News

Loading...

Thursday, June 16, 2011

Who Is This Interventionist Fool?

"Economics neither approves nor disapproves of government measures restricting production and output. It merely considers it its duty to clarify the consequences of such measures. The choice of policies to be adopted devolves upon the people. But in choosing they must not disregard the teachings of economics if they want to attain the ends sought. There are certainly cases in which people may consider definite restrictive measures as justified. Regulations concerning fire prevention are restrictive and raise the cost of production. But the curtailment of total output they bring about is the price to be paid for avoidance of greater disaster. The decision about each restrictive measure is to be made on the ground of a meticulous weighing of the costs to be incurred and the prize to be obtained. No reasonable man could possibly question this rule."

He thinks each government intervention should be evaluated for its own particular effects, and no general rule can be established as to when to intervene and when not to! Is this some follower of Keynes? Is it Krugman? Brad DeLong?

17 comments:

  1. It's Mises. I guess this should be a reminder for ancaps, who "misuse" Mises arguments against certain interventions against absolutely every intervention but nonchalantly ignore this statement.

    You think most ancaps are guilty of that?

    ReplyDelete
  2. Sounds like Mises.

    ReplyDelete
  3. I'm not entirely sure if that's (completely) consistent with his rule-utilitarianism. Should think about that a little more.

    ReplyDelete
  4. Well the problem is when he then claims that if you allow for any intervention, you will inevitably become socialist.

    ReplyDelete
  5. @ Ryan,

    I think you miss the point. Mises thinks one intervention leads to another, if you implement interventions without meticulous weighing of positive and negative effects and if you are not accepting the negative side effects as permanent as long as the intervention is up.Then you are prone for implementing one intervention after another.

    ReplyDelete
  6. "Mises thinks one intervention leads to another, if you implement interventions without meticulous weighing of positive and negative effects and if you are not accepting the negative side effects as permanent as long as the intervention is up."

    Where does he say that?

    ReplyDelete
  7. Thats how I understand the very quote you are giving in your blog post above (and the rest of his writings).

    Just because he lines out through economic reasoning that lots of interventions defeat their own purpose and are therefore not justifiable (like artificial price ceilings of lets say half the market price to keep a good available, which inevitable will decrease supply and therefore availability of the good even further...), doesn't mean that there are no interventions that really serve a certain goal, and whose costs (negative side effects) are deemed less important than its prize.

    He only lines out that there is no intervention which doesn't have a negative side effect, and either you accept it, or repel the intervention, or you will make a new intervention to counter the negative effects of the first intervention...

    What do you think he wanted to say? All interventions are bad, except fire regulation?

    ReplyDelete
  8. "He only lines out that there is no intervention which doesn't have a negative side effect, and either you accept it, or repel the intervention, or you will make a new intervention to counter the negative effects of the first intervention."

    That's an interesting idea, but does he say that somewhere? That certainly is NOT said in the quote I offered. There is no "either... or" bit in that quote at all.

    ReplyDelete
  9. I don't think I need to even cite the extended passage in Liberalism to justify what I said, do I?

    ReplyDelete
  10. @ Gene

    Sorry for the late reply. I went through some of his stuff on interventions and he never phrases it as I did. Nevertheless I think this summarizes his point.

    At first one should also mention that he does distinguish between different kinds of interventions. Mainly between restrictive and price fixing (interference with the structure of prices) interventions. And he only argues in the latter case that it will lead inevitably to socialism if one wants to achieve his goal WITHOUT having to suffer negative (often directly self-defeating) side effects.

    E.g. If you want minimum wage well above market rates, without having to suffer additional unemployment and loss of productivity you will have to resort to take control of the whole labor market and finally of all means of production.

    Take this quote from HA:
    "However, there were and are advocates of price control who have openly declared that they want to preserve the market economy. They are outspoken in their assertion that government fixing of prices,wage rates, and interest rates can attain the ends the government wants to attain by their promulgation without abolishing altogether the market and private ownership of the means of production. They even declare that price control is the best or the only means of preserving the system of private enterprise and of preventing the coming of socialism. They become very indignant if somebody questions the correctness of their doctrine and shows that price control, if it is not to make things worse from the point of view of the governments and the interventionist doctrinaires, must finally result in socialism.
    They protest that they are neither socialists nor communists, and that they aim at economic freedom and not at totalitarianism."

    The key line is "...if it is
    not to make things worse from the point of view of the governments and the interventionist doctrinaires..."

    Further he writes: "It is the tenets of these interventionists that we have to examine. The problem is whether it is possible for the police power to attain the ends it wants to attain by fixing prices, wage rates, and interest rates at a height different from what the unhampered market would have determined. It is beyond doubt that a strong and resolute government has the power to decree such maximum or minimum rates and to take revenge upon the disobedient. But the question is whether or not the authority can attain those ends which it wants to attain by resorting to such decrees."

    It alway depends on the ends sought. If they are ok with suffering a lack of homes for its citizens because of heavy rent control then this situation will be permanent or eventually result in a wild mob because of ever worsening housing situation. The other two possibilities if they want to solve to lack of homes are to either repel rent control or take further measures like nationalization of housing construction companies and build homes publicly...

    If you think I am wrong with this interpretation, would be nice if you could tell me why.

    ReplyDelete
  11. @ Ryan

    "I don't think I need to even cite the extended passage in Liberalism to justify what I said, do I?"

    Oh come on don't hold back, please quote where he plainly says "...if you allow for any intervention, you will inevitably become socialist."

    ReplyDelete
  12. "Thus the doctrine and the practice of interventionism ultimately tend to abandon what originally distinguished them from outright socialism and to adopt entirely the principles of totalitarian all-round planning" (Mises 1996: 723–724)

    skylien, there you go.

    ReplyDelete
  13. Are seriously saying that: “…if you allow for any intervention, you will inevitably become socialist” is the same as “Thus the doctrine and the practice of interventionism ultimately tend to abandon what originally distinguished them from outright socialism and to adopt entirely the principles of totalitarian all-round planning” ?

    Since when does any (single) intervention equate with the whole doctrine of interventionism? Since when is “inevitably become” the same as “tend to”?

    BTW: I did write a second post yesterday as answer to your former post to me. But it is not up yet. Is it lost?

    ReplyDelete
  14. "Since when does any (single) intervention equate with the whole doctrine of interventionism?"

    The quote said "doctrine and practice." A single intervention certainly is "the practice of interventionism."

    "Since when is “inevitably become” the same as “tend to”?"

    Yeah, Ryan is probably overstating what Mises said with "inevitably become." "Ultimately tend to" is more equivalent to "inevitably become without some countervailing force."

    ReplyDelete
  15. I disagree. Is it practice of cooking to heat water by one degree? Is it a sunny day if one ray of light peeks through thick clouds for a fraction of a second? Is it already the practice of war just because there is one shot fired? Sorry this is a non-sequitur in my eyes. It is clearly a matter of degree.

    Mises was no ancap but a Laissez-Faire guy. He didn't argue against all taxes, only above a certain level. But did he say there only one Dollar too much and we have Socialism on the next day? No. Restrictive measures are also ok if everything was considered and still worth the cost. See another quote from HA:

    “There are, as has been shown, cases in which a restrictive measure can attain the end sought by its application. If those resorting to such a measure think that the attainment of this goal is more important than the disadvantages brought about by the restriction-i.e., the curtailment in the quantity of material goods available for consumption - the recourse to restriction is justified from the point of view of their value judgments. They incur costs and pay a price in order to get something that they value more than what they had to expend or to forgo. Nobody, and certainly not the theorist, is in a position
    to argue with them about the propriety of their value judgments.” HA Page 749 (pdf)

    What he opposed immensely is directly overriding the “market phenomena” through price controls, which it seems he thought was an essential part of the doctrine of interventionism! Because these measures are always (with two exceptions he mentions) self-defeating even in the eyes of the authority (except they are sadists)! This is where they have to decide between Market or Planning, “if it is not to make things worse from the point of view of the governments and the interventionist doctrinaires”

    Here is a quote of what the interventionist doctrinaires he argued against believed in:” The interventionist doctrinaires and their followers explain all these undesired consequences as the unavoidable features of capitalism. As they see it, it is precisely these disasters that clearly demonstrate the necessity of intensifying interventionism.” HA Page: 887

    What do you get if you have an authority which believes, any negative effect is a market failure?

    Whatever I am sure you read that all(maybe you forgot some stuff already..). Sorry for these long posts, but this is a bit too complex for one liners (I think I saw you recently say that one cannot refute hundreds of pages with one line!)

    Finally Ryan's and your criticisms work only if you interpret Mises in an extreme and overstating way. Of course you are free to do that, but is not convincing...

    ReplyDelete
  16. Skylien, I think you may have a reasonable interpretation of what Mises was on about.

    (By the way, have you a lien on the sky?)

    ReplyDelete
  17. Oh, didn’t expect that. Ok. Thanks!

    And a second “Oh”, no I don’t have a lien on the sky. I didn’t even know what a lien was.. The name doesn’t mean much. The name is just a merge of the name of the folk-metal band Skyclad and Alien. (The first merge was Tool and Alien (=toolien), which fitted better, but since that name was already taken by someone else in ICQ about 10 years ago, I moved on [Skycladlien or Skyclien sounds stupid...]).

    In case you are wondering right now what “folk-metal” would sound like:
    http://www.youtube.com/watch?v=DOwxjxEwZgA

    Thanks for the talk, Cheers

    ReplyDelete