From: gcf@panix.com (Gordon Fitch)
Subject: Re: Economics and the Dart Board
Date: Fri, 18 Dec 1992 17:23:02 GMT
Organization: mydog in exile

wales@silver.ucs.indiana.edu (jimmy donal wales) writes:
| >| ... Gordon also took the position that prediction in economics is
| >| not really possible because we don't understand psychological factors
| >| very well at all. ...

gf:
| >                                    ...  Had I been
| >hanging around in the Fourteenth Century I could not have
| >looked at my watch and said "Uh-oh, capitalism is due to
| >appear in four hours, 37 minutes and counting...."  yet
| >given the state of culture and technology of the times
| >its appearance was almost certain around that time.

jfh@beach.cis.ufl.edu (James F. Hranicky):
| However, back then there was certainly no such thing as a concept of 
| economics. The Austrian School of economics approaches predictability
| with care. The school states that pinpointing specific times for events
| and even some events themselves may not be possible, but there are general
| trends that can be predicted, such as:
| 
| 1) An increase in the quantity of money will generate a boom...

Not necessarily.  As I explained in a previous article, what
is necessary is the generation of public confidence and
enthusiasm.  Printing money can bring this about.  So can a
war.  So can hucksterism.  Sometimes the boom can become
self-perpetuating: the rise in production leads to an
abundance of wages and goods, people work hard, invest and
spend more, leading to a rise in production...  And the same
can be true of busts and depressions.  There's little way of
evaluating the mood changes that govern these phenomena, as
far as I know; if someone has one, they're keeping it a
secret.

Of course -- as I mentioned in regard to stock prices, but
this is true of the economy in general -- if someone _did_
manage to understand these processes, and began to use their
understanding to enter the economy in any serious way, they
would obviously create a situation of positive feedback
which, as we know from elementary cybernetics, will soon
blow up or go off the rails.

Von Hayek predicted stagflation, Marx predicted stagflation.
Hey, _I_ can predict stagflation.

| 2) Interventionism [ leads ] to Socialism. ...

That depends what you mean by "socialism."  If you 
accept the propagandistic canard that socialism means 
government control, the interventionism _is_ socialism.  If
instead -- more historically -- you take socialism to mean
"ownership or control of the means of production by the
public or the working class" then, clearly, interventionism
on the part of a bourgeois (non-socialist) government does 
not lead to socialism; it's just a further exercise of
power by the bourgeoisie.  If it's successful, it will be
followed by further similar exercises, but it's not
socialism.

| ... Socialism must fail, because a bunch of government bureaucrats can
| never amass the amount of knowlege needed to imitate the price system
| of Capitalism.

This may come as a shock to you, but many of the 19th-
century anarchists and socialists expected whatever economic
units they thought would succeed capitalist corporations to 
relate to one another through markets.  In my view they were
rather simple-minded about it, as are many market
enthusiasts today, because they did not understand that a
market, especially a large one, is a complex entity with a 
number of levels or layers and aspects which involve 
feedback and recursion.  (That's why they can "collapse"
or "blow up.")

You'll notice that today's capitalists -- I mean the real
practitioners, not just amateurs and fans -- practice a 
great deal of market control.  In 1975, the algorithm which
set the opening price for certain bonds on the NYSE required 
several hundred lines of Fortran to express.
-- 

 )*(    Gordon Fitch    )*(    gcf@panix.com    )*(
( 1238 Blg. Grn. Sta.,  NY NY 10274 * 718.273.5556 )