Comments (14)

• hardway

  Great piece, I really liked reading about Professor Salin's journey to "Austrian" thinking. I underwent a somewhat similar evolution of thought and the Mises Institute has been an indispensable source of knowledge and theory for me as well.
  Well said prof. Salin!

  Published: February 13, 2009 2:16 PM

• Connie

  Wonderful article. Your call to action ... "But I cannot do it alone. I need the support of people I admire, and that is why I want to thank the Mises Institute and you all here, from the bottom of my heart."... has left me wondering how we can bring not just the intellectuals you admire but more importantly how can we bring John Q. Public into the fold. How can we amass not a majority but an overwhelming groundswell of support from those, who like me, are not intellectuals? Logic and fact, the only two factors upon which an argument can be based. They do not seem to have a role in making that happen. People are all to willing to blithely accept handouts from the "state" whether they be in the form of make-work jobs or in the form of an extra $8.77 (not a computed figure) in their weekly paychecks. They care not, about the consequences of their acceptance. The do not realize that they are losing their freedom and in the end are making the bad times we are experiencing worse.

  Let's spend more intellectual capital that is so abundant in the community of people who share their views on this forum (BLOG) and see if we can develop a plan to bring on the masses.

  Published: February 13, 2009 6:36 PM

• pbergn

  Not one of the best articles on this site, even though I sincerely congratulate the author for receiving the award...

  Strongly disagree with his postulates that human behavior is "rational"; indeed - it is not. But that is NOT a prerequisite for a free market relationship...

  Also, disagree that, according to the author, there is no such thing as macro or micro economics.

  Of course there has to be distinction between macroeconomics and microeconomics...

  While microeconomics policies should be mainly left to the free market forces to shape them, the macroeconomics is a prerogative of the State, which has to do some-long term strategic planning for the common benefit of private participants in the Free Market relationship, such as encouraging creation of common industry standards, building fundamental infrastructure, balancing trade deficit and regulating money supply...

  It's like in team sports: while the team's winning strategy has to be pre-determined and pre-agreed upon by the team's coach and the players, the individual playing tactics should be left at the discretion of each individual player. But don't tell me that you do not need a common strategy or vision. If left to each individual player in the team - the game will be lost, since each of them will try to do what is best from their narrow point of view, thus undermining the common goal of winning the game...

  Also disagree with the following paragraph:

  The author writes:

  "[...] Mainstream economics is founded on a completely arbitrary definition of competition — pure and perfect competition — implying in particular that competition prevails whenever there are a great number of producers producing exactly the same product. This theory has nothing in common with reality and it might be considered a purely intellectual game. But it is accepted as a norm and forms the basis of most antitrust policies.[...]"

  Nothing can be further from the truth! Of course the true competition implies multiple competitors... I cannot see how monopolies or oligopolies can be considered as true Free Market completion... That's an oxymoron!

  I think the author is being intellectually dishonest or is sincerely mislead, if he thinks that the common definition of the word "competition" is ambiguous or requires any further elaboration...

  Somewhat disappointing article, even though I applaud the author for formally embracing and promoting the main principles of freedom and Free Market Theory...

  Published: February 13, 2009 6:54 PM

• Matt

  Very Good article by Professor Salin.

  Alas, Austrian Economics is still too little understood even by many who consider themselves to be so informed. It was rightly pointed out the problems facing the world today was and is caused by government intervention in the realm of economics, it was NOT caused by Capitalists since nowhere in the world is Capitalism allowed fully top operate, at best what we have is Mixed-Economies where governments are given credit for economic progress and when there is economic trouble the Capitalists are blamed.
  
  It is perfectly clear very, very little has been learned from the fall of Soviet/Communist Russia where the State was all powerful in controlling the economy. This deliberate ignorance of what Capitalism is all about and how it should be encouraged is drawing the world into a Major Depression of a magnitude greater than the last one.
  The Constitution of the United States of America was written to prevent this type of catastrophe, it made no mention of a Federal Reserve that has the power to destroy the savings of its citizens and millions of others across the world. This is a crime that cannot be swept under the rug...Stay tuned, the crime is still in process.
  

  Published: February 13, 2009 11:42 PM

• newson

  pbergn says:
  "Of course there has to be distinction between macroeconomics and microeconomics..."

  and where would you join the two separate paradigms? and what about the exact point of juncture, is that governed by micro or macro? eeny, meeny, miny, moe...

  "Of course the true competition implies multiple competitors... I cannot see how monopolies or oligopolies can be considered as true Free Market completion... That's an oxymoron!"

  i have an acquaintance who is lucky enough to have inherited a sandstone quarry near a major city. it's effectively a monopoly; the cost of freighting heavy sandstone makes his the only logical source for city monumental works. can he charge whatever he wants and get away with it? of course not, because sandstone is not the only facing-stone. he competes with limestone, marble, and granite.

  there is always competition from substitutes.

  Published: February 13, 2009 11:42 PM

• NA

  pbergn,
  A couple of clarifications,
  First, it seems there is a discrepancy between your usage of the term 'rationality' and the way it is used in the Austrian economics community. Mises assumes a priori that all human action is rational:
  "Human action is necessarily always rational. The term 'rational action' is therefore pleonastic and must be rejected as such. When applied to the ultimate ends of action, the terms rational and irrational are inappropriate and meaning-less. The ultimate end of action is always the satisfaction of some desires of the acting man. Since nobody is in a position to substitute his own value judgments for those of the acting individual, it is vain to pass judgment on other people’s aims and volitions. No man is qualified to declare what would make another man happier or less discontented. The critic either tells us what he believes he would aim at if he were in the place of his fellow; or, in dictatorial arrogance blithely disposing of his fellow’s will and aspirations, declares what condition of this other man would better suit himself, the critic." (Human Action, 1.4)
  Of course this is just a definition, and nothing to disagree with.
  Second, you suggest that it is a function of the state to govern and regulate the market. However, once that is taken into account, you no longer have a free market. A free market, again as defined in the Austrian economics circle, is one that is free from government intervention. Going back to your analogy of team sports as the free market, you might view teams as firms. Of course, there would need to be rules (property rights) enforced by the umpires (govt), but you wouldn't want them rigging the game to favor particular teams.
  Finally, competition is a direct consequence of firms not having perfect knowledge of which strategy is successful until they try it. This, along with the other stringent conditions assumed in the perfect competition model, suggest that it is not a very realistic one. I think this is what Professor Salin is referring to here. Monopolies and oligopolies have really only been sustainable in industries where the government has granted privileges to a select few. There is extensive literature on this website regarding this issue and all of the other points you brought up. Agreeing with all of it is one thing. But you may want to get a better grasp of Austrian economics before bashing it outright.
  

  Published: February 13, 2009 11:44 PM

• pbergn

  TO: newson

  newson,

  Are you telling me that the sand quarry is a monopoly? That's weird... If it were, the citizens would have had no choice but to line up with their begging hands stretched out and heads down in front of your friends doorsteps...
  It's like saying a company controls all taxi service in town, but you still have a choice to take a bus, therefore enterprise controlling the taxi service in town is NOT a monopoly... Hmm... Shouldn't we compare apples to apples here? If you go down that path you are essentially saying: "take the cheaper alternative if you don't like what I offer you"... And you know, there is always an inferior alternative to everything - such as walking when other means of transportation are not an option...

  The monopoly, as I understand it to be, is an exclusive control of a VITAL resource or industry that leaves the consumers with no viable alternatives. The oligopoly is when there are only a few big players controlling that vital resource or industry, again leaving the consumers with no choice but to go to one of them...

  I still don't understand clearly Austrian position on monopolies - is it acceptable in terms of Free Market? Sounds counter-intuitive to me...

  Thanks for you comments, though...

  To: NA

  NA,

  I agree with you. I was referring to the term "rational" in a sense meaning the most optimal logical sequence of actions leading one's goal (if such exists)... But as you define it, "rational" means practically anything a man does or wants to do... (Kind of dilutes the meaning of the word, doesn't it?)

  Regarding my coach and team example: what I mean was you have to have a vision, a strategy, a purpose... Look, even people on this very site cannot agree on definition of simple words, how do you expect a Free Market containing millions of participants agree on something and make any progress without a designated broker or a judge to mitigate towards common goal?

  You see it is funny, but Austrians resemble the Evolutionists to me who claim that simple random changes (actions) could have produced such complex organisms like microbes, chimps and humans... You resemble the advocate for "Blind Watchmaker" to me...

  In my opinion the truth lies somewhere in the middle - you need a Free Market to better adapt to the tactical needs, but you also have to have a common broker - the State acting as the mediator among the participants in the Free Market Relationship, otherwise the whole system will descend into chaos... That's all I am saying... Thanks for your comments as well.

  Published: February 14, 2009 3:32 AM

• newson

  to pbergn:

  first, sandstone, not sand.

  second, it's a localized natural monopoly as i stated, because there is only one quarry within economic trucking distance from the market. the relative scarcity of sandstone outcrops is a feature of the local geology.

  the only way to break up this monopoly would be for the government to force divestment, and what public service would that serve? it would not alter the resource scarceness, just be robbing peter to pay paul, and taking a cut in the robbery for oversight expenses.

  your taxi/bus example is an example of man-made monopoly. if it weren't for the taxi licencing board, i could and would open a rival cab company, and compete away some of the rich takings. it's the artificial barriers to competition that austrians object to, not natural ones.

  in my example nobody's property rights are interfered with, in your example i am forced to desist from using my cars as cabs, although i am not impinging on anyone else's property rights.

  Published: February 14, 2009 4:32 AM

• newson

  to pbergn:
  in "literature", dominick armentano is the guy to look for if antitrust is your thing, though tom di lorenzo also deals with this here:
  http://mises.org/daily/436

  austrians do not accept the neoclassical idea of perfect competition.

  Published: February 14, 2009 6:03 AM

• NA

  pbergn,
  Your definition of rational then would fit the description of a "purely intellectual game," since the most optimal sequence of logical actions can never be revealed to any mortal on this planet - hence the need for competition and speculation in the market.
  And hence any "common goal" wouldn't make sense. What would such goals comprise of, whose interests would they serve and how would they be achieved? Look at the chaotic state that the current economy is in - in terms of employment, currencies, stocks. Blind? hardly. The Austrians were the only ones who foresaw this recession, correctly pointing to it as a direct consequence of common planning in banking and finance. And they continue to look at it with full clarity as it unfolds, while the stupefied planners frantically and vainly try every trick in the book.
  

  Published: February 14, 2009 10:50 AM

• loren

  pbergn writes:
  While microeconomics policies should be mainly left to the free market forces to shape them, the macroeconomics is a prerogative of the State, which has to do some-long term strategic planning for the common benefit of private participants in the Free Market relationship, such as encouraging creation of common industry standards, building fundamental infrastructure, balancing trade deficit and regulating money supply...

  pbergn must not work in the electronics or semiconductor industry. How do you think IEEE or SEMI standards come about to help coordinate billions of dollars worth of infrastructure to create a computer chip? Companies produce incredibly complicated electronics products and sell to a world wide market, consumers know that the products will (usually) work in their computers and homes - all without the hand of the state to guide them. This is because the semiconductor industry developed too fast for the government to create bureaucracies to regulate them.

  Published: February 15, 2009 12:54 AM

• Willabus

  I also found Professor Salin's journey to Austrian economics similar to my own. I believe it is a simple matter of opening your mind to the possibility that everything you have been taught your whole life may be wrong. If you are truly interested in the discovery of truth then it is inevitable that you end up finding Austrian theory because as Professor Salin rightly said, it is the only theory that starts from the simple fact that humans act in what they believe to be their own self-interest. They then use this fact relentlessly and never alter from it. It is the only theory that has any true principles.

  Published: February 15, 2009 8:27 PM

• forklifts

  first off, i'd like to commend Professor Salin on his award. his discussion on Australian economics is thought provoking. i agree with pbergn that humans aren't rational beings, and that we make decisions bias towards our emotions. yet, each individual decision doesn't determine the market of a free economy, so while we're not rational beings, i believe the market itself works in a rational way.

  Published: February 23, 2009 1:22 PM

• Nizam Ahmad

  Austrian Economics: The Ultimate Achievement of an Intellectual Journey
  Daily Article by Pascal Salin

  : To end, let me recall some statements I have made in the present lecture and which may be acceptable for all those who are here:
  There is no need to create money.
  There is never any balance-of-payments problem.
  The financial crisis is not a crisis of capitalism but of state intervention.
  One ought to suppress central banks and the IMF. UNQUOTE.
  I am no economist but all for freedom/liberty of the individual in economy or anything. While I agree with your comments above, could you explain why there is 'There is never any balance-of-payments problem'.

  
  

  Published: February 23, 2009 3:38 PM