From the English Eclectic blog of Paul Halsall, a socialist historian, in somewhat self-deluding response to Iain Dale's suggestion that we might have to cut public spending:
'I would expect that within less than 10 years we will have the computing ability to make effective economic planning possible and ditch the drang und sturm of imaginary "rational markets."'
I'm not sure which is worse, the complete impossibility or the utter undesirability of this prediction. It can't and won't happen, but if it could, would you want to live in a world where central government can read your thoughts and predict the future, and determines what is right for all of us on that basis, making our freedom of choice redundant? That's a dystopia to rival Brave New World and 1984.
Comments
Continued elsewhere
Paul (the English Eclectic) posted a separate entry on his blog to address this issue. I have continued the debate over there.
On second thoughts...
...I think I'll copy the debate here, for convenience and in case it disappears from the other site.
Austrian Economics and RFID
[Posted by Paul Halsall on the English Eclectic blog:]
One of my correspondents (RG Prior) responded to an earlier post on money.
Well, I think it is inhuman in the political policies it promotes, fails in understanding humanity, and fails even to understand that its practical proponents (i.e. conservative politicians) will not hold to such non-populist policies.
Not really, because I am in fact worried about the sheer amount of individual tracking that goes on already in our economies. In other words, not dogma, but reasonable prediction.
But, first of all, on the harder question. There is less and less social science proof that people have individual free will. Even if they do, the variety of what is willed is within very narrow limits. I agree that people may naturally have a higher choice range than older soviet central planning could account for, but on a mass level RFIDing goods, tracking credit card spending, etc. is giving organizations like Walmart an essentially "planned" approach to its internal economy. Hell, we even know people will buy more iced yogurt if it's placed in the middle shelf of the last aisle in a supermarket.
I think these IT changes already well under way, will make talk of "reading peoples minds" irrelevant. IT will not read people's minds, it will predict their economic behaviour.
In other words I think the economic calculation problem will be solved by modern IT (and its predictable developments) in a way that makes the eighty-year old theories of Mies and Hayek just a matter of historical interest.
Well since, by my current calculation I have been HIV+ since 1985, I really doubt I will be around ten years hence.
But we will see in any case that I am not predicting mind reading technologies within ten years. I think such technologies will be available in 30 years or so, and I find that quite as frightening as anyone else.
"I am in fact worried about
So this is not something that you advocate, but something that you fear? In that case, we agree on quite a lot.
If you think Austrian policies are "inhuman" but the surveillance society needed to implement a socialist alternative is "frightening", you appear to be stuck between a rock and a hard place.
Sorry about the HIV thing, by the way. Didn't know.
The question of the humanity
The question of the humanity (or otherwise) of the policies that flow from one or another political/economic philosophy is an interesting one.
I guess, in the Austrian case, you are thinking of the advice, in a recession, to allow liquidation of insolvent businesses, to raise interest rates, and to cut non-essential public-spending.
This undoubtedly does no favours to bankrupt businessmen and their employees, those who are significantly in debt, non-essential public-sector workers and those who use their services.
On the other hand, the alternative policies also have their losers. If we bail-out bankrupt businesses, cut interest rates, and increase public-sector spending, we punish solvent businesses and their employees, savers, taxpayers and future generations.
I don't see why the imprudent are more deserving of our intervention than the prudent? But I know which signal is better to send out, and which route will take us to a more balanced and sustainable economy rather than straight back to the start of another cycle, or worse still to the stagnation caused by the failure to allow systemic problems to correct themselves.
"[Austrian economics] fails
That is a good point. In a sense, Mises and Hayek would agree with you. Neither of them believed that it was possible to impose from above a political programme based on their philosophy, without wide public support.
Mises believed that the most important thing for a better future was for the public to be better educated in real economics (not the mathematical nonsense that we both dislike), because change could only be sustainable if the public understood the fundamental laws that doomed socialism and interventionism to failure. It is an irony that the dominance of modern, mathematical, neo-classical economics (of the various schools) is a barrier to the subject being comprehensible, attractive or useful to most people, maintains widespread economic-illiteracy, and therefore supports the perpetuation of socialist and interventionist delusions that most of those economists would condemn.
Hayek repeatedly emphasised the need to win the battle of ideas in order to enable a political climate in which sound policies could be implemented. He acknowledged (e.g. in his essay The Intellectuals and Socialism) that "the second-hand dealers in ideas" were instinctively drawn to socialism, generally "able to make out a better case than the majority of his opponents", and that this preference had "proved fatal to the influence of the liberal tradition".
But we do not change things for the better by limiting our vision to those policies that a present politician will be likely to implement. It is the politician's job to work out what compromises must be made with public opinion. The rest of us are free to promote the ideas we believe in, in the hope that we can influence public opinion and therefore enable politicians to implement and hold to policies that they could not previously have considered. So I would not regard the current unpopularity of Austrian ideas as any reason to disregard them. If that logic had prevailed, we would still be living under an absolute monarchy.
On one point, I must correct you, though. Austrians are not conservatives, they are liberals (in the classical sense, not the modern, wishy-washy, social-democratic sense) and (so long as we are in the lower-case) the politicians most inclined to implement Austrian policies will also be liberals, not conservatives.
Original post and exchanges
[Paul's original post and comments:]
Money is a Myth
Iain Dale's Diary: We Have to Cut Spending & Cut it Now has a long discussion of the current Tory idea to just cut government expenditure.
My Take
What economic theory would recommend cutting spending in a recession?
In a lot of bloggers' commentary there seems to a belief that money is something real.
I think it is equally fair to see money as purely symbolic notation of value whose purpose is to manage not just the exchange of goods, but to introduce incentives into an economy.
What government policy is trying to do is to utilise this symbolic notation to bring about specific economic ends.
Actual academic economics is spectacularly unable to deal with the chaotic aspects of money, and actual political discourse is dominated by people who seem not to realise money is a system of symbols at all.
I would expect that within less than 10 years we will have the computing ability to make effective economic planning possible and ditch the drang und sturm of imaginary "rational markets."
Posted by Paul Halsall at 8:01 PM
7 comments:
Re computation and ec. planning: GIGO. Rich people and governments will have lots of motivation to lie.
What is GIGO?
"What economic theory would recommend cutting spending in a recession?"
The Austrian school, and its theory of the business cycle.
"I think it is equally fair to see money as purely symbolic notation of value whose purpose is to manage not just the exchange of goods, but to introduce incentives into an economy" etc...
If you are going to question someone else for non-conformance with mainstream economic thought, I wouldn't follow it with this guff, which has little relation either to mainstream economics or to critical analysis. Try Mises, The Theory of Money and Credit, or, if you want something more modern, Jesus Huerta de Soto's Money, Bank Credit and Economic Cycles, for a real exploration of what money is. Not mainstream, but right.
"I would expect that within less than 10 years we will have the computing ability to make effective economic planning possible and ditch the drang und sturm of imaginary 'rational markets.'"
This IT system will have the ability to read people's minds and predict the changes to their preferences, will it? And to predict the impact of innovation (always picking the right winners) and to know, without the benefit of markets, which innovations people will value and by how much?
With reference to the twentieth-century debate about the possibility (or otherwise) of economic calculation in a socialist system, the socialist economist Robert Heilbroner admitted that the events of 1989 proved that "it turns out Mises was right". Time to bring yourself up-to-date with reality?
Try Mises' Economic Calculation in the Socialist Commonwealth (1920) (http://mises.org/econcalc.asp) and Socialism (1922) (http://mises.org/books/socialism/contents.aspx).
The point is I don't think mainstream economics can be in any way correct. It's a false science in which predictions can only be made, if at all, by assuming unassumable "all other things being equal" clauses.
I was interested to see if Iain would be willing to openly adopt Austrian economics.
Mises? You Jest.
This IT system will have the ability to read people's minds and predict the changes to their preferences, will it? And to predict the impact of innovation (always picking the right winners) and to know, without the benefit of markets, which innovations people will value and by how much?
I think IT systems will be able to at least this. People are not rational actors, but that does not mean IT cannot pick up changes in preferences much faster than old central planning did.
I agree with you about mainstream economics, although there are snippets of insight amongst the dross.
You don't appear to provide any reason to disregard Austrian economics, or to dismiss Mises. This, and the suggestion that IT systems will be able to read people's minds and predict the impact of innovation within 10 years sufficiently accurately and frequently that they will enable effective economic planning and the ditching of markets, indicates that you put dogma ahead of reason.
I'll tell you what. 10 years is soon enough that there's a decent chance both of us will still be alive. What shall we wager that IT systems with those capabilities are ubiquitous within that period?
Of course, we will need to come up with some tests by which this can be judged. Something like the Turing test, but demonstrating mind-reading and predictive capabilities rather than the ability to convince a human of the respondent's humanity?
By the way, as Steve isn't responding, GIGO = Garbage In Garbage Out. You don't seem to be well-versed in computer lingo for someone so confident about their capabilities. Steve's point about motivations and the capabilities of computers is well-made.
"on a mass level RFIDing
You're proposing the replacement of markets by computerised economic planning, aren't you? What will be your substitutes for credit card spending and buying yogurt, which will provide as much information about preferences as is provided by those market activities?
"[Austrian economics] fails
In my view, the case is exactly the reverse. Austrian economics works with the grain of human nature, whereas socialism works against it. Socialism relies on a degree of unselfishness that is not borne out by experience. It also relies on highly (indeed perfectly) rational beings within the central coordinating agencies. Free markets are a way of coordinating social cooperation that copes with and indeed harnesses man's imperfect motivations.
I think this criticism of yours is based on your view that Austrian economics relies on "rational markets", whereas the more we learn about human psychology, the less rational it seems, and the less free our will.
This is a semantic issue. What Austrians mean by "rational" is not what a psychologist means. Rationality, as it is used within Austrian theory, does not refer to reasonable behaviour, or the well-reasoned output of the conscious mind. It refers only to the product of human choice and action, not to the psychological causes.
It is irrelevant to Austrian economic theory whether someone buys a yogurt because he is hungry, because it is stacked on a particular shelf, because he viewed an advert for it, because it is discounted, as comfort food, or any other motivation (or more likely, combination of motivations). Indeed, it is fundamental to the theory that the motivations for every action will be individual, complex, unpredictable and unrepeatable.
For the purpose of the theory, all that matters is that he has made this choice, in preference (whatever the conscious or subconscious motivations) to the many other choices he could have made. At the moment of making that choice, he does so because it satisfies some urge more closely than the alternative options available. In other words, he has expressed a preference. His choice and action have moved him, however temporarily, from a lower to a higher state of contentment.
It may have been a foolish purchase, and one with which he will soon be dissatisfied, but the Austrians are betting that, on the whole, (a) he will guess what will increase his utility more often, more accurately than would a government-agent or computer making the choices for him, and (b) that even if he were so useless that an agent could make better choices for him, he would value his freedom sufficiently to prefer to make his own mistakes than have them made for him.
More on Austrians
[Paul has moved this on to yet another blog post on his site:]
BG Prior made a number of comments on my Austrian Economics and RFID
A few comments by me.
1.
I don't think Capitalism rewards the prudent and imprudent, it rewards the lucky and punishes the unlucky.
As I have said elsewhere, I am on the side of the "runts".
2.
I am suggesting that this is already happening, that is its taking place in the private sector just as much as the public sector. In fact, it's being pushed by private companies who as institutions - unlike banks - have no intrinsic desire to see "free markets." While I have some real reservations about privacy, I don't thing this is a bad thing.
3.
This may or may not be true. It's a metaphysical rather than a scientific statement.
***
Personally I think markets are destructive of happiness and the environment. They tread on families and create false ideas about status and wealth.
Once the world can been organized in such a way - by IT if necessary - that everyone is fed, clothed, housed, given medical treatment, and access to education in a sewage-free sustainable world ecology. If all that can happen, I am then quite prepared to let some people choose between Prada and Versace handbags.
Until them, I think a well planned economy will produced the shared wealth better.
Lucky runts
A bit of both, don't you think? Certainly luck plays a big part in whether you will be rich or poor. You could be born into money, you could win the lottery, you could decide to invest in something that does well for reasons you never anticipated.
But it's not just about the hand you are dealt, but what you do with it. There are plenty of examples of rich idiots who have frittered away their inheritance, gamblers who blew their winnings on ephemera, and businessmen who threw their money away on vanity projects. And conversely, people who started with little and worked their way up, many of them against impediments and adversity.
To suggest that judgment has nothing to do with it is an insult to all those who chose to live within their (often limited) means rather than rack up unsustainable debts. It is an insult to pensioners who thought they were being socially-responsible by putting a little away each week, often doing without, expecting to reap the modest rewards when they retired, only to find that their anticipated income is destroyed by a deliberately-suppressed rate of interest intended to support those who racked up debts (and encourage more to follow them) and punish those who put money away for a rainy day. It is an insult to businessmen who risked their capital to invest in products or services that they judged correctly people would want, and applied their business acumen to find ways of doing so more efficiently than their competitors.
And let's not forget skill, effort and self-sacrifice. Capitalism rewards them too, don't you think? It rewards the people who work the overtime or the second job in order to improve their (or their children's) lot. It rewards the people who study hard to achieve the qualifications for their vocation or profession. It rewards people who through aptitude and effort help their organisation to do well, gain the respect of their colleagues and work their way up the ladder. It rewards those who entertain audiences through their creativity, skill or application. Where it is allowed, it rewards people who impart knowledge effectively and enhance our understanding.
No doubt, some people are brought low by fortune, however great their efforts, judgment, and skill. It could happen to anyone, I agree. That is why we should never lose our compassion, and why I support a (specific type of) state-funded social safety-net (in which I may be in a minority of modern Austrians, but which I believe can be justified in Austrian terms).
The distinction between us is not whether we believe that luck plays a part, but whether it plays the only part in people's prosperity. It seems to me that it is just one of many factors, and often not a determining factor. It is in the interests of social cooperation and welfare that the other factors be encouraged and rewarded. It seems from your statement above that you deny the relevance of these factors, and attribute all gains to luck. What distinguishes your philosophy is not that you are on the side of the "runts" (even ignoring the strange identity that sees the unlucky as necessarily runts and runts as necessarily unlucky). It is that you are on the side of anyone who is dependent (whether unlucky or feckless) and against anyone who is not (whether as the result of luck or their own efforts).
I am not on anyone's side. Nor is Austrian economics. I am interested in the best way to coordinate social cooperation to everyone's benefit.
This is a truly disturbing dystopia you are painting. In it, not only do governments read our thoughts and predict the future (about which you seem somewhat ambivalent), but individuals have no ability to influence their destiny, tossed like leaves on the winds of fate and government direction.
Paul Halsall said...
There are dystopian aspects to the world a I expect it will develop. But there is a fair amount of current unpleasant aspects to Capitalist life, and I am not at all sure what I think will happen will be worse.
BTW, I think the luck aspect plays a much bigger role in life that you grant it.
I was going to disagree with
I was going to disagree with the other two points as well, but that seems like a good place to leave it - two pairs of fairly untestable views of life:
1. Our prosperity is mainly determined by luck; or is determined by a number of factors, including luck, and
2. People would rather have the option (illusion, if you prefer) of choosing for themselves; or would be happier having the options chosen for them.
People can make their own subjective judgments.