Blog Archives

Are Austrians Really Opposed to Central Planning?


This seems like a really stupid question to ask. I mean, after all, Ludwig von Mises wrote an entire treatise on the complete impossibility of economic central planning, and went on to call it “Planned Chaos”, the title of another of Mises’ brilliant works.

Murray Rothbard later expanded on Mises’ overall insights, particularly in the area of monopoly, and production theory. In political theory, Murray Rothbard was, make no mistake about it, what we consider to be an Anarchist today.1 He believed that the State could be and should be utterly abolished. To those who say that the State is required by the very nature of man because man is by necessity a societal being, Murray Rothbard had this to say:

A common defense of the State holds that man is a "social animal,"
that he must live in society, and that individualists and libertarians believe
in the existence of "atomistic individuals" uninfluenced by and unrelated
to their fellow men. But no libertarians have ever held individuals to be
isolated atoms; on the contrary, all libertarians have recognized the
necessity and the enormous advantages of living in society, and of
participating in the social division of labor. The great non sequitur
committed by defenders of the State, including classical Aristotelian and
Thomist philosophers, is to leap from the necessity of society to the
necessity of the State. On the contrary, as we have indicated, the State is
an antisocial instrument, crippling voluntary interchange, individual
creativity, and the division of labor. "Society" is a convenient label for
the voluntary interrelations of individuals, in peaceful exchange and on
the market. Here we may point to Albert Jay Nock’s penetrating distinc-
tion between "social power"-the fruits of voluntary interchange in the economy and in civilization-and "State power," the coercive interference
and exploitation of those fruits. In that light, Nock showed that human
history is basically a race between State power and social power, between
the beneficent fruits of peaceful and voluntary production and creativity
on the one hand, and the crippling and parasitic blight of State power
upon the voluntary and productive social process. All of the services
commonly thought to require the State-from the coining of money to
police protection to the development of law in defense of the rights of
person and property-can be and have been supplied far more efficiently
and certainly more morally by private persons. The State is in no sense
required by the nature of man; quite the contrary2

This is one of many gems in Murray Rothbard’s writings, and it is in this writing that we find our first real problem with the common concept of central economic planning; the question is virtually never asked, “what is the center of society?” Austrian economist Ludwig von Mises answered that question through his discussion of Praxeology. He pointed out (quite correctly) that only individuals act or are capable of acting, that individuals by necessity come before society. Drawing upon this insight, as well as the insight that Rothbard has given us, i.e., that “Society” is nothing more than a convenient label for the voluntary interrelations of individuals in peaceful exchange, we can safely conclude therefore that Austrians not only support central economic planning, but call for it almost religiously.

This almost sounds like a non sequitur (which I will be accused of I’m sure) at first glance, but I can assure you that it is not. The problem with the current, popular definition of Central Economic Planning is that it declares the State to be the center of society. As Rothbard pointed out in the above quote, however, the State is an inherently anti-social entity that cripples society by crippling voluntary exchange. On the contrary, the State is not the center of society, nor does it exist within society. The State is nothing more than an external force imposing its will upon society.

Using the above insights, we are prepared now to redefine the term Central Economic Planning. Central Economic Planning is that system in which all of the production in Society is controlled and maintained by all of the individuals of society through peaceful exchange.

I am well aware of the fact that I will be accused of redefinition for ideological reasons, but my reasons for redefining the term Central Economic Planning are far from ideological. The reason I am defining the term Central Economic Planning as such is because it is the only definition that fits the facts.

Using all of the above, we can safely conclude that it is not Central Economic Planning that Austrians such as Mises and Rothbard rejected, it was “External Planning”, that they rejected, and that is exactly what a State planned economy is; External Planning.

Advertisements

My Last Rebuttal (for now) to MarxistMax


It never ceases to amaze me how the average person argues when he talks about economics. His personal “presentation”, as it were, on economics almost always leads him to argue in favor of Republicanism or the Democratic Party. It is as if he can’t present his own personal position without mentioning a political party, and thus, we now have the groundwork for the first point that I absolutely must make in response to MarxistMax.

Quote from MarxistMax: “For a right-winger, this is hugely hypocritical.

This is going to come as a massive shock to both MarxistMax and other readers alike, but I am not a right-winger. Far from it. I am a staunch Liberal, and by Liberal I mean the old (true) definition of the word Liberal (some refer to it as “Classical Liberalism”, but I despise the adjective CLASSICAL). So far as politics goes, the closest that any politician has come to representing me is Ron Paul, but his Jeffersonianism displaces me as a supporter.

The point of this is simple enough; I don’t argue from the perspective of politics, I argue from the perspective of economics, and I don’t, as you charge, reject common sense.

Quote from MarxistMax: This guy, who from now on I’ll call ‘ken’, is staunchly capitalist, and favours market forces over common sense.

On the contrary, it is on the basis of common sense that I make my arguments.

Quote from MarxistMax: It’s perfectly reasonable for normal people to demand that the government they elected improve their living conditions by whatever way possible, and if that includes job creation then you free marketeers are just going to have to grin and bear it, because government is responsible for all that happens within it borders, economically or otherwise.

It is apparent from this that you don’t understand the very reason(s) people vote in the first place. As Lysander Spooner keenly pointed out, people only vote for one of two reasons; either they vote because they want the government to take money from someone else in order to meet their personal demands (education, healthcare, food stamps, subsidies, etc.), or they vote in order to keep the government from taking their money. If not for these two reasons, then the vast majority of people wouldn’t vote at all, and if you don’t believe me, ask yourself why you vote (if at all). What makes you think that a system like this isn’t going to collapse into civil war at some point, I don’t know.

Now, with regards to people demanding better living conditions, let me put it to you this way; suppose you (MarxistMax) were to just get up and go to a casino with nothing more than the money that’s in your pocket right now. How much of your money (if any) would you spend in gambling? Compare that number to the amount that you would be willing to spend if you had a super-rich friend who said to you, “Don’t worry about it, man! I’ll cover all of your losses.”

When you have a 3rd party subsidizing your expectations, your expectations are going to be far higher than they otherwise would’ve been. This one of the main reasons (the Socialist Calculation Problem is yet another reason) that socialism wastes so much in resources. Aside from the fact that the socialist government can’t calculate the cost of production (I’ll have a link for you on that at the end of this post), the democratic socialist government (which you support, and which happens to be an oxymoron) has to subsidize outrageous expectations with regards to the standard of living.  

The most interesting part about your post is that you say you don’t use violence.

Quote from MarxistMax: “A VERY large difference between me and Stalin, Hitler or any mass-murdering dictator you care to mention is that I DON’T USE VIOLENCE. I can’t believe this even needs to be said! If people don’t like my opinions then they can simply stop reading. I’m not trying to ‘instill all-around regimentation’.

This is the most interesting because your are, contrary to your claims, arguing for all around regimentation. The problem is that you don’t realize it. In your past post, you argued that the government should completely nationalize (people with guns should come in and take private property) the energy industry, and oversee the production and consumption of energy. But people aren’t going to simply go along with this new direction simply because the government passed some law, and the second that there is resistance to the new law, your (MarxistMax) energy policy will become thus:

“The government is going to produce energy from now on; no one else can produce energy but the government. We’re going to produce energy whether you like it or not. If you try to produce your own energy, we’re going to fine, arrest, or kill you (coercion). You will consume energy in the exact amount and manner we tell you; if you stray from our statutes, we will fine, arrest, or kill you (more coercion). If you try to sell the energy we give you to someone else, we will fine, arrest, or kill you (even more coercion).”

The above is, admit it or not, the system that you are advocating; this is what it looks like, and while you may not personally use violence to achieve your ends, you appoint others (the bureaucrats in government) to use violence in your stead. It is no coincidence that in the history of mankind, the most blood was spilled, and the most poverty was caused, by people who had good intentions. In their speeches before they got into power, they talked about helping others, caring for the needy, they denounced the greed of a few, etc., and yet the most horrendous social atrocities were committed by “humanitarian” regimes. Now you might respond that the likes of Hitler, Mao, or Stalin weren’t actually humanitarian, and if that is indeed your response, my response to that is this, “The humanitarian in theory is the terrorist in action.”

The last point I will respond to is this.

Quote from MarxistMax:  That taxpayers money will make much more of an impact when rolled into one than if spent on sweeties and magazines by a thousand separate civilians. It is important to get civilians spending, but the government can do more with that money than civilians can.

The very big fallacious assumption built into this quote is the existence of objective value, and that government, who’s bureaucrats and politicians (assuming democracy) are picked by the same people who’re supposedly too stupid to know what’s good for them (yet another assumption built into the above quote), somehow know which direction that humanity need to invest its resources. Forgive me if I believe that this is hopelessly absurd.

On that note, here is that video I promised you. And since you believe in Objective Value, I’ll throw in one more video for you.

Political Inconsistency/Cultish Behavior


You know, for some people economics is this mathematical science that allows people to predict the state of the future economy. For others, economics is the “dismal science”, i.e., a pseudo-scientific philosophy which rarely (if ever) tells us anything about the real world or makes accurate predictions. For myself, I can fully understand the latter group’s frustration with economics. How many economists told us, for instance, back in 2005-2007 that the economy was doing great, it was going to go even higher, etc.. And bear in mind that all of these economists had very sophisticated equations and models to back their arguments.

To me, economics isn’t a series of math equations or econometric models that predict the future. To me, the science of Economics is observation; it is acknowledging that humans act, i.e., utilize means to achieve pre-determined ends, and deducing from this the most logical conclusions that the actions themselves imply. Once you take and apply this method, you will understand precisely why the empirical/mathematical methodology utterly fails its purpose within the science of economics, but we will save the finer points of that conclusion for later. For right now, however, it is necessary that we take a few cases of complete hypocrisy regarding certain political issues that, at first glance, have nothing to do with each other. We will deal with two issues at the end in which the connection will be painfully obvious.

Rent Control/Minimum Wage:

These two issues, to the untrained eye, have next to nothing in common. Rent control is an act by which the amount of rent that can be charged by a landlord is capped, while Minimum Wage is an act by which employers are forced to pay their employees no lower than a given amount. Proponents of the Minimum Wage will argue fiercely that we need Minimum Wage regulations in order to enforce a “Livable Wage”, to keep the big guys from exploiting the little guys as “Slave Labor.”

Rent Control, however, has little to no supporters. Hardly anyone supports the idea of Rent Control. In fact, in 2011 when Jimmy McMillan, the RENT IS TOO DAMN HIGH guy, got evicted from his rent-controlled apartment, The Young Turks ran a segment on it. Cenk Uygur, who everyone knows is my FAVORITE news personality *sarcasm*, had this to say regarding Rent Control.

Quote from Cenk Uygur: “Now, it’s interesting because I actually think that Rent Control is not the right policy, and I think it’s created a lot of weird consequences because of it in New York; people holding onto apartments forever and doing all these shenanigans to pass it to people they know, yada yada yada.

 Of course, Cenk’s analysis doesn’t even cover a fraction of the problems regarding Rent Control, but this has nothing to do with what Rent Control and Minimum Wage regulations have in common at their core (besides being regulations, of course). The truth is, they are both price controls. Rent Control is a downwards control on Rent, Minimum Wage is an upwards control on wages. Price controls, ultimately, have the same effect no matter where in the economy they’re applied, i.e., Demand exceeds Supply and you have shortages as a result. In the case of Rent Control, it destroys existing housing, in the case of Minimum Wage, you doom a portion of the labor force to be unemployed indefinitely. But notice, Cenk Uygur is a fervent supporter of the Minimum Wage, but he opposes Rent Control as not being the right policy even though they are both, at their core, the exact same principle applied in two different directions.

 

Immigration/New Technology:

Ok, now this one is a head-scratcher. How can immigration possibly have anything to do with New Technology? How can someone be a hypocrite by supporting one but not the other?

The answer is simpler than it first appears. One needs only to consider what the ultimate effects of Immigration and New Technology are to see what they have in common. Immigration is that process by which people from foreign lands migrate from their home country in order to set up residence in another country. The effect this has on National Labor is immediately seen; the native laborers must compete with the laborers from the foreign lands for employment, thus driving down wages. The Protectionist exclaims that this is horrible; immigration should be restricted in order to protect National Labor against foreign competition. Why? Because Foreign Labor is willing to work for less than Native Labor. This competition creates unemployment for the Native Laborers, which puts us, ultimately, in a state of dependency on Foreign Labor and Foreign Investment.

New Technology, or Labor-Saving Devices if you prefer, is almost universally embraced (with a few notable exceptions). This wasn’t always the case, however. It used to be that new technology was frowned on. It was seen as the rich finding a way to squeeze the poor by laying them off and keeping the excess profits all to himself. it used to be argued, for instance, that if a machine were invented that would do the work of two workers as opposed to one, the employer would fire one of the two employees (the other would run the machine), and as a result, his income would be absent from circulation and the economy as a whole would suffer for it. Like I said, however, hardly anyone holds this position anymore.

What Immigration and New Technology both have in common is the means by which they operate in the market, and their ultimate effects. New Technology must, initially, compete with existing labor for the right to be used in place of the existing labor. If the New Technology is proven to be effective at the purpose for which it was designed, it begins putting pre-existing labor out of work, and while New Technology does create unemployment in the short-term, in the long-term however we are all better off for it.

Immigration has the same immediate competitive effects. The cheaper Foreign Labor, if it is effective, will put Native Workers out of work. The short-term result in both Immigration and New Technology regarding competition is the same. Ah, but the protectionist would be quick to intervene, “Your proposition is incredibly misleading! Sure, I cannot deny everything you’ve said thus far regarding the effects of Immigration and New Technology as you’ve said it, but you’re forgetting that New Technology doesn’t increase the population by one per new worker! New Technology doesn’t create new burdens on the tax-payer for school/emergency room fees!” I’m sorry to break this to Mr. Protectionist, but New Technology does in fact increase the population, just not in the immediate.

Immigration gives you in the short-run, regarding population increases, that you would’ve had with the New Technology. As the means of production become more efficient, we get greater returns for our labor, most notably in agriculture. More food = more energy for people to make babies. More energy for people to make babies = increase in the population. New Technology and Immigration, therefore, have the exact same long-term effects. It is therefore utter hypocrisy to oppose one on the basis that it creates unemployment, but defend from the other just such a criticism when they both have, in the long-run, the exact same effects.

The War on Drugs/Gun Control:

This is the one I mentioned earlier who’s connection is glaringly obvious. The War on Drugs is considered by many (including myself) to be a colossal failure; a government boondoggle in which billions of dollars has been wasted by housing otherwise harmless people in government-funding prisons, and is responsible for the rise of violent cartels (most notably in Mexico). The case for criminalization runs from “it’s harmful for you and society” to “you can’t be trusted with it”.

Remind me, along what lines does Gun Control go again? Oh yeah… “It’s harmful for you and society” to “you can’t be trusted with it.” The War on Drugs fails for the precise reason that if enough people want an illegal product, there will be a Black Market for said product. Just as in drugs, so too in guns. The same economic principles are at play in both cases, but notice one is being picked in favor of the other, even though the long-term effect of both policies is exactly the same. Once again, it is sheer hypocrisy to favor one over the other.

Conclusion:

The reason these people are contradicting themselves to such an extent is precisely because of their methodology; namely, the mathematical/empirical/statistical/positivistic methodology. The core problem with this doctrine, in my opinion, is the fact that in its line of reasoning, there isn’t any room for any sort of absolute truths. You have a hypothesis, you test the hypothesis, if your hypothesis comes through, you provisionally accept it. But even if your hypothesis comes through, this line of reasoning forces you to remember; it’s just a hypothesis and it could be overturned by the next experiment. As a result of this emphasizing what is seen, what is unseen is completely neglected, and if you point this out, they simply blast you for being “un-scientific”.

This sort of behavior, and line of reasoning, cannot be classified as anything but Cultish.

RationalWiki is a Front for Socialist Indoctrination


Arrogance Passing for Rationality

So I was browsing the web one day when I stumbled across a site called RationalWiki. Now the name and the design was appealing, what with the brain in the brackets and whatnot, so I decided to search through the site by looking at random articles to see what kind of material they offered. Well, what I found was anything but material that you’d expect to see on a site called “RationalWiki.” Instead, I find a series of nauseatingly shallow and arrogant articles that would make any objective scholar cringe; that this material is on the internet and no one has challenged it tells me a lot about the intellectual bankruptcy of the Western World.

Take, for example, the RationalWiki article on pseudoscience. One merely has to lightly read through it to see some of the most arrogant statements that can be made.

Quote from the page: “If an idea has not been published in a single peer review journal, it is safe to say it is not science. Most people have at least a passing knowledge of the peer review system and so pseudoscience promoters often have to offer hand-wavy explanations for why their ideas have not been published anywhere. In medicine it is common to blame Big Pharma for wanting to hide the fact that some natural product cures all known illnesses because it will hurt their profits – despite the fact that such a thing would generate more profit, and Big Pharma would be dying to get their hands on it!”

Let’s just assume for a second that I agree with the premise that this quote is putting forth (which I don’t); there is no excuse for passing this kind of blithely arrogant and shallow material off as anything other than trash, and that’s not even dealing with the factual inaccuracies. Starting with the idea that it is common in medicine to blame Big Pharma for wanting to hide natural cures, this couldn’t be further from the truth as in fact the idea of natural cures in medicine is very uncommon. Currently, Big Pharma has a massive monopoly over the medicine market, of which it enjoys thanks almost entirely to the Food and Drug Administration. You may think that said government agency is protecting you from harmful products, and it is true that they have banned some harmful drugs from the market, but what you don’t see is how many life-saving drugs that never make it to market if for no other reason than the bureaucratic red-tape. In fact, the FDA has approved a lion’s share of dangerous drugs that they ended up recalling later because they had links to serious side effects, and more are recalled regularly.

Big Pharma is, first and foremost, a cartel. It is a cartel that enjoys it’s monopoly privilege because it doesn’t have to worry about competition from smaller firms or corporations thanks to the FDA. In fact, the worst thing you could do to Big Pharma would be to get rid of the FDA. Now, don’t misunderstand me. I’m not saying that the FDA intentionally props up Big Pharma (though that’s not impossible), I’m saying that Big Pharma is being propped up because of the fact that they can afford to jump through the regulatory hoops, while smaller firms and corporations can’t. The result is an artificial demand for the products of Big Pharma because the products of smaller corporations and firms are barred from the market, thus, Big Pharma can charge a higher price for their products, and therefore, make much higher profits than they would have under free-market conditions.

Quote from the page: “Pseudoscience is sometimes referred to as “junk science.” However, the term “junk science” has become associated with anti-environmental bullshit due to corporate mouthpiece Steve Milloy‘s use of the term. Milloy runs a blog called “Junk Science” where he obfuscates and denies global warming, risks associated with the use of DDT, and other environmental problems. Michael Fumento, another shill, has furthered this use of the phrase. In general, when a pundit is being interviewed or writing a column about environmental or health issues, the term “junk science” usually translates to “science that will be very inconvenient for my funders” and “sound science” translates to “some bullshit I just made up to deny the problem.”

I’ve never heard of Steve Milloy or Michael Fumento, I’ve never read any of their material (which may or may not be bullshit as the author claims) and frankly, I don’t intend to. The ad hominem attacks and arrogant tone that the author takes are more than enough to discredit the integrity of the author in question. It is a clear indication that the author isn’t writing on the basis of Rationality, but on the basis of Emotion.

RationalWiki’s Attack on the Austrian School

Out of curiosity, I typed in “Austrian School,” just to see what would come up. This is what I found, and it’s a hit piece if there ever was one. In the introductory remarks, the intent of the piece is readily apparent.

Quote from the page: “As the claims of Austrian economists are difficult to verify without empirical testing (and the same economists openly admit to it), it is widely considered a pseudoscience.[4][5] Austrian arguments as to why statistical methods cannot adequately describe human behavior can seem intuitively compelling, but they fail to provide the mathematical proof demonstrating why normally unbiased estimates suddenly become biased simply because they are dealing with people who make decisions. Perhaps one reason they are so uncomfortable with empiricism is that Austrian economists are more interested in defending the political ideology of libertarianism than they are in advancing economic understanding,[6] and rigorous testing can sometimes undermine deeply held political beliefs.”

There is a glaring logical fallacy here. If you believe that statistical methods can’t adequately describe human behavior, why in the world would you be expected to provide mathematical proof to the claim? Doing so would be in direct contradiction with your own position, and would thus undermine it entirely. Apparently, the person who wrote this piece isn’t well versed in logic (or in the material that he’s/she’s critiquing).

As Ludwig Von Mises pointed out numerous times throughout his works (most notably in “Human Action: a Treatise on Economics,” and “Theory and History: an Interpretation of Social and Economic Evolution”), the natural sciences, i.e., chemistry, physics, owe the entirety of their success to the fact that they can conduct controlled experiments. They can recreate exact conditions as many times as needed to learn all that can be learned of a particular atom or chemical process. In the social sciences however, it’s not so simple. Human beings are not atoms that can be predicted 100%, or even 90% of the time, and it is impossible to conduct the type of empirical tests that those in the natural sciences conduct simply because of the fact that you can’t recreate exact conditions in the social sciences. The attempts to do so are even more laughable, since human beings do not react to the same stimuli in same way every time. Instead, the results are presented in the form of averages and percentages, but these results are worthless because they’re essentially comparing apples to oranges. Now, whether or not you agree or disagree with this is irrelevant to the fact that this is the Austrian Position simplified.

With regards to Praxeology, the author of the page hyperlinked Murray Rothbard’s Praxeology: The Methodology of Austrian Economics. As a side note, when yours truly first saw the RationalWiki page that I’m addressing, the hyperlink title was, “Praxeology: Or How I Learned Not to Think and Enjoy Stupidity.” I have since edited the page to give Murray’s work it’s original title. Apparently someone thought it was cute and funny to change the title of the work that he/she was critiquing to something derogatory. Again, that says something about the character and intention of the author of this RationalWiki page. The author goes on to quote two very short passages from Murray’s work, which is found on the first page ironically enough.

Quote from the page: Murray Rothbard‘s “Praxeology: The Methodology of Austrian Economics” describes praxeology as an application of deductive reasoning, applied to a set of ‘unquestionable’ axioms. Of course, any implications derived from these axioms are only as good as the analysis that derived them, and the axiom that they were derived from. This is where the praxeology gets into trouble, as they reject less mushy formal analysis in favor of more weasely verbal analysis. Lets look at the axiom that Rothbard refers to as the foundation of praxeological deduction as an example, the ‘fundamental axiom of action’. Almost immediately, the axiom wades into trouble. It states that:

“Individual human beings act.”

The first part of that assertion is simple enough to grasp, but what does it mean to act? One possible definition of act says it is to “perform an action”. This seems to be as far as most Austrian school thinker take this.”

This is where the author’s ignorance on the subject that he’s/she’s critiquing shows. The Austrian economists, especially Murray Rothbard and Ludwig Von Mises, went through great pains to illustrate what is action and what is not action in the Praxeological sense. Is breathing an action? No, because it is an unconscious reflex. Is typing up this rebuttal an action? Yes, because I am undertaking a purposeful (physical) action to achieve a given end. In the Praxeological sense, “perform an action” is not an adequate definition of action. Every action has three causes that must be simultaneously met, or action does not take place. First, the person must be dissatisfied with prevailing conditions. Second, the person must think that a different set of conditions would satisfy him more. Third, the person must think that he/she can succeed in changing his/her conditions. If so much as one of those conditions is missing, no action (in the Praxeological sense) takes place.

Quote from the page:“However, as an air conditioner, vacuum cleaner and TV all perform actions, it would seem this axiom places human beings in the rather large set of things that act. It would be pretty embarrassing then, to derive any economic conclusions from the fact that people are part of the set of things that act, as the conclusions deriving from being a member of the set of things that act would apply to other members of that set as well.”

It is true that the fore-mentioned machines perform actions, but only human beings act in the Praxeological sense. Do machines have goals that they themselves set? Can a vacuum cleaner or an air conditioner turn itself on without any kind of help from human beings? No. Even the most advanced units of machinery require presetting in order to perform these feats. In this case, the actions performed by machines are nothing more than reflexes and are not actions in the Praxeological sense. Only humans can act in the Praxeological sense, because only humans have the rational capacity to voluntarily chose ends and the means taken to meet those ends. This is well defined throughout the writings of both Murray Rothbard and Ludwig Von Mises, but apparently the author of this RationalWiki page couldn’t be bothered to actually read the material that he’s/she’s critiquing.

Quote from the page. “Rothbard is kind enough to clarify his definition: ’…that is human beings take conscious action towards chosen goals.’

Note that one under-defined concept has now been replaced with two; conscious action and chosen goals. Let us ignore the validity of this assertion, and try to figure out just what chosen goals are. The word choice would seem to imply some form of conscious action was taken in forming these goals, so is the real statement of this axiom “human beings take conscious action towards a consciously acted upon set of goals”? Perhaps Rothbard meant to differentiate between ‘choosing’ and ‘acting’, but that is never clearly expressed. In either case, it would seem that the definition of goal needs some work to be truly useful. Sound logic relies on clarity of definition, as many arguments are sensitive to subtle changes in meaning, and vague statements hide contradictions. This approach of verbal deduction also leads to a rather noticeable (ab)use of false analogies and intuition pumps.”

I have to point out that with as little as the author of the RationalWiki page quoted, anything can be under-defined. The author didn’t even bother going past the first page of the material that he/she hyperlinked. The above quote is the last of his rebuttal of Praxeology, and what’s worse, the author of the RationalWiki page didn’t even understand the little bit that he/she quoted. Choosing and Acting are two different things; choosing is a Psychological event, acting on your chosen ends is a Praxeological event. I would’ve expected the title of the work to hint at this, and some in-depth research to clarify, but again the point of the author’s RationalWiki page isn’t to actually refute anything. The point of the author’s RationalWiki page is to demonize opposition, and in pursuing this end, the author left countless fallacies in his/her wake.

The Attack on the Austrian Business Cycle Theory

The author of the RationalWiki page also takes aim at the Austrian Theory of the Business Cycle. Just for reference work, I’ll link two books for you to read on your own time. The first of these is Money, Bank Credit, and Economic Cycles by Jesus Heurta de Soto, and the second is The Theory of Money and Credit by Ludwig Von Mises.

Quote from the page:  “Austrian Business Cycle Theory (ABCT) is an attempt to explain the business cycle in capitalist economies through the lens of Austrian theory (obviously). ABCT is probably one of the elements of the Austrian school that helps it spread its laissez-faire meme-plex due to its appealing simplicity. In short, the business cycle is the creation of the central bank (the Federal Reserve in the US) — when it sets interest rates too low, this makes credit much easier to get. This easy credit is confused for “real loanable funds” (ie. hard cash money). In other words, the easy credit sends out “false signals” to banks and other creditors to go into a feeding frenzy and make loans to anyone and his dog. This causes a bubble driven by inflation, not true economic growth which is destined to burst. Recessions and depressions, then, are simply payback for getting drunk on easy credit. They are in fact desirable because they represent a market correction where “misallocated resources” are liquidated and thus free to be “reallocated” to a more useful ends. This has led economist Paul Krugman to dub it the “Hangover Theory,” calling it “about as worthy of serious study as the phlogiston theory of fire.”[7] Milton Friedman remarked: “The Austrian business-cycle theory has done the world a great deal of harm.”[8] Gordon Tullock claims that with the reallocation of capital the model predicts, “Laborers would be exploiting the capitalists.””

The irony of this quote rests in the fact that the author of the RationalWiki page demonstrates here a decent understanding of the ABCT, but then proceeds to argue from authority by quoting Milton Friedman, Gordon Tullock, and Paul Krugman; and what’s worse than the attempt at arguing from authority? Two of these people he’s attempting to quote don’t understand the model (Krugman especially, and has been called on it numerous times. For a rebuttal of Krugman’s Hangover Theory, written by David Gordon, click here.)

Quote from the site: “Of course, there is some grain of truth in it as low interest rates can induce risky lending and will be inflationary, but there are some glaring flaws in ABCT that any Joe should have spotted by this point. Like, umm, the fact that business cycles existed before the Fed. (Some try to skirt this issue by redefining “central bank” as any bank with a state or national charter.[10])”

The criticism that Business Cycles existed before the Fed is a very popular critique, but it is one that falls flat on it’s face when you take into account that the Austrian Theory of the Business Cycle doesn’t just talk about central banks, but any bank that practices Fractional-Reserve Banking. The footnote that was provided here was a Keynesian response to the Austrian position, but this also falls flat on it’s face for the same reason (for a rebuttal to the author’s foot-note, written by Robert P. Murphy, click here.)

 

Quote from the page: “It also relies on two mis- or re-defined terms. The Austrians define inflation as an expansion of the base money supply, a consequence of which is rising prices, whereas inflation is defined as simply a rise in prices by mainstream economic theory. While expansion of the money supply can lead to inflation, it does not necessarily do so. Prices do not always track the expansion of the underlying monetary base.[11] Thus, the implication drawn from the Austrian definition of inflation is false.”

I won’t really get into the definition of terms here, I’ll simply say that it is not enough to claim, “Well, so-and-so said that this is correct and so-and-so is the mainstream, so therefore, it is correct because so-and-so said so.” That’s arguing from authority yet again. Austrian economics is railing against mainstream economic theory, so it’s not enough to simply cite mainstream theory, you must go deeper into why the mainstream theory is correct and the opposing theory is false. Of which, the author of the RationalWiki page fails to do so.

Quote from the page: “The ABCT also relies on a single “natural rate” of inflation, but there is no single natural rate of inflation.[12] In addition, the proposal to revert to a gold standard implied by ABCT fails to explain how to deal with the effects of a fixed money supply when population and economic output have been increasing throughout American history.”

The author’s foot-note is interesting here, since he’s referencing a Natural Rate of Inflation in his own text, but his foot-note is referencing a Natural Rate of Interest. And while the author supposedly values scholarly, accredited sources, the foot-note in question is a link to a blog written by someone by the name of Lord Keynes. Yeah… *no comment* As for the rest of the quote, the Austrians don’t “imply” that we need to go back to a gold standard, the Austrians tell you upfront in no uncertain terms that we need to go back to a gold standard. The fact that the author didn’t know this tells me that he/she hasn’t had much interaction with the works of Austrian Economists. My opinion is further reinforced by the fact that the author seems to think that the issue of the gold standard hasn’t been dealt with by Austrian Economists, when in fact it has.

Quote from the page: “ABCT ultimately is better at explaining why the Austrians and libertarians are such hardcore goldbugs and why they rail against the Fed so much than it is at explaining actual business cycles.”

More demeaning rhetoric and practically no substance.

RationalWiki’s Attack on Peter Schiff

The author of the RationalWiki page also attacks Peter Schiff. This segment of the “article” is very interesting. It appears to be more of an emotional rant than an attempt at writing an informative article.

Quote from the page: “It’s impossible to make a post on the internet about the financial crisis, or even anything economic in general, without being bombarded by “Peter Schiff was right!!11!!” videos. For the new Austrians (i.e., 19-year-olds who read a few newsletters over at the von Mises Institute and think they have achieved enlightenment), the Austrian-influenced investor Peter Schiff’s prediction of the housing bubble was vindication of all things Austrian. They believed they had finally shown all other economic theories to be utterly bankrupt and discredited.”

It’s ironic to me that the author of this RationalWiki page would refer to the New Austrians as 19 year olds who read a few newsletters and think that they’ve achieved enlightenment, when I could make the exact same argument about the author of the RationalWiki page. The author’s writing style, and methods of argumentation scream “19 year old kid with too much time on his/her hands.” It’s also worth noting that it wasn’t just Peter Schiff who saw the crash of 2008 coming. Congressman Ron Paul also saw the crash coming, and predicted with devastating accuracy what would happen all the way back in 2001.

Quote from the page: “First, Peter Schiff is still wrong about many things.[13] Second, Austrians have continuously predicted the economic end times and Weimar-style hyper-inflation as they will never be satisfied with the American economy until all regulation is lifted, the Fed is abolished, and we return to a gold standard. Only then will doom be averted. Of course, it’s easy to be a Cassandra when all you predict is doom. (In short, even a stopped clock can be right twice a day.)”

The author’s foot-note here is, again, interesting. One of them is a twelve video series on YouTube entitled “Peter Schiff was Wrong”, in which the poster attempts to prove using random news clips that Peter Schiff was demonstrably wrong. All I’m going to say about those twelve videos is that ratings are disabled, and so are the comments. That should tell you everything. As for his other link in the foot-notes, that link is pretty much dead.

Quote from the page:  “Third, they overlook the metric buttload of economists and financial guys who also saw it coming.[14] Those guys just weren’t put on CNBC alongside the Wall Street cheerleaders. Even one of Dubya‘s own economic advisers, Greg Mankiw, warned of problems at Fannie Mae and Freddie Mac back in 2003.[15] Hell, firms like Goldman Sachs were shorting their own securities[16] — the bubble was apparently not a big mystery to insiders!”

Well, of course the bubble isn’t going to be a big mystery to insiders! They’re on the inside! They get information a lot sooner than you do!

In Conclusion

The author of that RationalWiki page is really working my last nerve, so I’ll just skip to the end and leave it at that.

Quote from the page: “The founder of the Austrian school, Carl Menger, was responsible for starting the Marginal Revolution, an important step forward in economic thinking.[22] However, that was in the late 19th century. Ludwig von Mises is credited with introducing the economic calculation problem in the 1920s, which argued that a state-run economy could not be efficient because prices could not be known, only decided by the state.[23] Austrians also argued for the non-neutrality of money.[10] The school hasn’t produced anything of much value since then. Now they are primarily a small group of cranks funded by even richer cranks through the von Mises Institute looking for self-serving rationalizations couched in the form of economic theory.”

As much, as a student of the Austrian school, I would like to agree with the statement that Carl Menger started the Marginal Revolution, this statement is factually incorrect. The Marginal Revolution is called the Marginal Revolution precisely because the principle of Marginal Utility was not discovered by one man, but by three different men within three years of each other. Carl Menger and William Stanley Jevons discovered the principle in the same year, Leon Walras was the last of the three discovering the principle three years later. No one person started the Marginal Revolution, and it is an error of fact to say otherwise. As for the accusation that the school hasn’t produced anything of value since then, this is demonstrably false! Henry Hazlitt’s “The Failure of the ‘New Economics’”, Ludwig Von Mises’ “Human Action: a Treatise on Economics”, Murray Rothbard’s “Man, Economy, and State”, just to name a few. The last sentence is interesting. “Cranks”, “Self-Serving Rationalizations.”

These terms fully reveal not only the intent of the RationalWiki page in question, but also of the entire site. This is not an isolated incident. The entire site is plagued by trash (the only suitable term) of this nature. I have no doubts that RationalWiki is just a front for Left-Wing Progressivism (a type of Socialism, basically), based on the style of the writing and the methods of argumentation used. 

In conclusion, if you’re going to get your information from a Wiki, you’re much better off going to Wikipedia.