[ExI] Economic laws/was Re: retrainability of plebeians

[dan_ust at yahoo.com]

--- On Tue, 4/28/09, BillK <pharos at gmail.com> wrote:
> On 4/28/09, Dan wrote:
>> No.  The law of supply and demand is not a
>> law people merely adhere to casually
>> -- because they're too stupid to see real value -- or
>> a law that they adhere to
>> because of ideological predilections.  It merely
>> states what's inescapable.
>> The reason some people in the entertainment industry
>> are paid a lot is because
>> they are, for whatever reason, highly demanded or
>> (inclusive "or") in short supply
>> as compared with others -- say, farmers, mathematics
>> professors, trauma surgeons, and caretakers.
>>
>>  What you've stumbled onto, too, is the what
>> diamonds and water paradox:
>>  http://en.wikipedia.org/wiki/Paradox_of_value
> 
> That's what I said.  :)  You have to start
> discussing complex theories of 'value'.

Well, this is what's under discussion, no?  And I don't think they [value theories in economics] are all that complex.  The chief problem is that people often seek objective values and try to compare values interpersonally.  Subjective value theory has, IMO, shown this not to work -- not in economics, anyhow -- and resolves the classical values paradoxes.  (And this theory was mostly complete before the end of the 19th century.  That intelligent people seem unaware of this is partly a failure of education and likely partly due to ideology.  On the latter, subjective value theory establishes some pretty firm limits on what economists as economists can say about preferences and values.  Also, economics itself, especially in its praxeology form, is fairly unpopular with elites because it basically shows why most rationalizations for elite rule are flimsy and why social order is the result of human action rather than some wise leaders planning things and
 guiding the herd.)
 
> Supply and demand is not a law.

I disagree.

> Lots of things the public wants, they
> can't get. And lots of things available, they don't really
> want. But
> you have to make do with what is available.

Well, praxeologically speaking, one starts with action and works back to preferences -- wants.  Strictly speaking, actions demostrate preferences.  In that sense, if a person chooses A over B, then they want B -- even if, perhaps, given another choice, C, she might have choosen C or even if she might have preferred choices other than A and B.  And this is the demand covered in the law of supply and demand -- not some hypothetical demand where a person can wish for anything at all.

In fact, a key problem, in my mind, with much mainstream economic theory -- where it deviates from a more rigorous theory -- is presuming some idealized choices and then faulting real world people (and institutions) for not choosing (or allowing) for the idealized choices.  (This goes along with many other unrealistic assumptions of mainstream theory, such as perfect information, no time lags, and equilibrium conditions.  Real world people and real world markets lack perfect information, have time lags (and these differ between people, between markets, and between times), and are often if not always in disequilibrium.  This doesn't at all invalidate the Law of Supply and Demand.  That law, like most praxeological laws, doesn't require perfect economic actors or perfect markets.  Also, that real world markets are far from any dreamed of ideal does NOT mean that interventions will actually make things better.  In fact, sound economic theory mainly
 demonstrates that,  despite these imperfections, interventions will only make things worse -- often much worse.)

> In olden times, you had to pay the strolling minstrel to
> hear him
> sing. Nowadays, everyone that sees or hears anything could
> be
> recording it.
> I've been to concerts where the band announced they would
> not be
> playing anything from their latest recordings because of
> the danger of
> surreptitious recording. So the audience were treated to
> 'Their
> greatest Hits' of years past.  (Still enjoyable).

I'm not sure how this relates to the Law of Supply and Demand...  Do you mean that that law would only work if supply is limited or if people always get absolutely what they expect?

>>  I'd also point out, too, that with regard to
>> entertainers who make a lot of money,
>> the judgment that they make too much (or too little)
>> is subjective and merely
>> signals the judge's particular subjective
>> values.  Yeah, you and I probably think
>> that a highly paid sports star is not of any value to
>> us.  But the thing she or he is
>> obviously of value to others -- that is, they value
>> her or his entertainment more
>> than other options, hence they're willing to trade
>> other values (e.g., money) for it.
>> (And all that would happen if you or I or Rafal or a
>> group of people were to decide
>> who gets paid what is merely to substitute our value
>> judgments for those of the
>> people who actually pay lots, say, to see their
>> favorite team play.)*
>>
>>  Of course, this is ignoring the myriad
>> government interferences in the market,
> 
> Not the evil government again!  Boo! Hiss!  ;)
> It is also ignoring all the 'entertainment industry'
> interference in
> the market, with all the manufactured boy bands,
> promotions, etc.
> manipulating the market.
> It is also ignoring all the crooked dealers in the market,
> like the
> financiers out for as much as they can con people for.

Not at all.  There is a difference between coercive interference and non-coercive participation.  And the former is not limited to government, though government interference tends to have a broader and more long lasting impact, partly because governments tend to be big players (the Big Player Effect) and tend to have legitimacy in their actions (or they would be overthrown, no?).

Also, to be for free markets and a libertarian society in general is not to ignore that people often do rotten and low things.  They do, but the best we can do is deal with them non-coercively until they use actual coercion.  In the case of music you don't like -- e.g., you seem to have an aversion to boy bands (that's your taste, but I don't see any good reason why your taste should dictate the choices available to everyone else) -- you don't have to listen to it or buy the music and you can even speak out against and offer, creative, or promote alternatives.  The non-libertarian alternative is not to make things better per se -- as who knows what the right tastes should be if there are even a right set of tastes -- but simply to allow an elite to force everyone else to support some laundry list of musicians currently favored by that elite.

To use an analogy, would you do that with science?  Would you say scientists left to their devices come up with wrong theories and that there should be no free market in science ideas, but a highly regulated one to prevent junk science from taking over?  I hope not.  Such an outcome would not be Extropian.  We'd end up with officials deciding and planning what to pursue -- instead of an open-ended, free inquiry where, yes, some will make stupid choices, but the overall entreprise is better for that than under the regulated alternative.
 
> 'Supply and demand' is like the 'free market'. They are
> mythical
> beasts that never appear in our day to day world.

Not at all.  The free market is an ideal.  However, economic laws, like the Law of Supply and Demand, apply to non-ideal conditions.  This is why that law is applied fruitfully to regulated markets.  For instance, the reason why many economists argue against rent control and minimum wage laws (and other price controls) is because the Law of Supply and Demand shows how, all else being equal, these interventions will not have the intended outcomes -- unless the intention is to, respectively, cause housing shortages and increase unemployment.  (The Law, of course, does not mathematically predict the amount of real world shortages or gluts.)

Regards,

Dan