Find counter arguments by entering NameVs… or …VsName.
The author or concept searched is found in the following 29 entries.
| Disputed term/author/ism | Author |
Entry |
Reference |
|---|---|---|---|
| Central Bank | Bentham | Rothbard II 52 Central bank/Bentham/Rothbard: (…) in an unpublished ‘Proposal for the Circulation of a [New] Species of Paper Currency’ (1796)(1), Bentham happily wedded his ‘projecting’ and constructivist spirit to his new-found inflationism. Instead of floating bonds and paying interest on them, the government, he proposed, should simply monopolize all issue of paper notes in the kingdom. Rothbard II 53 It could then issue the notes, preferably non-interest bearing, ad libitum and save itself the interest. Bentham was scarcely at his best answering the question of what limit there might be to this government paper issue. The limit, he answered, would obviously be ‘the amount of paper currency in the country’.(1) In his later writings on the subject, Bentham searched for some limits to paper issue, if unsuccessfully. But his commitment to a broadly inflationist course deepened further. In his unfinished ‘Circulating Annuities’ (1800)(2), he developed his government paper scheme further, and hailed the serviceability of inflation in wartime. BenthamVsSmith, Adam: Indeed, Bentham makes an all-out assault on the Turgot-Smith-Say insights and actually declares that employment of labour is directly proportional to the quantity of money: ‘No addition is ever made to the quantity of labour in any place, but by an addition made to the quantity of money in that place... In this point of view, then, money, it should seem, is the cause, and the cause sine qua non, of labour and general wealth.’ Quantity of money is all; so much for Smithian doctrine! 1. Bentham, J. 1796. Proposal for the Circulation of a [New] Species of Paper Currency. 2. Bentham, J. 1800. Circulating Annuities. |
Benth I J. Bentham An Introduction to the Principles of Morals and Legislation Mineola, NY 2007 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Classical Economics | Say | Rothbard II 22 Classical Economics/Say/Rothbard: Say did not rest content with a general, even if pioneering, analysis of the pricing of productive factors. He goes on to virtually create the famous ‘triad’ of classical economics: land (or ‘natural agents’), labour (or ‘industry’ for Say), and capital. Labour works on, or employs ‘natural agents’ to create capital, which is then used to multiply productivity in collaboration with land and labour. Although capital is the previous creation of labour, once in existence it is used by labour to increase production. If there are classes of factors of production, what easier trap to fall into than to maintain that each class receives the kind of income attributed to it in common parlance: i.e. labour receives wages; land receives rent; and capital receives interest? Surely a common-sense approach! And so Say adopted it. RothbrdVsSay: While useful as a first attempt (excepting the forgotten Turgot) to clarify production theory out of Adam Smith's muddle, this superficial clarity comes at the expense of deep fallacy, that would not be uncovered until the Austrians. >Austrian School. In the first place, these three rigidly separated categories already begin to break down in Say's interesting insight that labourers ‘lend’ their services to owners of capital and land and earn wages thereby; that landowners ‘lend’ their land to capital and labour and earn rent; and that capitalists ‘lend’ their capital to earn interest. For how exactly do these payments differ? How does rent as a ‘loan’ price compare with interest as a loan? And how do wages differ from interest or rent? In fact, the muddle is even worse, for workers and landowners don't ‘lend’ their services; they are not creditors. On the contrary, in a deep sense, capitalists lend them money by giving them money in advance of selling the product to the consumers; and so workers and landowners are ‘debtors’ to the capitalists, and pay them a natural rate of interest. Böhm-Bawerk: And finally, this classical triad rests on a basic equivocation, as Böhm-Bawerk would eventually point out, between ‘capital’ and ‘capital goods’. Capital as a fund of savings or lending may earn interest; but capital goods - which are the real physical factors of production rather than money funds - do not earn interest. Like all Rothbard II 23 other factors, capital goods earn a price, a price per unit of time for their services. If you will, capital goods, land, and labourers all earn such prices, in the sense of ‘rents’, defining a rental price as a price of any good per unit of time. This price is determined by the productivity of each factor. But then where does interest on capital funds come from? Interest/SayVsSmith/SayVsRicardo/SayVsMarx/Rothbard: Thus, in grappling with the problem of interest, Say criticizes Smith and the Smithians for focusing on labour as the sole factor of production, and neglecting the cooperating role of capital. Tackling the Smith-Ricardian (and what would later be the Marxian) riposte: that capital is simply accumulated labour, Say replies yes, but the services of capital, once built, are there and continue anew and must be paid for. >Division of labour/Say. |
EconSay I Jean-Baptiste Say Traité d’ Economie Politique Paris 1803 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Decision-making Processes | Thaler | Otteson I 34 Decision-making/Thaler/Otteson: A criticism of the Local Knowledge Argument comes (…) from the work of some recent behavioral economists. >Decisions/Adam Smith, >Knowledge/Adam Smith. ThalerVsSmith/SunsteinVsSmith, Adam: Richard Thaler and Cass Sunstein, for example, in their 2009 book Nudge(1) claim that recent empirical Study of human decision making has revealed that we often make mistakes, even mistakes that we ourselves judge to be mistakes after the fact. This is hardly a new discovery, but their claim is that psychologists and economists have uncovered systematic patterns of mistakes that human beings are likely to make. These include, for example, our susceptibility to present pleasures that come at the expense of other, more remote, or longer-term but greater goals we have. >Nudging, >Behavioral economics. Otteson: Thaler and Sunstein argue that perhaps a role for government is to help structure the choices we make so that we are more likely to make choices that are the right ones, all things considered, even if that means marginally restricting our liberty to choose. They might concede that in Smith's day, when we did not actually know much about human biology, psychology, health, or nutrition, perhaps an argument for free markets and for allowing people to make decisions in a trial-and-error fashion might have been justifiable. Today, however, when we have learned a great deal about human biology, psychology, and so on, there seems little reason to allow people to experiment and try things out. Indeed, it seems almost cruel to let them do so, when we know that people will make mistakes. Otteson I 35 Adam SmithVsThaler/Adam SmithVsSunstein/Otteson: How would Smith respond? He would no doubt acknowledge the great strides made by the modern advances in the sciences of humanity, and concede that we know much more today than anyone did in the eighteenth century. But he would probably also argue that much of what we know, or at least believe we know (remember that experts routinely change their minds and reverse or change their recommendations), is general and abstract, not tied to individuals. For example, we might know that obesity is not only growing in incidence in the United States today but that it poses significant health risks and health costs. But does that mean that I should not eat the doughnut offered to me? Does it mean I should work out more than, or differently from, how I do now? Does it mean I should Skip lunch today and continue working on this book? Questions like these cannot be answered by experts from afar, because those experts do not possess the relevant information about my particular circumstances - and yet those are the decisions facing me, and every other individual. So although we might know in general that obesity is bad, that unfortunately gives little guidance for any particular person or for any particular decision a person must make. 1. Thaler, Richard H., and Cass R. Sunstein (2009). Nudge: Improving Decisions about Health, Wealth, and Happiness. Penguin. |
EconThaler I Richard Thaler Misbehaving: The Making of Behavioral Economics New York 2016 Otteson I James R. Otteson The Essential Adam Smith Vancouver: Fraser Institute. 2018 |
| Decisions | Smith | Otteson I 33 Decisions/knowledge/Adam Smith/Otteson: Smith writes: "What is the species of domestick industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him" (WN(1): 456). Otteson: As Smith develops it, this argument proceeds as a three-step syllogism: Premise 1: People's individual situations, along with their values, purposes, and opportunities, are known best by individuals themselves. Premise 2: To be made wisely, decisions about allocating resources must exploit knowledge of situation, value, purpose, and opportunity. Conclusion: Therefore, the person best positioned to make such decisions is the individual. Otteson I 34 Otteson: Smith's claim is not that individuals are infallible or that they never make mistakes; obviously we all make mistakes, frustratingly often. And of course there might be special cases - for example, children or the mentally infirm - where individuals are not, in fact, best positioned to make decisions in their own cases. But for the vast majority of normally functioning adults, Smith's claim is that their personal knowledge of their own situations exceeds that of others. Hence, if making good decisions requires utilizing this knowledge, then in the vast majority of cases the persons who should be making decisions is those persons themselves. Local knowledge/Adam Smith/Otteson: (…) the statesman does not possess the local knowledge of individual people's circumstances, values, goals, and resources that he would need in order to make good decisions for them. For Richard ThalerVsSmith, Adam see >Decision-making/Thaler. >Governance/Adam Smith. |
EconSmith I Adam Smith The Theory of Moral Sentiments London 2010 EconSmithV I Vernon L. Smith Rationality in Economics: Constructivist and Ecological Forms Cambridge 2009 Otteson I James R. Otteson The Essential Adam Smith Vancouver: Fraser Institute. 2018 |
| Division of Labour | Say | Rothbard II 23 Division of labour/Say/Rothbard: Say follows Smith in his discussion of the division of labour, and in pointing out that the degree of that division is limited by the extent of the market. But Say's discussion is far sounder. He shows, first, that expanding the division of labour needs a great deal of capital, so that investment of capital becomes the crucial point rather than its division per se. SayVsSmith: He also points out that, in contrast to Smith, the crucial specialization of labour is not simply within a factory (as in Smith's famous pin factory) but ranges over the entire economy, and forms the basis for all exchange between producers. >Production/Say. |
EconSay I Jean-Baptiste Say Traité d’ Economie Politique Paris 1803 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Economic Rent | Ricardo | Kurz I 280 Economic Rent/Ricardo/classical economics/Kurz: In the Principles Ricardo defines rent rigorously in the following way: „Rent is that portion of the produce of the earth, which is paid to the landIord for the use of the original and indestructihle powers of the soil.“ (Ricardo 1951 : 67)(1). „It is often, however, confounded with the interest and profit of capital, and, in popular language, the term is applied to whatever is annually paid by a farmer to his landlord. If, of two adjoining farms of the same extent, Kurz I 281 and of the same natural fertility, one had all the conveniences of farming buildings, and, besides, were properly drained and manured, and advantageously divided by hedges, fences and walls, while the other had none of these advantages, more remuneration would naturally be paid for the use of one, than for the use of the other; yet in both cases this remuneration would be called rent. But it is evident, that a portion only of the oney annually to be paid for the improved farm, would be given for the original and indestructible powers of the soil; the other portion would be paid for the use of the capital which had been employed in ameliorating the quality of the land, and in erecting such buildings as were necessary to secure and preserve the produce.“ (Ricardo 1951: 67)(1) RicardoVsSmith, Adam: Adam Smith, Ricardo goes on to argue, did not stick to a rigorously defined concept when using the word rent. In Part II of Chapter XI of Book I of The Wealth of Nations ( WN)(2), 'Of the Produce of Land which sometimes does, and sometimes does not, afford Rent', Smith gives an example of the timber business, timber clearly being a reproducible resource, in which he confounds the concepts of profits and rent (WN I.xi.c.5)(2): „He [Smith] tells us, that the demand for timber, and its consequent high price, in the more southern countries of Europe, caused a rent to be paid for forests in Norway, which could before afford no rent. Is it not, however, evident, that the person who paid what he thus calls rent, paid it in consideration of the valuable commodity which was then standing on the land, and that he actually repaid himself with a profit, by the sale of the timber? If, indeed, after the timber was removed, any compensation were paid to the landlord for the use of the land, for the purpose of growing timber or any other produce, with a view to future demand, such compensation might justly be called rent, because it would be paid for productive powers of the land; but in the case stated by Adam Smith, the compensation was paidfor the liberty of removing and se/ling the timber, and not for the liberty of growing it.“ (Ricardo 1951(1): 68) Kurz I 282 Profit/rent/Ricardo: In Ricardo's view the distinction between profits and rent is crucial, because as capital accumulates and the population grows the two component parts of the social surplus are typically affected differently: „This is a distinction of great importance, in an enquiry concerning rent and profits; for it is found, that the laws which regulate the progress of rent, are widely different from those which regulate the progress of profits, and se/dom operate in the same direction. In all improved countries, that which is annually paid to the landlord, partaking of both characters, rent and profit, is sometimes kept stationary by the effects of opposing causes; at other times advances or recedes, as one or the other of these causes preponderates. In the future pages of this work, then, whenever I speak of the rent of land, I wish to be understood as speaking of that compensation, which is paid to the owner of land for the use of its original and indestructible powers.“ (Ricardo 1951:68-9(1)) RicardoVsSmith, Adam: Hence what Smith called 'rent' of coal mines or stone quarries is to Ricardo profits and not rent. >Profit, >Economic Rent, >Royalties. 1. Ricardo, D. (1951 [1817]) On the Principles of Political Economy and Taxation, in P. Sraffa (ed.) with the collaboration Of M.H. Dobb, The Works and Correspondence of David Ricardo, Vol. I, Cambridge: Cambridge University Press. (P/b edn 2004, Indianapolis, IN: Liberty Fund.) 2. Smith, A. (1976 [1776]) An Inquiry into the Nature and Causes of the Wealth of Nations,in R.H. Campbell, AS Skinner and WB. Todd (eds), The Glasgow Edition of the Works and Correspondence of Adam Smith, Vol. I, Oxford University Press, Oxford. (In the text quoted as WN, book number, chapter number, section number, paragraph number.) Kurz, Heinz D. and Salvadori, Neri. „Ricardo on exhaustible resources, and the Hotelling Rule.“ In: Kurz, Heinz; Salvadori, Neri 2015. Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). London, UK: Routledge. Rothbard II 83 Rent/land/Ricardo/Rothbard: Rent served as the linchpin of the Ricardian system. For, according to Ricardo's rather bizarre theory, only land differed in quality. Labour, as we have seen, was assumed to be uniform, and therefore wage rates are uniform, and, as we shall see, profits are also assumed to be uniform because of the crucial postulate of the economy's always being in long-run equilibrium. >Labour, >Ricardo, >Wages/Ricardo. Land is the only factor which miraculously is allowed to differ in quality. Next, Ricardo assumes away any discovery of new lands or improvements in agricultural productivity. His theory of history therefore concludes that people always begin by cultivating the most fertile lands, and, as population increases, the Malthusian pressure on the food supply forces the producers to use ever more inferior lands. In short, as population and food production rise, the cost of growing corn must inexorably rise over time. Rent, in Ricardo's phrase, is payment for the ‘use of the original and indestructible powers of the soil’. This hints at a productivity theory, and indeed Ricardo did see that more fertile and productive lands earned a higher rent. But unfortunately, as Schumpeter put it, Ricardo then ‘embarks upon his detour’. In the first place, Ricardo made the assumption that at any moment the poorest land in cultivation yields a zero rent. He concluded from that alleged fact that a given piece of land earns rent not because of its own productivity, but merely because its productivity is greater than the poorest, zero-rent, land under cultivation. Remember that, for Ricardo, labour is homogeneous and hence wages uniform and equal, and, as we shall see, profits are also uniform and equal. Land is unique in its permanent, long-run structure of differential fertility and productivity. Hence, to Ricardo, rent is purely a Rothbard II 84 differential, and Land A earns rent solely because of its differential productivity compared to Land B, the zero-rent land in cultivation. Rent/land/Ricardo: To Ricardo, several important points followed from these assumptions. First, as population inexorably increases, and poorer and poorer lands are used, all the differentials keep increasing. Thus, say that, at one point of time, corn lands (which sums up all land) range in productivity from the highest, Land A, through a spectrum down to Land J, which, being marginal, earns a zero rent. >Marginal costs/Ricardo. Rothbard II 95 RothbardVsRicardo/Problems: (…) in discussing the rise in cost of producing corn, Ricardo reverses cause and effect. Ricardo states that increasing population ‘obliges’ farmers to work land of inferior quality and then causes a rise in its price. But as any utility theory analyst would realize, the causal chain is precisely the reverse: when the demand for corn increases, its price would rise, and the higher price would lead farmers to grow corn on higher-cost land. But this realization, of course, eliminates the Ricardian theory of value and with it the entire Ricardian system. (…) as numerous critics have pointed out, it is certainly not true historically that people always start using the highest-quality land and then sink gradually and inevitably down to more and more inferior land. Rothbard II 91 VsRicardo/Rothbard: One of the greatest fallacies of the Ricardian theory of rent is that it ignores the fact that landlords do perform a vital economic function: they allocate land to its best and most productive use. Land does not allocate itself; it must be allocated, and only those who earn a return from such service have the incentive, or the ability, to allocate various parcels of land to their most profitable, and hence most productive and economic uses. >Allocation. Ricardo himself did not go all the way to government expropriation of land rent. His short-run solution was to call for lowering of the tariff on corn, or even repeal of the Corn Laws entirely. Rothbard II 108 VsRicardo: The Ricardian theory of rent was effectively demolished by Thomas Perronet Thompson (1783–1869) in his pamphlet, The True Theory of Rent (1826)(1). Thompson weighed in against this fallacious capstone to the Ricardian system: ‘The celebrated Theory of Rent’, Thompson charged, ‘is founded on a fallacy’, for demand is the key to the price of corn and to rent. The fallacy lies, in assuming to be the cause what in reality is only a consequence... [I]t is the rise in the price of produce... that enables and causes inferior land to be brought into cultivation; and not the cultivation of inferior land that causes the rise of rent. 1. Thomas Perronet Thompson. 1826. The True Theory of Rent, in Opposition to Mr. Ricardo and Others. Being an Exposition of Fallacies on Rent, Tithes, &C. In the Form of a Review of Mr. Mill's Elements of Political Economy. London. |
EconRic I David Ricardo On the principles of political economy and taxation Indianapolis 2004 Kurz I Heinz D. Kurz Neri Salvadori Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). Routledge. London 2015 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Egoism | Smith | Otteson I 43 Egoism/Adam Smith/Otteson: "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages" (WN(1): 27). Note the phrases "their own interest," "self-love," and "their advantages." Otteson: What do you hear when you read that passage? Do you hear selfishness? That is what Karl Marx (1818-1883), author of the 1848 Communist Manifesto(2), thought when he read Smith - and he did read Smith. MarxVsSmith, Adam: Here, Marx thought, not even twenty pages into the Wealth of Nations, was the smoking gun: Adam Smith, the father of economics, admitting - even celebrating - the fact that Smithian political economy is founded on selfishness. Marx would go on to argue that this system of political economy, which Marx called "capitalism," is built on recommending to people that they should be selfish and should consider other people as mere means to their own ends, as mere tools to be manipulated rather than moral agents with dignity to be respected. Whatever its material virtues might be, capitalism, Marx thought, was thus founded upon an immoral base, and thus its gains were ill-gotten. Otteson: Was Smith arguing that we should all be selfish in our dealings Sith one another? Certainly not in our moral dealings with one another: remember that in his Theory of Moral Sentiments(3) Smith argued that we all desire mutual sympathy of sentiments, which drives us to into mutually supportive relationships with others. But in our economic dealings with one another? Is Smith telling us we should be selfish in the market - as it were, to check our morality at the marketplace door? Smith did not believe so. What he saw in these dealings with the butcher, the brewer, and the baker was not a narrow, let alone odious, selfishness, but something rather different: respect. >Recognition. Otteson I 44 Because of our peculiar liabilities, human beings need the help of others; and it is by making mutually advantageous offers "that we obtain from one another the far greater part of those good offices which we stand in need of" (WN(1): 26). Now the assumption Smith makes in this argument is indeed that we are driven by self- interest. Because, however, of the twin constraints of (1) our desire for mutual sympathy of sentiments and (2) living in a "well-governed society," we are driven - both by our own desires and by our public institutions - to meet one another as peers, as moral equals, and to make offers to one another that either of us is free to decline. Each of us has an "opt-out option" that is protected by our society's commitment to Smithian justice, and this disciplines us from any notion we might otherwise have had about merely trying to steal from or defraud one another. >Sympathy/Adam Smith, >Community/Adam Smith, >Division of Labour/Adam Smith, >Equality/Adam Smith, >Inequalities/Adam Smith. And because each of us desires mutual sympathy of sentiments, we desire to conduct ourselves in ways that others will approve of. So when we seek our meat from butchers, our ale from brewers, and our bread from bakers, we make them offers that recognize that they are our equals, that they have interests and obligations of their own, and that our interests and obligations do not trump theirs. Recognition: For Smith, then, the act of making a person an offer is a recognition of the inherent value of others; it reflects the equal dignity that each of us has, and it is a shining example of proper moral relations among people. The mutually voluntary and thus mutually beneficial transaction that is the cornerstone of a Smithian market economy is, then, not only the key to increasing general prosperity, but it is also the instantiation of truly moral human relations. >Marx/Adam Smith. 1. Smith, Adam. (1776) The Wealth of Nations. London: W. Strahan and T. Cadell. 2. Marx, Karl, and Friedrich Engels (1994) [1848]. The Communist Manifesto. In Lawrence H. Simon (ed.), Karl Marx, Selected Writings. Hackett. 3. Smith, Adam (1982) [1759]. The Theory of Moral Sentiments. D. D. Raphael and A. L. Macfie, eds. Liberty Fund. |
EconSmith I Adam Smith The Theory of Moral Sentiments London 2010 EconSmithV I Vernon L. Smith Rationality in Economics: Constructivist and Ecological Forms Cambridge 2009 Otteson I James R. Otteson The Essential Adam Smith Vancouver: Fraser Institute. 2018 |
| Entrepreneurship | Say | Rothbard II 25 Entrepreneurship/Say/Rothbard: For Say, the entrepreneur, the linchpin of the economy, takes on himself the responsibility, the conduct, and the risk of running his firm. He almost always owns some of the firm's capital, Say being familiar with the fact that the dominant entrepreneur and risk-taker in the economy is the one who is also a capitalist, an owner of capital. The owner of capital or land or personal service hires these services out to the ‘renter’ or entrepreneur. In return for fixed payments to these factors, the entrepreneur takes upon himself the speculative risk of gaining profit or suffering loss. ‘It is a sort of speculative bargain, wherein the renter takes the risk of profit and loss, according to the revenue he may realize, or the product obtained by the agency transferred, shall exceed or fall short of the rent or hire he is to pay’.(1) Rothbard II 26 The entrepreneur, Say adds, acts as a broker between sellers and buyers, applying productive factors proportionate to the demand for the products. SayVsSmith: Say was critical of Smith and the Smithians for failing to distinguish the category of entrepreneurial profit from the profit of capital, both of which are mixed together in the profits of real world enterprises. Say also appreciated entrepreneurship as the driving force of the allocations and adjustments of the market economy. SchumpeterVsSay/HébertVsSay: Schumpeter and Hébert are critical of Say as having a view of the entrepreneur as a static manager and organizer rather than as a dynamic bearer of risk and uncertainty. We cannot share that view. It seems to us that Say is instead foursquare in the Cantillon-Turgot tradition of the entrepreneur as forecaster and risk-bearer. 1. Say, Jean-Baptiste. Traité d’Economie Politique, Paris 1803. |
EconSay I Jean-Baptiste Say Traité d’ Economie Politique Paris 1803 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Government Debt | Buchanan | Boudreaux I 13 Government debt/Buchanan/Boudreaux/Holcombe: „The essence of public debt, as a financing institution, is that it allows the objective cost of currently financed expenditure projects to be postponed in time. For the taxpayer, public debt delays the necessity of transferring command over resource services to the treasury.“ James M. Buchanan, “Confessions of a Burden Monger” (1964)(1). Boudreaux I 14 [It was a] consensus by mid-twentieth century economists that debt-financed projects are paid for by citizen-taxpayers at the time the projects are undertaken rather than by future generations. „New orthodoxy“/Buchanan: Buchanan called [this]“the new orthodoxy.” It was an orthodoxy because it was widely taken to be obviously true, and it was new because it sprung from Keynesian economics, which in 1958 was only 22 years old. Tradition: Until John Maynard Keynes published his General Theory of Employment, Interest, and Money in 1936(2), most economists - from Adam Smith in the mid-eighteenth century through economists in the early twentieth century - understood that the costs of government projects funded with debt are passed on to the future generations who, as citizen-taxpayers, must repay the debt. KeynesianismVsSmith, Adam: This understanding was rejected by the new orthodoxy ((s) Keynesianism) and replaced with the insistence that projects funded with borrowed money are, just like projects funded with currently collected taxes, paid for at the time the projects are undertaken. The new orthodoxy does recognize that debt financing nevertheless leaves a legacy for future citizen-taxpayers. In the case of [a] hypothetical hydroelectric dam built in 2021 with borrowed funds, citizens are obliged in 2051 to repay the debt that was incurred 30 years earlier. To do so they must, in 2051, pay more in taxes or suffer cuts in government programs (or some combination of the two) (…). Boudreaux I 15 But, the new orthodoxy continues, if the bond is owned and submitted for redemption by nationals, then apart from some relatively negligible costs incurred in carrying out the process of transferring the funds from citizen-taxpayers to citizen-bondholders, redemption imposes no net burden on nationals. Although those citizens who pay the debt are worse off as a result of paying more in taxes or receiving less in government services, other citizens - those who receive repayment of the debt - are better off by the same amount. Just as a household is made neither richer nor poorer if a wife transfers money to her husband, a nation is made neither richer nor poorer if one group of citizens transfers money to another group of citizens. Using the phrase that mid-1950s economists employed to describe this situation, nationals in 2051 might say, “We owe it to ourselves.” BuchananVsNew orthodoxy/BuchananVsKeynesianism: According to Buchanan, the new orthodoxy’s fatal flaw is its insistence that the costs of debt financing are incurred in the periods when the debt-financed programs are undertaken. Boudreaux I 16 And if this insistence is wrong, then the older, pre-Keynesian understanding is correct that programs funded with debt today are paid for by citizen-taxpayers tomorrow. Therefore, by using debt to finance government programs, we, today’s citizen-taxpayers, can indeed consume at the expense of our children and grandchildren. >Public finance, >Interest rates, cf. >Time/Rothbard. Solution/Buchanan: The key insight in Buchanan’s criticism of the new orthodoxy and, hence, of his revitalization of the older, classical view is the realization that creditors who lend money to the government do so voluntarily. But these creditors lend to the government only because they believe that the interest payments they will receive in exchange make such loans worthwhile for them. These creditors are not the purchasers of the debt-financed projects; instead, they are purchasers of future interest payments that make it worthwhile for them to sacrifice their consumption today. Thus, debt-financed government projects are not paid for by the government’s creditors. After all, the very reason the government in 2021 borrows the funds to build the dam is to relieve today’s citizen-taxpayers from having to pay for it. Yet someone has to pay for the dam! Who? Buchanan’s answer is that the dam is paid for by citizen-taxpayers in 2051, who are obliged to repay the debt. >Taxation. KeynesianismVsBuchanan: Adherents of the new orthodoxy respond by saying that if the debt is repaid to fellow citizens, there is no net reduction in aggregate national wealth. The repayment, they maintain, is merely a transfer, as if from the left hand to the right. BuchananVsVs: Buchanan, however, argued that this reasoning is mistaken. If the creditors in 2021 had not loaned [the money] to the government, they would have done something else with their money - something else of nearly equivalent value to lending to the government - such as, for instance, lending [the money] to private companies. >Time preference, >Opportunity costs. Credit/repayment: Buchanan assumed, not unrealistically, that credit markets are competitive. From this assumption it follows that the attractiveness to creditors of lending to the government is only marginally greater than (that is, is largely equivalent to) the attractiveness of using their money in other ways. And so when in 2051 the government’s creditors are repaid, they are made no better off (or worse off) than they would have been had they used their money differently in 2021. Repayment of the debt does not make the repaid creditors anything but marginally richer than they would have been had they instead invested their money in alternative projects. But repayment does make the citizen-taxpayers who foot the bill poorer by the full amount of the repayment. >Credit. Boudreaux I 19 Note that Buchanan’s argument that each debt-financed project is paid for by the future citizen-taxpayers who must service the debt holds regardless of whether the project is wasteful or productive. Debt/taxation/Buchanan: Buchanan’s argument should not, therefore, be interpreted as counselling against any and all debt financing. He explicitly recognized that it is appropriate to finance some projects with debt rather than with current taxation. Projects that yield benefits to future citizen-taxpayers are appropriately paid for by those future taxpayers rather than by current taxpayers who derive no benefits from such projects. In such cases, debt financing is a vehicle for handing the bill to those who will receive the benefits. Free rider/Buchanan: This ability of current taxpayers to use debt financing to free-ride on the wealth of future generations led Buchanan to worry that government today will both spend excessively and fund too many projects with debt. >Moral hazard. Boudreaux I 20 Democracy/Buchanan: Tomorrow’s citizen-taxpayers, after all, are not today’s voters. Thus, the interests of these future generations are under-represented in the political process. To reduce the magnitude of this problem, Buchanan endorsed constitutional rules that oblige governments to annually keep their budgets in balance. Constitution/Buchanan: His fear that the opportunity for debt financing of government projects and programs would be abused was so acute that it led him to endorse a balanced-budget amendment to the US Constitution. His participation in a political effort to secure such an amendment is one of the very few specific, ground-level policy battles that he actively joined. >Constitution/Buchanan. Boudreaux I 21 Government Debt: When analyzing the activities of government, the costs and benefits of government policies fall on individuals, not on aggregates or groups. The argument that domestically held public debt is no burden because “we owe it to ourselves” is revealed as fallacious once we recognize that the aggregate – ourselves - is really composed of many individuals, some of whom will pay the taxes to finance the debt repayment, and some of whom will receive the proceeds when they redeem the bonds they hold. 1. Buchanan, James M. (1964). “Confessions of a Burden Monger”. Journal of Political Economy Vol. 72, No. 5 (Oct., 1964), pp. 486-488. 2. Keynes, J. M. [1936] The General Theory of Employment, Interest and Money. London: Macmillan. Mause I 279 Government Debt/Buchanan: Question: Is it basically acceptable for citizens to give their representatives the opportunity to deficit finance their budgets? (Prerequisite: the Ricardian Equivalence Theorem does not apply; see Terminology/Economic Theories). Brennan/Buchanan: No: Deficit financing would be systematically used to finance expenditures beyond the desired level and past the tax resistance of citizens.(1) >Generational Justice/Diamond, Equivalence Theorem/Barro. See also BuchananVsBarro. 1. Geoffrey Brennan & James M. Buchanan, The power to tax. Analytical foundations of a fiscal constitution. Cambridge 1980. |
EconBuchan I James M. Buchanan Politics as Public Choice Carmel, IN 2000 Boudreaux I Donald J. Boudreaux Randall G. Holcombe The Essential James Buchanan Vancouver: The Fraser Institute 2021 Mause I Karsten Mause Christian Müller Klaus Schubert, Politik und Wirtschaft: Ein integratives Kompendium Wiesbaden 2018 |
| Illusory Correlation | McGarty | Haslam I 238 Illusory correlation/McGarty: McGarty et al. (1993)(1) asked whether the illusory correlation effect was more than a byproduct of passive information processing but might instead reflect an active process of trying to make sense of the stimuli. The approach was built on the ideas of Fiedler (>Illusory correlation/Fiedler; Fiedler (1991)(2)) and Smith (>Illusory correlation/Smith; Smith (1991(3)). McGarty: Question: [are there] ways of interpreting the information presented to participants such that the so-called illusory correlation was actually not a distortion of reality but a fair response to the information presented to participants. (Cf. >Experiment/Gifford/Hamilton). Thesis: when presented with two groups about which nothing was known prior to the experiment, participants would presume that there must be some difference between those groups and that they would be motivated to discover what that difference was. That is, in the absence of prior information that there was no difference between the groups, we expected the participants to search for a meaningful way to see the groups as in some way different. >Social World/McGarty, >Social World/Bruner, >Social Word/James. Haslam I 239 Fiedler/Smith: if perceivers entertained the hypothesis that Group A is more positive than negative, then they have ten pieces of evidence that support this hypothesis (i.e., 18 – 8) but only five pieces of Haslam I 240 evidence (i.e., 9 – 4) that support the alternative hypothesis that Group B is more positive than negative. (Cf. Fiedler (1991)(2) and Smith (1991)(3); >Illusory correlation/Fiedler, >Illusory correlation/Smith). McGartyVsFiedler/McGartyVsSmith: Thesis (McGarty and Turner(1992)(1): rather than simply encoding (or losing) this information, perceivers go beyond the information given in order to refine and sharpen the contrast between the two groups. Test: if people were expecting that the groups they were viewing were different, then their task was to search for plausible ways to differentiate between the groups. Intriguingly, if this were the case then we should expect to find differentiation when there were expectations even if there was no stimulus information at all. We tested this idea simply by telling participants (a) that there were twice as many statements about Group A as about Group B and (b) that there were twice as many positive statements as negative ones. Result: When they responded by indicating how they expected group members to behave, there was evidence of significant levels of illusory correlation (such that Group B was represented more negatively than Group A) in five of six tests. [In a second study] We reasoned that if the illusory correlation effect was produced by reinforcing initial expectations that there should be differences between the two groups, then we should be able to eliminate the effect by reducing the motivation to detect such differences. To examine this idea, we replicated Hamilton and Gifford’s first study (>Experiment/Gifford/Hamilton), but told the participants that the large group (A) was composed of right-handed people and the small group (B) was composed of left-handed people. As predicted, participants’ subsequent responses revealed no evidence of perceived difference between the two groups (i.e., no evidence of illusory correlation) – presumably because they were not looking for differences. 1. McGarty, C., Haslam, S.A., Turner, J.C. and Oakes, P.J. (1993) ‘Illusory correlation as accentuation of actual intercategory difference: Evidence for the effect with minimal stimulus information’, European Journal of Social Psychology, 23: 391–410. 2. Fiedler, K. (1991) ‘The tricky nature of skewed frequency tables: An information loss account of distinctiveness-based illusory correlations’, Journal of Personality and Social Psychology, 60: 24–36. 3. Smith, E.R. (1991) ‘Illusory correlation in a simulated exemplar-based memory’, Journal of Experimental Social Psychology, 27: 107–23. Craig McGarty, „Stereotype Formation. Revisiting Hamilton and Gifford’s illusory correlation studies“, in: Joanne R. Smith and S. Alexander Haslam (eds.) 2017. Social Psychology. Revisiting the Classic studies. London: Sage Publications |
Haslam I S. Alexander Haslam Joanne R. Smith Social Psychology. Revisiting the Classic Studies London 2017 |
| Illusory Correlation | Smith | Haslam I 237 Illusory correlation/Smith: Eliot Smith(1991)(1) proposed a new account that did not afford any special importance to paired or doubly distinctive information. (SmithVsHamilton, SmithVsGifford). >Illusory correlation/Fiedler, >Illusory correlation/psychological theories, >Illusory correlation/Social psychology, >Illusory correlation/Gifford/Hamilton. Smith (like Fiedler) explained the illusory correlation effect as a natural consequence of asking people to process skewed distributions of information. In effect, the new models were explanations of the illusory correlation effect rather than of stereotype formation. See also Berndsen et al., (1998)(2), McConnell et al., (1994)(3), Sherman et al., 2009)(4). Haslam I 238 Smith posited the existence of an information-processing architecture derived from work on connectionist modelling. He argued that if we assume that perceivers possess a cognitive system which, in an illusory correlation study, is forming and storing impressions of the two groups, then it is very plausible that the impression of the larger group will be more positive than that of the smaller group due simply to properties of the information set to which they are exposed. This is because, in the case of the larger group there are ten more positive pieces of information than there are negative pieces, while in the case of the smaller group this difference is just five pieces of information. If the positivity of impressions stems from the balance of positive and negative information then it is difficult to see how small groups could be seen as positively as the large group. VsSmith, Eliot: Problem: the model rests on a specific cognitive architecture that may not actually exist. It is also the case that the model is sensitive to sample size in similar ways to Fiedler’s proposal. >Illusory correlation/Fiedler. 1. Smith, E.R. (1991) ‘Illusory correlation in a simulated exemplar-based memory’, Journal of Experimental Social Psychology, 27: 107–23. 2. Berndsen, M., Spears, R., McGarty, C. and van der Pligt, J. (1998) ‘Dynamics of differentiation: Similarity as the precursor and product of stereotype formation’, Journal of Personality and Social Psychology, 74: 1451–63. 3. McConnell, A.R., Sherman, S.J. and Hamilton, D.L. (1994) ‘Illusory correlation in the perception of groups: An extension of the distinctiveness-based account’, Journal of Personality and Social Psychology, 67: 414–29. 4. Sherman, J.W., Kruschke, J.K., Sherman, S.J., Percy, E.T., Petrocelli, J.V. and Conrey, F.R. (2009) ‘Attentional processes in stereotype formation: A common model for category accentuation and illusory correlation’, Journal of Personality and Social Psychology, 96: 305–23. Craig McGarty, „Stereotype Formation. Revisiting Hamilton and Gifford’s illusory correlation studies“, in: Joanne R. Smith and S. Alexander Haslam (eds.) 2017. Social Psychology. Revisiting the Classic studies. London: Sage Publications |
EconSmith I Adam Smith The Theory of Moral Sentiments London 2010 EconSmithV I Vernon L. Smith Rationality in Economics: Constructivist and Ecological Forms Cambridge 2009 Haslam I S. Alexander Haslam Joanne R. Smith Social Psychology. Revisiting the Classic Studies London 2017 |
| Inflation | Say | Rothbard II 38 Inflation/Say/Rothbard: Say was a hard-money man, insistent that all paper must be instantly convertible into specie. Irredeemable paper expands rapidly in quantity and depreciates the value of the currency, and Say pointed to the recent issue by the revolutionary French government of the assignats, inconvertible paper that depreciated eventually to zero. Say was thus able to analyse one of the first examples of runaway inflation. If the national money is deteriorated, it becomes an object to get rid of it in any way, and exchange it for commodities. This was one of the causes of the prodigious circulation that took place during the progressive depreciation of the French assignats. Everybody was anxious to find some employment for a paper currency, whose value was hourly depreciating; it was only taken to be re-invested immediately, and one might have supposed it burnt the fingers it passed through.(1) Say also pointed out that inflation systematically injures creditors for the benefit of debtors. Rothbard II 39 SayVsRicardo/SayVsSmith, Adam: Say was highly critical of the Smith-Ricardo yen to find an absolute and invariable measure of the value of money. He pointed out that while the relative values of money to other prices can be estimated, they are not susceptible to measurement. The value of gold or silver or coin is not fixed but variable as is that of any commodity. 1. Say, Jean-Baptiste. Traité d’Economie Politique, Paris 1803. |
EconSay I Jean-Baptiste Say Traité d’ Economie Politique Paris 1803 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Justice | Singer | Otteson I 21 Justice/SingerVsSmith, Adam/Peter Singer/Otteson: The objection to Smith that social justice raises is that his account ofjustice is too thin because it does not suffciently incorporate our obligations to others who need our help. Thought experiment: The philosopher Peter Singer (2009)(1), for example, gives us the following thought experiment. Imagine you are on your way to an important job interview. You pass by a man-made fountain and see a small child drowning in it. It is not your child, and you did not put the child in the water; but you realize that if you do not wade in to save the child, the child will drown. a) Suppose that if you do save the child, you ruin your shoes, miss your interview, and do not get your job. Singer's question: should you save the child? The obvious answer is yes, you should save the child. That's the easy part. b) The hard part is: What should we say about a person who decided not to save the child? How should we characterize his immoral inaction? Beneficence /Smith: On Smith's distinction between justice and beneficence, all we could say is that such a person was insuffciently beneficent. >Charity/Adam Smith, >Justice/Adam Smith. Otteson I 22 SingerVsSmith, Adam: But, Singer argues, that seems too weak. Should we not also be able to say that the person failed in justice - in other words, acted unjustly? The reason to call for the stronger condemnation of "injustice" is that it might also license punishment. Remember, on Smith's account, we cannot coerce beneficence. We can enforce the rules of justice, coercively if necessary, and we can punish injustice - again, coercively if necessary. >Coercion. Beneficence/Adam Smith: But Smith believes that beneficence must be "free," which entails not only that beneficent action cannot be coerced but also that failure to act beneficently may not be (coercively) punished. >Punishment. Problem: So Smith would not allow us to punish the person who fails to rescue the drowning child. Similarly, Smith would apparently also not allow us to punish people for not helping others in other situations when they could and when those others desire or even need their help. For that reason, Singer, as well as many other thinkers, criticize Smith's account for being insuffcient, for debarring important mechanisms for society to provide aid to people when private, voluntary actions are insuffcient. Otteson I 23 Adam SmithVsSinger/Otteson: Based on the account Smith gives, we can guess that, were he alive to respond, he would suggest that the charge of "insuffcient beneficence" is not as weak as Singer might suppose. Smith's argument would preclude only initiating coercive punishment against the person - no fines, no jail time. Are the actions that Smith allows us enough? Smith seems to believe that in most cases it is. Public condemnation, and the consciousness of being judged negatively by others, are, Smith believes, powerful motivating factors for human behavior. "Nature," Smith writes, "has endowed [humankin], not only with a desire of being approved of, but with a desire of being what ought to be approved of; or of being what he himself approves ofin other men" (TMS(2): 117). For the person who has become cognizant that his actions have not only received blame but are actually blameworthy, the guilt can be debilitating: "These natural pangs of an affrighted conscience are the daemons, the avenging furies, which, in this life, haunt the guilty, which allow them neither quiet nor repose, which often drive them to despair and distraction" (TMS(2): 118). So strong is our desire for mutual sympathy of sentiments that we become, Smith says, "mortified" when we realize others do not approve of our conduct (TMS(2): 14, 60, 116). Thin justice/SmithVsSinger: Still, is this mortification suffciently reliable for us to count on in ensuring proper beneficent conduct? Or should we have public institutions that will enforce beneficence, coercively if necessary, in addition to enforcing justice? Smith has a few more reasons to offer in support of his "thin" account of justice, to which we will return in later chapters when we take up the discussion of what Smith believes is the proper role of government. Government/solution/Adam Smith: (…) government may be tasked with enforcing justice, but (…) acting with and enforcing proper beneficence must be left to individuals and private parties. >Charity/Adam Smith, >Justice/Adam Smith. 1. Singer, Peter (2009). The Life You Can Save: Acting Now to End World Poverty. Random House. 2. Smith, Adam (1982) [1759]. The Theory of Moral Sentiments. D. D. Raphael and A. L. Macfie, eds. Liberty Fund. |
SingerP I Peter Singer Practical Ethics (Third Edition) Cambridge 2011 SingerP II P. Singer The Most Good You Can Do: How Effective Altruism is Changing Ideas About Living Ethically. New Haven 2015 Otteson I James R. Otteson The Essential Adam Smith Vancouver: Fraser Institute. 2018 |
| Justice | Smith | Otteson I 20 Justice/Adam Smith/Otteson: In his 1759 Theory of Moral Sentiments(1), Adam Smith divides moral virtue into two broad categories: "justice" and "beneficence." Smith describes "justice" as a "negative" virtue, meaning that to fulfill it we must merely refrain from injuring others. By contrast, "beneficence" is a "positive" virtue, meaning that to fulfill it we must engage in positive action to improve others' situations. Beneficence includes for Smith things like charity, generosity, and friendship, things that inspire gratitude in the beneficiaries of our actions. Justice, on the other hand, requires that we do not harm or injure others; if we breach justice, then we inspire resentment in those we hurt. It turns out, Smith argues, that there are only three rules of justice: (1) the rule to "guard the life and person of our neighbor"; (2) the rule to "guard [our neighbor's] property and possessions"; and (3) the rule to "guard what are called [our neighbor's] personal rights, or what is due to him from the promises of others" (TMS(1): 84). Smith's argument is that if we do not kill, enslave, or molest others; if we do not steal from, trespass on, or damage another's property; and if we do not renege on voluntary contracts or promises we have made: then we will have acted with justice toward others. The just person, then, is the one who, whatever else he does, causes no harm or injury to others (…). As Smith strikingly puts it: "We may often fulfil all the rules of justice by sitting still and doing nothing" (TMS(1): 82). >Charity/Adam Smith, >Morality/Adam Smith, >Community/Adam Smith. Otteson I 21 Rules: Smith calls the rules of justice "sacred," which may seem an oddly strong word for an account claiming that moral virtues arise on the basis of experience and interactions among individuals. Why would he call justice "sacred"? The answer is that Smith believes that the rules of justice turn out to be necessary for any society to exist. He calls them "the foundation which supports the building" that is society, whereas he calls beneficence "the ornament which embellishes" society (TMS(1): 86). A society filled with people who fulfill the rules of justice perfectly - who, that is, never harm others in their persons, property, or promises - but who do not engage in beneficent action toward one another may not be the most inviting society in which to live. But it can survive. >Justice/Peter SingerVsSmith, >Community/Adam Smith. Government/solution/Adam SmithVsSinger: (…) government may be tasked with enforcing justice, but (…) acting with and enforcing proper beneficence must be left to individuals and private parties. >Charity/Adam Smith. 1. Smith, Adam (1982) [1759]. The Theory of Moral Sentiments. D. D. Raphael and A. L. Macfie, eds. Liberty Fund. |
EconSmith I Adam Smith The Theory of Moral Sentiments London 2010 EconSmithV I Vernon L. Smith Rationality in Economics: Constructivist and Ecological Forms Cambridge 2009 Otteson I James R. Otteson The Essential Adam Smith Vancouver: Fraser Institute. 2018 |
| Knowledge | Smith | Otteson I 33 Decisions/knowledge/Adam Smith/Otteson: Smith writes: "What is the species of domestick industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him" (WN(1): 456). Otteson: As Smith develops it, this argument proceeds as a three-step syllogism: Premise 1: People's individual situations, along with their values, purposes, and opportunities, are known best by individuals themselves. Premise 2: To be made wisely, decisions about allocating resources must exploit knowledge of situation, value, purpose, and opportunity. Conclusion: Therefore, the person best positioned to make such decisions is the individual. Otteson I 34 Otteson: Smith's claim is not that individuals are infallible or that they never make mistakes; obviously we all make mistakes, frustratingly often. And of course there might be special cases - for example, children or the mentally infirm - where individuals are not, in fact, best positioned to make decisions in their own cases. But for the vast majority of normally functioning adults, Smith's claim is that their personal knowledge of their own situations exceeds that of others. Hence, if making good decisions requires utilizing this knowledge, then in the vast majority of cases the persons who should be making decisions is those persons themselves. Local knowledge/Adam Smith/Otteson: (…) the statesman does not possess the local knowledge of individual people's circumstances, values, goals, and resources that he would need in order to make good decisions for them. For Richard ThalerVsSmith, Adam see >Decision-making/Thaler. >Governance/Adam Smith. |
EconSmith I Adam Smith The Theory of Moral Sentiments London 2010 EconSmithV I Vernon L. Smith Rationality in Economics: Constructivist and Ecological Forms Cambridge 2009 Otteson I James R. Otteson The Essential Adam Smith Vancouver: Fraser Institute. 2018 |
| Markets | Smith | Mause I 55f Market/Adam Smith/SmithVsNeoclassicism/NeoclassicismVsSmith: Smith, as a representative of classical economic theory and its successors, the aspects of market processes, in particular the suitability of markets, were of great importance to contribute to the realisation of individual freedom or to promote the production of innovations. Also unthinkable for the classics would be the neoclassical view of money as a mere "veil" without real effects, since these were very well aware of the real economic consequences of monetary factors. >Money, >Monetarism. NeoclassicismVsSmith: Neoclassical theory is about the ((s) at least theoretical) attainability of a market equilibrium. >Neoclassical economics as author, >Neoclassical economics. |
EconSmith I Adam Smith The Theory of Moral Sentiments London 2010 EconSmithV I Vernon L. Smith Rationality in Economics: Constructivist and Ecological Forms Cambridge 2009 Mause I Karsten Mause Christian Müller Klaus Schubert, Politik und Wirtschaft: Ein integratives Kompendium Wiesbaden 2018 |
| Markets | Surowiecki | I 149 Markets/SurowieckiVsSmith, Vernon L. /Surowiecki: Smith's laboratory results (1) (See Markets/Smith, Vernon) do not apply to all markets, as they are often a) distorted in real terms, b) there are different markets, e. g. securities markets are structured differently and have to do with more volatile prices. Markets do not even compensate for differences in wealth. Neither Smith's nor Arrow's and Debreu's results indicate whether markets deliver optimal social outcomes. I 150 However, Smith has shown that market participants - regardless of their level of education and information - can coordinate. They can reach mutually beneficial goals, even if they do not have a clear understanding of what these goals are and what measures are needed to achieve them. I 314 Stock markets/Surowiecki: in the real economy there are no such phenomena as on the stock market: the price of a television set does not suddenly double overnight and collapses again a few months later. >Stock market. 1. Vernon L. Smith’ Studie über sein erstes Klassenzimmer-Experiment ist »An Experimental Study of Competitive Behavior«, Journal of Political Economy 70/1962, S.111-137. Viele der seither zu diesem Thema über die Jahre von ihm publizierten Aufsätze sind in zwei Bänden gesammelt: Smith, Papers in Experimental Economics (Cambridge University Press, Cambridge 1991); und Smith, Bargaining and Market Behavior (Cambridge University Press, Cambridge 2000). |
Surowi I James Surowiecki Die Weisheit der Vielen: Warum Gruppen klüger sind als Einzelne und wie wir das kollektive Wissen für unser wirtschaftliches, soziales und politisches Handeln nutzen können München 2005 |
| Money | Boyd | Rothbard II 164 Money/Walter Boyd/Rothbard: Following Smith, Walter Boyd(1) makes the distinction between money, or ‘ready money’, and other assets crystal-clear. >Money/Adam Smith. By the words ‘Means of Circulation’, ‘Circulating Medium’, and ‘Currency’, which are used almost as synonymous terms in this letter, I understand always ready money, whether consisting of Bank Notes or specie, in contradistinction to Bills of Exchange, Navy Bills, Exchequer Bills, or any other negotiable paper, which form no part of the circulating medium, as I have always understood that term. The latter is the Circulator, the former are merely objects of circulation. Walter BoydVsSmith, Adam: Not only that: Boyd proceeded to go beyond Smith and to be the first to clearly identify bank demand deposits as fully ‘ready money’ as bank notes. As he put it: ‘Credits in the Books of the Banks... may be considered as Bank Notes virtually, though not really in circulation...’. Much grief and error would have been spared economic thought as well as the development of money and banking if the currency school - the mid-nineteenth century successors to the bullionists - had heeded this lesson, and understood that demand deposits were equivalent to bank notes as a part of the supply of money. Money supply/Walter BoydVsSmith, Adam: On another crucial point, too, Boyd proved to be far superior to Adam Smith. Like Cantillon and Turgot, Boyd objected to the unfortunate doctrine, propounded by Hume and then by Smith, that an increase in the quantity of money results in an equiproportional increase in the ‘price level’. Considering the essence of the Hume model, of assuming a magically great Rothbard II 165 propordonate increase in the money supply and discussing the consequences, Boyd echoes Cantillon rather than Hume: if... this country had acquired, by supernatural means, and thrown into every channel of circulation, the same additional currency in gold and silver, within the same period, this influx, altogether disproportioned to the progress of the industry of the country; within that period, could not have failed to produce a very great rise in the price of every species of property, not all with equal rapidity, but each by different degrees of celerity, according to the frequency or rarity of its natural contact with money. >Money/Adam Smith, >Gold standard/Walter Boyd. Rothbard II 166 Boyd denounced inconvertible or ‘forced’ paper money as ‘that dangerous quack-medicine, which, far from restoring vigour, gives only temporary artificial health, while it secretly undermines the vital powers of the country that has recourse to it’. Boyd concluded that restoring the nation's currency ‘to its pristine purity’, would be ‘not only proper and practical, but indispensably necessary, in order to prevent the numberless calamities which the uncontrolled circulation of paper not convertible into specie, must infallibly produce’. 1. Walter Boyd. 1800. A Letter to the Rt. Hon. William Pitt published in 1801. |
Boyd I Richard Boyd The Philosophy of Science Cambridge 1991 Boyd W I Walter Boyd Letter to the Right Honourable William Pitt on the Influence of the Stoppage of Issues in Specie at the Bank of England on the Prices of Provisions and other Commodities London 1801 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| National Economy | Marx | Höffe I 364 National Economy/Marx/Höffe: (...) Marx [seeks] to show how a national economy which is designed from the standpoint of the capitalists who own the means of production, among their own assumptions did not achieve its claimed goal. MarxVsSmith, Adam: While Smith, according to the title of his work, promises the "prosperity of nations"(2), in truth, according to Marx, the crass opposite takes place: an impoverishment, eventually impoverishment of the worker. Profit: The capital utilization aiming at profit increase favors on the one hand the large capital, because it destroys the small capital and seizes the property. Labor: On the other hand, it leads to an abundance of labor, which pushes the wage below the subsistence level. Impoverishment: Later, Marx abandoned the idea of absolute impoverishment. He only claims that the wage does not keep pace with the growing wealth of the capital owners (...). >Adam Smith. 1. K. Marx, Ökonomisch-philosophische Manuskripte (1844) (Pariser Manuskripte) 2. A. Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776 |
Marx I Karl Marx Das Kapital, Kritik der politische Ökonomie Berlin 1957 Höffe I Otfried Höffe Geschichte des politischen Denkens München 2016 |
| Political Economy | Buchanan | Mause I 59 New Political Economy/Buchanan: The term "economic imperialism" could also include the New Political Economy, whose most important representatives were James Buchanan (1919 - 2013), Anthony Downs (born 1930) and Gordon Tullock (1922 - 2014). The aim is to extend theoretical economic analyses to other areas of society and to the study of all human behaviour. VsClassical Economy/VsSmith: economic and political aspects are not combined as in the classics but political events are seen exclusively through the eyes of homo oeconomicus. (1)(2) 1. A. Downs, An economic theory of democracy. New York 1957 [dt. 1968: Ökonomische Theorie der Demokratie. Tübingen] 2. J. Buchanan, G. Tullock, The calculus of consent. Ann Arbor 1962. |
EconBuchan I James M. Buchanan Politics as Public Choice Carmel, IN 2000 Mause I Karsten Mause Christian Müller Klaus Schubert, Politik und Wirtschaft: Ein integratives Kompendium Wiesbaden 2018 |
| Production | Say | Rothbard II 20 Production/Say/Rothbard: One of Say's great contributions was to apply utility theory to the theory of distribution, in brief by discovering the productivity theory of the pricing, and hence the income, accruing to factors of production. SayVsSmith: In the first place, Say pointed out that, in contrast to Smith, all labour, not just labour embodied in material objects, is ‘productive’. Indeed, Say brilliantly pointed out Rothbard II 21 that all the services of factors of production, whether they be land, labour, or capital, are immaterial, even though they might result in a material product. Factors, in short, provide immaterial immaterial services in the process of production. That process, as Say pointed out clearly for the first time, was not the ‘creation’ of material products. Man cannot create matter; he can only transform it into different shapes and moulds, in order to satisfy his wants more fully. Production is this very transformation process. In the sense of such transformation, all labour is productive ‘because it concurs in the creation of a product’, or, metaphorically, in the creation of ‘utilities’. If, as can happen, labour has been expended to no ultimate benefit, then the result is error: ‘folly or waste in the person bestowing’ the labour. >Value/Say, >Experience/Say, >Desire/Say. Rothbard II 23 Production/capital/machines/value/Say: Despite the lack of resolution of the problem of interest, Say set forth an excellent analysis of capital, in the sense of capital goods, and its crucial role in production and in increasing economic wealth. Man, he pointed out, transforms natural agents into capital, to work further with nature to arrive at consumer goods. The more he has built capital goods – the more tools and machinery – the more can man harness nature to make labour increasingly productive. More machinery means an increase in productivity of labour and a fall in the cost of production. Such increase in capital is particularly beneficial to the mass of consumers, for competition lowers the price of product as well as the cost of production. Furthermore, increased machinery permits a superior quality of product, and allows the creation of new products which would not have been available under handicraft production. |
EconSay I Jean-Baptiste Say Traité d’ Economie Politique Paris 1803 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Profit | Ricardo | Kurz I 282 Profit/rent/Ricardo/Kurz: In Ricardo's view the distinction between profits and rent is crucial, because as capital accumulates and the population grows the two component parts of the social surplus are typically affected differently: „This is a distinction of great importance, in an enquiry concerning rent and profits; for it is found, that the laws which regulate the progress of rent, are widely different from those which regulate the progress of profits, and se/dom operate in the same direction. In all improved countries, that which is annually paid to the landlord, partaking of both characters, rent and profit, is sometimes kept stationary by the effects of opposing causes; at other times advances or recedes, as one or the other of these causes preponderates. In the future pages of this work, then, whenever I speak of the rent of land, I wish to be understood as speaking of that compensation, which is paid to the owner of land for the use of its original and indestructible powers.“ (Ricardo 1951:68-9(1)) RicardoVsSmith, Adam: Hence what Smith called 'rent' of coal mines or stone quarries is to Ricardo profits and not rent. >Royalties, >Economic rent. Kurz I 283 What we call 'royalties', Ricardo actually calls 'profits'. Ricardo's use of the concept of profits for 'the compensation paid for the liberty of removing and selling the timber' is not surprising: timber can be sown and grown again, it is clearly not an exhaustible resource, but a reproducible good, and to the extent to which it is used as a produced means of production it is capital. But the use of the word profits for the compensation paid for the liberty of removing and selling coal or stones may be surprising; coal cannot be reproduced by men, neither can stones. However, new coal pits can always be expected to be discovered and the cost of the search is equal to the value of the mine, a value that decreases with the amount of the resource that has been removed. In other words, Ricardo did not need the word royalties since the minerals and ores, etc., as such were not considered to be fully exhaustible in the foreseeable future. 1. Ricardo, D. (1951 [1817]) On the Principles of Political Economy and Taxation, in P. Sraffa (ed.) with the collaboration Of M.H. Dobb, The Works and Correspondence of David Ricardo, Vol. I, Cambridge: Cambridge University Press. (P/b edn 2004, Indianapolis, IN: Liberty Fund.) Kurz, Heinz D. and Salvadori, Neri. „Ricardo on exhaustible resources, and the Hotelling Rule.“ In: Kurz, Heinz; Salvadori, Neri 2015. Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). London, UK: Routledge. Rothbard II 87 Profit/Ricardo/Rothbard: (…) Ricardo may be pardoned for dismissing the profit-rate part of cost as of trivial importance. And, since all profit rates are assumed to be uniform, and, as we shall see, Ricardo had a cost theory of value or price, he could easily dismiss the uniform and small proportion, profit, as of no account in explaining relative prices. It is, of course, peculiar to consider profits, even profits as long-run interest, as part of the ‘costs’ of production. Again, this usage stems from eliminating any consideration of entrepreneurial profits and losses, and focusing on interest as a long-run ‘cost’ of inducing savings and the accumulation of capital. If profits for Ricardo are always uniform, how is this uniform profit determined? Curiously, profits are in no way related to savings or capital accumulation; for Ricardo, they are only a residual left over after paying wages. In short, to hark back to our original equation of Ricardian distribution: total output (or income) = rent + profits + wages. >Economy/Ricardo. Remarkably, Ricardo has attempted to determine all the variables with only one variable explicitly determined. Output, as we have seen, was assumed as mysteriously given, from outside the Ricardian system. Wages (‘the’ uniform wage throughout the economy) is the only explicitly determined variable, determined completely to equal the cost of subsistence, embodied in the cost of producing corn. But that leaves two residuals, rents and profits, to be determined. Rothbard II 88 The way Ricardo tries to get around that problem is to dispose of rents. Rents are the differential between the lands in cultivation and the least productive, zero-rent, land in use. The cost of producing corn is equal to the quantity of labour hours embodied in its production. >Economic rent/Ricardo. Since rents are zero at the margin, they do not enter into costs, and are passively determined; at the no-rent margin, labour and capital's shares exhaust output. And since wages are supposedly determined by the cost of raising corn, this means that profit can only be a truistic residual of wages, otherwise the variable would be overdetermined, and the system would evidently collapse. |
EconRic I David Ricardo On the principles of political economy and taxation Indianapolis 2004 Kurz I Heinz D. Kurz Neri Salvadori Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). Routledge. London 2015 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Rate of Profit | Ricardo | Kurz I 163 Rate of profit/Ricardo/Marx/Kurz: According to Sraffa, Marx had developed his law strictly against the background of Ricardo's explanation of a falling tendency of the general rate of profits. (…) Ricardo (1951-73, 1:49), in ascertaining the level of the general rate of profits and its development over time in changing technical conditions, had taken as given "the proportion of the annual labour of the country devoted to the support of the labourers" Ricardo's concept was subsequently adopted by Marx in terms of a given rate of surplus value. >Surplus value. In his observations on the wage-profit relationship, Ricardo typically assumed that the social capital consists only of wages (or can be fully reduced to wages in a finite number of steps), so that the rate of profits, r, is given by the ratio of profits, P, to wages, W, r=P/W = 1-w/w Kurz I 164 where w designates proportional wages (i.e., the wage share). Starting from this relationship, Ricardo had then argued that as Capital accumulates, proportional wages tend to rise, and the rate of profits tends to fall, because of increasing costs of production due to diminishing returns in agriculture. The rising money prices of agricultural commodities, in particular food, necessitate increases in money wages in order to keep "real," that is, commodity, wages constant. To this Ricardo added the following argument. With the rise in nominal wages and the associated fall in the rate of profits it becomes profitable to introduce known but hitherto unused methods of production ("machinery"). In Ricardo 's words, "Machinery and labour are in constant competition and the former can frequently not be employed until labour {i.e, the money wage} rises" (1:395)(1). The introduction of machinery in turn can temporarily check the rise in money wages and the associated fall in the rate of profits However, with further capital accumulation and a growing population, money wages, and hence also proportional wages, will sooner or later have to start rising again. 1. Ricardo, D. 1951-73. The Works and Correspondence of David Ricardo. I I vols. Edited by Piero Sraffa, with the collaboration of M. H. Dobb Cambridge: Cambridge University Press. Kurz, Heinz; Salvadori, Neri 2015. Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). London, UK: Routledge. Rothbard II 88 Rate of profit/Adam Smith/Ricardo/Schumpeter/Rothbard: Adam Smith believed that the rate of profit, or the long-run rate of interest return, is determined by the quantity of accumulated capital, so that more capital will lead to a falling rate of profit. While this theory is not fully correct, it at least understands that there is some connection between saving, capital accumulation, and long-run interest or profit. But to Ricardo there is no connection whatever. Interest on capital is only a residual. By a series of fallacies, and holistic, locked-in assumptions, trivial conclusions are at last ground out, all with a portentous air, allegedly telling us conclusive insights about the real world. SchumpeterVsRicardo: As Schumpeter scornfully puts it: propositions such as ‘profits depend upon wages’, and the falling rate of profit, are excellent examples of ‘that Art of Triviality that, ultimately connected with the Ricardian Vice, leads the victim, step by step, into a situation where he has got either to surrender or to allow himself to be laughed at for denying what, by the time that situation is reached, is really a triviality’.(1) >Profit/Ricardo, >Economy/Ricardo, >Value theory/Ricardo. Rothbard II 418 Rate of Profit/Smith/Ricardo/Rothbard: One crucial aspect of the inevitable doom of capitalism [for Marx] is the inescapable law of the falling rate of profit. The extant uniform equilibrium rate, according to Marx, was doomed to keep falling. Rothbard: Both Smith and Ricardo had theories of a falling rate of profit, each fallacious, and each arrived at in completely different ways. Smith: To Smith, the rate of profit (or interest) is determined by the stock of capital; the greater the amount of capital accumulated, the Iower the profit rate. RicardoVsSmith: Ricardo, in contrast, was worried about the increasing squeeze of the economy by the landlords as inexorable population growth puts ever more inferior lands under cultivation. Labour hours required for production are raised, thereby raising both money wages and rents, hence eating increasingly into profits. Rothbard: But, one may well ask, if the accumulation of capital necessarily slashes profits, why do capitalists, who are clearly motivated by a search for higher rather than Iower profits, insist on continuing to accumulate? Why do they persist in cutting their own throats? >Rate of Profit/Marx, >Value theory/Marx, >Competition/Marx. 1. J.A. Schumpeter, History of Economic Analysis (New York: Oxford University Press, 1954), note 3, p. 653n. |
EconRic I David Ricardo On the principles of political economy and taxation Indianapolis 2004 Kurz I Heinz D. Kurz Neri Salvadori Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). Routledge. London 2015 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Rate of Profit | Smith | Rothbard II 88 Rate of profit/Adam Smith/Ricardo/Schumpeter/Rothbard: Adam Smith believed that the rate of profit, or the long-run rate of interest return, is determined by the quantity of accumulated capital, so that more capital will lead to a falling rate of profit. While this theory is not fully correct, it at least understands that there is some connection between saving, capital accumulation, and long-run interest or profit. But to Ricardo there is no connection whatever. Interest on capital is only a residual. By a series of fallacies, and holistic, locked-in assumptions, trivial conclusions are at last ground out, all with a portentous air, allegedly telling us conclusive insights about the real world. SchumpeterVsRicardo: As Schumpeter scornfully puts it: propositions such as ‘profits depend upon wages’, and the falling rate of profit, are excellent examples of ‘that Art of Triviality that, ultimately connected with the Ricardian Vice, leads the victim, step by step, into a situation where he has got either to surrender or to allow himself to be laughed at for denying what, by the time that situation is reached, is really a triviality’.(1) >Profit/Ricardo, >Economy/Ricardo, >Value theory/Ricardo. Rothbard II 418 Rate of Profit/Smith/Ricardo/Rothbard: One crucial aspect of the inevitable doom of capitalism [for Marx] is the inescapable law of the falling rate of profit. The extant uniform equilibrium rate, according to Marx, was doomed to keep falling. Rothbard: Both Smith and Ricardo had theories of a falling rate of profit, each fallacious, and each arrived at in completely different ways. Smith: To Smith, the rate of profit (or interest) is determined by the stock of capital; the greater the amount of capital accumulated, the Iower the profit rate. RicardoVsSmith: Ricardo, in contrast, was worried about the increasing squeeze of the economy by the landlords as inexorable population growth puts ever more inferior lands under cultivation. Labour hours required for production are raised, thereby raising both money wages and rents, hence eating increasingly into profits. Rothbard: But, one may well ask, if the accumulation of capital necessarily slashes profits, why do capitalists, who are clearly motivated by a search for higher rather than Iower profits, insist on continuing to accumulate? Why do they persist in cutting their own throats? >Rate of Profit/Marx, >Value theory/Marx >Competition/Marx. 1. J.A. Schumpeter, History of Economic Analysis (New York: Oxford University Press, 1954), note 3, p. 653n. |
EconSmith I Adam Smith The Theory of Moral Sentiments London 2010 EconSmithV I Vernon L. Smith Rationality in Economics: Constructivist and Ecological Forms Cambridge 2009 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Saving | Marx | Kurz I 169 Saving/Adam Smith/MarxVsSmith/Kurz: (…) [there is] an erroneous proposition of Adam Smith, which was also adopted by Ricardo, and which was first noticed (and explicated at length in chapters 19 and 20 in volume 2 of Capital)(1) by Marx. As is well known, Smith (I1776] 1976, II.iii.18)(2) had contended that what is annually saved is as regularly consumed as what is annually spent, and nearly at the same time too; but it is consumed by a different Kurz I 170 set of people. The consumption is the same, but the consumers are different. As Marx had pointed out, this proposition is false, because a part of what is annually saved and invested must always consist of means of production which have previously been produced. Smith's error is Closely related to his false Claim that the portion of the annual gross produce which is devoted to the replacement of the materials used up in the production of the goods which are annually consumed "withdraws no portion of the annual produce from the neat revenue of the society" (II.ii.9)((2). Marx had traced this inconsistency in Smith's treatment of (circulating) capital back to his view that the price of every commodity resolves itself entirely, "that is, without leaving any commodity residue, into wage, profit, and rent - a claim which necessarily presupposed the existence of 'ultimate' commodities produced by pure labour without means of production except land" (Sraffa 1960, 94)(3). 1. K. Marx. 1867. The Capital.The Process of Production of Capital. https://www.marxists.org/archive/marx/works/1867-c1/ (21.11.2024) 2. Smith, A. [1776] 1976. An Inquiry into the Nature and Causes of the Wealth of Nations Vol. 2 of The Glasgow Edition of the Works and Correspondence of Adam Smith, edited by R. H. Campbell, A. S. Skinner, and W. B. Todd. Oxford: Oxford University Press. 3. P. Sraffa. 1960. Production of Commodities by Means of Commodities. Cambridge: Cambridge University Press. Kurz, Heinz; Salvadori, Neri 2015. Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). London, UK: Routledge. |
Marx I Karl Marx Das Kapital, Kritik der politische Ökonomie Berlin 1957 Kurz I Heinz D. Kurz Neri Salvadori Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). Routledge. London 2015 |
| Say, Jean-Baptiste | Rothbard | Rothbard II 11 Say, Jean-Baptiste/Rothbard: It is no wonder that the Say version of Smithianism became the most popular economics work on the European continent and in the United States. Not being able to call himself a physiocrat, Say called himself a Smith follower, but he was one largely in name only. As we shall see, his views were really post-Cantillon and pre-Austrian rather than Smithian classical. One crucial difference between Say and Smith was in the limpid clarity and lucidity of Say's Treatise. SayVsSmith, Adam: Say quite justly called the Wealth of Nations a ‘vast chaos’, and ‘a chaotic collection of just ideas thrown indiscriminately among a number of positive truths’. At another point, he calls Smith's work ‘a promiscuous assemblage of the soundest principles..., Rothbard II 12 an ill-digested mass of enlightened views and accurate information’. And again, with great perceptiveness, Say charges that ‘almost every portion of it [the Wealth of Nations] is destitute of method’.(1) 1. Say, J.-B. 1803. Traité d'économie politique ou simple exposition de la manière dont se forment, se distribuent et se composent les richesses.translated into English as A Treatise on Political Economy (ed. Clement C. Biddle, 6th Amer. ed., 1834, New York: A. M. Kelley, 1964), based on the final fifth French edition of 1826. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Socialism | Marx | Höffe I 366 Scientific Socialism/Marx/Höffe: In contrast to Proudhon's socialism, which is debased as "utopian," "petty-bourgeois", and "doctrinaire," Marx is not satisfied with a "utopian interpretation" of the previous national economy. He does indeed adopt Proudhon's guiding goal, the classless society. According to the Communist Party's Manifesto (1848)(1), written together with Engels, the "history of all previous society consists in the history of class struggles," which recalls Hegel's theorem of >master and slave. Religion/Marx/Höffe: astonishingly, [in the manifesto] (...) the religious opposites that dominate at least modern times are not mentioned. >Religion. Höffe I 367 According to the eleventh Feuerbach thesis, Marx is convinced of the mission and at the same time convinced of the power of a theory (...). With its help he believes he can achieve his goal, - establishing a classless society - and bring about the necessary path, the revolutionary transformation of the existing society. Höffe I 368 VsPolitical Economy: "Capital"(3) [rejects] the previous political economy (economics) (...) and develops an alternative. Labor: In one point Marx (...) agrees with his liberal opponents: As with Locke, wages should be based on the amount of work done. MarxVsSmith, Adam/MarxVsRicardo: Marx accuses his opponents of an unhistorical approach and the extrapolation resulting from it, which is in fact unacceptable: According to Marx, the laws of economic development asserted by Smith and Ricardo are not eternally valid laws of nature. They apply only to the modern, namely capitalist form of economy and society. >Adam Smith, >David Ricardo. He concedes that the traditional national economy has enlightened the mechanism of production relations: the connection of private property with the separation of labor and capital, with the division of labor, competition, etc. But he accuses it of a "fatalistic economy" that does not concern itself with the conditions of the origin of production relations and therefore does not recognize the law of their change. He contrasts this with what is later called historical materialism ("histomat"). Commodity/Money: [Marx] begins with the analysis of commodity and money as the material preconditions and formal elements. He concedes to capital the world-historical task of developing all productive forces of labor. On the other hand, however, it prevents what is indispensable for a truly humane economy: that labor or the worker becomes the subject of social processes. 1. K.Marx und F. Engels, Manifest der Kommunistischen Partei, 1848 2. K.Marx und F. Engels, Thesen über Feuerbach, 1845 3. K. Marx Das Kapital Vol. I 1867, Vol. II & II 1885 (= MEW 23-25) |
Marx I Karl Marx Das Kapital, Kritik der politische Ökonomie Berlin 1957 Höffe I Otfried Höffe Geschichte des politischen Denkens München 2016 |
| Taxation | Say | Rothbard II 40 Taxation/Say/Rothbard: [Say] tended to make it responsible for all the economic evils of society, even, as we have seen, for recessions and depressions. In contrast to almost all other economists, Say had an astonishingly clearsighted view of the true nature of the state and of its taxation. In Say there was no mystical quest for some truly voluntary state, nor any view of the state as a benign semi-business organization supplying services to a public grateful for its numerous ‘benefits’. No; Say saw clearly that the services government indubitably supplies are to itself and to its favourites, and that all government spending is therefore consumption spending by the politicians and the bureaucracy. He also saw that the tax funds for that spending are extracted by coercion at the expense of the tax-paying public. Say goes on to attack the ‘prevalent notion’ that tax monies are no burden on the economy, since they simply ‘return’ to the community via the expenditures of government. Say is indignant: Rothbard II 41 This is gross fallacy; but one that has been productive of infinite mischief, inasmuch as it has been the pretext for a great deal of shameless waste and dilapidation. The value paid to government by the tax-payer is given without equivalent or return: it is expended by the government in the purchase of personal service, of objects of consumption... (1) SayVsSmith, Adam/Rothbard: Thus, in contrast to the naive Smith's purblind assumption that taxation always confers proportional benefit, we see J.B. Say treating taxation as very close to sheer robbery. Taxes/SayVsSchumpeter/Rothbard: He is not impressed with the apologetic notion, properly ridiculed in later years by Schumpeter(2), that all society somehow voluntarily pays taxes for the general benefit; instead, taxes are a burden coercively imposed on society Rothbard II 42 by the ‘ruling power’. Neither is Say impressed if the taxes are voted by the legislature; to him this does not make taxes any more voluntary: for ‘what avails it... that taxation is imposed by consent of the people or their representatives, if there exists in the state a power, that by its acts can leave the people no alternative but consent?’(1) Taxation/production/Say: Moreover, taxation cripples rather than stimulates production, since it robs people of resources that they would rather use differently. Taxation/SayVsRicardo: Say engages in an instructive critique of Ricardo, which reveals the crucial difference over the latter's long-run equilibrium approach and the great difference in their respective attitudes toward taxation. Ricardo had maintained in his Principles(3) that, since the rate of return on capital is the same in every branch of industry, taxation cannot really cripple capital. For, as Say puts it, ‘the extinction of one branch by taxation must needs be compensated by the product of some other, towards which the industry and capital, thrown out of employ, will naturally be diverted’. Here is Ricardo, blind to the real processes at work in the economy, stubbornly identifying a static comparison of long-run equilibrium states with the real world. Taxation/Solution/Say/Rothbard: (…) ‘the best scheme of [public] finance, is to spend as little as possible; and the best tax is always the lightest’. In the next sentence, he amends the latter clause to say ‘the best taxes, or rather those that are least bad...’.(1) 1. Say, Jean-Baptiste. Traité d’Economie Politique, Paris 1803. 2. J.A. Schumpeter, History of Economic Analysis (New York: Oxford University Press, 1954), p. 491. 3. Ricardo, D. (1951 [1817]) On the Principles of Political Economy and Taxation, in P. Sraffa (ed.) with the collaboration Of M.H. Dobb, The Works and Correspondence of David Ricardo, Vol. I, Cambridge: Cambridge University Press. (P/b edn 2004, Indianapolis, IN: Liberty Fund.) |
EconSay I Jean-Baptiste Say Traité d’ Economie Politique Paris 1803 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
| Value Theory | Ricardo | Rothbard II 88 Value theory/Ricardo/Rothbard: While Ricardo formally admitted that supply and demand determine day-to-day market pricing, he tossed that aside as of no consequence, and concentrated solely on long-run equilibrium, i.e. ‘natural’ price and the alleged macro-distribution of income in that equilibrium. Utility/Ricardo: Utility Ricardo brusquely disposed of as ultimately necessary to production but of no influence whatever on value or price; in the ‘value paradox’ he embraced exchange value and abandoned utility Rothbard II 89 completely. Price/Ricardo: Not only that: [Ricardo] frankly and boldly discarded any attempt to explain the prices of goods that are not reproducible, that could not be increased in supply by the employment of labour. Hence Ricardo simply gave up any attempt to explain the prices of such goods as paintings, which are fixed in supply and cannot be increased. In short, Ricardo abandoned any attempt at a general explanation of consumer prices. We have arrived at the full-fledged Ricardian – and Marxian – labour theory of value. >Value theory/Marx, >Price/Ricardo, >Costs/Ricardo, >Wages/Ricardo, >Land/Ricardo, >Economy/Ricardo, >Class conflict/Ricardo. Rothbard II 90 VsSmith/VsRicardo: Recent analysts, in an attempt to mitigate the crude fallacy of Ricardo's labour theory of value, have maintained, as in the case of Smith but even more so, that he was attempting not so much to explain the cause of value and price but to measure values over time, and labour was considered an invariable measure of value. But this hardly mitigates Ricardo's flaws; instead, it adds to the general fallacies and vagaries of the Ricardian system another important one: the vain search for a non-existent chimera of invariability. For values always fluctuate, and there is no invariable, fixed base of value from which other value changes can be measured. Solution/Ricardo: Thus, in rejecting Say's definition of the value of a good as its purchasing power of other goods in exchange, Ricardo sought the invariable entity, the unmoved power: Ricardo: A franc is not a measure of value for any thing, but for a quantity of the same metal of which francs are made, unless francs, and the thing to be measured, can be referred to some other measure which is common to both. This, I think, they can be, for they are both the result of labour; and, therefore, labour is a common measure, by which their real as well as their relative value may be estimated. It might be noted that both products are the result of capital, land, savings, and entrepreneurship, as well as labour, and that, in any case, their values are incommensurable except in terms of relative purchasing power, as Say had in fact maintained. >Value/Say, >Economic Rent/Ricardo. Rothbard II 133 Samuel BaileyVsRicardo/Rothbard: The next important step in the theory of wages came from Samuel Bailey who, in the course of his definitive critique of Ricardian value theory in 1825, pointed to the crucial role of the productivity of labour in determining wages: the value of labour does not entirely depend on the proportion of the whole produce which is given to the labourers in exchange for their labour, but also on the productiveness of labour... The proposition, that when labour rises profits must fall, is true only when its rise is not owing to an increase in its productive powers... If the productive power of labour be augmented, that is, if the same labour produce more commodities in the same time, labour may rise in value without a fall, nay, even with a rise of profits. One of the critical problems in developing the productivity theory of wages was the Ricardian insistence on emphasizing the alleged laws of aggregate distribution, of ‘wages’ as a whole and as a total share of national product and income, rather than as wage rates of individual units of labour. >Wages/Ricardo. Rothbard II 392 Value theory/Ricardo/Rothbard: (…) the delighted Marx found that Ricardian doctrine was, in effect, a quantity oflabour theory of value. Utility dropped out, and since only reproducible goods and not non-reproducible goods such as Rembrandt paintings were considered explainable, only the cost of production was considered a determinant of the embodied value of goods. And since Ricardo finessed 'rent' as allegedly not a part of cost, the only possible cost except labour hours was profit (interest) or cost of capital, and this was so small as to be readily neglected. Besides, profits are allegedly only a declining residual after the payment of wages, which are doomed to keep rising in money but not in real terms as population continues to press upon the food supply. >Value theory/Marx. |
EconRic I David Ricardo On the principles of political economy and taxation Indianapolis 2004 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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| Neutrality | Black Vs Neutrality | III 84 Neutrality/Science/BlackVsNeutrality/BlackVsValue freedom: if science is considered to be rational in the sense of neutral, it runs the risk of becoming inhuman. It must instead be regarded as a human action. III 84 Neutrality/Robert L. Heilbroner: (sociologist, NY Times Magazine, 19 Jan 1975 p. 14f.): Brings an example by Adam Smith: Adam Smith: E.g. why would a person with a humanistic background, when facing the choice of seinding one million Chinese to death in order to save his little finger, let the Chinese live? (BlackVsSmith: Actually, why Chinese, why not Scots?) Heilbroner/Black: remains remarkably neutral! He believes that there is "no rational answer" to that! One cannot apply a logical calculus to it. BlackVsHeilbroner: Apparently, he did not read the very differentiated magazine in which he had the opportunity to publish carefully. Could anyone be in doubt about giving a human life for the salvation of a little finger?. |
Black I Max Black "Meaning and Intention: An Examination of Grice’s Views", New Literary History 4, (1972-1973), pp. 257-279 In Handlung, Kommunikation, Bedeutung, G. Meggle (Hg) Frankfurt/M 1979 Black II M. Black The Labyrinth of Language, New York/London 1978 German Edition: Sprache. Eine Einführung in die Linguistik München 1973 Black III M. Black The Prevalence of Humbug Ithaca/London 1983 Black IV Max Black "The Semantic Definition of Truth", Analysis 8 (1948) pp. 49-63 In Truth and Meaning, Paul Horwich Aldershot 1994 |
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