sep 2008 13:50:55 GMT

david skelton:
Great series of comments. Im not as knowledgeable as this group, but I am "listening."

It's great you also decided to join in! Welcome!

david skelton:
What do you think would this work?

With legal tender laws, anything can work. If you don't use legal tender, you will be beaten and kidnapped. So most people will use whatever violence pushes them to.

The market should determine what is money, not the state. Using land through legal tender is still fiat. The word fiat roughly means, "to make so". As long as someone or someones are abitrarily deciding what single or basket of goods will constitute money, represented by electronic or paper credit, it is a fiat system. There is nothing limited about electronic money, unless I can exchange my credits for a fixed amount of the rainforest, and believe me, such a system is unsustainable, because everyone would rather own a chunk of the rainforest, than some electronic credits on a card. Gresham's Law if you will.

david skelton:
Is this what the "world monetary system" is attempting?

What "World Monetary System" are you referring to?