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Source link: http://archive.mises.org/18371/murphy-replies-to-david-graeber-on-menger-and-money/

Murphy Replies to David Graeber on Menger and Money

September 8, 2011 by

I recently wrote a Mises Daily article defending Carl Menger’s theory of the origin of money from the critique set forth by anthropologist David Graeber, in an interview where Graeber was discussing his new book. I wasn’t disputing Graeber’s (obviously) superior command of the historical evidence. Rather, I was claiming that his conclusions failed to appreciate the standard Austrian position.

In the comments attached to the original article, Graeber gave a lengthy response. (We have compiled his comments into a stand-alone post here). In the present post, I want to reiterate my original claim and use Graeber’s elaboration to underscore my points.

I Didn’t Read His Book

Graeber first objects that I wrote a critique of his views, without having gotten and read his book. That’s true. But in my defense, I didn’t say that Graeber’s book was wrong; I said the views he expressed in the interview struck me as wrong. It wasn’t as if Graeber were referring to unspecified evidence that the reader of the interview would need to look up in the book to verify; Graeber did a good job laying out his basic position and its evidence in the interview.

Remember, my main point here is not to challenge the historical evidence that Graeber and his colleagues have assembled. I claim that they are falsely concluding that the Mengerian logic must be wrong. Since I saw Graeber making such an invalid leap in the interview, I didn’t think I had to go get the book before offering my opinion.

It’s true, in general it’s always safer to get a book before saying anything about its thesis. But then the internet would be a much lonelier place. In any event, what tipped me off to Graeber in the first place were two posts (here and here) where the bloggers, on the basis of the interview, told their readers that the standard economist story had been overturned by anthropologists. Dr. Graeber, can you believe there’s such shoddy scholarship out there?! Please chastise these two lazy bloggers for the audacity of praising your interview, without having first taken the time to read your book and verify that you were making sense. Release the hounds!

Using Goods Versus Engaging in Barter

At least in the interview (as I admitted, I haven’t read his book), Graeber thought he had dealt the Smithian/Mengerian account a decisive blow by saying that we have no evidence that there were ever societies based on barter. In the comments to my article, Graeber wrote:

Here the evidence is simply in and you’d think an honest economist would acknowledge it. As Caroline Humphreys of Cambridge in the definitive anthropological work on barter put it, “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money; all available ethnography suggests that there never has been such a thing.” (By “barter economy” of course she means a community in which this is how everyday goods are normally distributed amongst neighbors.) Arguing that it might have been a brief period of history which we never happen to have noticed anywhere is a perfect example of special pleading. That argument might stand up if we had no examples at all of moneyless economies, so we had to guess what a moneyless economy would actually look like, but in fact, we have endless examples and they don’t look like what the model predicts. A responsible scholar would try to reassess their theory if it proves non-predictive. Saying “yeah, how do you know they weren’t doing in a time and place for which we can’t have evidence?” strikes me as an act of pure defiance of all normal principles of empirical science.

I have underlined the two relevant phrases above. As I pointed out in the original article, the Mengerian theory does not predict (or at least, it need not predict–I don’t know if Menger himself ever attached a time frame to it) that humans would be in a state of barter for a long period, with money emerging perhaps decades or centuries later due to the problems of a double coincidence of wants.

This is not Monday morning quarterbacking. We have actual case studies of communities starting from barter—the famous POW camp described in this economics journal article, and the whimsical Halloween dining room “economy” Jeff Tucker described. In both cases, the participants developed money very quickly—in about 15 minutes in the Tucker household.

This is why I’m hesitant to trust Graeber when he claims that the evidence has clearly overturned the standard explanation: Graeber doesn’t accurately tell us what the evidence would look like, if the standard explanation were correct. So why should I believe him when he says it’s been falsified?

In his latest reply, Graeber handles the POW camp and similar cases by saying that these people were already familiar with money-using economies, and so it’s not surprising that things played out the way economists would have expected. Graeber is saying that we have no evidence that historically this is how money first originated.

That’s fine, but again, the limited purpose of those examples was to show that Graeber is subjecting the Smithian/Mengerian theory to a false “test.”

I think partly what’s happening here is that Graeber (erroneously) assumes that an economist in the Mengerian tradition assumes that human beings always used private property and engaged in voluntary exchange. Yet this isn’t the case. I personally have no problem if Graeber and other anthropologists tell me that humans relied on all sorts of non-market institutional frameworks to turn resources into goods and services, perhaps for thousands of years, before the development of what I would classify as “private property.”

Indeed, except for Austrian economists who adopt a literal interpretation of the Bible and believe in a young Earth, modern Mengerians presumably accept the standard scientific view that humans evolved from ape-like ancestors millions of years ago. Such economists wouldn’t say, “Those creatures must have been using barter all along, until they finally invented money.” No, there clearly was a period in (pre-)human history when our ancestors did not use money, or barter, in the property sense of the word—we don’t say that apes right now engage in barter transactions, unless we’re speaking metaphorically.

So we see that the existence of communities—whether in the distant past or even in our times, in isolated regions of the planet—where the members don’t use money or barter, is hardly a problem for the economist. What I do have a problem with, is Graeber telling me that money could have emerged from such a non-market framework. This was my fairly modest point. In spite of the fascinating details of past societies that Graeber provides in his elaboration, I still maintain that position. In fact, the more Graeber talks about the evidence, the surer I become that Graeber is indeed erroneously rejecting the basic Mengerian account.

Spot versus Credit Transactions

In a crucial passage, Graeber says:

[T]he flaw in the barter theory of the origin of money is that barter presumes SPOT TRANSACTIONS. There is no reason whatsoever to presume that neighbors would limit themselves to spot transactions in dealing with one another. However, if one does not presume spot transactions, then the notorious problem of the “double coincidence of wants” does not occur. You end up with a system of broad, non-enumerated credits, and this is precisely what those who actually did research on communities that do not use money did find.

This is an excellent point, and Graeber is right: In the standard exposition of a barter economy, economists typically think in terms of spot transactions. But in principle, there’s no reason to restrict ourselves in this way. If we can imagine a farmer trading a pig for an axe, we can also imagine a farmer trading a pig for a promise to deliver an axe in two weeks.

Graeber is also right that the possibility of credit transactions expands the scope of a moneyless economy, and mitigates the problem of finding a double coincidence of wants. However, it doesn’t eliminate the problem. After all, we saw that money emerged in the POW camp and in Jeff Tucker’s dining room very quickly indeed.

Still, my fundamental objection is that Graeber thinks this elaborate system of “non-enumerated credits” can be amalgamated into a common system of enumerated credits, without having objective measures of the proper exchange ratios between the various heterogeneous goods.

It’s true, I can’t prove that it’s logically impossible for money to have emerged in this way. And Graeber’s points about legal penalties are well-taken. But let me wrap up this blog post by pointing to something that, if Graeber is correct and Menger is wrong, has to be one of the most amazing coincidences in world history.

An Interesting Coincidence

Look at Graeber when he describes a little more fully the “unit of account” developed by the temples, in an account that Graeber thinks discredits the Mengerian story:

The actual evidence is that in Mesopotamia – the first case we know anything about – these more widespread pricing systems in fact emerged as a side-effect of non-state bureaucracies. Again, non-state bureaucracies are a phenomenon that no economic model would even have anticipated existing. It’s off the map of economic theory. But look at the historical record and there they are. Sumerian Temples (and even many of the early Palace complexes that imitated them) were not states, did not extract taxes or maintain a monopoly of force, but did contain thousands of people engaged in agriculture, industry, fishing, and herding, people who had to be fed and provisioned, their inputs and outputs measured. All evidence that exists points to money emerging as a series of fixed equivalents between silver – the stuff used to measure fixed equivalents in long distance trade, and conveniently stockpiled in the temples themselves where it was used to make images of gods, etc – and grain, the stuff used to pay the most important rations from temple stockpiles to its workers. Hence a silver shekel was fixed as the amount of silver equivalent to the numbers of bushels of barley that could provide 2 meals a day for a temple worker over the course of a month. It was the Temples that actually had a need to extend a silver system from a unit used to compare the value of a limited number of rare items traded long distance, used almost exclusively by members of the political or administrative elite of the societies in question – to something that could be used to compare the values of everyday items, like planks of wood, jugs of beer, and so forth.

The standard Mengerian account easily explains why silver (and gold) emerged as the “natural” money in decentralized, private property settings. So if Menger is totally wrong, and Graeber is instead giving us an alternate history of the origin of money, isn’t it an astounding coincidence that the temples didn’t use a generic unit—such as the Temple Unit as I suggested in my original article—but instead they used silver as their money?

(Note too that this wasn’t merely a case of sloppy reading on my part: What originally set me down the path of reading Graeber was a post from Gene Callahan, who thought Graeber had demonstrated that fiat money preceded commodity money. But as it turns out, Graeber is showing nothing of the kind; at best he’s explaining that the commodity silver emerged as money for reasons different from the ones Menger gave. But in fairness to Gene, Graeber himself gave that impression in the interview, when he said, “So really, rather than the standard story – first there’s barter, then money, then finally credit comes out of that – if anything its precisely the other way around. Credit and debt comes first, then coinage emerges thousands of years later…”)

Graeber admits too that the temple authorities didn’t just independently pick silver because it was lying around. No, he says that silver was what was used to facilitate trades with foreigners.

This is exactly what I said the situation looked like, based on my reading of Graeber’s interview. Therefore, far from refuting my article, Graeber is here confirming it.

In conclusion, I still maintain that Graeber has yet to show us that the standard Mengerian story is wrong. Menger said that for money to emerge, you need to have antecedent barter transactions where at least one commodity outstrips its rivals in marketability. It then becomes the commonly accepted medium, and its exchange rate with other goods and services is determined through voluntary trades.

Graeber’s account is still consistent with that general explanation. The fact that the temples used silver as money, a practice which even he says they copied from the merchants who traded with foreigners, proves the point of my original article.

Last point: To repeat, I am not saying Graeber’s knowledge is useless. His discussion is fascinating, especially when he talks about the vitality of stateless communities. (Graeber might be surprised to see that I’ve written on that myself, from a theoretical rather than historical perspective.)

All I am saying is that Graeber hasn’t overturned the Mengerian theory of the origin of money.

{ 196 comments }

Jake September 8, 2011 at 2:20 pm

I see a Misesmedia debate in the making.

nate-m September 8, 2011 at 7:52 pm

It really seems to be much more like people talking past one another.

One guy didn’t do his research and the other guy has a misunderstanding of who he is talking to and what Austrian stuff is about. (bringing up Adam Smith and trying to point out that people don’t put a lot of effort in measuring advantages is a dead giveaway that he is directing his comments to the wrong group)

The only real dispute that I can tell is that Austrian dogma says that accounting practices rose because they could due to the innovation of money (money came first then accounting developed from that) and this guy says that money rose up as a response to the need of accounting (people realized accounting was needed, so thus created money).

It’s a Chicken vs Egg debate.

From what I can tell both sides have very salient points and both have significant lapses in logic when it comes to divining the true origins as money as historical reality rather then economic theory.

There is a lot to learn.

Iain September 8, 2011 at 11:40 pm

It’s simply not true that we have no evidence of societies based in barter. Gifts and barter coexisted in societies throughout history. Graeber is simply looking at one side of the evidence and trying to say that’s the only side of it.

political economist September 25, 2011 at 7:25 pm

I know the feeling of wanting to reject what Graeber has to say. But, read the read the book. You’ll learn a lot and it will or at least should change your mind.

political economist September 25, 2011 at 7:31 pm

For more go to the Naked Capitalist website for 12 Sept.

David B September 8, 2011 at 2:21 pm

This is really fun discussion, and I’ve enjoyed both your comments here (and at FreeAdvice) and Graeber’s comments. We have many views in common with Graeber, despite the many obvious objections. I also found his theory on the role of legal systems in setting prices interesting, I had to consider the question, “where did the judges and victims get the idea of what each crime was ‘worth’ for lack of a better word?” Well there had to be some precedent of exchange otherwise their requests for restitution would have been perceived as ridiculous. Perhaps on third thought, I will change my mind again :)

iawai September 9, 2011 at 9:40 am

I think this also explains Graeber’s example of the valuation of floorboards, where there wasn’t evidence of “barter” in the item.

The judges needed to determine the intrapersonal exchange needed to replace the floorboards: he would have to give up x days of other work, he would have to cut y trees, he would have to deplete z saw blades. Of course the value of the floorboards are subjective to the actor, and don’t themselves trade in a market, but the need to choose a common unit of account was satisfied by selecting a frequent commodity wherein the debt owed could be presented as a single sum of the unseen costs, which can be better reduced to a market price.

Still, the “money” here could be anything, from fiat bills or tokens for temples to silver or tobacco. But Menger’s account remains true, and Graeber’s evidence and assertions are in accord with this account

DD5 September 8, 2011 at 2:29 pm

Graeber: ” strikes me as an act of pure defiance of all normal principles of empirical science.”

I like how it’s always an alleged “sin” to be as he says “defiant of normal principles of empirical science” but always OK to be defiant of logical problems that can have no empirical based solutions. Not that Rob didn’t adequately respond to Graeber, but I’m surprised he didn’t emphasize the Mises Regression theorem which defines the logical problem of the origin of money and solves it! Graeber could not refute the regression theorem on empirical evidence at all even if he had such evidence.

J. Murray September 8, 2011 at 2:58 pm

Ultimately, this is something we most likely will never know. Money was likely developed long before the advent of writing, so finding records as to whether the chicken or egg came first in this scenario will probably not be possible.

Matt Gilliland September 8, 2011 at 3:07 pm

Fascinating discussion. I’ve previously seen Graeber as a sort of kindred spirit (similar to James C. Scott) because of his rejection of the state while avoiding the pretensions of most anarcho-communists and anarcho-syndicalists. While this particular issue is certainly contentious, I think that if Graeber and the Austrians each understood each other better, each would have valuable things to learn.

Inquisitor September 8, 2011 at 3:58 pm

“If we can imagine a farmer trading a pig for an axe, we can also imagine a farmer trading a pig for a promise to deliver an axe in two weeks.”

But that assumes someone wants that axe in two weeks. This doesn’t eliminate the problem. It moves it a little down the road. Debt is purely derivative and contingent on the creditor actually wanting what the debtor has to give them in a few weeks’ time.

Nick Rowe September 8, 2011 at 4:16 pm

Q. Why is Lake Ontario the same height on both sides of the US/Canada border?

A. Suppose it weren’t. Suppose it were 1 foot higher on the Canadian side. Then the pressure from that extra foot of water would be higher on the Canadian side, and water would flow from Canada to the US until the levels were equal.

Objection: That answer must be wrong, because historically we have never seen the water higher on one side than on the other. Physics is crap.

Q. Why do we use money?

A. Suppose we didn’t. Suppose we used barter instead. Then people would…. (do what Menger said they would do).

Objection. That answer must be wrong, because historically we have never seen people use barter. Menger is crap.

Wonks Anonymous September 8, 2011 at 4:53 pm

Hey, Nick Rowe at Mises! Someone who’s got a very different perspective from the tendency here, but is very good at layman’s explanations and writes a lot about how difficult barter is and hence why we persist with using money even when encountering problems from monetary disequilibrium.

Nick Rowe September 8, 2011 at 5:18 pm

Hey Wonks! You have captured my views correctly.

I really like Menger on monetary exchange. And i think Menger’s basic model can also be easily stretched to handle liquidity more generally. Did you know there was a difference between “on-the-run” and “off-the-run” bonds? These are absolutely identical bonds (same issuer, same term, same everything) except the former have a lower yield than the latter? Weird. But it makes perfect sense from Menger’s theory of money. The more you trade something, the easier it is to trade, so the more you trade it….hence a lower yield, because it’s more liquid.

I like Mises’ Regression Theory too (which nobody else does).

Reverend Moon September 17, 2011 at 11:33 am

Nick:

I think you have it backwards. On the run are newer not older aren’t they? And it is the new issues that trade at a premium (or the older bonds trade at a discount). So, it is not explained by Menger’s theory of money. Or am I misunderstanding something?

Reverend Moon September 17, 2011 at 11:44 am

Nick:

I think you have it backwards. On the run bonds are newer and have a lower yield. The off the run bonds trade at a discount. So Menger’s theory of money does not explain liquidity like you think it does. Or am I misunderstanding something?

Bob Murphy September 8, 2011 at 9:32 pm

Good one, Dr. Rowe.

Diatom September 10, 2011 at 5:19 am

You know what I hate about you Nick? You criticize the very best scholars using only the most superficial understanding of their work. Talk about a waste of an otherwise perfectly good mind.

Iain September 8, 2011 at 11:42 pm

Of course we’ve seen people use barter. This is ridiculous.

Alexander S. Peak September 9, 2011 at 2:37 am

Dr. Rowe’s simple six-line reply is absolutely sublime!

Peter D September 13, 2011 at 4:06 pm

Nick, really? A smarty-pants response like this from you? Your example is inapplicable. If there were two alternative theories about why the water should be level and if you observed only instances confirming one of the theories, then that would be closer to what Graeber proposes. Note that I am not taking sides here and not claiming Graeber’s evidence is ironclad or even correctly interpreted by him. I am saying that he proposes that (a) there is 0 evidence of money systems arising from barter exchanges in the past and (b) that ALL primitive societies that have been studied give rise to credit money before barter money. Again, I am not opining on the validity of these claims. But if claims (a) and (b), are correct then indeed it is as close as you can come to proving that “Menger is crap”.

GreenLeaf September 8, 2011 at 9:29 pm

Nick..are you on google +

Iain September 8, 2011 at 11:55 pm

Graeber is just wrong. There were many many trading civilizations, in fact all of them. The Inca, the Phoenicians, the Greeks, Romans, Mesopotamians, the Chinese, the hill peoples of Zomia, the various dynasties of India. I mean these people are just illiterate when it comes to economics.

Marc Smith September 9, 2011 at 8:17 am

Did you read the book Iain? Graeber’s point is that these trading situations did not come from a free market but were established by states. This whole state vs. market debate is missing the point. For the most part states created markets for their own needs, the didnt spontaneously errupt to be corrupted by states as Austrians would have us believe.

Matt Gilliland September 9, 2011 at 8:41 am

If that’s Graeber’s point, then it really is ridiculous. We have evidence from every era (including our own) that markets are not created by government. That’s an incredibly irrational conclusion, and I hope it’s not Graeber’s – I’ve previously thought much better of him.

The Crackshot Crackpot September 9, 2011 at 2:38 am

I think this may have something to do with his research on the origins of money: http://bit.ly/p5fRqU. The whole article is really interesting.

Ron Finch September 23, 2011 at 8:32 am

Well done. You have revealed Graeber’s agenda. He wants to replace capitalism with a gift economy. So, he is trying to use his academic authority to argue that capitalism is an aberration. He is arguing that the gift economy is the natural state of humanity.
Unfortunately for the gifters, all the examples of gift societies are the poorest and most savagely primitive of human gatherings. Graeber does not seem to have noticed that ALL the first world societies are capitalist.
Note that in this article he mentions competition in a context which reminds me of the very common error of thinking that the essence of capitalism is competition. The essence of capitalism is freedom, or more precisely, voluntary exchange.
Graeber argues in the above article that capitalism dehumanizes us by reducing everything to an economic transaction. He should learn that Freedom, which is the necessary foundation for wealth, provides the opportunity and ability to provide others with gifts and assistance in time of need.

Indigo October 18, 2011 at 1:20 am

Graeber isn’t “arguing against freedom”. That is utter nonsense. He is an adamant defender of freedom if you knew his work. Robert Murphy is a defender of freedom too. They have more in common than in difference.

Alexander S. Peak September 9, 2011 at 2:48 am

I wouldn’t mind seeing Graeber and Murphy get together and write a book in collaboration on this subject. Although I have not read Graeber’s book, and cannot comment on the content thereof, it appears at the moment, at least from these discussions, that his research is perhaps accurate and only his analysis thereof is lacking. Thus, were the two gentlemen to get together and collaborate, it might very well lead to a rather remarkable co-production.

Sincerely,
Alex Peak

terrymac September 9, 2011 at 6:51 am

Regarding barter exchanges, we tend to think of specific bargains, such as “a pig for an axe.” Graeber might be right in saying that such exchanges are rare – even if we broaden the field to include time-delayed components.

Ellickson, in his book Order Without Law, discovered the prevalence of certain social norms in Shasta County, California. His focus was cattle disputes and fence maintenance, but he discovered three points of interest to this discussion:

First, participants almost never “go to law”; there is almost never a written record of the resolution of disputes, or of mutual exchanges. Those who study paper would see the merest tip of the iceberg. Ellickson studied the behavior of people.

Second, exchanges were not precisely balanced; neighbors tend to trust that, over the long haul, things would tend to balance, and that small differences are unimportant. A “good enough” resolution in a minute is better than spending hours to dicker for “perfect.”

Third, exchanges were seldom made explicit. Person A might offer to supply posts and barbed wire; person B might offer to provide labor; but they wouldn’t explicitly say “this is an exchange of material for labor” – the exchange was understood implicitly, not explicitly stated. Such exchanges would fly under the radar of Graeber’s test, I think. To an outside observer, “They didn’t say it was an exchange, it sounded like a pair of simultaneous gifts.”

This imprecision is a feature, not a bug. It saves time on bookkeeping and negotiations.

Andras September 9, 2011 at 11:09 am

In California? The third happened until a lawyer showed up.

Wildberry September 9, 2011 at 11:33 am

terrymac,

This example was used by David Friedman in his book, Law’s Order, and I give a personal example below. I think you are right.

However I think the motivation is greater than what you call “bookkeeping and negotiations”, because I think in fact there was a careful but subjective accounting being kept, and “offenses” were redressed in a way that let the parties satisfied and socially whole.

They did not resort to legal redress, because they were solving a social problem; the need for cooperation among adjacent ranchers. In this regard, it was not with “strangers” but with “community”.

This will not “evolve” into a legal and monetary system. It is sustainable for its designed purposes, and does not depend on money or legal coercion but trades in social status and cooperation.

Sione September 14, 2011 at 1:02 am

“This will not “evolve” into a legal and monetary system. It is sustainable for its designed purposes, and does not depend on money or legal coercion but trades in social status and cooperation.”

As soon as the inevitable occurs and “strangers” turn up, then it must and will “evolve”.

Sione

Indigo October 18, 2011 at 1:23 am

Not necessarily. You simply allow for a roughly balanced barter on the spot for that stranger occurence, or the stranger already knows of a rate for exchange for that particular region/context, so they ask for a negotiation based on that premise.

The daily workings of the system, go on unchanged.

Dave Albin September 9, 2011 at 10:44 am

This discussion is fascinating, but the points on one side don’t seem to destroy the other. If anything, with modern communication and global trade, this would seem to make any governing bodies who regulate and control money obsolete.

Wildberry September 9, 2011 at 11:18 am

Now this is the way people should debate! What an excellent exchange, Mr. Murphy.

I agree with the comments here that imply that neither account of money is inconsistent with the other. It seems obvious that the use of barter and credits of the nature Graeber describes could co-exist with the use of commodity money that Murphy describes.

The distinction seems to be ones of context and time preference. Transaction as primarily social interaction would proceed in the way Graber describes, it seems to me. If fact, in a relatively closed community, this might well be adequate and sustainable well after money was available.

As one simple illustration in my own family history in a context of self-reliant farming in the Deep South, beef and pigs were slaughtered and exchanged in this way. My grandfather would make it generally known that he planned to slaughter a steer on Saturday, and certain neighbors would come and help, in return for a portion. Very careful attention was paid to who got what cuts, with an expectation that when that neighbor’s turn came, each would get their “fair” share. The quality of the beef was a source of prestige and value in these types of trades. There was a complex set of interactions and judgments taking place on a social level, and conflicts would arise when one of the neighbors provided a “poor” steer, or kept prime cuts to himself, etc. These conflicts were dealt with on a social, not legal basis.

To those within this close group, there was a vague measure of valuation, and the time preference was long; the farmer slaughtering did not expect immediate compensation, but it was deferred over time until the next turn at slaughter. There was a strong motivation to keep the group bound cordially together in the service of cooperation and support.

In the case of dealing with strangers (or traders at a distance in Graber’s terms), the time preference for fair compensation was immediate; goods were not transferred on this type of social credit, because there was no relationship bond there as the basis for this type of barter. If the seller required compensation for value at the time of trade, then the double coincidence of wants (DCOW) problem appears. In short long-distance trade (if we can use that term to include those who are not in the immediate community relationships) can only occur if some form of money is available to satisfy the immediate time preference for compensation and to overcome the DCOW problem. In this context, money would emerge as Menger and Murphy describe.

There is no falsification as both can sustainably coexist with a single society, while operating differently in the two contexts and according to two different time preference for compensation.

As a historical note, the barter story was occurring in rural Mississippi around 1920, when the US population was distributed 51% urban and 49% rural, but in Mississippi it was 87% rural, compared to 1990 where the national distribution was 75% urban, but only 47% urban Miss.
The point I am making is that as the population becomes more urban, the use of money and the breakdown of socially bound bartering decreases in scope to include only immediate family and close friends, and the dependency on monetary exchange increases as most trades are conducted with strangers (at a distance socially).

The more tightly bound a community is socially, the more likely bartering of the nature that Graber describes will be a prominent feature of the economy, the more socially distant the greater the need for commodity money. Where there is a need, humans will invent a means.

Indigo October 18, 2011 at 1:24 am

You hit the nail on the head.

Nathan September 9, 2011 at 10:57 pm

Oh, yes, it’s all so “fascinating.” It is pathetic that so many Austrians and Austrian-leaning people responding to Graeber’s book don’t rip to shreds for lacking basic logic. The reality is that the anthropologist doesn’t understand economics and refuses to acknowledge the infinite number of barter arrangements that have popped up repeatedly throughout history. Furthermore, to argue that the state created markets is so ridiculous that Graeber’s argument doesn’t warrant a detailed response. How could the state create something without which it couldn’t have existed otherwise? The state must feed off some type of market, or else it cannot even come about.

Matt Gilliland September 9, 2011 at 11:45 pm

Most people don’t understand economics, and most people lack basic logic in some respects. If we “rip to shreds” everyone who isn’t as “enlightened” as we, we’ll be very lonely for a long time to come. Your view is very purist, but it’s not pragmatic. Any philosophy or approach of any sort (political or otherwise) that is not pragmatic is either dead or dying. The beauty of the Austrian approach is that it truly is a valuable tool for pragmatism. We as its followers, however, can destroy that by ridiculing rather than educating. The few anarchist anthropologists, while imperfect (they aren’t Austrians, after all), have tremendous insights that would be value for our movement.

The Crackshot Crackpot September 12, 2011 at 12:20 am

Well said dude

Nathan Beal September 13, 2011 at 12:58 am

I have to say that I don’t have much respect for anthropologists. I saw a show where a couple of them held up an ancient Greek helmet. They stated with absolute confidence that nobody knows how it was made. The only problem was that in the few seconds that it was visible on the screen I could determine the exact method, since I had actually studied the craft and knew how to do the exact procedure and there were obvious tool marks to support the technique of raising. This was a case where there was an actual physical object to study and they got it completely wrong. How much more difficult would it be to track unwritten trades from thousands of years ago of a sheep for some grain, all of which gets eaten? Not that I will dismiss out of hand everything a person says if they tell me they studied anthropology, but it makes it suspicious.

Ariel S September 14, 2011 at 12:12 am

Really? I once saw a TV show where an economist advised people to buy Bear Sterns stock; thus, I don’t have much respect for economists.

See how using anecdotal evidence is silly?

Indigo October 18, 2011 at 1:27 am

You shouldn’t generalize about anthropologists based on some that you saw a television show or some other commcercial endeavor. As a rule of thumb, anthropologists and economists alike who go on television and produce “shows”, are typically whacks anyway.

Jeremy Weiland September 10, 2011 at 7:15 am

Mr. Murphy, from the bottom of my heart, with all due respect, please just do yourself a favor and read the book. Really. He deals with so many of the counterarguments you’re making here that it’s really kind of embarrassing to read this. David Graeber does not deserve the Kevin Carson treatment (Kevin Carson didn’t, either, but there it is).

myhumangetsme September 10, 2011 at 9:59 am

1) If Graeber was so concerned with how people would view his book, why didn’t he, I don’t know, give an interview that accurately represents what he wrote?

2) Have you actually read Graeber’s response on this very site? If you did, how can you somehow believe that Graeber did not supply more than enough information to satisfy the need for Murphy to “read the book” before responding?

These two things are so obvious it’s really kind of embarrassing that I should have to point them out to you.

J. Murray September 10, 2011 at 11:24 am

If reading the book is a prerequisite, then he should be giving it away for free. Nothing screams irrelevant to the discussion than demanding the detractors pay him to disagree.

Huh? September 13, 2011 at 9:20 am

Or, maybe it makes sense to read something, to think about what the author is saying, before you critique it? Is it asking too much to expect people to not get up in public and scream about something they haven’t bothered to understand or haven’t read themselves? I get turned off by most Austrians for the same reasons I do many Marxists. You can’t stand anyone that makes you re-think your position on the issues. You have so attached yourselves to these theories and ideas that to break with them, even a small portion of them, would be emotionally traumatic. Many people see a big chunk of who they are in their pet theories and would feel empty without them. It is more an issue of psychology than logic.

Ron September 13, 2011 at 9:58 am

I would say it is more an issue of Truth which I define as an accurate description. Austrian theories always agree with all facts. Otherwise, Austrians modify the theories to fit reality. Marxists and Keynesians have to distort facts to fit their theories. For example, Marxists saying that Lennon was not a true Marxist. The USSR failed because they tried to impose Marxism by the book. Keynesian doctrines resulted in the stagflation under Carter and now. Yet they will not give up trying to create wealth by dispersing it. Likewise Graeber prefers serfdom to freedom. Not because it is true. but because values are subjective. We choose our ideas the same way we choose our friends, food, clothes and everything else. We go for the things that attract us and avoid the things that repel us. It is difficult to accept conclusions that seem to conflict with our current opinions. But we have to love Truth enough to make the effort.

Peter D September 13, 2011 at 4:23 pm

Lennon for sure was not a true Marxist…

Ron September 14, 2011 at 2:15 pm

Why do you believe that?

Peter D September 14, 2011 at 2:19 pm

You see, Marxists have to distort facts to fit their theories and Lennon never did that…
(Seriously, dude, you know that Lenin and Lennon are not the same person, right?)

Huh? September 13, 2011 at 8:34 pm

You have got to be kidding me. There has never, in modern times, been a libertarian economic system. Never. There never will be either. It is an impossible dream. Polanyi was right, if it WERE attempted it would reduce the environment to a wilderness and would destroy society. Keynesian economics is at least reality based enough to have been put into place, whatever you think of it. Libertarian economics hasn’t even risen to that level, where it can be realistically applied in practice. Within the capitalist economy, there hasn’t been a better set of policies as far as uplifting workers, lowering differences in wealth inequality and getting the economy started when it is going through a deflationary spiral. Here in the US we have, since the early 60′s, lowered the top marginal tax rates, lowered corporate taxes, we have more not less free trade, more financial liberalization, less powerful unions, we don’t have capital controls, don’t have wage and price controls. We aren’t a libertarian economic system, thank god, but we are much closer to one. What has been the impact? De-industrialization, an explosion in wealth inequality, the financialization of the economy, the debt levels in all of society (not just the government) has exploded. According to the evil Fed household debt doubled between 1975 and 2005. Total disaster. I am not Keynesian, but that is apparent. I am not a capitalist ideologue, either. Having said that, I fully back your push for a libertarian economic system for similar reasons that Marx supported free trade. It is bound to speed up the collapse of this movement (which is apparent the world over, Europe has moved in a similar direction in recent decades as well) to the right and to speed up the radicalization of working people. If you see working people’s opinions on the issues that certainly is taking place. So preach on Austrians, dig your own grave.

Sione September 14, 2011 at 12:26 am

Hard to find a better example of imbecility than what you’ve posted “Huh?”.

By the way, your tag line is apt. You really do not have the slightest clue about what you are on about.

Sione

Ron September 14, 2011 at 2:17 pm

Why do you blame Freedom for the problems caused by government intervention?

Huh? September 14, 2011 at 2:23 pm

Sione, give me a break. If you had anything of substance to say you would. The whole trick people do of dismissing things out of hand, pretending that it will take the place of a logical response, isn’t going to work. Everything I said is true, if you could argue against it you would. You can’t. Go back to your coffee house economics, impress all the college sophomores who will take your nonsense seriously.

Huh? September 14, 2011 at 2:59 pm

Ron, all economies, whether we like it or not, are mixed economies. No economy is entirely the state and no economies are entirely the market. Some might be close to one or the other, but no economy is or will ever be 100% one or the other. If an economy is reformed to go more towards a market and that involves far less governmental intervention or activity in the economy and the economy fails (like the US, Europe and Latin America) it LOGICALLY makes no sense to entirely blame the government. It doesn’t. Maybe the government is partially to blame, maybe it isn’t, depends. It is a mixed economy and the US, for example, has moved much closer to a “free market” than anything most people would call “socialism”. It isn’t a free market, but it has moved in that direction over the last few decades. So blaming “freedom”, by that I guess you mean the market, makes logical sense. If an economy is dominated more by markets than it is the state and the economy fails it makes sense to at least partially blame “freedom”. The problem I have with many libertarians is that they are so ideologically fundamentalist that logic itself doesn’t matter.

The same applies if the economy went in the other direction, and I KNOW most people here would not waste a second saying so. If a government nationalized many industries, instituted wage, price and capital controls and the economy failed it wouldn’t matter if there were markets, profits, competition at the outer margins of the economy. If the economy failed it would be, at least partially, the result of the government.

Personally, I have little faith that MOST libertarians will be objective about this at all. If 99% of an economy were a “free market” and the government was active in 1% of the economy you people would still blame the state. When Chile’s economy imploded in 1982, after its radical “free market” reforms, I am sure libertarians blamed “the state”.

Ron September 19, 2011 at 11:04 am

Huh?
Thanks for taking time to read my posts and reply to them. I think your last post has shed light on the source of our disagreement for me. You point out that all economies are mixed and talk of logic and objectivity. You use these words differently from my understanding of them.
Einstein was able to discover and describe some very real things about how the world works by “thought experiments.” This is the method of the Austrians. Since they cannot experiment on people, they imagine situations and describe them. Then they check the descriptions against reality, that is, the historical record.
Also, there is some predictive power to the truth, as you would expect.
In the 1920′s Mises predicted the failure of “Socialism” as in the now defunct USSR and the inabilty of the Chinese to make it work over the last 6 decades.
Also in the 1920′s, Mises predicted the Great Depression when the experts were claiming to have banished the trade cycle.
Try reading Human Action or Man, Economy and State. They are free on line on the Mises website.
If you make an honest attempt at it and still hold the same opinions, I would be interested in hearing why.

Indigo October 18, 2011 at 1:28 am

You can read the book for free on Amazon……

konst September 11, 2011 at 10:10 pm

What Dr. Graeber has not elaborated on, at least in these debates, is whether there is a need for coercion or force to establish the states money unit. In this case I consider even the temple a state for obvious reasons.

What people seem to be glossing over or neglecting is that these two different necessarily require the persistent use of force in the Graeber hypothesis and “non-aggression” in the Mengerian/Misesian hypotheses.

That is the basis of the two systems.

wh10 September 12, 2011 at 6:41 pm

Taxes.

Indigo October 18, 2011 at 1:36 am

David Graeber would argue that coercion is unproductive, but that a certain degree of social responsibility is productive. However, it cannot be enforced by coercion.

Tom Hickey September 12, 2011 at 11:56 pm

Either the Menger view of money is based on self-evident principles, in which case it is a dogmatic philosophy, or it is based on empirically testable hypotheses capable of being falsified by evidence, if it is scientific. I assume you take it to be scientific. What are the hypotheses in your view, and what would it take to falsify them?

Ned Netterville September 13, 2011 at 12:26 am

Mr. Hickey, your comment reflects ignorance of the scientific method that is applicable to human action, which is the subject of the science of economics. Here is a hint: it is not empiricism. Building on the work of Ludwig von Mises, Hans-Hermann Hoppe extinguishes the notion that the methods of physics can be applied to human action in a small book entitled, ECONOMIC SCIENCE AND THE AUSTRIAN METHOD.

mdm September 13, 2011 at 4:41 am

Ned,
Perhaps you can clarify some issues.
The Austrian method is an a prior deductive system, where conclusions are derived from various axioms.

The way I look at this is similar to mathematical and other axiomatic systems. For instance, the euclidean geometry. Is this a fair assessment? If it is, then how do you know that your axiomatic system applies to the real world, i.e. how do you know if the real world is a euclidean system? In the real world, the world is non-euclidean, where the sum of angles of a triangle can be greater than 180 degrees, and where parallel lines often meet.

Ned Netterville October 6, 2011 at 5:10 pm

“Yet that geometry is either mere play, forever subject to empirical testing seems to be irreconcilable with the fact that Euclidean geometry is the foundation of engineering and construction, and nobody there ever thinks of such propositions as only hypothetically true. Recognizing knowledge as praxeologically constrained explains why the empiricist-formalist view is incorrect and why the empirical success of Euclidean geometry is no mere accident.”
Hans-Hermann Hoppe, ECONOMIC SCIENCE AND THE AUSTRIAN METHOD, p. 75.

mdm, a full explanation of how we know that our axiomatic system applies to the real world, an explanation that addresses any questions raised by the discovery of non-Euclidean geometry with Einstein’s relativistic theory of gravity, is found in this book on pages 74-83.

Here is a pertinent comment and a hint of some of the revelations the book may afford you from a note on page 76: “”the lenses of the telescopes which one uses to confirm Einstein’s theory regarding the non-Euclidean structure of physical space must themselves be constructed according to Euclidean principles.” The book, btw, unlike Graebers, is available to download free of charge on the web.

physguy October 6, 2011 at 5:23 pm

“”the lenses of the telescopes which one uses to confirm Einstein’s theory regarding the non-Euclidean structure of physical space must themselves be constructed according to Euclidean principles.””

Clearly nonsense.

The Parallel Postulate (which distinguishes Euclidean from non-Euclidean geometry) is NOT used in the construction of ANYTHING (lenses or otherwise).

Riemannian Geometry is the geometry of locally-Euclidean spaces (manifolds). THAT, and not some praxeological mumbo-jumbo, explains the “success” of Euclidean geometry.

Stick to Economics, Ned.

Tom Hickey September 13, 2011 at 8:04 am

Ned, I have a PhD in philosophy and have a pretty good grasp in the philosophy of science, philosophy of logic and mathematics, and analytic philosophy.

Your comment suggests to me that AE uses a philosophical method based on intuition and self-evidence rather than the scientific method as most people understand it. Of course, if your redefine the scientific method to suit yourself, that’s fine. Just don’t expect the rest of the world to accept it.

Theoretical models have to semantically interpreted in order to represent experience as observable reality. That means the model has to correspond in its structure to that which is being represented. The way to show that explanation is what it purports to be is through predictions in the form of hypotheses ideally testable through controlled experiment. This is non-controversial.

Admittedly, controlled experiment is not always possible in the social sciences, of which economic is one. However, some sort of empirical connection must be demonstrated to show that the model is actually a model of what it purports to explain. That means that the causal mechanisms of the model have to be shown to produce the effects that would be expected. The way this is arrived at is through hypotheses and testing by applying statistical methodology to data. The problems lie with the experimental design, the quality of the statistical analysis, and the reliability of the data.

But maybe you think that science is something else and the proof of claims runs differently? If so, please explain. From what I can tell, praxeology is controversial, to say the least, and virtually no one other than the Austrian School accepts it among scholars familiar with scientific and economic methodology.

That doesn’t necessarily mean it is wrong, but who is going to take something seriously as a scientific explanation rather than as a philosophical one without testable predictions that can be replicated by others? What good is an explanation if it can’t be used to for prediction?

It seems to me that without meeting these widely accepted criteria, proponents of AE are just talking to themselves about how dense everyone else is for not seeing the world in terms of their worldview.

And this is without even getting into the issues surrounding methodological individualism wrt causal explanation. There is a whole literature on this.

Reagards,
tom

fundamentalist September 13, 2011 at 10:03 am

Tom Hickey: “controlled experiment is not always possible in the social sciences, of which economic is one. However, some sort of empirical connection must be demonstrated to show that the model is actually a model of what it purports to explain.”

Controlled experiments are never possible in economics, except for trivial ideas. Austrian economists have written about the differences between economics and the natural sciences in hundreds of books and articles. For one of the best, google for Hayek’s Nobel Prize speech “The Pretense of Knowledge.”

You’re right that today science refers only to the natural sciences. But the natural sciences lay on a continuum of certainty, with physics being the most certain and biology the least. If physics is the gold standard of science, then the field of evolution is no science at all. And social sciences aren’t sciences either.

But who cares? What difference does it make if a discipline is a science like physics or not? Can physics tell us why depressions happen, how to rescue people from poverty, or how to grow an economy? No it can’t. Neither can astronomy.

But we need answers to those questions, so how should we go about finding them? The answer from mainstream econ is to measure everything and apply the methods of physics to those measurements. But we can’t do controlled experiments so our measurements are worthless. Mainstream economists know that, but they pretend that they aren’t worthless. Then they come up with quasi-physics models that can’t predict anything and are useless, but they can take pride in the fact that their worthless models are based on the math techniques of physics.

How about instead doing what all of the great Austrian economists have suggested: we adopt methods appropriate for the subject. They aren’t the methods of physics, so you can claim it’s not a science, but who cares what you call it? The work still has to be done and in a systematic way. Insisting that economics be physics or we don’t do it is not an answer to the problem because economics can never be physics. It’s impossible.

As for finding support in the empirical data for an economic theory, that is trivial. Historical data are so vast and contradictory that just about any theory can find support in it. But that doesn’t prove the theory is correct. It would be a very sorry theory that couldn’t find some support in the historical record.

BTW, Austrians always offer empirical support. Hardly any book or article lacks it. They see it as illustration, though, and not proof.

Tom Hickey September 13, 2011 at 10:31 am

You obviously have no idea of how theory, models, and verification operate in the life and social sciences. No one in these sciences thinks that the methods of physics are the standard in these sciences, too, since the context gets very different once organisms are involved. However, the basic principles of model building and representation of observable events are similar.

The problem with most economists is that they are unaware of what other social scientists do and what their research shows. See, for example, evolutionary theorist David Sloan Wison’s thirteen part series on Evolution and Economics at http://scienceblogs.com/evolution/economics_and_evolution_as_dif/

For an overview of the philosophy of explanation in the social sciences, see Merrilee H. Salmon, Explanation in the Social Sciences, http://www.mcps.umn.edu/philosophy/13_12MSalmon.pdf

Representing this as a cut and dried case resolved by the founders of AE a century ago is myopic. If there were a satisfactory comprehensive scientific theory of human action, it would case closed and move on to other issues. As is is, the issues are still hotly debated, not only the substance but also the procedure. I’m sorry, but assertions to the contrary are simply dogmatic and fundamentalist, more religious and ideological than scientific.

How can you have a science of human action without consulting the latest findings of evolutionary theory, biology, psychology, cognitive science, etc.? Why are we to take musing of a small group of economists of the early 20th century as the standard, as if knowledge froze at that point in time?

Iain September 13, 2011 at 10:48 am

“How can you have a science of human action without consulting the latest findings of evolutionary theory, biology, psychology, cognitive science, etc.?”

Because you don’t need those things to have a science of human action because it is a different field entirely.

fundamentalist September 13, 2011 at 12:31 pm

It’s pretty easy to have a science of human action without “evolutionary theory, biology, psychology, cognitive science, etc.” Just study humans.

Most evolutionary theory is nothing but speculation, anyway. Psychology and cognitive science tell us why people value some things over others, but that information is not relevant to economics. All we need to know for economics is that people have preferences and that they manifest those preferences in the market place with their decisions to buy and sell. Biology is irrelevant because humans aren’t animals who respond only to instinct; we have minds and the ability to choose and reason.

Wilson: “Laissez-faire economics bears little resemblance to its own patron saint.”

I don’t think Wilson understands Adam Smith or laissez-faire economics; they are one in the same. Keep in mind that Smith qualified his invisible hand metaphor with “as if”. He never thought there was an invisible hand working. There isn’t. What he meant was that competition from other businessmen will force greedy businessmen to serve the interests of their customers and thereby serve the “common good”.

Smith assumed the rule of law would protect people from fraud and theft. Laissez-faire is nothing but a synonym for Smith’s system of “natural liberty.”

Tom Hickey September 13, 2011 at 12:48 pm

fundamentalist, you chose your monicker accurately. :)

fundamentalist September 13, 2011 at 12:57 pm

The second article you linked to isn’t far from the thinking of Mises in “Human Action.” If you would stop expelling verbal farts and just read something, as you insist we do, you would discover that. The first section of “Human Action” goes deeply into the epistemology and methodology of sound social science and I don’t think you will find much to disagree with.

fundamentalist September 14, 2011 at 8:05 am

You’ve done nothing but fart on this site. Let’s see some substance. Show us what your great learning has taught you about economics and then maybe we can decide if you know as much as you think you know.

Tell us what evolution has to say about the business cycle. Tell us what cognitive science has to teach us about poverty.

I read some of Sloan’s posts and he offers nothing but vague generalities. If you can’t do better than him, then you don’t know anything.

Tom Hickey September 13, 2011 at 3:44 pm

fundamentalist, I have read Mises’ Human Action on his idea of action in terms of praxeology. Its spun out of this head. The world has moved on. Read cognitive psychologist Antonio Damasio, Descartes’ Error and The Feeling of What Happens, for instance. The concept of man as “rational” is just unsusaintable in light of how the brain actually functions.

This is even before getting into Mises idiosyncratic idea of the individuals as free agents cooperating in society, which again ignores discoveries of cognitive science and institutionalism, for example. I don’t fault Mises for that, however. These discoveries came after him. But I do fault his contemporary adherents if they do not taking them into account, dismiss them, or explain them away without engaging them.

One problem I have with Mises himself is that he states his position and then contrasts it with its opposite, which he erects as a straw man, including everything that opposes him in it. The actual and ongoing debate is much more nuanced than he makes out.

There is a reason that the world has moved on from the approach of Mises, which is essentially a philosophical one. History shows that it easy to be taken in by apparently self-evident ideas. The scientific method was developed in contrast to this approach in order to assess claims in a rigorous fashion in terms of evidence-based criteria that can be checked publicly.

As a grad student in philosophy, I used to think very much like Mises, but I was disabused of this error by some really excellent professors through study of the philosophy of science and analytic philosophy, as well as scientific disciplines that call the deductive method based on so-called self-evident principes into question. I came to see it as absolutist thinking that lacks adequate criteria, on one hand, and ignores important evidence, on the other. While it is appealing to those seeking truth as an absolute, it is just wrong-headed and won’t cut it in the contemporary world except among ideologues.

fundamentalist September 13, 2011 at 4:51 pm

Cognitive psychology has nothing it can add to economics. All social sciences are based on humans acting rationally. If humans weren’t rational then there would be no pattern to behavior at all and no one could predict what another would do from one moment to the next.

And it doesn’t matter how the brain functions. Mises addressed that in Human Action very well and you would know that if you had actually read it.

So if you have such a good handle on economics, show us some of your econ. Explain how capital markets work, or what causes business cycles. If cognitive science is the root of all knowledge, let’s see what it has to say about economic problems.

The world hasn’t moved on from Mises; it hasn’t caught up to him, yet. Austrian economics is the best predictor of economic events that exists. Mainstream can’t hold a candle to it.

Seems to me that your gripe is with all economics, not just Austrian. Sounds to me like your a closet Marxist.

Tom Hickey September 13, 2011 at 8:07 pm

Have your read Human Action? In the section on choice and rationality to which I am referring Mises is not talking specifically about economics but the underlying epistemology, psychology, and agency theory. It’s actually quite Aristotelian in approach.

Peter Surda September 14, 2011 at 1:24 am

Tom,

The concept of man as “rational” is just unsusaintable in light of how the brain actually functions.

I think when you claim this you obviously did not get what Mises wrote. His point is that people act because they want to achieve goals. It could be that they are not aware of these goals and doing it subconsciously, it could be they do not correctly understand what they are doing and will therefore not reach the goal. But none of this invalidates Mises.

There are two alternatives: either people do not want to reach goals, or it is impossible for them to evaluate how well specific actions help to reach their goals. Purely as a falsificationist, I admit that these alternatives are thinkable, but if they were true, they would invalidate, well, everything. To consider them would be pointless.

Ron September 20, 2011 at 1:57 pm

I think Tom has explained why there is no hope.

“As a grad student in philosophy, I used to think very much like Mises, but I was disabused of this error by some really excellent professors through study of the philosophy of science and analytic philosophy, as well as scientific disciplines that call the deductive method based on so-called self-evident principes into question. I came to see it as absolutist thinking that lacks adequate criteria, on one hand, and ignores important evidence, on the other. While it is appealing to those seeking truth as an absolute, it is just wrong-headed and won’t cut it in the contemporary world except among ideologues.”

I have a graduate degree in Mathematics and understand a little about science. My take away from this quote is that there is no knowledge. Science is only trial and error. So we are all wasting our time tying to understand how things work. Just observe, catalog and correllate.

I disagree. Read “Philosophical Melancoly and Delirium.” Livingston explains how David Hume would accuse your professors of “false philosophy.”

I define Truth as an accurate description. We don’t have to agree, but I see your arguments as more of a waste of time than mine.

Wildberry September 13, 2011 at 11:48 am

@ Tom Hickey September 13, 2011 at 8:04 am

As you can see, your post was misunderstood by everyone who has responded to it.

It is true, as you said and as respondents reiterate, that experimentation is not appropriate to sociology in all cases, although certainly social experimentation takes place, especially in the fields of applied psychology.

But I take your point that human action is a model for understanding observations of human conduct, and is the basis for praxeology, which is the basis for Mises’s economic theories. But your point is fundamental; that conclusions that are obtained from any methodology, praxeology or any other that are integrated to form a model, must withstand some scrutiny regarding whether the model actually describes what it purports to describe, and whether it is predictive in the way in purports to be. Empirical data is employed regularly by even the most vocal adherents and spokespersons for the AET for that very purposes (i.e. Murphy uses economic statistics to support his analysis of AET predictions and actual results).

I cannot think of a more fundamental principle of a scientific method (meaning a method that purports to compare theories to observations), as contrasted with ideological rhetoric, for example.

Tom Hickey September 13, 2011 at 12:03 pm

The further one gets from controlled experiment, the more questionable the argument gets for lack of adequate criteria. When there’s no data or hard evidence used at all, that’s a philosophical argument based on speculation. Taking speculative conclusions as dogma is the mark of an ideologue. The next step is rejecting contrary evidence because it conflicts with the ideology. The history of thought and even science is littered with this kind of rigid thinking. In contrast, science is always tentative, proceeding iteratively through trial and error to more accurate models to represent experience.

fundamentalist September 13, 2011 at 12:52 pm

Tom, I think if you would study some Austrian economics you would find a lot of answers to your questions. It’s hard to answer them in the limited space of a blog without over simplification.

Your issue relates to the inductive vs deductive debate that has gone on for centuries. They natural sciences use inductive reasoning to build up the results of controlled experiments into theories. Economics can’t do that because it can’t conduct controlled experiments except on trivial matters.

Economists solved the controlled experiment problem by constructing mental models of how an economy would work in equilibrium and reasoning from that. Equilibrium is a fictional construct; it is a mental controlled experiment. Mentally we can loosen some of the assumptions of equilibrium and imagine what changes would happen. Of course, at some point you have to make predictions with your theories and compare them with reality, but that is a trivial thing to do because any theory can find support in historical data.

Many economists have rebelled against the deductive method and tried to build theory inductively. They have run into the problem of contradicting data and models, and highly correlated and numerous variables.

For example, there are several models that show that the stimuli during the recent depression were very effective. A similar number of models from equally respected economists show that the stimuli were a waste. Which models are correct?

Ned Netterville September 13, 2011 at 12:06 am

Clearly, Mr. Graebner doesn’t comprehend praxeology. Here is a pertinent comment extracted from Hans-Hermann Hoppe’s small book, ECONOMIC SCIENCE AND THE AUSTRIAN METHOD:

“[T]he empiricist methodology is simply contradictory when applied to the field of knowledge and action…”–p. 38

Huh? September 13, 2011 at 9:29 am

Are you kidding me? Why the hell would he bother studying some obscure Austrian theory? Anthropologists have REAL things to worry about and study. Austrians really are like the most fundamentalist Marxists. At least people who call themselves Marxists took power and attempted, without success, to implement a system that worked to benefit people. There has never been, nor will there ever be, a truly “libertarian” system. It wouldn’t benefit enough people to last even if it were attempted. People have to have a stake in a system or they will work to replace it or won’t stop others from doing so. Besides, try explaining your pie in the sky ideas to a typical working person, who is the majority of the country. Then explain what assumptions underlie your theory. A normal person would be too embarrassed to try.

Iain September 13, 2011 at 10:47 am

“At least people who call themselves Marxists took power and attempted, without success, to implement a system that worked to benefit people.”

LMAO! Wow that shouldn’t be funny, but it is in a very macabre way.

Huh? September 13, 2011 at 9:02 pm

Shouldn’t be. Marxism obviously didn’t benefit people the way Marxists predicted. Having said that, it was powerful enough as a movement to take power and to at least attempt to put concrete policies in place. Austrian economics isn’t, never will be and any movement in that direction has imploded upon itself. Socialism is still a force in the developing world and socialism, especially as you Austrian define it, has been the only thing that has ever lead to economic development. If you can bring yourself to read a non Austrian economist read Ha Joon Chang’s “Kicking Away the Ladder”. The US has moved to the right on economic issue after economic issue (lower individual and corporate taxes, more free trade, less financial regulation, the removal of capital, wage and price controls, far weaker unions, mass privatizations) as has Europe, and look at the shape of the economies. Whatever you want to say about Keynesian economics or social democracy it worked far better for those countries and working people than the movement towards your utopia. Don’t respond with some nonsense comment by Hayek or something, respond with some facts and straight ahead logic that shows how the movement to the right on economic issues has benefited countries that have attempted those policies. Why is the IMF and its policies so unpopular in Latin America? I know the IMF’s policies aren’t “Austrian”, but they surely are closer to AE than anything on the left. Mass privatizations and cuts or elimination of services delivered by the government, deregulation of finance, trade liberalization, removal of capital controls, “labor market reforms”, amongst other things. Why did those policies so horribly fail? Let me guess, the STATE. Somehow, in some alternate universe, it all makes sense I am sure.

Ned Netterville September 13, 2011 at 6:54 pm

Why? “Its statements and propositions are not derived from experience. They are, like those of logic and mathematics, a priori. They are not subject to verification and falsification on the ground of experience and facts. They are both logically and temporally antecedent to any comprehension of historical facts. They are a necessary requirement of any intellectual grasp of historical events.”–Mises.

To say, my good fellow, that you are quite as clueless as Graebner regarding Austrian economics is the kindest response I can make to your gibberish. If you had even a rudimentary grasp of AE, you would not only realize that Marxism was an unmitigated failure, you would also be able to comprehend why it failed? However, I suppose you also get along well enough without understanding mathematics or logic either, particularly if you have a job where a computer does most of your thinking.

Huh? September 13, 2011 at 8:48 pm

You aren’t as smart as you think you are. I said myself that Marxism failed. Certainly a genius like yourself can at least read, right? I mean, you didn’t learn the brilliant AE from books on tape. I have a degree in economics and am in graduate school now studying ecological economics. It makes total logical sense though to assume I know nothing of mathematics and logic. I disagree with YOU, so I must be dim bulb. Great example of impeccable logic there buddy. Honestly, most of the time I talk to people like yourself and I ask them about their knowledge of economics they give me a list of books written by Austrian economists. They have little to no knowledge of economics outside of AE. They don’t know economics, they know AE. I personally can’t respect people who don’t read people they disagree with. How can you say you don’t agree with something that you haven’t bothered to try and understand? I am not well versed in Austrian economics for the same reasons I am not well versed in Scientology. It’s nonsense. I’ve read Hayek, I’ve read and appreciate Rothbard a little, I’ve had to read boat loads of neo-classical economics too (although I think it may be even less reality based than AE. At least AE isn’t consumed with equilibrium) . I prefer economics that is based in reality, that has realistic assumptions and that is applicable. As I said above, there never has been an economic system governed by AE, nor will there be. If AE is such a logically sound, brilliant school of economics that is completely in tune with human nature, why hasn’t it been put into practice even once? Maybe you geniuses will have to teach lowly workers, the non-productive class of parasites, the obscure theories you always regurgitate.

Sione September 14, 2011 at 1:35 am

Huh?

You just blew yourself up there little one! Wasting the best years of your life studying such nonsense as “ecological economics” is tragic. Purile bullshit. Says it all about you really. Had you considered that you are never going to be able to recover the lost time and resource being plowed into your grad school “qualification”? It is sinecure you are chasing for your career, preferably one established and protected by regulatory welfare. You naughty parapsite, you!

You have already invested a great deal of intellectual effort in the mumbo jumbo faiths & myths that pervade the institution you are incarcerated within. Within a few short years you have progressed to the point where you can’t possibly admit to anyone (not even to yourself in private contemplation) that what you involved in is shot through with falsity, relies on premise which is dead wrong and features a hierarchy of thinking which is faulty- illogical and immoral to boot. What a tragic waste of a young mind. What a waste of a potential for a good and productive life. You should alter course before it is too late for you. People, like you, who boast so loud about their oh so important qualifications, bits of paper, courses bagged and academic credentials are, in general, severly lacking in real experience, competence and ability to produce anything useful. The type finds it more than difficult to survive well for very long unless protectively ensconced within the sheltered workshop of a statist university environment or some govt “job” somewhere or even some protected crony “consultancy”.

You are one of those self-deluded critters who is “igrint ’bout what he be igrint of”. Maybe you can learn. Perhaps you can change. Still, if you were capable of doing anything valuable and worthwhile you’d have done it by now. You have not done anything much though…

Sione

Huh? September 14, 2011 at 2:49 pm

Sione, I really can’t take you seriously. Have you ever met me? Do you know anything about me? When you say that people like me “everly lacking in real experience, competence and ability to produce anything useful.”, how in the hell would you know? Maybe you think my real name is Huh?, and you have certainly never heard anyone named Huh? write a book or do anything productive, so obviously I lack in competence and real experience. Honestly, if this is how you think I won’t bother giving a damn what you think about economics or anything else.

“The type finds it more than difficult to survive well for very long unless protectively ensconced within the sheltered workshop of a statist university environment or some govt “job” somewhere or even some protected crony “consultancy”.

Yeah, that or after studying (largely neo-classical) economics I started to read about ecological issues extensively. After I moved to China and taught there (had to work two jobs for two years in California to save up to move to China), and saw the ecological damage with my own eyes (the government there says about 10% of GDP is eaten up by ecological destruction), my interest in ecological issues increased. After reading about the long list of ecological issues we are dealing with over a number of years I thought I would combine my knowledge of economics with my interests in ecological issues. Very sinister stuff really. Statist university, and all that jazz.

“You have not done anything much though…” LOL! Again, you don’t know who the hell you are talking to! You don’t know jack squat about me. All you know is that I am a person who came here, posted under the name Huh? and I don’t like Austrian economics. That is all you know about me. You must assume that anyone who dares to disagree with AE is a blah blah blah. Notice too that you haven’t responded to anything I said. Not a damn thing, just a rambling, ignorant, blind tirade with a bunch of put downs towards a person you have never met and know nothing about.

“Wasting the best years of your life studying such nonsense as “ecological economics” is tragic.”

Most definitely. Surely soil erosion, deforestation, ocean acidification, consumption beyond sustainable limits, water and air pollution, global warming, externalities, aren’t big issues we have to deal with. Economists also surely have nothing to add. Economics doesn’t impact the environment, now does it? Even some “free market” folks like Terry Anderson haven’t admitted that traditional economics has not paid enough attention to the environment, and is largely the cause of the ecological crisis, now have they? Since you are obviously, once again, talking out of complete ignorance, you wouldn’t know that these problems won’t be solved until our economies are reformed (and the economy can be reformed in many different ways) to take these issues into account.

By the way, anyone with a brain, well a brain that works, can see that I mentioned my background in economics only in response to the person above who said I knew nothing of mathematics and logic. I didn’t mention it in any of my other posts because it had nothing to do with the discussion. Obviously, if I am studying economics in graduate school, I HAVE to know a lot about math and logic or I wouldn’t be where I am at. You people don’t like to respond with substance it seems. Just personal attacks, weak ones too. C level stuff.

Are you done with your tail whooping now? Care to respond to anything I said or do you want to bark at the moon a little more?

I do thank the blog here for letting me post even though I don’t agree with the philosophy of the blog. Some blogs aren’t open like this.

Actual Anarchist September 13, 2011 at 1:36 am

Graeber’s embarrassed silence concerning Murphy’s response speaks volumes. It’ll be hard for anyone, anywhere, to take him seriously ever again. The asinine and infantile lengths that people will go to in their failed attempts to refute Austrian economics is simply astonishing.

xy chromosone September 13, 2011 at 2:12 pm

since it is clearly irrefutable…

Stan Teuoff September 13, 2011 at 3:48 am
Wildberry September 13, 2011 at 11:52 am

Thank you for this link. It was briliant.

Sione September 14, 2011 at 1:54 am

Why do you credit-came-first acolytes feel the need to generate such obvious fibs? There was no “climb down”.

Sione

John September 13, 2011 at 9:08 am

As far as I can tell, his new article doesn’t really address Murphy…

Personally, I liked Tyler Cowen’s review of the book “Do you seek an overly verbose, sometimes fascinating synthesis of economic anthropology, early 20th century credit theories of money, and the history of debt? The book overinterprets early historical evidence and falls apart as it approaches contemporary times, still it has a vitality which many other tracts lack.”

fundamentalist September 13, 2011 at 10:01 am

From Glaeser’s response:

“professor Caroline Humphrey concludes, “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money; all available ethnography suggests that there never has been such a thing”

That’s an argument from silence. I wish “scientists” would learn some logic.

Glaeser: “Just in way of emphasis: economists thus predicted that all (100%) non-monetary economies would be barter economies.”

Straw man, thus not true.

Glaeser: “Similarly, the number of documented marketplaces where people regularly appear to swap goods directly without any reference to a money of account is also zero.”

Argument from silence fallacy.

Glaeser: “But without assuming the spot trade, there’s no double coincidence of wants problem, and therefore, no need to invent money.”

What is he saying? Is he claiming that people never needed to make spot trades, the most common trade ever?

Glaeser: “if a neighbor wants some possession of yours, it usually suffices simply to praise it (“what a magnificent pig!”); the response is to immediately hand it over, accompanied by much insistence that this is a gift and the donor certainly would never want anything in return. In fact, the recipient now owes him a favor.”

So Glaeser assumes that people never traded with strangers. Funny thing, my family members trade things all the time and we don’t need any money to do it. Seems that money becomes valuable only when dealing with strangers. Odd isn’t it?

Glaeser: “It is widely attested in many times and places. But it typically occurs between strangers, people who have no moral relations with one another.”

Exactly!

Glaeser: “Barter can take the form of occasional interactions between people never likely to meet each other again. This might involve ‘double coincidence of wants’ problems but it will not lead to the emergence of a system of money because rare and occasional events won’t lead to the emergence of a system of any kind.”

Clearly, money will only be valuable outside of the family or clan, in other words in a market. So what is Glaeser saying, that markets didn’t form until the government invented money?

Glaeser: “Rather than leading to people having to create some circulating medium of exchange (money) to facilitate transactions, such trade normally leads to the creation of a system of traditional equivalents relatively insulated from vagaries of supply and demand.”

And that “system of traditional equivalents” is money. At first it was wheat and barley grains from small items and cattle for large items. Later it became silver and gold, but the measures of the metals were first determined by the grains. Shekels, for example, were weights of barley grains, so many grains (8, I believe) to the shekel.

In Genesis, Abraham measured out a certain weight of silver nuggets (there were no coins) to buy land for Sarah’s tomb.

Glaeser: “Sometimes, barter becomes a widespread mode of interaction when you have people used to using money in everyday transactions who are suddenly forced to carry on without it.”

Exactly! Which makes it reasonable to assume that before money people used barter. But no economist has ever written that people used barter for long periods of time. The inconvenience motivated them to find something with common value to use in the market.

The historical record can’t prove anything about what happened in pre-history and the explanation of the origin of money is mostly about pre-history. But the barter to money theory is based on what we see human beings doing when they are short of money: they barter.

Peter September 13, 2011 at 1:25 pm

Graeber simply generalizes Menger: he talks about non-instant barter.

Example:
“I will give you the fish today, you (X) will give me 3 beaver skins next month” – a record of this transaction is debt. It can say “3 beaver skins will be delivered by X” – any owner of this note has a claim on the skins from X, so the note becomes money. Barter story demands that all transactions are instantaneous. Debt simply allows to stretch them in time. All money is debt. That is all what Greaber says.

Jim September 13, 2011 at 4:03 pm

The concept of man as “rational” is just unsusaintable in light of how the brain actually functions.

Should I accept this sentence by using my reason? Or should I not accept it by using my reason? Or, like my cat, should I follow the deep structure of the “actual functioning” of my brain and just ignore it–making sure that I am ignoring it not out of a rational assessment but out of sheer animal indifference?

Tom Hickey September 13, 2011 at 4:19 pm

You should probably read some of the research.

Jim September 13, 2011 at 5:58 pm

That would be a rational decision. The fundamental structure of my brain would not allow it, and that is also why this reply is irrational, just as language is fundamentally irrational, and fundamentally doesn’t exist, which is why it is irrational for you to read and post messages that require reason to be understood in defiance of the brain’s fundamentally irrational structure, which is a purely random hypothesis produced by stochastic processes and not by rational brains. We are not intelligent. If the research has convinced you of that hypothesis, celebrate! It is reasonable to do so…
As my mother would say, Tom, I think you are often way too big for your britches.

Sione September 14, 2011 at 1:41 am

Jim

Outstanding take down!

Your mother was quite right to employ the saying. It is espacially apt when applied to these over-qualified, under-performing intellectual deficients.

Sione

RonT September 13, 2011 at 4:07 pm

The Austrians cannot possibly accept that Graeber is right as it makes the whole religious system based on faith in the prophets (Mises, Menger etc) crumble: if Menger was wrong once, maybe he is not infallible? Maybe armchair pondering isn’t the best way to understand the world? What then?

DixieFlatline September 13, 2011 at 4:36 pm

Ron, awesome strawman argument!

RonT September 13, 2011 at 4:58 pm

I wish it was.

Experiment always trumps “logic” – our logic evolved to help us on the savanna, it is fallible when thinking about abstract concepts.

feudalredux September 13, 2011 at 5:20 pm

Logic evolved? Can you provide some more details? Like an evolutionary tree of logic?

Maybe even something like : “first there was the grunting and the fists. and then … “

Iain September 13, 2011 at 6:33 pm

“our logic evolved to help us on the savanna, it is fallible when thinking about abstract concepts.”

First off, no one ever said logic was infallible. Secondly, just because it evolved has no bearing on its usefulness.

konst September 13, 2011 at 4:56 pm

My question still remains unanswered. My conjecture is that the free market/free society is the natural condition of human society. In other words people prefer to not aggress against one another.

What Dr. Graeber has not elaborated on, at least in these debates, is whether there is a need for coercion or force to establish the states money unit. In this case I consider even the temple a state for obvious reasons.

What people seem to be glossing over or neglecting is that these two different hypothesis necessarily require the persistent use of force in the Graeber hypothesis and “non-aggression” in the Mengerian/Misesian hypotheses.

Tom Hickey September 13, 2011 at 7:59 pm

I don’t want to leave the impression that I am denigrating Mises or any of the Austrian cohort of the time. I regard them fondly for several reasons., I am Austrian descent, my mother having emigrated from Vienna before WWI. Moreover, I wrote a dissertation on Ludwig Wittgenstein, also Viennese, and through that endeavor I am quite familiar of Vienna at the time that the Austrian economists were flourishing at the University of Vienna. As a student of the history of philosophy, I am also partial to their philosophical way of thinking, and I hold all of them in high regard as contributors to the development of Western thought. They were keen thinkers and notably clear and brilliant writers.

I regard many others of the past in that light, too, from Plato and Aristotle, to Augustine and Aquinas, to Kant and Hegel, for example. However, that does not mean that I agree with them. They were representative of their time and made remarkable contributions that make them still very much worth reading.

At the same time, the debate has moved forward and the issues and methods of the past are no longer as applicable in the present context and are often inappropriate in the changed context. The way to deal with the past is to take what is useful and leave behind what is not, as well as to build on the good ideas and learn from the bad ones so as not to repeat the mistakes.

Sione September 14, 2011 at 1:47 am

“…the debate has moved forward and the issues and methods of the past are no longer as applicable in the present context and are often inappropriate in the changed context.”

Next thing you’ll be writing that the US Constitution is a “living document”.

Gotta laugh loud at your bilge. Too silly to take seriously- even for a moment.

Sione

fundamentalist September 14, 2011 at 8:12 am

Show us how any of this relates to economics. And don’t point to Sloan’s rants. He offers nothing but vague generalities. Show us what your great depth of knowledge can teach us about the business cycle or lifting people out of poverty or creating jobs, then maybe we will listen to you. But crapping on great economists and offering nothing substantive in return doesn’t elevate your image or promote your ideas.

Tom Hickey September 13, 2011 at 8:09 pm

My conjecture is that the free market/free society is the natural condition of human society.

Evidence?

Iain September 13, 2011 at 8:28 pm

Logic and the need to set price controls and punish severely those that did not adhere to them throughout history.

konst September 13, 2011 at 9:04 pm

Look up the meaning of conjecture.

In the case that the persistent use of force by the state ceases the free society will reemerge. I don’t know of any cases where that actually happened but that’s what I suspect will happen in those circumstances. That would be some evidence.

Your reply is short on context in terms of what’s changed. Do you mean e.g. that the time for freedom is past and now it’s time to accept the slavery of the state or something like that?

Geoffrey Allan Plauché September 14, 2011 at 8:44 pm

We have another entrant to this debate on the Austrian side.

Check out “On the Austrian Theory of Money, a Reply to David Graeber” over at The Libertarian Standard.

It begins:

David Graeber and Robert Murphy have been debating the validity of the monetary regression theory. They seem to be talking past one another. Graeber is assuming that Austrian theory agrees with neo-classical theory in areas where it does not, and Murphy is assuming that Graeber is substantially more familiar with Austrian ideas than he seems to be. To clear up the confusion, we need to take a step back and start at the beginning.

Wildberry September 15, 2011 at 10:49 am

This is excellent. someone earlier posted the link.

As usual, the author points out that there is something correct about both arguments. This is what happens when people talk past each other; neither can acknowledge what is mutually supportive and merely look to the differences to try to prove that the other is ALL wrong.

I find it much more productive to start from a premise that, given a particular interpretation, a rational and honest person only says what they believe to be true. I think in this case, both sides have valid points, and they are not a self-exclusive as either Murphy or Graeber seem to want to claim.

Ned Netterville September 14, 2011 at 11:30 pm

Huh? wrote in response to a comment of mine:

“You aren’t as smart as you think you are. I said myself that Marxism failed. Certainly a genius like yourself can at least read, right? I mean, you didn’t learn the brilliant AE from books on tape.”

My dear sir, I read carefully. I wish you would too. if you will reread my comment, you will see that I clearly recognized that you knew that Marxism failed. If you CAREFULLY reread my words you will see that I gave no indication that you hadn’t “said yourself” that Marxism failed. Here is exactly what I said:

“If you had even a rudimentary grasp of AE, you would not only realize that Marxism was an unmitigated failure, you would also be able to comprehend why it failed?”

Everyone knows Marxism failed. But that wont earn you a passing grade in high-school economics. Only those who have read Mises devastating critique of Socialism in his 1922 book appropriately entitled SOCIALISM understand WHY Marxism and every other form of socialism are all inevitably doomed to fail.

Huh? also said, “I disagree with YOU, so I must be dim bulb.” No, you must be a dim bulb because with your undergraduate degree from some obscure diploma mill you have the temerity to refer to AE as “obscure theory,” to compare Marxism to AE, which, particularly through Mises scholarship, drove the intellectual stake through the heart of Marxism. Certainly their are still many people who cling to socialism, but not a one of them has ever been able to intellectually defend it against Mises criticism, although some with PhDs from the best universities in Britain and the US have tried. I particularly concur in you assessment that you are a dim bulb because you made this utterly stupid and insensitive statement: “At least people who call themselves Marxists took power and attempted, without success, to implement a system that worked to benefit people.” You buffoon, between the two of them, the Lenin and Stalin socialist regimes murdered nearly fifty million (50,000,000) men, women and children, mostly their own citizens, in their vain attempt to “implement” socialism. Long before most of those people were murdered, Mises had shown that what the Soviet Union was trying to do couldn’t be done–not even over the dead bodies of fifty million. If you don’t read SOCIALISM before you utter another word on the subject, you are dim beyond redemption.

Huh also said this: “I have a degree in economics and am in graduate school now studying ecological economics…I’ve had to read boat loads of neo-classical economics too ”

Ecological economics is not a program of serious study, so you are only wasting your time and money, although I am safe in presuming most of your college expenses have been paid for out of OPM (sounds like opium, is equally addicting, stands for other people’s money). As for what you have read of neo-classical or any other so-called school of economics, your comments on this site demonstrate conclusively that the only “load” of any economic discipline that you have ever read would easily fit in the hold of one of the boats my grandchildren play with in the bath tub.

et3 September 15, 2011 at 1:17 pm

Some primates, besides for humans do barter. Bonobos, in the wild, engage in an exchange of food for sex. Bonobos are also famous for using sex to “make up” after arguments – a form of exchange or barter. Unless you want to call sex a money, I would consider this to be barter. Bonobos also trade services such as watching the small ones.

Regular chimps engage in grooming. Reciprocating is seen often. I don’t see them using gold, though perhaps they might trade bananas. In that case, perhaps we simply haven’t seen the transition from a barter society to a banana republic.

Sione September 15, 2011 at 2:55 pm

Huh?

You whine, ” I really can’t take you seriously.”

Yet you went on and on and on presenting a lengthy position statement, an emotive attempt of self-justification.

You took what I wrote seriously alright. It was accurate.

Think on it.

Sione

Ned Netterville September 18, 2011 at 4:53 pm

Tom Hickey wrote:

“Admittedly, controlled experiment is not always possible in the social sciences, of which economic is one. However, some sort of empirical connection must be demonstrated to show that the model is actually a model of what it purports to explain. That means that the causal mechanisms of the model have to be shown to produce the effects that would be expected. The way this is arrived at is through hypotheses and testing by applying statistical methodology to data. The problems lie with the experimental design, the quality of the statistical analysis, and the reliability of the data.”

Mr. Hickey, controlled experiments in human action are never possible. However, the fact that the theories of Austrian Economics may not be empirically proved nor falsified does not negate their scientific value to understanding the real world–a world inhabited by human beings purposefully acting. Indeed, the methodology of AE is the only means available for understanding the real world. And there is a valid, scientific method of proving or disproving the validity of the theories and laws of AE that does not require empirical validation. The theories and laws are put forward for all of humanity and in particular the scientific community to approve or disprove by the same means used to develop them, which is careful, dispassionate, logical, discursive, a priori reasoning. If someone finds a flaw in the reasoning, they expose the theory supported by it as flawed. If you think, for example, you can refute Say’s Law of Markets, you are always invited to give it a go. J.M. Keynes tried to refute it and failed miserably, but it remains open to anyone and everyone to try. Notice, however, that without a shred of empirical evidence to support it, Say’s Law has withstood the challenges of critics for centuries, which is why it has shed its designation as theory and is now referred to as a law.

Let me borrow a little from Hans-Hermann Hoppe’s 88-page tract entitled ECONOMIC SCIENCE AND THE AUSTRIAN METHOD. (Unlike Graeber’s work, Hoppe’s book is available for free on the Internet making it much easier for the scientific community to assess its content and value or challenge his reasoning and conclusions.) From page 14-21 with several ellipses [...]:
——————–

“Now let us turn to some typical economic propositions. Consider the validation process of a proposition such as the following: Whenever two people A and B engage in a voluntary exchange, they must both expect to profit from it. And they must have reverse preference orders for the goods and services exchanged so that A values what he receives from B more highly than what he gives to him, and B must evaluate the same things the other way around.

“Or consider this: Whenever an exchange is not voluntary but coerced, one party profits at the expense of the other.

“Or the law of marginal utility: Whenever the supply of a good increases by one additional unit, provided each unit is regarded as of equal serviceability by a person, the value attached to this unit must decrease. For this additional unit can only be employed as a means for the attainment of a goal that is considered less valuable than the least valued goal satisfied by a unit of such good if the supply were one unit shorter.

“Or take the Ricardian law of association: Of two producers, if A is more productive in the production of two types of goods than is B, they can still engage in a mutually beneficial division of labor. This is because overall physical productivity is higher if A specializes in producing one good
which he can produce most efficiently rather than both A and B producing both goods separately and autonomously

“Or as another example: Whenever minimum wage laws are enforced that require wages to be higher than existing market wages, involuntary unemployment will result.

“Or as a final example: Whenever the quantity of money is increased while the demand for money to be held as cash reserve on hand is unchanged, the purchasing power of money will fall.

“Considering such propositions, is the validation process involved in establishing them as true or false of the same type as that involved in establishing a proposition in the natural sciences? Are these propositions hypothetical in the same sense as a proposition regarding the effects of mixing two types of natural materials? Do we have to test these economic propositions continuously against observations·? And does it require a never-ending trial and error process in order to find out the range of application for these propositions and to gradually improve our knowledge, such as we have seen to be the case in the natural sciences?

“It seems quite evident-except to most economists for the last forty years-that the answer to these questions is a clear and unambiguous No!…

“To use an analogy; it is as if one wanted to establish the theorem of Pythagoras by actually measuring sides and angles of triangles. Just as anyone would have to comment on such an endeavor, mustn’t we say that to think economic propositions would have to be empirically tested is a sign of outright intellectual confusion?

“But Mises by no means merely notices this rather obvious difference between economics and the empirical sciences. He makes us understand the nature of this difference and explains how and why a unique discipline like economics, which teaches something about reality without requiring observations, can possibly exist. It is this achievement of Mises’s which can hardly be overrated…

“Mises provides the solution to this challenge. It is true, as Kant says, that true synthetic a priori propositions are grounded in self-evident axioms and that these axioms have to be understood by reflection upon ourselves rather than being in any meaningful sense “observable.’) Yet we have to go one step further. We must recognize that such necessary truths are not simply categories of our mind, but that our mind is one of acting persons. Our mental categories have to be understood as ultimately grounded in categories of action. And as soon as this is recognized, all idealistic suggestions immediately disappear. Instead, an epistemology claiming the existence of true synthetic a priori propositions becomes a realistic epistemology. Since it is understood as ultimately grounded in categories of action, the gulf between the mental and the real, outside, physical world is bridged. As categories of action, they must be mental things as much as they are characteristics of reality: For it is through actions that the mind and reality make contact…

“Yet it is Mises who brings this insight to the foreground: Causality; he realizes, is a category of action. To act means to interfere at some earlier point in time in order to produce some later result, and thus every actor must presuppose the existence of constantly operating causes. Causality is a prerequisite of acting, as Mises puts it.

“But Mises is not, as is Kant, interested in epistemology as such. With his recognition ofaction as the bridge between the mind and the outside reality; he has found a solution to the Kantian problem of how true synthetic a priori propositions can be possible. And he has offered some extremely valuable insights regarding the ultimate foundation of other central epistemological propositions besides the principle of causality; such as the law of contradiction as the cornerstone of logic. And he has thereby opened a path for future philosophical research that, to my knowledge, has hardly been traveled. Yet Mises’s subject matter is economics, and so I will have to lay to rest the problem of explaining in more detail the causality principle as an a priori true proposition.”
————-

I hope this wets your appetite enough to read the entire book of only 88 pages, or Mises short book, THE ULTIMATE FOUNDATION OF ECONOMIC SCIENCE. They may open your eyes to the limitations of empiricism.

Ned Netterville September 19, 2011 at 5:52 pm

Since I know from a number of referrals to my website from this page that I am not speaking to a vacuum, I thought I’d copy and paste a bit more from Hoppe’s scintillating dispatch of empiricism as an essentially worthless methodology for economics or to understand the real world:

“It took painstaking intellectual effort to recognize explicitly what, once made explicit, everybody recognizes immediately as true and can understand as true synthetic a priori statements, i.e., propositions that can be validated independently of observations and thus cannot possibly be falsified by any observation whatsoever.

“The attempt to disprove the action-axiom would itself be an action aimed at a goal, requiring means, excluding other courses of action, incurring costs, subjecting the actor to the possibility of achieving or not achieving the desired goal and so leading to a profit or a loss.

“And the very possession of such knowledge then can never be disputed, and the validity of these concepts can never be falsified by any contingent experience, for disputing or falsifying anything would already have presupposed their very existence. As a matter of fact, a situation in which these categories of action would cease to have a real existence could itself never be observed, for making an observation, too, is an action.

“Mises’s great insight was that economic reasoning has its foundation in just this understanding of action; and that the status of economics as a sort of applied logic derives from the status of the action-axiom as an a priori-true synthetic proposition. The laws of exchange, the law of diminishing marginal utility the Ricardian law of association, the law of price controls, and the quantity theory of money-all the examples of economic propositions which I have mentioned-can be logically derived from this axiom. And this is why it strikes one as ridiculous to think of such propositions as being of the same epistemological type as those of the natural sciences. To think that they are, and accordingly to require testing for their validation, is like supposing that we had to engage in some fact-finding process without knowing the possible outcome in order to establish the fact that one is indeed an actor. In a word: It is absurd.

“Praxeology says that all economic propositions which claim to be true must be shown to be deducible by means of formal logic from the incontestably true material knowledge regarding the meaning of action.

‘Specifically all economic reasoning consists of the following:

“(1) an understanding of the categories of action and the meaning of a change occurring in such things as values, preferences, knowledge, means, costs, etc;

“(2) a description of a world in which the categories of action assume concrete meaning, where definite people are identified as actors with definite objects specified as their means of action, with some definite goals identified as values and definite things specified as costs. Such description could be one of a Robinson Crusoe world, or a world with more than one actor in which interpersonal relationships are possible; of a world of barter exchange or of money and exchanges that make use of money as a common medium of exchange; of a world of only land, labor, and time as factors of production, or a world with capital products; of a world with perfectly divisible or indivisible, specific or unspecific factors of production; or of a world with diverse social institutions, treating diverse actions as aggression and threatening them with physical punishment, etc; and

“(3) a logical deduction of the consequences which result from the performance of some specified action within this world, or of the consequences which result for a specific actor if this situation is changed in a specified way.

“Provided there is no flaw in the process of deduction, the conclusions that such reasoning yield must be valid a priori because their validity would ultimately go back to nothing but the indisputable axiom of action. If the situation and the changes introduced into it are fictional or assumptional (a Robinson Crusoe world, or a world with only indivisible or only completely specific factors of production), then the conclusions are, of course, a priori true only of such a “possible world.” If, on the other hand, the situation and changes can be identified as real, perceived and conceptualized as such by real actors, then the conclusions are a priori true propositions about the world as it really is.”

Graeber’s belief that he has adduced empirical archeological evidence refuting any AE theory is, in a word, absurd.

Peter D September 20, 2011 at 2:07 pm

Ned, there is a big difference between saying “all humans acts with purpose” (however unconscious and poorly understood by humans themselves this purpose might be, which makes the axiom of action a very flexible concept indeed) and saying that money had to evolve from barter systems. Is there an incontrovertible logical proof, arising from the basic axioms of AE of the latter? If no, then you have to admit that it is just a hypothesis, and as such it can be subjected to hypothesis testing in the light of available evidence.
Seems to me that AE – broadly understood – has more stuff to it than only logical propositions derived from the basic axioms (unlike math).

J. Giles September 20, 2011 at 3:10 pm

You’re right; there is a big difference. And yes, the axiom of human action is extremely flexible, as it is simply a statement of a fact; people do things, and they do them for some reason. That’s all it says.

And yes; from that axiom, it is in fact possible to logically prove that money is an evolution of barter, and in fact that in the absence of barter the monetary system would not and could not have come about. The logical chain is long, and I’m not going to reproduce it here, but if you sit down with pencil and paper sometime to think about the problem, you can do it for yourself.

As to your last point; I agree. Much of what people call AE, especially recently, seems to me to have drifted away from a strictly-logical, praxeological basis. But Menger’s explanation of money does not fall into that category.

Peter D September 20, 2011 at 3:16 pm

Thanks, J.Giles, I would appreciate a pointer to the proof. My suspicion is that you’ll wind up with a fairly loose definition of barter, which would fit also the things that Prof. Graeber defines as “not barter”, but I might be wrong.

J. Giles September 21, 2011 at 7:06 pm

Yes, you will. What you end up defining barter as is ‘interpersonal transactions in goods and services, which do not involve a monetary unit’, or something similar. Perhaps someone here can tighten up my wording. But in any case, that’s exactly the point; ‘barter’, in the Mengerian sense, is not limited to spot transactions, and does not rule out the possibility of extending credit. All it means is that people are swapping non-monetary goods and services directly, rather than calculating prices and such in some third, monetary good.

It’s obvious, then, that barter preceded money. It must have, because there would be no reason for money to develop without an already-entrenched system of barter. Money just makes bartering more convenient, it doesn’t actually change trade in any important way (when used as money, that is. As a good, money certainly can affect trading decisions).

Peter D September 23, 2011 at 9:04 am

Thanks. So, first, this would not resolve the question of credit vs. barter origins of money, because “barter” defined thus would encompass credit. Second, I still fail to see how this refutes the possibility of fiat money (and one may treat fiat money as credit money extended by the state – or some other authority). You say “because there would be no reason for money to develop without an already-entrenched system of barter”, but the imposition of fiat – by force (I am being redundant) – is a reason good enough, it seems to me.
Admittedly, I need to wrap my head around this some more, I might be missing some parts. Still, doesn’t seem to me right now that there is an irrefutable argument against Graeber here.

Ned Netterville September 21, 2011 at 8:41 am

Peter D: “Is there an incontrovertible logical proof, arising from the basic axioms of AE of the latter? If no, then you have to admit that it is just a hypothesis, and as such it can be subjected to hypothesis testing in the light of available evidence.”

No, I’m afraid I cannot admit that. If Menger reached his conclusion through logical, discursive reasoning from the action axiom, his rational conclusion can only be disproved by finding logical flaws in his reasoning. Empirical testing wont turn the trick. Essentially what I see Graeber futilely trying to do is disprove, not just an economic theory, but economics itself by means of empirical anthropology. Here is an example of what I mean from one of his original series of replies to Murphy’s critique and the chorus of other Austrians who joined in:

“I think the participants in this forum should reflect on what they consider the status of economics to be. Is it a science that generates hypotheses about empirical reality that can then be tested against the evidence, and changed or abandoned if they don’t prove to predict what’s empirically there? Or is it a kind of faith, a revealed Truth embodied in the words of great prophets (such as Van Mises) who must, by definition be correct, and whose theories must be defended whatever empirical reality throws at them – even to the extent of generating imaginary unknown periods of history where something like what was originally described “must have” taken place? ”

As you can see, Graeber hasn’t a clue as to the methodology of AE (praxeology). He asks: Is it a science that generates hypotheses about empirical reality…? The AE answer to this question is, No, it isn’t a science that generates hypotheses about empirical reality because there is no such reality. However, praxeology it is the only science whose methodology is suitable for understanding reality. The fact that Graeber refers to himself as an “economic anthropologist,” without having any understanding of economics, for me conjures an image of an ostrich preening its feathers so it can fly like an eagle. How is one supposed to respond to Graeber’s sarcastic, contemptuous remarks about “Van” (sic) Mises” and (Austrian) economics, remarks that clearly demonstrate complete ignorance of economics and its methodology, which he thinks he is challenging? He is like a man who buys a ticket to a Yankee’s game at Yankee Stadium and when he gets there complains that he came to watch Manchester United play Liverpool and that the teams failed to even show up.

Peter D September 21, 2011 at 8:54 am

To make the point short, I agree that if you can show me a logical proof that money HAS to arise from barter transactions starting from the simple axiom that people act with purpose then your point is valid. But we need to be careful to have:
(a) a consistent scope of meaning of the axiom of action: this axiom can be stretched to mean almost anything. For example, when a person commits an act that seems irrational, such as throwing away money, I suppose Austrians would posit that the motive for the act is still to satisfy the person in a wider sense. Then you have to make sure that in your logical derivation of the proof you allow for such irrational behaviors and not use the axiom of action only in its narrower sense (such as “people act to seek profit” or something like that)
(b) a good definitions of barter that does not allow to treat too wide a range of transactions as barter. Because as you can see from this thread, some people claim that what Graeber found were still barter transactions in a “wider sense”. If too wide a scope of transactions can be classified as “barter” then there is no point in the exercise. From what I understand, Graeber attacks the usual fairly narrow definition of barter as used by most people.

Ned Netterville September 22, 2011 at 10:39 pm

Peter D, I wish I was capable of doing that, but I’m not. And I am not sure that that you have asked the right question. Graeber disputes Menger’s disquisition ON THE ORIGINS OF MONEY, which is available on the web (http://mises.org/daily/3993). On paper it is only about 41 small pages. The following paragraph is from the introduction to the Mises edition by Douglas E. French:

“Written in the same year that he testified before the Currency Commission in Austria-Hungary, Carl Menger explains that it is not government edicts that create money but instead the marketplace. Individuals decide what the most marketable good is for use as a medium of exchange. “Man himself is the beginning and the end of every economy,” Menger wrote, and so it is with deciding what is to be traded as money.”

I think that the circumstances of where, when and why Menger wrote his disquisition must be taken into account by anyone like Graeber trying to discredit his work. If Graeber wants to prove Menger wrong, he will have to show that money was created by government edict, and not spontaneously by individuals to improve their ability to engage in the exchange of goods. So your question, I think, should be: Is Menger’s crucial point, that money was developed by the market not by government edict, right or wrong?

Fortunately, as is almost always the case, Mises commented on this subject in his masterpiece on economics, HUMAN ACTION (http://mises.org/Books/humanaction.pdf, p.405ff). I’ll let Mises speak for me, and if this doesn’t respond to your question it is the best I can do.

“Carl Menger has not only provided an irrefutable praxeological theory of the origin of money. He has also recognized the import of his theory for the elucidation of fundamental principles of praxeology and its methods of research.

“There were authors who tried to explain the origin of money by decree or covenant. The authority, the state, or a compact between citizens has purposively and consciously established indirect exchange and money. The main deficiency of this doctrine is not to be seen in the assumption that people of an age unfamiliar with indirect exchange and money could design
a plan of a new economic order, entirely different from the real conditions of their own age, and could comprehend the importance of such a plan. Neither is it to be seen in the fact that history does not afford a clue for the support of such statements. There are more substantial reasons for rejecting it.

“If it is assumed that the conditions of the parties concerned are improved by every step that leads from direct exchange to indirect exchange and subsequently to giving preference for use as a medium of exchange to certain goods distinguished by their especially high marketability, it is difficult to conceive why one should, in dealing with the origin of indirect exchange, resort in addition to authoritarian decree or an explicit compact between citizens. A man who finds it hard to obtain in direct barter what he wants to acquire renders better his chances of acquiring it in later acts of exchange by the procurement of a more marketable good. Under these circumstances there was no need of government interference or of a compact between the citizens. The happy idea of proceeding in this way could strike the shrewdest individuals, and the less resourceful could imitate the former’s method. It is certainly more plausible to take for granted that the immediate advantages conferred by indirect exchange were recognized by the acting parties than to assume that the whole image of a society trading by means of money was conceived by a genius and, if we adopt the covenant doctrine, made obvious to the rest of the people by persuasion.

“If, however, we do not assume that individuals discovered the fact that they fare better through indirect exchange than through waiting for an opportunity for direct exchange, and, for the sake of argument, admit that the authorities or a compact introduced money, further questions are raised. We must ask what kind of measures were applied in order to induce people to adopt a procedure the utility of which they did not comprehend and which was technically more complicated than direct exchange. We may assume that compulsion was practiced. But then we must ask, further, at what time and by what occurrences indirect exchange and the use of money later ceased to be procedures troublesome or at least indifferent to the individuals concerned and became advantageous to them.

“The praxeological method traces all phenomena back to the actions of individuals. If conditions of interpersonal exchange are such that indirect exchange facilitates the transactions, and if and as far as people realize these advantages, indirect exchange and money come into being. Historical expe- rience shows that these conditions were and are present. How, in the absence of these conditions, people could have adopted indirect exchange and money and clung to these modes of exchanging is inconceivable.

“The historical question concerning the origin of indirect exchange and money is after all of no concern to praxeology. The only relevant thing is that indirect exchange and money exist because the conditions for their existence were and are present. If this is so, praxeology does not need to resort to the hypothesis that authoritarian decree or a covenant invented these modes of exchanging. The etatists may if they like continue to ascribe the “invention” of money to the state, however unlikely this may be. What matters is that a man acquires a good not in order to consume it or to use it in production, but in order to give it away in a further act of exchange. Such conduct on the part of people makes a good a medium of exchange and, if such conduct becomes common with regard to a certain good, makes it money. All theorems of the catallactic theory of media of exchange and of money refer to the services which a good renders in its capacity as a medium of exchange. Even if it were true that the impulse for the introduction of indirect exchange and money was provided by the authorities or by an agreement between the members of society, the statement remains unshaken that only the conduct of exchanging people can create indirect exchange and money.

“History may tell us where and when for the first time media of exchange came into use and how, subsequently, the range of goods employed for this purpose was more and more restricted. As the differentiation between the broader notion of a medium of exchange and the narrower notion of money is not sharp, but gradual, no agreement can be reached about the historical transition from simple media of exchange to money. Answering such a question is a matter of historical understanding. But, as has been mentioned, the distinc- tion between direct exchange and indirect exchange is sharp and everything that catallactics establishes with regard to media of exchange refers categorially to all goods which are demanded and acquired as such media.

“As far as the statement that indirect exchange and money were established by decree or by covenant is meant to be an account of historical events, it is the task of historians to expose its falsity. As far as it is advanced merely as a historical statement, it can in no way affect the catallactic theory of money and its explanation of the evolution of indirect exchange. But if it is designed as a statement about human action and social events, it is useless because it states nothing about action. It is not a statement about human action to declare that one day rulers of citizens assembled in convention were sud- denly struck by the inspiration that it would be a good idea to exchange indirectly and through the intermediary of a commonly used medium of exchange. It is merely pushing back the problem involved.

“It is necessary to comprehend that one does not contribute anything to the scientific conception of human actions and social phenomena if one declares that the state or a charismatic leader or an inspiration which descended upon all the people have created them. Neither do such statements refute the teachings of a theory showing how such phenomena can be acknowledged as “the unintentional outcome, the resultant not deliberately designed and aimed at by specifically individual endeavors of the members of society.”

David, the words of Mises most pertinent to Graeber’s belief that he has overthrown all of AE and praxeology through some of his archeological findings are in the paragraph beginning, “The historical question concerning the origin of indirect exchange and money is after all of no concern to praxeology…” Actually, if Graeber wants to challenge praxeology or AE, he is going to have to read a lot more of what Ludwig von Mises has written on the subject before he further embarrasses himself. (Since he twice referred to von Mises as Van (sic) Mises, I doubt it was a typo, and from his comments to Murphy, II rather doubt he has read much if anything by Mises. To criticize praxeology or AE without knowing the works of Ludwig von Mises is akin to criticizing Scholastic philosophy without having read Aquinas, or Greek philosophy with out having read Aristotle.

Peter D September 23, 2011 at 8:58 am

This doesn’t resolve the question. The quoted passage is not an irrefutable logical proof that barter exchanges are the only way thru which money comes into existence. Instead, note how Mises uses phrases like “it is difficult to conceive”, “It is certainly more plausible”, “however unlikely this may be” etc. In other words, Mises just considers the fiat (and I guess also credit) origins of money “unlikely”, less “plausible”, “inconceivable”, but nowhere does he manage to deny that there is indeed a chance that money comes into existence thru fiat (or credit). Not in this passage at least. Graeber’s research, if correct and interpreted correctly also seems to show (note I’m hedging with “seems”, as I did not spend enough time on it to feel qualified to say so more forcefully) that Mises’ assertion that “… history does not afford a clue for the support of such statements” might be exactly wrong, that is, history seems to support ONLY such statements. Finally, J. Giles’ reply above suggests that the robust praxeological proof of the origins of money would have to arrive at a very broad definition of barter exchange, such that would encompass the credit and possibly fiat money, and as such would be useless to resolve the current dispute.

Ned Netterville September 23, 2011 at 10:38 am

“Even if it were true that the impulse for the introduction of indirect exchange and money was provided by the authorities or by an agreement between the members of society, the statement remains unshaken that only the conduct of exchanging people can create indirect exchange and money.”

Seems logically, historically and anthropologically irrefutable to me.

Peter D September 23, 2011 at 11:09 am

“the statement remains unshaken that only the conduct of exchanging people can create indirect exchange and money.”

Not only not irrefutable, this sentence seems ungrammatical to me. Some preposition is missing, I think. Maybe it should read “only in the conduct of exchanging people can create indirect exchange and money” (“people” is the subject) Or “only the conduct of exchanging between people can create indirect exchange and money” (“conduct” is the subject). As it is, it says that the act of “exchanging people” (what the hell is that?) is what creates “indirect exchange and money”. Surely not what Mises had in mind, methinks.
But regardless, what is irrefutable about the credit story? This reminds me of an elaborate logical proof that something cannot exist, which gets shuttered in one second by a counterexample (logic is tricky and things that sometimes seem “irrefutable” could turn out to be just a result of sloppy reasoning.)

Peter D September 23, 2011 at 2:08 pm

Actually, I managed to parse this sentence, so, I take it back. It is “conduct of exchanging people”, where “exchanging ” is an adjective for “people”. So, OK, no problem with the sentence after all. But I am still not convinced about the claim, so, the second part of my comment stands.

Inquisitor October 2, 2011 at 5:03 pm

“This reminds me of an elaborate logical proof that something cannot exist, which gets shuttered in one second by a counterexample”

What was the counter example, precisely?

Jim September 22, 2011 at 4:53 pm

Re: Just study humans.

My goodness, what an idea! You mean human beings understood each other before the advent of Freud, Jung, Darwin and the like? You mean Plato, Aristotle, Dante, Shakespeare, the Buddha, Lao-Tzu, Confucius, and Jesus Christ don’t have anything to learn from some sociologist cracking his head over his theories? Is it possible tha the real essentials of the human condition have always been understood and transmitted to human beings by a galaxy of sages for millennia? Which is not to denigrate valid insights concerning changed conditions–such as the insights of MMT on the financial system. But these things have nothing to do with the essentials of the human soul, which have always been understood in greatest depth, and certainly not by Harvard sociologists and their ilk.

Ned Netterville September 24, 2011 at 7:52 am

Peter D, Ok, so can you logically explain why and how anyone (the State, Temple authorities, or whomever you choose) would create money for people to use, people who were not engaged in exchange? In other words, can you provide that one counterexample? (Remember, credit transactions are exchanges every bit as much as barter.)

Peter, Carl Menger’s primary point in his appearance before the Currency Commission of a State, was to logically demonstrate that exchanging people–the market–created money as opposed to the proposition that the State (or, in Graebner’s case, if I am not misinterpreting him, the authorities of the Temples of Sumer) created money. And Menger made his case by careful, logical, discursive a priori reasoning without any reference to anthropology or history nor need thereof. If he neglected to explicitly address credit transactions, as I think perhaps he did, that small deficiency is fully accounted for in Mises’ explanation by his use of the term “exchange” as opposed to barter. (Mises was such a brilliant scientist tand his work was so careful, precise and complete that it left no openings for the epigones of economics or any other so-called scientific discipline to discredit him. Certainly Graeber with his outlandish claim hasn’t made a dent or even a ding in the AE “story” of the “creation” of money as told by Ludwig von Mises.

G8R HED September 24, 2011 at 9:43 am

Perhaps archaeologists have no irrefutable, peer-reviewed historical evidence that when offered credit in exchange for a herd of camel there existed any logical, discursive, a priori-reasoning individuals to ask “What else you got?”

Ned Netterville September 25, 2011 at 11:03 am

I don’t know about archeologists, but an economist would know a priori that camels are faster and can run farther, so it would definitely be logical to get something more concrete than credit before the camels and their new owners disappeared over the sand dunes.

Peter D September 26, 2011 at 8:20 am

Ned, I don’t know whether I have time to do this any further. Please, re-read what Bob Murphy wrote above in the part “Spot versus Credit Transactions”. It sums up the entire discussion pretty nicely. If you expand the definition of barter to encompass credit and fiat money,t hen there is no dispute at all, except that most economics books use highly misleading language when they talk of barter (namely, spot transactions). Bob Murphy himself acknowledges (in that very part) that there is no logical way to rule out emergence of money not in spot transactions or even with fiat. So, what are we arguing about? You not understanding what your own theory says?

physguy September 24, 2011 at 3:08 pm

“Ok, so can you logically explain why and how anyone (the State, Temple authorities, or whomever you choose) would create money for people to use, people who were not engaged in exchange?”

Here’s an example (paraphrased from Graeber because, evidently, you find it too tedious to read the original):

Since the King controls the gold and silver mines, one might find it a little odd that he should go to the trouble of minting coins, stamping his face on them, handing them out to the populace, only to demand them back, in the form of taxes. The explanation has to do with the provisioning of his army. Throughout all of history, logistics is the bugbear of having a military. Rather than taking on the task himself, the King forced the population to provision his army. The coins are handed out as salary to his soldiers. The peasantry is required to pay their taxes in those coins, and the only way to obtain them is to find stuff to sell to the soldiers, that the soldiers want to buy.

Here we see the introduction of money as a strategy to CREATE a market (peasants selling stuff to soldiers) that would not, otherwise, have existed.

Inquisitor October 2, 2011 at 5:29 pm

One would have to ask who these soldiers were, to begin with, how they survived prior to the advent of the so-called King taking on their services, how he would elicit their services without a pre-existing or emergent demand for the goods these coins would trade for, why they could not simply have used their previous vocations to acquire said goods and how this diverges from a demand for exchange impelling the creation of money. Yes, a state can artificially prop up the value of a given commodity by intensifying demand for it, but so what? The currency still arises out of a demand for exchanging goods, i.e. barter.

physguy September 24, 2011 at 3:26 pm

Note: for the purposes of the present discussion, it doesn’t matter whether the story the, that Graeber tells, ACTUALLY HAPPENED. You claim that Menger and von Mises have logically PROVEN that the above scenario is impossible.

So, what you really have to do is explain why it is that the above scenario COULD NOT POSSIBLY have taken place, as described.

Matthew Swaringen September 25, 2011 at 11:57 am

This is nonsense, it’s akin to expecting a logical proof that dragons do not exist.

physguy September 29, 2011 at 8:33 pm

Precisely so!

If only Menger/von Mises were making an empirical claim: “We have examined the historical instances in which money arose, and they ALL follow the following pattern …” But, no, they are making a LOGICAL claim: “We have logically DEDUCED that money MUST have arisen via the following mechanism…”

And, of course, by the standard rules of logic, if you have deduced that X is true, then you have also deduced that not-X is false (and that any Y, which implies not-X, is also false). So, yes, Menger/von Mises are making an outlandish claim, one easily refuted by even a single counter-example (such as this one cribbed from Graeber).

It is worth contemplating both

1) why they would do this
2) what other parts of the Austrian program are similarly suspect

In this, Graeber’s book, which is about the history of “debt”, not about the origin of money, per se, is an excellent resource.

Happy reading!

Inquisitor October 2, 2011 at 5:07 pm

“So, yes, Menger/von Mises are making an outlandish claim, one easily refuted by even a single counter-example (such as this one cribbed from Graeber).”

What is the “outlandish” claim? What is the single counter-example?

“1) why they would do this”

Couldn’t care less.

“2) what other parts of the Austrian program are similarly suspect”

Why should they be?

“In this, Graeber’s book, which is about the history of “debt”, not about the origin of money, per se, is an excellent resource.”

/care

Inquisitor October 2, 2011 at 5:41 pm

“So, yes, Menger/von Mises are making an outlandish claim, one easily refuted by even a single counter-example (such as this one cribbed from Graeber).”

“What I do have a problem with, is Graeber telling me that money could have emerged from such a non-market framework. ”

How did the soldiers demand for goods to be acquired by coins emerge in a non market framework?

I guess we should just believe that these soldiers were mystical superhuman entities that spontaneously came into creation.

Again another royal “bitch, please”.

Inquisitor October 2, 2011 at 5:05 pm

You’re throwing around words with great sloppiness. What is it that Graeber describes that “happened”, that Mises and menger claimed could not happen?

David B September 24, 2011 at 4:29 pm

“Since the King controls the gold and silver mines”

Where did the gold and silver mines come from? How did the King come up with the idea that those could be turned into mints? How did the King come up with the idea that the peasants would know what could be traded for a gold and silver coin? How did the soldiers know that the peasants would sell them goods in exchange for the coins given to them from the King?

physguy September 24, 2011 at 8:28 pm

“Where did the gold and silver mines come from?”

As you, apparently, are unaware, gold and silver were used for ornamentation (in royal courts and in temples) for many, many centuries before they EVER circulated as money.

As to the rest of your questions, I have every confidence that, with a little reflection, you will be able to figure out the answers without any further need to consult with Graeber’s book or with me.

David B September 25, 2011 at 10:33 am

“As you, apparently, are unaware, gold and silver were used for ornamentation (in royal courts and in temples) for many, many centuries before they EVER circulated as money.”

So what is the difference between this position and Menger’s? I’m quite confused. Gold and silver had a value as a commodity before they became a medium of exchange. You are saying the same thing, only you believe that its value derived from the despot. I think that’s simplistic and state centric. Human societies have traded with each other well before kings and temples arrived, and non-state land was immense compared to the miniscule state land of ancient times. State populations were a speck compared to non-state. This means that traders had been negotiating exchange well before the state, even if those exchanges did not involve gold and silver. And that means that it is traders that set prices, and not kings.

Now, it is conceivable that non-state traders found the King’s ornamentation desirable and wanted to trade for it. it’s also within the realm of reason that the state’s need to trade with non-state traders led to a market for gold and silver, and that over time these become money because these were the only items that non-state traders could trust (despots being generally disgusting and seedy creatures.)

physguy September 25, 2011 at 12:13 pm

“So what is the difference between this position and Menger’s?”

In Menger’s account:

1) Money arose to facilitate a pre-existing system of (barter) exchanges.
2) Commodity money arose before other forms of money
3) This is the ONLY way that money could POSSIBLY have arisen. (Historical/anthropological/archaeological evidence be damned!)

“Now, it is conceivable that non-state traders found …”

Yes, there are MANY things which are logically-possible. That’s PRECISELY Graeber’s point (contra Menger). Money could, logically, have arisen in many different ways. It, in fact, DID arise in many different ways, in different times and places. (That none of them seem to correspond the Menger “ONLY POSSIBLE” account, is one of those picayune empirical points that we will set aside, for the moment.)

The above account, of one mechanism by which money arose, differs from Menger’s account in crucial ways.

1) There was no pre-existing system of exchanges (between peasants and soldiers). Money (and, most crucially, taxation) was invented to bring into being a market where none previously existed.
2) What is being described, of course, is the creation of what is (pejoratively) known as “fiat money.” Again, in conflict with Menger’s account.

So, again, if you want to defend Menger, you need to argue, NOT that other mechanisms for money to have arisen are logically POSSIBLE (of course they are), but that the mechanism described above (one of several described by Graeber) is logically IMPOSSIBLE.

David B September 25, 2011 at 12:24 pm

“There was no pre-existing system of exchanges (between peasants and soldiers)”

This is logically impossible. Since soldiers came from the peasantry (they didn’t pass through a membrane from another universe, after all), to say that soldiers and peasants had no pre-existing system of exchange is saying that peasants had no system of exchange with other peasants. This is obviously untrue, as human’s exchanges pre-date the existence of the state. Archeological evidence shows evidence of trade going back 150,000 years.

“What is being described, of course, is the creation of what is (pejoratively) known as “fiat money.” Again in conflict with Menger’s account.”

No it’s not. The concept of taxing the populace to force them to use the state’s pet money was well known in Menger’s time. The famous Hut Tax that English colonialists forced upon the Africans would have been known to Menger. It’s the exact same system you describe. This still does not show the origins of money itself. It merely shows once again that despots will always use a private sector invention to enslave populations.

physguy September 25, 2011 at 8:40 pm

“This is logically impossible.”

My, but you’re quick to declare something “logically impossible.” I begin to suspect that, in Austrian parlance, that phrase means something OTHER than what it means to the rest of us. (Which would explain a LOT.)

As is invariably the case, the soldiers (or, at least, the vast majority of them ) would have originated from distant provinces, and would have had NO prior relations — familial, social or economic — with the local populace.

Moreover, they would not have spontaneously initiated trade with the local subsistence farmers, amidst whom they were garrisoned, for a blindingly simple reason: they had nothing to trade. Up to this point, a soldier’s salary consisted of rations of food and other necessities (I’ll remind you of the etymology of the word “salary”). And these would have held no interest for the local farmers.

“This still does not show the origins of money itself.”

It certainly does (at least, in this one instance).

As I said, money independently came into existence many different times, in many different places. And it came into existence via many different mechanisms. If you want to argue that all of these (other) mechanisms are (per Menger) logically IMPOSSIBLE, then please do so: starting with this one.

And I don’t mean “logically impossible” is the stupid sense of your statement above.

Ned Netterville September 25, 2011 at 10:07 pm

physguy, if you will, go back and read Mises statement on this subject. The most pertinent paragraph is this:

“The historical question concerning the origin of indirect exchange and money is after all of no concern to praxeology. The only relevant thing is that indirect exchange and money exist because the conditions for their existence were and are present. If this is so, praxeology does not need to resort to the hypothesis that authoritarian decree or a covenant invented these modes of exchanging. The etatists may if they like continue to ascribe the “invention” of money to the state, however unlikely this may be. What matters is that a man acquires a good not in order to consume it or to use it in production, but in order to give it away in a further act of exchange. Such conduct on the part of people makes a good a medium of exchange and, if such conduct becomes common with regard to a certain good, makes it money. All theorems of the catallactic theory of media of exchange and of money refer to the services which a good renders in its capacity as a medium of exchange. Even if it were true that the impulse for the introduction of indirect exchange and money was provided by the authorities or by an agreement between the members of society, the statement remains unshaken that only the conduct of exchanging people can create indirect exchange and money.”

This is Mises commenting and elaborating Menger’s theory. Can you find a flaw it it as restated by Mises in 1948 or earlier.? Graeber couldn’t. Mises explanation, written before Graeber was out of diapers, is the clearest elucidation of the Austrian school’s position. Graeber has a PhD. He is smart enough not to try to discredit Mises so he took a shot at Menger’s commentary, which was written back in 1872 for the benefit of the Austrian Currency Committee. Other scientist with significant credentials in their respective disciplines from economics to physics have tried but been unable to shake Mises’ brilliant scholarship, but perhaps you’d like to try.

Inquisitor October 2, 2011 at 5:15 pm

“As is invariably the case, the soldiers (or, at least, the vast majority of them ) would have originated from distant provinces, and would have had NO prior relations”

What the fuck were they before they were soldiers? What did these “sistant provinces” do for food and other goods? Why pay someone who has no demands?

“And I don’t mean “logically impossible” is the stupid sense of your statement above.”

Should one use it in the stupid sense you do?

“As I said, money independently came into existence many different times, in many different places. And it came into existence via many different mechanisms. ”

What is the sense in which it came into existence under Graeber? The reason Ned and David probably stopped bothering with you is because you don’t really offer much but your say-so, as with the case of soldiers.

Inquisitor October 2, 2011 at 5:41 pm

CAPS MAKE ME SEEM SMART

physguy September 25, 2011 at 10:37 pm

“The historical question concerning the origin of indirect exchange and money is after all of no concern …”

Indeed. I’ve volunteered to table all discussion of what ACTUALLY HAPPENED, in the various instance where money arose. There remains, however, a logical claim, of Menger/von Mises, namely that it is logically IMPOSSIBLE for money to have arisen by any mechanism OTHER than the one Menger outlined.

You’ve been asked to provide a proof of the above statement, and have failed to deliver.

So, to focus attention, I’ve outlined one scenario (borrowed from Graeber’s account), of money arising in a fashion deemed LOGICALLY IMPOSSIBLE by Menger.

If you can’t supply a general proof, perhaps you can explain why this particular scenario is logically impossible.

Saying ‘von Mises says that Menger is correct; ergo Menger must be correct.” is NOT sufficient.

Ned Netterville October 5, 2011 at 9:54 am

No, you are not reading what was written: “All theorems of the catallactic theory of media of exchange and of money refer to the services which a good renders in its capacity as a medium of exchange. Even if it were true that the impulse for the introduction of indirect exchange and money was provided by the authorities or by an agreement between the members of society, the statement remains unshaken that only the conduct of exchanging people can create indirect exchange and money.”

Nor are you listening to what Graebner said on this blog: “I think the participants in this forum should reflect on what they consider the status of economics to be. Is it a science that generates hypotheses about empirical reality that can then be tested against the evidence, and changed or abandoned if they don’t prove to predict what’s empirically there? Or is it a kind of faith, a revealed Truth embodied in the words of great prophets (such as Van Mises) who must, by definition be correct, and whose theories must be defended whatever empirical reality throws at them – even to the extent of generating imaginary unknown periods of history where something like what was originally described “must have” taken place?”

Now compare the two statements. Graeber is disparaging Mises as a “prophet.” Yet if you or Graeber can find a single logical flaw in Mises analysis, or if you or Graeber can point to one single shred of empirical evidence refuting Mises’ logical conclusion “that only the conduct of exchanging people can create indirect exchange and money,” give it a go, but so far neither Graeber nor any of those supporting him have done so. Certainly nothing Graeber adduced in his comments here either logically or empirically make even a small dent in the Austrian theory of money enunciated by Mises.

Graeber also said this on this blog: “Even there, I think the persistence of the barter myth is curious. It originally goes back to Adam Smith. Other elements of Smith’s argument have long since been abandoned by mainstream economists – the labor theory of value being only the most famous example. Why in this one case are there so many economists desperately trying to concoct imaginary times and places where something like this “must” have happened, despite the overwhelming evidence that it didn’t? It seems to me because it goes back precisely to this notion of rationality that Adam Smith too embraced: that human beings are rational, calculating exchangers seeking material advantage, and that therefore it is possible to construct a scientific field that studies such behavior.”

This paragraph demonstrates complete misunderstanding of AUSTRIAN economics and economists of the Austrian school, to whom Graeber is apparently referring on this Austrian-economic blog. (Btw, it was an Austrian economist who originally and logically without a shred of empirical evidence discredited once and for all Adam Smith’s labor theory of value.) Here is some further insight into AE from the pen of Hans-Hermann Hoppe in ECONOMIC SCIENCE AND THE AUSTRIAN METHOD, which may explain Graeber’s misunderstanding to some extent.

“Mises says of the science of economics: ‘Its statements and propositions are not derived from experience. They are, like those of logic and mathematics, a priori. They are not subject to verification and falsification on the ground of experience and facts. They are both logically and temporally antecedent to any comprehension of historical facts. They are a necessary requirement of any intellectual grasp of historical events.’

“In order to emphasize the status of economics as a pure science, a science that has more in common with a discipline like applied logic than, for instance, with the empirical natural sciences, Mises proposes the term “praxeology” (the logic of action) for the branch of knowledge exemplified by economics.

“It is this assessment of economics as an a priori science, a science whose propositions can be given a rigorous logical justification, which distinguishes Austrians, or more precisely Misesians, from all other current economic schools. All the others conceive of economics as an empirical science, as a science like physics, which develops hypotheses that require continual empirical testing. And they all regard as dogmatic and unscientific Mises’s view that economic theorems-like the law of marginal utility or the law of returns, or the time-preference theory of interest and the Austrian business cycle theory-can be given definite proof, such that it can be shown to be plainly contradictory to deny their validity.

The view of Mark Blaug, highly representative of main- stream methodological thought, illustrates this almost universal opposition to Austrianism. Blaug says ofMises, ‘His writings on the foundations of economic science are so cranky and idiosyncratic that one can only wonder that they have been taken seriously by anyone.’

“Blaug does not provide one argument to substantiate his outrage. His chapter on Austrianism simply ends with that statement. Could it be that Blaug’s and others’ rejection of Mises’s apriorism may have more to do with the fact that the demanding standards of argumentative rigor, which an apriorist methodology implies, prove too much for them?”

Mises–in 1949–was affirming Menger’s reasoning–in 1872–that money developed from barter, but he chose his words more carefully than Menger had and substituted “exchange” for barter as a more correct rendering. Now along comes Greaber in 2011 to challenge Menger’s analysis without daring to challenge Mises explication of it using correct Austrian-economic terminology. And then Graeber raises a passel of straw men arguments that are foreign to Austrian economics, and proceeds to slay them with his version of historical events. And his epigones conclude that he has undermined the very foundation of AE. Graeber’s grasp of historical events would be vastly improved if he had a better understanding of AE and its epistemology.

Peter D October 5, 2011 at 10:10 am

Ned, if Mises’ point is that the medium of exchange arises to facilitate exchange, then it is not an “insight”, it is a tautology. In which case there is no illuminating content in it, no matter how hard you try to think there is, and there is also no disagreement. Again, look up at Murphy’s own section ““Spot versus Credit Transactions” above. I am not sure Graeber goal is to discredit AE – he’s goal is to discredit the barter story, whether promoted by Austrians or by mainstream economists. And you cannot just redefine barter to fit any exchange so that you can pretend that barter story is still correct.

Ned Netterville October 6, 2011 at 9:59 pm

Peter D, I have to chuckle at you comment, and warn you to be careful that a tautology doesn’t up and bite you. Here, for example, is one of the meanings of tautology that I find on Wiki: “Tautology (logic), a technical notion in formal logic, universal unconditioned truth, always valid.” Jesus said to his disciples, “And ye shall know the truth, and the truth shall make you free.” (JN 8-32) Of course if you don’t realize that tautologies can teach you truth, you’re between a rock and a hard place regarding what you can learn. If you think there is no illuminating content in tautologies, you’re sure to be found groping around in the dark. But let me illuminate by quoting AE’s leading light. This is from HUMAN ACTION, p. 38-41″

“The A Priori and Reality

“Aprioristic reasoning is purely conceptual and deductive. It cannot produce anything else but tautologies and analytic judgments. All its im- plications are logically derived from the premises and were already con- tained in them. Hence, according to a popular objection, it cannot add anything to our knowledge.

“All geometrical theorems are already implied in the axioms. The concept of a rectangular triangle already implies the theorem of Pythagoras. This theorem is a tautology, its deduction results in an analytic judgment. Nonetheless nobody would contend that geometry in general and the theorem of Pythagoras in particular do not enlarge our knowledge. Cognition from purely deductive reasoning is also creative and opens for our mind access to previously barred spheres. The significant task of aprioristic reasoning is on the one hand to bring into relief all that is implied in the categories, concepts, and premises and, on the other hand, to show what they do not imply. It is its vocation to render manifest and obvious what was hidden and unknown before.

“In the concept of money all the theorems of monetary theory are already implied. The quantity theory does not add to our knowledge anything which is not virtually contained in the concept of money. It transforms, develops, and unfolds; it only analyzes and is therefore tautological like the theorem of Pythagoras in relation to the concept of the rectangular triangle. However, nobody would deny the cognitive value of the quantity theory. To a mind not enlightened by economic reasoning it remains unknown. A long line of abortive attempts to solve the problems concerned shows that it was cer- tainly not easy to attain the present state of knowledge.

“It is not a deficiency of the system of aprioristic science that it does not convey to us full cognition of reality. Its concepts and theorems are mental tools opening the approach to a complete grasp of reality; they are, to be sure, not in themselves already the totality of factual knowledge about all things. Theory and the comprehension of living and changing reality are not in opposition to one another. Without theory, the general aprioristic science of human action, there is no comprehension of the reality of human action.

The relation between reason and experience has long been one of the fundamental philosophical problems. Like all other problems of the critique of knowledge, philosophers have approached it only with reference to the natural sciences. They have ignored the sciences of human action. Their contributions have been useless for praxeology.
It is customary in the treatment of the epistemological problems of economics to adopt one of the solutions suggested for the natural sciences. Some authors recommend Poincaré’s conventionalism. They regard the premises of economic reasoning as a matter of linguistic or postulational convention. Others prefer to acquiesce in ideas advanced by Einstein. Einstein raises the question: “How can mathematics, a product of human reason that does not depend on any experience, so exquisitely fit the objects of reality? Is human reason able to discover, unaided by experience through pure reasoning the features of real things?” And his answer is: “As far as the theorems of mathematics refer to reality, they are not certain, and as far as they are certain, they do not refer to reality.”

However, the sciences of human action differ radically from the natural sciences. All authors eager to construct an epistemological system of the sciences of human action according to the pattern of the natural sciences err lamentably.

“The real thing which is the subject matter of praxeology, human action, stems from the same source as human reasoning. Action and reason are congeneric and homogeneous; they may even be called two different aspects of the same thing. That reason has the power to make clear through pure ratiocination the essential features of action is a consequence of the fact that action is an offshoot of reason. The theorems attained by correct praxeological reasoning are not only perfectly certain and incontestable, like the correct mathematical theorems. They refer, moreover, with the full rigidity of their apodictic certainty and incontestability to the reality of action as it appears in life and history. Praxeol- ogy conveys exact and precise knowledge of real things.

“The starting point of praxeology is not a choice of axioms and a decision about methods of procedure, but reflection about the essence of action. There is no action in which the praxeological categories do not appear fully and perfectly. There is no mode of action thinkable in which means and ends or costs and proceeds cannot be clearly distinguished and precisely separated. There is nothing which only approximately or incompletely fits the eco- nomic category of an exchange. There are only exchange and nonexchange; and with regard to any exchange all the general theorems concerning exchanges are valid in their full rigidity and with all their implications. There are no transitions from exchange to nonexchange or from direct exchange to indirect exchange. No experience can ever be had which would contradict these statements.

“Such an experience would be impossible in the first place for the reason that all experience concerning human action is conditioned by the praxeo- logical categories and becomes possible only through their application. If we had not in our mind the schemes provided by praxeological reasoning, we should never be in a position to discern and to grasp any action. We would perceive motions, but neither buying nor selling, nor prices, wage rates, interest rates, and so on. It is only through the utilization of the praxeological scheme that we become able to have an experience concerning an act of buying and selling, but then independently of the fact of whether or not our senses concomitantly perceive any motions of men and of nonhuman elements of the external world. Unaided by praxeological knowledge we would never learn anything about media of exchange. If we approach coins without such preexisting knowledge, we would see in them only round plates of metal, nothing more. Experience concerning money requires familiarity with the praxeological category medium of exchange.

“Experience concerning human action differs from that concerning natural phenomena in that it requires and presupposes praxeological knowledge. This is why the methods of the natural sciences are inappropriate for the study of praxeology, economics and history.

“In asserting the a priori character of praxeology we are not drafting a plan for a future new science different from the traditional sciences of human action. We do not maintain that the theoretical science of human action should be aprioristic, but that it is and always has been so. Every attempt to reflect upon the problems raised by human action is necessarily bound to aprioristic reasoning. It does not make any difference in this regard whether the men discussing a problem are theorists aiming at pure knowledge only or statesmen, politicians, and regular citizens eager to comprehend occurring changes and to discover what kind of public policy or private conduct would best suit their own interests. People may begin arguing about the significance of any concrete experience, but the debate inevitably turns away from the accidental and environmental features of the event concerned to an analysis of fundamental principles, and imperceptibly abandons any reference to the factual happenings which evoked the argument. The history of the natural sciences is a record of theories and hypotheses discarded because they were disproved by experience. Remember for instance the fallacies of older mechanics disproved by Galileo or the fate of the phlogiston theory. No such case is recorded by the history of economics. “The champions of logically incompatible theories claim the same events as the proof that their point of view has been tested by experience. The truth is that the experience of a complex phenomenon—and there is no other experience in the realm of human action—can always be interpreted on the ground of various antithetic theories. Whether the interpretation is considered satisfactory or unsatisfac- tory depends on the appreciation of the theories in question established beforehand on the ground of aprioristic reasoning.

“History cannot teach us any general rule, principle, or law. There is no means to abstract from a historical experience a posteriori any theories or theorems concerning human conduct and policies. The data of history would be nothing but a clumsy accumulation of disconnected occurrences, a heap of confusion, if they could not be clarified, arranged, and interpreted by systematic praxeological knowledge.”

AS you can see, Peter D, Mises had throughly discredited your notion that nothing can be learned from tautology–that nothing can be learned from truth–in 1948 when HUMAN ACTION was first published, and actually long before that. Mises was a brilliant scientist, on par with Albert Einstein.

Peter D October 6, 2011 at 10:19 pm

Yes, you are right, all mathematical propositions are tautologies and this of course doesn’t mean that they cannot teach us anything. I was wrong to use just the term “tautology” to qualify the statement “the medium of exchange arises to facilitate exchange”. But I still claim that this particular statement is not really illuminating. Tautologies can be of different levels, for example, 2=2 is a tautology and 2=sqrt(4) is a tautology, but the former has very little to teach us.
I fail to find the very deep insight of the statement “only the conduct of exchanging people can create indirect exchange and money”.
And frankly, I am not even sure why you Austrians are so up in arms about this. What’s the big deal? How does a refutation of a narrow interpretation of “indirect exchange”, namely, the spot barter exchange – and it is this that was attacked by Graeber – is of any consequence to the Austrian Theory?

physguy October 6, 2011 at 11:07 pm

“All geometrical theorems are already implied in the axioms. The concept of a rectangular triangle already implies the theorem of Pythagoras. This theorem is a tautology,…”

No, “the concept of a rectangular triangle” does not (by itself) imply the theorem of Pythagoras.

And, NO, theorems are not tautologies. Tautologies are statements that are true by definition. Theorems are true only if the axioms from which they are derived are true.

Moreover, before a theorem has been proven, you don’t even know whether it’s true (given the axioms).

Did Wiles’s proof( suddenly, after centuries) turn Fermat’s Theorem into at tautology? Is Goldbach’s Conjecture a tautology (or is it false?) ?

“Mises was a brilliant scientist, on par with Albert Einstein.”

:-) Yeah, there’s the ticket ….

physguy September 27, 2011 at 3:52 pm

So…

It appears that both Ned N and David B have (most admirably!) decided to abstain from attempting to justify Menger’s assertion that his is the only logically-possible account of the origin of money. While it would have been entertaining to see such an attempt, in light of the obvious difficulties, theirs was the sensible path to take.

The only question is why — in the passage Ned cited above — does von Mises display such a preternatural confidence in the correctness of Menger’s assertion? Surely, he too is aware of the (obvious) difficulties?

Those who have been down this road before have, doubtless, already figured out the answer. But, for the benefit of those who haven’t, allow me to translate the passage cited by Ned, from Austrian … into English.

“Sure, if you look at any actual historical instances where money arose, Menger’s account appears to be in big trouble. But don’t worry! I will simply DEFINE the phrase ‘the origin of money’ to mean Menger’s account. Thus, the statement ‘Menger’s account of the origin of money is the only logically-possible one.’ is tautologically CORRECT. Now, some people will doubtless make some objection-or-other about ‘historical evidence’. In response, you should scowl sternly, mutter something about ‘praxeology’ and ‘catallactic theory’ in a thick German accent, and that should properly intimidate them.”

Lather. Rinse. Repeat.

It’s a lot easier to understand the Austrians if you’ve read “Through the Looking-Glass”, first:

“‘When I use a word,’ Humpty Dumpty said, in a rather scornful tone, ‘it means just what I choose it to mean – neither more nor less.’”

Ken Brosky October 1, 2011 at 9:30 pm

Just a note: you guys might want to actually read the book, because it doesn’t seem like any of you know what you’re talking about, least of which Murphy who misses one of the main points by Graeber on the use of silver.

More importantly: Graeber makes some excellent points about the origins of COINAGE; namely, that it was created by states in order to pay soldiers. “Money” has a number of other origins, depending on the society. CREDIT was in place since the dawn of civilization. He also discusses the different moralizing methods of DEBT, and how it was used to suppress as well as appease (during jubilees). It really is a fascinating book, and you don’t have to hate capitalism to enjoy it. I like capitalism, but at the same time I respect the anthropological history presented here (and backed up with tons of research by other historians and anthropologists).

One of the most fascinating aspects of the book are the examples of other forms of exchange that don’t involve money or, when they do involve “money,” are used primarily to measure “justice.” It’s worth mentioning that “money” after the fall of Rome continued to be measured in Roman coins, even though no one actually had many of the coins in western Europe. It was just a form of measurement for other goods, namely to measure “justice.”

Really worth reading.

Inquisitor October 2, 2011 at 5:17 pm

“Just a note: you guys might want to actually read the book, because it doesn’t seem like any of you know what you’re talking about, least of which Murphy who misses one of the main points by Graeber on the use of silver.”

You might want to put a stop break on the barrage of assertions.

“More importantly: Graeber makes some excellent points about the origins of COINAGE; namely, that it was created by states in order to pay soldiers.”

Who did what with it, pray tell?

” “Money” has a number of other origins, depending on the society. CREDIT was in place since the dawn of civilization.”

Yeah. Whoo. Stunning revelation. Except credit is a very derivative form of demand.

” I like capitalism, but at the same time I respect the anthropological history presented here (and backed up with tons of research by other historians and anthropologists).”

What does this history present?

Inquisitor October 2, 2011 at 5:45 pm

“One of the most fascinating aspects of the book are the examples of other forms of exchange that don’t involve money or, when they do involve “money,” are used primarily to measure “justice.” It’s worth mentioning that “money” after the fall of Rome continued to be measured in Roman coins, even though no one actually had many of the coins in western Europe. It was just a form of measurement for other goods, namely to measure “justice.”

I’m not seeing what’s so fascinating about this. Money already measures other goods. It is a medium of exchange, its demand derived. Not a good in itself. It is still just a form of measurement of other goods.

physguy October 2, 2011 at 2:10 pm

“I like capitalism…”

It’s not about liking capitalism; it’s about hating government.

These guys would like to believe that fully-functioning free-market systems arose prior to, and independent of, the advent of centralized government. Government, according to them, is a parasitic late-addition; at best superfluous, at worst an impediment, to the functioning of free markets.

The origin of money is but one piece (albeit a significant one) in the construction of this mythology. Graeber’s book (which I agree is wonderful), or indeed any attempt to inject actual empirical evidence into the discussion, is deeply threatening to their whole project.

Ron Finch October 2, 2011 at 3:59 pm

You are correct. Except for the part about empirical evidence. Economics is a science to explain how humans use scarce resources. Austrians welcome opportunities to show how their analysis explains things better than other theories.
Graeber has an agenda to promote gift economies over free enterprise. In my opinion he is the one constructing a “mythology.”

physguy October 2, 2011 at 4:05 pm

“Graeber has an agenda to promote gift economies over free enterprise”

You OBVIOUSLY haven’t read his book.

Inquisitor October 2, 2011 at 5:10 pm

You OBVIOUSLY are just here to advertise it.

See? Can do that too.

Inquisitor October 2, 2011 at 5:09 pm

“These guys would like to believe that fully-functioning free-market systems arose prior to, and independent of, the advent of centralized government. Government, according to them, is a parasitic late-addition; at best superfluous, at worst an impediment, to the functioning of free markets.”

it is.

“The origin of money is but one piece (albeit a significant one) in the construction of this mythology. Graeber’s book (which I agree is wonderful), or indeed any attempt to inject actual empirical evidence into the discussion, is deeply threatening to their whole project.”

How so?

Ned Netterville October 5, 2011 at 10:12 am

Hey physguy, don’t claim victory yet. I was merely taking a break from jousting with dunces, since you haven’t even understood, let alone dented, AE’s explanation of the origins of media of exchange, or money. The reason Mises could display such apodictic (a more accurately descriptive adjective than preternatural) certainty was that he had previously dispatched so many empiricists like Graeber that he must have felt much like Rocky Marciano when he retired as the only undefeated heavyweight champ after knocking out a few contenders and a bunch of other wannabees.

Lather, rinse, repeat: Mises: “only the conduct of exchanging people can create indirect exchange and money.” Refute it if you can, logically or empirically, or depart with your tail betwixt your legs.

physguy October 5, 2011 at 10:46 am

As Peter D says, above, you can redefine terms so as to turn the Menger/Mises statement into a tautology. Conversely, if you keep the conventional definitions of “barter” and “the origin of …”, then the Menger/Mises logical “proof” is refuted by a single logically-consistent counter-example (see above).

So you can choose between:

a) A content-less statement (true, but tautological)
b) A contentful, but false statement.

Ned Netterville October 6, 2011 at 9:06 pm

To repeat myself: If you or Graeber can find a single logical flaw in Mises analysis, or if you or Graeber can point to one single shred of empirical evidence refuting Mises’ logical conclusion “that only the conduct of exchanging people can create indirect exchange and money,” give it a go, but so far neither Graeber nor any of those supporting him have done so. Certainly nothing Graeber adduced in his comments here either logically or empirically make even a small dent in the Austrian theory of money enunciated by Mises. Can you, physguy, or Prof. Graeber, refute Mises explication rather than attacking Mengers 1872 analysis, and pretending that Menger’s analysis is the crux of Austrian economic, which it is not? Menger’s analysis admittedly failed to include the possibility that the kind of credit exchanges on which Greaber lays such great importance played a role in the origin of money, but Mises use of the term exchange rather than barter eliminates Menger’s oversight. It is to Mises simple statement that I invite you all to turn your attention and try to refute it.

physguy October 6, 2011 at 9:26 pm

“To repeat myself: If you or Graeber can find a single logical flaw in Mises analysis”

I did.

Mises/Menger claimed to have proven that money could only have arisen to facilitate a pre-existing system of exchanges. Menger was very specific about what sort of exchanges (barter). That was, by Mises’s time, clearly untenable, so Mises relaxed the claim to include any sort of exchange.

That considerably weakens the statement, rendering it almost (but not quite) a tautology.

The example, that I gave (borrowed from Graeber’s historical account), involved (one instance of) the origination of money to engender a system of exchanges (between soldiers and the local populace) which was NOT pre-existing.

If you want to drop the “pre-existing” clause, too, then all you have left is “money exists to facilitate exchanges.” Which is a complete tautology; an “insight” that would be embarrassing to put in a fortune cookie.

(There are other aspects of the Menger account — commodity money vs. fiat money, … — which are also contradicted by this example. We can discuss those later, if you still have the stomach for it.)

And, again, for present purposes, it matters not a whit whether Graeber’s account actually took place, historically, as described. It suffices that this account be LOGICALLY POSSIBLE, to serve as a counterexample to the Mises/Menger “proof.”

Ned Netterville October 6, 2011 at 10:52 pm

No, my friend, Graeber attacked Mengers 1872 explication rather than Mises 1948 restatement, probably because he realized that he would be up Shit Creek without a paddle if he tried to propose his credit theory of the origins of money as a refutation of Mises’ account, for the judgment of the scientific community would be that Graeber hadn’t even come close to refuting Mises account

And, No, you did not find a flaw–logical or empirical. I did not and do not take your imagined scenario of soldiers spontaneously trading–using the king’s invented coins to trade with people (who did not engage in exchange, as Mises surmised), didn’t produce more than their basic needs because since they didn’t engage in exchange had nothing to trade for the soldiers’ money, which they had no use for.

Regarding your palpable ignorance of the value of the truth that can be found ib tautologies by those who know how to look, see my lately entered response to Peter D above with a passage from Ludwig von Mises’ HUMAN ACTION. Mises must be laughing in his grave to find that there are still fools who think themselves “scientific,” yet are still stuck in the mud of empiricism alone without any praxeological knowledge of unimpeachable truths.

Nevertheless, stick around this site. If you do, you are almost certain to discover what it is that you do not know that you do not know.

physguy October 6, 2011 at 11:22 pm

“No, my friend, Graeber attacked Mengers 1872 explication rather than Mises 1948 restatement.”

The example refutes both (as does the rest of Graeber’s nuanced and well-documented account).

“And, No, you did not find a flaw–logical or empirical. I did not and do not take your imagined scenario …”

Well, tough luck.

The “scenario” exists, whether or not you wish to consider it. And, unless you can prove it to be logically-impossible, it refutes both Menger’s and Mises’s “proof”.

“Regarding your palpable ignorance of the value of the truth that can be found ib tautologies by those who know how to look, see my lately entered response to Peter D above…”

I did, and it confirmed my overall impression that von Mises sorely needed to take a course in mathematical logic.

physguy October 6, 2011 at 11:28 pm

“Mises must be laughing in his grave to find that there are still fools who think themselves “scientific,” yet are still stuck in the mud of empiricism alone without any praxeological knowledge of unimpeachable truths. ”

That’s what’s called “religion”, not science. And for good reason …

Ned Netterville October 10, 2011 at 9:15 pm

Only by pseudo-scientists who do not know what they do not know.

physguy October 2, 2011 at 4:29 pm

P.S.:

“Austrians welcome opportunities to show how their analysis explains things better than other theories.”

Welcoming confirming evidence, but dismissing, out-of-hand, contradictory evidence, is utterly incompatible with what non-Austrians call “science.”

Inquisitor October 2, 2011 at 5:15 pm

DEARIE ME SOUND THE SIRENS ALERT THE PRESSES TEH SCIENCES HAVE BEEN VIOLATED

Bitch, please.

Ned Netterville October 6, 2011 at 10:57 pm

True, but in the absence of even a shred of any such evidence, as is the cae here, a judge would throw the prosecution’s case out of court and perhaps sanction the lawyers who brought it.

Henry October 6, 2011 at 2:10 pm

Re: If only Menger/von Mises were making an empirical claim: “We have examined the historical instances in which money arose, and they ALL follow the following pattern …” But, no, they are making a LOGICAL claim: “We have logically DEDUCED that money MUST have arisen via the following mechanism…”

Logic is merely mental coordination. Reasoning cannot take place in a void. It requires data, unless you are using strictly mathematical entities, in which there is no need to have recourse to concrete reality. A deduction based on false premises is worthless, even if the logic is impeccable. Your premises are everything.

Ned Netterville October 6, 2011 at 11:08 pm

Yes indeed. And the premise stated by Mises is that money, which is a medium whose purpose is to facilitate exchange, could only have arisen among people who engaged in exchange.

I wonder how much longer the boys from anthropology will continue fogging Greaber’s dead horse?

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