PhilosophicIssuesinEconomicsPart2

HarryBinswanger1Hr31min
Money(continuedfromlastlecture)
Thegovernmentisnotthesourceofmoney
Golditisamarketoutcome
Becauseofwhatitis,peoplewanttouseitasmoney
Thereshouldnosuchconceptasdollaronlyweightsofthecommodity(notRandsview)
WedontneedaspecialtermforLiterandwedonthaveaspecialtermforgram,sowhydowe
needdollar?
Shouldthelawspecifythatdamagesbepaidinacertaincommodity?
[Breakfromaxiomaticconcepts]Inflationisanexpansionoffiatmoney
Fiatmoneyissomethingwhichthegovernmentcoercivelysubstitutesforactualmoney.
Thegovernmentcounterfeitingitsowncurrency
Usuallyresultsingeneralpricesbutthisisaneffect
Inflationisanexpansionoffiatmoneyratherthanariseofprices
Thesameasthedistinctionbetweensubjectiveandobjective
Noobjectivemarketbasedchangecanbecomparedtopoliticallydictatedchange
Thereforeapricerisefromadeclineofsupplyisnotinflation
Thisisfundamentallydifferentthanthegovernmentprintingnewmoney
Itsepistemologicallyinvalidtogrouptogetherfreechangesinsupplywith
governmentforcedprinting
[Continuewithaxiomaticconcepts]Time
Productiontakestime,duringwhichconsumptionmustoccurwithoutyetprovidingresults
Didntwanttoomittimebuthsntsystematizedhowitworksout
Goodisanobjectoraction(service)havingvalue
Producersgoods(capital)aretoolsofproduction
likehigherorderconcepts
Theyarewhatmakecivilizedsocietypossible
BowandArrow/Fishingnet/reinsurancearrangements/swaps/etc
Meansofmakingmoney
Consumersgoodsaregoodsthatareconsumed[Yadontsay]
Caneatorwear
DivisionofLabor
ThevalueofDoListhatitallowsspecialization
Specialization,atroot,acceleratestheaccumulationofknowledge
Knowledgeiswhatweneedinordertoproducewealth
AdamSmithgetsthiswrong
Onlynamessuperficialminoraspectsofwhatspecializationpossible
Thelaborersdexterity
Timenotwastedpassingfromtasktotask(asinagriculture)
Machineshavearisenasspecifiedtools
Theessentialvalueisthatspecializationallowsyoutofocusyourmindonfewerunitsmental
leverage
PhilosophicIssuesinEconomicsPart2
HarryBinswanger1Hr31min
Isaresultofcrowepistemology
MurrayRothbardalsowrong
Saysthatthevalueofspecializationhastodowithdiversity
Ex:Yourlandisgoodforpotatoesandmineforberriessoourlandisbetterusedfor
thesepurposes
Therewouldbenovalueindivisionoflaborifeveryonewasthesame
Thisiswrong,evenifeverythingwereexactlythesametherewouldbeanenormouspayoff
forspecializing
Finallypreparedtodefineeconomics
Whatitsnot:
Scienceofproductionandtrade
Notawfulbuttoobroad
Howsteelismadeisnotpartofeconomics
Whatfertilizertousewhilegrowingcornisnotpartofeconomics
Howcontractsarewrittenisnotpartofeconomics
Economicsconcernsthesystem
Scienceofproductionfortradeunderadivisionoflabor
Closerbutnotenough
Economicsidentifieslaws
Economicsisthesciencethatstudieshowpricesarisefromandcoordinateproductionand
tradeunderthedivisionoflabor
tradeimpliesfreemarket
Whatisamarket?
Alocationornetworkwherepotentialbuyersandsellersmeettobargainforand
effecttransactions/trades
Thereisnoeconomicsofunfreesystemspertheleftists
Economicsdrawsabrightlinevoluntaryinteractions
Thereisnoeconomicsforthepoliticalsystemassuchpertheanarchists
Amarketforthemarketisillogical
Itslikeweplayedagamewheretherulesofthegamearesetbywhowinsit
Primacyofproduction:Productionhasprimacyoverconsumption
Causalprinciple:Beforeonecanconsumesomethingonemusthavealreadyproducedit
Anerrortosaythatconsumptionisacauseofproductionbecausethatiswhyyouproduce
Consumptionisinthefutureitdoesnotexistyetandthereforecannotbeacause
Whatmakesitconfusingisthatthecausationisreciprocal
Tomorrowscakeisnotacauseoftodayscake
Consumptionisaneffectitdependsuponproduction
Supplysideeconomicsisonlyafirststeptowardsproductionisteconomics(austrianish)
Justliketheprimacyofexistencedoesnotdenyconsciousness
Theprimacyofconsumptionisactuallyjustaformoftheprimacyofconsciousness
PhilosophicIssuesinEconomicsPart2
HarryBinswanger1Hr31min
Theideathatsomeonesdesireforconsumptioniswhatcauseswealthtocomeinto
existence
Thereisalwaysadesireforwealth
Butprimacyofconsumptionistheideathatconsumptioniswhatbringsproductioninto
existence
Weneedtoencouragesavingnotspending
Animportantaspectofconsumptionistheneedtoconsumeinordertoproduce
Inthissense,consumptionoffactorsofproductionisinvolvedinproduction
Reciprocalcausation
Economicsdependsuponrecursionbitingback
Ex:asdoesarithmeticanumberisthatwhichisoneorisonemorethananumber
Isitnotcircularbecauseitgetsitsstartingpointfromone
Ex:Biologylifeisaprocessofdoingthatwhichsustainslife
Isnotcircularbecausethelifeincludesthefactthattheentitystaysinexistence
anddoesnotdisintegrate[?Confused]
Ex:Evolutionfutureevolutiondependsonwhatevolvedbefore
Ex:Epistemologyaconceptisanintegrationofperceptualconcretesorearlier
formedconcepts
Isnotcircularbecausethebaseisperceptualconcretes
Productioniswhatmakesaconsumptiongoodorsomethingthataidsproduction
Modelofthisiscompoundinterest
Makeinterestonyourpastinterest
Themethodologythatshouldbeemployedisoneofobjectiveconcepts[Oistepistemology]
Rationalismwrongmethodology
Tobaseeconomicsonhypotheticaldeductivemodeling/prediction
Wemakeupanarbitraryhypothesisandtestit
Orwetakeequationsoutofcontextandtestthem
Thisistheoppositeofsciencepluckinganideaoutoftheairandseeingwhereitgoes
EconomicsisnotdeducedfrombroaderprinciplesasisMisesapproach
EvenifyoucorrectMisesbyshowingthattheaxiomsarederivedfromperception,itdoesnt
matterbecauseeconomicsasasciencecontinuestorequirebothdeductionandinduction
AlotofeconomicsisintrospectivewhatwouldIdoif
Requiresabroadunderstandingofhistory
Deductionexistsforapplicationnotfordiscoveryoflaws
Andforintegratingyourinductions
Empiricismwrongmethodology
Economicsisnotbasedonassemblingstatistics
Thenphenomenonarejusttoocomplex[classicproblemwithALLempiricism]
Statisticsdealwithcorrelationbuteconomicsneedstodifferentiatecauseandeffect
Thisisparticularlydumbforbecauseeconomicsisreciprocal
Properproofisreductiontotheperceptuallevel
PhilosophicIssuesinEconomicsPart2
HarryBinswanger1Hr31min
Reductionineconomicsmeansreductiontobarter
Economicprinciplesarenotformedjustbylookingattodaysadvancedeconomy
Ex:youcantdeterminewhatjusticeisbylookingatjustandunjustlaws
Ex:Youcantdeterminewhatlogicisbylookingathowpeoplecometoconclusions
manypeopleareillogical
Therearetoomanycasesinthehighlyevolved
ThisiswhatRanddoesinherarticleonegalitarianism/inflation
Shebringsitbacktohandmouthexistence,whathappenswithagricultureetc
EconomistsinformertimesDIDdoitthiswayJeanBaptisteSay,CarlMenger
Question:towhatextentcaneconomicstellyouwhathappensunderaninterventionistsystem?
Economicsisascienceofhowcapitalismworkthereisntanyothereconomicsystemwithits
ownlaws
Sowhatyoudoisapplycapitalistlawstotheintervention
Question:Whyisprimacyofconsumptionsoprevalenttoday
Itsanepistemologicalproblembecausepeoplewontintegratethesimplecaseswiththe
complexcases
WhatisthepointofsayingAisA?Doyouhavetotellpeople,thisbookisthisbook?
Itsbecausetheprincipleyouabstractfromtheselfevidentcasecanservetoguidethem
whenitsnotsosimplyandselfevident
Ex:Iwantfullemploymentandaminimumwage
AnswertothatisAisA
Question:Thatbringsupgametheory
Gametheoryisrationalism
Ex:Prisonersdilemma
Thisisnoteconomicsbothpeopleareinjail
Thequestionofwhatyoudounderforceisbydefinitiontheantithesisofeconomics
Peoplelikeitbecauseyoucanapplyprobabilitytheorytoit
Economicsisnotessentiallymathematical(beyondarithmetic)
Priceissociallyobjective(thekeytounderstandingthemoralpoliticaldimensionsofeconomics)
SociallyObjectiveValue
Whatdoesobjectivemean(applicationofphilosophy)
Inphilosophy:objectivityisvolitionaladherencetoreality.
Conceptsandconclusionsareobjectiveiftheyarereachedtherightway,bylogic
Intrinsicknowledgeisarevelation
Conceptsareinthingsapartfrommanabsorbedbyintuition
Value:valueisinthingsapartfrommanindependentofman
Subjectiveitsallinthemind
Wearbitrarilydecideconceptsandvalue
Objectivevalue
Arationalidentificationofsomethingscausalefficacyinachievingyourowngoalswith
yourownlifeastheultimategoal
PhilosophicIssuesinEconomicsPart2
HarryBinswanger1Hr31min
Tobeobjectivelyvaluabletoyou,istorationallyjudgesomethingbyreferencetoyourlife
Objectiveeconomicvalueisvalueinexchange
Usevalueisdifferentthanexchangevalue[!]
Atreasuredfamilyheirloomhastremendouspersonalvaluebutnoexchangevalue
Exchangevalueisobjective
Intrinsictheoryofpricesaysthatpriceisfixedbyrealityindependentofman
Ex:Marxeconomicvalueistheamountoflaborittooktocreatesomething
Subjectivetheoryofprice:Priceisthegreedofthesellervswishesofthebuyermereemotions
Objective:Pricesaresetbysupplyanddemandnotindependentofmanandnotindependent
ofreality
Thepriceofagoodwillmovetowardsapricethatclearsthemarket
Thequantitydemanded=quantitysupplied
Sowhyissupply/demandobjective?
Austriansclaimeditwassubjective
Questions:Timepreference?
Youwouldprefertohavesomethingnowratherthanlater
Comesfromtwofactors(notexhaustivelist)
Lifespanisfinite
Thetimeittakestoproducethings
Questions:Inflationtakesplaceunderthegoldstandard.WhengoldwasfoundinCalifornia
Thereisafundamentaldifferencebetweenthesubjectiveandtheobjective
Thefindofgoldisfundamentallydifferentthanpoliticianprintingmoney