Posted tagged ‘Spontaneous Order’

Must Reads For The Week 3/11/17

March 12, 2017

ECONOMIC STUFF

Donald Trump and Peter Navarro Suffer From ‘Trade Deficit Disorder‘, by Mark J. Perry, at carpediemblog. Here is an excerpt form the article: “In his speech and op-ed, Navarro laid out Team Trump’s trade agenda that involves expanding US exports, reducing imports, and thereby reducing America’s merchandise trade deficit and supposedly therefore increasing our nation’s economic growth. Unfortunately, that’s a pure mercantilist trade agenda, which is an approach to trade that has been discredited now for several hundred years.

How Did Peter Navarro Ever Get A Ph.D In Economics From Harvard? economicpolicyjournal.com. Regular people being ignorant about economics is one thing. But having a Ph.D in economics and being economically ignorant is dangerous.

What Is Laissez-Faire? by Jeffery Tucker, at mises.ca. It simply means ‘Let it be’. A majority of people believe that complex order comes from top down planning by leaders possessing authority. It is inconceivable to them that unplanned order arises when people are allowed to manage their own lives and interact with others. Language is an example of complex spontaneous order. The rules of English were not written by someone and everyone started to follow them. People communicated with people and over time the ‘rules’ were established after discernible patterns (unwritten rules) were recognized. Attempts by Government central planners to control every aspect of society leads to chaos and conflict. Laissez-Faire. Please!

Repeal And Replace Needn’t Be Complicated, by Hunter Lewis, at mises.org. Do you use the term “healthcare system” or “healthcare market” when talking about ‘healthcare’. Most people talk about our “healthcare system”.  This shows we think of healthcare as a centrally planned system. The cost will never go down unless we see healthcare as an economic good rationed by prices in a market. Obamacare was 2500 pages of rules and regulations designed to ‘fix’ what was left of a healthcare market already encumbered by mountains of government regulations. The only ‘fix’ to our current “healthcare system” is to allow it to become a healthcare market. LAISSEZ-FAIRE! Get rid of all government regulations and a complex healthcare order will almost magically form itself. It won’t be a perfect order (nothing man does is perfect). But it will be the best that can possibly exist in a world of scarce resources and subjective value.

High Prices Don’t Cause Economic Bubbles, by Frank Shostak, at mises.org. When central banks increase the money supply (counterfeit money), scarce resources are misallocated to activities that would have never come into existence under normal market conditions. The 08 bubble was caused by the Fed electronically printing counterfeit money. It was not allowed to liquidate. More electronically printed counterfeit money was created to stop the correction. This counterfeit money has and is creating our present financial bubble. Excerpt from the article: “The emergence of a bubble or a monetary balloon need not be always associated with rising prices – for instance, if the rate of growth of goods corresponds to the rate of growth of the money supply then no change in prices will take place……what matters is not whether the emergence of a bubble is associated with price rises but rather with the fact that the emergence of a bubble gives rise to the emergence of non-productive activities that divert real wealth from wealth generators. The expansion of the money supply, or a monetary balloon, in similarity to a counterfeiter, enables the diversion of real wealth from wealth generating activities to non-productive activities.”

The Fed’s Dependence On The Consumer Will Backfire, by C. Jay Engel, at mises.org. Production is the creation of wealth and consumption is the destruction of wealth. Spending is consumption. Consumption is the destruction of what has been produced. Spending doesn’t grow an economy. We can only spend out of our own production. What we produce allows us to spend. Consumption has to lag behind production for an economy to grow. When consumption is increased by debt and money printing, we start a process where consumption is out pacing production. We start to eat our seed corn so to speak. Artificially increasing spending is a quick shot of adrenaline.  But it has no staying power.

 

CARTOONS

Here Is Some Econ. Homework

March 22, 2016

When knowledge is allowed to flow unhampered through the market, mainly through the price system, it works to coordinate all activities as optimally as possible. But when Government interventions don’t allow this knowledge to flow freely, malinvestments and dislocations are the result. The only way to cure these problems is for the interventions to stop. This allows the market to purge itself of these wasteful activities via a recession. Unfortunately no politician, bureaucrat, or Fed policy maker wants to have this correction happen on his watch.

Even tough hampered markets have an appearance of sustainability, they ultimately succumb to economic forces.

Here are two articles that talk about hampered markets. The first article is titled, Mises Was Right: The Hampered Market Is Unsustainable, by Sandy Ikeda, at mises,ca. Here are some excerpts from the article:

“Regulatory Dynamics Are Worse Than Transfer Dynamics. This is all because of the central role that prices play in coordinating market processes. That means that the government’s attempt to execute macroeconomic policy by manipulating the quantity of money and credit is perhaps the worst aspect of regulatory capitalism. Monetary manipulation eventually impacts all market prices directly and severely. Other things equal, it is the most distortionary form of intervention.”

“We can rank the major categories of intervention in order of their distortionary effects and thus in order of their unsustainability: 1) Large-scale monetary manipulation, 2) Large-scale price control, 3) Large-scale income redistribution.”

“So, other things equal, a country that pursues a pure form of welfare state capitalism might last longer than a country that pursues a pure form of regulatory state capitalism……”

“……Every country that has attempted interventionism in the past 100 years or so has experienced repeated economic crises. In Russia, crisis led to the Bolshevik Revolution and later the collapse of the Soviet Union. In Germany, the failure of the Weimar Republic conditioned the rise of National Socialism and then later the “economic miracle” under Ludwig Erhard. And in the United States, regulation and monetary manipulation produced the Great Depression and, decades later, the so-called Great Recession of 2007–09, with the “Reagan Revolution” in between.”

Ludwig Erhard And The German Economic Miracle.

 

Here is the second article titled, We Live In A Time Of Piecemeal-Planning & Incremental Interventionism, by Richard Ebeling, at mises.ca. Here are some excerpts from the article:

“Wherever we turn we are confronted with politicians, political pundits, television talking heads, and editorial page commentators, all of whom offer an array of plans, programs, and projects that will solve the problems of the world – if only government is given the power and authority to remake society in the design proposed.”

“Even many of those who claim to be suspicious of “big government” and the Washington beltway powers-that-be, invariably offer their own versions of plans, programs, and projects they assert are compatible with or complementary to a free society.”

“The differences too often boil down simply to matters of how the proposer wants to use government to remake or modify people and society. The idea that people should or could be left alnoe to design, undertake and manage their own plans and interactions with others is sometimes given lip service, but never entirely advocated or proposed in practice.”

“In this sense, all those participating in contemporary politics are advocates of social engineering, that is, the modifying or remaking of part or all of society according to an imposed plan or set of plans.”

“The idea that such an approach to social matters is inconsistent with both individual liberty and any proper functioning of a free society is beyond the pale of political and policy discourse. We live in a time of piecemeal planning and incremental interventionism.

“Society is a spontaneous order not a planned one.”

“Hayek argued that the true individualism starts from the premise that “society” is not some ethereal entity having an existence of its own, nor the designed creation of one or a handful of minds imposing a “plan” on people that produces the social order.”

“Instead, society is the cumulative and interactive outcome and result of multitudes of individual human beings making their separate individual plans that interact and generate connections and associations with other individual plans to produce the overall social order and its coordinated patterns.

 

If you really want to do some home work, read The Use Of Knowledge In Society, by F. A. Hayek at mises.org.

Related ArticleSpontaneous Order = Free Market Economy, at austrianaddict.com.

Related ArticleCentral Planners Hate Economics, at austrianaddict.com.

Related ArticleCharles Hugh Smith; Why Suppressing Feedback Leads To Financial Crisis, at austrianaddict.com.

The Essential HAYEK.

June 16, 2015

The Frasier Institute has come up with a project called Essential Hayek (here). It consists of a book, a website, and videos, that explain F.A. Hayeks ideas on liberty and economics in simple understandable language.

I remember reading The Road To Serfdom by F. A. Hayek in September of 1994. I don’t think I comprehended a quarter of the book at the time, but what I did comprehend opened my eyes to the fact that the US was traveling down this road rapidly. I have reread this book several times and have also read The Constitution of Liberty, all three volumes of Law Legislation and Liberty, The Fatal Conceit, Prices and Production, A Tiger By The Tail, Individualism and Economic Order, and many of his articles and essays.

When you first read Hayek he is not easy to understand because he was writing about abstract concepts and his native tongue was German. As you start to know his writing style, which includes the lengthy sentences he constructs, he becames much easier to comprehend.

Here are two short videos from Essential Hayek.

Economic Booms And Busts

Everything Has Its Price (And That’s A Good Thing)

 

My Favorite Hayek Quote, is at the top right of my blog.

“The coordination of men’s activities through central planning or through voluntary cooperation are roads going in very different directions. The first to serfdom and poverty the second to freedom and plenty.

Volumes have been written explaining this quote, or these two sentences explain volumes of writings.

Spontaneous Order

The spontaneous order of the market far exceeds coordination through central planning, in the use of knowledge, the use of scarce resources, the creation of a higher standard of living. If you don’t understand the concept of spontaneous order it will be difficult to understand how the world works.

F. A. Hayek—” The free market pricing mechanism has a double misfortune. It is not the product of human design, and the people guided by it usually do not know why they are made to do what they do.”

Here are some related articles about spontaneous order.

Related ArticleSpontaneous Order More Complex Than Top Down Planning, at austrianaddict.com.

Related ArticleSpontaneous Order Utilizes More Knowledge Than Central Planning Could Ever Hope To Utilize, at austrianaddict.com.

Related ArticleSpontaneous Order = Free Market Economy, at austrianaddict.com.

Related ArticleSpontaneous Order Demonstrated By Traffic With No Signals, at austrianaddict.com.

Tiger Drops Out Of Masters + Ticket Prices Fall = Value Is Subjective.

April 7, 2014

File:Tiger Woods Masters 2006.jpg

VALUE IS SUBJECTIVE

This article titled, Masters’ Ticket Prices Drop In Wake Of Tiger”s Absence, by Dan Wetzel, at yahoo.com, shows that value is not objective it is subjective. Value exists in the mind of each individual, it does not exist in an object. I could produce the best mouse trap ever invented for a price of x, but if no one is willing to pay x,  it has no value to anyone other than me. If you offered a sports fan  free tickets to either Saturdays third round at the Masters, or Saturdays Final Four games, he would make the decision based on which event he valued more, not on the monetary value of the tickets.

SUPPLY AND DEMAND

What does the drop in the price of the tickets mean? It doesn’t mean that people don’t value the Masters tournament, it just means that some people value it less when Tiger is not playing. After a bad back forced Tiger to withdraw from a tournament a month ago, demand for Masters tickets started to slow as people began to speculate that he wouldn’t play in this years Masters. Demand really dropped off when he officially withdrew from the Masters. This drop in demand revealed itself as the price for tickets began falling. The law of supply and demand is always in play, and in this case it says; if demand is low and the supply is fixed, the price will fall, and conversely if demand is high and the supply is fixed, the price will rise.

CONSUMER SETS WAGES

When you hear people say “they wouldn’t pay a particular athlete a particular amount of  money”, or “this athlete isn’t worth that much”, they obviously don’t understand subjective value, or supply and demand. The reason Tiger gets paid more than any golfer is because the value he creates is in high demand. There is a high number of people who value what he produces. Put simply, when there is a fixed supply of Tiger Woods, and a high demand for him, his price rises. If there weren’t enough consumers to voluntarily pay for the value they subjectively think Tiger produces for them, he wouldn’t get paid these “outrageous” sums of money. The consumer ultimately sets all prices in the process of production, and this includes the wages or salaries of all workers. So if you think certain professions don’t get payed enough, blame the greedy consumer, and if you think other professions get paid too much, blame the generous consumer.

Related Article – In a previous post, Ticket Scalping; The True Free Market In Action, we talked about voluntary exchanges from the stand point that each person involved in the exchange values what they receive more than what they give up, or no exchange would take place. Value is increased in voluntary exchanges.

Related ArticleSpontaneous Order = Free Market Economy, by austrianaddict.com.

Related ArticleSpontaneous Order Utilizes More Knowledge Than Central Planning Could Ever Hope To Utilize, by austrianaddict.com.

Related ArticleSpontaneous Order More Complex Than Top Down Planning, by austrianaddict.com.

Related ArticleSpontaneous Order Demonstrated By Traffic With No Signals, by austrianaddict.com.

 

Marriage Laws Don’t Expand Rights They Limit Rights.

June 28, 2013

Marriage Day

I don’t understand why gay people want the Government to be involved in their relationship decisions. When the Government makes a law it is a one size fits all decision and it limits what you are free to do, it doesn’t expand freedom. Gays should be allowed to make a contract concerning their obligations with there partner however they both mutually agree to do so. Each, (we’ll call it a civil union), would be unique to the two people involved in the decision and wouldn’t apply to any other couple. There would conceivably be as many civil union contracts as there are civil unions. When the Government decides what the rules are, it trumps all the possible decisions couples could make in a civil union.

I have listened to both sides in this debate over the last two days since the Supreme Court decisions and quite frankly I’m disappointed in the shallow thinking on both sides of the issue. It’s like both sides have their banners planted on their particular hill of truth, and as long as their rhetoric is flying high, they won’t try to analyze the issue any deeper than their rhetoric. (more…)

Spontaneous Order = Free Market Economy.

April 12, 2013
Spontaneous Order

Spontaneous Order (Photo credit: KAZVorpal)

SPONTANEOUS ORDER CREATES COMPLEXITY.

For us to understand how free market capitalism works, we have to understand the concept of spontaneous order. In this video below titled, “The Lawless Streets of Hanoi, Vietnam”, the man filming the video doesn’t even understand what he is watching. He says,”There’s no traffic lights to be found and everybody pretty much does what they want……It’s mad chaos.” He’s used to seeing traffic centrally planned by signs, signals, or traffic cops, and because of this bias toward centrally planned order, he is incapable of seeing the complex order that is created by individuals voluntarily cooperating. (more…)

Spontaneous Order Utilizes More Knowledge Than Central Planning Could Ever Hope To Utilize.

December 10, 2012

This video from http://www.learnliberty.org talks about spontaneous ordering processes.

This quote by Thomas Sowell, “The abstract existence of knowledge means nothing unless it is applied at the point of decision or action“, explains why the spontaneous order of the market, efficiently produces more output than central planners can produce in a statist economy. The market economy brings abstract knowledge and decision makers together more effectively than central planning could ever hope to do.

Abstract knowledge can’t be known by one individual or board of individuals, this fact alone dooms central planning to failure. Even if planners knew all of the abstract knowledge of every individual , they wouldn’t know the exact time or place to apply this knowledge in the decision-making process. Voluntary cooperation through the free market process is (more…)