0:00 *Ludwig Von Mises* 0:39 Contributions 1:34 Economics is not a Hard Science for Mises. *_Humans Act_* 3:06 Mises Line of Reasoning. 4:23 Economic Laws 5:18 Logical Debate 6:15 There is No Third Way, only 2, Trade and Force 7:54 Critique of Socialism - Socialism is destined to fail in the absence of a price system, central planners would be unable efficiently to allocate the factors of production in complex supply chains 9:01 Baking Soda/Bread example 11:17 Now, in a Command Economy 12:44 Let's Posit a Genius Central Planner 13:55 So Many Variables, So Many Numbers, So Many Decisions on 1 person 14:37 What about changing technology and changing taste? 15:55 How Many? How Much? 16:32 USSR used Western Prices and Consumer Prices. _Weight Quotas_ , 18:10 and _Food Shortages_ 19:16 _The Theory of Money and Credit_ . Money's secondary functions. 20:22 Money and Money Substitutes 22:00 _Cantillon Effect_ 23:15 Intertemporal Misallocation of Resources 24:00 Housing Market Crisis 2008 25:05 Credit Expansion 26:12 Great Depression 26:43 Mises Last Laugh 27:04 _With Special Thanks to..._
"In the 1950s there was an epidemic of people killed by chandeliers falling on their head, because the managers of the chandelier factory, likewise, were making the as heavy as possible to meet a weight quota" Truly next level insanity.
My uncle is a blacksmith and he used to make forged fences and gates. Patterns are priced by the weight. Those more complicated cost more per same weight. Same goes for chandeliers. Of course, if you want some huge chandelier that weights a lot you must also think about the support. Soviets went per gross output, and some genius had a bright idea to demand chandeliers that are as massive as possible. This was probably a result of an over-correction because previously made chandeliers were probably too flimsy so the production quota could be met.
Great job! This is the most intuitive explanation I’ve seen if the socialist calculation problem, and yet it’s thorough and not super oversimplified. Outstanding!
The best easy measure I’ve found of comparing economic performance is percent of household spending on food. The poorer you are the more you spend on food almost without exception, this called Engel’s law.
Households aren't a good measurement unit though, because they differ across time and regions regarding size, age, etc. It's better to compare individuals.
@@commanderwhitehead1224 I would say it still has significant influence since there are few households that purchase groceries using two separate purchasers. Assuming our stereotypical 50's nuclear family, the father, mother, boy, and girl all may have different individual desires, the mother is the one who makes the purchase at the end of the day and buys on behalf of the rest of the family. We may not always have a perfect nuclear family, but all permutations constitute a household, from which we can get our average number to compare.
Although it's not bad, traveling to a place and seeing first hand what's going on is superior. You will find that many peoples are perfectly satisfied through their higher needs like community, marriage and religion while lacking in physical material goods.
Tasos Obscure the problem with that is that happiness is a subjective measure and difficult to compare. People won’t always be honest about how happy they are either, a study showed that the happiest states in America seem to have the highest suicide rates.
Intelligence measures were difficult to figure out but we got some reasonable methods nowdays. Aggregate happiness(however defined) is not necessarily individual happiness. It is even rather reasonable to assert that for a society to be happy, you need small subset of the population to be unhappy. A measure of happiness through community could be how many social events does one attend per month. A measure of base material comfort as food expenses to median wages. A measure of fancy material comfort as electronics prices. A measure of total economic output could be GDP without debt, speculative markets, higher order goods etc, preferably without cooked numbers either.
Imagine having your life work summed up so comprehensively in 27 minutes. That said, my life work would amount to a sentence at most. Maybe a mockumentary if I'm lucky.
Layman here. Von Mise’s assertion that economics can’t be viewed as a science the same way chemistry can baffles me. If the minimum wage was raised to $25 per hour tomorrow, it’s predictable based on past observations what would happen (prices go up, labor gets cut, some businesses will close). If I throw cesium into water, it’s going to explode. It just seems most challenging part of this experiment would just having enough people to do a control test, account for all variables and measuring the effects afterwards.
Mises explicitly states in human action that his economic theory is a priori. We've have a terminological problem in our hands. A priori is supposed to be knowledge *independent* of empirical experience. "Reason" as mises puts it, is simply the more deductive nature of austrian economics, he is completely ignorant of true deductive systems such as formal system mathematics. In other words, the term a priori is inappropriate for austrian economics. The action axiom if dependent of empirical observation, as human logic itself is the evolutionary adaptation of empirical structures. It is not dependent on our lifetimes, but our ancestral past. Mathematics is very different, they reduce to a true formal system of axioms, assumptions on the methods of proof and assumptions on the logical calculus. Austrian economics is rationalist, yes, but economics evidently has a wider scope, however spurious.
I love this series. As a novice, I'd love to hear your explanation of...things like VICE getting a $250mil injection of capital despite their failures. It seems like these kind of investors and investments make a mockery of the free market system, since there clearly isnt a demand for the products they boost. And I don't know how to explain it.
For the same reason HuffPo didn't go under decades ago, politics. Getting your political spew out is valuable in and of itself, regardless of direct return.
@@senselessnothing Yeah I know Rothbard called it 'social capital' or something like that, but it still seems like it's a flaw in capitalism. I don't know how else to explain it.
I'm not sure what you're trying to say, be it mises or hitler, propaganda/ political education has always been thought important. Although the intentions are different(perhaps not always), philanthropic organizations are similar in that their purpose is not profit. In the latter case you can think of it as someone trying to induce positive externalities, thereby having a more valuable property/lifestyle/ community, or perhaps even satisfying some personal desire.
@@senselessnothing I'm saying according to free market principles and theory, these companies should fail. But they are not, because of these partisan investors. This seems like a failure of the free market. But there's probably another explanation I'm just not educated enough on to realize.
Economic theory is defined to be a study of an "economy", which is difficult to define and does not take into account politics/ power/ governance etc. You're looking for a more general social theory than economists could possibly have. The praxeology of mises does explain it though. edit: some economists are trying to incorporate politics into economics and failing miserably, economists are partisans too after all.
Observations on the efficiency and effectiveness of capitalism visa ve government: I worked for a major worldwide pizza chain for 2 years while attending graduate business school and working toward a masters degree in finance. This was after graduating from college with a dual major in economics and political science (heavy on law, Latin American foreign affairs, government management, and local government), and with a minor in business administration (with extra finance classes). I found out when I got into a car accident with another pizza delivery driver (can you imagine the odds?) that my car insurance company didn’t cover any damages which happened while I was delivering pizza. The whole 2 years would not have even been a profitable job for me except for the fact that the other guy accepted responsibility and paid for my repairs. I asked my co-workers which car insurance companies they use. My co-workers all said they have insurance which doesn’t cover them on the job either. My store manager told me to just lie about being on the job if i get into another accident. One thing that interested me was that the production process for a small order of cheese sticks was to make a large order of cheese sticks, right down to the same type of box, and then throw away half of the cheese sticks. They charged 4.99 for a small order and 9.99 for a large order. My manager and everyone else looked at me like I was crazy for even objecting to the pricing of large vs. small cheese sticks. His main argument was “that is what a large costs” and “that is what a small costs.” He seemed more concerned that I didn’t find this convincing. I asked what happens if somebody just orders two small orders, which, of course, would only come to 9.98. They charged 9.99. I objected but that isn’t what the price of two small is on the menu. They retort was “but two smalls IS a large.” My further objection that if two snakes is a large then you are saying that large costs both 9.99 and 9.98 at the same time was met with suspicion. I tried to get a job in at this time finance, I interviewed for one job; the deal was I work for them, along with 99 other people, full time, at long hours, for a year for free generating skates leads for financial services. The reward was at the end of a year, they would fire 80 of us and the 20 lucky interns would get to work long hours full time for $30,000 per year, for one year, with no bonuses, no commissions. At the end of that year, they would fire about 15 people. The remaining 5 people would them be required to live entirely off of sales commissions. The other job, which I actually interned for required me to generate my own sales leads and work entirely off of commissions. There the only requirements were a bachelors degree (in anything), and padding the stock brokers and insurance exams. I found out I was the only one in the internship program who had any financial economics or business training. I wasn’t the youngest, but many interns were only 22 or 23 I also found out that must interns got most of their sales selling financial services to their own family members and family friends. The only other techniques which were even discussed were cold calling people and going door to door. The fee structure was they would take 5 percent of a clients investment up front, and then they would place the client in no-liar mutual funds which charged 1-2 percent expense ratios, about half of which went back to the company. I and I found out that the “advisors” didn’t even make allocation or investment decisions these were all made centrally, and passed off as the “advisors” own ideas. Now I work in the public sector, and yes it is even worse, but at least they pay me.
The problem with Mises, is that it takes someone with an ability to think two or three steps into the implications. We are stuck with people like AOC, who do not possess this ability. From a psychological point of view, we are stuck with people in government who only possess concrete reasoning, rather than abstract reasoning.
The problem you have identified is simply that the retarded cannot fathom conceptual thinking. Perhaps you can make a coloring book for people like AOC to follow along. Nonetheless it is important that we spread this essential knowledge of the laws of economics. So please share ilthese videos with someone who can benefit from it.
Two thoughts: can you apply von Mises theories to a single-payer health care economy? Can you expand his theories to something he never would have foreseen: a software economy (where the margins on software can become almost infinite without raising costs)?
John Bugay The margins on software are not infinite because margins aren’t dictated by costs really but customers. Just look at Steam and note how gamers are the ones who effectively set the prices.
Spann was a nazi who formulated the theory of the corporate state. He most certainly was not an Austrian school economist. Hayek rejected socialism, whereas Spann embraced the fascist version of it.
_The Austrians owe alot to the German Historical School._ Only as a foil. The Historicists held that economics is strictly an historical discipline, and its tenants contingent upon the specific present circumstances, characteristics, and organization of society. The Austrians, on the other hand, held that economics is the study of the universals of human behavior, which are present in all periods and in all institutional arrangements of society. In short, the Austrians held to the doctrine that economic laws exist, and pervade through place and time. The Historicists would have none of this.
@5:40 ''...the per mililiter price of a large coffee was more than that of a small coffee...'' Wouldn't the argument to justify this just be a time preference one? As in, you can buy a large coffee, and get it all now, or alternatively, you can buy a small coffee, slightly cheaper, with the minor inconvenience of having to go back and get another coffee later
No, the coffee example is explained by marginal utility. The first units of coffee will always be worth more than the last units to most people because the satsifaction of wants is being fulfilled. In my forthcoming new economics course I explain all this in much more detail.
Those are still based on a pricing system whereby different departments spend their budget buying the services of other departments. This only works because the whole system is driven by customer demand for services or goods the company provides. Therefore, as it is reliant on the market, it does not suffer from the socialist pricing problem.
Michael Foye sometimes yes. Sometimes no. Sometimes they roll costs forward to newer projects in order to appear to always be profitable, so that no one ever looks bad, and everyone gets bonuses, gets promoted and never gets fired.
@@user-wi3yx3gy2o The failure of poorly managed firms is a feature, not a problem, of capitalism. If such a company cannot rely on a political bailout, it will either have to develop a more efficient practice, or it will cease to exist as an economic entity, and its assets will be reallocated to mote efficient investors.
Michael Foye yes but sadly, I think most large corporations either started out or still are subject to significant government ownership or control, rely on government subsidies, are able to manipulate the tax code in ways private individuals can’t, have received bail-outs of one form or another, receive substantial capital because of their size from government pension plans, or get other special treatment in the form of actual subsidies of one form or another.
Unemployment, and mass unemployment come a business cycle. But im sure it would cut off the business cycle pretty early, provided its a credit induced boom that is.
@@nicosmind3 I can't make sense of what you said. Why would you get unemployment? and what does that have to do with the business cycle? Minimum wage is raised now with inflation or most often greater. my question is not a matter of would it fail. but what would fail. I think it would make immigration untenable though. Because more people = higher rent + lower wages. It may be the only way to solve the feedback loop on wealth disparity. if the system can break you would change your decisions wouldn't you?
@@becauseitscurrentyear8397 >Minimum wage is raised now with inflation or most often greater. Rent and housing are also raised with inflation. >I think it would make immigration untenable though. Because more people = higher rent + lower wages. Would this same phenomenon occur with people migrating from state to state within the US? How about town to town, neighborhood to neighborhood? Is your objective to prevent anyone from moving anywhere?
@@artemiasalina1860 well that would depend on what scale it is implemented. and I only asked for a thought experiment, Actually most minimum wages out perform reported inflation and price of rent outperforms both inflation and minimum wage. They are not raised with inflation they minimum wage is raised based on cost of living which is similar but includes increases in expected living standards. Things like internet access or cell phones. While the price of housing is inflated by the available debt to the purchasers and a buyer to available house ratio. More people= higher price, less houses = higher price. more available banking debt = higher price. this in turn increases the cost of living. But there is not hard link between minimum wage and rent/price and adjustments of minimum wage take about a decade. If they directly linked minimum wage to the national average housing price I don't see why internal movement would be effected. If you put a town by town assessment you would might see an increase in commuting and a depopulation of large city centers. If you did it on a state level you might see alot more internal migration attracting people to higher wage states but also high unemployment in those areas.
One criticism of 'humans act', that frequently humans will act entirely based on emotions, with no desired end in sight. Think of 'lashing out', or even dancing. There's no goal. I recognise that Mises says economics is not a hard science, but he then goes on to try and build a hard science out of it. I dunno. I always find Austrian economics contradicts itself with its own rules.
Stefan Lamb it is specifically PURPOSEFUL action. In your examples, lashing out is not purposeful. Dancing however satisfies some need to dance, depending on your tastes.
@@stefanlamb1179 You can dance for pleasure, dance for money etc. But try and think of it as economic man if that helps. Or positive man. Ie we all have choices in front of us but choose the one that has the greatest "positive". You can be thirsty while watching the TV. But the TV is good and youre comfortable. So you sit on. In 5 minutes time the TV is just as good, maybe even better, but now your thirst is so bad you get up anyway and grab a glass of water. So often actions requires subjectively weighing wants, which we do automatically with barely a thought (like driving were that acustom decisions often dont need deep thought).
I disagree with you ,the prices aren’t the only indicator of efficiency. For example you can determined the most efficient oven according to an energetic output: - the quantity of gas or watts needed to function -the energy return rate Ect... OF COURSE THE PRECISES ARETHE BETTER INDICATOR !!!
The point is that across all of the production processes -- we are talking many thousands -- in the absence of a common denominator like price it's very very very difficult to the point where full blown socialism is actually impossible.
If you implement a maximum price for milk and those who produce under high cost have to alter there buissnes model to be suitable shouldn't there emerge more milk seller that sell for a lower price since the demand for milk is still high (people just have to settle for lower quality)?
@@AcademicAgent I thought that in the milk example the milk seller that sells for a higher price deliberately chooses to pay higher production cost since this enables him to produce a higher quality product which people will pay more money for. So another producer could enter the market that produces with less expensive equipment but offers his end product at a lower price. So in the end the best quality milk is gone from the market but there is more mid quality milk because people take that over no milk at all...
The Last European it’s not about quality but total quantity of milk. The price cap drives out marginal producers and so there’s less milk overall. Quality is not part of the calculation.
The important part of the Economic Calculation Problem, which is only possible in a capitalist economy, is the part about prices and therefore efficiency. Of course it’s possible to produce resources in a socialist economy, but it’s important to stress that supply and demand produce prices which show the value of these resources in an economy. These prices are used by people and companies to decide what to purchase in order to minimise costs, and this ensures that the least valuable resources are used. This decisionmaking itself is feedback on what is valuable - through changing demands - and will affect production according to the costs incurred and revenues produced. A company that no longer makes a profit due to lower demand can no longer afford to operate because the resources it produces are now less valuable than the resources it consumes in production. If this company continued to operate, it would be draining value from society rather than producing it, and the resources it consumes in the process (which include labour) would be better used elsewhere. In a socialist economy, due to the lack of prices, nobody would know what activities would be worth doing or not. It’s quite possible that people would be making products that are less valuable than the resources used, but there would be no way of knowing this without prices. This national scale of misallocation and inefficiency in production means that people would be worse off - because this inefficiency means that, in the best scenario, people would have to work more in order to produce what they want and need, and in the likely and worse scenario, the misallocation is so severe that production in many sectors of the economy will not be enough, and there would be shortages in important items, including food. Looking at history, this is what has always happened. We know how poor people were under these systems, but even with people’s best interests at heart, it is not possible to allocate resources efficiently without market prices. When people are free to trade, prices naturally arise from supply and demand, and profit is the measure of value produced, since it is the value of the product minus the value of the resources consumed to produce it. This is why the money people and companies make is not a sign of what they have taken from others, but rather what they have produced for others - since people will only swap their money with something that they deem worth more. Further, this fact that profit is the measure of value produced means that people are incentivised into activities that are more valuable to others, whether this is the choice of one job over another for higher income, or the choice of a company to produce certain products over others. This ability to know how valuable resources are is only possible with market prices and, as demonstrated, is necessary for efficient allocation of resources.
Yes, excellent comment and thanks for watching. I would say that in addition to what you say, prices are incredibly important for producers to choose between inputs. For example, between investing in workers or capital as I showed in the example.
Harrison, I believe you are confusing two separate questions. 1. What consumer goods should be produced? 2. How should producer goods be allocated so as to produce the consumer goods that we want as efficiently as possible? For (1), you indeed need a market to extract the information of what the consumers desire. If you did not have a market, you would have to guess what people want or ask them using some survey or voting system. Neither system would probably work well for an entire economy. For (2), you don't need a market because the subjective preferences of the consumers are not relevant. Only the objective use-value of a good matters. What you need is information about the resources (original factors) that exist in the economy and the technology available for turning inputs into output. If you have this information, you can set up an algorithm that calculates the production possibility frontier of the economy and derive the most efficient way of allocating resources. Since it is impossible to go beyond the frontier, this method would in practice be more efficient than a market system (since markets are almost never fully efficient). So, the idea that you need prices in order to know how to produce efficiently only applies to consumer goods. For producer goods (capital goods, resources, labor) you don't. And by the way, not all socialist economies had low rates of growth. The Soviet Union, for example, had very good results in terms of economic development (not political!). People tend to think that because eastern Europe is poor today, socialism must have failed to produce rapid growth. They forget that eastern Europe has always been poorer than the west. It was poorer before, during, and after socialism.
@@karlostjuroukei1802 Yes indeed. He spoke about it in various books of macroeconomic theories. He said in the short run and especially during recessions economic output is strongly influenced by aggregate demand (total spending in the economy). Now, don't get me wrong I see your point. If Kaynes was still alive and see the management of his theories in the economy he would possibly disagree.
i think a third way of distributing resources would be charity, which is neither trade nor socialism. without the natural tendency of people to be charitable, socialists would have a much stronger case in favour of tyrannical redistribution.
Surely if you show empirically that every time (or even the majority of times) you set a minimum wage there is no increase in unemployment you would begin to suspect that the logical deduction of Von Mises is flawed somewhere. To imply anyone performing such a study is trying to (impossibly) argue against pure logic just shows inflexibility in even entertaining the presence of flaws in the arguments.
@@AcademicAgent Thanks for the reply. Your confidence in the logic has at least made me want to go and read more. In the mean time though, did von Mises consider how the increase in worker wages would lead to more demand for goods/services in the system and therefore more jobs being created to meet that demand? Btw, enjoyed the video, very thought provoking.
@@Deltelly This would not happen because the total number of jobs would decrease, and therefore the total demand would decrease. Employers tend to shift investment from labour into capital (think McDonalds machines). The increased wages of the chosen few will not offset the fact that fewer people are getting money. There are no logical arguments for minimum wage, it is just a bad policy.
@@AcademicAgent Ah, so if I understand you, the total jobs should decrease as employers, hit with the increased cost of labour, lay off staff and not just take the hit in their profit margins (he said euphemistically)? That sounds a simple enough premise to test empirically :). I suppose the primary reason I am against letting the market decide all wages is that the relationship between employer and employee in setting the wages, particularly for low skilled jobs is really quite coercive, like trying to negotiate when you're standing on the edge of a cliff. Of course in some minds the employer pushing wages down to the edge of starvation or homelessness is just the system being efficient. Is there no place for treating our fellow human beings as ends in themselves here or am I just being melodramatic.
@@Deltelly First, it is seldom the case that a minimum wage hike will lead to straight-up firings, but rather that workers will find their hours reduced and -- this is more important -- in the long-run new workers will be hired less frequently. Most often the marginal workers (i.e. least experienced, least skilled, usually 17-22 year olds). Second, the relationship is not coercive because no one HAS to do any job -- it is a voluntary agreement between the person and the employer. Bohm-Bawerk has a very good 40-page essay on how this all works here: mises.org/library/control-or-economic-law#iii Note the constraints of the employer as well as the constraints of the worker in his analysis.
The thing about deduction, though, is that no amount of synthesizing can get you on a firm ground in the absence of empirical testing. It doesn't mean that without empirical testing one is wrong, but one cannot be presumed to be right. Just look at all the deductions that the religious apologists are spewing. And Austrian economics looks to me awfully similar to religious belief, when something happens that runs contrary to the theory some ad hoc axcuse is made, some scapegoat is found so we can all pretend there was nothing wrong with the theory. It is, in other words, unfalsifiable.
KalifUmestoKalifa I’d like to see you prove any one of the laws wrong. Your reasoning here is “because theology has used deductive reasoning all deductive reasoning is like religion.”
@@AcademicAgent Ok, let's look at the minimum wage creates involuntary unemployment one. Sure, it is true that if you price work out of it's utility you will create involuntary unemployment. The devil is in the details though. Mises assumes that the market derived minimum wage is at the level close or equal to marginal revenue from that work. Is it though? What if there is more people than there is work? If it is a buyers market for work the actual market minimum wage could be, in the extreme, as low as maintenance costs of workers biological needs. (in the absence of social programs and minimum wage, if unable to find better work, one would work for food and shelter) In that case setting a minimum wage above the market minimum wage but below the marginal revenue from unskilled work would not increase unemployment.
Also consider that “Theologists used deductive reasoning therefore deductive reasoning in economics is like religion” is not a great argument in itself.
what the hell is a constant variable? lol mises has not contributed anything of significance to economics and his analysis is agenda driven. value is objective, not subjective. and game theory has proven praxeology to be absolutely worthless.
0:00 *Ludwig Von Mises*
0:39 Contributions
1:34 Economics is not a Hard Science for Mises. *_Humans Act_*
3:06 Mises Line of Reasoning.
4:23 Economic Laws
5:18 Logical Debate
6:15 There is No Third Way, only 2, Trade and Force
7:54 Critique of Socialism
- Socialism is destined to fail in the absence of a price system, central planners would be unable efficiently to allocate the factors of production in complex supply chains
9:01 Baking Soda/Bread example
11:17 Now, in a Command Economy
12:44 Let's Posit a Genius Central Planner 13:55 So Many Variables, So Many Numbers, So Many Decisions on 1 person
14:37 What about changing technology and changing taste?
15:55 How Many? How Much?
16:32 USSR used Western Prices and Consumer Prices. _Weight Quotas_ ,
18:10 and _Food Shortages_
19:16 _The Theory of Money and Credit_ . Money's secondary functions.
20:22 Money and Money Substitutes
22:00 _Cantillon Effect_
23:15 Intertemporal Misallocation of Resources
24:00 Housing Market Crisis 2008
25:05 Credit Expansion
26:12 Great Depression
26:43 Mises Last Laugh
27:04 _With Special Thanks to..._
Trade, or force. What about original appropriation?
Benjamin Rood you raise at least one interesting question.
"In the 1950s there was an epidemic of people killed by chandeliers falling on their head, because the managers of the chandelier factory, likewise, were making the as heavy as possible to meet a weight quota" Truly next level insanity.
My uncle is a blacksmith and he used to make forged fences and gates. Patterns are priced by the weight. Those more complicated cost more per same weight. Same goes for chandeliers. Of course, if you want some huge chandelier that weights a lot you must also think about the support.
Soviets went per gross output, and some genius had a bright idea to demand chandeliers that are as massive as possible.
This was probably a result of an over-correction because previously made chandeliers were probably too flimsy so the production quota could be met.
This whole series I've been waiting for Mises
this is the one no one wants to mises
@@randomicus4782 let's hoppe in the next one
He Haz Litt my eyes up with this amazing video.
(Waiting for a Rothbard pun)
Hip-hip, Murray for Austrian economics.
I'm so sorry I let the team down.
Great job! This is the most intuitive explanation I’ve seen if the socialist calculation problem, and yet it’s thorough and not super oversimplified. Outstanding!
my favorite economist, I read Human Action and Bureaucracy and my thinking was changed forever
Absolutely loving this series!
yes...
me to...
The Academic Agent , This is an excellent series. Thank you.
Great video! Thank you
Oh hi TIK!
You follow lolberts TIK? Gotta be honest I lost some respect for you.
The best easy measure I’ve found of comparing economic performance is percent of household spending on food. The poorer you are the more you spend on food almost without exception, this called Engel’s law.
Households aren't a good measurement unit though, because they differ across time and regions regarding size, age, etc. It's better to compare individuals.
@@commanderwhitehead1224 I would say it still has significant influence since there are few households that purchase groceries using two separate purchasers. Assuming our stereotypical 50's nuclear family, the father, mother, boy, and girl all may have different individual desires, the mother is the one who makes the purchase at the end of the day and buys on behalf of the rest of the family. We may not always have a perfect nuclear family, but all permutations constitute a household, from which we can get our average number to compare.
Although it's not bad, traveling to a place and seeing first hand what's going on is superior. You will find that many peoples are perfectly satisfied through their higher needs like community, marriage and religion while lacking in physical material goods.
Tasos Obscure the problem with that is that happiness is a subjective measure and difficult to compare. People won’t always be honest about how happy they are either, a study showed that the happiest states in America seem to have the highest suicide rates.
Intelligence measures were difficult to figure out but we got some reasonable methods nowdays.
Aggregate happiness(however defined) is not necessarily individual happiness. It is even rather reasonable to assert that for a society to be happy, you need small subset of the population to be unhappy.
A measure of happiness through community could be how many social events does one attend per month. A measure of base material comfort as food expenses to median wages. A measure of fancy material comfort as electronics prices. A measure of total economic output could be GDP without debt, speculative markets, higher order goods etc, preferably without cooked numbers either.
Choice by Robert Murphy is a wonderful and easy read that will help you prepare/understand Mises’ Human Action.
How are you fitting all this into 27 minutes.
And he did it impressive
Imagine having your life work summed up so comprehensively in 27 minutes.
That said, my life work would amount to a sentence at most. Maybe a mockumentary if I'm lucky.
this man was an absolute diamond
Mises is simply brilliant, thank you AA.
This was so good AA. Thank you so much
Layman here.
Von Mise’s assertion that economics can’t be viewed as a science the same way chemistry can baffles me.
If the minimum wage was raised to $25 per hour tomorrow, it’s predictable based on past observations what would happen (prices go up, labor gets cut, some businesses will close).
If I throw cesium into water, it’s going to explode.
It just seems most challenging part of this experiment would just having enough people to do a control test, account for all variables and measuring the effects afterwards.
IamRayson his point is that you can get there by logic alone you don’t need to test it
Mises adopts the traditional false dichotomy of a priori/ a posteriori which is bonkers.
Mises explicitly states in human action that his economic theory is a priori. We've have a terminological problem in our hands.
A priori is supposed to be knowledge *independent* of empirical experience. "Reason" as mises puts it, is simply the more deductive nature of austrian economics, he is completely ignorant of true deductive systems such as formal system mathematics.
In other words, the term a priori is inappropriate for austrian economics.
The action axiom if dependent of empirical observation, as human logic itself is the evolutionary adaptation of empirical structures. It is not dependent on our lifetimes, but our ancestral past.
Mathematics is very different, they reduce to a true formal system of axioms, assumptions on the methods of proof and assumptions on the logical calculus.
Austrian economics is rationalist, yes, but economics evidently has a wider scope, however spurious.
The term a priori is only appropriate if your epistemology is as old as kant's.
Johan Strydom Mises was far from perfect.
I love this series. As a novice, I'd love to hear your explanation of...things like VICE getting a $250mil injection of capital despite their failures. It seems like these kind of investors and investments make a mockery of the free market system, since there clearly isnt a demand for the products they boost. And I don't know how to explain it.
For the same reason HuffPo didn't go under decades ago, politics. Getting your political spew out is valuable in and of itself, regardless of direct return.
@@senselessnothing Yeah I know Rothbard called it 'social capital' or something like that, but it still seems like it's a flaw in capitalism. I don't know how else to explain it.
I'm not sure what you're trying to say, be it mises or hitler, propaganda/ political education has always been thought important.
Although the intentions are different(perhaps not always), philanthropic organizations are similar in that their purpose is not profit.
In the latter case you can think of it as someone trying to induce positive externalities, thereby having a more valuable property/lifestyle/ community, or perhaps even satisfying some personal desire.
@@senselessnothing I'm saying according to free market principles and theory, these companies should fail. But they are not, because of these partisan investors. This seems like a failure of the free market. But there's probably another explanation I'm just not educated enough on to realize.
Economic theory is defined to be a study of an "economy", which is difficult to define and does not take into account politics/ power/ governance etc.
You're looking for a more general social theory than economists could possibly have. The praxeology of mises does explain it though.
edit: some economists are trying to incorporate politics into economics and failing miserably, economists are partisans too after all.
my favorite youtuber never seen such high quality content in this website
One of your best videos
Observations on the efficiency and effectiveness of capitalism visa ve government:
I worked for a major worldwide pizza chain for 2 years while attending graduate business school and working toward a masters degree in finance. This was after graduating from college with a dual major in economics and political science (heavy on law, Latin American foreign affairs, government management, and local government), and with a minor in business administration (with extra finance classes). I found out when I got into a car accident with another pizza delivery driver (can you imagine the odds?) that my car insurance company didn’t cover any damages which happened while I was delivering pizza. The whole 2 years would not have even been a profitable job for me except for the fact that the other guy accepted responsibility and paid for my repairs. I asked my co-workers which car insurance companies they use. My co-workers all said they have insurance which doesn’t cover them on the job either. My store manager told me to just lie about being on the job if i get into another accident.
One thing that interested me was that the production process for a small order of cheese sticks was to make a large order of cheese sticks, right down to the same type of box, and then throw away half of the cheese sticks. They charged 4.99 for a small order and 9.99 for a large order. My manager and everyone else looked at me like I was crazy for even objecting to the pricing of large vs. small cheese sticks. His main argument was “that is what a large costs” and “that is what a small costs.” He seemed more concerned that I didn’t find this convincing. I asked what happens if somebody just orders two small orders, which, of course, would only come to 9.98. They charged 9.99. I objected but that isn’t what the price of two small is on the menu. They retort was “but two smalls IS a large.” My further objection that if two snakes is a large then you are saying that large costs both 9.99 and 9.98 at the same time was met with suspicion.
I tried to get a job in at this time finance, I interviewed for one job; the deal was I work for them, along with 99 other people, full time, at long hours, for a year for free generating skates leads for financial services. The reward was at the end of a year, they would fire 80 of us and the 20 lucky interns would get to work long hours full time for $30,000 per year, for one year, with no bonuses, no commissions. At the end of that year, they would fire about 15 people. The remaining 5 people would them be required to live entirely off of sales commissions.
The other job, which I actually interned for required me to generate my own sales leads and work entirely off of commissions. There the only requirements were a bachelors degree (in anything), and padding the stock brokers and insurance exams. I found out I was the only one in the internship program who had any financial economics or business training. I wasn’t the youngest, but many interns were only 22 or 23 I also found out that must interns got most of their sales selling financial services to their own family members and family friends. The only other techniques which were even discussed were cold calling people and going door to door. The fee structure was they would take 5 percent of a clients investment up front, and then they would place the client in no-liar mutual funds which charged 1-2 percent expense ratios, about half of which went back to the company. I and I found out that the “advisors” didn’t even make allocation or investment decisions these were all made centrally, and passed off as the “advisors” own ideas.
Now I work in the public sector, and yes it is even worse, but at least they pay me.
I love this series, keep it up
my good sir more of this. I am loving this
Love the nested concepts graphic
This is a really awesome video, thank you!
17:40 here you start putting examples of problems at resource managing in USSR. Do you have any source that i can quote for all of this?
The problem with Mises, is that it takes someone with an ability to think two or three steps into the implications. We are stuck with people like AOC, who do not possess this ability. From a psychological point of view, we are stuck with people in government who only possess concrete reasoning, rather than abstract reasoning.
It is always so tedious arguing with such people were you have to explain every little detail and chew through every thought process for them
The problem you have identified is simply that the retarded cannot fathom conceptual thinking. Perhaps you can make a coloring book for people like AOC to follow along. Nonetheless it is important that we spread this essential knowledge of the laws of economics. So please share ilthese videos with someone who can benefit from it.
Grate series
Don’t mind us, just a normal Econ channel here
This gave me a semi!
Very well done.
Great work! Carry on!
Werner Sombart (1863-1941) deserves some consideration..
3.8k views.. how many campus lessons would be needed to achieve that reach!
Two thoughts: can you apply von Mises theories to a single-payer health care economy? Can you expand his theories to something he never would have foreseen: a software economy (where the margins on software can become almost infinite without raising costs)?
John Bugay The margins on software are not infinite because margins aren’t dictated by costs really but customers. Just look at Steam and note how gamers are the ones who effectively set the prices.
God bless you.
If you do Hayek next, then you must do a discussion of his teacher Othmar Spann (1878-1950). The Austrians owe alot to the German Historical School.
S D Austrians hated the German school
Spann was a nazi who formulated the theory of the corporate state. He most certainly was not an Austrian school economist. Hayek rejected socialism, whereas Spann embraced the fascist version of it.
@@AcademicAgent Still do.
_The Austrians owe alot to the German Historical School._
Only as a foil. The Historicists held that economics is strictly an historical discipline, and its tenants contingent upon the specific present circumstances, characteristics, and organization of society. The Austrians, on the other hand, held that economics is the study of the universals of human behavior, which are present in all periods and in all institutional arrangements of society. In short, the Austrians held to the doctrine that economic laws exist, and pervade through place and time. The Historicists would have none of this.
Will you review work of Friedrich von Wieser?
Maxim Pluto no I’m afraid he’s too renegade but will mention him in Hayek video.
But will AI upend this logic? Will AI be able to determine prices from a central location? I think certain people are betting on this being the case.
@5:40 ''...the per mililiter price of a large coffee was more than that of a small coffee...''
Wouldn't the argument to justify this just be a time preference one?
As in, you can buy a large coffee, and get it all now, or alternatively, you can buy a small coffee, slightly cheaper, with the minor inconvenience of having to go back and get another coffee later
No, the coffee example is explained by marginal utility. The first units of coffee will always be worth more than the last units to most people because the satsifaction of wants is being fulfilled. In my forthcoming new economics course I explain all this in much more detail.
Can u talk about the time lag for lazy, overpriced or capital to redeploy to a new venture
Can you?
Large companies do use internal transfer prices but it is often corrupted.
Those are still based on a pricing system whereby different departments spend their budget buying the services of other departments. This only works because the whole system is driven by customer demand for services or goods the company provides. Therefore, as it is reliant on the market, it does not suffer from the socialist pricing problem.
Michael Foye sometimes yes. Sometimes no. Sometimes they roll costs forward to newer projects in order to appear to always be profitable, so that no one ever looks bad, and everyone gets bonuses, gets promoted and never gets fired.
@@user-wi3yx3gy2o The piper must eventually be paid. There is no escaping the laws of economics.
@@user-wi3yx3gy2o The failure of poorly managed firms is a feature, not a problem, of capitalism. If such a company cannot rely on a political bailout, it will either have to develop a more efficient practice, or it will cease to exist as an economic entity, and its assets will be reallocated to mote efficient investors.
Michael Foye yes but sadly, I think most large corporations either started out or still are subject to significant government ownership or control, rely on government subsidies, are able to manipulate the tax code in ways private individuals can’t, have received bail-outs of one form or another, receive substantial capital because of their size from government pension plans, or get other special treatment in the form of actual subsidies of one form or another.
Risk and the amount you take on....ponderous.
15:44 i think the commissar would know less about it (but notnlike never know)
We need a more modern writer to take praxeology a few steps further.
Hoppe is 100% praxeology.
There have been attemps at quantum economics.
do austrian economics cringe compilation
Watching this makes me wonder what would happen if you pinned the minimum wage to the price of rent/housing.
Unemployment, and mass unemployment come a business cycle. But im sure it would cut off the business cycle pretty early, provided its a credit induced boom that is.
@@nicosmind3 I can't make sense of what you said. Why would you get unemployment? and what does that have to do with the business cycle?
Minimum wage is raised now with inflation or most often greater.
my question is not a matter of would it fail. but what would fail. I think it would make immigration untenable though. Because more people = higher rent + lower wages. It may be the only way to solve the feedback loop on wealth disparity. if the system can break you would change your decisions wouldn't you?
@@becauseitscurrentyear8397
>Minimum wage is raised now with inflation or most often greater.
Rent and housing are also raised with inflation.
>I think it would make immigration untenable though. Because more people = higher rent + lower wages.
Would this same phenomenon occur with people migrating from state to state within the US? How about town to town, neighborhood to neighborhood? Is your objective to prevent anyone from moving anywhere?
@@artemiasalina1860 well that would depend on what scale it is implemented. and I only asked for a thought experiment,
Actually most minimum wages out perform reported inflation and price of rent outperforms both inflation and minimum wage. They are not raised with inflation they minimum wage is raised based on cost of living which is similar but includes increases in expected living standards. Things like internet access or cell phones. While the price of housing is inflated by the available debt to the purchasers and a buyer to available house ratio. More people= higher price, less houses = higher price. more available banking debt = higher price. this in turn increases the cost of living.
But there is not hard link between minimum wage and rent/price and adjustments of minimum wage take about a decade. If they directly linked minimum wage to the national average housing price I don't see why internal movement would be effected.
If you put a town by town assessment you would might see an increase in commuting and a depopulation of large city centers.
If you did it on a state level you might see alot more internal migration attracting people to higher wage states but also high unemployment in those areas.
Minimum wage laws primary effect is mandatory unemployment for anyone whose labor is not worth the minimum legal rate to those profering employment.
Aa's wage is funded by the third biscuit
One criticism of 'humans act', that frequently humans will act entirely based on emotions, with no desired end in sight. Think of 'lashing out', or even dancing. There's no goal.
I recognise that Mises says economics is not a hard science, but he then goes on to try and build a hard science out of it.
I dunno. I always find Austrian economics contradicts itself with its own rules.
Stefan Lamb it is specifically PURPOSEFUL action. In your examples, lashing out is not purposeful. Dancing however satisfies some need to dance, depending on your tastes.
@@AcademicAgent Indeed. My point was you can't always build rational models when humans can behave irrationally.
@@stefanlamb1179 You can dance for pleasure, dance for money etc. But try and think of it as economic man if that helps. Or positive man. Ie we all have choices in front of us but choose the one that has the greatest "positive". You can be thirsty while watching the TV. But the TV is good and youre comfortable. So you sit on. In 5 minutes time the TV is just as good, maybe even better, but now your thirst is so bad you get up anyway and grab a glass of water. So often actions requires subjectively weighing wants, which we do automatically with barely a thought (like driving were that acustom decisions often dont need deep thought).
Stefan Lamb this doesn’t really hold since Mises does not expect rationality. You’d do well to read first chapter of Human Action
@@AcademicAgent I'll be sure to pick it up sometime. Thanks :)
I disagree with you ,the prices aren’t the only indicator of efficiency.
For example you can determined the most efficient oven according to an energetic output:
- the quantity of gas or watts needed to function
-the energy return rate
Ect...
OF COURSE THE PRECISES ARETHE BETTER INDICATOR !!!
The point is that across all of the production processes -- we are talking many thousands -- in the absence of a common denominator like price it's very very very difficult to the point where full blown socialism is actually impossible.
Austrian economists had physics envy - Lord_Keynes2
Economists of all stripes still do. So I am told at least by a professor of economics.
Theres a reason they call it the dismal science
Little Cripple
I thought it was called a dismal science since politicians and interest groups don’t like listening to them.
If you implement a maximum price for milk and those who produce under high cost have to alter there buissnes model to be suitable shouldn't there emerge more milk seller that sell for a lower price since the demand for milk is still high (people just have to settle for lower quality)?
The Last European It would always produce a shortage.
@@AcademicAgent yes but shouldn't that only be temporary till other suppliers enter the market?
The Last European No, there’s no reason to believe this. Price controls always produce shortages. Why would you assume production costs come down?
@@AcademicAgent I thought that in the milk example the milk seller that sells for a higher price deliberately chooses to pay higher production cost since this enables him to produce a higher quality product which people will pay more money for. So another producer could enter the market that produces with less expensive equipment but offers his end product at a lower price. So in the end the best quality milk is gone from the market but there is more mid quality milk because people take that over no milk at all...
The Last European it’s not about quality but total quantity of milk. The price cap drives out marginal producers and so there’s less milk overall. Quality is not part of the calculation.
The important part of the Economic Calculation Problem, which is only possible in a capitalist economy, is the part about prices and therefore efficiency. Of course it’s possible to produce resources in a socialist economy, but it’s important to stress that supply and demand produce prices which show the value of these resources in an economy. These prices are used by people and companies to decide what to purchase in order to minimise costs, and this ensures that the least valuable resources are used. This decisionmaking itself is feedback on what is valuable - through changing demands - and will affect production according to the costs incurred and revenues produced. A company that no longer makes a profit due to lower demand can no longer afford to operate because the resources it produces are now less valuable than the resources it consumes in production. If this company continued to operate, it would be draining value from society rather than producing it, and the resources it consumes in the process (which include labour) would be better used elsewhere. In a socialist economy, due to the lack of prices, nobody would know what activities would be worth doing or not. It’s quite possible that people would be making products that are less valuable than the resources used, but there would be no way of knowing this without prices. This national scale of misallocation and inefficiency in production means that people would be worse off - because this inefficiency means that, in the best scenario, people would have to work more in order to produce what they want and need, and in the likely and worse scenario, the misallocation is so severe that production in many sectors of the economy will not be enough, and there would be shortages in important items, including food. Looking at history, this is what has always happened. We know how poor people were under these systems, but even with people’s best interests at heart, it is not possible to allocate resources efficiently without market prices. When people are free to trade, prices naturally arise from supply and demand, and profit is the measure of value produced, since it is the value of the product minus the value of the resources consumed to produce it. This is why the money people and companies make is not a sign of what they have taken from others, but rather what they have produced for others - since people will only swap their money with something that they deem worth more. Further, this fact that profit is the measure of value produced means that people are incentivised into activities that are more valuable to others, whether this is the choice of one job over another for higher income, or the choice of a company to produce certain products over others. This ability to know how valuable resources are is only possible with market prices and, as demonstrated, is necessary for efficient allocation of resources.
Yes, excellent comment and thanks for watching. I would say that in addition to what you say, prices are incredibly important for producers to choose between inputs. For example, between investing in workers or capital as I showed in the example.
@@AcademicAgent Yes, exactly. They're all resources which all have values which are important to determine.
Harrison, I believe you are confusing two separate questions.
1. What consumer goods should be produced?
2. How should producer goods be allocated so as to produce the consumer goods that we want as efficiently as possible?
For (1), you indeed need a market to extract the information of what the consumers desire. If you did not have a market, you would have to guess what people want or ask them using some survey or voting system. Neither system would probably work well for an entire economy.
For (2), you don't need a market because the subjective preferences of the consumers are not relevant. Only the objective use-value of a good matters. What you need is information about the resources (original factors) that exist in the economy and the technology available for turning inputs into output. If you have this information, you can set up an algorithm that calculates the production possibility frontier of the economy and derive the most efficient way of allocating resources. Since it is impossible to go beyond the frontier, this method would in practice be more efficient than a market system (since markets are almost never fully efficient).
So, the idea that you need prices in order to know how to produce efficiently only applies to consumer goods. For producer goods (capital goods, resources, labor) you don't.
And by the way, not all socialist economies had low rates of growth. The Soviet Union, for example, had very good results in terms of economic development (not political!). People tend to think that because eastern Europe is poor today, socialism must have failed to produce rapid growth. They forget that eastern Europe has always been poorer than the west. It was poorer before, during, and after socialism.
Ludwig von fuckin' Mises
I'm new to your channel,are you a libertarian?
miguel bragança here follows a fact: He has a video named "Why I'm not a libertarian"
Yeah i saw that and forgot to delet the comment thanks btw
miguel bragança actually it’s called why I’m not an ancap, I am broadly speaking a libertarian or classical liberal
Damn, the man himself responded. Great work btw
socialist left praises kaynes. Also socialist left : we hate over-cosumption
Did Keynes help accelerate consumerism?
@@karlostjuroukei1802 Yes indeed. He spoke about it in various books of macroeconomic theories. He said in the short run and especially during recessions economic output is strongly influenced by aggregate demand (total spending in the economy).
Now, don't get me wrong I see your point. If Kaynes was still alive and see the management of his theories in the economy he would possibly disagree.
i think a third way of distributing resources would be charity, which is neither trade nor socialism. without the natural tendency of people to be charitable, socialists would have a much stronger case in favour of tyrannical redistribution.
Charity can be rejected so it's just a trade with one party giving zero.
Surely if you show empirically that every time (or even the majority of times) you set a minimum wage there is no increase in unemployment you would begin to suspect that the logical deduction of Von Mises is flawed somewhere. To imply anyone performing such a study is trying to (impossibly) argue against pure logic just shows inflexibility in even entertaining the presence of flaws in the arguments.
All you are showing is that you can't do logic.
@@AcademicAgent Thanks for the reply. Your confidence in the logic has at least made me want to go and read more. In the mean time though, did von Mises consider how the increase in worker wages would lead to more demand for goods/services in the system and therefore more jobs being created to meet that demand? Btw, enjoyed the video, very thought provoking.
@@Deltelly This would not happen because the total number of jobs would decrease, and therefore the total demand would decrease. Employers tend to shift investment from labour into capital (think McDonalds machines). The increased wages of the chosen few will not offset the fact that fewer people are getting money. There are no logical arguments for minimum wage, it is just a bad policy.
@@AcademicAgent Ah, so if I understand you, the total jobs should decrease as employers, hit with the increased cost of labour, lay off staff and not just take the hit in their profit margins (he said euphemistically)? That sounds a simple enough premise to test empirically :). I suppose the primary reason I am against letting the market decide all wages is that the relationship between employer and employee in setting the wages, particularly for low skilled jobs is really quite coercive, like trying to negotiate when you're standing on the edge of a cliff. Of course in some minds the employer pushing wages down to the edge of starvation or homelessness is just the system being efficient. Is there no place for treating our fellow human beings as ends in themselves here or am I just being melodramatic.
@@Deltelly First, it is seldom the case that a minimum wage hike will lead to straight-up firings, but rather that workers will find their hours reduced and -- this is more important -- in the long-run new workers will be hired less frequently. Most often the marginal workers (i.e. least experienced, least skilled, usually 17-22 year olds).
Second, the relationship is not coercive because no one HAS to do any job -- it is a voluntary agreement between the person and the employer. Bohm-Bawerk has a very good 40-page essay on how this all works here: mises.org/library/control-or-economic-law#iii
Note the constraints of the employer as well as the constraints of the worker in his analysis.
Who's next?
Hayek
Another question, will you BTFO Democratic Socialist 01, he made a garbage dis video of you.
Daddy Mises
Lattwik won Mießes
1.5 gp for a loaf of bread...outrageous, you can shove your shirgar as well😂
First
But m8 my dell could do that 🤣
He's not the greatest economist. Bohm Bawerk was greater.
Another thumbs down from some weirdo.
The thing about deduction, though, is that no amount of synthesizing can get you on a firm ground in the absence of empirical testing.
It doesn't mean that without empirical testing one is wrong, but one cannot be presumed to be right.
Just look at all the deductions that the religious apologists are spewing.
And Austrian economics looks to me awfully similar to religious belief, when something happens that runs contrary to the theory some ad hoc axcuse is made, some scapegoat is found so we can all pretend there was nothing wrong with the theory. It is, in other words, unfalsifiable.
KalifUmestoKalifa I’d like to see you prove any one of the laws wrong.
Your reasoning here is “because theology has used deductive reasoning all deductive reasoning is like religion.”
@@AcademicAgent Ok, let's look at the minimum wage creates involuntary unemployment one.
Sure, it is true that if you price work out of it's utility you will create involuntary unemployment. The devil is in the details though. Mises assumes that the market derived minimum wage is at the level close or equal to marginal revenue from that work.
Is it though? What if there is more people than there is work? If it is a buyers market for work the actual market minimum wage could be, in the extreme, as low as maintenance costs of workers biological needs. (in the absence of social programs and minimum wage, if unable to find better work, one would work for food and shelter)
In that case setting a minimum wage above the market minimum wage but below the marginal revenue from unskilled work would not increase unemployment.
KalifUmestoKalifa See Bohm Bawerk on this, the essay is called The Example of the Strike.
@@AcademicAgent will do
Also consider that “Theologists used deductive reasoning therefore deductive reasoning in economics is like religion” is not a great argument in itself.
what the hell is a constant variable? lol mises has not contributed anything of significance to economics and his analysis is agenda driven. value is objective, not subjective. and game theory has proven praxeology to be absolutely worthless.
But m8 my dell could do that 🤣