The Critiques: An Analysis

Compensatory Justice and the Problem of Knowledge

laminustacitus — Sat, 09 Jan 2010 03:02:00 GMT

The concept of coercing those who have indirectly benefited from either racism, or sexism to pay compensation to those who have been negatively effected is a ridiculous legal concept that holds tyrannical potential. However, not only is the program nigh impossible due to the fact that the amount that must be compensated to the victims of discrimination is an example of knowledge throughout society, but it is also absolutely immoral to penalize individuals retroactively.

As Friedrich A. Hayek elucidated in his article:“The Use of Knowledge in Society”, it is impossible to centralize the information contained in society in such a fashion as to make it possible to make decisions based on it. The reason for this is because of the dynamic nature of society, especially the modern society of the information age, and that the knowledge per se is of an extremely precise, and ever-changing nature being related to a specific circumstance in both space, and time. The importance of the peculiar nature of knowledge cannot possibly be understated for this feature illuminates the impossibility of centralized planning since a top-down structure cannot efficiently adapt to circumstances perpetually in flux. The reason for this is that a board of planners does not have the knowledge necessary to adapt to problems for they cannot centralize the tacit character of knowledge. This relates to the problem of compensating victims of discrimination in that it thus follows that it is impossible to calculate the amount that would be given assuming the program is initiated. Therefore, any attempt to compensate victims would have to utilize monetary quantities that have basis only in the sentiments of the politicians constructing that plan rather than the actual damages done by discrimination. Hence, grave injustice could be done against those who have not profited as much from this crime as much as the plan accuses them resulting in the necessary condemnation of any such plan.

Furthermore, the very act of penalizing individuals who benefited from past injustices based on activities done when they were note explicitly illegal is an absolute affront to the very basis of law. By punishing individuals for actions that were completely legal when the actions were done, the state is creating a scenario in which the law is no longer absolute, rather it is merely tentative. This undermines the purpose of legal institutions in society; where they were once meant to give stability to society against certain actions deemed illegal, now they provide an atmosphere in which individuals within society live in legal insecurity not knowing the legal boundaries that they should beware. It may very well be that an action seen as completely acceptable one day may be a ticket to a life-sentence in jail a decade following, and this precedent would be a great restraint to the cultivation of a society in which citizens are all considered equal under the law. In fact, under this system, it may very well be that all citizens are equal under the law until a future generation deems fit for their own purposes, and this sort of a power would grant the government far too much potential for tyranny. Overall, any retroactive legal policy must be condemned on grounds of legal stability, and for the sake of preventing the growth of government-tyranny.

In the end, the policy of compensating victims of discrimination at the cost of those who benefited from it must be condemned to to the impossibility of calculating the monetary quantities involved in such a policy, and because of its legal implications.

A Critique of Rawls: The Unknowable Social Order

laminustacitus — Tue, 03 Nov 2009 06:30:00 GMT

In A Theory of Justice, John Rawls elucidates a theory of justice that holds two basic principles of justice: 1. each individual is to have equal liberties in a scheme that enables the greatest amount of liberty without encroaching on those of others, and 2. social, and economic advantages are to be organized to the advantage of everyone while being open to the acceptance of all. With these two principles, society could be organized in such a manner that is, in Rawl's view, conductive to the equal liberty of each citizen. However, his entire theory is erroneous in the respect that it speaks of planning society according to certain rights as if certain conditions can be imposed upon the social order of the status quo without dangerous consequences – his most critical error lies in the fact that the optimal organization of society is inherently unknowable, so any attempts to mold society according the the whims of individuals is an erroneous policy.

In the article: “The Use of Knowledge in Society”, the economist, and political theorist F.A. Hayek elucidates the impossibility of economic, and social planning on account of the fact that the social engineer simply does not have enough knowledge to go about this task. Speaking on the topic of knowledge, the article reads:

Today it is almost heresy to suggest that scientific knowledge is not the sum of all knowledge. But a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place. It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active coöperation.¹

Without a doubt, a direct conclusion of this would be that any attempt to impose social, or economic order upon society would fail because of the fact that the planners involved would simply not have the knowledge to sufficiently design a social order. Instead, it is the individual who knows what is in his best interests, and how to pursue them – any attempt to declare any distribution as “just” is erroneous due to the fact that it presupposes the possible knowledge of what is the optimal distribution. On the contrary, the optimal distribution can only be the result of the free interactions of individuals who have the knowledge necessary to make the best decisions possible. Any attempt to plan a top-down order is doomed to result in a sub-optimal distribution because the social engineers at the top will not have the necessary knowledge to go about his task.

The decentralized nature of knowledge in society, and the resulting impossibility of planning a social order dooms any distributive theory of justice at best practically impossible, at worst practically disastrous, and the theory of Rawls is no exception. The social order the enables the arrangement of economic, and social advantages, and disadvantages so that they are to the benefit of all is inherently unknowable; hence, it is a intractable criterion on justice, a platonic form that has little utility to the empirical world.

1F.A. Hayek, “The Use of Knowledge in Society”. <http://www.econlib.org/library/Essays/hykKnw1.html >

Cultural Relativism, Ethical Positivism, and Human Reason

laminustacitus — Thu, 10 Sep 2009 03:31:00 GMT

The challenge of ethical relativism leaves mankind in doubt about the standards with which it can critique the ethics of a different society on account of the fact that the theory states that societies develop ethics in order to cope with both their physical, and social environments. The central tenet of the dogma is that there is no universal truth in ethics, and therefore critics speak in vain when criticizing the ethics of another society; rather, the critic ought to tolerate the ethics of another society because the ethics he obeys, and those that he critiques developed in two different environments. However, ethical relativism can lead mankind down a path to aberrant ethical positivism where the only standard of ethics are the existing ethics of the day thus denying man the capability of improving his society via reason.

In fact, the entire concept of tolerance, while it is certainly a keystone to an open society in which individuals of differing judgments of value (especially ones of a metaphysical character) can unite in the division of labor that is the engine of prosperity, should not hinder man from critiquing himself, his society, or that of others. There is absolutely no reason to uphold the status-quo as the absolute best of all outcomes in the fashion of some demented species of Leibnizian optimism, and to demand that man should even tolerate all outcomes. For instance, if a missionary is murdered while in Papa New Guinea there is absolutely no reason why his sponsors should not be outraged even though they are from a different culture, and uphold different ethics. However, their just outrage does not mean that it is necessarily just for them to persecute the guilty New Guineans under Western law for the crime. For, while we should not tolerate actions that are deeply offensive to our judgments of value, that does not entail that we can persecute the offenders; instead, just because tolerance should not be given to an actions does not mean that coercion should be used against him. While tolerance should sway the sword-arm of man, it should not do so for the pen of the critic for imagine how much would have been lost in Western civilization if Voltaire had been condemned as not being “tolerant” of his native France.

Instead, society can be improved via the actions of brave souls willing to face the disapproval of society in order to elucidate the problems of the status quo, and how human reason can provide solutions to them. Without a doubt, a dogmatic interpretation of cultural relativism leads to an ethical positivism where the only criterion of right, and wrong are the ethical facts that exist despite how repugnant they may be to a critical analysis. Indeed, the fact that cultures have developed differing ethics does not mean that man does not have any objective criterion for judging ethical standards, which is a conclusion of ethical relativism. Nevertheless, whether by an objective standard, or not man must still refine his society in order to best fit with his moral judgments of value, and even though one might deny that there is any truth in ethics, it is still absolutely ridiculous to believe that certain ethical systems of not advantageous over others. For instance, man has enjoyed an era of unrivaled prosperity on account of the fruits yielded by capitalism, which is in turn made possible thanks to the division of labor, and society has changed forms distinctly as a result of demands the free market. It is absolutely foolish to believe that man does not possess enough reason to realize that there is a difference between an industrial society, and a preindustrial one, and that the two require different social norms, and ethical perspectives. Yet, if we take ethical relativism as a dogma, then we deny man's ability to do so, and we end up in a paradox of sorts: while the doctrine asserts that ethics are nothing but a society's adaptation to its environment, it is a straight-jacket against man's ability to further evolve his ethics to adapt to an environment in flux for no man, nor society exists in a stationary world.

Prices, and Production: Lecture III, Part VI

laminustacitus — Tue, 08 Sep 2009 00:49:00 GMT

At last, an answer to the question posed in the first lecture, that of how it comes about that the economy cannot utilizes all existing resource (which Hayek attests is “the central task of any theory of industrial fluctuations”¹), and without having to base the analysis on the assumption that unused resources exist. Rather than elucidating the process of economic recovery, Hayek felt that is was more worthwhile to discuss important conclusions of the preceding theory.

Based on the business cycle contained in the preceding lecture, it is all by certain that granting credits to consumers, which has been lauded as a method of curing depressions by increasing consumer demand, would only worsen a depression. A relative increase in the demand for consumer goods would only make affairs worse by further skewing a structure of production that is in the process of reallocating resources in a sustainable arrangement after a prior boom-bust cycle. All that those consumer credits would do is a further delaying of a long-term structure of production based on the demands of the market.

However, producers' credits are not so simple. In theory, it is at least plausible that the granting of producers' credits could have a beneficial effect when, in the acute stages of the recession, the structure of production shrinks more than what would be necessary. This would only be the case if the quantity were regulated so to compensate for the initial rise in the prices of consumer goods compared to producers', and if arrangements were made to withdrawal the additional money as the prices fall as the proportion between the supply of the two adapts itself with the demand for the two. Nevertheless, the credits would do more harm than good if their quantity were not strictly regulated, and Hayek's later essay: “The Use of Knowledge in Society”shows, sine dubio, elucidates the impossibility of doing so.

In the end, we return to a time-old conclusion that the only way of avoiding a recession is to check credit expansion in time; but, if that proves to be impossible, then the recession must run its natural course. From the above investigation, conclusions with regard to the methods used in an analysis of business fluctuations follow:

The first is that our explanation of the different behavior of the prices of specific and nonspecific goods should help to substitute for the rough empirical classifications of prices according to their sensitiveness, a classification built upon more rational considerations. The second, that the average movements of general prices show us nothing of the really relevant facts; indeed, the index numbers generally used will, as a general rule, fail even to attain their immediate object because, being for practical reasons almost exclusively based on prices of goods of a nonspecific character, the data used are never random samples in the sense required by statistical method, but always a biased selection which can give only a picture of the peculiar movements of prices of goods of this class. And third is that for similar reasons every attempt to find a statistical measure in the form of a general average of the total volume of production, or the total volume of trade, or general business activity, or whatever one may call it, will only result in veiling the really significant phenomena, the changes in the structure of production to which I have been drawing your attention in the last two lectures.²

1Hayek, 274

2Hayek, 276

Prices, and Production: Lecture III, Part V

laminustacitus — Fri, 04 Sep 2009 01:04:00 GMT

It is now time to move from a case where credits are given to producers to where consumers are being given credits. Indeed, the general effects of an increase of money via consumers' credits, which will result in an increased relative demand for consumers' goods compared to producers' ones, results in the inverse of the previous scenario where there is an increase through producers' credits. The sudden injection of money into the economy done by the purchasing of consumers' goods will result in entrepreneurs investing in shorter processes of production in order to take advantage of the large profit margins to be obtained in the markets for consumers' goods.

Obviously, once consumers have been given consumer-credits they will then proceed to purchase a greater quantity of consumers' goods than prior, but the structure of production at the time, having been created for a vastly lower consumer-demand, cannot produce enough to satiate consumer-demand. Due to the fact that there is now a large discrepancy between supply, and demand, the rise in consumer prices will be considerable, and this will result in greater profit-margins to be obtained from later stages of production compared to stages closer to the original means of production. The resulting prices, only the result of the scarcity of consumers' goods, will have the effect that production will shrink to fewer stages than will be necessary after those goods have reached equilibrium price once the scarcity has been alleviated.

While the structure of production is being altered to fit a more present-orientated economy, original factors, and the more mobile producers' goods will be in high demand, and, as a result, the longer production-processes will become less profitable – strengthening the trend towards shorter ones. Producers' goods of a more specific character created for the prior state of equilibrium will fall in price as their complementary nonspecific goods are reinvested in shorter processes; ergo, the production of those producers' goods will cease. In addition, though capital in the later stages of production is generally of a highly specific character, entrepreneurs may very well employ original factors in order to the consumers' goods that have yet to be finished. Nevertheless, the fall in the prices of intermediate products with be across the board, and entrepreneurs will hence stop work in the earlier stages of production once they realize their unprofitability.

However, the capital utilized in the longer processes of production cannot instantly be assimilated into the longer ones; rather, the process will be gradual. In order to employ the capital in the shorter processes, it must begin at the beginning as the product progresses toward consumption, and the available producers' goods are implemented in the process. The production of goods does not happen in an instant; instead, it is a process that, in a capitalistic structure of production, occurs over the course of years, and intermediate goods are created for a specific process of production. Hence, entrepreneurs just cannot add new capital to structures of production where the intermediate goods from the preceding stage are goods of a specific character designed for the capital existent in the following stages; rather, one must begin from the original factors of production, and proceed with a new process of production. Furthermore, the form of the end process will be further retarded by the uncertainty that entrepreneurs face as to what methods will be profitable once the scarcity of consumers' goods, and the resulting scarcity-level prices have been alleviated.

As Hayek notes: “It seems something of a paradox that the self-same goods whose scarcity has been the cause of the crisis would become unsaleable as a consequence of the same crisis.” The high demand for consumers' goods has diminished the supply of nonspecific producers' goods necessary to finish the reallocation of producers' goods in the structure of production. The crux of the matter lies in the fact that the specific producers' goods necessary for a structure that employs the quantity of capital at hand have not been produced. Here, we find a fundamental economic fact that mankind so often neglects: capitalistic production can continue only so long as man is content with consuming that goods that part of our wealth, which the structure of production has produced for consumption. Any increase in the quantity of consumption requires saving beforehand if it is not to disrupt current production, and if the increase in production is to be maintained continuously, then the amount of intermediate goods must be increased proportionately in all stages. “The impression that the already existing capital structure would enable us to increase production almost indefinitely is a deception.”

Overall, the increased demand for consumers' goods resulting from an injection of money into the economy via consumer-credits will result in a scarcity of consumer-goods, and, to satiated demand, there will be a resulting shortening of the structure of production toward a more present, consumption orientated economy.

A Reflection on Aeneas Slaying Turnus

laminustacitus — Tue, 01 Sep 2009 19:23:00 GMT

“Turnus lowered

his eyes and reached with his right hand and begged,

a supplicant: “I deserve it all. No mercy, please,”

Turnus pleaded. “Seize your moment now. Or if

some care for a parent's grief can touch you still,

I pray you – you had such a father, in old Anchises -

pity Daunus in his old age and send me back

to my own people, or if you prefer,

send them my dead body stripped of life. Here,

the victor and the vanquished, I stretch my hands to you,

so the men of Latium have seen me in defeat.

Lavinia is your bride.

Go no further down the road of hatred..”

Aeneas, ferocious in armor, stood there, still,

shifting his gaze, and held his sword-arm back,

holding himself back to as Turnus' words began

to sway him more and more... when all at once

he caught sight of the fateful sword-belt of Pallas,

swept over Turnus' shoulder, gleaming with shining studs

Aeneas knew by healt. Young Pallas, whom Turnus had overpowered,

taken down by a wound, and now his shoulder flaunted

his enemy's battle-emblem like a trophy. Aeneas,

soon as his eyes drank in that plunder – keepsake

of his own terrible grief – flaring up in a fury,

terrible in his rage, he cries: “Decked in spoils

you stripped from one I loved – escape my clutches? Never -

Pallas strikes this blow, Pallas sacrifices you no,

makes you pay the price with your own guily blood! “

In the same breath, blazing with wrath he plants

his iron sword hilt-deep in his enemy's heart.

Turnus' limbs went limp in the chill of death.

His life breath fled in a groan of outrage

down to the shades below.”¹

Virgil's The Aeneid is one of the land-mark works of Western literature, and it is the tale of the hero Aeneas, and his Trojan exiles in their quest to establish a new city as divine providence dictated. Combining both the epic warfare style of The Iliad, and the swash-buckling exploits of The Odessey, in my opinion it is superior to both, and, without a doubt, the greatest accomplishment of Rome's literary culture. Throughout the epic Virgil characterizes his protagonist as pius Aeneas, a virtuous hero who is the paragon of pietas, yet the compassion, and moderation that is entailed in pietas does not stop Aeneas, now being characterized by furor (the paradigm of which had been the deity Juno, the primary obstacle against the refugees) – the opposing force to pietas in The Aeneid - from executing his foe, Turnus. The most astonishing feature of the entire act is the fact that Virgil ends his poem with it, he finishes the exploits of pius Aeneas with an act that seems to defy the very meaning of pietas, but perhaps it is a blunt statement by the author about nature of emotion, revenge, and war.

Even a character as noble as Aeneas can fall victim to emotion, and furor; it is his sorrow for the death of his friend, and ally Palas, son of King Evander who aids Aeneas in his war against Turnus, that drives him to executing his foe. However, when Pallas was slain in battle as Aeneas watched, and then rushed forward through the Latin ranks to kill Turnus, though Juno lured him away so that he could not kill him, the price, pushed forward by a murderous rage, slaughtered Lausus, “driv(ing) his tempered sword through the youth/ plunging it home hilt-deep”². However, Aeneas proceeded to regret the action, filled with compassion for the soldier who had tried to defend his father Mezentius; but, it is not so with Turnus, even though Aeneas is possessed by the same murderous fury as he was before.

Nevertheless, Aeneas is a veteran of war, having not only fought in Latium against Turnus, but also in Ilium alongside Hector against the Achaeans, and as such he knows that compassion, despite its virtue, is irrelevant, and often a hindrance on the battlefield. Unspeakable horrors are done once armies have been raised in hostility, and, as a war-hero, Aeneas is not innocent of such crimes, but rather a man who has done his best to fight for his patria, his fatherland, without giving into the excesses of war. But, like all men, he is corruptible, and furor often acts through him, and it did so when it corrupted his love for Pallas into a lust for revenge against Turnus. War is a terrible thing, and even when it is presented in a virtuous fashion as done in The Aeneid, it is suitable that the affair ends with an act, though one can argue its legitimacy, that defies the sought-after virtue of pietas. Indeed, pietas cannot survive in a world of perennial war, and man cannot be expected to conform to its precepts in such an environment where furor dominates.

1Virgil, The Aeneid, Trans. Fagles, Robert, New York: Penguin Books, 2006

2ibid

Prices, and Production: Lecture III, Part IV

laminustacitus — Thu, 09 Jul 2009 15:50:00 GMT

The importance that the adjustments of the price mechanism free of any external influences has in respect to a prospering economy is highlighted when we investigate the results of the “'natural' movement of prices” is disrupted by monetary policies. These may take the form of either injections of new money into circulation, or the withdrawal of a portion of the current circulating quantity, and here, as prior, the results of two typical cases shall be elucidated: a) the case of injected money being utilized to purchase producers' goods, and b) the case of the injected money being utilized to purchase consumers' goods¹ ². As before, the analysis is begun with the supposition that an additional amount of money is injected into the structure of production via credits to producers that can only be spent purchasing producers' goods.

If the injector desires to seek borrowers for this additional quantity, then the rate of interest must be suppressed below the equilibrium rate in order that the employment of this sum, and just this sum, is profitable³. To complicate matters, borrowers will only be able to use their loans to purchase producers' goods though if they are able to outbid those who are currently utilizing them, but borrowers who plan on creating a longer, more capital-intensive production-process will be given a boost against those whose means of production were profitable at the equilibrium rate. It must be understood that the alteration in the interest-rate will also change the relative profitability of different factors of production, and will give a relative advantage towards more capital-intensive investments. Without a doubt, though, the result of this increased bidding, and competition on the part of entrepreneurs will result in a general rise in the prices of producers' goods⁴, and this coupled by the low rate of interest will induce entrepreneurs into spending a portion of what they once spent on original means of production on intermediate products, or capital. As companies buy parts of their products, which they once produced for themselves before the rate of interest was reduced, from another firm, they can employ the labor so dismissed in producing these parts on a large-scale thanks to the aid of new capital. This will then have the result of transitioning the structure of production into a more capitalistic process, and will relinquish the necessary original means of production, and nonspecific producers' goods for the newly created stages. In the end, a reduced rate of interest will result in a more capitalistic structure of production, and the transition to one will probably be done without an increase in the resources at the disposal of entrepreneurs resulting in them investing less in the original means of production, and more on intermediate goods.

Unlike the scenarios where the entire process is begun by voluntary savings on the part of consumers, the investments necessary to bring about a more capitalistic structure of production as a result of monetary injection will result in decreased consumption being forced upon the consumers. This results from the fact that, while in the case of voluntary savings the transition is a result of the consumption preferences, and the application of producers' goods to longer processes will be done without any reduction in consumption, in the current case the investments are not done as a reaction to any change in preferences, but due to the availability of newly injected credit. Nevertheless, there will be a time during which the transition-process will go about without a reduction in consumption due to the fact that there will still be consumers' goods being finished off in the roundabout structure of production, but these goods will eventually be finished. Once the final consumers' goods have been sold, a scarcity of consumers' goods will then occur, and its price will then rise as a result since the consumers still desire to continue their previous rate of consumption.

Even though the consumers will, as a result of the investments in the structure of production, be forced into consuming at a lower rate than before that does not mean that they will passively accept the decrease in consumption, and not attempt to resist it. In fact, the real income of the consumers, as a result of this, will be retrenched, and it is improbable that consumers will acquiesce to this for they will most likely try to fight their decreasing rate of consumption by spending more of their total income on consumption. At the same time many entrepreneurs will know that they are in command of, at least nominally, a greater quantity of resources, and ergo a greater expected profit, and the income of wage earners will be increasing as a result of the increased amount of money in the hands of entrepreneurs; much of this income will be spent on consumption thus pushing the prices of consumers' goods ever higher. As the consumers are trying to regain their prior level of consumption, the prices of consumers' goods will rise relative to the prices of producers' goods, and this will point towards a return to a shorter, less future-orientated process of production if the increase in the demand for consumers' goods is not compensated for by a proportional injection of money by new loans granted to producers'. As long as there is further credit-expansion, then entrepreneurs will not have much of an incentive to liquidate much of their long-term investments aimed at satiating the demands of a more roundabout structure of production; however, the process of credit expansion cannot go on ad infinitum.

Once the banks cease to inject new credit to producers then the absolute increase in the quantity of money spent on consumers' goods will no longer be compensated by a proportional increase in the demand for producers' goods. This will result in an increased demand for consumers' goods that will be very much similar to the second case above, and hence shall be discussed along with the second case in the next liveblog entry.

1“The corresponding cases of a diminution of the amount of money we may neglect because a diminution of the demand for consumers' goods would have essentially the same effects as a proportional increase of the demand for producers' goods, and vice versa.” (Hayek, pg. 265)

2For the sake of portioning this liveblog into posts that are only of moderate, or short length, I shall only cover a here, and leave b for the next entry.

3However, the efficiency with which the injector would be able to calculate the rate of interest referred to here is sub par due to the fact that he is attempting to centrally plan a price, and the critiques against central planning as elucidated by both F.A. Hayek, and L.v. Mises are applicable, though on a small scale.

4Remember that the original means of production are a form of producers' good.

Thoughts on Popper's Theory of All Life as Problem Solving

laminustacitus — Mon, 29 Jun 2009 17:05:00 GMT

When I first heard of Karl Popper's book All Life as Problem Solving, I though that he would show how all the experiences humanity faces during life can be boiled down to instances of problem solving, but as I have become more intimate with his thought (though, I have yet to read the above book), I have actually discovered that Popper boils down all biological life, and the evolution of it down to problem solving. While I have yet to decide whether this is a completely correct view, the lessons learned from coming in contact with it are very much worthwhile.

Popper in Objective Knowledge: An Evolutionary Approach introduces a theory by which man is always testing conjectural knowledge upon which he understands the world through the problems he faces in his experiences. This process can be represented through the following schema, which in Popper's words is: “...a general schema of problem-solving by the method of imaginative conjectures and criticism (italics his )”¹:

P₁→TT→EE→P₂

In the above, P1 is the problem with which we start, and, trying to solve it, we proceed to TT, a tentative hypothesis, the first conjectural solution to the problem, and hence tentative interpretation. The next stage, EE, error elimination, consists in the “severe critical examination” of the conjectural solution , and our tentative interpretation consisting not only in a critical utilization of documentary evidence, but also critical discussion, and, if there are competing theories, comparison to competing interpretations. P2 will be the problem situation as it emerges from our first attempt to solve it, and this will then lead to further attempts to comprehend the problem further. A truly satisfactory understanding of a problem will be able to illuminate details of it that had not been noticed prior, or the fact that it explains many sub-problems that were not seen to begin with.

Not only does Popper relate this framework to the manner by which man tackles intellectual problems like physics, but he also employs it with respect to biological evolution. Even insentient organisms face problems, such as the problem of reproduction, and those problems are solved by the organisms through a process of tentative interpretations that are subjected to error elimination via extinction that results in a set of organisms most adapted towards the surrounding environment. It is necessary to remember that all problems that will face an organism need not be survival problems, and that new when a new problem situation emerges the organism may very well had changed its ecological niche during the process of solving the prior problem. In addition, the organism solves its problems by adapting to its environment via growing new organs, and somatic modifications, and that when an organism fails to solve its problem, it dies off. Overall, Popper describes all of evolution as problem solving in that organisms through the process of evolution attempt to somatically solve problems they are faced with.

The process of evolution via mutations is then conquered, so says Popper, by man's ability to think rationally about the world in terms of conjectural hypotheses, and the fact that when tentative solutions fail it is not man that dies with it, but the idea. Man, is faced with problems, many of which are ecological, just like the lower animals, but, unlike the animals, man does not grow new organs, and modify those he already has to persevere, rather he creates ideas, and grows exosomatic tools. Problem solving is also not, as many like to see it, a phenomenon we are not always completely conscious of for it is only in hindsight that we are able to truly able to speak of the problem². The vast improvement that man's problem solving has over a lower organism's is that man has separated the adequacy of his tentative conjectures with that of his survival When a hypothesis fails, man need not die, instead he can let his ideas die in his stead; thus the problem solving process of evolution of lower organisms is still effecting man, but he has created a solution to the problem of survival that enables him to outlive his conjectures.

While Popper's theory seems to be very much correct in describing the realm of a posteriori knowledge, when it comes to the realm of the a priori, though, the entire theory is inadequate for it suggests that there is a never-ending process of problem solving, P₁→P_N, and that human knowledge can never be truly valid as the a priori category. Popper himself rejects the idea that there is an a priori category of knowledge that can elucidate anything other than tautologies, in his framework there are then two types of knowledge: there are empirical statements about the world that are always hypothetical and accordingly never apodictically true, and there are analytic propositions that are tautological, hence true by definition³. Ergo, it would follow that the existence of any non-hypothetical branch of knowledge would break-down Popper's theory of problem solving; however, I will advocate that it does not necessarily break-down, I will admit that I am not even sure of the validity of my claim as of now. Even in the a priori branch of knowledge, we have problems that must be solved, the part of Popper's theory that seems to not apply is the conjectural portions that imply human knowledge can never be non-hypothetical:

P₁→TT→EE→P₂

However, even in the realm of the a priori there can be logical faults that are not at first realized, and that must be hunted down in order to create a truly valid claim. It is the process of hunting down these logical flaws, and the logically flawed theory that can respectfully be called error elimination, and the tentative hypothesis. However, in the a priori interpretation, though, the first problem does not lead to an innumerable amount of further problems as man's comprehension of the problem is fine tuned, rather the process will end once all logical errors are eliminated. While Popper's theory does not take into consideration a priori knowledge due to his rejection of non-tautological a priori judgments, it can be reinterpreted in view of the elimination of logical fallacies from an a priori judgment in order to accommodate them.

In the end, Popper gives a theory of how not only all human life, but all biological life can be explain by the process of problem-solving by means of conjectures, and severe appraisal of their adequacy. For lower organisms, this entails solving the problem through growing, or adapting somatic organs, yet for man this means the creation of exosomatic theories, and tools. While the very lives of the former are tied to their conjectures, the latter can abandon obsolete theories, and tools without sacrificing his life. Even though this theory does not admit the validity of a priori judgments in its original understanding, or if it even does not allow a priori judgments whatsoever, it remains a very much interesting gem of though that can give some light on the question of: “Is evolution still in effect for mankind?”

1Popper, Karl R., Objective Knowledge: An Evolutionary Approach. (New York: Oxford University Press, 1979). pg. 164.

2As a testament to this, Popper elucidates: “For example, Kepler's conscious problem was to discover the harmony of the world order; but we may say that the problem he solved was the mathematical description of motion in a set of two-body planetary systems. Similarly, Schrödinger was mistaken about the problem he had solved by finding the (time independent) Schrödinger equation: he thought his waves were charge-density waves , of a changing continuous field of electric charge. Later Max Born gave a statistical interpretation of the Schrödinger wave amplitude; an interpretation which shocked Schrödinger and which he disliked as long as he lived. He had solved a problem- but it was not the one he had thought he solved . This we know now, by hindsight.” (Popper 1979, pg. 246)

3A very simple critique of this division of human knowledge is this: if Popper's division is true, then what kind of a statement is the statement that knowledge is either tautological, or hypothetical? For a more in depth critique of Popper watch Hoppe's lecture “Praxeology The Austrian Method” here.

Prices, and Production: Lecture III, Part III

laminustacitus — Sun, 28 Jun 2009 19:28:00 GMT

The initial changes in the relative prices between producers' goods, and consumers' goods, resulting from a change in their relative demands, cause a movement of goods to other stages of production – a definite price relationship will only result once this transition is complete. Later, it shall be shown that this process may result in discrepancies between supply, and demand where Say's law is not valid. Nevertheless, there happens to be one medium through which the effects of the shift in relative prices will be felt immediately, and will guide the decisions of the entrepreneur during the entire transition: the rate of interest.

The role of the loan market in the formation of a more capitalistic structure of production because very rarely are the ones who saved money, and the entrepreneurs who desire to utilize it in production are the same. In the majority of cases there will therefore need to be a medium through which money can pass into the hands of those who want it, and this medium is the loan market through which the question of who will receive the addition funds to invest will be solved. Only at a lower rate of interest than before will the new loans be possible to be lent out, and how far the interest-rate declines will be dependent on the additional quantity of funds, and the expectations of profits on the part of entrepreneurs willing to expand production. If the entrepreneurs correctly forecast the price changes that will result from the transition, then the new interest-rate should correspond to the price margins that will finally be established. Without a doubt, the loan market is important in order to ensure that the additional funds for investment created by savings reaches those who can make a productive use of them, and the corresponding interest-rate, unlike other prices, will be immediately effected by the overall transition.

It is here that the two methods of analyzing the business cycle, that is either starting from the changes in the relative magnitude of the demand for consumers' goods and that for producers' goods, or doing so from changes in the rate of interest, meet. In addition, one can even see that many use the rate of interest as the horizontal projection, or hypotenuse of the Hayekian triangle to show the price margin between the different stages of production.

Prices, and Production: Lecture III, Part II

laminustacitus — Fri, 26 Jun 2009 02:43:00 GMT

Once again, as done in previous lectures, we shall analyze the results of a scenario where consumers decide to save, and accordingly invest a larger portion of their income than before; however, here we shall see the effects the price of goods will have on the entire structure of production. As in the earlier elucidation, there will be an increased demand for producers' goods, and a decreased for consumers' goods that will result in a relative rise in the prices of the former compared with the latter. Nevertheless, the prices of producers' goods will not rise equally, nor even without exception; instead, they will be effected by their position in the structure of production.

The prices of producers' goods will be greatly effected by the prices of the goods in the next stage of production, and when the demand for consumers' goods decreases there will be a narrowing in the price margins between the stages resulting from a shift in the funds used in each stage. In addition, the stages of production that are closer to the finished goods will be effected by the falling prices for consumers' goods with greater influence than the stages of production closer to the original means of production. As the prices fetched for consumer goods decrease, those for the producers' products adjacent to them will similarly, and some of the funds used there will be shifted to earlier stages, which are now more profitable than the later ones, resulting in the narrowing of the price margins between the different stages. This shift will overcome the tendency towards a fall in the prices for the producers' goods in earlier stages as the funds arriving from the later stages creates a tendency for a rise in prices. Generalizing the above, the rise in the price of a product in any stage of production will result in a greater bounty of profits to be made in the preceding stage, and hence boost its production, and as funds are sent to earlier stages of production, entrepreneurs there will begin purchasing more producers' goods from the earlier stage, resulting in an increased price there. In the end, through the fall of the prices in later stages, and the rise of those in earlier, the price margins throughout the entire structure of production will have decreased.

Other results will be that nonspecific producers' goods will be attracted towards the earlier stages, which will continue until the diminution of returns there has equaled the profits to be made in all stages, and the general narrowing of price margins will make it possible to start production in new, and more distant stages that have hitherto been unprofitable. With specific producers' goods though, the effects are not as straight forward as they are with nonspecific ones, because they will be effected by the alteration in the entire structure of production, since they can be used only in specific roes. If a specific producers' good is adapted to a later stage, then its return will diminish as their supply remains constant as the demand diminishes, and its production will be curtailed, and the entire process is logically vice versa for those adapted to the earlier states. Further, the additional stages created as a result of increased investment will most likely require new specific goods, including natural resources unprofitable to utilize prior. Not only will the transition of the structure of production into a more capitalistic process effect the price margins between the stages, but it will also effect the types of producers' goods demanded, and used.

.Overall, the prices that goods in any stage of production are able to demand are important factors in determining the structure of production for if one stage is booming, then it will then require a greater supply of goods for antecedent stages, thus making business good for those as well. Furthermore, when the prices of consumer goods decline, then the finances used in the later stages will be reinvested in the structure of production thus stimulating earlier stages, rising the prices of the producers' goods manufactured there, and therefore lowering the price margins throughout the entire structure of production, which will accordingly effect the markets for both nonspecific, and specific producers' goods. Finally, we have arrived to the point at which the title Prices, and Production finally makes sense.

Prices, and Production: Lecture III, Part I

laminustacitus — Wed, 10 Jun 2009 15:56:00 GMT

At this point it is necessary to introduce a distinction between producers' goods that can be used in many, if not all, stages of production, and those that can be used in one, at most a few, stages of production. To the first class belong almost all original means of production, and implements that are not specific as to their use, Hayek gives knives, and tongs as examples for this. To the second belong most specialized machinery, complete manufacturing establishments, and the types of semi-manufactured goods that would become finished goods only by passing through a few more stages of production. Using von Wieser's terminology, the former are producers' goods of a specific character, or specific goods, and the latter are producers' goods of a more general applicability, or nonspecific goods. Though the categorization is not absolute, we should always be in a position to whether a good is more, or less specific relatively to other goods.

It is obvious that producers' goods of the same kind cannot bring in different returns, or obtain different prices for a long duration of time. On the other hand, it is similarly obvious that the only method by which to shift producers' good between stages of production happens to be temporary differences between prices offered in those varying stages. When such a difference occurs between the relative attractiveness occurs, the goods in question will be transferred to the more appealing stage until, by the law of diminishing returns, the difference is erased. Neglecting the possibility of changes in technical knowledge, the apparent cause for a change in the return obtained from a producers' good of a certain kind used in different stages of production must be a change in the price of that good in the stage of production in question. Our question now is: “(W)hat brings about variations of the relative price of such products.” Though it may seem strange that the prices of the successive stages of the same product would fluctuate since they both depend upon the price of the final product, of the consumer good. But, looking back on the last lecture, the possibility for a shift in respect to the proportion of consumers' goods demanded, and producers' goods demand, and the consequent changes in the structure of production resulting from a change in the relation between the quantity of original means of production utilized, and the final output of consumers' goods presents us with an easy answer to the prior.

Hitherto, Hayek has not mentioned the price margin that results from these relative fluctuations of the prices of the products of successive states because he has paid no attention to interest by treating it as a payment for a definitely given factor of production, just like wages, or rent. In equilibrium, the price margins are completely absorbed by interest; hence, Hayek's assumption concealed that the total amount of money received for the product of any stage will exceed the amount paid out for any goods, or services utilized there. Investigating this though, will bring us too far into the general theory of interest, even for the book itself; ergo, we must be content with Hayek's insistence that: “other things remaining the same- these margins must grow smaller as the roundabout processes of production increase in length, and vice versa.” Nevertheless, the fact that in equilibrium the price margins, and amount paid in interest coincide does not allow us to take for granted that the same holds in a transitory period; in fact, the relation between these two magnitudes will consist one of the main objects of our further inquiry.

The interrelation between the two suggests two possible methods to solving our problem, for which I will quote Hayek at length:

either we may start from the changes in the relative magnitude of the demand for consumers' goods and the demand for producers' goods, and examine the effects on the prices of individual goods and the rate of interest; or we may start from the changes in the rate of interest as an immediate effect of the change in the price system which are necessary to establish a new equilibrium between price margins and the rate of interest.

Since the first follows naturally from the first lecture, Hayek takes that approach.

The Action-Axiom: A Kantian Understanding of the Action-Axiom, and Its Praxeological Conclusions

laminustacitus — Tue, 09 Jun 2009 18:09:00 GMT

The synthetic a priori judgment can guide our comprehension of the action-axiom, and similarly can do so for our comprehension of the entire structure of praxeology, more specifically its advantages over empirical techniques. The synthetic a priori is true because it is the manner by which we necessarily experience the world, there is no way beyond how the understanding orders, and unifies, and it is in that sense where the validity of praxeology can truly be beheld because the science of praxeology yields for us the very laws of society that we need in order to steer the course of the social sciences. In fact, the action-axiom, and praxeology are true for the reason that we cannot experience the world, with respect to the sphere of the social sciences, though any other mode than through the proposition “man acts,” and its logical consequences.

The action-axiom is a synthetic a priori judgment that is the necessary foundation for our comprehension of economics, and the entire manner by which we understand the world, though I shall not delve into applying Mises' insight into the teleological nature of the human understanding. The reason why it is a synthetic judgment rather than an analytic one is that the predicate of action is not contained in our concept of man, rather it is synthesized with it in the statement: “man acts.” It is necessary here to remember the Kantian notion that though all knowledge stems from experience, with analytical judgments yielding no more knowledge than we started off with, that does not mean that it is from the content of the experience that we learn. Rather, we can analyze our experience itself in order to discover the preconditions of it whence we discover the synthetic a priori truths, and the action-axiom perfectly fits in this category. As established above, the judgment “man acts” is not an analytic one, rather it is a self-evident, irrefutable statement about the way by which man must experience his reality; truly, the very action of trying to refute it results in its validation. In the end, the axiom-action is a synthetic a priori judgment that is one of the many foundations of human experience.

Since the action-axiom is undeniable true, the basis of praxeology also rests on such grounds, and the synthetic a priori nature of the former also shines light on a fact of the entire praxeological framework: that we need it construct it antecedent of our analysis of society. It is only with the conclusions, and laws of praxeology that theorists can understand the workings of society, without them, he is doomed to linger in the dark for he is without a compass in his endeavor for understanding. Much like how synthetic a priori truths structure, and unify our perceptions through our understanding, praxeology does so for our understanding of society: there are far too many factors at work for empirical methods to yield any understanding, not to mention the fact that man is also a moral agent who does not react to the same stimuli similarly as atoms, or stones do, but I digress. From the action-axiom, praxeology derives similarly necessary truths that are required for our very experience of the world that are unattainable from any empirical inquiries; no experiment will yield the fact that in all transactions both parties will result in a psychic profit for both, and that the entire affair would have never manifested had both thought they could not gain from it. Had we relied on purely empirical methods we would never have discovered crucial truths about society, truths that are the very basis of our experience, and hence synthetic a priori.

Overall, the action-axiom is a synthetic a priori truth in that the judgment “man acts” is a necessary foundation for experience, and it gives similar truth to praxeology. Ergo, it is the role of praxeology to guide our analysis of human society by illuminating for us the laws that elucidate manner by which man must act by necessity, laws that the theorist would be condemned never to discover had he relied on an empiricism.

Kant's Analytic-Synthetic Dichotomy

laminustacitus — Mon, 08 Jun 2009 16:59:00 GMT

In his Critique of Pure Reason, Immanuel Kant defines a synthetic judgments as one in which the predicate “B lies outside of the concept A, though connected with it,” as opposed to analytic ones in which “the predicate B belongs to the subject A as something which is (covertly) contained in the concept A”. He then proceeds to refer to analytic judgments as “elucidatory” since nothing is added to the concept by means of the predicate, the concept is merely broken into its constituent parts , and to the synthetic judgments as “expansive” since they add to the concept a predicate that was not hitherto thought in it. Kant's example for an analytic judgment was “All bodies are extended” since our very concept of any body includes a concept of extension, all we need to analyze it, to “become conscious of the manifold that I always think in it.” Nevertheless, since the two concepts are tautological, though, the judgment “All bodies are extended” not enlarge our knowledge of what a “body” is. Similarly, he gives as an example for a synthetic judgment: “All bodies are heavy” where we are adding to the concept of a body, a predicate that is quite different from the concept, and it is by this process magnifying our knowledge of the body. From the above it then follows that all analytic judgments must be a priori since it is by analysis we are discovering the predicates that, by their very nature, accompany our concepts (experience cannot change that fact that in our concept of a body is included the predicate of being extended), and that all empirical judgments are synthetic (synthetic a posteriori) since here we are adding, by the process of experience, predicates onto our concepts (it is by experience that we base the synthesis of the concept of a body, and the predicate of weight).

This leads to the problem of the possibility of synthetic a priori judgments since if I am to reach beyond the concept A, and synthesize it with another concept B, then what is the justification behind that act of synthesis, for there is not experience to guide me. Investigating this, Kant, whom I shall quote at length here, ponders about causation saying:

Take the proposition: Everything that happens has its cause. In the concept of something that happens I do indeed think an existence preceded by a time, ect., and from that analytic judgments can be obtained. But the concept of a cause is entirely outside that concept and indicates something different from that which happens; hence it is no way contained in that representation. How then can I predicate of that which happens something totally different from it, and know the concept of cause, though not contained in the concept of that which happens, as belonging to it, and belonging to it necessarily.

For Kant, the solution to this was that synthetic a priori judgments are the manner by which the human understanding necessarily orders, and unifies its experiences; hence, the synthetic a priori truths, including the truths of mathematics (for the sum of interior angles is not included in the concept of a triangle), are the internal limits of our understanding, they are the manner by which man is condemned to experience his world.

In the end, the difference between synthetic, and analytic judgments is that in the former the predicate is not included in the object, and that in the latter the predicate is included in the concept. In the realm of analytic judgments, the only possibility is the analytic a priori in which one analyzes a concept into its constituent predicates, and Kant's example for such a judgment is “All bodies are extended.” In that of synthetic judgments, there are both synthetic a priori, and synthetic a posteriori judgments with the former being the necessary conditions of experience, and the latter being the result of adding predicates to concepts via experience; Kant gives mathematics as an example of synthetic a priori judgments, and “All bodies are heavy” as an example of a synthetic a posteriori judgment.

Immanuel Kant, Critique of Pure Reason. (New York: Penguin Group, 2007), 43 (B11)

Kant, 43 (B11)

Kant, 43-44 (B11-12)

Kant, 45 (B14)

The Action-Axiom: Introduction

laminustacitus — Mon, 08 Jun 2009 03:08:00 GMT

The action-axiom is the basis of all praxeology, and it is the basic proposition that all specimens of the species homo sapiens, the homo agens, purposefully utilize means over a period of time in order to achieved desired ends. In Human Action, Mises defined “action” in the sense of the action axiom by elucidating:

Human action is purposeful behavior. Or we may say: Action is will put into operation and transformed into an agency, is aiming at ends and goals, is the ego's meaningful response to stimuli and to the conditions of its environment, is a person's conscious adjustment to the state of the universe that determines his life. Such paraphrases may clarify the definition given and prevent possible misinterpretations. But the definition itself is adequate and does not need complement of commentary.

The action axiom, as an a priori fact, is true by definition, and any attempts to disprove it are actions that result it its validation.

This is my introduction to a series of blog posts that I shall be writing about the action-axiom as I myself attempt to magnify my own comprehension of it; therefore any input, or even critiques of what I write are appreciated . Among the topics that I will be writing about include the superiority of the Kantian understanding of the action-axiom to the Aristotelean, how it reinforces the fact that the laws of economics must be theorized antecedent to theorists looking at human society, and a criticism of the positivists critiques about it.