Mises Book Club

"Throttling the Railroads" by C. B. Carson (1971)

willybrin — Sun, 27 May 2012 22:26:47 GMT

Calculus of Consent -some questions.

fakename — Wed, 28 Dec 2011 08:41:24 GMT

If anyone is reading this I just have one question: What does "Uncertainty" mean in this book? (If you're not reading it and want to help, I think econlib has it online.) Anyway, on page 78, or the last section of the "Economic Theory of Constitutions" called "Some Qualifications" the authors state: "essential to the analysis is the presumption that the individual is uncertain as to what his precise role will be in any one of the whole chain of later collective choices that will actually have to be made. For this reason...he cannot predict with any degree of certainty whether he is more likely to be in a winning or a losing coalition on any specific issue. Therefore he will...choose rules that will maximize the utility of an individual in a series of collective decisions with his own preferences on the separate issues being more or less randomly distributed." If they are saying that individuals will choose constitutional rules that will bring greater "happiness" to any arbitrary person, that prefers the same thing as they do and who vary their preferences randomly due to uncertainty; then why would they assume at the chapter's beginning that, "the specific institutional structure through which collective action is to be carried out is exogenously fixed" and that "the choice among the...[constitutional] rules is not independent of the choice as to the method of organization [which I take, to mean the same as "specific institutional structure]." For if this is what they really meant, then wouldn't the choice of constitutions, be already dependent on the institutional structure? and if that is true, then wouldn't the rational individual predict a certain set of outcomes based on this institutional structure and not any random outcome; that is, wouldn't uncertainty be non-existent? Note: in the book the constitution is different from the institutional structure.

Re: Man, Economy, and State w/ Power and Market

kristopher2505 — Fri, 08 Jul 2011 16:05:55 GMT

Matthew - ya, I came to that same conclusion since i've been continuing my studies. What has helped me to also understand interest is to think of it as the exchange rate between current and future money, as Bob Murphy wrote in Lessons for the young Economist, as well as time preference.

Re: Man, Economy, and State w/ Power and Market

shannonkathleendaily — Thu, 07 Jul 2011 04:57:40 GMT

I emailed Walter Block and quoted your question. He emailed a group of Austrian scholars. They came to the conclusion that in the hardback edition there is indeed a typo. They mentioned that it would be corrected in the next printing.

Re: Man, Economy, and State w/ Power and Market

Matthew Farley — Sun, 03 Jul 2011 10:38:51 GMT

Kris, just came across your post. Labor and capital are by definition means that achieve ends. Thus, labor and capital as such are logical ways to achieve ends. If an entrepreneur does not expect to gain from the employment of labor and capital in specific instances, then he will not do so. This is assumed during any sound economic analysis. Interest rates aid in the purchase and sale of capital because they are the piece of information in the market that reflects time preference, i.e. the markup on present goods over future goods. It is not strictly a capital-based phenomenon. The reason why it has anything to do with capital at all is because capital, when durable, i.e. lasting into the future, will not allow the owner to derive all of its services in the present. Thus, it's future services (rents) must be discounted by the interest rate since those rents can only be earned by waiting. The interest rate is the income one would earn by selling a consumer good to a consumer (the markup on the cost of production.) The consumer will pay the interest rate because he prefers the finished product now rather than owning all of the factors of production that produced it. This is so because he would have to wait for the factors to produce it, which takes time. In the ERE, the markup on final products does not disappear, just the uncertainty component placed on top of it. This praxeological fact is what would make entrepreneurs continue to employ the land, labor and capital to produce consumer goods in the ERE.

Re: Man, Economy, and State w/ Power and Market

shannonkathleendaily — Sun, 03 Jul 2011 05:42:56 GMT

That's a good question. I think you might be right. I'm going to email one of the Austrians about it.

Re: Man, Economy, and State w/ Power and Market

mickst3r — Sun, 26 Jun 2011 21:20:34 GMT

Just started the book, only 30 pages in. Everything's good so far, but I think I found a significant 'typo' on the graph on page 30 (I'm reading hte Man, Economy, and State with Power and Market, Scholars Edition.) The graph represents marginal utility for two goods, Good X and Good Y (which here he refers to as cows and horses.) Rothbard many times refers to the marginal utility of X-4 and Y-3, and claims that X-4 has a lower marginal utility than Y-3, even though they both take up the '6th' line from the top. Am I misinterpreting the two graphs? I imagine that X-4 is just suppose to be one line lower, but can someone confirm?

Re: Human Action

kristopher2505 — Wed, 12 Jan 2011 20:33:31 GMT

even with that argument, one could argue that it is a law of nature that man has preferences, period, and that human action reflects those preferences. Again, Economics, as it relates to Human Action, proves that it is part of Nature itself that man-kind have preferences, rather than valuing everything exactly the same. This makes a case for natural science, rather than social, even if your argument is accepted (and by the way, it is logically sound from my point of view, it just doesn't refute the natural-science argument to me)

Re: Human Action

meambobbo — Wed, 12 Jan 2011 08:34:26 GMT

Because the nature of action has specific consequences. For instance, if I take a nap right now, I can't also ride a bike right now. There's nothing that inherently says preferences MUST stay the same. So increased money printing does not necessarily mean increased prices. People COULD prefer to spend less money and prices would stay the same or drop. But if one attempts to achieve the same ends (same purchase of goods) with an increased money supply, austrian economics describes the logical process of how prices would be bid up.

Re: Human Action

LNielsen76 — Wed, 12 Jan 2011 06:19:43 GMT

Danny, So what you are saying is that Human Action is deduced a priori and not from its consequences (which would make it a posteriori) and that desires, wants, and motivations ("ends") are not considered except as given. Is this correct?

Re: Human Action

kristopher2505 — Mon, 10 Jan 2011 15:32:26 GMT

Desires, preferences, and motivations can only be known by taking into consideration action. But that is not always enough. Sometimes we are barred from doing the things we really do prefer doing. If Economics cannot be repeated, how can we possibly have any such thing as "economic law"? How could it possibly be proper to say that when currency increases faster than goods and services, you have higher prices? Or to say that wages held above the market rate will cause unemployment? The specifics of any economy cannot be repeated, but the foundational laws of supply and demand are always repeated; that is an attribute to the nature of man. Human Action brilliantly points out man's natural position in this world. No matter how big the government, its only tool is force; it is not omniscient, omnipotent... etc. we live in a limited world and have limited abilities, and so we must choose. This is the nature of man, and it is constantly repeated.

Re: Human Action

Lilburne — Mon, 10 Jan 2011 13:08:47 GMT

Lyle: "Economics attempts, a priori, to discover the wants and desires of man, his preferences and motivations."

Actually, this is incorrect. Thymology (a branch of history) is the science of discovering ends. Praxeology, including economics, takes ends as given.

Re: Human Action

meambobbo — Mon, 10 Jan 2011 07:17:57 GMT

i'm a lil confused. i never thought economics was about knowing individuals' ends, either by themselves or as a large group. i thought it was simply about the most efficient means to achieve those ends, taking all individuals into consideration and long-term as well as short-term consequences. For example, if my ends is to kick around a soccer ball, I first need the ball; and the most efficient means to get one is through mutual exchange with those who specialize in making one. Now, given certain circumstances I could steal one more easily; but if everyone tried to steal to achieve their ends, we would find that security is increased making this a more difficult option today, the theft would only benefit a small group of people rather than everyone, or no one would have an incentive to produce leaving future ends more difficult to achieve. A free market is the most efficient means to achieve all ends when taking into consideration all individuals and short-term vs. long-term consequences, independent of the given ends. Of course, this only goes so far - your ends may be a society where there is no free market. but if everyone wanted that, it could be most easily achieved in a free market - everyone would voluntarily enter into a contract with everyone else and cede their property over to this collective entity.

Re: Human Action

LNielsen76 — Mon, 10 Jan 2011 03:02:59 GMT

If all wants, desires, preferences and motivations are elusive, it would be impossible to presuppose any axiom in economics. To pressupose an axiom, it is not necessary to know every want, desire, preference or motivation held by each individual person but those which are held in common. These are "ends" that are sought by multitudinous "means," the variety of which is as numerous as the people on earth.

I don't think I said that Human Action makes the case that Economics can be repeated, rather that it cannot and, therefore, fails the test of empiricism in the natural sciences.

Re: Human Action

kristopher2505 — Sat, 08 Jan 2011 18:02:42 GMT

I agree with what you are saying, but Human Action doesn't make the case that Economics can be repeated. So we will agree on the same information as far as that is concerned. I disagree that the attempt is to discover wants and desires based on preferences and motivations. In many cases motivations are obvious, as are preferences; however, in a lot of cases preferences and motivations are unknown. These are very subjective things we are talking about... I do believe it is not within the realm of economics to attempt at guessing what motivates man in his actions. However, I do believe actions reflect preferences. That is what the whole argument of opportunity cost shows. We cannot do everything we want to, so we must choose. All of this is true, but Human Action shows that man acts to improve the lot of his life. This axiom is proven and repeated on a daily basis. It is not within our nature to say "how hard can I make my life today?" Know what I mean? The other argument is that anything mankind does socially is wholly within our Nature to do so.

Re: Human Action

LNielsen76 — Fri, 07 Jan 2011 22:17:39 GMT

Economics attempts, a priori, to discover the wants and desires of man, his preferences and motivations. Actions are then logically deduced from these wants and desires. The process is not a posteriori, where wants and desires are logically deduced from actions. In this sense, Economics fails the first empirical requirement of natural science: It is not a posteriori. Also, it fails the second empirical requirement of natural science: It cannot be repeated (meaning, the wants and desires of man cannot be standardized - they are as varied as are people and the circumstances and times in which they find themselves.) Therefore, it must be a social science (and better than any other social science!)

Re: Human Action

sami.osei — Thu, 06 Jan 2011 00:06:46 GMT

Indeed the two books did show the nature of man in his effort to better his living conditions. However, economics studies the actions taken by man to fulfill those aims. These actions are non-predictable and they are based not necessarily on his nature but his behaviour. In a way economics studies human behaviour and what determines these behaviours are his actions. The books did show the nature man because both are treatise which expands beyond economics per se. If they were economic textbooks then we could make that case. Hope it helps.

Re: Human Action

stephanielong — Wed, 05 Jan 2011 22:39:47 GMT

Frank Chodorov considered it a natural science...

Re: Human Action

austinite — Wed, 05 Jan 2011 21:54:12 GMT

I believe the reason economics is considered a social science is because being a study of human action, it is not predictable or non repeatable. Each person (actor) will act in his (her) own self interest and will not necessarily act the same way at any other time. On the other hand, a natural science has laws that, if proven correct, results will be repeatable and predictable. Comments?

Re: Human Action

kristopher2505 — Wed, 05 Jan 2011 20:50:29 GMT

I have a comment about this book... well, about Austrian theory in general. After reading this book, along with Man, Economy, and State with Power and Market; I don't understand why it is not part of "Austrian" theory to reason that Economics is not a social science, but it is a natural science. These two works more than any other show the nature of man in his efforts to better his living conditions. It could be extended to rout out all talk of "social science", because whatever actions man takes, even when combined with others, it is still confined to his nature. I am not an economics major; and I found myself telling people that economics is a natural science, based on the fact that Austrian theory very much revolves around the indisputable nature of man. When I found that it is a "social science", I had the suspicion that calling it a social science was just yet another way for statists to build the case that manipulating economic data somehow means economic growth, as any smart statist government would do. Any thoughts here? perhaps I was wrong to say it is a natural science per se, but I think Austrian theory shows that that is all it can possibly be.