Wednesday, June 3, 2009

Subjective Value through Non-Austrians

James Buchanan in his book The Reason of Rules(10.2.9) states:
The individual is the unique unit of consciousness from which all evaluation begins. Note that this conception does not in any way reject the influence of community or society on the individual. The value structure of an isolated human being may be totally divergent from that of such a person described by membership in one or many social relationships. The presupposition requires only that societal or communitarian influences enter through modifications in the values that are potentially expressed by the individual and not externally.
Armen Alchian and William Allen in Exchange and Production: Competition, Coordination, and Control:
Groups, organizations, communities, nations, and societies are best understood by focusing on the incentives and actions of their members. A business, union, or family may be formed to further some common interest of its members, but group actions are still the results of decisions of individuals. Therefore, do not ask, "Why does the U.S. government, or General Motors, or some union behave as it does?" Ask instead, "Why does the decision-maker decide as he does?"
It is followed with some postulates that I list below:
  1. For each person, some goods are scarce
  2. Each person desires many goods and goals
  3. Each person is willing to forsake some of an economic good to get more of other economic goods
  4. The more one has of any good, the lower its personal marginal valuation
  5. Not all people have identical tastes and preferences
  6. People are innovative and rational
Value must be subjective otherwise a planned economy would be the easiest solution, but as Postulate 5 shows, tastes and preferences differ b/w individuals even b/w identical twins.

Monday, June 1, 2009

Value: Subjective or Objective

Is value objective or subjective?

I am not sure this is much debated today as most economists agree that value is subjective.

Objective value dictates that value is taken from the object. This would mean even if there were no one to purchase the apple; the apple still holds a certain value.

Subjective value, on the other hand, is taken from man's use of the object. Using the apple as a reference, the apple holds a value only because it is scarce and someone can use it. It is therefore from the individual that the value is taken and not from the apple itself. The cost of producing the apple does not influence it's value except to the person who went through the action of producing the apple.

There is then multiple amount of subjective values placed on an object as their could be numerous individuals who have use for it. Their value will allow them to bid on the item allowing those who value the object higher to be willing to give up more for it. If the producer values the object more than what others are willing to give, then he would not sell it.

Thursday, March 19, 2009

The Empiricist Claim

Last night, I was fortunate to lead the discussion.
I had tried to tackle the question, why we are the Austrian Knights and not the Smithian Souls.

The debate Austrians find themselves with mainstream economists is not over economics persay but a philosophical debate.

I am curious if when reading blog posts such as this one that claim Austrians don't like empirical data, do you get the same sense as I do? That this is not a debate over economics but of a philosophical nature that has long been in discussions.
Found an easy to follow Philosophy Forum on Kant vs Hume.

How can we best argue in this debate?

Wednesday, March 4, 2009

Austrian Knights to Smithian Souls

Tonight, Dan Klein had lead the discussion at the weekly Austrian Knights event.

The main point, at least as I took it, is the need for students to study Adam Smith.
Adam Smith had begun with the Theory of Moral Sentiments. It is important to note that it is the questions of morality that Adam Smith begin with, but to say that if other economists do not begin with such questions, they are not doing economics is rather short.

Economics is not the study of morals. We can not measure morals. It is only individual's making choices according to their preferences that help reveal the morality of the individual. This is not something that should be taken lightly. Morality and the study of ethics is a great assistance in learning about liberty, but they are not able to discuss economics. Economics defined famously by Lionel Robbins is "the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses." This is not the study of morals on society. Only value that an economist can use in their studies is that of price which unveils a load of information for that period of time.

In the study of liberty, morality is essential as it answers many questions allowing each of us to comprehend why we strive so hard towards it. Communism attacks religion for the very reason that morality denies that government intervention is a worthwhile policy.

Let us take from this event that we can not use morality to argue on economics, but we can and should study morality to discuss liberty. Read your SMITH!

Thursday, February 12, 2009

The People's Stimulus : What's your view?

Michelle Muccio, the Rebel Economist has decided its time to say what we have all been thinking.
We don't need a stimulus plan, just give us our taxes back.

Watch the video and let me know what you think?
If you like, send it to a friend and give us their take.
Leave comments on the video, and best of all, let us begin again our economic lessons for President Obama.

Wednesday, February 11, 2009

Pete Boettke on Obama's Stimulus

On the Austrian Economists blog, Professor Pete Boettke at GMU's Economics Department responds to Obama's outlandish claims during his first Presidential press conference.

Boettke is not known for his short blog posts, but a well said rebuttal it is.

President Obama, GMU is a short trip on the Metro away. You should make it out to one of Boettke's classes; perhaps you'll learn a thing or two.

Monday, February 9, 2009

OBAMA needs to Learn Economics Part 1

"All things are subject to the laws of cause and effect." - Menger

This is not philosophy but truth on causation.
Physics teaches us that energy is neither created nor destroyed.

What do you think free market thinkers speak of when we discuss the market fluctuations?
Whenever there is an interference within the market, it will have to react in order to re-stabilize.
The more you interfere the more the market will have to fluctuate.

What Obama does not understand, is that by the government not interfering within the market the individuals will not have halted. They will still be buying and selling. Their actions will be the cause that effects other's actions. This is how the market fluctuates.

I would like someone to explain to me how this is philosophy, or does someone want to take the side of explaining how government action actually means individual citizens actions.
We act with or without governments actions. Our actions do not need government involvement for them to affect one another.

Let us remember the lesson Henry Hazlitt wanted everyone to learn in his first chapter of Economics in One Lesson.
"The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the con- sequences of that policy not merely for one group but for all groups."

Part Two following shortly on "Government will create more jobs"