http://au.news.yahoo.com/a/-/latest/6412821/first-home-buyers-to-face-price-caps/

The “price caps” they are talking about are still rather generous in the sense that they are set at around $750k so if the state govts FHB assistance was affecting house prices at all this move is hardly going to reverse the overinflated house prices on it’s own.

Mulrax

You make some good points. I understand where you are coming from because I’ve spent a significant part of my professional career working on financial/trading/portfolio systems too. It pays to learn enough about the sector so that you can speak the same language as the end users of your systems and grasp the concepts involved. But coming from a different background to many people in the finance industry sometimes helps you notice things that they gloss over, and that could be why you can see the benefits of Steves models where many people in the industry can not.

How the flaws creep into ecconomic models is less to do with how exhaustively they are tested (on paper – because it’s not really possible to manipulate the actual ecconomic system) but rather the number of assumptions that they make in order to make them ‘work’. What really separates Steve from other ecconomists is that he challenges long-held assumptions to see if they are rock-solid fact (generally showing that they are not) and through that an ecconomic model that more accurately reflects the underlying ecconomy should result.

Just as with system development, it doesn’t matter how reliably a model is implemented if the original design and the premises that it’s based on are inadequate.

It will probably be quite a while before Steve has a model that he considers to be ‘complete’, but in the mean time – as you say – we can all benefit by following the evolution of the model and contemplating the issues that are raised along the way.

Mulrax

Just to explain – I am an embedded / telecommunication software hacker who joined a financial software vendor because there are no good embedded jobs any more. I have to read about economics and politics to stay sane – surrounded by former traders (very nice people by the way). Please don’t think I know anything more than how to google for all of this stuff. But I still can hack and use gaffer tape, I think. I employ the same old technique here.

If somebody claims than something works – let’s apply a bit more load to the system and see how it spits the dummy.

I do the same at work, this is my current job. The experience from this forum is invaluable, I have learned so much thanks to Steve and other participants what can be applied either directly or indirectly.

The only problem is that if the economy spits the dummy – it’s us.

Thanks for the reply.

“If we are talking about the best way to discredit stupid ideas – I don’t think that reductio ad absurdum is the best one in most o fthe cases”.

I am starting to believe you may be right about this.

“However I agree that due to the nature of the Austrian economics it may be well-calibrated against them”.

I suppose you mean with this that Austrian economics is an idealistic doctrine (in Marxian speak) and thus traces its origins to Platonism itself. That was my very inspiration. I guess I do have a soft spot for irony.

I probably should have stuck to what Marxism has to say about such debates: they are framed by ideology, not reason. Thus, there is no point to argue. Still, the idea of a paradigm shift (as employed by T. Kuhn) is quite appealing.

Regarding the rest of your post, I myself, years ago, did start studies in neoclassical microeconomics -using Varian’s book itself!- and in game theory (which I never finished). So I do have some basic understanding of what you are talking about, although probably some more technical details are beyond me.

Very sad thing that neo-classical economists (who claim to be Positivists) neglected experimentation for so long.

Unfortunately, and although most Marxists do not see themselves as Positivists, I also have to include Marxism in this.

And I still smoke!

Good night!

Marco

If we are talking about the best way to discredit stupid ideas – I don’t think that reductio ad absurdum is the best one in most o fthe cases. However I agree that due to the nature of the Austrian economics it may be well-calibrated against them.

Trying to defeat the enemy with his own weapon is one of the reasons why Steve’s book “Debunking” is so difficult to read.

Let’s start from a very simple example.

Individual demand curves cannot be aggregated as we can see with our own eyes that when a product becomes more popular – demand grows (see iPhones vs other types of smartphones based on Windows Mobile or Android). My demand curve depend on yours as we are social creatures. The whole idea of advertising any products depends on throwing away the concept of individualistic homo economicus.

What if human brain is not linear and the choice between products A and B determines the choice between products B and C? Just imagine – will you buy vodka glasses without buying vodka? But you can drink beer straight from the bottle. So the choice between beer and vodka determines the choice between buying vodka glasses and buying nothing (or more beer).

http://en.wikipedia.org/wiki/Homo_economicus
(the last section contains a reference to “debunking of the debunking”)
and then:
http://en.wikipedia.org/wiki/Rational_choice_theory

But by trying to find holes in the microeconomics by looking for plain inconsistencies and simple errors we may easily get entangled in an endless discussion as things are getting more and more messy.

To throw away these “rational” ideas we need to look from a different angle. Use a sledgehammer instead of a screwdriver.

What about the direct influence of consumed alcohol on the brain causing dependency? It is well known that alcohol directly affects decision making processes. How does it affect utility curves?

What about this?
http://www.eastonbh.ac.nz/?p=59

“The misuse of alcohol has
- reduced the New Zealand population by about 0.8 percent;
- reduced the overall quality of life (intangible costs) by about 2.0 percent (including the population loss);
- reduced the available material goods and services (tangible costs) by around 4.0 percent (of GDP).”

Tobacco Use
The use of tobacco has
- reduced the New Zealand population by about 2.0 percent;
- reduced the overall quality of life (intangible costs) by about 3.2 percent (including the population loss);
- reduced the available material goods and services (tangible costs) by around 1.7 percent (of GDP).

5.7% of GDP sacrificed indirectly due to legal substances abuse – is this insignificant? Are we humans rational or irrational?

Disclaimer: I gave up both “pleasures” >15 years ago.

Thanks for the comments. I general, I agree with your post. Just let me explain this:

“‘Basically, the idea is that Socialism is the negation of Libertarianism. And vice versa, Libertarianism is the negation of Socialism.’

and

‘…but I have observed that the word ’socialism’ appears to have lost all meaning in public discussions.’

In the first statement, without actually recognizing it, you are in fact using the twisted definitions of socialism and libertarianism, which makes it more ironic considering you recognize that the word socialism has lost all meaning in the second statement”

That was the whole point of the exercise: to point to the contradictions one derives from them.

As I was discussing with Tel (see post #89) and he advanced the definitions himself, I was using them. That’s why I enclosed them in quotations and I went to great lengths to justify any changes I did propose to them.

Perhaps I should have made this more explicit. But sorry, not that ironic.

Anyway, this is not really substantive.

Cheers,

Marco

============================================

ak @95

Answers to questions 1, 2, 3, and 4: No difference whatsoever.

You comment then: “So you have the answer. I am not saying that there is no difference between leftist and right-wing ideologies but let’s not waste time on marginal issues”.

My question now is: Who said there was any difference between SPD and CDU, Labour (old or new) and Tories/Libs, Democrats and Republicans or whatever they are called in Poland? Not me.

I don’t mean to be rude, but it seems to me the time wasted is the result of trying to convince me without actually paying much attention to what I was talking about.

In post #94 I tried my best to be impartial and civil (which I always appreciate, by the way) with Tel’s reasoning, but at least in my opinion, my answers can hardly hide that I am a Marxist.

“The glue sticking together left and right sides is so-called economic science”. Again I agree.

“Regarding clarifying the meaning of the word ’socialism’ – you are interfering with the process of making a straw man which is required by Austrians to present their utopian ideas”. In this case, I am happy I am interfering (see above). That was my intention and the point of all my posts (but especially so with number #94).

“Let’s agree first on the point of methodology used to describe the reality and then we can talk about Libertarianism vs Socialism – otherwise it makes no sense to me to dispute things which have different meanings to different people. It is like me writing a post on this site in Polish – it will be rather ‘bez sensu’ (without sense)”. Agreed. I have no problem with Positivism (I guess, this makes me a sort of non-mainstream Marxian).

Marco

=============================================

This is a general observation and is not directed to anyone in particular: has anyone here ever read a Platonic dialogue? Or, paraphrasing ak, am I talking Greek? You know, a thesis is proposed, the consequences deduced and if there are any contradictions, the thesis is modified? Reductio ad absurdum, anyone?

“Basically, the idea is that Socialism is the negation of Libertarianism. And vice versa, Libertarianism is the negation of Socialism.”

and

“…but I have observed that the word “socialism” appears to have lost all meaning in public discussions.”

In the first statement, without actually recognizing it, you are in fact using the twisted definitions of socialism and libertarianism, which makes it more ironic considering you recognize that the word socialism has lost all meaning in the second statement.

When I first started learning economics years ago, I had thought that the word libertarianism referred to the ideal of free markets with a minimal state and that socialism referred to the centrally-planned communist states. There was only one problem with this: it was a load of crap.

Only later did I learn that the words libertarianism and socialism generally meant the same thing and were not mutually exclusive. The first usage of the word libertarianism in post-Enlightenment history was by anti-state socialists, beginning in 1858 onwards.

Libertarianism meant freedom from all forms of domination, coercion and hierarchy. This not only included nation-states but also private property and wage labor, the two fundamental institutions of capitalism.

Later on, there were those who would call themselves ‘libertarians’ in the US during the 1930s-1940s, and later became a movement during the 1970s. These types usually identified themselves with Austrian economics and were pro-capitalist.

This was almost entirely a US movement. Everywhere else, the word libertarianism, especially in Europe over the ages, meant freedom from both the tyrannies of state and capital.

Those who call themselves ‘libertarian’ and yet advocate that society’s resources and decisions should be made by unelected and unaccountable central planners within undemocratic and anti-democratic, internally totalitarian, collectivist, and psychopathic externalizing and rent-seeking institutions called capitalist firms that require the utilization of the extremely perverse and dehumanizing system of wage labor can’t be called libertarian.

Libertarianism is anti-state and anti-capitalist to the core. A better term for these so-called ‘libertarians’ are ‘right-wing propertarians’.

Anarcho has a better summary of it here:

http://anarchism.pageabode.com/afaq/150-years-of-libertarian

and

http://anarchism.pageabode.com/anarcho/an-anarchist-critique-of-anarcho-statism

Let’s ask a few questions:

1. What is the difference in the economic policy regarding privatisation, free supply of essential social services between the New Labour and the Tories in the UK?

2. What is the practical difference between first home owner grants policy implemented by John Howard and Kevin Rudd?

3. What personal changes related to controlling the American Treasury, Federal Reserve Bank, and broad economy did Barack Obama make when he took power?

4. What is the difference between so-called post-communists (Social-Democrats) in Poland and PiS (conservative nationalists) / PO (conservative liberals)? Has anyone there ever considered ditching the NAIRU-based inflation targeting policies after 1989?

So you have the answer. I am not saying that there is no difference between leftist and right-wing ideologies but let’s not waste time on marginal issues.

The glue sticking together left and right sides is so-called economic science. Progressive policies were branded “unscientific” and granting several Nobel prizes to neoclasscal economists cemented this consensus. Another reason is that pragmatic approach is the only way to win next elections. Can you imagine Kevin Rudd telling people:

“Guys I have to tell you that we are screwed up because of the debt bubble. And from tomorrow we will all be working on trying to clean up that mess. By the way you guys know that your superannuation accounts are worth only 50% of what you think and your houses are 40% overpriced.”

Will his wife ever allow him to criticise the policies of outsourcing essential social services to private companies?
http://en.wikipedia.org/wiki/Therese_Rein

“Along with many others, Ingeus has taken on the role after the Howard Government abolished Commonwealth Employment Service (CES), whose functions passed into the private sector.”

I don’t see any conspiracy there. Everything is written in open text. It is as obvious as my left hand reaching to my right pocket.

Regarding clarifying the meaning of the word “socialism” – you are interfering with the process of making a straw man which is required by Austrians to present their utopian ideas. Since I read about praxeology I stopped wasting my time on disputing particular elements of that ideology.

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

“Mises attempted to find the conceptual root of economics. Like other Austrian economists, he rejected the use of observation, saying that human actors are too complex to be reduced to their component parts and too self-conscious not to have their behaviour affected by the very act of observation. Observation of human action, or extrapolation from historical data, would thus always be contaminated by overlooked factors in a way that the natural sciences would not be.
To counter the subjective nature of the results of historical and statistical analysis (see Methodenstreit), Mises looked at the logical structure of human action (he entitled his magnum opus Human Action). In other words, he built on the methodological aspect of Economics, the synthetic a priori.”

If somebody rejects the use of observation and prefers to make up theories based on “a priori” reasoning … well… I cannot help much.

Let’s agree first on the point of methodology used to describe the reality and then we can talk about Libertarianism vs Socialism – otherwise it makes no sense to me to dispute things which have different meanings to different people. It is like me writing a post on this site in Polish – it will be rather “bez sensu” (without sense).

You provided two definitions:

Definition A
“A political philosophy [that] is built around subservience of the individual…” is Socialism.

Definition B
“A political philosophy [that] is built around individual freedoms especially freedom of association, free speech, free trade, minimal intervention by central authority” is liberty (Libertarianism?).
Basically, the idea is that Socialism is the negation of Libertarianism. And vice versa, Libertarianism is the negation of Socialism.

Although Definition A is a little vague, Definition B is much more detailed. A more schematic representation of Definition B goes like this:

A system can be called Libertarian if and only if in this system each one of the following characteristics is true:
* “freedom of association”
* “free speech”
* “free trade”
* “minimal intervention by central authority”
* (possibly many others).

As Definition B is also the negation of Socialism, then it follows that any system where at least one of the characteristics above is not true, is Socialism.

This is not only misleading, it’s also arbitrary. And I’ll try to argue it.

FIRST PART: WHY IS IT MISLEADING?

A first observation, then, concerns the relative breadth of these definitions of Socialism and Libertarianism: potentially, any system actually in existence -according to the definitions given- is Socialist. Even political systems perceived as widely different would all be classified under Socialism: Nazism and New Deal, Stalinism and Democracy.

This is, at best, misleading. And in the 1930s, 1940s and 1950s, it could get you in deep trouble

Conversely, no system actually in existence would be Libertarian.

In other words: if the definition of Socialism is so inclusive that everything falls within it, the definition of Libertarianism is so restrictive that nothing falls in it. This is not very useful at all. And this problem cannot be solved on the sole basis of the definitions provided.

To put an example from biology: taxonomy would not offer much in the way of enlightenment, if the only categories used were “material” and “alive”: plants are both material and alive, but so are animals: are they the same? Rocks are material but not alive, but so are machines. Is there any difference between rocks and machines? Is there anything non material which is also alive? Are all non material things also non alive?

So, let’s try to fix this. Although you did not mention it, in order to provide some kind of content to these definitions, one could further assume some kind of scale between Socialism and Libertarianism, such that both lie at the opposite ends of the scale. In one end, one has Libertarianism, with full personal freedom and at the other end one has Socialism, with no personal freedom.

Let’s observe that in this “Libertarianism-Socialism scale” Libertarianism only exists as an ideal case where there is full personal freedom and government intervention is minimal (which is in itself a difficult thing to answer). Here, then the notion of Libertarianism has not changed at all. But now the notion of Socialism has become an extreme, ideal case, too: no liberty whatsoever and non-minimal government intervention [1].

This raises a natural question: what happens then to intermediate cases? Say, cases where some characteristics are present and some are not? In the case of binary characteristics (i.e. yes-or-no, like freedom of association, free speech, free trade), one could ask which characteristics can be added to Socialism, such that the resulting political philosophy remains close to it?

Conversely, which characteristics can be removed from a political philosophy, such that it still remains “close” to Libertarianism in the scale?

Furthermore, is it possible to have non-minimal government intervention and still be close to Libertarianism? Say in the case that all other personal freedoms are protected. I can’t see why not. But isn’t this contradictory with the original Definition B? In other words: is there a tradeoff between government intervention and personal freedoms, such that one can still be close to Libertarianism?

Even with this “Libertarianism-Socialism scale” we have gained very little extra insight. As in the case of the definitions proposed originally, this seem to open more questions than it answers, and the answers one may advance are either arbitrary (what is minimal intervention anyway?), contradictory or at least controversial (is there a tradeoff between government intervention and other personal freedoms?).

In any case, the precise classification of intermediate cases remains open. As it is open the assignment of labels to these intermediate cases.

To apply what has been discussed in this section (the next one, I promise, will be much shorter ) to a concrete case: Keynesianism, for instance, cannot be classified as Libertarianism (there is a non minimal government intervention), but cannot be classified as Socialism, either, because people still retained freedom of association, free speech, and many others not explicitly mentioned. Are the freedoms maintained under Keynesianism enough to say it’s close to Libertarianism?

SECOND PART: WHY IS IT ARBITRARY?

The definition of socialism provided is arbitrary because it is neither the one socialists use, nor the one that appears in dictionaries:

“so·cial·ism (…)
-noun
1. a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole.
2. procedure or practice in accordance with this theory.
3. (in Marxist theory) the stage following capitalism in the transition of a society to communism, characterized by the imperfect implementation of collectivist principles” [2].

I don’t mean this as a personal criticism to you and please don’t take it the wrong way (as this does not apply to you only), but I have observed that the word “socialism” appears to have lost all meaning in public discussions.

I have my opinion about why this has happened, but that would be a matter for another occasion.

Cheers

Marco

[1] Allow me to elaborate on this a little: most of the characteristics given as definition of Libertarianism are yes-or-no: freedom of association, for instance (either you have it or you don’t). The case of government intervention is not so. So, following the definition provided, in the case of “minimal intervention by central authority”, for Libertarianism, I suppose one must have non “minimal intervention by central authority” for Socialism as definitions for this characteristic only. Although this is not what was propposed, I think it captures the gist of the definition advanced.

[2] socialism. (n.d.). Dictionary.com Unabridged. Retrieved October 17, 2009, from Dictionary.com website: http://dictionary.reference.com/browse/socialism

=====================================================

Alan Gresley @92

Thanks for your comments. Although I have not had the time to give them proper consideration, it appears to me you are explaining what a false dichotomy is, in general.

However, my question was why right vs. left is a false dichotomy?

I gather this has something to do with what you call corporatism (being something like a form of extreme or degenerate capitalism). Yet, I fail to see why corporatism is essentially different from capitalism in general.

Anyway, if you can provide further details it would be appreciated. I’ll get back to you.

Marco