The Intrinsic Value of Nothing, Part 1 75 comments
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“Action is purposive conduct. It is not simply behavior, but behavior begot by judgments of value, aiming at a definite end and guided by ideas concerning the suitability or unsuitability of definite means. . . . It is conscious behavior. It is choosing. It is volition; it is a display of the will.”
-- Ludwig von Mises
Reach in your wallet, and pull out a dollar bill. Look at it for a moment. Now ask yourself, “What is this worth?”
This isn’t a trick question. Don’t think about anything but that dollar in your hands. Don’t think about a soft drink. Don’t think about a bag of chips, or a handful of screws at the hardware store. Think about that dollar in your hands without thinking about what it can buy. Can you do that? It’s pretty difficult, isn’t it? That’s because a dollar, qua a dollar, isn’t worth anything more than the paper and ink on which it’s printed. And even the value of the paper and ink must be expressed in terms of some medium of exchange. Thus, we dive deep into the dark epistemological implications of the human perception of value.
Think about it. Do you really believe a dollar is valuable on its own? In other words, do you believe that a dollar is valuable, just as it is – simply because the government says so? Or do you believe a dollar is valuable because of the goods and services for which it can be exchanged?
You would be amazed at the vast number of people in the world who have never considered this question. As tautological as it may seem, most people believe currencies are valuable simply because they are valuable. That is to say, most people believe – explicitly or otherwise – that currencies are intrinsically valuable, for no other reason than governments decreeing them as such. And pardon me for saying so, but that’s just absurd.
And yet, this is precisely what Ben Bernanke and Barack Obama want you to believe about the currency in your wallet. In fact, their jobs depend on it, because if the majority of people stopped believing the dollar was valuable “just because,” we’d have some really big problems. I mean really big problems.
Allow me to expound: The United States Government – under Ben Bernanke, George W. Bush, and Barack Obama -- has committed to spending $13 trillion of your money to battle this, the worst economic crisis in 80 years. I know I’ve said it all before, but it certainly bears repeating: the $13 trillion to which I’m referring has been allocated to this crisis, alone. It’s not going to be used for historical obligations, nor will it be used for future budgets. It’s for this crisis. Period. That, my friends, is how the government has planned to solve this recession: by spending more money, in a shorter period, than ever in history.
According to the U.S. Census Bureau, about 308 million people are currently United States citizens. This means the United States would have to obtain just over $42,000 for every single man, woman, and child in the country (and abroad) just to cover the $13 trillion to which it has so recently committed. And I’m not talking merely about productive, working Americans; I’m talking about $42,000 from every single human being – comatose, bed-ridden, crawling, suckling, or paralyzed. Everyone.
Of course, you may be one of the multitudes of people who believe the crisis is over, and that we are currently experiencing an economic recovery – and that everything is magically going to fix itself. You may also believe in unicorns and leprechauns. If you are one of those people, please allow me to disabuse you of any notion that this crisis is anywhere near over.
Or, if you prefer, I’ll just get to the point: this entire, elaborate fiasco called quantitative easing that governments all over the world have foisted on the entire global human population is an illusion and a joke. It is based on nothing more than the common misperception that currencies have intrinsic value. And I hope you’re beginning to understand where I’m headed with this article: currencies do not have intrinsic value.
There are two theories of value:
1. The Bad Theory. This is The Labor Theory of Value – which is most closely associated with Marxism and socialism. The Labor Theory maintains that anything involving labor has an intrinsic value. And, in fact, most egalitarians believe that everything has intrinsic value. So, maybe you sit in your back yard all day slapping a mule with a garden hose. According to the proponents of the Labor Theory, not only do the mule and the hose have value, but so does your labor. Intrinsically. No matter what.
2. The Good Theory. This is The Subjective Theory of Value – most closely associated with The Austrian School of Economics. The Subjective Theory maintains that value can only exist because two or more interested parties involved in an exchange willingly participate. Thus, at that moment (and only at that moment) does true value exist. All other perspectives of the exchange are interpretative, and can only be used as general guides. So, to continue with our example: you can slap your mule as much as you want, but unless someone wants to pay you for your hard work, it’s not worth anything.
Nothing in this universe has intrinsic value; every single thing you possess, want to possess, use, can use, have used, can offer, have offered, or will offer is valuable only if someone else finds it valuable. I want you to try to imagine a universe in which no sentient creatures exist. How much would a “car” be worth? While you’re chewing on that, I’ll let you know that this is the general foundation of subjective value, and it is also the foundation of the most significant economic movement in history.
Welcome to Austria. I am an Austrian. I will be your guide.
I know what you’re thinking: Wow! For an Austrian, this guy speaks English really well! And his accent… my God! You can’t even detect it!
You’re reading this, by the way -- not listening to it. So you wouldn’t be able to detect an accent anyway. But just so you know, I do not have an Austrian accent. I’ve never even been to Austria. I wouldn’t know Vienna from Vietnam. I am, in actuality an American, but I am also a member of The Austrian School of Economics.
There are many varying schools-of-thought in the practical and academic economic communities around the world. For instance, there’s the Chicago School – perhaps made most famous by Milton Friedman. There are also the French Liberal School, the German Historical School, and the English Historical School. There are also other schools of economic thought -- like Keynesianism, socialism and communism. But those schools suck, so I guess they don’t get to put cities or countries in their titles (that’s just my theory -- I can’t say for sure).
But then there’s the Austrian School -- perhaps made most famous by Nobel Laureate, F.A. Hayek, as well as one of my heroes: Ludwig von Mises (they both had Austrian accents, by the way). The Austrian School is free-market. Really, really free-market.
I know. This is confusing. Just because one is a member of The Austrian School of Economics does not make one an Austrian. But, then again, it does. See? So, for the sake my own sanity, I’m just going to make this proclamation: from now on, when I use the word Austrian, I’m talking about The Austrian School of Economics. Okay? Can we just agree on that?
In an interview not long ago, Peter Schiff (Austrian. No accent.) was asked about Austrian Economics. His reply was as elegant as it was short: “…saying ‘Austrian economics’ makes as much sense as saying ‘Chinese physics.’ Austrian economics is economics, period!” And that’s the point of this article: some things are simply self-evident; there is no contemporary and obvious way to refute them. For instance, how does one go about replacing the theory of Natural Selection with something better? Wouldn’t replacement itself be Darwinian – at least in the Dawkins sense?
Sometimes epistemology just won’t give you a break…
The following statement is true.
The previous statement is false.
You’re starting to get it, aren’t you? Austrian Economics is economics; it is the most elegant and simple explanation of how resources can and should be used. Unlike other schools, it eschews dogmatism and absolutes, adopting instead tendencies, and trends. Austrians don’t actually get to the places we’re trying to reach – we merely approach them…places like equilibrium, and parity, and inflation aren’t fixed points in the universe, but rather, they are tendencies which we can only approach, and the closer we get, the more we affect the actual objective we are trying to achieve or observe – thereby changing not only the conditions, but also the outcome.
It sort of reminds you of another discipline, doesn’t it? One equally near and dear to my heart: subatomic physics. The similarities are so fascinating, in fact, they inspired me to write a book.
Unfortunately, the number of human beings within the District of Columbia and its surrounding areas (or anywhere else, for that matter) who have actually heard of The Austrian School is inversely proportionate to the number of times Michael Jackson’s image has appeared in the world since the day he died. Yes, it’s an asymptotic relationship, but it says a lot about our societal priorities.
By the way, Oprah cried when Michael Jackson died. I bet she didn’t cry when Murray Rothbard died. That’s just a little digression. Sorry.
Anyway, of the people who have heard of the Austrian School, still fewer truly understand its tenets. And that’s where I come in: now that the government has committed to spending $13 trillion – and probably a lot more than that – do you know what its biggest problem is? Again, this isn’t a trick question, and you already know the answer:
Where in the hell are they going to get $13,000,000,000,000?
They obviously can’t tax us for it; I don’t know too many people who are willing to write a check for $42,000 to the government “just because.” So I guess that leaves two choices: borrowing, and printing.
And therein lies the problem, because both borrowing and printing have mysterious ways of creating something called inflationary price-increases. And this is why Ben and Barack want you to believe the dollar is valuable -- just because they say so. You see, the more you believe the dollar is almighty, the longer they can put off the inevitable inflationary pressures that are marching on Washington like a pack of wild, angry activists.
With that thought, I’m going to end this week’s opus. Next week, for Part II of this subject, I will dive further into Austrian dogma – specifically the work of Ludwig von Mises and his Economic Calculation Argument, which should help you understand more clearly why all this quantitative easing garbage is going to be the dollar’s undoing – and maybe even that of the United States, as well.
Until then…
Disclosures: Paco is long TBT and Gold. He also holds U.S. dollars by necessity, pending the advent of private gold-backed currencies.
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This article has 75 comments:
Gold as currency is a fallacy. The last time I tried to wire a bag of gold, someone told me to shove it up somewhere.
You can argue about certificates and etc, but there's no reason to think such a system will break down as soon as one government somewhere discovers that they can inflate the system again. It only takes one before the rest discover that they'll need that competitive edge, too.
just one comment. you can
Good article, but I have a philosophical bone to pick.
You wrote:
"Nothing in this universe has intrinsic value; every single thing you possess, want to possess, use, can use, have used, can offer, have offered, or will offer is valuable only if someone else finds it valuable."
You have defined value in terms of exchange. I would argue that is too narrow a definition. There are things with intrinsic value independent of any medium of exchange. Exchange is merely one way, but not the only way, to define value.
I maintain that anything necessary for my existence has intrinsic value. Air to breathe, water to drink and food to eat have intrinsic value. The value has a binary measurement: either I have these things and exist or one is missing and I don't exist.
Most economists make their definitions based on commerce. The basics of existence don't come into the equation, except for a few fringe operatives who play with things like "happiness indexes".
Ultimately, all of the "commercial" definitions of value are secondary to the "existence" definition of value. We lose sight of that and many externalities result, which repetitively blow apart the best of economic theories. Throughout history societies and civilizations have failed because of resource exhaustion. They thrived on commerce and decayed on the basis of not sufficiently supporting existence.
There absolutely are things with a real intrinsic value.
I know this is outside the scope you intended to address, but I just had to have my rant.
Despite what obama and others might believe, America's credit is not dependent upon how "green" our environment can become. But rather, how much tax revenue can be raised. And as "green technology" is being given huge tax incentives....Oh, Dear.
"Nothing in this universe has intrinsic value; every single thing you possess, want to possess, use, can use, have used, can offer, have offered, or will offer is valuable only if someone else finds it valuable. I want you to try to imagine a universe in which no sentient creatures exist. How much would a “car” be worth?"
This makes me think of my days hiking in the Montanan wilderness, with nobody else around. If I were to live in that wilderness, alone, with no sentient creatures around, how much would a car be worth? There would be nobody around to exchange something for it, like gold or currency or anything else. So you might say it has no value since there is no other human around to value it. However, it does have value. I would kill for a car out in that wilderness at times. You couldn't drive it anywhere, but you could certainly use it for shelter against inclement weather. You could use the cigarette lighter to start fires so you could preserve all important matches. You could use the gasoline to help fire up wet wood. You could store wood in the trunk to keep it dry. There are copious amounts of uses, so it has value, even with no other sentient creature around.
You also use an anology containing a mule. If nobody would pay you any gold or dollars or whatever for that mule, does that mean it has no intrinsic value? No, not in my opinion. I guess it would depend on what your definition of intrinsic value is. However, a mule has uses and thus retains value no matter what. Even if nobody wanted the mule, you could still make use out of it. You could eat it for one. My point is, just because nobody else finds something valuable does not mean something retains no value.
I'm not making an argument for the labor theory, I am merely stating what I thought of when I read this article.
Thank you, Paco, for the laugh. A solid post all around, too.
Loved the comment by Schiff. There is, indeed, only economics. The various "schools" involve nothing more than competition for power. Putting "Austrian" in front of economics merely demeans it, making it seem to be one very obscure "school" among many.
Also love the comment by the always insightful John Lounsbury, especially as further refined by Hester: things have value not only if they support my existence (too sterile for me) but also if they enrich my existence.
I think one of the things that confuses people is the modern definition of inflation, which most people think of in terms of CPI. This blurs together too many variables and removes clarity from our thinking.
If we think in terms of Austrian Monetary Inflation, it is, approximately: change-in-quantity-of-... / change-in-gdp. If our monetary base grows faster than our productive output, then we have inflation, whether we see it in CPI or not.
Monetary inflation always yields effects that reduce the value of the currency involved. Sometimes these produce what we think of as inflation (CPI increase), but only when the currency is devaluing faster than local labor and resources. If real labor rates and finished-goods prices are falling (as today), it doesn't show up in CPI. It shows up in currency weakness and increase of the price of globally traded assets (e.g. commodities). Even during the great depression, which most of us think of as a deflationary event, we had a 60% dollar devaluation in terms of gold, which is clearly Monetary Inflation.
This is why we argue about whether there's going to be inflation or deflation, because we are looking at if from a blurry and myopic perspective: that of locally produced asset prices and labor-rates.
Our labor-rates are decreasing right now in real terms, which we see as a decline in the value of the dollar. At the same time, the real price of local goods are declining, so CPI is neutral, and we feel it as stagnation or depression. But at the same time, the price of overseas labor and globally traded raw materials is rising, which is price inflation. It all depends what you're buying and where.
If our incomes stay the same while global incomes and globally priced commodities increase, that is known, technically, as getting poorer, which is what, in fact, is happening.
This is simply the result of imbalance in the system. We can't continue to send higher and higher wage jobs overseas, and magically get richer here. It's a fairy tale. There are exactly two ways to regain balance:
- Accept nominal (in dollars) reduction in pay and local prices, which is not politically tenable and causes a big problem with dollar denominated debt (debt deflation).
- Print more dollars, steadying or increasing our nominal incomes, while allowing our real incomes and local costs to fall.
Either one of these will eventually lead to our labor rates becoming once again competitive, and a return to full employment. At that point, and not until, we will begin to see CPI inflation, along with increased wealth.
The major difference in effect between the two approaches is subtle: a moderate and orderly transfer of wealth from those with higher net worth to those with lower net worth, will occur with the second, versus a disorderly transfer in the same direction via mass bankruptcies, business failures, draconian government actions, and civil unrest in the first case.
I, like the author, expect rapid inflation, though not necessarily in CPI in the short term. I see this as an important part of the cure. We won't be the first country to take this road: Argentina, Mexico, more recently Russia -- France and the UK several times. It's a painful period, but puts the affected country back on the road to recovery, and rarely results in hyper-inflation. It must be done gingerly, of course. I believe this is what our leaders are counting on, and working toward, though they naturally can't admit to it.
In the grand scheme of things it will be a ten or twenty year speed bump -- Hard knocks for this generation, but it's hard to envision a more optimistic outcome at this stage.
Could you imagine if during the 2012 election, no one decided to show up, because everyone decided the system is a fraud? Although I am sure our determined men and women at the top would figure out a way to continue and still get paid.
Oh how I laughed. All you have to do is look thru SA to see that the Austrian school inspires a more dogmatic approach in its followers than any other. As you quote one of the high priests in your article:
"Austrian economics is economics, period!"
The reason I posited the hypothetical in which one might imagine a universe with no sentient creatures was simply to point out that without something to place "value" on a good or service, it has none. "Value" requires subjective interpretation, and therefore, nothing can have intrinsic value. It simply isn't possible.
Paco
On Oct 27 10:58 AM John Lounsbury wrote:
> Paco - - -
>
> Good article, but I have a philosophical bone to pick.
>
> You wrote:
>
> "Nothing in this universe has intrinsic value; every single thing
> you possess, want to possess, use, can use, have used, can offer,
> have offered, or will offer is valuable only if someone else finds
> it valuable."
>
> You have defined value in terms of exchange. I would argue that is
> too narrow a definition. There are things with intrinsic value independent
> of any medium of exchange. Exchange is merely one way, but not the
> only way, to define value.
>
> I maintain that anything necessary for my existence has intrinsic
> value. Air to breathe, water to drink and food to eat have intrinsic
> value. The value has a binary measurement: either I have these things
> and exist or one is missing and I don't exist.
>
> Most economists make their definitions based on commerce. The basics
> of existence don't come into the equation, except for a few fringe
> operatives who play with things like "happiness indexes".
>
> Ultimately, all of the "commercial" definitions of value are secondary
> to the "existence" definition of value. We lose sight of that and
> many externalities result, which repetitively blow apart the best
> of economic theories. Throughout history societies and civilizations
> have failed because of resource exhaustion. They thrived on commerce
> and decayed on the basis of not sufficiently supporting existence.
>
>
> There absolutely are things with a real intrinsic value.
>
> I know this is outside the scope you intended to address, but I just
> had to have my rant.
But there is also something inherent to all things which allows a person, irrespective of all other persons, to want or need that thing.
Air & water are obvious, but shelter and clothes and all other things have something innate that a person wants/needs irespective of any other person.
Hence, "value" as defined in this article is that which another is willing to assign to an object. The innate "something" that everything has is different to different people, but many people simply use the term "value" to refer to that innateness of every object.
I am somewhat confused by your comment here unless you have given up on the long TBT trade??? Yes Bill Gross did call it right but I think it's a "dance with the devil" in that IMO he can't stay in that trade for long. It just can't work with massive expansion in money supply and QE with probably more to come.
On Oct 27 11:03 AM Mad Hedge Fund Trader wrote:
> cvd For the last six months there has been a great big whopping contradiction
> in the markets. The stock market has been discounting a return to
> the “Roaring Twenties,” while the bond market has been anticipating
> another “Great Depression.” After yesterday’s publication of the
> Labor Department’s September nonfarm payroll number showing the loss
> of another 263,000 jobs, it looks like the bond market now has the
> upper hand. This takes the unemployment rate up 0.1% to 9.8%, and
> total job losses for this recession to 7 million. The really disturbing
> aspect of this number is that 57,000 teachers were fired, as states
> chop budgets to the bone. This is really eating our seed corn by
> the bushel full. Of course, I have been banging pots and pans, setting
> off distress flares, and yanking the fire alarm, trying to alert
> readers that this kind of disappointment was coming (click here for
> “Risk Reversals Can Be Such a Bitch” and here for “Stocks Offer No
> Value”). Shares have dropped 5% from last week’s peak, as the bond
> market soared, the ten year yield reaching nosebleed territory of
> 3.05%. The dollar maintained its flight to safety status, which to
> me is one of the great ironies of all time. It’s like that reprobate,
> alcoholic uncle with the bad teeth, who, when your car breaks down
> in the middle of a downpour in a bad neighborhood, will always let
> you crash on his sofa. Let’s call him your Uncle Sam. You have to
> hand it to PIMCO’s inveterate card counter, Bill Gross, who says
> this is all about transitioning to a “new” normal of 1%-2% real GDP
> growth. That’s why he was loading the boat with bond yields at 4%,
> a “ballsey” move at the time, which now smells like roses. I guess
> that’s why they call him the “Bond King.”
But I liked this article very much. I especially liked the following quote:
"Austrians don’t actually get to the places we’re trying to reach – we merely approach them…places like equilibrium, and parity, and inflation aren’t fixed points in the universe, but rather, they are tendencies which we can only approach, and the closer we get, the more we affect the actual objective we are trying to achieve or observe – thereby changing not only the conditions, but also the outcome..."
I think part of our current problem is that we are too literal in our modernism. I don't think we really WANT to get where we think we want to get. We should be more like the Austrians, and understand that a goal is not a place to be, but a place to go (toward). The Inflationists think Inflation is the goal; in fact, Inflation is a direct we go; we never reach the Ideal Inflation, and we don't want to; before we reach the Ideal Inflation (the absolute dogma), we veer away from this concept toward the next concept. This way we keep moving, never become rigid with fixed belief. As we approach Ideal Inflation we change the world such that we no longer should want Ideal Inflation because Ideal Inflation is no longer the answer....the conditions have changed.
That's why we now need to move toward deflation, with the understanding that this target is not really a target that we want to hit but a target we want to approach without letting the target become us.
On Oct 27 10:58 AM John Lounsbury wrote:
> Paco - - -
>
> Good article, but I have a philosophical bone to pick.
>
> You wrote:
>
> "Nothing in this universe has intrinsic value; every single thing
> you possess, want to possess, use, can use, have used, can offer,
> have offered, or will offer is valuable only if someone else finds
> it valuable."
>
> You have defined value in terms of exchange. I would argue that is
> too narrow a definition. There are things with intrinsic value independent
> of any medium of exchange. Exchange is merely one way, but not the
> only way, to define value.
>
> I maintain that anything necessary for my existence has intrinsic
> value. Air to breathe, water to drink and food to eat have intrinsic
> value. The value has a binary measurement: either I have these things
> and exist or one is missing and I don't exist.
>
> Most economists make their definitions based on commerce. The basics
> of existence don't come into the equation, except for a few fringe
> operatives who play with things like "happiness indexes".
>
> Ultimately, all of the "commercial" definitions of value are secondary
> to the "existence" definition of value. We lose sight of that and
> many externalities result, which repetitively blow apart the best
> of economic theories. Throughout history societies and civilizations
> have failed because of resource exhaustion. They thrived on commerce
> and decayed on the basis of not sufficiently supporting existence.
>
>
> There absolutely are things with a real intrinsic value.
>
> I know this is outside the scope you intended to address, but I just
> had to have my rant.
The CPI measures 'inflation' in the way the local government wants it measured. Juggling the components, when necessary, changes the outcome. Perhaps we should drop the term 'inflation' from the CPI reading and call this, instead, 'affordability quotient' or 'Cost of Living quotient'...
Falling interest rates are inflation. Rising interest rates are deflation. How much money do you have to pay to rent money. How much money does the bank pay you to rent your money.
On Oct 27 12:48 PM Tetrapod wrote:
> Good article, Paco!
> I think one of the things that confuses people is the modern definition
> of inflation, which most people think of in terms of CPI. This blurs
> together too many variables and removes clarity from our thinking.
>
> If we think in terms of Austrian Monetary Inflation, it is, approximately:
> change-in-quantity-of-... / change-in-gdp. If our monetary base
> grows faster than our productive output, then we have inflation,
> whether we see it in CPI or not.
>
> Monetary inflation always yields effects that reduce the value of
> the currency involved. Sometimes these produce what we think of
> as inflation (CPI increase), but only when the currency is devaluing
> faster than local labor and resources. If real labor rates and finished-goods
> prices are falling (as today), it doesn't show up in CPI. It shows
> up in currency weakness and increase of the price of globally traded
> assets (e.g. commodities). Even during the great depression, which
> most of us think of as a deflationary event, we had a 60% dollar
> devaluation in terms of gold, which is clearly Monetary Inflation.
>
>
> This is why we argue about whether there's going to be inflation
> or deflation, because we are looking at if from a blurry and myopic
> perspective: that of locally produced asset prices and labor-rates.
>
>
> Our labor-rates are decreasing right now in real terms, which we
> see as a decline in the value of the dollar. At the same time, the
> real price of local goods are declining, so CPI is neutral, and we
> feel it as stagnation or depression. But at the same time, the price
> of overseas labor and globally traded raw materials is rising, which
> is price inflation. It all depends what you're buying and where.
>
>
> If our incomes stay the same while global incomes and globally priced
> commodities increase, that is known, technically, as getting poorer,
> which is what, in fact, is happening.
>
> This is simply the result of imbalance in the system. We can't continue
> to send higher and higher wage jobs overseas, and magically get richer
> here. It's a fairy tale. There are exactly two ways to regain balance:
>
> - Accept nominal (in dollars) reduction in pay and local prices,
> which is not politically tenable and causes a big problem with dollar
> denominated debt (debt deflation).
> - Print more dollars, steadying or increasing our nominal incomes,
> while allowing our real incomes and local costs to fall.
> Either one of these will eventually lead to our labor rates becoming
> once again competitive, and a return to full employment. At that
> point, and not until, we will begin to see CPI inflation, along with
> increased wealth.
> The major difference in effect between the two approaches is subtle:
> a moderate and orderly transfer of wealth from those with higher
> net worth to those with lower net worth, will occur with the second,
> versus a disorderly transfer in the same direction via mass bankruptcies,
> business failures, draconian government actions, and civil unrest
> in the first case.
> I, like the author, expect rapid inflation, though not necessarily
> in CPI in the short term. I see this as an important part of the
> cure. We won't be the first country to take this road: Argentina,
> Mexico, more recently Russia -- France and the UK several times.
> It's a painful period, but puts the affected country back on the
> road to recovery, and rarely results in hyper-inflation. It must
> be done gingerly, of course. I believe this is what our leaders
> are counting on, and working toward, though they naturally can't
> admit to it.
>
> In the grand scheme of things it will be a ten or twenty year speed
> bump -- Hard knocks for this generation, but it's hard to envision
> a more optimistic outcome at this stage.
I think that you have to go beyond epistemology to metaphysics and here you are naturally relying upon the 'either/or' Subject/Object Metaphysics originated by the Greeks.
You say that there are only two possible approaches: either a Bad - Objective - theory of value or a Good -Subjective - theory.
Now, over here in pragmatic Scotland we have not just the two verdicts of 'Guilty' and 'Not Guilty' but also a third verdict of 'Not Proven'. In the same way, I think that there is a third approach to Value which lies in that same zone of uncertainty or indeterminacy between the absolutes of subjectivity and objectivity.
I am attracted to Robert Pirsig's approach to Metaphysics - his 'Metaphysics of Quality' which is based upon the proposition that reality cannot be defined other than by analogy ie in relative terms.
As J A Wheeler said;
"Reality is defined by the questions you put to it."
So, with Pirsig, I would propose a Metaphysics of Value based upon the proposition that Value is definable only in relative terms, and that transactions are events at which the subject individual interacts with objects and value judgements are made at an intuitive and sub-conscious level.
It seems to me that economists - including Austrians - all conform to Wilde's definition of a Cynic: ie someone who knows the Price of everything and the Value of nothing.
The maverick monetary thinker E C Riegel - whose analysis in relation to the nature of Money is IMHO unsurpassed - viewed Money not as an object, but as a relationship.
He speculated that Money, if it exists at all,does so in the transient instant of exchange - and his non-definition of Value was as the "Relativity of Desire".
In Riegel's anthropocentric view, the source of credit is the sovereign individual. But brilliant though he was, IMHO he had - like the Austrians, and conventional schools of economics, including Marx - a blind spot in relation to Property, and to Capital.
In my view the individual is one source of value, but not the only one.
While Riegel observed that Money is not an object - which puts him in conflict with Rothbard, for one - it was Bentham, that paragon of legal precision, who pointed out that Property is not an object either, but a relationship.
So Land is not correctly described as Property, but more accurately as "the object of a man's Property" or " some thing that is 'proper' to the Man".
in other words, Property is a relationship - it is the bundle of rights and obligations that relates the subject individual to the object eg land or knowledge (intellectual property)
What I am getting to is simply that I do not believe that the Austrian subjective approach is any more or less valid than the objective approach.
In my view, it's all relative, and I think that a Political Economy that is based upon a relational metaphysical assumption may well be optimal.
My other point is that an anthropocentric assumption as to Value fails to recognise that Location/Land and Energy (in material and dynamic forms) both have an independent value in use which are capable of forming a basis of credit, and of value in exchange.
For instance, a Unit redeemable in 10 Kilo Watt Hours issued by an energy producer has a value in exchange - based upon its value in use - entirely independent of any individual; as does a Unit redeemable in the use value of location.
Gold, on the other hand, is maybe not such a good candidate upon which to base credit, because its value in use is low: you can't live on it; heat your house with it, power your car with it; or type emails using it.
If it is assumed that all value flows from the individual, then this justifies an approach to taxation which is based only upon the earned income of the individual, rather than unearned income from ownership of productive assets.
This position is of course as valid as the assumptions of political economy which underpin it.
In the most favorable light, which assumes that liberal politicians are sincere in wanting to improve the human condition instead of just seeking power, it can be said that they can see the evil in other men but not in themselves or in those who, like them, are not only incorruptible but also so much wiser than the rest of us in knowing what is good for us. The road to hell is paved with good intentions, and the utopia they seek is never within worldly reach.
On Oct 27 12:55 PM chap08 wrote:
> "Unlike other schools, it eschews dogmatism and absolutes"
>
> Oh how I laughed. All you have to do is look thru SA to see that
> the Austrian school inspires a more dogmatic approach in its followers
> than any other. As you quote one of the high priests in your article:
>
>
> "Austrian economics is economics, period!"
"The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people."
-- Wealth of Nations Book 1, chapter V
"The value of any commodity, ... to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities."
-- Wealth of Nations Book 1, chapter V
Most economists today start with utility theory which basically says that individuals have a set of preferences where a larger quantity of a good is preferred to lesser quantities of the same good and preferences are transitive so that if a bundle of goods (A) is preferred to another bundle (B) and B is preferred to still another bundle (C), then A will be preferred to C.
Because people have preferences, goods have value to them even in the absence of exchange because a person can always state whether they prefer one bundle of goods over another (i.e. they value one set of goods over another). In fact, it is downright inane to argue that something has value to you only because someone else finds it valuable as well. This is one of the traps that caused the labor theory of value to be abandoned because they could never quite reconcile the concepts of value in use and value in exchange. Today we do that via supply and demand curves derived from costs of production on the one side and utility theory on the other.
"The word VALUE, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called 'value in use ;' the other, 'value in exchange.' The things which have the greatest value in use have frequently little or no value in exchange; and on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce any thing; scarce any thing can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it."
-- Wealth of Nations Book 1, chapter IV
On Oct 27 12:50 PM jeffgroove wrote:
> The problem with other schools of economic thought is that they assume good intentions on behalf of the people in charge ...
Bzzzt. No school of economics assumes anything of the sort.
Hey! Unicorns and leprechauns got me trough college!
"you can slap your mule as much as you want.."
Unfortunately this also got me through college....I
"You have defined value in terms of exchange. I would argue that is too narrow a definition. There are things with intrinsic value independent of any medium of exchange. Exchange is merely one way, but not the only way, to define value.
I maintain that anything necessary for my existence has intrinsic value. Air to breathe, water to drink and food to eat have intrinsic value. The value has a binary measurement: either I have these things and exist or one is missing and I don't exist."
This is the point of the Austrian theory of value as "subjective". In values theory it is called the "conative theory of value". A thing only has value inasmuch as some conative being, a being with needs, wants and desires, values that thing. All value is thus "subjective", because value can only exist if some conative "subject" values something. Such as continuing his own existence.
That's where the dead universe counterexample comes in. If there never was and never would be any sentience in the universe, no life, no consciousness, just dead mass interacting, there could be no value because there is nobody in that universe to "care" what happens one way or another. So I personally find the conative theory to be self-evidently true.
That said, I have encountered smart philosophers who do not accept the conative theory of value. They believe in the "intrinsic value" idea. They think it is just "better", somehow, that there is something rather than nothing. I personally suspect this is due to their inability to truly imagine a truly dead universe with no God and no sentience of any kind, ever. How could it possibly "matter" whether such a universe existed or not? Or if it blew up or collapsed? Or if it was made of gold or lark's vomit? There is nobody there for it to matter to. So there can be no value one way or the other and thus no value, period.
It's good to see you on this site. Been a long time since we were writing posts on TMF. Great to see you well and successful in what you love doing.
Warm regards,
Mycroft
The work of Hayek can only be assessed in a process that sees the early "cold war" ideological backdrop of his period. Over time there are qualifications that he included which are omitted by current proponents of the herd instinct economic advisors. Mises' statement that you quote, meanwhile, suggests clearly that Mises'
numbers were more convincing than his narrow minded thought and reasoning. Action is certainly not always purposeful; it can be reactive (especially on the market...perhaps exampled by what you are attempting to accomplish with this diatribunal to hail hail, we're all going to fail dissasociation from REAL purposeful direction). And much of the consequences of your rally will be reactive itself (milking reflex reactions with pride and prejudice). That is to say it is behavioristic and its subject to conditioned reflex like Pavlov's dog. Perverted incentives and big bonus capital behavior modification will take purposeful action for a joy ride off the roof.
Of course the other side of the coin says that momentum is a random walk; totally unrelated to past incidence. Prevailing sentiment is unpredictable overall but the "purposeful" actions of some behaviorist praxis is to work the trend and provoke the principles of leverage that can evoke fear and doubt into self serving market logic.
2020 dozen eggs $30 loave bread $50 can soup $18 Bus fare $25
Debt paid :^/
On Oct 27 10:58 AM John Lounsbury wrote:
> Paco - - -
>
> Good article, but I have a philosophical bone to pick.
>
> You wrote:
>
> "Nothing in this universe has intrinsic value; every single thing
> you possess, want to possess, use, can use, have used, can offer,
> have offered, or will offer is valuable only if someone else finds
> it valuable."
>
> You have defined value in terms of exchange. I would argue that is
> too narrow a definition. There are things with intrinsic value independent
> of any medium of exchange. Exchange is merely one way, but not the
> only way, to define value.
>
> I maintain that anything necessary for my existence has intrinsic
> value. Air to breathe, water to drink and food to eat have intrinsic
> value. The value has a binary measurement: either I have these things
> and exist or one is missing and I don't exist.
>
> Most economists make their definitions based on commerce. The basics
> of existence don't come into the equation, except for a few fringe
> operatives who play with things like "happiness indexes".
>
> Ultimately, all of the "commercial" definitions of value are secondary
> to the "existence" definition of value. We lose sight of that and
> many externalities result, which repetitively blow apart the best
> of economic theories. Throughout history societies and civilizations
> have failed because of resource exhaustion. They thrived on commerce
> and decayed on the basis of not sufficiently supporting existence.
>
>
> There absolutely are things with a real intrinsic value.
>
> I know this is outside the scope you intended to address, but I just
> had to have my rant.
On Oct 27 10:18 AM Ricard wrote:
> I will risk the ire of the hoard of gold bugs on SA:
>
> Gold as currency is a fallacy. The last time I tried to wire a bag
> of gold, someone told me to shove it up somewhere.
>
> You can argue about certificates and etc, but there's no reason to
> think such a system will break down as soon as one government somewhere
> discovers that they can inflate the system again. It only takes one
> before the rest discover that they'll need that competitive edge,
> too.
On Oct 27 10:58 AM John Lounsbury wrote:
> Paco - - -
>
> Good article, but I have a philosophical bone to pick.
>
> You wrote:
>
> "Nothing in this universe has intrinsic value; every single thing
> you possess, want to possess, use, can use, have used, can offer,
> have offered, or will offer is valuable only if someone else finds
> it valuable."
>
> You have defined value in terms of exchange. I would argue that is
> too narrow a definition. There are things with intrinsic value independent
> of any medium of exchange. Exchange is merely one way, but not the
> only way, to define value.
>
> I maintain that anything necessary for my existence has intrinsic
> value. Air to breathe, water to drink and food to eat have intrinsic
> value. The value has a binary measurement: either I have these things
> and exist or one is missing and I don't exist.
>
> Most economists make their definitions based on commerce. The basics
> of existence don't come into the equation, except for a few fringe
> operatives who play with things like "happiness indexes".
>
> Ultimately, all of the "commercial" definitions of value are secondary
> to the "existence" definition of value. We lose sight of that and
> many externalities result, which repetitively blow apart the best
> of economic theories. Throughout history societies and civilizations
> have failed because of resource exhaustion. They thrived on commerce
> and decayed on the basis of not sufficiently supporting existence.
>
>
> There absolutely are things with a real intrinsic value.
>
> I know this is outside the scope you intended to address, but I just
> had to have my rant.
The carrot has no intrinsic value. It simply is what it is, and any value associated with -- exchange or use -- is subjective.
Again, imagine a universe with no sentient beings. How valuable is that "carrot." Indeed, what is a "carrot" in this hypothetical? Even the word "carrot" is a value we have placed on this thing to describe it. It is a subjective construct. And that's all prices are.
Nothing in this universe has "intrinsic" value, for if there were no one to "value" goods and services, what would they be "worth?"
>The carrot that I just grew in my back yard that I intend to eat has >value to me, and me only.
You would be amazed at the vast number of people in the world who have never considered this question."
The reason no one has considered the question is because it doesn't bear considering. This isn't Ben and Barack's idea - the world over right through time has used exchange mechanisms to store value and to trade with. Ours is the US Dollar. In Australia, it's the Australian Dollar. In England, it's the British Pound. Put it this way - try using a pound sterling in Mobile, Alabama. Ain't gonna work. Doesn't mean the pound has no value it just means that the store of value and/or the means of exchange represented by the pound has no value in Mobile. Not the same in Manchester though, is it?
You've tried to write an uber-intelligent essay that, frankly, comes across as pretentious and a little try-hard and it adds little if any value to the debate around inflation. In fact, it adds zero value.
On Oct 27 12:34 PM Thomas J. Gordon wrote:
> A lot of us have lamented gov't spending in excess of tax take. It's
> not clear to me that genuine borrowing (borrowing with the intent
> of paying it back later) is inflationary. Although clearly the u.s.
> is borrowing a lot more than they have in the past and you would
> think that would have a bad effect somewhere, at minimum drive interest
> rates up. but so far obama and geithner are getting away with it.
> they are spending a ton of money they don't have and there are no
> new bad effects. no inflation (defined as a rise in the overall price
> level), u.s. treasury rates are low, the stock market is rising.
> so when do obama and geithner pay the piper?
Hosea 8 - Verse 7
For they have sown the wind, and they shall reap the whirlwind...
They have corrupted out their own agenda and they have lie and lived out the lie. What they call good evil and evil good in Isaiah 5:20. They were not so. Do not put light for darkness and darkness for light.
Care for a hot dog?
On Oct 27 11:25 AM Hester wrote:
> I'm not an economist, and I'm not as smart as you (and I'm not being
> sarcastic). However, I think about your argument in several ways.
> I look at your economic argument from the standpoint as a normal
> American, trying to make it in modern society. I also think of your
> argument as someone who must depend on nobody to survive, as I would
> if there were some disastor that made it so. I am a naturalist as
> well as an investor, so I imagine myself sitting in the woods with
> nobody else, trying to survive. In that situation, neither gold nor
> dollars would be valuable. However, some things would still be valuable,
> which I think refutes the Austrian argument, something is valuable
> only if someone else thinks its valuable.
>
> "Nothing in this universe has intrinsic value; every single thing
> you possess, want to possess, use, can use, have used, can offer,
> have offered, or will offer is valuable only if someone else finds
> it valuable. I want you to try to imagine a universe in which no
> sentient creatures exist. How much would a “car” be worth?"
>
> This makes me think of my days hiking in the Montanan wilderness,
> with nobody else around. If I were to live in that wilderness, alone,
> with no sentient creatures around, how much would a car be worth?
> There would be nobody around to exchange something for it, like gold
> or currency or anything else. So you might say it has no value since
> there is no other human around to value it. However, it does have
> value. I would kill for a car out in that wilderness at times. You
> couldn't drive it anywhere, but you could certainly use it for shelter
> against inclement weather. You could use the cigarette lighter to
> start fires so you could preserve all important matches. You could
> use the gasoline to help fire up wet wood. You could store wood in
> the trunk to keep it dry. There are copious amounts of uses, so it
> has value, even with no other sentient creature around.
>
> You also use an anology containing a mule. If nobody would pay you
> any gold or dollars or whatever for that mule, does that mean it
> has no intrinsic value? No, not in my opinion. I guess it would depend
> on what your definition of intrinsic value is. However, a mule has
> uses and thus retains value no matter what. Even if nobody wanted
> the mule, you could still make use out of it. You could eat it for
> one. My point is, just because nobody else finds something valuable
> does not mean something retains no value.
>
> I'm not making an argument for the labor theory, I am merely stating
> what I thought of when I read this article.
On Oct 28 11:19 AM beentheredonthat wrote:
> I think you missed the point of this blog. The activity 'striking
> the mule with a hose' has no value, unless someone is willing to
> compensate you for doing so. The hose has value, you paid for it.
> Same said for the mule.
Of course a lumber economy could work really well. You carry a few boards around for your purchases and just cut off what you need. No doubt some politician would soon be giving a Cross of Wood speech.
For me, I'll comment in a light tone:
Mr. Ahlgren: You write beautifully and logically. Everything makes sense but some commenters have equally good but different ideas about what "value" is all about.
We must all learn however that sometimes the proverbial "man behind the curtain" is best left alone. Sometimes we don't want or need to learn how powerless he really is.
Many, many students of economics understand that our economy (and now those of most of the world) are dependent upon the full "FAITH and CREDIT" of the government of the United States.
So please sir, do cooperate and pull the curtain closed once more and leave well enough alone.
On Oct 27 10:08 AM PatrickD wrote:
> One of the better written essays I've seen in awhile. Hopefully
> this goes from your tablet to somebodies ears.
Now consider the use value of sand (rightly prepared).
I snuck into your backyard and ate that carrot. Guess it has value to me also.
On Oct 28 10:13 AM Schneidehouse wrote:
> The carrot that I just grew in my back yard that I intend to eat
> has value to me, and me only.
Over time, the value of any good or service regresses to it's true value versus it's stated, propped, manipulated, or marketed value.
Thus...GM and Chrysler went belly up, gold has gone up, the dollar has gone down, yet truth has yet to attain true value.
Truth usually attains true value in crises such as wars; the collision point of facts and fallacies and good and evil.
Let's hope the good wins before too many lives are lost.
On Oct 27 10:18 AM Ricard wrote:
> I will risk the ire of the hoard of gold bugs on SA:
>
> Gold as currency is a fallacy. The last time I tried to wire a bag
> of gold, someone told me to shove it up somewhere.
>
> You can argue about certificates and etc, but there's no reason to
> think such a system will break down as soon as one government somewhere
> discovers that they can inflate the system again. It only takes one
> before the rest discover that they'll need that competitive edge,
> too.
On Oct 27 11:25 AM Hester wrote:
> I'm not an economist, and I'm not as smart as you (and I'm not being
> sarcastic). However, I think about your argument in several ways.
> I look at your economic argument from the standpoint as a normal
> American, trying to make it in modern society. I also think of your
> argument as someone who must depend on nobody to survive, as I would
> if there were some disastor that made it so. I am a naturalist as
> well as an investor, so I imagine myself sitting in the woods with
> nobody else, trying to survive. In that situation, neither gold nor
> dollars would be valuable. However, some things would still be valuable,
> which I think refutes the Austrian argument, something is valuable
> only if someone else thinks its valuable.
>
> "Nothing in this universe has intrinsic value; every single thing
> you possess, want to possess, use, can use, have used, can offer,
> have offered, or will offer is valuable only if someone else finds
> it valuable. I want you to try to imagine a universe in which no
> sentient creatures exist. How much would a “car” be worth?"
>
> This makes me think of my days hiking in the Montanan wilderness,
> with nobody else around. If I were to live in that wilderness, alone,
> with no sentient creatures around, how much would a car be worth?
> There would be nobody around to exchange something for it, like gold
> or currency or anything else. So you might say it has no value since
> there is no other human around to value it. However, it does have
> value. I would kill for a car out in that wilderness at times. You
> couldn't drive it anywhere, but you could certainly use it for shelter
> against inclement weather. You could use the cigarette lighter to
> start fires so you could preserve all important matches. You could
> use the gasoline to help fire up wet wood. You could store wood in
> the trunk to keep it dry. There are copious amounts of uses, so it
> has value, even with no other sentient creature around.
>
> You also use an anology containing a mule. If nobody would pay you
> any gold or dollars or whatever for that mule, does that mean it
> has no intrinsic value? No, not in my opinion. I guess it would depend
> on what your definition of intrinsic value is. However, a mule has
> uses and thus retains value no matter what. Even if nobody wanted
> the mule, you could still make use out of it. You could eat it for
> one. My point is, just because nobody else finds something valuable
> does not mean something retains no value.
>
> I'm not making an argument for the labor theory, I am merely stating
> what I thought of when I read this article.
To further dissect value, system-optimizing efforts of both hierarchies have to offer the system efficiency, effectiveness, risk management, and proportionate cost; when measured in an aggregate, the quantified value then becomes comparable across differing systems and offers a yardstick to judge the impact of any contemplated “improvement” by any segment of the societal system.
You have won the "Worst Post Ever" award as your lengthy response can be summed up as basically you saying "You're a poopy pants because I said you're a poopypants." You provided NO SUBSTANCE, just numbing bloviation. A truly amazing and comical post in at least a dozen ways.
When you want to logically destroy a premise, don't ramble. Construct, man, construct! Unless you didn't really want to logically compete against the Austrians at all...hmmmm.
PS: Don't hate on Dictatorships. It is un-American.
"As with most of Austrian Economics, you have much of a cart before the horse and a dead horse at that. There is something of a dogmatic herd instinct to your blind trust, and the headstrong denial of failures in application are always smoozed over by transferance of synptoms to the Doctor. Historically and analytically, Austrian Economics descends not from pure science as it purports (numbers and quantification can obscure as much as they can predict; but even predictive quantity and projections of probability are only as good as the horses that are being run). But instead it stands as a reflection of a proud Aristocratic form of a Golden Liberty style of Dictatorship of the majority by the minority.
The work of Hayek can only be assessed in a process that sees the early "cold war" ideological backdrop of his period. Over time there are qualifications that he included which are omitted by current proponents of the herd instinct economic advisors. Mises' statement that you quote, meanwhile, suggests clearly that Mises'
numbers were more convincing than his narrow minded thought and reasoning. Action is certainly not always purposeful; it can be reactive (especially on the market...perhaps exampled by what you are attempting to accomplish with this diatribunal to hail hail, we're all going to fail dissasociation from REAL purposeful direction). And much of the consequences of your rally will be reactive itself (milking reflex reactions with pride and prejudice). That is to say it is behavioristic and its subject to conditioned reflex like Pavlov's dog. Perverted incentives and big bonus capital behavior modification will take purposeful action for a joy ride off the roof.
Of course the other side of the coin says that momentum is a random walk; totally unrelated to past incidence. Prevailing sentiment is unpredictable overall but the "purposeful" actions of some behaviorist praxis is to work the trend and provoke the principles of leverage that can evoke fear and doubt into self serving market logic. "
Same thing happened with the cyanide process.
powerandcontrol.blogsp...
Austrian economics had it's day, and is coming back out of the woods along with Ayn Randians, all well and good but it is like using using a tube TV, you can but there are so many advances by people like Kahnemann, Beinhocker, Talib and Soros that explain the differences between perception and reality, biases and contextual distortions and other elements of uncertainty. Still a hard thing to understand and the mistakes that will be made in the future will prove that.
The current mistake you made in comparing the math of quantum mechanics is deciding that people are like atoms, and particles that if we could develop more complex algorithms we could predict markets and value wealth.
This is exactly the lie that got us into this mess, and several of the most recent such as LTCM and even the melt down of 1987, I love that math as much as the next guy but to apply it to economics has proven impossible as people aren't simple autonomous agents like Quarks and Gluons. They are more complicated.
People that want to deconstruct value into discrete elements are foolish in thinking that they can return wealth to something tangible when that hasn't been the case ever. The situation in the first transaction was determined by a complex set of individual understanding and contextual forces, and as the creators of Billions and Billions of SKU's alone to say nothing of services, e.g. no SKU for prostitution as an example.
Everyone likes to think that the answer is in the past when it is always in the future, we will repeat history without trying so let's move ahead and stop pretending that dead philosophers will get out of this mess, which is more about what we don't understand that anything we forgot.
On Oct 27 05:21 PM user396040 wrote:
> Worrying about inflation now is like worrying in 1942 about the unemployment
> that will result when WW2 ends. We are still very much threatened
> by a deflationary downward spiral which could generate the kind of
> unemployment we had in the 1930s. Depressions do bad things to real
> people - suicides occur, couples get divorced, some students will
> never get a college education, trillions of dollars of human productive
> capacity are lost forever, children's development is retarded by
> malnutrition. None of this is really necessary unless public policy
> is straightjacketed by obsolete economic theory.
On Oct 28 02:31 PM joes wrote:
> It looks like you are picking the lie you like to me, reintroducing
> Hayek's work as a modern and developed theory for today's economic
> landscape can only make sense to a fool or an economist with some
> physics training.
>
> Austrian economics had it's day, and is coming back out of the woods
> along with Ayn Randians, all well and good but it is like using using
> a tube TV, you can but there are so many advances by people like
> Kahnemann, Beinhocker, Talib and Soros that explain the differences
> between perception and reality, biases and contextual distortions
> and other elements of uncertainty. Still a hard thing to understand
> and the mistakes that will be made in the future will prove that.
>
>
> The current mistake you made in comparing the math of quantum mechanics
> is deciding that people are like atoms, and particles that if we
> could develop more complex algorithms we could predict markets and
> value wealth.
>
> This is exactly the lie that got us into this mess, and several of
> the most recent such as LTCM and even the melt down of 1987, I love
> that math as much as the next guy but to apply it to economics has
> proven impossible as people aren't simple autonomous agents like
> Quarks and Gluons. They are more complicated.
>
> People that want to deconstruct value into discrete elements are
> foolish in thinking that they can return wealth to something tangible
> when that hasn't been the case ever. The situation in the first transaction
> was determined by a complex set of individual understanding and contextual
> forces, and as the creators of Billions and Billions of SKU's alone
> to say nothing of services, e.g. no SKU for prostitution as an example.
>
>
> Everyone likes to think that the answer is in the past when it is
> always in the future, we will repeat history without trying so let's
> move ahead and stop pretending that dead philosophers will get out
> of this mess, which is more about what we don't understand that anything
> we forgot.
Soros? A student of Karl Popper who has done more damage to Critical Rationalism than any of Popper's opponents.
Soros is completely out of touch. But he IS popular and rich, so I guess that's something...
On Oct 28 02:31 PM joes wrote:
> It looks like you are picking the lie you like to me, reintroducing
> Hayek's work as a modern and developed theory for today's economic
> landscape can only make sense to a fool or an economist with some
> physics training.
>
> Austrian economics had it's day, and is coming back out of the woods
> along with Ayn Randians, all well and good but it is like using using
> a tube TV, you can but there are so many advances by people like
> Kahnemann, Beinhocker, Talib and Soros that explain the differences
> between perception and reality, biases and contextual distortions
> and other elements of uncertainty. Still a hard thing to understand
> and the mistakes that will be made in the future will prove that.
>
>
> The current mistake you made in comparing the math of quantum mechanics
> is deciding that people are like atoms, and particles that if we
> could develop more complex algorithms we could predict markets and
> value wealth.
>
> This is exactly the lie that got us into this mess, and several of
> the most recent such as LTCM and even the melt down of 1987, I love
> that math as much as the next guy but to apply it to economics has
> proven impossible as people aren't simple autonomous agents like
> Quarks and Gluons. They are more complicated.
>
> People that want to deconstruct value into discrete elements are
> foolish in thinking that they can return wealth to something tangible
> when that hasn't been the case ever. The situation in the first transaction
> was determined by a complex set of individual understanding and contextual
> forces, and as the creators of Billions and Billions of SKU's alone
> to say nothing of services, e.g. no SKU for prostitution as an example.
>
>
> Everyone likes to think that the answer is in the past when it is
> always in the future, we will repeat history without trying so let's
> move ahead and stop pretending that dead philosophers will get out
> of this mess, which is more about what we don't understand that anything
> we forgot.
On Oct 27 10:58 AM John Lounsbury wrote:
> Paco - - -
>
> Good article, but I have a philosophical bone to pick.
>
> You wrote:
>
> "Nothing in this universe has intrinsic value; every single thing
> you possess, want to possess, use, can use, have used, can offer,
> have offered, or will offer is valuable only if someone else finds
> it valuable."
>
> You have defined value in terms of exchange. I would argue that is
> too narrow a definition. There are things with intrinsic value independent
> of any medium of exchange. Exchange is merely one way, but not the
> only way, to define value.
>
> I maintain that anything necessary for my existence has intrinsic
> value. Air to breathe, water to drink and food to eat have intrinsic
> value. The value has a binary measurement: either I have these things
> and exist or one is missing and I don't exist.
>
> Most economists make their definitions based on commerce. The basics
> of existence don't come into the equation, except for a few fringe
> operatives who play with things like "happiness indexes".
>
> Ultimately, all of the "commercial" definitions of value are secondary
> to the "existence" definition of value. We lose sight of that and
> many externalities result, which repetitively blow apart the best
> of economic theories. Throughout history societies and civilizations
> have failed because of resource exhaustion. They thrived on commerce
> and decayed on the basis of not sufficiently supporting existence.
>
>
> There absolutely are things with a real intrinsic value.
>
> I know this is outside the scope you intended to address, but I just
> had to have my rant.
You are Austrian, but pissed off about having the wrong accent?
If you're the last sentient creature in the universe, and you "value" an apple, it's still subjective. Once you're gone, what "value" does it have?
Goods and services only possess value if someone values them; again, nothing is valuable "just because."
On Oct 28 06:07 PM americanincanada wrote:
> I didn't understand the idea of "value" solely as exchange either.
> In biological terms it only takes one to decide something as having
> value, and usually it is phrased in terms of the amount of energy
> it takes or effort to acquire it and the benefit it bestows. If
> you are hungry and the only apple left is at the top of the tree
> you will expend energy to get it, it has some value to you. If you
> are not hungry or if there is plenty to eat within arms reach its
> value is much less. Even a lion has to calculate the value of prey
> based on the amount of effort and energy required to capture it relative
> to the energy it will supply when eaten. It doesn't seem to take
> two lions or more to establish that value. Am I missing something?
>
Love the comments, especially those that lean towards the debt being unimportant.
Truth is our future liabilities WITHOUT this extra $42k per head are at least 10 times that over the next 20-25 years. PLUS the cost of all current programs and laws over the same time period.
Oh yeah, let us not forget the interest on the debt.
American education wins again, the majority of citizens seem to think that worthless currency will continue to buy their Chinese processed apple juice, fast food and fish sticks. Not to mention band-aids, medicines and underwear.
Government is spending and soon you won't be able to afford socks.
That is the reality of the situation and it doesn't matter what school of economics you subscribe to.
In a somewhat related vein, I find it interesting when discussing intrinsic and face values, the “ring” and “clunk” test of US currencies over the past 45 years, how the newly minted state series of quarters play into the mix. If the “render unto Caesar” principle is applied, (whose inscription is on it?), can we look forward to greater states rights and a devolution from centralized planning, I mean, government?
That said, I agree the "elaborate fiasco called quantitative easing" is doomed to fail. Yet that we have among us the blind leading the blind into a ditch is not necessarily a bad thing. How else might wiser minds gain the path of least resistance in rising to the top?
Still, sir, I have said this before in this forum and I should say it again: the Austrian school is one whose principles best suit a fascist social arrangement, whereas a Hamiltonian credit system best suits a nation whose foundational principle seeks to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare and secure the Blessings of Liberty to ourselves and our Posterity.
Please provide an example.
"Yet that we have among us the blind leading the blind into a ditch is not necessarily a bad thing. How else might wiser minds gain the path of least resistance in rising to the top?"
Now you're talking. Burn, baby, burn!
You make a good and very important point, even if you are not arguing it as elegantly as my anal mind requires.
"Intrinsic value" is not the same as "utility value": yes, things like air and food have a UTILITARIAN value for beings with bodies that need such things in order to continue surviving, but that is NOT the same thing as intrinsic value in and of itself regardless of whether humans exist or not (which is what Paco said in the 2nd paragraph of his "Good Theory": "I want you to try to imagine a universe in which no sentient creatures exist. How much would a “car” be worth?").
Which points put the whole problem with Austrian economics (which is also your main point) : it only works in a world where people aren't made of flesh and bone that must be fed and clothed. In our REAL world, whoever is the furthest economically from destitution ALWAYS has the better bargaining position and can ALWAYS hold out for a better deal, and thus there is NEVER an exchange with both parties "willing participants": one is always MORE extorted BY LIFE to strike a bad deal than the other. "The other" is often a corporation, as corporations are actually NON corporeal (kind of a misnomer there), and thus do not need to consume anything but the lives of their employees.
And that is why "Austrian economics" and "physics" should NEVER be mentioned together in the same sentence except to point out that "with one, you can do stuff" (like annihilate innocent Japanese civilians and American POWs in Hiroshima and Nagasaki), and "with the other one, you can't".
That said, try this for size: nobody (especially including "the Austrians") has come up with a commonsense definition of government that is infinitely scaleable, such as
Government: "One or more persons who claim natural resources, are willing and able to defend their claim on those resources, and make and enforce decisions regarding the allocation of those resources."
Per that definition, EVERY government is the "de facto" owner of everything (including EVERYONE) within its domain (governments subsequently create "de jure" ownership in order to get resources into the hands they believe will be most productive and thus most conducive to the government's prosperity and longevity), and thus no government EVER needs to borrow to fund its operations and to facilitate commerce (except for foreign exchange, a topic we will address at a later date); all it needs to do is to "monetize" the wealth it already owns. Our government's creation of "a monopoly over money" and its relinquishment (to the Federal Reserve central bank in 1913) of the creation of money were due to the fact that the banking industry assumed ownership of the U.S. Federal Government after "We, the People" lost the SECOND American Revolution (usually referred to as "Shays' Rebellion") and have used the U.S. Federal Government ever since to enrich themselves at the expense of everyone else (major corporations and media being "virtual subsidiaries" of the banking industry due to their need for financing to fund their operations), mainly by means of loaning us our own money "at interest", a process which has resulted in the transfer of 95% of the value of the 1913 dollar into the pockets of U.S. Treasury bondholders.
Several things need to happen to address the situation in which we currently find ourselves:
1. Take the printing press back from the U.S. central bank (the Fed), and legalize a "free market" in banking and money while removing all of the government support and protections the banks currently enjoy. The new money will be mainly electronic ("e-bucks", credited to a debit account for every economic entity, as needed), with maybe some 1's (with Tom Paine's picture on them) in circulation.
2. Existing Federal Reserve dollars are to be taken in and credited in the new e-bucks and then used to retire the U.S. National Debt. In order to address the wealth disparity that has resulted from the last 200 years of "banking ownership of everyone else", we may want to limit the amount of Fed dollars we credit from any one particular economic entity (like "Goldman Sachs" or "China"); those enties could either hold on to their Fed dollars or else trade them in via their depositors, shareholders, or citizens by distributing their excess Fed dollars in equal amounts to those entities.
3. Implement a version of Tom Paine's "Agrarian Justice" plan (modified to incorporate the above "commonsense definition of government") by sending every legal resident at least $1000 per month as compensation for their government's impairment of their "right to free access to land". (Minus such a right, a "right to life" is nothing but an empty phrase and a free ticket to "the land of wage slavery".) This compensation should and must replace ALL other forms of corporate and personal welfare and subsidies.
4. Head off inflation by charging an "infrastructure maintenance fee" of up to 1% (but probably much less) on every electronic debit transaction (whatever is required to remove as much money as is being added each month). Eliminate ALL income-based federal taxation (and the IRS as well).
On Oct 27 10:58 AM John Lounsbury wrote:
> Paco - - -
>
> Good article, but I have a philosophical bone to pick.
>
> You wrote:
>
> "Nothing in this universe has intrinsic value; every single thing
> you possess, want to possess, use, can use, have used, can offer,
> have offered, or will offer is valuable only if someone else finds
> it valuable."
>
> You have defined value in terms of exchange. I would argue that is
> too narrow a definition. There are things with intrinsic value independent
> of any medium of exchange. Exchange is merely one way, but not the
> only way, to define value.
>
> I maintain that anything necessary for my existence has intrinsic
> value. Air to breathe, water to drink and food to eat have intrinsic
> value. The value has a binary measurement: either I have these things
> and exist or one is missing and I don't exist.
>
> Most economists make their definitions based on commerce. The basics
> of existence don't come into the equation, except for a few fringe
> operatives who play with things like "happiness indexes".
>
> Ultimately, all of the "commercial" definitions of value are secondary
> to the "existence" definition of value. We lose sight of that and
> many externalities result, which repetitively blow apart the best
> of economic theories. Throughout history societies and civilizations
> have failed because of resource exhaustion. They thrived on commerce
> and decayed on the basis of not sufficiently supporting existence.
>
>
> There absolutely are things with a real intrinsic value.
>
> I know this is outside the scope you intended to address, but I just
> had to have my rant.
On Oct 29 12:45 PM RiskAverseAlert wrote:
> Still, sir, I have said this before in this forum and I should say
> it again: the Austrian school is one whose principles best suit a
> fascist social arrangement, whereas a Hamiltonian credit system best
> suits a nation whose foundational principle seeks to form a more
> perfect Union, establish Justice, insure domestic Tranquility, provide
> for the common defence, promote the general Welfare and secure the
> Blessings of Liberty to ourselves and our Posterity.