Thursday, August 08, 2013

The Sun Was Once a Planet

As Thomas Kuhn noted, in 1400, both the Sun and the Moon were planets, while the Earth was not one.*

But if today you were to campaign for calling the Sun a planet, you would be campaigning to redefine the term planet. The fact that once upon a time that definition was current makes no difference. So Blackadder is right.

Also curious in Murphy's post is this: "I agree with the standard Austrian position on this," i.e., that inflation is an increase in the money supply. Let us set aside the question of what it means to "agree with" a definition, rather than simply employing it, and focus on the word "standard": we have here a definition of inflation offered by Mises, and adopted by Rothbard and his followers. Has it ever been used by Hayek? Lachmann? Kirzner? Horwitz? White? Selgin?

Not that I know of. Apparently, what makes something a "standard" is its use by a small Austrian splinter group.

* And note, this was a matter of definition: what it meant to be a planet in 1400 was "a heavenly object that wanders among the fixed stars from the point of view of Earth." The Moon and the Sun were planets by this definition; it was a change of definition that made the Sun not a planet, not an empirical fact. (Of course, newly discovered empirical facts had a role in changing the definition!)


  1. There's actually a substantive point here too that the Austrians are being a bit obscure on. They predicted inflation, even hyper inflation. So we know that really implies price rises, but let's ignore that for a second. Their point was that the inflation was bad. Still is a bad thing. But would have happened had we *not* had the growth in money supply? Since they reject Keynesian effects they cannot argue we would have had *less* growth. So we would have had pretty brutal *price* deflation. Wouldn't this have caused "sectoral imbalances" as debtors got "crucified" to borrow from W J Bryan? I'm just not sure their position here makes a lot of sense.

    1. "Austrians ... They predicted inflation, even hyper inflation"

      Be more specific, which Austrians predicted this? Obviously, I know that a few have, because one of my friends happens to be the most notable of these (he admitted his mistake), but other than that this statement doesn't hold much water on the whole (most of those who are referred to as "Austrians" are nothing of the sort, they're just people on the internet who subscribe to Austrian ideas, they aren't even economists).

      "But [what] would have happened had we *not* had the growth in money supply?"

      Prices would have adjusted to their new equilibrium based upon the reality of the situation as perceived by the actors within the economy, and the factors of production would go to their most valued ends.This is true in all sectors and at all stages of production. Prices are always the guide to economic calculation, and thus are the impetus for economizing activity. It certainly doesn't help to intervene in this process, but it is rather prudent to allow all actors within the economy to make rational decisions based upon real money prices.mRemember, there were bubbles in certain sectors, thus the prices were already higher than they otherwise would have been without the initiation of easier credit and money, much of Fed and gov policy has been aimed at maintaining these higher prices.

    2. "which Austrians predicted this? Obviously, I know that a few have, "

      Then why ask?

      Bob lost a bet, Schiff has been widely quoted. I'm sure there are more.

    3. I said that I know "a few" have. If a few Americans are murderers, are all Americans murderers?

      And I ask because what many people are talking about when they say "Austrians" is merely a collection of people who they argue with on the internet. Are we talking about Austrian economists, or are we talking about non-economists who're very knowledgeable of economics and support the Austrian view?

      "Bob lost a bet, Schiff has been widely quoted. I'm sure there are more."

      Right, and Bob admitted his mistake. As for Schiff, last I checked he's not an economist and has never served in that capacity.

      So essentially it looks to me like you're saying, "one Austrian economist made a bad prediction, I 'd bet that others did too, however I'm still going to implicate ALL Austrian economists".

    4. Oh Joe, go read FreeAdvice some day. Schiff gets cited endlessly as an example, indeed THE example, of an Austrian who got the crash right. Then suddenly he doesn't count?

      Ironic in a discussion about moving the goalposts!

    5. That's fine that people like to associate with him. I've hung out with him and I think that he's a good dude, and I have nothing against him personally. In fact, I like him and his work.

      However, I've always been consistent in saying that I don't consider him an Austrian economist or even an economist at all (he's a stockbroker and entrepreneur), and that I find a lot of supply-side influences in what he says. I've said this in public forums more than a few times using my own birth-name. I have moved no goal post.

      Now I know that I am being far too generous by saying this, but honesty is always my way. I have in the past said that Schiff's analysis of the situation before the crash (esp. in his Mortgage Bankers speech) was a good example of an informal Austrian analysis. Granted, he made many predictions, which aren't at all part of what Austrian economics is about. However, even with those predictions (correct, as they were), it was his analysis of the situation that I found to be "Austrian".

      Does this make him an "Austrian"? Well, that depends upon how you define it ...

    6. And by "hung out", I don't mean that we're buddies. That's too strong of a phrase, my fault. We've been at the same functions more than once.

  2. I get your point, Gene, but it still isn't quite the equivalent example that you think that it is in this case.

    After all, we know that the sun is not a planet, whereas monetary inflation certainly is the prime driver of price inflation, and both of these terms are quite relevant to the nature of the thing that we're talking about in terms of economics (money and prices), this has never really changed.

    That's why I distinguish between "monetary" and "price" inflation, because I think that it is more important that people understand the relationship between money and other goods than anything else.

    Whenever I hear the term "inflation" I automatically think in terms of it dealing with money and prices, whereas when I hear the term "sun" I never think in terms of it being a planet. In the one case the term was deemed entirely unconnected to its description, whereas in the other the description is still intimately tied to the term.

  3. Apart from which, the word "inflation" has always been used in both senses, either “price inflation” or “monetary inflation”:

    1. Your poinbt is stronger than you realize LK. The locutions "inflation of " price and money were common. When the shorter, one word, locution gained ascendancy as the default which is more likely, that the general public cared about M0 or that they cared about the cost of bread?

  4. Before I waste more of my precious time on this, are you actually saying Gene you think Kirzner et al. would disagree with Mises' claim that there was an unfortunate semantic revolution? Because that's what I meant by the "standard Austrian position."

    1. Bob, here are my guesses as to what they would think -- some of these people are alive, so we can actually ask:

      Hayek: disagree
      Lachmann: no idea
      Kirzner: would say it is not his field
      Horwitz: disagree
      White: disagree
      Selgin: disagree


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