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I don't buy it. Boom & bust cycles are driven by the fundamental difficulty of quantifying value. Since there is no true value, people base their opinions on t

I don't buy it. Boom & bust cycles are driven by the fundamental difficulty of quantifying value. Since there is no true value, people base their opinions on those of others (+delay), leading to "inertia," leading to oscillation. The government might exacerbate the oscillations, but the lion's share of responsibility lies with the market. Complaining that the oscillations happen because the market "just isn't free enough" represents a delusion about the qualities of free markets. As for make-work, it's a compromise that nobody is happy with, but it is a compromise, and that's its value proposition. Some want to let the market clear without intervention by any means necessary, regardless of the social cost, based on (arguably misplaced) faith that this will ultimately make things better. Others think it's ridiculous that periodically attacking the foundation-tier Maslow needs of large swaths of the population is "a feature not a bug," and demand (arguably unsustainable) social policy to fix it. Make-work lies between the "free-market reckoning" and "re-distributional cash grant" extremes and so once the dust of democratic process has settled it's the thing that actually happens even though both sides see it as a poor alternative to their favored solution. > The Baltic dry should be studied in conjunction with other indicators such as yield curves and indications of credit tightness. The Baltic dry should be studied in conjunction with the reliable unreliability of the market in general. Since markets are as inherently unavoidable as physics or politics, we cannot simply wish them away. Instead, we should develop social policy to decouple the markets for well-understood core needs-providing infrastructure from the global economy in order to place bounds on the social cost of market corrections, which could then be allowed to happen (otherwise) unimpeded.

vezzy-fnord 11y ago
What you're describing might explain fluctuations, but it's inadequate and incomplete for the business cycle. Virtually no one, not even Keynesian or other left-economists support make-work. It's mostly an idea favorable to laymen, or often done for more nationalistic rather than economic reasons. FDR was inspired by William Trufant Foster's and Waddill Catchings' policy advice for instance, who had Keynesian-esque underconsumptionist views but did not derive these from any economic theory per se. Even ardent Keynesians will advocate a more sophisticated proposal of what amounts to government-owned employment agencies that combine private contract procurement with state investment projects, with the intention of having the unemployed serve as buffer stocks of labor to meet some form of output target. But not quite brute make-work. (Actually the "quantifying value" problem makes no sense. It's not as if there is some objective essence called "value" that people seek. Value is largely denominated in units of currency. I suppose what you're getting at is the importance of monetary policy?)
- danharaj 11y ago
  > It's not as if there is some objective essence called "value" that people seek. use-value? you know, people actually using the goods and services they acquire?
  - vezzy-fnord 11y ago
    But use value cannot be quantified, since utility is not a mathematical scale, but a subjective feeling that varies from person to person and with time as preferences shift or swing. I'm also unaware of how you can explain diverse business cycles throughout history as emanating from it. Practically every economic theory that has tried to objectively quantify "value", i.e. those of Ricardo, Marx and Sraffa, relies on gigantic and complicated expositions involving leaps of abstraction and mathematical transformation problems that are completely detached from how real-world people actually think about or treat value. (Indeed, such exercises in value theory aren't so much about determining value as much as trying to work out given theories of income distribution and perceived exploitation.)
    - danharaj 11y ago
      I don't think our inability to quantify it means it's not objective. It means our mathematics is not advanced enough yet to capture use-value. Use-value is definitely objective as it is determined by nature. A screwdriver is useful because it screws screws. Use-value is definitely context dependent and agent dependent. This is fine. But we have to acknowledge that the reason why people assign exchange-value to goods is because they have actual use-value: economics describes physical, real world activities. I can agree that no one has presented a good dynamical theory of use-value. That's sensible: it would require at least a full description of reality, and a deep understanding of nonlinear mathematics. One quibble i have is i don't think Marx tried to establish such a theory: his observations about use-value and exchange-value can be made without a full theory of use-value or a full theory of exchange-value. The relationship between the two can be examined in the abstract and that is Marx's program. I can still perform calculations with use-value to derive exchange value: why is water worth so little in exchange-value even though it is so vital to life? The marginalist point of view says that the price of water is determined by equilibrium between marginal cost and utility. Why is the marginal utility of water so low? Well, if we're talking about people drinking water, then it is obvious, isn't it? You only have to drink so much water. When you're not thirsty, water has none of that use-value anymore. Ignoring the relationship between use-value and exchange-value is... weird. It's replacing the true and difficult reality with a nice fiction amenable to manipulation with our primitive mathematics. Do markets define exchange-value or do they compute exchange-value from the aggregate use-values of everyone participating? Edit: as for business cycles, i think they are caused by structural flaws in property rights and financial institutions, but if you asked 5 people why the business cycle occurs, you'll get 6 conjectures and 3.5 theories.
crimsonalucard 11y ago
>Boom & bust cycles are driven by the fundamental difficulty of quantifying value. Since there is no true value I disagree with this statement. Although I do agree that it is hard to quantify or even estimate value, all things do have a true intrinsic value relative to the utility they can provide human beings. Entire empires have been built based on the concept of intrinsic value. Berkshire Hathaway is probably the most famous.
brc 11y ago
Boom and bust markets are caused by human infallibility and time lags. Instead of providing government cover for the cycle, the lesson for businesses should be that they need to prepare for boo and bust. Knowing a truckload of government money will splash down the chute only increases moral hazard for reckless investment. Your last paragraph sounds like a central planning nightmare. We don't need people in government buildings drawing lines around core needs. People faced with scarce resource allocation will make the choices that are right for themselves. Anything else ends up with tractor and leather shoe 5 year plans which don't match what people want.

vezzy-fnord 11y ago

What you're describing might explain fluctuations, but it's inadequate and incomplete for the business cycle. Virtually no one, not even Keynesian or other left-economists support make-work. It's mostly an idea favorable to laymen, or often done for more nationalistic rather than economic reasons. FDR was inspired by William Trufant Foster's and Waddill Catchings' policy advice for instance, who had Keynesian-esque underconsumptionist views but did not derive these from any economic theory per se. Even ardent Keynesians will advocate a more sophisticated proposal of what amounts to government-owned employment agencies that combine private contract procurement with state investment projects, with the intention of having the unemployed serve as buffer stocks of labor to meet some form of output target. But not quite brute make-work. (Actually the "quantifying value" problem makes no sense. It's not as if there is some objective essence called "value" that people seek. Value is largely denominated in units of currency. I suppose what you're getting at is the importance of monetary policy?)

danharaj 11y ago
> It's not as if there is some objective essence called "value" that people seek. use-value? you know, people actually using the goods and services they acquire?
- vezzy-fnord 11y ago
  But use value cannot be quantified, since utility is not a mathematical scale, but a subjective feeling that varies from person to person and with time as preferences shift or swing. I'm also unaware of how you can explain diverse business cycles throughout history as emanating from it. Practically every economic theory that has tried to objectively quantify "value", i.e. those of Ricardo, Marx and Sraffa, relies on gigantic and complicated expositions involving leaps of abstraction and mathematical transformation problems that are completely detached from how real-world people actually think about or treat value. (Indeed, such exercises in value theory aren't so much about determining value as much as trying to work out given theories of income distribution and perceived exploitation.)
  - danharaj 11y ago
    I don't think our inability to quantify it means it's not objective. It means our mathematics is not advanced enough yet to capture use-value. Use-value is definitely objective as it is determined by nature. A screwdriver is useful because it screws screws. Use-value is definitely context dependent and agent dependent. This is fine. But we have to acknowledge that the reason why people assign exchange-value to goods is because they have actual use-value: economics describes physical, real world activities. I can agree that no one has presented a good dynamical theory of use-value. That's sensible: it would require at least a full description of reality, and a deep understanding of nonlinear mathematics. One quibble i have is i don't think Marx tried to establish such a theory: his observations about use-value and exchange-value can be made without a full theory of use-value or a full theory of exchange-value. The relationship between the two can be examined in the abstract and that is Marx's program. I can still perform calculations with use-value to derive exchange value: why is water worth so little in exchange-value even though it is so vital to life? The marginalist point of view says that the price of water is determined by equilibrium between marginal cost and utility. Why is the marginal utility of water so low? Well, if we're talking about people drinking water, then it is obvious, isn't it? You only have to drink so much water. When you're not thirsty, water has none of that use-value anymore. Ignoring the relationship between use-value and exchange-value is... weird. It's replacing the true and difficult reality with a nice fiction amenable to manipulation with our primitive mathematics. Do markets define exchange-value or do they compute exchange-value from the aggregate use-values of everyone participating? Edit: as for business cycles, i think they are caused by structural flaws in property rights and financial institutions, but if you asked 5 people why the business cycle occurs, you'll get 6 conjectures and 3.5 theories.

crimsonalucard 11y ago

>Boom & bust cycles are driven by the fundamental difficulty of quantifying value. Since there is no true value I disagree with this statement. Although I do agree that it is hard to quantify or even estimate value, all things do have a true intrinsic value relative to the utility they can provide human beings. Entire empires have been built based on the concept of intrinsic value. Berkshire Hathaway is probably the most famous.

brc 11y ago

Boom and bust markets are caused by human infallibility and time lags. Instead of providing government cover for the cycle, the lesson for businesses should be that they need to prepare for boo and bust. Knowing a truckload of government money will splash down the chute only increases moral hazard for reckless investment. Your last paragraph sounds like a central planning nightmare. We don't need people in government buildings drawing lines around core needs. People faced with scarce resource allocation will make the choices that are right for themselves. Anything else ends up with tractor and leather shoe 5 year plans which don't match what people want.