Reisman Article

http://mises.org/story/3712

What are everybody's thoughts on Reisman's difference in opinion with von Mises?  The most interesting aspect, in my opinion, is that consumer goods and the valuations of them impute value to capital goods could possibly harm the economic calculation impossibility in socialism (according to the article).  I disagree with this because although obviously a capital good is valued based on its contribution to the productive process, which will end in the consumer goods valued by consumers through their purchases or abstaining from such purchases, in the end it still comes down to supply/demand.  Hence von Mises was never saying that "if people buy consumer good A at $3.00/unit than the lowest order capital good is Ax3". The value imputation was never intended to give way to entertaining the possibility of calculation under socialism as value is subjective and can't be plugged into some mathematical formula.

It goes without saying that the prices that consumer goods sell for on the market will influence how much people will be willing to pay for the capital goods that produce them.  But under socialism, it would still be completely impossible for this imputed value to do much of anything.  Factors of production still need to be privately owned and bought and sold, people must compete for them, there are bids between buyers/sellers, etc.  to bring about supply/demand and hence a real price. 

Best regards,

Chris

I dont think they disagreed at all. Ive read articles where Reisman explicitly says that Mises at times, on request directed his research and indicated to him what papers of other economists to read on the subject. supply and demand for consumer goods will lead to the formation of cost prices which then feed back  into the supply and demand of consumer goods. so essentially the whole process is that of supply and demand in a market but there is a direct effect and an indirect effect (via 'costs') (which is only brought about by suply and demand!). the formation of the costs can only come about in a market for what is being costed, so if socialism will do away with that market, so much for that story....

For Reisman, prosperity depends mainly on business saving and spending, not the vagaries of consumers.

By what measure exactly is business spending/saving more precise and less vague than consumer spending/saving?  Just because their profit is subject to a relative comparrison thanks to money doesn't make it more real or precise, or its value less subjective than the satisfaction a consumer gets from his purchase.  That's just a function of it's place in the production cycle.  At the final, consumptive end, there's no more need for money or economic calculation, so it's not done, so no relative price is assigned because no more exchange is necessary.  It sounds like they're implying that just because you can't see and relatively measure the profit of consumers, it must not be there or be ephemeral.

Plus I don't know anyone who says that the prices of consumer goods directly determine the prices of capital goods, I don't ever recall reading anything in Mises including the quotes here that support the idea that  there is a definite relationship between the price of bread and the flour that makes it, just that there IS a relationship, and the difference between the two prices of say bread and whatever measure of flour is needed to make it are subject to the same subjective valuations over time that determine ALL prices.  Isn't the margin the producer is willing to accept and the investment he is willing to make just as subjective as anything else too?  It sounds like hard imputation is more of a strawman than anything else and that Reisman is gravitating towards his position because of an inclination if not towards math then towards the illusion of certainty that numbers, definite prices, provides.

xahrx:

For Reisman, prosperity depends mainly on business saving and spending, not the vagaries of consumers.

By what measure exactly is business spending/saving more precise and less vague than consumer spending/saving? 

can you hope to have prosperity without entrepeneurs? what would Mises say?
this is all the emphasis Reisman puts on business, nothing else. its a fine emphasis. There is always a danger in 'Review' pieces that the authors long detailed arguments get condensced into a form that might lead one to think that author thinks other than they do....

xahrx:

For Reisman, prosperity depends mainly on business saving and spending, not the vagaries of consumers.

"It sounds like they're implying that just because you can't see and relatively measure the profit of consumers, it must not be there or be ephemeral."

"Isn't the margin the producer is willing to accept and the investment he is willing to make just as subjective as anything else too?  It sounds like hard imputation is more of a strawman than anything else and that Reisman is gravitating towards his position because of an inclination if not towards math then towards the illusion of certainty that numbers, definite prices, provides."

xahrx:

Reisman is likely trying to reconcile the theoretical subjectivism of Mises with the objectivism of Ayn Rand, or possibly even arrive at an economic theory not based on theoretical subjectivism.  He is/was a student of both Mises and Rand.  That is probably what causes the aversion you are sensing to the ephemeral nature of consumer demand (subjective value), and the desire to conceive the market process as much as possible in terms of "objective magnitudes" such as the money entries in a going business concern.  The attempt is being made to arrive at a theoretically based "objective" economics, as opposed to one based on theoretical value subjectivism.  The school of ethical value objectivism (objective ethics) is generally opposed to theoretical value subjectivism---especially in ethics---and this leads to attempts to apply the preferred objective theoretical approach to economics as well.  This is what I believe Reisman is trying to accomplish.

 

nirgrahamUK:

xahrx:

For Reisman, prosperity depends mainly on business saving and spending, not the vagaries of consumers.

By what measure exactly is business spending/saving more precise and less vague than consumer spending/saving? 

can you hope to have prosperity without entrepeneurs? what would Mises say?

Don't care as it's irrelevant to the point.  Just because entrepreneurs are necessary doesn't mean their judgements about how to spend their time and resources are any less subjective.  Plus the entrepreneurial function and capitalist function are technically seperate.  The entrepreneur deals with uncertainty and makes decisions based on their subjective judgement about what people want in the future.  Sure, they look at current prices.  But it is a logical and physical impossibility for current prices to contain future information.  In the end they are guessing.  As far as the capitalist function, they're just lucky enough to be positioned in the structure of production such that relative prices form for what they're buying and selling, and they can calculate the difference and determine how much to save to fund the process.  However, they can only play a game of constant catch-up to meet demand that has already been demonstrated.  They want a profit they have to start guessing and moving resources around to meet what they guess future demand will be.  Either way there's just as much subjectivity involved as in consumer decisions.

nirgrahamUK:

There is always a danger in 'Review' pieces that the authors long detailed arguments get condensced into a form that might lead one to think that author thinks other than they do....

Granted, and I personally love Reisman's stuff.  But the differences between the decision making process of the entrepreneur, the capitalist, and the consumer, are all incidental, not fundamental.  They all take whatever information they have available, judge it according to their preferences, and decide.  All run the risk of finding out ex post that some other decision might have satisfied them better.

xahrx:

Don't care as it's irrelevant to the point.

i dont wish to sound adversarial as im suire we dont have any substantive agreements, but im not sure what is the 'contentious' point here? i was defending the charge that Reisman deviates from Mises radically vis-a-vis the role of business/ntrepeneurialism as he does not. perhaps that didnt need defending but hey ho.

xahrx:

Just because entrepreneurs are necessary doesn't mean their judgements about how to spend their time and resources are any less subjective

who is disagreeing with you? Reisman?

xahrx:

Either way there's just as much subjectivity involved as in consumer decisions.

just so long as we arent 'measuring' amounts of subjectivity. fine-o

xahrx:

But the differences between the decision making process of the entrepreneur, the capitalist, and the consumer, are all incidental, not fundamental.

is there nothing fundamentally different beetween producing someithng and consuming something? are we in a semantic argument about what 'fundamental means?

ach. maybe I shouldnt have responded...

Adam Knott:

xahrx:

Reisman is likely trying to reconcile the theoretical subjectivism of Mises with the objectivism of Ayn Rand, or possibly even arrive at an economic theory not based on theoretical subjectivism.  He is/was a student of both Mises and Rand.  That is probably what causes the aversion you are sensing to the ephemeral nature of consumer demand (subjective value), and the desire to conceive the market process as much as possible in terms of "objective magnitudes" such as the money entries in a going business concern.  The attempt is being made to arrive at a theoretically based "objective" economics, as opposed to one based on theoretical value subjectivism.  The school of ethical value objectivism (objective ethics) is generally opposed to theoretical value subjectivism---especially in ethics---and this leads to attempts to apply the preferred objective theoretical approach to economics as well.  This is what I believe Reisman is trying to accomplish.

Reisman consistently holds the subjective value theory of value. (lol, apart from his IP blackspot!...and Rothbard, through Mises through Menger were all striving for objective economic laws... so you would be hardpressed to say Reisman is radically divergent....