libertarians-and-stoya:

rtk9221:

me: All I have heard is that the Austrians don’t advocate the use of math.

austrian: We use math.

me: So…

austrian: We just try to not use math as a means of modeling everything.

me: I suppose it’s sensible that we cannot model everything and everyone’s individual preferences. So where does the criticism of Austrians’ love/hate relationship with math come from then?

austrian: An organic system such as the economy is best left without implementing policies based off faulty math.

me: So the whole deal is that you don’t use a lot of math? Is that it?

austrian: Yeah.

———————

I don’t get it. There is nothing wrong with utilizing math to help predict the effects of a policy, but does the Austrian school of thought toss math to the sidelines 90% of the time?

Austrians don’t like mathematically modeling behavior because they think that you can’t.

You can. It’s what neoclassical economics has done using the same ideas Austrians had (utility maxizing individuals, preferences, etc etc)

Perhaps economics could be mathematically organized if we had perfect information and all participants practiced rational behavior that can also be quantified.

But we don’t always have perfect information, the info we do have can’t always be extrapolated and actors are certainly not always rational.  

But I do agree that if math can be utilized, then by all means, do so. I’m just not convinced that it can always be utilized as an effective tool. 

(via libertarians-and-stoya-deactiva)

libertarians-and-stoya replied to your quote: “I never understood how libertarians, especially…

Objective reality, subjective value. Two different ideas.

Right, but Ayn wasn’t talking about Objective reality. That would be the same as intrinsic value, which she rejected. She was talking about objective as in the value to a person that is discovered, not invented, by them. 

She presents three types of value, intrinsic, subjective and objective. She rejects the other two and favors the objective. 

I don’t remember the exact wording but it’s from her ‘What is Capitalism’ work. 

libertarians-and-stoya:

samcapener:

Shahe Writes…: Inflation exists on a gold standard.

sugashane:

libertarians-and-stoya:

Inflation exists on a gold standard.

YES!

Even on a gold standard, you can print more notes that represent each asset of gold.

Even if you made gold coins, you can still maintain the same amount of pure gold (by content) and mix in other metals into each coin…

If I may defend the gold standard, (although I am hardly a worthy representative) the inflation that is suffered may not be an issue as inflation isn’t too harmful in the long run, (as far as I know at least), and if it only happens in small amounts, then perhaps that would be the benefit to the gold standard? From what I understand the danger of inflation is that initially it hurts a certain group of people, hurting the economic system before it balances out. Thus if inflation only occurs when a group collects and mints more gold, wouldn’t this be a rare enough occurrence to be insignificant?

The problem with inflation comes from unexpected increases in inflation.  The name of the game with inflation is expectations.

And fiat currency has a stable inflation rate in the long run, so long as the inflation rate stays within expectations (as inflation itself can be a self-fulfilling prophecy; if people expect inflation to be X they’ll write in price increases of X in their contracts and prices will increase by X).

So inflation doesn’t hurt the economy per se - only if the inflation is unexpected.

Note: I think inflation’s effect on deterring savings is negligible with an inflation rate of 2%.  There is, of course, the hidden tax of inflation, but that’s why I think we should embrace the Friedman rule or CPI targeting.

We’re all talking about monetary inflation (from increased liquidity/money supply) right? Just making sure.

I think that inflation itself is a gimmick, especially if you have a monetary system who’s value is tied to production/confidence and not to a particular asset, like gold. 

Inflation in the short term doesn’t really hurt anyone but it sure does benefit those who get their hands on the money first. They are able to use money that most aren’t (physically) aware exists yet. (Even if you have knowledge of the money being circulated, until the increased liquidity impacts your own spending, it’s moot).

Once that money has a chance to enter the market and people are spending more and more willing to pay higher prices, that’s where short term inflation has an impact. But this usually doesn’t last too long.

What happens is that businesses get to spend cheap money to increase production or expand or whatever and now that people can afford to spend more, businesses can charge more. Businesses increase prices since demand is up and ability to ask for those prices is possible. The reaction of increased prices is, eventually, a demand for increased wages, until the equilibrium is found once again. The negative impact on the majority of people is minimal to null in the short term and the positive impact on businesses can easily be seen. 

In the long run, there is a major negative impact, even with expected inflation levels. If I earn $1,000 today and put it in a safe, I most likely won’t have equal value 10, 20, or 30 years down the line, even at a 1% rate of inflation (very low), my money with devalue 10%, 20% and 30% respectively.

Even if I put the money in the bank in an interest baring account, Inflation, even when expected, usually outpaces interest rate returns, slowing down my losses but not stopping them. 

Now, as I was saying before, the reason I think inflation is a gimmick is because the money supply is said to be increased to meet demand. But if there is more demand and static or less supply, economics tells us that the value/price will increase. Deflation is a good thing.

If this creates a physical shortage, don’t print more bills, remove large bills and print smaller bills. (Remove 1 $100 note and introduce 100 $1 notes). Fractionally swap the value of notes without increasing the overall value in circulation. 

This prevents the ill-effects of long-term inflation. Your $1,000 earned 10 years ago not only won’t lose value, it will increase in value. 

The reason we don’t have this system is because the system is built and run by the same banks who benefit from money introduction, like QE3. If we took my approach, these banks would never have those short-burst moments to increase profitability through. 

This wasn’t a really good write-up, but this is why I think inflation is a gimmick. 

(via libertarians-and-stoya-deactiva)

libertarians-and-stoya:

Inflation exists on a gold standard.

YES! 

Even on a gold standard, you can print more notes that represent each asset of gold. 

Even if you made gold coins, you can still maintain the same amount of pure gold (by content) and mix in other metals into each coin to create more currency with the same amount of valuable assets backing it. 

This is the one thing I think most Austrians that want a ‘Gold Standard’ don’t understand.

BUT I will say that having an asset backed currency makes it harder to just print more money without the people noticing because they actually have a tangible asset by which to measure the value of their currency on.

Right now, we measure inflation based on hundreds of items, which helps the masses ignore or even forget about the fact that their money buys less. They just assume costs have gone up and move on. 

(via libertarians-and-stoya-deactiva)

amagi-nation:

Keynes and Krugman are walking. Keynes says, “I’ll pay you $5,000 to eat a dog turd.” Krugman does it. Keynes doesn’t have any evil savings and didn’t think Krugman would do it: The next day he begs for the money back. Krugman says, “I’ll give it back if you eat a turd.” Keynes does it. Krugman says, “That was stupid: No one made money and we’ve both eaten sh*t.” Keynes says: “But we boosted GDP by $10,000.”