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Thread: The Individual and the Market

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    the flying pig Capitalist Pig's Avatar
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    Post The Individual and the Market

    It is customary to speak metaphorically of the automatic and anonymous forces actuating the "mechanism" of the market. In employing such metaphors people are ready to disregard the fact that the only factors directing the market and the determination of prices are purposive acts of men. There is no automatism; there are only men consciously and deliberately aiming at ends chosen. There are no mysterious mechanical forces; there is only the human will to remove uneasiness. There is no anonymity; there is I and you and Bill and Joe and all the rest. And each of us is both a producer and a consumer.

    The market is a social body; it is the foremost social body. The market phenomena are social phenomena. They are the resultant of each individual's active contribution. But they are different from each such contribution. They appear to the individual as something given which he himself cannot alter. He does not always see that he himself is a part, although a small part, of the complex of elements determining each momentary state of the market. Because he fails to realize this fact, he feels himself free, in criticizing the market phenomena, to condemn with regard to his fellow men a mode of conduct which he considers as quite right with regard to himself. He blames the market for its callousness and disregard of persons and asks for social control of the market in order to "humanize" it. He asks on the one hand for measures to protect the consumer against the producers. But on the other hand he insists even more passionately upon the necessity of protecting himself as a producer against the consumers. The outcome of these contradictory demands is the modern methods of government interference whose most outstanding examples were the Sozialpolitik of imperial Germany and the American New Deal.

    It is an old fallacy that it is a legitimate task of civil government to protect the less efficient producer against the competition of the more efficient. One asks for a "producers' policy" as distinct from a "consumers' policy." While flamboyantly repeating the truism that the only aim of production is to provide ample supplies for consumption, people emphasize with no less eloquence that the "industrious" producer should be protected against the "idle" consumer.

    However, producers and consumers are identical. Production and consumption are different stages in acting. Catallactics embodies these differences in speaking of producers and consumers. But in reality they are the same people. It is, of course, possible to protect a less efficient producer against the competition of more efficient fellows. Such a privilege conveys to the privileged the benefits which the unhampered market provides only to those who succeed in best filling the wants of the consumers. But it necessarily impairs the satisfaction of the consumers. If only one producer or a small group is privileged, the beneficiaries enjoy an advantage at the expense of the rest of the people. But if all producers are privileged to the same extent, everybody loses in his capacity as consumer as much as he gains in his capacity as a producer. Moreover, all are injured because the supply of products drops if the most efficient men are prevented from employing their skill in that field in which they could render the best services to the consumers.

    If a consumer believes that it is expedient or right to pay a higher price for domestic cereals than for cereals imported from abroad, or for manufactures processed in plants operated by small business or employing unionized workers than for those of another provenance, he is free to do so. He would only have to satisfy himself that the commodity offered for sale meets the conditions upon which he makes the allowance of a higher price depend. Laws which forbid counterfeiting of labels of origin and trademarks would succeed in attaining the ends aimed at by tariffs, labor legislation, and privileges granted to small business. But it is beyond doubt that the consumers are not prepared to act in this way. The fact that a commodity is marked as imported does not impair its salability if it is better or cheaper, or both. As a rule the buyers want to buy as cheaply as possible without regard for the origin of the article or some particular characteristics of the producers.

    The psychological root of the producers' policy as practiced today in all parts of the world is to be seen in spurious economic doctrines. These doctrines flatly deny that the privileges granted to less efficient producers burden the consumer. Their advocates contend that such measures are prejudicial only to those against whom they discriminate. When, pressed further, they are forced to admit that the consumers are damaged took they maintain that the losses of the consumers are more than compensated by an increase in their money income which the measures in question are bound to bring about.

    Thus in the predominantly industrial countries of Europe the protectionists were first eager to declare that the tariff on agricultural products hurts exclusively the interests of the farmers of the predominantly agricultural countries and of the grain dealers. It is certain that these exporting interests are damaged too. But it is no less certain that the consumers of the country that adopts the tariff policy are losing with them. They must pay higher prices for their food. Of course, the protectionist retorts, that this is not a burden. For, he argues, the additional amount that the domestic consumer pays increases the farmers' income and their purchasing power; they will spend the whole surplus in buying more of the products manufactured by the nonagricultural strata of the population. This paralogism can easily be exploded by referring to the well-known anecdote of the man who asks an innkeeper for a gift of ten dollars; it will not cost him anything because the beggar promises to spend the whole amount in his inn. But for all that, the protectionist fallacy got hold of public opinion, and this alone explains the popularity of the measures inspired by it. Many people simply do not realize that the only effect of protection is to divert production from those places in which it could produce more per unit of capital and labor expended to places in which it produces less. It makes people poorer, not more prosperous.

    The ultimate foundation of modern protectionism and of the striving for economic autarky of each country is to be found in this mistaken belief that they are the best means to make every citizen, or at least the immense majority of them, richer. The term riches means in this connection an increase in the individual's real income and an improvement in his standard of living. It is true that the policy of national economic insulation is a necessary corollary of the endeavors to interfere with domestic business, and that it is an outcome of warlike tendencies as well as one of the factors producing these tendencies. But the fact remains that it would never have been possible to sell the idea of protection to the voters if one had not been able to convince them that protection not only does not impair their standard of living but raises it considerably.

    It is important to emphasize this fact because it utterly explodes a myth propagated by many popular books. According to these myths, contemporary man is no longer motivated by the desire to improve his material well-being and to raise his standard of living. The assertions of the economists to the contrary are mistaken. Modern man gives priority to "noneconomic" or "irrational" things and is ready to forego material betterment whenever its attainment stands in the way of those "ideal" concerns. It is a serious blunder, common mostly with economists and businessmen, to interpret the events of our time from an "economic" point of view and to criticize current ideologies with regard to the alleged economic fallacies implied. People long for other things more than for a good life.

    It is hardly possible to misconstrue the history of our age more crassly. Our contemporaries are driven by a fanatical zeal to get more amenities and by an unrestrained appetite to enjoy life. A characteristic social phenomenon of our day is the pressure group, an alliance of people eager to promote their own material well-being by the employment of all means, legal or illegal, peaceful or violent. For the pressure group nothing matters but the increase of its members' real income. It is not concerned with any other aspects of life. It does not bother whether or not the realization of its program hurts the vital interests of other men, of their own nation or country, and of the whole of mankind. But, of course, every pressure group is anxious to justify its demands as beneficial to the general public welfare and to stigmatize its critics as abject scoundrels, idiots, and traitors. In the pursuit of its plans it displays a quasi-religious ardor.

    Without exception all political parties promise their supporters a higher real income. There is no difference in this respect between nationalists and internationalists and between the supporters of a market economy and the advocates of either socialism or interventionism. If a party asks its supporters to make sacrifices for its cause, it always explains these sacrifices as the necessary temporary means for the attainment of the ultimate goal, the improvement of the material well-being of its members. Each party considers it as an insidious plot against its prestige and its survival if somebody ventures to question the capacity of its projects to make the group members more prosperous. Each party regards with a deadly hatred the economists embarking upon such a critique.

    All varieties of the producers' policy are advocated on the ground of their alleged ability to raise the party members' standard of living. Protectionism and economic self-sufficiency, labor union pressure and compulsion, labor legislation, minimum wage rates, public spending, credit expansion, subsidies, and other makeshifts are always recommended by their advocates as the most suitable or the only means to increase the real income of the people for whose votes they canvass. Every contemporary statesman or politician invariably tells his voters: My program will make you as affluent as conditions may permit, while my adversaries' program will bring you want and misery.

    It is true that some secluded intellectuals in their esoteric circles talk differently. They proclaim the priority of what they call eternal absolute values and feign in their declamations--not in their personal conduct--a disdain of things secular and transitory. But the public ignores such utterances. The main goal of present-day political action is to secure for the respective pressure group memberships the highest material well-being. The only way for a leader to succeed is to instill in people the conviction that his program best serves the attainment of this goal.

    What is wrong with the producers' policies is their faulty economics.

    If one is prepared to indulge in the fashionable tendency to explain human things by resorting to the terminology of psychopathology, one might be tempted to say that modern man in contrasting a producers' policy with a consumers' policy has fallen victim to a kind of schizophrenia. He fails to realize that he is an undivided and indivisible person, i.e., an individual, and as such no less a consumer than a producer. The unity of his consciousness is split into two parts; his mind is inwardly divided against himself. But it matters little whether or not we adopt this mode of describing the fact that the economic doctrine resulting in these policies is faulty. We are not concerned with the pathological source from which an error may stem, but with the error as such and with its logical roots. The unmasking of the error by means of ratiocination is the primary fact. If a statement were not exposed as logically erroneous, psychopathology would not be in a position to qualify the state of mind from which it stems as pathological. If a man imagines himself to be the king of Siam, the first thing which the psychiatrist has to establish is whether or not he really is what he believes himself to be. Only if this question is answered in the negative can the man be considered insane.

    It is true that most of our contemporaries are committed to a fallacious interpretation of the producer-consumer nexus. In buying they behave as if they were connected with the market only as buyers, and vice versa in selling. As buyers they advocate stern measures to protect them against the sellers, and as sellers they advocate no less harsh measures against the buyers. But this antisocial conduct which shakes the very foundations of social cooperation is not an outgrowth of a pathological state of mind. It is the outcome of a narrow-mindedness which fails to conceive the operation of the market economy and to anticipate the ultimate effects of one's own actions.

    It is permissible to contend that the immense majority of our contemporaries are mentally and intellectually not adjusted to life in the market society although they themselves and their fathers have unwittingly created this society by their actions. But this maladjustment consists in nothing else than in the failure to recognize erroneous doctrines as such.
    Adapted from chapter 15, section 12 of Human Action by Ludwig von Mises.

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    Hot Message FDG's Avatar
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    Kind of obvious. Let's take a look at land value tax instead
    Obsequium amicos, veritas odium parit

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    the flying pig Capitalist Pig's Avatar
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    Quote Originally Posted by FDG View Post
    Kind of obvious. Let's take a look at land value tax instead
    Ok, question.

    How, exactly, does one arrive at an objective value of the untransformed land on a lot that has been transformed (e.g., into a house, park, storefront, and so on)? How do we know what the land owner values his property at, or the "community" at large, without some kind of indication as through the sale of the property deed?

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    the flying pig Capitalist Pig's Avatar
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    Quote Originally Posted by Ashton View Post
    Lol @ "objective speculation" oxymoron.
    SHUT UP I KNOW I SET HIM UP FOR FAILURE THAT WAS THE POINT LOL!!!

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    Fantastic post. Ty.

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    Glorious Member mu4's Avatar
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    Quote Originally Posted by fallacy
    It is customary to speak metaphorically of the automatic and anonymous forces actuating the "mechanism" of the market. In employing such metaphors people are ready to disregard the fact that the only factors directing the market and the determination of prices are purposive acts of men. There is no automatism; there are only men consciously and deliberately aiming at ends chosen. There are no mysterious mechanical forces; there is only the human will to remove uneasiness. There is no anonymity; there is I and you and Bill and Joe and all the rest. And each of us is both a producer and a consumer.
    Anyways, you sound amazingly like Marx except you seem to fight for the "producers" instead of the "workers". Replace a few words and you might as well be Marx.

    Quote Originally Posted by Marx
    In the social production of their existence, men inevitably enter into definite relations, which are independent of their will, namely relations of production appropriate to a given stage in the development of their material forces of production. The totality of these relations of production constitutes the economic structure of society, the real foundation, on which arises a legal and political superstructure, and to which correspond definite forms of consciousness. The mode of production of material life conditions the general process of social, political, and intellectual life. It is not the consciousness of men that determines their existence, but their social existence that determines their consciousness. At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or — this merely expresses the same thing in legal terms — with the property relations within the framework of which they have operated hitherto. From forms of development, of the productive forces, these relations turn into their fetters. Then begins an era of social revolution. The changes in the economic foundation lead, sooner or later, to the transformation of the whole, immense, superstructure.
    The truth is that neither is wholly true. Human beings engage in necessary relations not entirely of our will as well as deliberate and purposeful relations of our will, and these occur in a hierarchy of needs and wants. By starting from a fallacy that the market is only consisting of deliberate social relations, which is unsubstantiated, you've set yourself up for failure. The truth is that social relations are not always deliberate and purposeful, and they exist in the same pool of social interaction as deliberate and purposeful relations.

    You might sound nice glorifying the strength of human will and the power of the human mind, but in the end this is a appeal to a ethical understand of the market, where all that is bad and the material forces of the world which drives us to engage in social relations is denied. In short, a naive fantasy.

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    Nice post hkkmr. It seems to me that Capitalism needs to make roughly as many assumptions and gross generalizations about human nature as Socialism or Communism. I wonder if any of those assumptions are IM related.
    It was in the reign of George III that the aforesaid personages lived and quarrelled; good or bad, handsome or ugly, rich or poor, they are all equal now.

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    the flying pig Capitalist Pig's Avatar
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    Quote Originally Posted by hkkmr View Post
    Anyways, you sound amazingly like Marx except you seem to fight for the "producers" instead of the "workers". Replace a few words and you might as well be Marx.
    Except that Marx says pretty much the exact opposite and, if you noticed, Mises makes no distinction between the "producers" and the "workers" as they are one in the same. Production and consumption are not mutually exclusive, merely "different stages" of economic action.

    Quote Originally Posted by hkkmr View Post
    The truth is that neither is wholly true. Human beings engage in necessary relations not entirely of our will as well as deliberate and purposeful relations of our will, and these occur in a hierarchy of needs and wants. By starting from a fallacy that the market is only consisting of deliberate social relations, which is unsubstantiated, you've set yourself up for failure.
    Human action is always purposeful and deliberate. People act in order to achieve some end. Whether that action is misguided or poorly conceived is irrelevant, the point is man acts with purpose in mind. If you dispute this, then you dispute the very thing that separates mankind from animals; that is, our ability to inhibit instinctual drives and act according to our capacity for reason. The specific reasons, however, and the internal, psychological events that lead to action, are just as irrelevant to the issue at hand. Conscious human action is still deliberate and purposeful action, whether it is grounded in emotion or some visceral intuition. In acting, or even not acting, man reveals his preferences, and by choosing between one or another according to his own subjective valuations. Mises writes,
    Praxeology consequently does not distinguish between "active" or energetic and "passive" or indolent man. The vigorous man industriously striving for the improvement of his condition acts neither more nor less than the lethargic man who sluggishly takes things as they come. For to do nothing and to be idle are also action, they too determine the course of events. Wherever the conditions for human interference are present, man acts no matter whether he interferes or refrains from interfering. He who endures what he could change acts no less than he who interferes in order to attain another result. A man who abstains from influencing the operation of physiological and instinctive factors which he could influence also acts. Action is not only doing but no less omitting to do what possibly could be done.

    We may say that action is the manifestation of a man's will. But this would not add anything to our knowledge. For the term will means nothing else than man's faculty to choose between different states of affairs, to prefer one, to set aside the other, and to behave according to the decision made in aiming at the chosen state and forsaking the other.

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    Glorious Member mu4's Avatar
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    Quote Originally Posted by Capitalist Pig View Post
    Except that Marx says pretty much the exact opposite and, if you noticed, Mises makes no distinction between the "producers" and the "workers" as they are one in the same. Production and consumption are not mutually exclusive, merely "different stages" of economic action.
    Which is kinda of what I said, you sound like Marx except on two different sides of the game. The thing is that the position might as well be religious.

    Just because Mises doesn't make the distinction between producer and worker doesn't mean that people do not make such a distinction. The distinction is a matter of control over the means of production not the actions of material transformation. The issues of misery, class struggle, envy, ressentiment are psychological, as well as feelings of lack of control. These issues exists because of differences in material means and means of advancement. In the end the end isn't about producing or consuming, because this is merely the dance, but about the psychological pain and pleasure we feel engaging in social relations. When the deliberate and purposeful action of some become that of destruction, rather then either producing or consuming, there another form of social relation is engaged. So Mises has left out another option in this web of social relations and that is when those who feel they are workers or those who feel they are producers engage in neither production or consumption against the other, but rather destruction.

    Quote Originally Posted by Capitalist Pig View Post
    Human action is always purposeful and deliberate. People act in order to achieve some end. Whether that action is misguided or poorly conceived is irrelevant, the point is man acts with purpose in mind. If you dispute this, then you dispute the very thing that separates mankind from animals; that is, our ability to inhibit instinctual drives and act according to our capacity for reason. The specific reasons, however, and the internal, psychological events that lead to action, are just as irrelevant to the issue at hand. Conscious human action is still deliberate and purposeful action, whether it is grounded in emotion or some visceral intuition. In acting, or even not acting, man reveals his preferences, and by choosing between one or another according to his own subjective valuations. Mises writes,
    Praxeology consequently does not distinguish between "active" or energetic and "passive" or indolent man. The vigorous man industriously striving for the improvement of his condition acts neither more nor less than the lethargic man who sluggishly takes things as they come. For to do nothing and to be idle are also action, they too determine the course of events. Wherever the conditions for human interference are present, man acts no matter whether he interferes or refrains from interfering. He who endures what he could change acts no less than he who interferes in order to attain another result. A man who abstains from influencing the operation of physiological and instinctive factors which he could influence also acts. Action is not only doing but no less omitting to do what possibly could be done.

    We may say that action is the manifestation of a man's will. But this would not add anything to our knowledge. For the term will means nothing else than man's faculty to choose between different states of affairs, to prefer one, to set aside the other, and to behave according to the decision made in aiming at the chosen state and forsaking the other.
    You sound a bit religious, you might as well be trying to prove free will. You say a lot of things that is a bunch of fluff and hides contradictions. "People have preference but they choose them?" Well, some studies would say that people have preferences like information metabolism, but don't choose them but develop them in some way that is pre-cognitive. People are also born into external circumstance not of their choosing, and that circumstance necessarily limits the scope of immediate and local actions. In that sense we can only act within the constraints of our immediate environment, and only by escaping that environment to another can we open different options.

    Human beings are still animals, we've developed tools to manage our environment, the market is one of them, so is government. These are social organism we've brought to life in order to create social order. And taking your view on things, these organisms make their own "deliberate and purposeful actions" towards their own ends. When these "deliberate and purposeful actions" are seen to be harmful to some group of "deliberate and purposeful" human beings, they will take "deliberate and purposeful actions" against them whether it be the market or government.

    How's this. Stop breathing for a while, we'll see what actions you perform after a while. Did you choose to pass out and start breathing again? Don't go to the bathroom for a while, see what happens, wonder what you will "choose" to do. As much choice and freedom we have in our actions, our bodies can act against us, as well as our mind. We know people react differently to pain, physical and psychological, and it's that pain that sometimes need to be addressed, because sometimes their "choice" will be to eliminate the perceived source of that pain, real or phantom.

    As much as I value the power and ingenuity of human reason, it allows us to escape our environment and create new possibilities, but nevertheless, the environment makes demands of us that we must necessarily meet within a certain time frame and it often leaves us with few if any reasonable choices.

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    Hot Message FDG's Avatar
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    Quote Originally Posted by Capitalist Pig View Post
    Ok, question.

    How, exactly, does one arrive at an objective value of the untransformed land on a lot that has been transformed (e.g., into a house, park, storefront, and so on)? How do we know what the land owner values his property at, or the "community" at large, without some kind of indication as through the sale of the property deed?
    Yeah, that's a rather big pratical problem inherent to land value tax. I'm personally against the typical proposal of "hiring an expert" which will evaluate the land: I think it would inevitably lead to corruption i.e. owners of large pieces of land would manage to obtain a small land value tax, while owners of your average small piece of land would end up paying more than they deserve.

    So, one potential solution: before you introduce land value tax, you check and register in a database market prices of all unimproved land for which transactions are taking place. This value will be yearly modified on the basis of inflation.(*) Then, you levy similar values of LVT for similar pieces of land.
    I understand that this approach would be problematic when computing LVT for big cities, especially approaching the city centre, where density will likely be so high that there will be no unimproved land. In that case, one potential solution which I've seen mentioned is: find a piece of land with extremely similar improvements in a place where LVT can be easily computed (so, in a smaller city and / or countryside). There will be a difference in rent earned / payed between the two piece of land - that difference can be used as proxy for market value of unimproved land.

    (*) Inflation must be computed by an independent third-party entity, since even a minimal government might be tempted to artificially give higher numbers, in order to obtain higher tax revenues.
    Obsequium amicos, veritas odium parit

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    Glorious Member mu4's Avatar
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    Quote Originally Posted by Ashton View Post
    hkkmr, you're being ridiculous and vomiting nonsense that's completely aside from the point. And being religious imposing your asinine speculations of a deterministic ontology.

    Whether out of luxury or bound by exigency, man acts in pursuit of ends chosen. That's it. No end is inherently rational or irrational, and any question of this could only be normative in nature, hence beyond the scope of economics. If Joe Bob gobbles down a box of twinkies, jacks off to a porno flick, and commits suicide—was his series of actions rational? Who can really say?
    Oh look at you, skeet skeet skeet... your media could be better, instead of Mises 1:1 and Mises 15:12, there's better stuff out there.

    I notice some people, religious people, when ever their precarious fantasy world is being questioned, they tend to start ranting and raving from some sacred tome.

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    the flying pig Capitalist Pig's Avatar
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    Quote Originally Posted by FDG View Post
    blah blah blah i'm a georgist
    Man, that shit sounds so convoluted. Why not come over to the Light Side and be a LeFevreian autarchist with me?

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