To a generally interested person who is not an academic economist, the article is a yawner, full of theoretical ifs and whens. Surely neither the author nor many of the commetators here have ever have been engaged in disater relief. Basics are missing.

I’m not being sarcastic: Can you tell me what you wanted? I mean, did you want me to get into specifics and say what the Red Cross’s distribution policies would be for diapers in a libertarian society? (Seriously, I’m not being sarcastic.)

Prices are a tool; an “accessory of appraisement”, because they enable appraisement by means of cardinal or mathematical calculation. What exactly does “signaling” have to do with this? Would you agree that it’s at least potentially confusing to say prices “signal” information?

We’ve had this argument before. Do you ever think something signals information?

Is the basic problem that you, Salerno, Hoppe, et al. think that there is something besides the dispersed information that market prices are allowing entrepreneurs to incorporate into their calculations? If so, that’s fine, but I do indeed think Hayek is right when he says a tin mine collapse leads to higher price for tin which signals people to economize on tin. I have no problem with that statement.

Bob, nice article. Couple of queries/points. First, I like your point that pro-market writers often overlook that not every action is an attempt to maximize monetary income. In fact, if you think about it, the very existence of money implies this: money is valued because it can be spent on other things. But an act of spending money is an action that definitely does not maximize money–in fact it gives it away. If we only wanted to maximize money we would never spend it on consumption.

But you say,

In many cases, the owners will indeed not care for the identity of the prospective buyer or the uses to which they will put the goods in question, and will truly sell to whichever party offers the most. However, there are many cases where this rule doesn’t hold. When parents maintain a college-bound child’s room for Thanksgiving visits etc., they are not maximizing revenue.

Well. Do you mean psychic revenue, or monetary revenue? Of course all actions without exception are aimed at making a profit. It’s just that, as you imply, not all profit is monetary in nature.

You also state,

…the function of market prices is not to dictate how resources are deployed, but rather to let the owners make an informed decision.

Right. By enabling calculation. More on this below.

If there is a tremendous housing shortage, then the rising rental rates will let the parents know just how much someone else would like to use their child’s room. And the best trial lawyer in the world will probably not end up as a librarian, because of the outrageous salary he or she would be turning down. Again, the market price of his or her services signals how much others value them.

Bob, you say that it is “rising” rental rates that “lets the parents know” something–how much the room is demanded. Here you seem to imply that a trend in prices is what conveys information. I would think that a high price–that is, a high price relative to other prices–is what corresponds to a higher demand for houses–not the trend. In any event, whether it is price trends, or prices, is it not misleading to imply prices convey information? Especially when you say prices “signal” how much others value things?

Obviously, valuation is not cardinal, so the “how much” or quantitative information being conveyed must be how much money people are willing to trade for a given object or service demanded. In other words, if I pay $100 for a service (or am “willing to”?), that does mean I “value” the service at least $100, in money terms at least. But is the $100 price a “signal” of this? No, it is actually exactly how much I have demonstrated that it is worth to me. Where is the “signaling”?

As I noted above, it seems to me it is more precise to say that market prices “let the owners make an informed decision” because they enable calculation. Not by conveying knowledge or information, which is implied if you say prices “signal” something, right? Prices are a tool; an “accessory of appraisement”, because they enable appraisement by means of cardinal or mathematical calculation. What exactly does “signaling” have to do with this? Would you agree that it’s at least potentially confusing to say prices “signal” information? Does this notion not rest on a Hayekian view of the calculation problem as a knowledge problem?

For example, as Rothbard (here, p. 66) writes, “the entire Hayekian emphasis on ‘knowledge’ is misplaced and misconceived”; see also Hülsmann (here, p. 39), discussing “the irrelevance of knowledge
problems”, and Salerno (here, p. 44), stating: “[t]he price system is not—and praxeologically cannot be—a mechanism for economizing and communicating the knowledge relevant to production plans. The realized prices of history are an accessory of appraisement”.

Or, as Hoppe (here, p. 146) bluntly puts it: “Hayek’s contribution to the socialism debate must be thrown out as false, confusing, and irrelevant.”

I summarize and discuss these articles in this article, where I also write:

The encoding metaphor seems to be a pseudoscientific and scientistic attempt to give this kind of economic theorizing a patina of scientific respectability by borrowing engineering terminology. It is scientistic because, in vainly trying to borrow natural science terminology, there is an assumption that only the “hard” or natural sciences have true validity. It is akin to using such inapt phrases as the “momentum” of the leading team in a basketball game, the “energy” of crystals and astral forms, or, even worse, “revving the engine” of the economy. Both economics and ethics can be sciences, but not in the same way as the causal, natural sciences.

I would be curious to know–do you think it is meaningful to speak of prices “signaling” certain information or knowledge, without being based on Hayek’s knowledge-related view of the socialism issue (in which case, I would be interested in your elaboration); or, do you think your use of “signaling” does invoke the Hayekian knowledge paradigm, but you would disagree with Rothbard et al. above?

I hesitate to disagree with you because we are very close to agreement. The tiny little nit to pick is “are outcomes always optimal (ex post)?” I address this rebuttal: “but i bought a house and regretted it, how did both parties in the transaction benefit there?” To which i answer human action, and therefore economics can only happen or deal in “ex ante”. Ex post you could both regret your action; but who’s going to know this till later? So therefore, no action is ever based on ex post observations. You bought the house because ex ante, you expected to benefit. Furthermore, a non-actor could regret your action, but who can know this for sure ever, as only action (in economics) reveals (ex ante) preference.

Action always happens ex ante, and it is only ex ante that can we say you ALWAYS expect to benefit by your actions. Or else you would not have bothered. It is only on that basis that I conceded that free market outcomes may not be optimal. I love this stuff.

Free market outcomes are not always optimal, true. People are so human it’s ridiculous, making one mistake after another. Economics cannot speak for how action turns out ex post. All it can say is that ex ante, free actors expect their actions to be optimal at least from a psychic, if not monetary perspective.

If a company owner puts his less competent son in charge of the firm, in preference to someone else, he has perhaps, traded off some profit for the psychic gain of having his son take over the family business. It does not matter that to the outside observer, the action seems less than optimal, what matters is that the actor sees it ex ante as optimal, all things considered (by him).

This arrangement is certain to be more optimal than having a coercive social apparatus dictate how that property owner will manage his property. It can’t miss at that modest aim.

Incidentally, as a general proposition, I find it hard to characterize favoring one’s own children over others as a vice, although it is possible to ruin a child. It’s like saying the habit of eating is a vice, although you can over eat. Some things are just as they should be.

The political market for campaign funds provide people with the information needed to decide where their vote will best meet their needs. Every group is an interest group. People often are members of more than one group. Campaign finance reform is just a way for incumbents to gain power by restricting the flow of information.

Lobbying doesn’t bother me. What I’d like to see is disclosure of same within 24 hrs of contact. If you want to reduce corruption, reduce the power of government to destroy people. Case in point, when I read Ira Magaziner’s remarks about medical care, I knew that I had to be politically active to protect my life, liberty, and property if Bill Clinton became President. I did everything that I could to prevent his election both times. My fears were grounded in reality, even though I lost the fight.

Do you purchase a house just to get the interest deduction? In any case, what makes you think that Wal-Mart felt anything at all?

“…some offers should have been refused. … it is entirely possible that the “right” thing … would be to politely refuse their offer. This is because the cost in resources needed to escort them or give aid to them if they became sick, would likely exceed the benefits of getting batteries to the few residents still in the flooded area.”

First of all, the question is to whom is the offer of assistance being made? If it is to the individuals living in N.O., rather than FEMA, then what FEMA thinks of the offer is irrelevant. This is the problem, a useless centralized organization assuming the right to accept or decline assistance on behalf of the individual recipients. The right thing to do, for FEMA, is to step out of the way and let more efficient and intelligent private persons and organizations provide the assistance. After all, it is their resources and property, (which the article makes a point of), not FEMA’s.

Secondly, the only escorts and medical assistance in question should be from those offering help that they provide themselves. Concern for the cost of resources should be left entirely in private hands. We allow the state too much power because we assume assistance from them. It is the individual who can best decide what he’s willing to risk personally to help someone. Let him decide.

Finally, I do not believe this issue represents the (Misesian form of) calculation problem. The calculation problem is something entirely different from the event of an arm of the state intervening and hampering free market activity. The fact that FEMA is grossly inefficient is not because there are no prices in the factors of production. Therefore, it certainly would be glib to apply the term “calculation problem” in considering FEMA. The calculation problem is very specifically and exclusively connected with the monopolization of the entire means of production, as the article points out. This situation is not present in a hampered market such as ours, and FEMA does not suffer from it.

However, I strongly agree with the author when he concludes that “As in all other areas, the free market is superior to monopoly governments when it comes to disaster relief.”

To the various comments, even within the appropriate and beneficial response that Robert Murphy outlines in a free market environment, there is no reason to believe (in such a world) that government would not (could not) still support the rule of law by protecting the property rights of the private relief effort and their right to engage voluntarily in transactions with those needing help who choose to deal with them. Though it may or may not be vital to the overall issue of disaster relief, that specific issue seems ancillary to the points he is making and only distracts from the important points to be made about the coordinating and problem solving power of the marketplace, not only during disasters, but Especially during disasters. Government’s job isn’t to decide where the Walmart truck goes or doesn’t go, or if it goes at all. It’s to make sure looters, etc. don’t successfully attack it (although I’d send some private security along if they were my trucks and employees!).

It’s rather offensive how the government thinks we all get stupid the second an emergency goes down and we need transcended, all seeing bureaucrats to swoop in and save us. If you were dropped in a survival scenario, would you rather have with you a carpenter who didn’t graduate from highschool, or an ivy league Phd from FEMA, as your only other human resource?

What equipment is needed? Where do you use it? Who and where are the people needing medical attention? These questions are not so easy to solve in a city of hundreds of thousands. They are impossible to solve for the government.

For example, the city school buses suddenly became an extremely valuable resource. One of the rich folks trying to pay 1000 plus dollars for a 100 mile ride could attest to that. One clever individual stole one and carted several dozen other folks to safety. The city let the buses get flooded.

The other issue is in what resources are needed. Walmart had 14 trucks of stuff on the way to the area. The beauty is that this stuff is WALMART funded not tax payer funded. So if it is not the correct stuff or not usable or not appropriate then it is Walmart’s problem. More over there are lots of these private agencies. Some will be more effective than others. Instead of one size fits all.