A Beast by Any Other Name

The term "corporatism" (or even "crony capitalism") does not seem to capture the essence of the economic system that prevails today in the greater part of the world, especially when it comes to its monetary and financial aspects. Should it then be called banking socialism, banking statism, corporate socialism, corporate statism, financial kleptocracy, financial paternalism, financial socialism, financial statism, monetary kleptocracy, monetary paternalism, monetary socialism, monetary statism, oligarchic socialism, plutocratic socialism, plutocratic statism, private socialism, socialist oligarchy, socialist plutocracy? What pithy, memorable and marketable name would stick and help the unprejudiced see the reality accurately?

A Note on "Radical Subjectivism" and Equilibrium Tendency

Lachmann and Shackle, the so-called "radical subjectivists", claimed that the fact that we live in a "kaleidic" world, where consumer preferences, the supply of consumer and producer goods of various orders, and technological possibilities constantly change, renders the future essentially unpredictable, hence not ruling out as a logical impossibility a scenario in which the majority of entrepreneurs consistently fail to anticipate and meet the demands of the consuming public. In other words, these authors contend, there can be no purely logical argument for the claim that there exists a market tendency towards equilibrium - its existence or non-existence is a matter of historical observation and institutional analysis.

I have the following to say contra this argument: there can be no market without the exchange of consumer goods, from which it follows that there can be no market without the existence of capital goods needed to produce the aforesaid consumer goods. However, even in the most primitive economy the continued existence of capital goods presupposes their necessarily time-consuming assembly and maintenance, which in turn presuppose a requisite, even if minimal, degree of preference stability and correctness of entrepreneurial foresight (otherwise how could the funds needed to create and maintain these capital goods be obtained in the first place?).

I suppose that at this point one might object by suggesting that very primitive capital goods can be created and conserved single-handedly, outside of the nexus of the division of labor. However, to the extent that one fails to utilize these capital goods for the satisfaction of the preferences of one's fellow human beings (i.e., uses them to produce final goods that nobody wants to purchase), they cannot be regarded as goods at all, and, a fortiori, under such conditions we cannot talk about the existence of any market (defined as a nexus of voluntary exchange) in the first place.

To conclude, even though I do not deny that it is not a logical impossibility that the world could be so kaleidic that the purposive agents inhabiting it would fail to engage in any mutually beneficial exchanges, I claim that as soon as we stipulate that some exchanges of this kind do in fact take place (as Lachmann and Shackle do insofar as they refer to the market environment), we need to acknowledge that there is an equilibrium tendency necessarily built into the socioeconomic system within which they occur. In other words, there is certainly nothing logically necessary about the existence of markets (and by the same token competent entrepreneurs), but it is, I contend, a logically necessary truth that any actually existing market displays a tendency towards equilibrium, or else it disintegrates and disappears by turning from a nexus of exchange into that of non-exchange.

Jobs and Mises on Creative Action

Being the richest man in the cemetery doesn’t matter to me. Going to bed at night saying we’ve done something wonderful... that’s what matters to me.

Don't be trapped by dogma - which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice. (...) Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work.

Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes... the ones who see things differently — they’re not fond of rules... You can quote them, disagree with them, glorify or vilify them, but the only thing you can’t do is ignore them because they change things... they push the human race forward, and while some may see them as the crazy ones, we see genius, because the ones who are crazy enough to think that they can change the world, are the ones who do.
– Steve Jobs

Far above the millions that come and pass away tower the pioneers, the men whose deeds and ideas cut out new paths for mankind. For the pioneering genius to create is the essence of life. To live means for him to create. (...) His incentive is not the desire to bring about a result, but the act of producing it.

The creative genius is at variance with his fellow citizens. As the pioneer of things new and unheard of he is in conflict with their uncritical acceptance of traditional standards and values.

These pioneers and originators of things unheard of do not produce and work in the sense in which these terms are employed in dealing with the affairs of other people. They do not let themselves be influenced by the response their work meets on the part of their contemporaries. They do not wait for encouragement.
- Ludwig von Mises

PS. Contrast the above with the claim that von Mises was a poor student of human nature.

Collected Pearls of Wisdom from the Economic Mainstream

The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.
- Ben Shalom Bernanke, 21.11.2002

The Federal Reserve is not currently forecasting a recession.
- Ben Shalom Bernanke, 10.01.2008

Stocks have reached what looks like a permanently high plateau.
- Irving Fisher, 16.10.1929

If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again, there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is.
- J. M. Keynes, 1936

[It is] comparatively easy to make capital goods so abundant that the marginal efficiency of capital is zero. (...) There are no intrinsic reasons for the scarcity of capital. [Rather, it is] possible for communal saving through the agency of the State to be maintained at a level where it ceases to be scarce.
- J. M. Keynes, 1936

The notion that the creation of credit by the banking system allows investment to take place to which 'no genuine saving' corresponds (...) is to be explained, I think, by an optical illusion.
- J. M. Keynes, 1936

The market process with its cumbersome tatonnements appears old-fashioned. Indeed, it may be considered as a computing device of the pre-electronic age.
- Oskar Lange, 1967

To fight this recession the Fed needs (...) soaring household spending to offset moribund business investment. And to do that (...) Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.
- Paul Krugman, 02.08.2002

So never mind those long lists of reasons for Japan's slump. The answer to the country's immediate problems is simple: PRINT LOTS OF MONEY.
- Paul Krugman, ?

The Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.
- Paul Samuelson, 1989

Avoid BS. Learn good stuff.

Some Quotes on Mathematical Economics

[Social] sciences are not science in the sense of physical science and cannot attempt to be such without forfeiting their proper nature and function. Insistence on a concretely quantitative economics means the use of statistics of physical magnitudes, whose economic meaning and significance is uncertain and dubious.
- Frank H. Knight

Indeed, the chief point was already seen by those remarkable anticipators of modern economics, the Spanish schoolmen of the 16th century, who emphasized that what they called pretium mathematicum, the mathematical price, depended on so many particular circumstances that it could never be known to man but was known only to God.
- Friedrich von Hayek

[Mathematical economics] gives our results a merely spurious precision. It gives an illusion of knowledge in place of the candid confession of ignorance, vagueness, or uncertainty which is the beginning of wisdom.
- Henry Hazlitt

The most sophisticated fallacy in [neoclassical] economic theory [is] the notion that because certain relationships hold in equilibrium the forced interferences designed to implement these relationships will, in fact, be desirable.
- James Buchanan

I venture to deny (...) the doctrine that Mathematics can be applied to the development of economic truth; (...) unless it can be shown, either that mental feelings admit of being expressed in precise quantitative forms, or, on the other hand, that economic phenomena do not depend upon mental feelings, I am unable to see how this conclusion can be avoided.
- J. E. Cairnes

The mathematical economists disregard the whole theoretical elucidation of the market process and evasively amuse themselves with an auxiliary notion [i.e., equilibrium] employed in its context and devoid of any sense when used outside of this context.
- Ludwig von Mises

Those who think that it would be possible to apply the equations of mathematical economics for making the calculations fail to see that included among the items of which these equations are composed are unknown preference scales belonging to a situation which is unreal and can never be realized in practice.
- Ludwig von Mises

The best readers' guide to the jungle of mathematical economics is to ignore the fancy welter of equations and look for the assumptions underneath. Invariably they are few in number, simple, and wrong.
- Murray Rothbard

We must never let reality be falsified in order to fit the niceties of mathematics.
- Murray Rothbard

Nothing has done more to render modern economic theory a sterile and irrelevant exercise in autoeroticism than its practitioners' obsession with mathematical, general-equilibrium models.
- Robert Higgs

Two Crises of Socialism

The transformation-inducing crisis of 1989-91 in the so-called "Eastern Bloc", brought about by the non-existence of private property rights in factors of production, bureaucratic fixing of prices and wages, and the general subjection of the Soviet-controlled economies to the political goals of the ruling parties rather than the freely determined economic goals of millions of individual consumers and producers, is rightly and almost universally regarded as a crisis of socialism.

The currently ongoing financial crisis, brought about by bureaucratic manipulation of the money supply and interest rates by the monetary politburos known as central banks, securitization of mortgage-backed "junk assets" by government-sponsored enterprises instituted to fulfill the welfare-statist dream of "universal homeownership", economically groundless rating practices of the state-created rating agency cartel, implicit governmental bailout guarantees for the banking sector, and an unprecedented, flagrantly unsustainable accumulation of public debt, is, despite the wishful thinking of socialists of all stripes, the aptly called second crisis of socialism.

Thus, if one is in the mood for pointing fingers of blame, one should choose one's targets carefully and informedly, lest one end up looking very foolish.

A Brief but Obligatory Tribute to Jobs

In a world in which the majority of opinion-forming outlets have been lately spewing forth economic nonsense of the most vulgar kind, including the claims that value destruction brings prosperity, spending and indebtedness drive economic development, and large-scale creation of colored paper tickets or virtual bookkeeping entries can create real wealth, Jobs and Apple were an island of sanity, a reminder that there are no short-cuts to changing the world for the better, and no paths leading to that goal other than the ethos of hard work, advanced specialization and division of labor, long-term investments leading to the accumulation of productive capital, innovative vision, and keen entrepreneurial foresight.

He was the creative genius of our age, so if there are any people who genuinely deserve celebration, he was no doubt one of them.

Bastiatian Thought Experiment No. 2

Imagine a protection racket that successfuly utilizes economies of scale, up to the point where all it requires of certain parts of its extensive clientele is that they offer it unswerving moral support and a promise not to join any effort to rebel against its actions in exchange for a meagre, but constant share of its loot.

Imagine further that this protection racket, in conjunction with other, similar protection rackets, set up an immense apparatus of propaganda, so vast that it is difficult to find a professional sophist who has nothing to do with it and an area of everyday life not suffused with its indoctrinating influence.

In fact, imagine that this apparatus of propaganda becomes so prodigiously successful that the necessity of obedience to the protection rackets that control it attains the popular status of one of the most incontestable and self-evident propositions.

How likely do you think the above scenario is? And, more importantly, how plausible do you think it is to get out of it?