SOLO Economics

Jason Quintana's picture
Submitted by Jason Quintana on Tue, 2006-01-31 16:25

 

I have been invited by Tim Sturm and Lindsay Perigo to take over SOLO Economics.  I thank both of them for their vote of confidence.

 

I am happy to have the opportunity to lead SOLO Economics because I think that an understanding of the subject is important for those who wish to advocate freedom and capitalism.  I hope that our discussions will promote interest in the subject.   I want to note up front that I am not an expert in economics.  I do not have any official degrees in the subject.   Those who are more knowledgeable (like Ed Younkins or Tibor Machan) are welcome to correct me when I am in error. 

Here are some random thoughts that I have about the subject of economics.

  • Economics should not be used as the primary grounds for advocating laissez faire capitalism.  Economic principles can be used to argue against specific policies (tariffs, price controls, minimum wages etc.) and are vital for refuting the claims of capitalism’s enemies, but without the proper rational and ethical base such arguments are easily brushed aside.  
  • Arguments for the free market based upon economic efficiency are useful and persuasive at times (especially against supporters of politicians who claim their government programs benefit the “common good”) but utilitarian notions of efficiency are not the reason that I am in favor of capitalism.  Economic prosperity is in my own self interest and that is why I want to promote it.
  • Economic principles must be grounded in a basic understanding of individual human action to hold any validity.    
  • Consumer spending is not the main engine of economic growth.  Economic growth results from the accumulation of capital, improved technology and improved knowledge among businessmen and their employees.  Thus, economic progress is the result of actions taken by businessmen and capitalists to enlarge and improve the productivity of their assets.  This in turn provides consumers with more and more varieties of goods and progressively improved levels of quality for less and less money and hours of labor.
  • People who advocate any kind of protectionism make me very angry.
  • The production of wealth is not limited by any factor beyond aggregate human labor, productive ability and current productive capacity.   Scarcity is a result of these human limitations and not some strictly limited and rapidly depleting quantity of natural resources.
  • The occurrence of economic progress anywhere in the world is beneficial to me.    In the free market competition exists between individual men and individual business firms.  It does not exist between nations, races or “classes”. 

I am pleased that I am officially a member of the SOLO staff and I hope that other people find economics and the advocacy of capitalism as interesting and as important as I do.  I would also like to have discussions here about investing and personal finance.  I will try to start one discussion a week here relating in some way to economics. 

 - Jason


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Physics- A handmaiden of economics

Rick Giles's picture

Indeed, when your physical laws get in the way they may be, and have been, supplanted

The laws of thermodynamics have never been observed to be incorrect

Neither have I. But that doesn't prove anything.

Aristotle's and Newton's and flat-Earth-theories and geocentric theories all come and go. In their reign they all claim to be the final authority on the "possible," and so they are until the next guy comes along. You're just like all the rest.
Physics? Pah!

The physical universe is older and more real than the human race will ever be. We are just blips, dust in the wind.

Utter nonsense. Men will outlast this sun. And reality is a binary proposition; Either something is real or it is not. There is no 'more real' unless with reference to moral evaluation. In case of values, for want of intrinsic values, man and his affairs are supreme and the chaotic cosmic malstrom is an amoral feral zero.

The science of physics is the greatest creation of the human intellect to date. It is firmly glued to reality by observation, measurement and experiment.

Give me a break. The philosophy of Ayn Rand is the greatest creation of human intellect to date. It draws on the knowledge and wisdom of ages and brings them to a consistent unity, a unity upon which all cognitive and physical science depends for its viability. Physics cannot supplant in greatness what it will ever be a dependency of! That is also the reason why economics comes before physics.

the nature of the forces and energy, the underlying symmetries of nature are what they are and we cannot change that

If that's your concern you should interest yourself in metaphysics, not the pale overextention thereof.

> but the nature of the

Duncan Bayne's picture

> but the nature of the forces and energy, the underlying symmetries
> of nature are what they are and we cannot change that.

... yet.

There is evidence that certain physical phenomena did not function as they do now, during the early life of the universe. Gravity and time, for example.

I wouldn't bet against physicists, someday, discovering a way to change things we currently describe as laws or constants; perhaps somehow manipulating a volume of space in a lab, so as to change the gravitational constant within that space?

*That* would be an accomplishment. In fact, it'd probably go down in history as one of the greatest fundamental achievements of humanity, actually tinkering with universal constants.

I suspect the first step towards such an accomplishment, if it is even possible, would be a Theory of Everything, and AFAICT that's quite some way off.

No I didn't.

Jason Quintana's picture

"You left out something. Physical laws. The nature of nature. That is the ultimate limit of wealth production. As my grandmother of blessed memory used to tell me: you can't make a Gucci Bag from a pig's tuchas."

My above post was not meant to be a treatise on economics. And so I wonder why people mention that I "left something out".

Physical laws are implied in the very nature of economic production. I don't need to reiterate that among intelligent people.

- Jason

Physics is science. Economics is sometimes useful fiddling.

bobkolker's picture

Rick says:
Indeed, when your physical laws get in the way they may be, and have been, supplanted or refined whereas the principle of unlimited wealth production marches on through time. Never opposed, never changing.

I reply:

The laws of thermodynamics have never been observed to be incorrect. Energy cannot be produced out of nothing.

Rick further says:

Physical systems merely act as coordinate systems to plot the line of human capacity. Time and again that line runs off your (arbitrary) grid. The thing for the recorders and draftsmen to do, at last, is admit they keep making their graph paper too small for a line that runs forever.

I reply:

Utter nonsense. The sun (for example) is a physical system that was here long before humans existed and will be around long after humans are extinct. The sun is good for another five billion years (give or take) before it exhausts its hydrogen. The physical universe is older and more real than the human race will ever be. We are just blips, dust in the wind.

The science of physics is the greatest creation of the human intellect to date. It is firmly glued to reality by observation, measurement and experiment.

Any wealth we produce must fit in the bounds of nature. The best we can do is fiddle with natural forces so that produce some benefits for us, but the nature of the forces and energy, the underlying symmetries of nature are what they are and we cannot change that.

Bob Kolker

My science: better'n yours

Rick Giles's picture

Careful study of nature clear indicates that there are some things that are not possible.

Careful study of economic history clearly indicates that feats of wealth production are not amoung those things.

Indeed, when your physical laws get in the way they may be, and have been, supplanted or refined whereas the principle of unlimited wealth production marches on through time. Never opposed, never changing.

Physical systems merely act as coordinate systems to plot the line of human capacity. Time and again that line runs off your (arbitrary) grid. The thing for the recorders and draftsmen to do, at last, is admit they keep making their graph paper too small for a line that runs forever.

Is economics a science?

Yes, and a higher science than physics- yuck!

Do economic theories produce predictions which are testable? Or is Economics some mode of social commentary?

Both of those things.

An economic physicist is a person who avoids stirring his coffee because he doesn't want to increase the entropy of the universe.

"You can't make a Gucci Bag

Fred Weiss's picture

"You can't make a Gucci Bag from a pig's tuchas."

I wouldn't bet on it, Bob.Smiling

Of course you are right that "nature to be commanded must be obeyed". But if the Industrial Revolution, and its capitalist underpinning, has proven anything, it is the virtually unlimited potential of wealth creation with the application of innovative technology.

Question: Is Economics a science

bobkolker's picture

Is economics a science? Do economic theories produce predictions which are testable? Or is Economics some mode of social commentary?

I was once told, many years ago, that if you laid all the economists out in a straight line head to foot, you would not reach a conclusion.

Bob Kolker

Done the impossible

bobkolker's picture

The nature of nature (which is partially described by physical laws) does bind us.

Careful study of nature clear indicates that there are some things that are not possible. The best example of such are the laws of thermodynamics.

Yodah says: Do not your breath hold Young Rick, until perpetual motion achieved is, else blue turn you will.

Bob Kolker

done the impossible

Rick Giles's picture

You left out something. Physical laws

Now, -within- the bounds of physical possibility, the limits of prosperity are to be found in human wit.

Much that was once Jules Verne fantasy has come to pass. Who thought oil could be useful? Who before the Wrights believed man could fly? Who would believe we could put man on the moon? Who knew what billion dollar industry and undiscovered technology was contained in silicon? The history of man is the history of surpassing limits. The economics of man is the economics of creative power drawing new wealth out of what once was inconceivable.

In 1899 Charles Duell, commissioner of the US Patent Office, said "Everything that can be invented has been invented." That's a joke! Not a joke for 1899 though, a joke for all time.

Physical laws do not bind us, they're just prose in which to describe an act that makes us mighty.

Economic Productivity

bobkolker's picture

Jason wrote:

# The production of wealth is not limited by any factor beyond aggregate human labor, productive ability and current productive capacity. Scarcity is a result of these human limitations and not some strictly limited and rapidly depleting quantity of natural resources.

I reply:

You left out something. Physical laws. The nature of nature. That is the ultimate limit of wealth production. As my grandmother of blessed memory used to tell me: you can't make a Gucci Bag from a pig's tuchas.

No matter how clever one is, one cannot beat the laws of thermodynamics. That is why John Galt's perpetual motion machine will not happen.

The conservation laws and symmetries of physics are as true as true can get in the non a priori sense. You can't beat them. It does not matter how smart one is. Look, Albert Einstein himself could not beat the Heisenberg Principle. Why? Because that is the way things work, at least according to the massive, massive preponderance of physical evidence. Einstein beat his head against a wall for the last thirty years of his life trying to impose his metaphysical prejudices on Nature. It cannot be done.

Now, -within- the bounds of physical possibility, the limits of prosperity are to be found in human wit. Nature provides the raw materials and the ur-forces. It is up to us to channel them and use them productively. Wit and focus. That is what makes us rich and comfortable. But only within the bounds of nature.

Bob Kolker

Good point regarding the

Ross Elliot's picture

Good point regarding the "level of abstraction in relation to the concept". This objectivist often forgets that when he's hammering the point and berating the pointee Smiling, and, yup, OP means ob-phil.

Rick, Jason, Charles, & Ross

Mark Dow's picture

First let me say I do support Jason’s views regarding economics and concur with the comments made here regarding Objectivism, and yes I am an Objectivist, though I’ve been out of touch for a number of years, but it is good to hear your voices. My only bone of contention was with Jason’s first paragraph:

“Economics should not be used as the primary grounds for advocating laissez faire capitalism. Economic principles can be used to argue against specific policies (tariffs, price controls, minimum wages etc.) and are vital for refuting the claims of capitalism’s enemies, but without the proper rational and ethical base such arguments are easily brushed aside.”

I am not sure that if Jason had said, “justifying,” instead of “advocating,” in the first sentence, I would have said anything at all. But, to “justify,” means to prove by reason. To “advocate,” means to solicit the support of. If you are “advocating” something, I would think you would want to consider your audience and the level of abstraction in relation to the concept (that would be primary) being argued. And for some, an economic argument might be more “efficacious,” than a philosophical one. But yes, if you want to “justify” laissez faire, I agree with everyone's comments.

Ross, I'm sorry, what does “OP” stand for (objectivist principles?) in your comment?

Nothing wrong with that strategy

Jason Quintana's picture

Sometimes the most efficacious route is hammering people over the head until they see that their argument is entirely worthless. Generally I find that economic theory is useful as a counter argument against people who claim that pure free market capitalism leads to this or that disaster.

To illustrate that our ethical system doesn't advocate some pie in the sky utopia, counter arguments to specific claims about things like minimum wage laws are effectively dealt with via economics.

- Jason

"if someone argues that the

Ross Elliot's picture

"if someone argues that the minimum wage law is fair and kind, you would hit them over the head with Objectivist philosophy, but if they argue that the minimum wage law creates demand in our economy, I would base my arguments on economic theory."

Mark, you've stated a non-contradiction. Just use OP in all circumstances since we all know that the moral route is also the most efficacious Smiling

Congratulations, Rick,

Ross Elliot's picture

Congratulations, Rick, you've just achieved a 9/10 on the lucidity index.

Re:Rational Economic Theory as extension of Objctvsm & ViceVersa

Charles Henrikson's picture

Mark,

Objective Economics is a derivative of Objective Politics; it is derived out of the relationships between two entities. In fact, economics is a study of a certain type of relationships between entities: the exchange of goods, services or the promise of future goods and services.

Objective Politics is derived from Objective Ethics-how should one, as an ethical being interact with others.

Objective Ethics is derived from Objective Epistemology-from what I know to be true, how should I best act to make the best of it.

Objective Epistemology is derived from Objective Metaphysics-since existence exists, there is knowledge out there, how can I discover and know it.

There is a hierarchy in philosophy, a primacy of one branch to another built on the axiom that existence exists. Without a foundation set in Objective Reality and starting from a rational theory of economics, you may have it right on (lucky guess), or you may just be rationalizing-How would you know?

Without a hierarchical structure founded in Objective Reality, you wouldn't.

Fortune Favors the Bold

James Heaps-Nelson's picture

I heartily recommend Lester Thurow's Fortune Favors the Bold ( I especially like the title which is lifted from Virgil's Aenied). Thurow is an economist with a liberal bent, but his latest offering is terrific. It is a tour de force surveying trends in corporate strategy, globalization, and intellectual property issues. He highlights the fact that business is changing faster than ever and that coporations need to make big picture decisions more rationally.

He maintains that companies are faced with life or death decisions such as whether to change the business they're in, whether to sell the business and how to protect their intellectual property assets much more frequently than before and that companies don't give these decisions the attention they deserve.

Jim

Mark, there are those who

Rick Pasotto's picture

Mark, there are those who argue that mathematics has nothing to do with reality, that 2+2=4 is a purely logical statement rather than a statement about reality. Objectivism certainly has something to say to them.

Similarly, there are those who claim that economics is just economic history, or that economics is some kind of applied math, or that economics must predict to be valid. Objectivism claims that economics is a scientific tool whose understanding helps men enhance their lives.

Objectivism doesn't deal with the how of mathematics or economics but rather with their relationship to reality.

Congratulations!

Ed's picture

Jason,

Congratulations on the acceptance of a leading position at SOLO! You are tremendously intelligent and articulate. You have a great grasp on economics. Prediction: You will do well here!

Admiring yourself & recent acknowledgement,

Ed

Jason

Mark Dow's picture

Jason, I agree with you, and good luck as the new SOLO economics guru. I look forward to your posts.

Ross

Mark Dow's picture

“Rational has a warped meaning and therefore a rational economic appreciation is a completely different kettle of fish.”

While I agree with your response that economics is sometimes nothing more than subjective whim masquerading as science, economics, need not be subjective. At least for those who subject the discipline to actual science. And I only thought that Jason comments were directed to the participants of this website. But I think my comment was more in line with:

Would you use Objectivist theory “fundamentally” to argue mathematics? I would say no.

I.e., if someone argues that the minimum wage law is fair and kind, you would hit them over the head with Objectivist philosophy, but if they argue that the minimum wage law creates demand in our economy, I would base my arguments on economic theory.

"Is not rational economic

Ross Elliot's picture

"Is not rational economic theory just an extension of Objectivism? And to say that it cannot be fundamental or primary makes little sense. To me, one is just an extension of the other."

Yup, to an objectivist it is but to a statist or an environmentalist (but I repeat myself) "rational" has a warped meaning and therefore a rational economic appreciation is a completely different kettle of fish.

Unless you go back to some very basic principles and apply them with consistency, that is, rationally, then you won't get far. As I said above most statists, especially the giggly hippy types, are quite genuine in their defence of personal freedoms but when it comes to applying those same individual rights of self-ownership to the sphere of property they balk. And that balking is a learned response, perhaps with psychological overtones. As Mises said: "a grand rationalisation of petty resentment".

Healthy, educated minds beget capitalism.

Yes and no

Jason Quintana's picture

It is hard to answer this question without getting a more clear elaboration of what you mean. So allow me to attempt an answer but if I am misrepresenting your viewpoint by all means come in and correct me.

Philosophy is the fundamental discipline. Upon it all of the more distinct sciences can be integrated. When evaluating a set of economic theories I have to be armed with both a method of judging their logical structure and with a method of judging their value.

As Ross noted above it is quite possible that a person could develop philosophical insights while studying economics (or any other scientific discipline). As you say it can all be connected. I don't think that this is a good path though and I certainly won't suggest this on a site that advocates Objectivist philosophy.

So I agree with the point you are making about the integrated nature of knowledge but we must make a clear distinction regarding the fundamental nature of philosophy as opposed to individual sciences and
disciplines.

- Jason

Jason

Mark Dow's picture

Is not rational economic theory just an extension of Objectivism? And to say that it cannot be fundamental or primary makes little sense. To me, one is just an extension of the other.

Nothing to comment on

Jason Quintana's picture

I agree entirely with your last post and I'm guessing everyone else on the thread does as well. That should be evident from the rest of the discussion. If you would read my last post in the proper context you will see that it was nothing more then a few good natured jibes.

- Jason

content of posts

Rick Pasotto's picture

Is it going to be your intention to comment on the poster rather than what is posted?

Floating Abstractions!!!!!

Jason Quintana's picture

Uh oh. It looks as though Pasotto is here. You do realize of course that anarcho-capitalism represents a set of baseless floating abstractions don't you? Smiling

I suppose you do know a lot about economics so I guess you can stay. Plus I know that I can always count on you to correct my spelling and grammar. I look forward to seeing your contributions here.

- Jason

basis of economics

Rick Pasotto's picture

You really can't do economics without talking about exchange and that implies property titles. Any attempt to do economics without acknowledging its base in private property (actually, the "private" is redundant) is, uh, well, baseless. Another way of saying "baseless" is "floating abstraction".

Economists and floating abstractions

Jason Quintana's picture

"The interesting thing though is that you can start from an economic thesis and achieve a philosophical position."

Indeed, it is called integration. The problem is keeping the heirarchy in order and a good number of people fail to do this. It is far far easier to build from the bottom up rather then beginning with economics.

Unfortunately what happens in many cases is that economists (the better ones at least) come to the understanding that individual rights and protections are necessary and yet still remain entirely amoral regarding their ethical pronouncements. These protections for them are not important because of their moral significance but instead because they make the economic system run more efficiently. Their deductions are still very useful but in their presented form they remain up in the sky as floating abstractions. Abstractions that have no linkage to commonly held ethical and political beliefs.

This is why the better economists have virtually no following beyond fringe libertarian groups. The crappy economists are studied widely in universties and get major government positions because their theories are more agreeable with the commonly held ethical and political beliefs.

- Jason

Welcome, Jason.

Ross Elliot's picture

But...

"Consumer spending is not the main engine of economic growth. Economic growth results from the accumulation of capital, improved technology and improved knowledge among businessmen and their employees. "

...the accumulation of capital, etc. rests upon the recognition & protection of individual rights including the security of contracts and protection of intellectual property. All else follows. That's why economics per se is not the fundamental discipline. The interesting thing though is that you can start from an economic thesis and achieve a philosophical position. I'm sure many advocates of capitalism operating initially on the grounds of efficacy have come to an understanding of the importance of individual rights. Plus, witness the number of leftists who are vocal in their defence of personal freedoms but can't stomach capitalism. Get 'em any way you can, I say Smiling

Good choice

Jody Gomez's picture

I look forward to these weekly discussions. I've always thought Jason very adept at clearly expressing his ideas.

Congrats Jason.

Ah, well, you see ...

Lindsay Perigo's picture

All sorts of wacky stuff appears in that JARS thing. It is, after all, the purview of Dr. Diabolical Dialectical. I've thought of lynching him, but I suspect he'd enjoy the suffocation bit. Besides, what would I do for sport if I didn't have him to kick around? Heh, heh, heh!

Reisman

sjw's picture

See Resiman's latest JARS article--he's still slipping up on this point. Definitely looks like an occupational hazard, on the other hand I wouldn't lynch him for it, you just say something like "looks like our good freind Reisman has lost sight of the big picture again..." (ostracizing him for stuff like this is downright whacky).

Excellent start, Jason!

Lindsay Perigo's picture

And welcome aboard! When Tim suggested you for the job I knew immediately that it was a great choice. Besides, I have to keep upping the number of beautiful men on staff to keep Ashley satisfied. And no, Tim is not going anywhere. More later when I do a Feb 1 Update.

Your first two points in particular should be conscientiously taken to heart by all Objectivists. Even so towering a luminary as Reisman made the mistake, at a TJS conference, of claiming that economics was the "fundamental" discipline. He quickly retracted when the lynch mob assembled, but there's no doubt that those with an economics bent are susceptible to this egregious illusion. Of course, if it were over to me all economists would be lynched regardless, as an entirely rational precaution.

Smiling

Linz

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