This guy is a good speaker, it all comes naturally to him. It's a great presentation But if I had a dollar for every time he said "right", I'd have a lot of money
Matthew missed one important source of wartime income: The opposing side. This comes in the form of plunder, economic subjugation or war reparations after the fact. And governments do look at their financial charts with such future earnings already assumed. This is one big reason that war is so devastating. For instance- in WWI both sides counted on reparations, so the Germans were broke and the entante needed to extract extra resources from them for the same reason.
The thing about socialism in war is that although they don't have a system of market prices, it's not as much of a problem in that the state can calculate demands to a reasonable degree and it is in direct control of the supply chain and therefore they only need to fulfill its demands. Having all its industries under control allows it to mobilize it faster and have greater control of its production, this allows it to have a potentially higher efficiency in a war time economy where the goals (winning the war) and demands (equipment needed) were clear to the planners. This is seen in WWII where the USSR with its totalitarian wartime economy was about to outproduce the Germans with a mixed economy despite having a much smaller prewar GDP and heavy industries such as steel and coal, where only oil was produced at a greater amount than the Germans.
Tom Y Mises writes about this in Human Action. His point there is that the freer the economy and the price system, the more efficient and effective production for war will be. Among other things, the USSR was massively supported by its allies once it broke with the Nazis. Also, as a side note, the calculation problem isn't about what to produce (stated demands), but how to produce (combinations of scarce heterogeneous capital goods).
The calculation problem is about the lack of a medium of exchange, which makes it harder for a system calculate the production goods with multiple inputs. However in a war economy, it is unnecessary since if all the inputs are known (resources and man hours) and there is only one supplier and buyer. All the state needed to do was allocate resources based on what is needed the most since it already knows the inputs needed for wartime demands. Even though the USSR was supported by the Allies, it does not change the fact that it produced more wartime equipment domestically than the Germans with a much much smaller prewar GDP and industrial base (shown in nearly all industrial production metrics). There is no doubt that a freer market works better in a peacetime economy, but there seems to be little evidence for it being more efficient in a war time economy. Where production is more rigid.
Tom Y You're confusing a lack of money as such with a lack of money prices. Also, it's not the case that the USSR could "know" the relevant information, as the information is only produced through the market process. The simple volume of production is also irrelevant: what matters is the process by which production methods are chosen. But beyond that, as Mises explained, even with a full knowledge of production possibilities, the state of technology, consumer preferences, etc. calculation is still impossible without market prices and the entrepreneurial division of labor. I recommend Joseph Salerno's various articles on the topic, in addition to the primary sources.
@@tomy3116 its not about inputs and outputs. Its about the machine in between. A war time economy (under the management of gov) has no idea of what is the most efficient way of producing X tank or Y plane. They might know that a plane is 20 tons of steel and costs 100h of labor to finish, but they don't know whether 20 tons and 100h is the best way about making a plane, nor if 20 tons is better or worse than 15 or 25 tons.
He doesn't build from the ground up. 50,000 years ago, there were 50 warriors on one side and 50 warriors on the other. Each were outfitted with uniforms, gear, and weapons. There was a battle. Afterward, there were 40 warriors on one side with double the number of uniforms, gear, and weapons, 25 new slaves, and a whole lot of fresh meat for the cooking. Is there any other gambit in the ancient world that offered such a profound gain in material wealth to its participants?
crimony This is not an entirely accurate description of primitive warfare. See for instance Keegan's A History of War, which explains the role of ceremony and myth in the earliest war making, which was often (though certainly not always!) characterised by a lack of lethal violence. However, this kind of material was in any case far outside the scope of a 45 minute lecture. Walking through this history would take hours. However, a discussion of exactly the point you raise can be found in a recent paper of mine on Chinese military strategy and unproductive entrepreneurship during the Warring States period, and in several other of my papers and public writings.
please for the love of god stop ending every sentence with "Right?" No not right! It's a terrible affectation...so is y'know what I'm sayin' or any other idiom.
The idea that war only shifts production to lower levels of production is problematic historically. What about the Manhattan Project or the development of the jet engine? Similarly didn’t US planners turn to the “Cold War” and “wartime socialism” in part as the ideological cover for State intervention to support development of new technologies. Also can someone give a reference for anyone saying their was “wartime prosperity”? I’ve seen plenty of analyses noting the increase in economic output but never “prosperity”. I’ve tried google without luck; it sounds like a straw man argument. It’s obviously ridiculous because, aside from the grotesque waste of human life, WWII was financed by a reduction in private consumption. Profits might have been prosperous for some, but that’s about it. I was waiting for a rebuttal of Lenin’s and Trotsky’s analysis of the outbreak of WWI, that capitalism had created a world economy which had outgrown the nation-state system which it could not do away with. The only way under capitalism to resolve this contradictions is to “work out” which nation-State would dominate its rivals.
Tim Bo I do not claim that war only shifts production to lower stages, only that that is the most common systematic result. But for example, I leave aside the question about government spending on higher-stage technology, as that has been explored many times by others. The short answer though is that such spending tends to be wasteful, and at the same time involves the kind of horizontal reallocation of capital I discuss first. On the problem of prosperity during and after the war, see Bob Higgs's work, especially his book Depression, War, and Cold War. He walks through all of the common errors about price and production data and how they falsely imply a booming economy. It is a very common claim that WWII got the US out of the Great Depression. Lastly, the argument of Lenin et al. carries much less weight today than it did in the inter-war period, when it was successfully attacked by people like Lionel Robbins. I'm sorry you were disappointed that I didn't mention it, but you didn't let me know your preferences in advance.
Matthew McCaffrey I’ll look up Higgs, thanks. The impulse for expecting a critique of Lenin and Trotsky comes from other Austrians criticism of Marxism and, most importantly, the preparations for war by the major powers. This includes the rearmament of Germany and Japan who are shaking off the vestiges of the conclusion of the last major conflict. Above all it includes the December 2017 National Security Strategy of the US that said the time of “complacency” was over and the US had to prepared for war against at least China and Russia. Shouldn’t a discussion on the economics of war deal with the present wars and the threatened repeat of world war? I suspect the Austrians have strong views on these developments and this was the place to hear them. The Marxists certainly do have a view on this ‘Trump’s National Security Strategy: The return of “great power” military conflict’ www.wsws.org/en/articles/2017/12/20/pers-d20.html
Tim Bo To put this in context, this seminar is about introducing students to the fundamentals of economic analysis, and relating these to some historical cases that intrigued the Austrians. Contemporary conflicts are discussed in other Austrian public and academic writings, whereas this session is about building the framework: getting to grips with some distinctly Austrian ways of looking at war.
Matthew McCaffrey Okay. I’ll have a look for comments on the contemporary danger. This article answered my question on sources claiming “war prosperity”. It still seems remarkable they would make such a claim. His table shows the war was definitely a good time for corporate profits which is really the decisive metric in a capitalist economy. Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s By Robert Higgs | March 1, 1992 Also published in The Journal of Economic History www.independent.org/publications/article.asp?id=138#f2 (FWIW Higgs assessment of the relation US war production to the fighting in WWII is the Cold War/“Hollywood history” (“... however successfully it overwhelmed the nation’s enemies ...”) that the US won the war, which was definitely a common view in 1992. Even allowing for the significance of Lend Lease aid curious readers should look up US Army War College historian David Glantz’s works on the Eastern Front to comprehend how the war in Europe was decided by the success of the Red Army. There’s plenty on RUclips featuring him as well.)
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This guy is a good speaker, it all comes naturally to him. It's a great presentation
But if I had a dollar for every time he said "right", I'd have a lot of money
you'd have a hundred bucks.
Matthew missed one important source of wartime income:
The opposing side.
This comes in the form of plunder,
economic subjugation or war reparations after the fact.
And governments do look at their financial charts with such future earnings already assumed.
This is one big reason that war is so devastating.
For instance-
in WWI both sides counted on reparations, so the Germans were broke and the entante needed to extract extra resources from them for the same reason.
He mentions it at 19:40
War is the health of the State!
The thing about socialism in war is that although they don't have a system of market prices, it's not as much of a problem in that the state can calculate demands to a reasonable degree and it is in direct control of the supply chain and therefore they only need to fulfill its demands. Having all its industries under control allows it to mobilize it faster and have greater control of its production, this allows it to have a potentially higher efficiency in a war time economy where the goals (winning the war) and demands (equipment needed) were clear to the planners. This is seen in WWII where the USSR with its totalitarian wartime economy was about to outproduce the Germans with a mixed economy despite having a much smaller prewar GDP and heavy industries such as steel and coal, where only oil was produced at a greater amount than the Germans.
Tom Y Mises writes about this in Human Action. His point there is that the freer the economy and the price system, the more efficient and effective production for war will be. Among other things, the USSR was massively supported by its allies once it broke with the Nazis. Also, as a side note, the calculation problem isn't about what to produce (stated demands), but how to produce (combinations of scarce heterogeneous capital goods).
The calculation problem is about the lack of a medium of exchange, which makes it harder for a system calculate the production goods with multiple inputs. However in a war economy, it is unnecessary since if all the inputs are known (resources and man hours) and there is only one supplier and buyer. All the state needed to do was allocate resources based on what is needed the most since it already knows the inputs needed for wartime demands. Even though the USSR was supported by the Allies, it does not change the fact that it produced more wartime equipment domestically than the Germans with a much much smaller prewar GDP and industrial base (shown in nearly all industrial production metrics).
There is no doubt that a freer market works better in a peacetime economy, but there seems to be little evidence for it being more efficient in a war time economy. Where production is more rigid.
Tom Y You're confusing a lack of money as such with a lack of money prices. Also, it's not the case that the USSR could "know" the relevant information, as the information is only produced through the market process. The simple volume of production is also irrelevant: what matters is the process by which production methods are chosen. But beyond that, as Mises explained, even with a full knowledge of production possibilities, the state of technology, consumer preferences, etc. calculation is still impossible without market prices and the entrepreneurial division of labor. I recommend Joseph Salerno's various articles on the topic, in addition to the primary sources.
@@tomy3116 its not about inputs and outputs. Its about the machine in between. A war time economy (under the management of gov) has no idea of what is the most efficient way of producing X tank or Y plane. They might know that a plane is 20 tons of steel and costs 100h of labor to finish, but they don't know whether 20 tons and 100h is the best way about making a plane, nor if 20 tons is better or worse than 15 or 25 tons.
He doesn't build from the ground up. 50,000 years ago, there were 50 warriors on one side and 50 warriors on the other. Each were outfitted with uniforms, gear, and weapons. There was a battle. Afterward, there were 40 warriors on one side with double the number of uniforms, gear, and weapons, 25 new slaves, and a whole lot of fresh meat for the cooking. Is there any other gambit in the ancient world that offered such a profound gain in material wealth to its participants?
crimony This is not an entirely accurate description of primitive warfare. See for instance Keegan's A History of War, which explains the role of ceremony and myth in the earliest war making, which was often (though certainly not always!) characterised by a lack of lethal violence. However, this kind of material was in any case far outside the scope of a 45 minute lecture. Walking through this history would take hours. However, a discussion of exactly the point you raise can be found in a recent paper of mine on Chinese military strategy and unproductive entrepreneurship during the Warring States period, and in several other of my papers and public writings.
please for the love of god stop ending every sentence with "Right?" No not right! It's a terrible affectation...so is y'know what I'm sayin' or any other idiom.
TDBoedy I know, right?
TDBoedy Chill dude, it's just a verbal tick.
The idea that war only shifts production to lower levels of production is problematic historically. What about the Manhattan Project or the development of the jet engine?
Similarly didn’t US planners turn to the “Cold War” and “wartime socialism” in part as the ideological cover for State intervention to support development of new technologies.
Also can someone give a reference for anyone saying their was “wartime prosperity”? I’ve seen plenty of analyses noting the increase in economic output but never “prosperity”. I’ve tried google without luck; it sounds like a straw man argument. It’s obviously ridiculous because, aside from the grotesque waste of human life, WWII was financed by a reduction in private consumption. Profits might have been prosperous for some, but that’s about it.
I was waiting for a rebuttal of Lenin’s and Trotsky’s analysis of the outbreak of WWI, that capitalism had created a world economy which had outgrown the nation-state system which it could not do away with. The only way under capitalism to resolve this contradictions is to “work out” which nation-State would dominate its rivals.
Tim Bo I do not claim that war only shifts production to lower stages, only that that is the most common systematic result. But for example, I leave aside the question about government spending on higher-stage technology, as that has been explored many times by others. The short answer though is that such spending tends to be wasteful, and at the same time involves the kind of horizontal reallocation of capital I discuss first. On the problem of prosperity during and after the war, see Bob Higgs's work, especially his book Depression, War, and Cold War. He walks through all of the common errors about price and production data and how they falsely imply a booming economy. It is a very common claim that WWII got the US out of the Great Depression. Lastly, the argument of Lenin et al. carries much less weight today than it did in the inter-war period, when it was successfully attacked by people like Lionel Robbins. I'm sorry you were disappointed that I didn't mention it, but you didn't let me know your preferences in advance.
Matthew McCaffrey I’ll look up Higgs, thanks.
The impulse for expecting a critique of Lenin and Trotsky comes from other Austrians criticism of Marxism and, most importantly, the preparations for war by the major powers. This includes the rearmament of Germany and Japan who are shaking off the vestiges of the conclusion of the last major conflict. Above all it includes the December 2017 National Security Strategy of the US that said the time of “complacency” was over and the US had to prepared for war against at least China and Russia.
Shouldn’t a discussion on the economics of war deal with the present wars and the threatened repeat of world war? I suspect the Austrians have strong views on these developments and this was the place to hear them.
The Marxists certainly do have a view on this
‘Trump’s National Security Strategy: The return of “great power” military conflict’
www.wsws.org/en/articles/2017/12/20/pers-d20.html
Tim Bo To put this in context, this seminar is about introducing students to the fundamentals of economic analysis, and relating these to some historical cases that intrigued the Austrians. Contemporary conflicts are discussed in other Austrian public and academic writings, whereas this session is about building the framework: getting to grips with some distinctly Austrian ways of looking at war.
Matthew McCaffrey Okay. I’ll have a look for comments on the contemporary danger.
This article answered my question on sources claiming “war prosperity”. It still seems remarkable they would make such a claim. His table shows the war was definitely a good time for corporate profits which is really the decisive metric in a capitalist economy.
Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s
By Robert Higgs | March 1, 1992
Also published in The Journal of Economic History
www.independent.org/publications/article.asp?id=138#f2
(FWIW Higgs assessment of the relation US war production to the fighting in WWII is the Cold War/“Hollywood history” (“... however successfully it overwhelmed the nation’s enemies ...”) that the US won the war, which was definitely a common view in 1992. Even allowing for the significance of Lend Lease aid curious readers should look up US Army War College historian David Glantz’s works on the Eastern Front to comprehend how the war in Europe was decided by the success of the Red Army. There’s plenty on RUclips featuring him as well.)
Tim Bo I'm glad you found the Higgs paper useful.