[ExI] Psychology of markets explanations

painlord2k at libero.it painlord2k at libero.it
Tue Jun 2 20:32:24 UTC 2009

Il 02/06/2009 16.45, Stathis Papaioannou ha scritto:
> 2009/6/2<dan_ust at yahoo.com>:
> [It annoys me that gmail doesn't automatically add "wrote" when I
> reply to emails. Does anyone know how to change this?]
>> I don't think they and I mean the same thing by economic laws
>> here. It seems to me, and either can correct me, that they see
>> economic laws as provisional or not laws at all, and reduce
>> economic phenomena to psychology -- hence my subject line.
> Yes, and I don't see how this could be a point of contention.
> Economics *must* supervene on the interaction between human behaviour
> and the physical environment, just as the mind *must* supervene on
> brain processes, unless you believe there in a magical spirit that
> animates the mind or the economy.

Do you consider logic a "magical spirits"?
And, not "human behaviour" but "purposeful human behaviour".

> You can come up with a deeper explanation, such as an excess of
> liquidity causing asset price inflation, but in the end it is still
> peoples' reaction to the excess liquidity (or whatever it is) that
> drives the economy.

What is the rational reaction for the single individual to lower
paper-money interest rates?
Consume more now, save less for tomorrow, take a loan, pay later.
This because money is valued more now than will be valued in the future.
But if all do so, there is a disconnection between the resources
saved/invested and the resources consumed in all the system. Then, in
the future, there will not be enough resources saved to continue to
consume. Then the consumes will reduce.

A feather will feel the gravity whatever the atmosphere will be. It
could go down like a brick (on the Moon), it could fall gently on Earth
atmosphere if there is no wind, or it could fly away if there is wind
(until the wind cease). But the gravity is there, it is not suspended
when it fly under the influence of the wind. It will always pull the
feather down.

> An analogy from physics might help illustrate my point. We know that
>  there are billions of gas molecules all jostling each other in an
> extremely complex way, but the relationship between pressure and
> volume for the gas as a whole can be approximated by the very simple
>  Boyle's Law, PV=k. But we know that Boyle's Law *must* be due to the
>  complex behaviour of the individual molecules, even if it's useless
> or impossible to try to follow those individual molecules in order
> to try to predict the behaviour of the gas.

I remember it was PV=kT.
The relation between molecules and their container could be very
complex, indeed. But if you raise the temperature, the pressure will
raise. No animal spirits on these molecules to explain because they hit
harder the container or blow it up. Only higher temperature.

In the same way, there is no need of an animal spirit to explain because
consumers prefer to take more loans, consume more and save less when
interests rates are low. They are doing what is rational given the data
they have at hand.

Do you ever read the first chapter or two of Man, Economy and State of
It is free to read at Mises.org (PDF)

> THE DISTINCTIVE AND CRUCIAL FEATURE in the study of man is the
> concept of action. Human action is defined simply as purposeful
> behavior. It is therefore sharply distinguishable from those observed
> movements which, from the point of view of man, are not purposeful.
> These include all the observed movements of inorganic matter and
> those types of human behavior that are purely reflex, that are simply
> involuntary responses to certain stimuli. Human action, on the other
> hand, can be meaningfully interpreted by other men, for it is
> governed by a certain purpose that the actor has in view.2 The
> purpose of a man’s act is his end; the desire to achieve this end is
> the man’s motive for instituting the action. All human beings act by
> virtue of their existence and their nature as human beings.3 We could
> not conceive of human beings who do not act purposefully, who have no
> ends in view that they desire and attempt to attain. Things that did
> not act, that did not behave purposefully, would no longer be
> classified as human. It is this fundamental truth—this axiom of human
> action— that forms the key to our study. The entire realm of
> praxeology and its best developed subdivision, economics, is based on
> an analysis of the necessary logical implications of this concept.4
> The fact that men act by virtue of their being human is indisputable
> and incontrovertible. To assume the contrary would be an absurdity.
> The contrary—the absence of motivated behavior— would apply only to
> plants and inorganic matter.5


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