Courtesy of David van der Linden @ New Austrian.org:
A recent article one came across presented an interesting analogy. It was stated that “unconscious thought is like fluid gold, streaming down the side of a mountain towards a deep chasm”. Placing moulds along the mountain saves the gold from flowing into the chasm, just as increasing one’s vocabulary allows one to capture thought and express ideas. The conclusion of the analogist was that the study of philosophy is of value, since one learns to explicate unconscious thoughts, just as capturing gold on the side of the mountain allows one to capture value.
The analogy as it stands is of limited use. Rather than to view gold merely as an object of value, one might learn more by heeding the unparalleled marketability of coined gold. To state that simply capturing gold is a useful endeavour seems to be an objectification. Gold is not valuable in and of itself, rather it is valued by individuals. Capturing gold in moulds does not directly imply one is capturing value, unless one first assumes gold is a valuable substance in and of itself. The minting of gold into coin on the other hand, is useful since one increases the marketability of the substance. To return to the analogy, one can say that broadening one’s vocabulary -the goal of which is to be able to explicate thought- may increase the marketability (or exchangeability) of one’s ideas. Thoughts and ideas are not valuable of themselves, yet it is useful to increase the exchangeability of the same so as to be able to debate, discuss and develop them. Continue reading
Courtesy of Peter Van Coppenolle @ NASOE.org:
Prof. Carl Menger dedicated an entire book to what he considered the appropriate methodology for the thinker in the human and social sciences, of which the field of theoretical economics is a subsection.
If the methodology has been handed to us, why expand on it? Times have not changed since Menger exposed the fallacies of positivist theories. The scorn heaped on subjectivism from positivist corners has increased, even after positivism was found wanting. And not only in the subsection of theoretical economics.
This contribution is intended for the scholar in the hope it will shed more light or provide a deeper understanding on the justification for a subjectivist methodology in theoretical economics. As a philosophy of science, subjectivism draws on a seasoned and proven track record, something Menger thoroughly realised. One hundred and fifty years after Menger, what is the score?
Whατ Δο ωΣ (κ)ποω ?
Evaluating the scientific tools on their appropriateness is not a task for the tools themselves. Obviously, that decision is a task for the philosophy of science to make. The quality of this philosophy will determine the quality of decision making about science and the quality of thinking within science.
One significant result of the Age of Enlightenment has been a marked narrowing of the field of reason to the sense realm. For pre-moderns, reason included in its field the moral and spiritual dimension of human life. For the majority of Western intellectuals since the Enlightenment reason is restricted to the empirical or quantifiable aspects of human existence. Continue reading
Courtesy of Sandeep Jaitly @ FeketeResearch.com:
One of the greatest conflicts that prevented the establishment of a credible theory of interest was that between the time preference & productivity schools. Fekete, looking back to Menger, synthesised the two schools to produce the only coherent & complete theory of interest.
Looking back to Menger’s observation of the existence of a bid/offer spread as opposed to a monolithic price, Fekete combined the productivity and time preference schools via marginal analysis with marginal time preference and marginal productivity of capital. Ludwig von Mises admitted only time preference – and not marginal time preference at that – as the basis for the formation of interest. This was an oversight and not in keeping with the Menger’s established form of marginal analysis.
Space – via marginal productivity of capital – and time – via marginal time preference – were united in Fekete’s theory of interest. Marginal time preference is expressed via the marginal bond holder. The marginal bondholder is the first to refuse to exchange gold coins for bonds in view of the (bid) rate of interest falling below their time preference. The time preference of the marginal bondholder is defined as marginal time preference. In a similar fashion, marginal productivity of capital is expressed via the marginal entrepreneur. The marginal entrepreneur is the first to refuse to exchange bonds for capital goods in view of the offered rate of interest being above their (potential) productivity.
Marginal analysis coupled with Menger’s original observations, can be extended further to determine the theoretical shape of the yield curve under an unadulterated gold standard: discussion of which occupies the faculty of The New Austrian School & Fekete Research. Would it be flat? Would it have an upward bias? Continue reading
Posted in New Austrian Economics
- Tagged Ask, Bid, Bonds, Fekete, Gold, Marginal bondholder, Marginal liquidity preference, marginal maturity preference, marginal productivity of capital, Marginal time preference, Menger, Sandeep Jaitly, Spread, Yield curve
I was fortunate enough to be at the launch of the New Manifesto. From this memorable time I understood that if we do not like the reality set before us, we must change it or accept the consequences. Courtesy of Professor Fekete.com:
July 4, 2013
Formally adopted at the Seminar held in the British Museum, London, on October 6, 2013
In a recent pamphlet Llewellyn H. Rockwell, President of the Mises Institute writes that we are all ceaselessly being bombarded by the media and college educators with propaganda to the effect
“that capitalism causes depressions and exploits the poor. That government is our salvation, and the bureaucrat a hero. That America owes its wealth to the Federal Reserve. That without massive regulation we’d be sunk…That cutting government even a smidgen and permitting free markets would be a disaster… John Maynard Keynes died more than 60 years ago, but his ideas still rule us from the grave: give government more power, and print more money…”
It is a pleasure to acknowledge that Mises University, the Mises Institute’s week-long summer program for students has done an outstanding service to society in flouting the conventional wisdom about government, and explaining the logic behind free enterprise. Continue reading
Posted in New Austrian Economics, Precious Metals
- Tagged Adam Smith, Carl Menger, Circulation, Discounting bills, Fractional reserve banking, Gold, Gold bond, hoardability, Keynes, Marketable, Menger, Mises, New Austrian School of Economics, Principle of Marginality, Professor Fekete, Real Bills Doctrine, saleability, Sandeep Jaitley, Silver
It appears to me that whenever the government gets involved in what serves the public good, they have the unique ability to bastardise and ruin whatever was inherently good, in the process and delivery of said good.
Money has not been generated by law. In its origin it is a social and not a state institution.
Courtesy of Sandeep Jaitly @ Fekete Research:
Bimetallism is often thought of as an unworkable system of monetary arrangement. In the last form that bimetallism existed prior to the ‘de-monetisation’ of silver across the globe in the 19th century, this is certainly true. But in its original form, with floating ratios, it is a perfectly valid monetary system.
The problem, as ever, comes with the attempt to fix prices. Bimetallism – on the strict proviso that the ratio of gold to silver is not fixed – is a perfectly viable system. Since time immemorial, money was defined in terms of silver, not gold. The Pound Sterling was originally defined as 5,400 Troy grains of silver; 240 Pfennigs originally equalled one Troy pound of silver and the Indian Rupee was equal to 175 Troy grains to name but a few. Gold coinage, in so far that it existed, was very much limited in circulation. An often overlooked fact is that gold coinage was never originally defined in terms of silver. Trying to enforce a fixed relationship between gold and silver is like trying to enforce a fixed relationship between the exchange of chalk and cheese. Continue reading