Okay, no constants, no science. So what are our arguments for capitalism and free markets based on? Faith? According to Wenzel, evidently...

Quote:

And I will reply, “Do you not believe in supply and demand? Do you not believe that products once made will adjust to a market clearing price?”

Further , I will argue that the price of the factors of production will adjust to prices at the consumer level and that thus the markets at all levels will clear. Again do you believe in supply and demand or not?

I scratch my head that somehow most of you on some academic level believe in the theory of supply and demand and how market setting prices result, but yet you deny them in your macro thinking about the economy.

IMHCO we had better be able to come up with something better than just shouting, "Heretics!"

“I stand here confused as to how you see the world so differently than I do.”

I'm with Wenzel.

What other word would you use to ask that question? "supply and demand" is a theory. It's not a scientific fact. You have to believe in theories, your belief can be based in evidence, but you can't *know* a theory is true.

Not only that Mrbill, but no less an authority (and renegade economist) than Steve Keen would argue that the conventional economic theory of supply and demand is wrong:

http://www.debtdeflation.com/blogs/2011/....

Certainly no scientific constant, and not even an uncontested theory.

http://mises.org/media/4347/Praxeology-T....

The link above might be of interest as it pertains to scientific statements applied to economic thought. The hour long video by Hans-Hermann Hoppe gives the background of the Austrian School "praxeological" methodology by first contrasting them with the commonly held "positivist" methodology. The meat of Hoppe's explanation of the ( non-Austrian ) "positivist" views begins at 9'00 into video; his summary of the "positivist" view comes in at 18'30.


The Austrian viewpoint holds that there are economic propositions that are logically true a priori statements that can be stated and built upon without continuous testing: Hoppe starts giving examples at about 19'00 into video with specific economic propositions at about 24'40. Supply and demand falls into a category Austrians would classify as a priori truths.

No doubt a lot of folks, mostly reductionists in my experience, think that if a phenomenon can't be measured down to the puckered ******* of a boson particle, then it is illegitimate to apply the scientific method to it. Not because the social sciences haven't produced reproducible results in controlled studies, but because it doesn't fit with their view of the world.

Say what you will, counting economics as illegitimate just because economists are often wrong is EXACTLY ANALOGOUS to counting physics as illegitimate just because meteorologists are often wrong. The only reason a reductionist will protest the latter and not the former is because it cuts across his personal Faith.

Meanwhile, I'll be enjoying my popcorn while someone, anyone, here or anywhere else explains to me what the scientific method is going to be replaced with other than Faith.

Mrbill wrote..

What other word would you use to ask that question? "supply and demand" is a theory. It's not a scientific fact. You have to believe in theories, your belief can be based in evidence, but you can't *know* a theory is true.

That depends entirely on where you decide to draw the line on *know*. On the side of the line you seem to be arguing, you cannot *know* that water freezes at 32 F. At. All. In that, *knowing unto a metaphysical certainty* about anything is an impossibility for mere mortals to attain.

The line that I would argue for defining when we *know* something -- and that philosophically-speaking has to be argued for the scientific method to remain valid -- is whether we have sufficient warrant to say that we *know* it. And I would answer in the affirmative for both the freezing point of water and the supply-demand curves. Could I be wrong? If Newton could be, no doubt about it. But I'm from Missouri...

Platawn wrote..

The Austrian viewpoint holds that there are economic propositions that are logically true a priori statements that can be stated and built upon without continuous testing: Hoppe starts giving examples at about 19'00 into video with specific economic propositions at about 24'40. Supply and demand falls into a category Austrians would classify as a priori truths.

All of science begins with an a priori assumption, namely that the cosmos makes rational sense.

Supply and Demand is a known fact. IMO, one cannot have capitalism without accepting this as a central theorem of economic reality. Remove it, and we economics majors might as well have been playing with ouija boards.

Quote:

It will ultimately result in huge price inflation, or, if you stop printing, another massive economic crash will occur.

There is no other way out.

Will the world end in fire or ice? That is the question.

-Uwe-

Good luck applying the scientific method to human actions. How do you propose to construct a formula to exactly explain decisions driven by emotions? The best you can do is an approximation. MV=PQ is a great example. It's a crude approximation at best, since V is based on human action, not all rational. It may not even be a linear relationship. If you have a formula that can accurately describe this chart, I'd love to see it:




There is a reason why economics is called a dismal science. That doesn't mean it isn't worth studying, but it's limitations must be understood.

Quote:

How do you propose to construct a formula to exactly explain decisions driven by emotions?

You cannot. I can say from personal experience that people do plenty of irrational things with their money.

-Uwe-

Jota wrote..

That depends entirely on where you decide to draw the line on *know*.

Oh dear.

Quote:

On the side of the line you seem to be arguing, you cannot *know* that water freezes at 32 F. At. All. In that, *knowing unto a metaphysical certainty* about anything is an impossibility for mere mortals to attain.

That's the nature of empirical investigation. You can be off by a decimal point, take a variable for granted. A "metaphysical certainty" is not falsifiable.

Contrast, the Pythagorean theorem: it's not a matter of collecting data from a number of triangles.

http://en.wikipedia.org/wiki/Inductive_r....

Similarly, comparative advantage is not a scientific hypothesis to be believed or disbelieved according to experiment or statistical research, but a statement of algebra.

(Afterthought: meanwhile, a Ben Bernanke or a Paul Krugman demands that he be able to verify his theories by furiously twiddling the knobs until they've snapped off in his hand. See the difference?)

http://wiki.mises.org/wiki/Comparative_a....

HHH (who supplied the example, and is just gangbusters for Immanuel Kant) lays it out like this:

A proposition is synthetic if formal logic is insufficient to decide its truth; analytic otherwise. (Imagine Ayn Rand, glaring. Consider: "I want pizza." Consider also the Gödel sentence, a merciless application of formal logic Kant could not have imagined.)

A proposition is a priori if observation is unnecessary to decide its truth; a posteriori otherwise. (The loaded distinction leads Hoppe to assert "realizing, independent of observation," which is mayonnaise.)

http://en.wikipedia.org/wiki/A_priori_an....

The philosophistry of classifying propositions is orthogonal to what Mises ever had in mind. You may experience a compulsion to march into the nearest department of a university and just hurly-burly throw mother****ers out of windows. This is natural.

All that aside, this is a decent primer for Human Action, and a cold shower introduction to Austrian jargon.

pdf: http://library.mises.org/books/Hans-Herm....
mp3: http://media.mises.org/mp3/audiobooks/Ho....