abskebabs

I want to reply to this post specifically and may come back to reply to others when I have time. First of all you have misconstrued what kind of science economics is. It pays no attention to what factors or characterisations one can make in order to explain why man acts in a certain way. This is the task of psychology, not economics or praxeology. It rather, starts off from the notion that man acts, hence has a set of ends ranked in terms of preference or urgency taken as a given, and wishes to apply whatever means he may find to achieve these ends. This is not controversial and has formed the backbone of Micro-Economics since Lionel Robbins wrote "The Nature and Significance of Economic Science." It investigates the necessary structure of action. More importantly, It is not interested in humans as physiological or psychological beings, but as acting beings. In that sense, economics applies to any kind of acting being, human or not. The same is true for mathematics or computer science. Computer science does not ask whether a computer is a circuit board or a human writing on paper. The rules unfold as they unfold regardless of the nature of the computer. If the rules are violated, the laws break down regardless of the nature of the computer. What you have called a disadvantage,, a reliance on metaphysics is the entire point. Finally, the empirical and nominal notions, you cite as the requirement of establishing what you think would be an actual economic science actually have nothing to do with the real questions economics seeks to answer and elucidate. You have the comics, with episodes 2 and 3 linked above. Can you explain to me how making "measurements" or arranging statistical data would ever solve the diamond-water paradox, or even the imputation problem? Finally, I'll link the piece of work I recommended you to have a look at in my PM. I think others will appreciate it too: http://mises.org/journals/scholar/long.pdf It clarifies how little Misesian Economics has to do with the Cartesian brand of rationalism.

There are numerous advantages, but what I think is the chief one is its consistent application of a logical method of deduction to produce the theorems of Economics from very basic notions implicit in the concept and nature of action in the real world. This naturally may sound very contentious and nonsensical, to those with a positivistic view of science, as it did to myself when I first encountered them. The following is a set of easy to read sources that I think provide a good example of how this method of elucidation is actually utillised. At best, it may give you an idea of where I'm coming from: The first is a series of comics, although not finished, starting from very basic considerations: Human Action Comics #1 Human Action Comics #2 Human Action Comics #3 Human Action Comics #4 I think they also provide an interesting, while amusing glimpse into the intellectual history of the development of Economics. Another great, and more broad source designed for the layman is: Economics for Real People by Gene Callahan The following provides a fairly good overview of the school: http://mises.org/about/3223 Incidentally, unlike much of neoclassical economics, wholly unrealistic assumptions are not utilised, though theoretical constructions are used in a fairly strict way according to the Method of Imaginary Constructions. This is all covered in Human Action. Arguably, and as noted in the Wikipedia article Hayek was closer to the "mainstream" because of his more amicable methodological stance, and for the fact that he was in many ways, or at least tried to be; a general equilibrium theorist. Hence why John R. Hicks, an author I currently am looking at, considers much of his work in Capital and Interest theory to be along the same lines. Knut Wicksell to a lesser extent(since his work was used in Hayek's elaborations of Misesian business cycle theory), and Phillip Wicksteed to a much greater extent can be considered "proto-austrians". I don't think I have the patience or the time to debate these issues any longer, at least not for now; these discussions have taken a surprisingly long amount of time from my studies, which I think I should get back to. You did make a thread to dedicate to the subject however, so I thought these links would be useful for your discussion. Have a good one;)

And I find your responses uneducated and wilfully ignorant. The procedure chosen for the scientific investigation of bodies of knowledge and phenomena has a dependence on the nature of that which is under investigation, not the other way round. Hence the failure of J.S. Mill's attempt to create a foundation of logic as an "empirical science." Hence also the failure of the Milton Friedman's project to establish Economics as an empirical science, since you correctly state there are no measurable constants, and to even think such assumptions of constants and idealisations the Austrians DO NOT IMPLY, like perfect competition and perfect knowledge leads to fundamental and philosophical contradictions taken to their final conclusion. This does not mean however, there is no fundamentally true knowledge that cannot be gained from Economics. If one derives one's statements from little more than what is implicit in the nature of purposeful action, the existence of scarcity and the quantitative relations of cause and effect prevalent in the world, then the entire body of sound economic thought can be deduced. As I said earlier, the validity of these statements is certain but have to be evaluated ET CETERIS PARIBUS when interpreting their empirical consequences. Again, since you are vehemently debating a subject you seem to know almost nothing about and have not studied, I don't expect this conversation to get far either, and these will be my last words on this thread, and perhaps this section of the forum.

Your criticism of the terminology I used is certainly interesting. I used the word "crucial", since I thought by implying that these companies were "too big to fail", you were essentially implying that this was a problem; since due to their size, their survival was crucial to the functioning of the economy. If this is not the case, then am I correct in ascertaining that you are utillising the word "big", in a purely neutral, descriptive sense? If so, then I'm puzzled as to what the problem of letting these firms collapse is. On your second point: You are again correct in pointing out the historical fact that current conditions do not resemble that of a free market/pure market economy. However, neither the nominal conditions that describe the current state of reality, nor their heuristic development have anything necessarily to do with the logical construction of a scientific description of reality. We do start off our analysis of the mechanics of motion down slopes initially with idealistic assumptions like frictionless slopes that are at best only approxiamtely recreated in reality, and step by step introduce other elements like friction and angular momentum after analysing the ideal case in isolation. Although there are important respects in which the theoretical constructions of Economics differ; their logical construction is similiar in this regard. The definition of a market economy is that means of production are privately owned. The case where this true for all means is the pure market economy. All other cases are classified as hampered market economies. When all means of production are owned by the state, this is a socialist commonwealth. The only logically contestable procedure for developing a description of economic phenomena(note this is true for virtually ALL schools of Economics, the Austrians are simply the most consistent in its application), has been the elucidation of all features logically implied by the theoretical construction of a market economy, and only then proceeding to investigating the effects of interventions and regulations over the decisions and voluntary contracts agreed on by acting individuals within its sphere. Indeed you are already contradicting yourself in criticising such a procedure. In asking for regulation, you first depict the alleged disaster that would be brought about by the operation of a free market.

No, of course not, I cited moral hazard as an extra causal factor not the main one, and I replied to iNow in your earlier thread because he misconstrued what i said. The main factor is the distortionary effect that credit expansion through the Federal Reserve and the fraudulent fractional reserve banking system have on the development of capital structure and industrial organisation. I published an article on this forum back in February explaining both that you might want to have a look at: http://www.scienceforums.net/forum/showthread.php?t=42329 Many of these Wall Street banks that you consider too crucial to fail do not even serve much of a social function, and definitely would not survive on a free market since they do not even lend their own capital and simply utillise Fed credit to arbitrage the market.That is how they are making record profits even though the general economy is declining. You can't even claim they fulfill any social function.

If you're talking about the bailiuts and the redistrbutional Cantillon effects benefitting bankers and their main industrial clients as the ones who first receive new credit; for once I can entirely agree with you. This should never have been allowed to occur and at once we should get rid of central banks and legal tender laws to get rid of this facist favourite picking system.

Interesting, especially since you're often the first to often correctly claim that current conditions do not in any way resemble that of a free market, yet you still use our experiences of government intervention in the monetary sphere as your obvious "proof" of the failure of the free market. How "scientific" of you.

Not sure what you mean. Apart from the situation of states and "public property" that is effectively owned by no one, companies are exclusively owned by entrepreneurs or exclusive ownership is split into portions delineated among shareholders. Disputes are then settled between parties accordingly by the settlement according to contractual agreements between individuals, i.e. between creditors and stockholders. Individuals may act in groups but catallactic action like all others is vitiated by individuals, and dealt with accordingly. There is no mythical "group right", and I think you mistake the concept of property rights with your own arbitrary egalitarean whims for the redistribution of wealth.

Libertarians support the defense of individual property rights and prevention of the violation of voluntary contracts. If that means coming on the side of the employer, employee or consumer so be it.

I think I possibly should have said the "continental" meaning of the word as opposed to the specific spanish, thoug valid reference. My point was that the word liberal having socialist or social democratic connotations is only a comparitively recent phenomenon, hence the distinction between its orignal conception that is labelled classical liberalism and what is often referred to as social liberalism. Liberalism originally was a doctrine advocating the defence of individual and property rights in the form of advocating freedoms both economic and social, from arbitrary trespass on the part of the state. Hence it used to be more properly associated with thinkers like Richard Cobden, Frederic Bastiat, Gustave de Molinari etc. In the 20th century this has been significantly narrowed and diluted to only a defense of social freedoms, if that. Hence your false left-right dichotomy. For reference check out: http://en.wikipedia.org/wiki/Movimiento_Libertario http://en.wikipedia.org/wiki/Liberal_Party_(Denmark) http://en.wikipedia.org/wiki/Italian_Radicals http://en.wikipedia.org/wiki/Liberal_Democratic_Party_(Serbia_2005) Admittedly the word liberal is one with changing connotations, and I don't doubt that the current western connotations are being adopted in other countries.

Interesting that Libertarian is positioned as a characteristic of the left, I would have thought it to break the entire left-right paradigm since libertarians reject both the warfare and the nanny state. Also unsurprising is the lack of acknowledgement that liberal actually means quite the opposite of what is meant in the UK and US in the Spanish speaking world, and also the English speaking world of the past(check out Bastiat, Molinari and the classical liberals).

Depends what you mean by science. If you mean it has nothing relevant to say about the real world that is nothing more than the collection of arbitrary opinions on a certain subject, I entirely disagree. I can only slightly sympathise, as this was my opinion before engaging in a study of the subject myself. The concepts of psychic profit, loss and marginal utillity are defined in the very concept of action in the real world in the first place, in the sense we cannot reason it to occur without them. Again without reading the subject, it's very easy to dismiss it out of hand. I urge you again to read the essays I linked.

Equally, I find your responses to demonstrate very little critical reasoning or thought with regard to the concepts under discussion. You're right we entirely disagree. I brought up mercantillism precisely to respond to your claims about credit being the alleged lifeblood of the economy; a treacherous half-truth at best. You seem to miss the point that liquidation would have brought about massive deflation erasing much of the previously created artificial credit, so losses in real terms would not have actually been that high, given the drop in money supply. Indeed this is part and parcel of the entire correction process as had occured in 1921, and other recession recoveries. In any case, if you read the set of essays I linked and would like to discuss the matter further, possibly in another thread, send me a PM. I also would like to apologise for being rude eariler. The nature of what I've seen discussed on this forum lately, from defenses of marxism to utter blindly naive defenses of current economic policy has really ruffled my feathers.

I'm not sure what's so wrong, as the Wikipedia article said estimates vary and it certainly does not show all of them. Also, Woods' work on the subject is more recent so it may well be he has accounted for things others have missed or not accounted for. He's also not that far off on employment from Stanley-Lebrott so I'm not sure what you're beef is there. Also your claim that the causes are different is only true on a superficial basis. It is an example of another malinvestment boom fuelled by credit creation and inflationary monetary policy carried out by the Fed, albeit it affected different sectors. This is to be expected however.

I think you first have to get rid of the popularly propogated and unjustified neo-mercantillist myth that the "credit" created by fractional reserve and central banking somehow creates real economic growth, rather than inflation, malinvestment and fraud. Sure the debt ridden institutions would have been liquidated, and where their creditors could not be paid back from the sale of their assets they would have to abide by their losses as part of the contract; simple as that. Sustainable investment has to come from real savings(these have been destroyed in the US, hence why it is no longer a creditor nation), to allow true development via capital accumulation, a truth Adam Smith thought he made clear when destroying the fallacies of the mercantillists, which unfortunately came back to haunt the world with the writings of John Maynard Keynes and his followers in the 20th century. Indeed a rise in interest rates that would occur if the recession were allowed to take course would help both increase the rate of savings, as well as prevent further capital flow toward wasteful projects, as has been continued for the last year. Both these steps would mark the first few towards a real recovery, though there is no doubt that the structural problems in the US economy are serious. Exacerbating them further however will not help. So you understand where I'm coming from, I'd like to recommend, if the fact it's hosted by mises.org doesn't make you sneeze ideologically, you read the following set of essays: http://mises.org/pdf/austtrad.pdf You never know, you might learn a lot.

I'd say about 1-2 years. Read up on the 1921 depression, and what was done by Warren Harding's administration at the time for reference. Again, the link I supplied by Tom Woods is a great place to start: http://www.firstprinciplesjournal.com/articles.aspx?article=1322&loc=fs Given how much a REAL recovery has been hampered politically however, I'd say the US will not recover for at least about a decade, unless serious political change is made.

A mixed bag. There would have been temporary unemployment in the mal-invested sectors, but on the positive without the Fed massively increasing the money supply there would have been a high degree of deflation, especially in staples benefitting ordinary consumers. The economy would present a real recovery and unemployment figures would begin to fall sustainably as capital is allowed to be allocated more productively, and as savings are allowed to build up. At the moment the prospects look to be long term unemployment, stagnation and possibly even stagflation, as capital is still unproductively allocated, and even capital consumption is occuring with idiotic schemes like cash for clunkers!

1) Depends how you define the world financial system. If you mean all types of banks and financial intermediaries worldwide, then the simple answer is no. I don't deny a lot of banks would have suffered, especially those most leveraged and adjusted to such an artificially high supply of credit backed by low real savings. However, their clearing and the clearing of their assets through an honest insolvency process from the system, would have been a necessary correction. Call me whatever you like, you can stay assured your dollar backed assets are safe and drink as much coolaid as you like.

As I tried to point out, this would not culminate in a complete collapse of either the financial sector or the economy. There were plenty of smaller banks ready to take the place of the failing ones. I don't deny there would have been a short, sharp depression if nothing was done, but the damage was already done during the boom making such a correction inevitable. All the further interventions have done is make a larger collapse inevitable, while the fundamentals economically are terrible, and politically preferred failing institutions have been bailed out. Given the interventions, the outlook looks far worse as a result. If you see "green shoots" give me a shout, but you're chasing a unicorn.

What is it you don't understand? Doing more of the things that created the crisis in the first place does not solve it. Indeed, continuing these policies, is precisely what destroys and has been destroying the economy. How is it not doing these things creates (gasp!) a complete collapse? The only thing the policies of the past year have done is to further damage the economy, bail out inefficient companies, keep the capital structure poorly adjusted and make inevitable the upcomng dollar crisis. The prices adjust and losses are revealed in balance sheets because entrepreneurs are revealed the level of malladjustments of capital that were made during the boom. The damage has already been done, and the correction needs to be allowed to take place, the sooner the better. Otherwise look forward to your 10 year depression.

Ever hear of the Greenspan put, or do you selectively read what I write so you can make false accusations?

Just because my conclusions do not fit in with your own pet theory or that fed to you by your political masters does not make them an "ideology" that has nothing to do with reality. Rather than resorting to criticising any specific points in my reasoning, your labelling makes your argument moot, not that you had any to begin with. Just out of curioisity, did you look at the earlier link I provided on the inflationary depression created in 1921? It was in many ways worse than the 1929 one, yet there was a swift recovery within 2 years. And you know what the Harding administration did? They engaged in NO stimulus, and lowered government spending and taxes. Meanwhile the Fed was not allowed to inflate either. Keynesians still cannot explain this even today, and they are also the same people who predicted a depression after World War 2 given the huge drop in government spending. And I'm the one who's crazy? For reference you may want to check out the following piece by Tom Woods on the subject: http://www.firstprinciplesjournal.com/articles.aspx?article=1322&loc=fs

I don't think that such a collapse was warranted given the fact the major problems were with large, highly leveraged banks and investment banks that did make bad decisions dabbling in mortgage securities and credit default swaps, while albeit being misled by false interest rates and moral hazard. But given the corrections that were already taking place, by no means was commercial lending overall(many banks, especially smaller banks were not making these mistakes, and in ordinary circumstances would have taken over, gaining market share) even dropping overall until the TARP was passed as shown in the chart I posted on your other thread. Also you're charge is a little unwarranted in the sense that you believe the propaganda Paulson spewed out in order to pass his bill. Nobody would back a package to bail out the fat cats on Wall Street, so instead it was sold that small businesses would lack short term financing. Have you ever thought to yourself what kinds of business would pay their employees would pay their employees with borrowed money, and do you really think this represents the cross section of small businesses you cry about the collapse of if no bailout is given?

No if anything, that's more your solution and the solution that has been taken. Intervene heavily in money and banking, create an unsustainable boom followed by a bust, slap yourself in the face and say, golly gosh I should have done even more damage, then I'd get better! Even better, let's raise taxes and increase govenment spending, bidding resources away from the already crippled private sector! But for God's sake, don't allow the market or prices to correct!