One of my correspondents (RG Prior) responded to an earlier post on money.
You don't appear to provide any reason to disregard Austrian economics, or to dismiss Mises.
Well, I think it is inhuman in the political policies it promotes, fails in understanding humanity, and fails even to understand that its practical proponents (i.e. conservative politicians) will not hold to such non-populist policies.
This, and the suggestion that IT systems will be able to read people's minds and predict the impact of innovation within 10 years sufficiently accurately and frequently that they will enable effective economic planning and the ditching of markets, indicates that you put dogma ahead of reason.
Not really, because I am in fact worried about the sheer amount of individual tracking that goes on already in our economies. In other words, not dogma, but reasonable prediction.
But, first of all, on the harder question. There is less and less social science proof that people have individual free will. Even if they do, the variety of what is willed is within very narrow limits. I agree that people may naturally have a higher choice range than older soviet central planning could account for, but on a mass level RFIDing goods, tracking credit card spending, etc. is giving organizations like Walmart an essentially "planned" approach to its internal economy. Hell, we even know people will buy more iced yogurt if it's placed in the middle shelf of the last aisle in a supermarket.
I think these IT changes already well under way, will make talk of "reading peoples minds" irrelevant. IT will not read people's minds, it will predict their economic behaviour.
In other words I think the economic calculation problem will be solved by modern IT (and its predictable developments) in a way that makes the eighty-year old theories of Mies and Hayek just a matter of historical interest.
I'll tell you what. 10 years is soon enough that there's a decent chance both of us will still be alive. What shall we wager that IT systems with those capabilities are ubiquitous within that period?
Of course, we will need to come up with some tests by which this can be judged. Something like the Turing test, but demonstrating mind-reading and predictive capabilities rather than the ability to convince a human of the respondent's humanity?
Well since, by my current calculation I have been HIV+ since 1985, I really doubt I will be around ten years hence.
But we will see in any case that I am not predicting mind reading technologies within ten years. I think such technologies will be available in 30 years or so, and I find that quite as frightening as anyone else.
6 comments:
"I am in fact worried about the sheer amount of individual tracking that goes on already in our economies. In other words, not dogma, but reasonable prediction."
So this is not something that you advocate, but something that you fear? In that case, we agree on quite a lot.
If you think Austrian policies are "inhuman" but the surveillance society needed to implement a socialist alternative is "frightening", you appear to be stuck between a rock and a hard place.
Sorry about the HIV thing, by the way. Didn't know.
The question of the humanity (or otherwise) of the policies that flow from one or another political/economic philosophy is an interesting one.
I guess, in the Austrian case, you are thinking of the advice, in a recession, to allow liquidation of insolvent businesses, to raise interest rates, and to cut non-essential public-spending.
This undoubtedly does no favours to bankrupt businessmen and their employees, those who are significantly in debt, non-essential public-sector workers and those who use their services.
On the other hand, the alternative policies also have their losers. If we bail-out bankrupt businesses, cut interest rates, and increase public-sector spending, we punish solvent businesses and their employees, savers, taxpayers and future generations.
I don't see why the imprudent are more deserving of our intervention than the prudent? But I know which signal is better to send out, and which route will take us to a more balanced and sustainable economy rather than straight back to the start of another cycle, or worse still to the stagnation caused by the failure to allow systemic problems to correct themselves.
"[Austrian economics] fails even to understand that its practical proponents (i.e. conservative politicians) will not hold to such non-populist policies."
That is a good point. In a sense, Mises and Hayek would agree with you. Neither of them believed that it was possible to impose from above a political programme based on their philosophy, without wide public support.
Mises believed that the most important thing for a better future was for the public to be better educated in real economics (not the mathematical nonsense that we both dislike), because change could only be sustainable if the public understood the fundamental laws that doomed socialism and interventionism to failure. It is an irony that the dominance of modern, mathematical, neo-classical economics (of the various schools) is a barrier to the subject being comprehensible, attractive or useful to most people, maintains widespread economic-illiteracy, and therefore supports the perpetuation of socialist and interventionist delusions that most of those economists would condemn.
Hayek repeatedly emphasised the need to win the battle of ideas in order to enable a political climate in which sound policies could be implemented. He acknowledged (e.g. in his essay The Intellectuals and Socialism) that "the second-hand dealers in ideas" were instinctively drawn to socialism, generally "able to make out a better case than the majority of his opponents", and that this preference had "proved fatal to the influence of the liberal tradition".
But we do not change things for the better by limiting our vision to those policies that a present politician will be likely to implement. It is the politician's job to work out what compromises must be made with public opinion. The rest of us are free to promote the ideas we believe in, in the hope that we can influence public opinion and therefore enable politicians to implement and hold to policies that they could not previously have considered. So I would not regard the current unpopularity of Austrian ideas as any reason to disregard them. If that logic had prevailed, we would still be living under an absolute monarchy.
On one point, I must correct you, though. Austrians are not conservatives, they are liberals (in the classical sense, not the modern, wishy-washy, social-democratic sense) and (so long as we are in the lower-case) the politicians most inclined to implement Austrian policies will also be liberals, not conservatives.
"on a mass level RFIDing goods, tracking credit card spending, etc. is giving organizations like Walmart an essentially "planned" approach to its internal economy. Hell, we even know people will buy more iced yogurt if it's placed in the middle shelf of the last aisle in a supermarket."
You're proposing the replacement of markets by computerised economic planning, aren't you? What will be your substitutes for credit card spending and buying yogurt, which will provide as much information about preferences as is provided by those market activities?
"[Austrian economics] fails in understanding humanity"
In my view, the case is exactly the reverse. Austrian economics works with the grain of human nature, whereas socialism works against it. Socialism relies on a degree of unselfishness that is not borne out by experience. It also relies on highly (indeed perfectly) rational beings within the central coordinating agencies. Free markets are a way of coordinating social cooperation that copes with and indeed harnesses man's imperfect motivations.
I think this criticism of yours is based on your view that Austrian economics relies on "rational markets", whereas the more we learn about human psychology, the less rational it seems, and the less free our will.
This is a semantic issue. What Austrians mean by "rational" is not what a psychologist means. Rationality, as it is used within Austrian theory, does not refer to reasonable behaviour, or the well-reasoned output of the conscious mind. It refers only to the product of human choice and action, not to the psychological causes.
It is irrelevant to Austrian economic theory whether someone buys a yogurt because he is hungry, because it is stacked on a particular shelf, because he viewed an advert for it, because it is discounted, as comfort food, or any other motivation (or more likely, combination of motivations). Indeed, it is fundamental to the theory that the motivations for every action will be individual, complex, unpredictable and unrepeatable.
For the purpose of the theory, all that matters is that he has made this choice, in preference (whatever the conscious or subconscious motivations) to the many other choices he could have made. At the moment of making that choice, he does so because it satisfies some urge more closely than the alternative options available. In other words, he has expressed a preference. His choice and action have moved him, however temporarily, from a lower to a higher state of contentment.
It may have been a foolish purchase, and one with which he will soon be dissatisfied, but the Austrians are betting that, on the whole, (a) he will guess what will increase his utility more often, more accurately than would a government-agent or computer making the choices for him, and (b) that even if he were so useless that an agent could make better choices for him, he would value his freedom sufficiently to prefer to make his own mistakes than have them made for him.
Well you are certainly a committed and coherent believer in your theoretical position.
A few comments.
I don't see why the imprudent are more deserving of our intervention than the prudent?
1.I don't think Capitalism rewards the prudent and imprudent, it rewards the lucky and punishes the unlucky.
As I have said elsewhere, I am on the side of the "runts".
2. I am quite aware of transformations of the term "liberal".
3. "You're proposing the replacement of markets by computerised economic planning, aren't you?"
I am suggesting that this is already happening, that is its taking place in the private sector just as much as the public sector. In fact, it's being pushed by private companies who as institutions - unlike banks - have no intrinsic desire to see "free markets." While I have some real reservations about privacy, I don't thing this is a bad thing.
4. Austrians are betting that, on the whole, (a) he will guess what will increase his utility more often, more accurately than would a government-agent or computer making the choices for him, and (b) that even if he were so useless that an agent could make better choices for him, he would value his freedom sufficiently to prefer to make his own mistakes than have them made for him.
This may or may not be true. It's a metaphysical rather than a scientific statement.
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Personally I think markets are destructive of happiness and the environment. They tread on families and create false ideas about status and wealth.
Once the world can been organized in such a way - by IT if necessary - that everyone is fed, clothed, housed, given medical treatment, and access to education in a sewage-free sustainable world ecology. If all that can happen, I am then quite prepared to let some people choose between Prada and Versace handbags.
Until them, I think a *well* planned economy will produced the shared wealth better.
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