The free market and unintelligent design

[bascule]

 

From this diagram I think it's pretty obvious that this structure is not a stable one. It's also obvious why Bear Stearns collapsed, and why AIG would've collapsed without the bailout. Much like evolution, the free market does not produce optimal structures, because it is not an intelligently guided process, but one which operates according to the emergent behavior of the various systems involved.

 

It seems like with a little regulation, putting more intelligence into how the system is designed, we could avoid having structures like this appear in our financial system. We paid $700 billion to avoid having this obviously unstable structure completely collapse.

 

Given this, I really don't see why people advocate relying entirely on emergent behavior to let these structures evolve. It reminds me of creationists who look at the sort of weird systems evolution produces and think they're intelligently designed.

 

This is a bad design, and one we paid dearly for.

[Pangloss]

I agree with what you're saying. In answer to your question, I think the problem is not only a political (or ideological) one, but also a problem of comprehension and prediction. Even setting aside the ideological issues it may not have been possible to predict this outcome. Nothing quite like this has ever happened before, at least not on this kind of scale (and scale does impact analysis).

 

So there's an academic problem here as well as a political one.

[ParanoiA]

Given this' date=' I really don't see why people advocate relying entirely on emergent behavior to let these structures evolve. It reminds me of creationists who look at the sort of weird systems evolution produces and think they're intelligently designed.

 

This is a bad design, and one we paid dearly for.[/quote']

 

No, you won't let the emergent behavior check itself. You bail them out, you legislate their existence, you print money and regulate the hell out of the whole thing and then pretend as if what little resemblance of free market is left over is the culprit for the disaster.

 

You can worship central planning and start as many threads as you want on disparaging "emergent" planning, but it's still avoiding the issue and spinning political preference. Central planning has it's own set of problems, costs and catastrophes.

 

The difference is in how power is appropriated - consolidated or distributed. An emergent system creates a more distributed power structure which compliments our old fetish for liberty. The central planning system consolidates power to the central authority, whatever form that takes, which obviously does *not* compliment a republic design, let alone a liberty driven republic. I know you all think it does, but I don't agree.

 

We get all of these reminders about those who trade liberty for security deserve neither when we're talking about war and George Bush but that all seems to go out the window when we're talking about economy and Obama. The more of the economy the state takes upon itself, is the less of the economy run by free people - that's an encroachment of liberty. And it's a stab in back of market forces that serve as the check on our system when they're ignored - ie. the bailouts.

[iNow]

The more of the economy the state takes upon itself, is the less of the economy run by free people - that's an encroachment of liberty.

You have made the assumption that an economy which is less state regulated will always make a person more free, but this is hardly the case if that persons ability to survive is being trampled by this free economy you so worship. Just look at this pragmatically... Who is more free: The person who is unable to feed themselves or find shelter living under an unregulated economy without state safety nets, or a person provided with assistance programs and protections living in an economy with greater state influence and control? Further, the freedom required in your approach also allows companies to implement dreadful practices and avoid safety conditions (I encourage a read of The Jungle by Upton Sinclair).

 

 

I understand the argument you are making, but find it based on an unrealistic ideal, an ideal which assumes (and explicitly relies upon) conditions which never were and never will be present.

[ParanoiA]

You have made the assumption that an economy which is less state regulated will always make a person more free, but this is hardly the case if that persons ability to survive is being trampled by this free economy you so worship.

 

No, actually I haven't. Regulations are a force by government to protect someone else's liberties. Regulations, on their face, are quite justified.

 

I'm talking about taking ownership. I'm talking about buying crappy companies and then kicking out their CEO's. I'm talking about invading the private sector with acquisition, using fear to get the public to comply. I'm talking about forcing companies to readjust their mortgage rates for irresponsible poor folk that choose to stay poor and abuse credit intentionally.

 

In short, these companies won't behave this way when you make them account for it. When you circumvent market forces, you create an unnatural condition that can't be swept under the rug. So when you unsuccessfully ignore it and then use it as a pretense for fault, you're just adding to the insult.

 

I think most of the behavior and structure we see in the market today is a direct result of complicated implied safety nets built up throughout the years to the point that risk assessment is no longer checked by natural forces.

 

Who is more free: The person who is unable to feed themselves or find shelter living under an unregulated economy without state safety nets, or a person provided with assistance programs and protections living in an economy with greater state influence and control?

 

The first case is more free. The second case requires the freedom of countless others to be sacrificed in order for this person to be free. That's tyranny. I get the same result owning a slave. I'm more free then, with better resources, time to spend with my family, accumulation of wealth - at the expense of other's liberty.

 

It's easy to do this more-free less-free thing when you're only looking at the person gaining freedom. Remember, all men want liberty. Some want liberty for all, some want liberty for themselves over others. I'm the former case.

 

But of course, I'm not advocating non-regulation and zero entitlements. We do sacrifice our liberty right out the gate when we enforce taxation. But a freedom first society will not tolerate much beyond that. And we are way, way beyond that.

Edited April 25, 2009 by ParanoiA

[iNow]

Okay. That most certainly helps, and you're right, I did have some misconceptions about your point. I need to think on this for a bit (also, I need to go outside and mow my lawn before it rains later, so in the words of the Governator... I'll be back.)

[The Bear's Key]

So when you unsuccessfully ignore it and then use it as a pretense for fault....

And that is how politics work...often enough.

 

Half the U.S. government is opposed to public schools, ignores their needs -- willfully, mind you, usually by cutting funds or with half-ass efforts, laws, fixes -- and then blames public school ineffectiveness on, guess what...the public schools themselves.

 

If you dig enough into many failures of society, you'll encounter this problem.

 

What's needed isn't pure market or excessive government, what's needed is both smart economics and government.

[bascule]

No, you won't let the emergent behavior check itself.

 

If your attitude is "let them fail" so be it, but do you really think it's better to have a financial system governed by emergent properties which is subject to periodically collapsing, or do you think it would be better if some intelligence were put into the design of the system so risk were more evenly distributed?

 

I'm certainly arguing for the latter. What, really, is the argument for the former?

 

You bail them out

 

Well, my argument is with a little bit better planning risk would've been better distributed and the bailout would've been unnecessary. The bailout is, in effect, a bandaid on a problem which resulted from underregulation. If risk were more evenly distributed then parts of the system could fail without causing risks to the entire system. The reality is Bear Stearns turned into the financial sector's whipping boy, collapsed, and put the entire sector at risk for collapse. This is bad.

 

You can worship central planning and start as many threads as you want on disparaging "emergent" planning, but it's still avoiding the issue and spinning political preference. Central planning has it's own set of problems, costs and catastrophes.

 

Great, so how about you bring up some problems which would occur if the goverment required a more balanced distribution of risk in the financial sector? I'm sure there are cons but I can't think of any offhand.

 

The difference is in how power is appropriated - consolidated or distributed. An emergent system creates a more distributed power structure which compliments our old fetish for liberty.

 

Well, the problem with a distributed power structure is no one's in charge. Having no one in charge does mean everyone is free but it means nobody's in charge of making sure things get done correctly and efficiently.

 

On the flip side, we see that thanks to the distributed power structure we instead got consolidation of risk. Bear Stearns and AIG took on all the risk.

 

We get all of these reminders about those who trade liberty for security deserve neither when we're talking about war and George Bush but that all seems to go out the window when we're talking about economy and Obama.

 

Yep, I'm definitely arguing we should get rid of the "liberty" which allows corporations to set up completely unbalanced co-risk feedbacks. I think that's a "liberty" they probably shouldn't have.

Edited April 25, 2009 by bascule

[ParanoiA]

What's needed isn't pure market or excessive government, what's needed is both smart economics and government.

 

It's just that we disagree on how that's achieved. Since I value freedom over performance, I'm willing to sacrifice for it. You always sacrifice something, whatever your choices are.

 

I love your point on the education system, and how this conceptually finds its way into all areas of politics. You are spot on.

 

I also don't advocate a pure market, but you'd probably call it that compared to what we have today.

 

I'm certainly arguing for the latter. What, really, is the argument for the former?

 

Distribution of power over consolidated power, for all the reasons used to establish the republic.

 

Well, my argument is with a little bit better planning risk would've been better distributed and the bailout would've been unnecessary

 

And my argument has been that we haven't been assessing risk accurately because of the unnatural forces of implied safety nets, and legislation that have built up over time. Do not confuse this with regulations - I may object to some, but not to the concept. I do not believe the housing crisis would have happened if every entity involved thought they were truly on their own - like market forces require. No way for me to prove that, of course.

 

Great, so how about you bring up some problems which would occur if the goverment required a more balanced distribution of risk in the financial sector? I'm sure there are cons but I can't think of any offhand.

 

Because laws typically create a shotgun approach to killing a fly? You're eliminating any chance of innovation or creativity by applying some "standard" for distributing risk, when it can be maintained by establishing a rejection of bailing out the private sector. When you fail to catch a falling behemoth, the message is loud and clear: You will reap what you sow...proceed accordingly.

 

I'm not sure this network of risk and systemic consequence would be as dramatic when those companies know they are not any more special than any other private citizen, and no, they will not be "taken care of".

 

Well, the problem with a distributed power structure is no one's in charge. Having no one in charge does mean everyone is free but it means nobody's in charge of making sure things get done correctly and efficiently.

 

Right. The same consequence with our republic. We don't do things as correctly or efficiently here. Kim Jong Il can efficiently govern and could probably save billions in legislator's salaries, and pass laws by the hundreds on a daily basis. I don't see you or anyone else clamoring for a dictator to take over and make our country more efficient and stable.

 

Yep, I'm definitely arguing we should get rid of the "liberty" which allows corporations to set up completely unbalanced co-risk feedbacks. I think that's a "liberty" they probably shouldn't have.

 

How did they get them? What enables them bascule?

[Pangloss]

Interesting discussion. I'm reminded of a point made last week in PBS's Frontline program on pollution in Puget Sound (available online here). Apparently local county regulation has been used there that says that if you have property that includes over 65% vegetative covering you're required by law to leave it alone -- you can't clear it and develop it.

 

On the surface this seems like an extreme violation of ownership rights, and it's not hard to see why people are upset, especially since it impacts directly on small holders, like individuals with an acre or two of wooded property around their house. But this is in direct response to a specific, local issue regarding pollution caused by rainwater runoff into Puget Sound which is exacerbated by reduced vegetation (nothing to absorb the runoff before it goes into the Sound).

 

I'm sure some on the left will view this as demonstration of the evil of all human development, and some on the right will view this as demonstration of the extremes of liberal governance. But I think it's actually a textbook example of how you HAVE to struggle to find the correct balance between regulation and pure freedom. Pure freedom has produced the current situation -- clearly some degree of regulation is called for. Perhaps the exact degree of this regulation will have to be tweaked, but better to try that and seek out the correct balance over time than to use either extreme (doing nothing, or taking ownership away and putting the state in charge of everything).

 

I am also increasingly mindful of ideas revolving around the concept of "true cost".

[Sayonara]

Slightly off-topic, but is that diagram's resemblance to a mushroom cloud deliberate?

[The Bear's Key]

Slightly off-topic, but is that diagram's resemblance to a mushroom cloud...

I dunno, seems to resemble more Darth Vader's head

 

[Pangloss]

Well that makes sense. The revised Darth Vader is essentially an analog for the law of unintended consequence.

 

 

(He said, desperately trying to drag the thread back on topic.)

[bascule]

Distribution of power over consolidated power, for all the reasons used to establish the republic.

 

Well, that's a nice overriding principle and clearly your answer to everything. But does it really belong here?

 

By that sentiment, shouldn't all business operate most efficiently as anarchosyndicalist enclaves rather than having any management at all? Then power is fully distributed.

 

The same goes for having a government at all. Can't we distribute goverment power equally among all the citizens? I believe that's called anarchy.

 

Why did the founding fathers switch from a government which distributed power more evenly across the states to one with a stronger federal government?

 

And my argument has been that we haven't been assessing risk accurately because of the unnatural forces of implied safety nets, and legislation that have built up over time.

 

What implied safety net? Where was the safety net for Bear Stearns? A company that's over a century old practically evaporated overnight.

 

There was no safety net. The government conjured one out of thin air when they believed that the entire financial sector was on the brink of systemic collapse.

[ParanoiA]

By that sentiment, shouldn't all business operate most efficiently as anarchosyndicalist enclaves rather than having any management at all? Then power is fully distributed.

 

No, because distrubution of power does not promote efficiency at all. Why would you think so? That's the whole point of consolidated power - central planning - to efficiently control and manipulate. The more consolidated, the more efficient, and the more tyrannical. That's the trade off. And since we're talking about private business, they are free to be inefficient and run their business like a republic, or they can choose efficiency and run it like a dictatorship - I would choose the latter for my private business, as would most.

 

The same goes for having a government at all. Can't we distribute goverment power equally among all the citizens? I believe that's called anarchy.

 

Why did the founding fathers switch from a government which distributed power more evenly across the states to one with a stronger federal government?

 

Well the power is equal among the citizens' date=' it comes from them. If they choose to not to wield it or cower like puppies like they do today, then they lose it. They've been losing it for quite some time now and are very comfortable with it. Let's see, how did that saying go...The greatest trick the devil ever performed was fooling everyone into believing he didn't exist...something like that. Our government and today's common citizen is the epitomic relationship of handing power to perceived "benevolence"; as if those good ole days of tyrannical dictatorship all behind us now...never to be returned.

 

What implied safety net? Where was the safety net for Bear Stearns? A company that's over a century old practically evaporated overnight.

 

There was no safety net. The government conjured one out of thin air when they believed that the entire financial sector was on the brink of systemic collapse.

 

You're really going to pretend as if there was no implied safety net for Fanny and Freddie? And that huge corporations - knowing full well their size and stake and "co-risk feedback" systems - and legislating a mortgage market won't have deliterious effects?

 

Look, the government may have done some good things in FHA, but that doesn't make them economically sound. Stealing a donut and feeding a homeless man with it is nice, but it isn't an economic winner. The mortgage market is heavily regulated, by comparison. When I have to put up new screens on my house and install a GFCI outlet in the kitchen in order to sell a one hundred thousand dollar home - that's regulation. Don't misunderstand, that's just beans, but the point is that there is far more regulation than we perceive - every step of the process is littered with regulation that we take for granted.

 

As heavily regulated as it is, you are shocked when you don't preempt market forces with your foresight - so then they get "accused". It's laughable.

 

The entire mortgage market is a carefully orchestarted scheme of regulated steps, from buying to selling - everyone must do it the same way. There isn't that much difference even when one achieves a conventional loan, although there are some steps that can be ignored.

 

I don't believe this interdependency would emerge without the hand of government's regulatory centralization and standardization process of the entire market. Innovation is stifled in such a controlled market - so creativity is limited to loop holes, in this case, financial ones, probably the worst kind.

[iNow]

The libertarian, Austrian, anti-regulation crowd really needs to return to reality. I am beginning to wonder if free marketeering is the new creationism or global warming denial.

 

The failures of the market without regulation are so obvious as to be unmistakably apparent even to a toddler.

 

 

This week, Frontline did a special called "The Warning."

 

http://www.pbs.org/wgbh/pages/frontline/warning/

"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"

 

In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

 

<...>

 

Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. "Born faced a formidable struggle pushing for regulation at a time when the stock market was booming," Kirk says. "Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves."

 

Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.

 

<...>

 

Following the publication of the concept release, Born testified before Congress in support of regulating derivatives. Federal Reserve Chairman Alan Greenspan, Deputy Treasury Secretary Lawrence Summers and SEC Chairman Arthur Levitt all testified against regulation.

 

 

The next time someone argues non-regulation, pure free market, and other Austrian fantasyland rubbish, you should seriously think of them like you do a creationist, a person who thinks aliens abduct people and insert probes into their asses, or people who deny human impact on global climate. They truly are that far removed from reality.

 

 

In the meantime, you should watch this special. It's slightly less than an hour, and pulls together some of the most critical human elements which led to the current crisis, and how mistaken ideologies have caused us all so much strife.

 

Watch Online --> http://www.pbs.org/wgbh/pages/frontline/warning/view/

[abskebabs]

The libertarian, Austrian, anti-regulation crowd really needs to return to reality. I am beginning to wonder if free marketeering is the new creationism or global warming denial.

 

The failures of the market without regulation are so obvious as to be unmistakably apparent even to a toddler.

 

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.

[bascule]

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.

 

Hi abskebabs.

 

Please examine this figure:

 

 

Would you say its obviously unbalanced structure is due to "moral hazards"?

 

I would say it's due to the free market. The structure evolved organically. There was no meticulous well thought out structure in place.

 

The structure is assembled according to each actor's own self-interest, however there was not enough forethought to analyze the rather complex potential systemic effects that could happen if you pull a block out of this Jenga tower.

 

Perhaps you think this is a suitable distribution of risk. Perhaps you think it's this way because the market isn't free enough. Did "moral hazards" make this structure more unstable than it would be otherwise?

 

I think your fundamentally wrong assumption about how the economy works is that all actors can envision all potential types of risk, including complex systemic risks, and any time they fail to do so you write it off as a "moral hazard" because the system isn't free enough. I say sorry, no. We can't trust all actors in the system to envision all types of risk, and we can't just write off actors taking unnecessary risks as occurring due to the presence of "moral hazards". Sometimes people just don't see it coming, and it has nothing to do with "moral hazards". Or as Greenspan said:

 

I made a mistake in presuming that the self-interest of organizations, specifically banks and others, was such as they were best capable of protecting their own shareholders.

 

You're using "moral hazards" as a sort of "get out of any argument free" card and you're playing it against iNow.

 

I call bullsh!t. Self-interest alone will not prevent the actors in the system from taking excessive risks, because some risks are invisible and result from complex systemic interdependencies.

[Skye]

There seems to me to be three main issues here:

 

1. The tendency of industries to consolidate in free market conditions.

 

2. The interconnected nature of the finance industry.

 

3. The uneven distribution of risk within the finance industry.

 

The second two points are what this figure is looking at, but I think the first one is most important.

 

If we assume continued consolidation then the above figure could realistically contain three or four companies at some point. The failure of any company would be almost impossible for the industry to withstand or for the US government to be able to bail or buy out. The failure of larger, less risky companies is less likely. However it is a likelihood, and over a long enough time scale failure would (probably) occur. So even with an even distribution of risk due to well thought out regulation the system would be arguably be more prone to catastrophe, unless the process of consolidation is resisted or ideally reversed.

[bascule]

If we assume continued consolidation then the above figure could realistically contain three or four companies at some point. The failure of any company would be almost impossible for the industry to withstand or for the US government to be able to bail or buy out. The failure of larger, less risky companies is less likely. However it is a likelihood, and over a long enough time scale failure would (probably) occur. So even with an even distribution of risk due to well thought out regulation the system would be arguably be more prone to catastrophe, unless the process of consolidation is resisted or ideally reversed.

 

Indeed, and one of the mantras coming out of the financial crisis was "If it's too big to fail then it's too big to exist!"

 

It's hard to say when "too big to fail" happens exactly, but Lehman Brothers and many other institutions certainly surpassed it. The Fed/Treasury experimented with the "let it fail" approach. Everyone expected the government to bail out Lehman Brothers, and it didn't, fearing the effect it might have on how other institutions might assume risk. The result was the financial crisis.

 

It seems the failure of one of these sorts of institutions is enough to freeze up credit worldwide. I hate to think what would happen if an institution the size of Citigroup were to fail.

[abskebabs]

Would you say its obviously unbalanced structure is due to "moral hazards"?

 

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.

[iNow]

Not too "crucial" to fail, but too "big." They are big precisely due to the lack of regulation. Finally, we're not a pure free market, nor will we ever be. You continue to argue using a constantly shaped and sized spherical cow in an attempt to describe the set of all mammals, which are themselves constantly evolving. In other words, your idealized case is too far removed from reality to be useful.

[abskebabs]

Not too "crucial" to fail, but too "big." They are big precisely due to the lack of regulation. Finally, we're not a pure free market, nor will we ever be. You continue to argue using a constantly shaped and sized spherical cow in an attempt to describe the set of all mammals, which are themselves constantly evolving. In other words, your idealized case is too far removed from reality to be useful.

 

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.

[iNow]

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.

Okay. I suppose that's fair. Let me say it this way. They are so systemically connected to other businesses... businesses which sit at the core and serve as the foundation of our entire economy... connected to these other businesses due explicitly to their ability to act in a free-er less regulated market... such as with derivatives... and connected in hidden ways and with vast amounts of money... that the failure of one of these companies would lead to an unacceptable cascade effect whereby the others would also fail like dominoes... resulting in a profound real world impact and directly leading to significant suffering of real people.

 

I hope you can understand why I substituted the word "big" to simplify that point. This also summarizes why regulations are, in fact, a good thing (see Frontline special I posted in a previous post last night), and why the lack of regulation is so problematic.

 

 

 

 

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.

See above.

 

 

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.

Yet again... You make an invalid comparison, and you AGAIN act as if the economy can be treated using simplified and idealized representations (see my spherical cow reference above).

 

The economy is NOT equivalent to measurements on frictionless slopes, which can be repeated easily by multiple researchers in multiple contexts. I suggest strongly that we take this conversation to the "Is economics a science" thread if you wish to continue, as my larger point is that there is too much variability in human nature and economic systems to be treated in the idealized way you propose, and hence it is NOT a science in this regard, and nor do the premises which you are using as the foundation of your argument have any stability or utility when engaging in these discussions.

 

 

 

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.

I'm not sure we're going to get any where in our conversations with one another on this subject abskebabs. I find your responses myopic, and rather frustrating. You are arguing on premises that are unconnected with reality, and then attacking others when they point out where your assumptions are flawed. Obviously, this is indicative of the fact that your arguments cannot stand on their own merits.

[abskebabs]

Yet again... You make an invalid comparison, and you AGAIN act as if the economy can be treated using simplified and idealized representations (see my spherical cow reference above).

 

The economy is NOT equivalent to measurements on frictionless slopes, which can be repeated easily by multiple researchers in multiple contexts. I suggest strongly that we take this conversation to the "Is economics a science" thread if you wish to continue, as my larger point is that there is too much variability in human nature and economic systems to be treated in the idealized way you propose, and hence it is NOT a science in this regard, and nor do the premises which you are using as the foundation of your argument have any stability or utility when engaging in these discussions.

 

 

 

 

I'm not sure we're going to get any where in our conversations with one another on this subject abskebabs. I find your responses myopic, and rather frustrating. You are arguing on premises that are unconnected with reality, and then attacking others when they point out where your assumptions are flawed. Obviously, this is indicative of the fact that your arguments cannot stand on their own merits.

 

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.