A Beginner’s Guide to Austrian Economics
From the article:
The “Austrian School” of economics grew out of the work of the late 19th and 20th century Vienna economists Carl Menger, Eugen von Bohm-Bawerk, Ludwig von Mises, and Friedrich Hayek (though of course Austrian School economists need not hail from Austria). Austrians focus strongly on the analysis of individual human action. This is known as praxeology, the study of the logical implications of the fact that individuals act with purpose, from which all economic theory can be deduced. Austrians also note the correlation between greater economic freedom and greater political and moral freedom. This in part explains why Austrian economics is the intellectual foundation for libertarianism. Austrians rightly attribute the repeated implosions of mainstream Keynesian economics to the latter’s focus on empirical observations, mathematical models, and statistical analysis.
The “Austrian School” of economics grew out of the work of the late 19th and 20th century Vienna economists Carl Menger, Eugen von Bohm-Bawerk, Ludwig von Mises, and Friedrich Hayek (though of course Austrian School economists need not hail from Austria). Austrians focus strongly on the analysis of individual human action. This is known as praxeology, the study of the logical implications of the fact that individuals act with purpose, from which all economic theory can be deduced. Austrians also note the correlation between greater economic freedom and greater political and moral freedom. This in part explains why Austrian economics is the intellectual foundation for libertarianism. Austrians rightly attribute the repeated implosions of mainstream Keynesian economics to the latter’s focus on empirical observations, mathematical models, and statistical analysis.
Do whatever it takes to convince voters to sustain my uninterrupted political career with its great health care plan and a retirement package.
(Hey, I did not even think to use my cynical Comrade Citizen character for this baby. Well, I did after the writing).
Leonard Reed expressed it in
I, pencil
"The lesson I have to teach is this: Leave all creative energies uninhibited. Merely organize society to act in harmony with this lesson. Let society’s legal apparatus remove all obstacles the best it can. Permit these creative know-hows freely to flow. Have faith that free men and women will respond to the Invisible Hand. This faith will be confirmed. I, Pencil, seemingly simple though I am, offer the miracle of my creation as testimony that this is a practical faith, as practical as the sun, the rain, a cedar tree, the good earth."
And get several resources for my Econ class from cafehayek.com
Aloha, have a great one!
I left my copy of Human Action in my class so I'm not sure just how much this aligns with the Austrians. As with much the argument comes down to what is the role of the State. I lean towards the libertarian ideal that only laws agreed upon are valid, and state forced IP laws overstep that role. If you and me agree on payment for ideas that's one of free association or voluntary action.
Simple but it's one way to look at laws or boil down which are valid natural laws.
Have fun
If you wish to call privately paid arbiters and police "government," you are free to do so -- but there is a big difference. If you don't believe you have received valuable service from your private service provider, you can cancel your contract and choose another provider. You can't do that with government, and that monopoly leads to abuses of power, lack of accountability or innovation, and inefficiency. Hiring any type of private service is voluntary and respects the individual's rights, while funding the government is done by force.
But your proposed scenario (which I addressed) was a property dispute between friends, not someone squatting in your house or raping and pillaging. In the type of situation you initially raised, it could be handled much more efficiently by private insurance and arbitration services, as opposed to the current monopolistic police and court system.
When force is used against me, who exactly has the right to self defense - strangers representing the State, or me? Of course, it's me. If I own the right, shouldn't I have the right to either exercise or delegate it as I wish, rather than the State monopoly usurping my right?
The police and courts today will not protect us from assault, rape, or real property theft; the most they will do is sometimes find the guilty party and arrange some type of compensation long afterward (and sometimes not). If you think the police exist "to protect and serve," read about Joe Lozito bring stabbed by a serial killer while the police watched from safety, and then read about the Supreme Court decision that specifically said police have no duty to protect citizens.
A private police or security force could have all of the powers of the current State police, if we the customers wanted that. The difference would be that the private police would actually have specific contractual and moral justification as a person's chosen agent for self defense.
I guess it would make sense in someplace like Detroit, if there are many owners abandoning their property.
There was a "nanny" sometime in the past year who refused to perform her duties and refused to depart the premises. Same thing.
At some point is an IP 'invention' of a shipping box for pencils (to enable them to be shipped around the world...) an 'invention' worthy of a patent?
Sort of like, Why is Disney essentially getting In Perpetuity copyright to Mickey Mouse and ALL derivatives of it.... FOREVER?
No limits? That pushes my skepticism button.
Sorry...
But thanks for your constructive criticism, knowledge and information-sharing and willingness to help educate me...
(---not)
Oh, wait... your comment was an abject ad hominum, wasn't it?
Thanks, and Happy New Year to you, too.
:)
And as for your 'legal procedural' comment, do you recognize that most 'legal' decisions are rooted in 'moral arguments' on the self-same subjects?
As I've noted in my Laws and mentioned here many times, 'you can tell when someone has run out of logical arguments for their side of the discussion when they flip the issue into a "Moral" one.'
Same thing, if you can see it... And your point on corporate rights bears the same burden of proof... where is the "logic" of choosing '100 years' as the sunset time for corporate copyright? That's often called 'favorite number' effect. It is an arbitrary choice, though usually 'founded' on some kind of Consensus, which, in addition, is not == Truth.
And Happy New Year to All!
:)
To your last statement. copyrights vs patents. They are completely different standards. While I disagree how we changed our copyright laws, they were done in such a way to "harmonize" with the rest of the world. This is a concept I disagree with.
Government can't 'stop' someone from stealing my corn or my invention, but the Legal System can, out of consensus, create process and mechanism to punish someone (or some organization/corporation) who/which has been proven in a court of law to have broken Those Rules (established by Consensus)!
Are you hinting that copyright and patent laws spring from some sort of Natural Law?!
Interesting....
Absolutely, Patents are part of natural rights. Natural Rights start with the fact that you own yourself and therefore you own those things you create. John Locke. Locke's ideas of Natural Rights were incorporated into US common law by Sir William Blackstones Commentaries on the Law. Blackstone is clear that both patents and copyrights are founded on this basis.
Some here are going to rail against it (particularly those who derive their livelihood from the current system), but it presents some interesting arguments.
dbhaling might do well to look at how often and in what contexts the word 'arbitrary' keeps appearing in that link.
And though the concept might occur somewhere in the parts of the writeup that I hadn't gotten to, I think the author might agree with my position/belief that 'ownership' of tangible properties comes only with the ability to defend it from someone else taking it from you. Suing them after the fact of theft is a socially-agreed-upon remedy. Keeping 'your land' as your own, and particularly on a national level or scope, depends on the strength of your defensive forces being able to repel any and every invader that wants to take it from you... even if you've "won" it by force from someone else in the past.
Thanks, Robbie! Most of that argument thread skirts the issue of 'agreement' and 'social contract' that I kept trying to raise. I have problems with "Natural Laws" being used to justify things when even Natural Laws 'exist' based on "Agreement" between folks that believe in them!
I forget... is that a truism, tautology or just a Catch-22?
:)
There are some merits to the scarcity approach. The oceans were essentially "free" to all until navies became able to patrol and control them, at which time they began to be less and less that wasn't controlled - thus scarce. Similarly, the North American continent was "free" - non-homesteaded - at a time when all of Europe had already been totally homesteaded. There was no need for property rights/law in the earliest years of the westward movement since there was so much open land (let's not get into a discussion of whether the natives "owned" that land as at this point it is moot). Only after home-steading was applied did property rights begin to have meaning.
As for IP, it seems logical that an individual who creates an idea should retain the rights to that idea, and I would say that they retain such rights for their life-span. As such, they can license the ability to utilize the idea or even sell those rights outright (which then brings into question the timespan of such rights should be enforced). What I do not agree to is that the individual who first comes up with an idea can claim sole ownership over another individual who comes up with the same idea totally independently. Yes, that brings up the question of "how do you know it was totally independent?" but that seems immaterial to the basis of the issue. If one person who comes up with an idea owns the product of his mind, why shouldn't a second person with the same idea not own his product? Some here will say that rarely occurs, but I would say the rate of occurrence is immaterial. If it does occur at any frequency, then it is a real and fundamental flaw to "natural rights."
btw - that does not negate that those rights may be "God given." My view is that God did bestow those rights on mankind, but the free-will of man subverts those rights of their fellow man.
From MY personal, engineering, Socratic, atheistic and whatever-the-fuck other perspective, "Natural Rights" is a whole category which comes under the umbrella of my oft-stated "It's All By Agreement" Laws...
Natural Rights are 'rights' agreed-upon by a consensus/majority/whatever of a culture/society as to what 'natural rights' ARE!
They're not 'inscribed in stone' or scientifically researchable or analytically provable by anyone on Either Side of such a discussion, so, imnsho, to assert that they Exist Of, For or By Themselves is some kind of extreme act of hubris or illogic.
Sort of like "God Exists Because See, This Book Says So... "
Ditto, "Natural Rights."
Now, cut the name calling and down-voting each other because you're in hard disagreement!
I disagree that Robbie's "I've always had a problem with Natural Rights..." constitutes 'spam,' which, I understand to be one of the few criteria in The Gulch for down-voting a comment. I consider insults to be almost always spam unless they're accompanied with some kind of link, reference or reasoning behind the disagreement.
Happier New Year, guys... ?
Ciao!
When communication and copy ability rose to a point where investment couldn't be recouped without some sorts of protection, IP laws were needed. Similar to when unions were needed in the nineteenth and twentieth centuries to protect workers from the overwhelming power of the business.
Today, communication and the ability to copy are so ubiquitous that IP protection is moot. The legal system is inadequate to truly protecting IP, and so convoluted that by the time the legal process has worked its process, the IP is out of date. No, today the best answer is to continue to innovate, not to seek to block others from leveraging the technology. Again, similar to unions - no longer needed for their original purpose (but linger on due to their power, but even that is being diminished slowly but surely).
Happy, healthy and prosperous New Year to you and db in any case.
Mises praxeology is inherently subjective and glorifies this point. Real per capita increases in wealth are the result increasing levels of technology. The only way to increase man kinds level of technology is by inventing. Austrians say almost nothing about this.
Inventions do not happen naturally. There is absolutely no evidence for this point of view. The only reason we escaped the malthusian trap was because of property rights for inventions.. And only increases in technology can make use wealthier. Without Patents there is no incentive to invent, because it is always cheaper to copy other people as history shows.
Just to set the record straight. and if you do some reading, theft was part of their business model.
People only invent things in significant quantities if they have property rights in their inventions. People invent things to make a profit, not to improve productivity. Focusing on productivity does not lead to inventions.
A footnote at the following link quotes Ayn Rand as saying that perpetual IP would breed a class of parasites. http://wiki.mises.org/wiki/Intellectual_...
And you are right in a roundabout way that inventions do not happen naturally. They occur when an individual (inventor) believes that there is a better way of doing or solving an existing problem. As it turns out this process is constantly occurring because people are always finding better ways to solve existing problems. So in a way it is happening naturally but it is only because people see a better way of solving existing problems. But this is more of a focus on specific words rather than the concept.
So you might ask why would a person invent something in the first place if they know somebody else is going to copy and sell their idea? Let me ask you, would you rather buy a knockoff or the real deal? Would you rather buy Rearden’s Metal from Hank or would you rather buy someone else’s knockoff of it? I know I would rather buy it from Hank if they were both the same price but if they weren’t the same price, then I would consider value vs. price in my buying decision. But is it that bad that people can buy the same goods for lower price? Or is it that bad that there are multiple companies competing for my money?
In order to support copyright laws you must by definition also support a restricted flow of knowledge in the economy. Copyright laws at a basic level are the creation of a legal monopoly on ideas and inventions. In order to support copyright laws you also have to support some degree of stagnation in the economy. When you prohibit ideas from flowing freely, you are slowing down technological growth in the economy. Government regulations and copyright laws have one thing in common, they both slow down growth in an economy.
But throwing that aside, the computer was created to help people carry out more advanced calculations quicker and easier than could be done by previous inventions. It didn’t just go from the abacus to the computer we see today. In between the two were inventions of other computing devices that used mechanical pieces that performed the functions of calculations (the Babbage differential engine). It was a process of invention after invention, improvement after improvement that eventually lead to the digital programmable computers we see today. And the use of using digital inputs and programming was just an improvement from the existing technology of using analog inputs.
As everything became digital, calculations were able to become increasingly complex through the use of programming. It didn’t take long before you had people (innovative programmers) looking at other ways of using programming to create other functions with the computer. Before you knew it, people were writing programs and computer games from nothing more than advanced versions of this original technology.
And now today we are able to do so many advanced functions on these computers that no one would have imagined 100 years ago. So when we look at the computer today, it is often hard on how to see how it all came to be. Was the computer created so you could play games on it or surf the internet? Absolutely not. Its origins were for computing and number crunching but with a little bit of innovation, people were able to think of many other functions and uses for it.
And I still reject the notion of an abacus as a computer. It does not perform the calculations - the human does. You can't give the abacus an instruction and tell it "go" and receive a result. The slide rule is the same, and I don't think anyone is going to dispute the notion that the slide rule is far more complex than an abacus. I would also note that neither the abacus nor slide rule is programmable - the key capability of a true computer. The real productivity of a computer comes in its flexibility to be reconfigured to handle different types of problems. An abacus fails this as well, but was the point of Babbage's original engine. Lastly, what we shouldn't overlook is that critical to the functioning of the engine was the development of binary logic - the true work of genius of Charles Babbage and Ada Lovelace.
But the abacus is still a computer. A computer is a device that was used to aid in calculations. I think the only part we differ in opinion is to whether a computer has to be able to automatically calculate given a certain set of inputs. For a computer, I would answer no. For a modern computer, I would answer yes.
I take it you must be an engineer or something closely related to it. Anyways again thanks for the post and I look forward to many more conversations like this. Also thank you! I learned a lot from reading your posts and doing some of my own digging around.
"A computer is a device that was used to aid in calculations."
If that is the case, our toes are computers, are they not? So are lines of sticks. Thus I can't accept such a simplistic definition and I don't know of anyone involved in Computer Science that would either. It's your choice, of course. I would simply caution that you will likely receive a similar response from anyone in the field given such an assertion.
You brought up some really good points about fingers and sticks. My question to you is, at what point between the abacus and the modern computer did these devices actually became known as computers? They were all built from improvements off each other. I'm still trying to figure this question out for myself as well and honestly I don't have a solid explanation for it either way. Depending on how you search for it online, you can get info for and against an abacus being considered a computer.
I'm sorry this has gone into such a long drawn out conversation. And unfortunately (fortunately) I have never used a slide ruler before, I missed out on that as well!
A degree establishes that the person has a verified level of competence in that topic that is of notable difference from the common man. Does this exclude other individuals from enlightening themselves? Of course not. But let's be realistic - that is the exception rather than the norm and should be treated as such.
For me, a computer must be a device able to take an input and generate an output autonomously. It can't be an "aid". That was why Babbage's engine was so revolutionary. The engine was set up (programmed) to accept an input, process it, and generate an output, but was not reliant on the person to provide the processing power. That's the differentiation I would make. If you set up Babbage's engine to a crankshaft powered by a diesel engine, it could operate without human interference consistently and without error while still churning out useful (and variable) results. Take a human out of the pairing with either abacus or slide rule and there is no similar utility.
And BTW - my dad showed me how to use a slide rule one time, and you're not missing out on anything - as long as we still have power. In the event of a global EMP, I may just have to ask him to break it out again for me...
I agree with the abacus
Have you ever tried doing math in Base 8 (octal) or Base 16 (hex)? Talk about a complete mind shift. Same thing applies with binary/digital logic - it requires its own rules and computational constructs. Babbage's engine was really only a physical construct that used binary logic. The genius was in not only outlining the rules for the binary logic structure, but incorporating them into a physical manifestation/invention that proved the concept.
Clearly logic is used to design slide rules and analog computers but does not use AND and OR statements.
Here's a quick list of the more common ones (the XNOR and EOR are REALLY situational):
NOT - inverts input: 0 becomes 1, 1 becomes 0
OR - when either input is true, output is true: 0 + 1 = 1, 1 + 0 = 1, 0 + 0 = 0, 1 + 1 = 1
NOR (~OR) - when either input is false, output is false: 0 + 1 = 0, 1 + 0 = 0, 0 + 0 = 0, 1 + 1 = 1
XOR (eXclusive OR) - only when one of the two inputs is true is the output true: 1 + 0 = 1, 0 + 1 = 1, 1 + 1 = 0, 0 + 0 = 0
AND - when both inputs are true, output is true: 0 + 1 = 0, 1 + 0 = 0, 1 + 1 = 1, 0 + 0 = 0
NAND (~AND) - when both inputs are false, output is false: 0 + 1 = 1, 1 + 0 = 1, 1 + 1 = 1, 0 + 0 = 0
http://en.wikipedia.org/wiki/Logic_gate
What would you call a slide rule? It's not digital and it is operated by a human. Programming is merely a set method of converting an input to an output. The same is true of an abacus and a slide rule. It's only that the conversion is done by the human interacting with the logic.
Having worked a slipstick way back in the day, I can attest that it was doing the logic, not me. I merely followed the rules of moving the slider.
Inventions and productivity are not the same thing. And inventions always come first.
Were they made at the exact time? That's hard to say but I would argue that if they can be made independently without knowing of its current existence in the first place then yes it would be possible.
With the acceleration of new innovations happening today and all of the information of world at everyone's finger tips, I would say it would be even more possible now than ever before.
As for inventions and productivity not being the same thing, I mention this in the first paragraph of my first post. And I agree, they are not the same thing.
This is exactly the sort of nonsense that suggests that no mechanical invention should obtain a patent because they are all made from the 8 simple machines.
What dbh and kh have a problem with is IP protection. As a patent attorney this is understandable, but it clouds their perspective.
"Proposition 6: Private property in the means of production is a necessary condition for rational economic calculation.
Economists and social thinkers had long recognized that private ownership provides powerful incentives for the efficient allocation of scarce resources. But those sympathetic to socialism believed that socialism could transcend these incentive problems by changing human nature. Ludwig von Mises demonstrated that even if the assumed change in human nature took place, socialism would fail because of economic planners’ inability to rationally calculate the alternative use of resources. Without private ownership in the means of production, Mises reasoned, there would be no market for the means of production, and therefore no money prices for the means of production. And without money prices reflecting the relative scarcities of the means of production, economic planners would be unable to rationally calculate the alternative use of the means of production.
Proposition 7: The competitive market is a process of entrepreneurial discovery.
Many economists see competition as a state of affairs. But the term “competition” invokes an activity. If competition were a state of affairs, the entrepreneur would have no role. But because competition is an activity, the entrepreneur has a huge role as the agent of change who prods and pulls markets in new directions.
The entrepreneur is alert to unrecognized opportunities for mutual gain. By recognizing opportunities, the entrepreneur earns a profit. The mutual learning from the discovery of gains from exchange moves the market system to a more efficient allocation of resources. Entrepreneurial discovery ensures that a free market moves toward the most efficient use of resources. In addition, the lure of profit continually prods entrepreneurs to seek innovations that increase productive capacity. For the entrepreneur who recognizes the opportunity, today’s imperfections represent tomorrow’s profit. The price system and the market economy are learning devices that guide individuals to discover mutual gains and use scarce resources efficiently."
Thanks...
Thanks.
You (we) don't GET laws enacted until there IS a consensus of what IS "right or wrong" AND a majority (consensus) votes to enact and support the law/decision.
I'm really surprised you can't separate those causes and effects and influences, but continue to call the process one of "logic."
Whatever....
Laws don't 'spring from the brow of Zeus.' They are written by humans to delineate acceptable versus unacceptable activities, and the acceptability or unacceptability of ANY such prescribed or proscribed activities ARE defined by consensus, whether any Logic (or lack of it) is involved!
A nice example is the historic War on Drugs. There's LOTS of 'logic' that shows that the laws on the books today are not only ineffective but counterproductive compared to alternatives.
BUT, the laws were enacted by people allowed to make such decisions based on who got elected to which position and what CONSENSUS the citizens they allegedly represented 'asked them to do.'
I claim that virtually everything in the world of Law IS based on consensus, whether there's any Logic involved or not.
Hell, if you look at the conspiracy theorists, the WTC buildings' collapses seem to be more frequently 'explained' by consensus reports than by strictly 'scientific' or 'engineering' logic at all!
And yes, "I ARE an 'enjunear'!"
:)
1. That only one person at a time in the entire world can be thinking of the same solution to a problem at any given point in time.
2. That inventions happen instantaneously.
If you can’t agree with these two points then your point is nonsense. And quite honestly it would be pretty absurd to believe that these two would be true because history has shown that more than one person in the world can have the same solution to the same problem.