Tag Archives: Austrian School Of Economics

Are those who obtain more income better in some way, perhaps more intelligent than others? Are they luckier? According to Ludwig Von Mises, they are superior in intelligence: "The entrepreneur is the agency that prevents the persistence of a state of production unsuitable to fill the most urgent wants of the consumers in the cheapest way. All people are anxious for the best possible satisfaction of their wants and are in this sense striving after the highest profit they can reap. The...

[embedded content]The Start Of This Video Is An Anecdote About George Dantzig1.0 Introduction Ludwig Von Mises popularized the Socialist Calculation Problem and brought it to wider attention. (This problem is also known as the Economic Calculation Problem.) In Von Mises' 1920 paper, he argues rational economic planning is impossible without market prices for capital goods and unproduced resources. Thus, anybody advocating socialism is advocating a system that cannot obtain a high material...

1.0 Introduction I have been reading fools in other parts of the Internet. Hence this post. 2.0 Assertions Marx says the following (I am least sure of 6): Both sides to an exchange gain. (Capital, volume 1, chapter 5) Nobody, neither consumers, nor workers, nor investors, nor the managers of firms, make decisions on the grounds of the labor time embodied in commodities. (Capital, volume 1, chapter 1, section4) Surplus value (dividends, interest, rent, etc.), in an ideal competitive...

Figure 1: Structural Economic Dynamics of the Price of a New Machine I am not sure that there is any great insight here. But this post depicts the evolution of prices in an example which I have been explaining in two posts. For some parameters, I have found that a shorter economic life of a machine may be associated with a more capital-intensive technique around a switch point. This can occur at both a 'normal' and a 'perverse' switch point. This finding raises difficulties for tradional...

Figure 1: Variation of Switch Points with Technological Progress in Industry This post is an expansion on this post. Technological progress in industry, in which the machine is produced, can be illustrated in Figure 1 in the previous post by a movement roughly from off the graph to the upper right to below the lower left. More concretely, suppose each of the two non-zero coefficients of production in the machine industry decrease at a constant rate of σ0 and σ1 respectively. The two...

Figure 1: A Part of the Parameter Space1.0 Introduction This post presents a perturbation of an example from Salvatore Baldone. It follows the style of some posts that almost add up to a draft research paper. A widespread view among Austrian-school and mainstream economists is mistaken. Given competitive markets, if the supply of capital were increased, in some sense, the rate of profits would supposedly be driven down. At the level of abstraction here, no distinction exists between the...

1.0 Introduction I have previously quoted authorities disparaging Böhm-Bawerk's pamphlet examining the supposed contradiction between volumes 3 and 1 of Marx's Capital. I refer to Karl Marx and the Close of His System, first published in German, in 1896. Engels brought out volume 3 of Marx's Capital in 1894. Böhm-Bawerk's treatment, although it ultimately misses the point, is important from a historical angle: "...the historical importance of Böhm-Bawerk's criticism of Marx ... should...

1.0 Introduction In his book, Human Action, Ludwig von Mises defines 'praxeology' as the science of human action. He says that it is a subject of formal reasoning. Human action is conscious action in which the actor attempts to decrease felt uneasiness. 'Catallactics' is a subset of praxeology treating market exchanges. But von Mises is quite confused. 2.0 Does Formal Reasoning Enlarge Our Knowledge? Von Mises does not know. At one point, he says formal reasoning does enlarge our...

I have found a common misrepresentation from many, including mainstream economists, is that critics of their models do not understand them or the role of the assumptions. Those mainstream economists rely on an incoherent essay from Milton Friedman to dismiss criticism of the realism of assumptions. My favorite criticism, though, is that their conclusions do not follow from their assumptions. I like to show this by constructing numerical examples that contradict their teaching. On the...

1.0 Introduction I recently stumbled across McKiernan (2017), an Austrian response to Sraffa's book. This is a weird working paper. He works through Sraffa, with apparently no knowledge of all the textbooks explaining the book. McKiernan correctly notes that Sraffa provides little context about his points. And the mathematics is not always explicit. Naturally, McKiernan makes mistakes. If he ever revisits this, I think he would want to break it up into several papers. (Fabra (1991) is the...