moi:
> >> So the GMU types side with Chicago in practice even if they differ in
> >> theory. It's practice that counts.
David B. Shemano wrote:
> Are you saying that if a theory leads to a practice you dislike, you should
> reject the theory? The appropriate approach is to define the practice you
> like, then figure out a theory to justify it? If practice precedes theory,
> how do you justify the practice?<
No. that would be silly. All I was saying that whether they are valid
or not, the Chicago school and the "Austrians" at GMU are basically
allies, brethren and cistern under the skin. Perhaps they may hate
each other or at a minimum distance try to themselves from each other,
but it's like small groups of left- or religious sectarians who
basically share the same goals and principles but differ vehemently
about one or two tenets of their programs, while holding grudges from
past sectarian disputes. ("You always hate the ones closest to your
politics" is the old joking slogan ("jogan"?) "The only people we hate
more than the Romans are the fucking Judean People's Front," as the
leader of the People's Front of Judea says in the LIFE OF BRIAN.)
Ideally, practice should precede theory -- but theory should also
precede practice, so that they are in sync. Of course, in reality,
that harmony seldom happens.
David:
> I really am unfamiliar with the whole importance of the debate regarding
> Akerlof. What is the point? That there are certain markets where
> information imbalance leads to less than optimal results? That the Austrians
> believe entrepeneurs will tend to reduce the problem, while you (or Akerlof)
> believe there is some structural problem that prevents entrepreneus from
> reducing the problem?<
The point is that at the time Akerlof wrote his article, the
mainstream economists basically ignored the role of imperfect and
asymmetric information in markets (except as friction). So Akerlof's
article was seen as revolutionary. To my mind, I like the classical
economists who never assumed perfect information (and the like) in the
first place. (They did not fall in love with the deductive method but
were instead more empirical in orientation.) His article is
interesting, but not revolutionary. (There are a lot of "innovations"
in mainstream economics which are merely bringing in common sense for
a change.)
The Austrian belief that "entrepreneurs will tend to reduce the
problem" of imperfect and asymmetric information seems to ignore the
incentive for "entrepreneurs" to keep as much information as secret as
possible in order to exploit others' ignorance. (Knowledge is power,
after all, but only if no-one else has it.) This incentive is
reinforced by the entrepreneurs' friend, the government, which makes
the secrecy of "proprietary" information sacrosanct.
> Of course, if the government passes laws that restrict the ability to ration
> credit, redline, discriminate, we get a housing bubble. <
No, you don't seem to have studied the issue. The housing bubble was
driven more by (1) cheap credit (cf. Greenspan) and (2) deregulation
-- either in law or in practice -- of financial practices (cf.
Greenspan). The bankers' ability to ration credit, red-line, and
discrimination in loaning has not been reduced in recent years.
original article:
> >> > Masonomics worries much more about government failure than market
> failure.
> >> > Governments do not face competitive pressure.
me:
> >> On the other hand, governments are subject to the wrath of the voters
> >> to the extent that the system is democratic.
David:
> I think this really avoids the depth of the Austrian/public choice critique
> of government decision-making, even if (maybe I should say especially if)
> "democratic" in form.<
Since I am quite familiar with that critique, I was not avoiding it
(except in the sense of trying to keep the magnitude of my missive to
a minimum).
Even if the Public Choice (PC) critique of democracy were valid, it
denies the fact that _we are forced by the circumstances we live in to
engage in collective activities_. That is, the real world cannot be
broken into bite-size pieces so that individual choices can deal with
all issues. If the world that we live in is inherently collective, how
are we going to make decisions about matters that affect us all?? The
PC folks want to us markets to make the decision, so that those with
the most money rule the roost. I don't think so.
In practice, of course, US democracy involves those with the most
money ruling the roost (via campaign contributions and the like) -- in
coalition with their tame government bureaucrats. This domination has
intensified with the decline and/or fall of labor unions and other
countervailing forces.
--
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
way and let people talk.) -- Karl, paraphrasing Dante.
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