Thank you all. I am now going to put my attention to the books I am writing.

I’ll be back.

Thank you all. I am now going to put my intention to the books I am writing.

I’ll be back.

One more thing: Congratulations for the hard work you’ve put into being a scientist. I truly respect your openness to ideas, the strength of your intellectual creativity, and your breadth of knowledge. I’ve learned several valuable things in our discussion. Continued success to you.

Regards,
Austroglide

Excellent. Thank you for your response.

You asked: “Were Menger’s value theory acceptable to you, would you then consider Austrian economics to be scientific?”

Yes, I would. But it would not be an exact science. And therefore it would be constantly debated. It would that have in common with a science like biology, which also has an epistemological criterion that is not exact, namely Darwin’s evolution.

Biology also can become an exact science. And maybe it already is. Darwin’s evolution is not enough. But it is based on DNA. And DNA itself explains evolution because it is an information carrier. And information has become a measurable quantity, since the publication of Shannon’s book: A Mathematical Theory of Communication.

So the fusion of Darwin’s evolution with the discovery of Crick and Watson of the structure of the DNA molecule, together with Shannon’s definition of information has created an epistemological basis for the testing of exact biological theories . Therefore, biology has become an exact science.

Dawkins, in his books: ‘The Blind Watchmaker’ and ‘The Extended Phenotype’ has shown the power of this approach. These books show some remarkable things about life you would never come up with without such a fusion of these three things.

What I can see is that whenever somebody debates with Dawkins, he loses. Of course, losing a debate will still not cause acceptance. About quantum mechanics it is said many times that it became mainstream only because the opponents of the theory just died. Moreover, although many physicists still debate over the meaning of quantum mechanics, no physicist today will dispute the validity of quantum mechanics. Quantum mechanics works. About that there is no doubt.

Why do I say this? I have seen in some documentaries, that when Dawkins reaches out to young people, he almost always convinces them of the validity of evolution, even when these were children of very orthodox religious persons.

Dennett, in his book: Darwin’s dangerous idea’ has compared evolution with an ‘universal acid’, unstoppable burning through everything it touches, and transforming more and more sciences. This means that the revolution evolution causes is slow, but it is unstoppable . There are even people who apply evolution to the whole universe, although personally I think this is a mistake. (There is, however, something in dead matter that is similar to evolution. It is the variational principle , also called the ‘minimax principle’. Every law of nature found up till now satisfies it. The variational principle itself, however, is not a law of nature, because you can also have equations that are not laws of nature which also satisfy the variational principle.)

In the same manner, what we need to make economy into a true exact science is a principle that explains exactly what value is. With such a principle we can test whether an economic theory will lead to wealth creation or whether it will lead to wealth destruction.

With Menger’s subjective theory of value this is not possible.

About your pessimism, I repeat something I said earlier here, and elaborate a little bit on it.

Well, what can I say. What you say reminds me of something I heard of Mahatma Ghandi. He was that man with the spinning wheel, and who was pointing out, that people should not be so greedy. One of the things he said: “The world provides more than enough to fulfill the needs, but vastly too little to satisfy the desires of people.” And he demonstrated it in his own life.

But, the funny thing is, that when he had appendicitis, he did not rely on the ‘simple life’ and on meditation, but he ran to the hospital to treat it. In other words, in his normal actions he condemned science and technology, and only allowed the simplest of it for his followers, but when his life was at stake, his behavior showed, that he had more faith in modern science than in his own view.

That is the power of science.

My point is, economy is not yet a science. But when it has become one, even those who express that they are against it, know that it is the only thing that really has demonstrated to work. They may oppose it with their words, but in their actions they show, that denying it might have devastating consequences. In the same manner, if you have a theory that shows how tremendous amounts of wealth can be created, and a group applies it, then others will see this. And this will cause the exact same acceptance in actions, no matter how much they express in words that they are against it.

Greetings,

Konrad.

I appreciate your description of the relationship between individual (i.e. property) rights and economic freedom – that the magnitude of one’s economic freedom consists in the measure of one’s ability to acquire the right of property in goods + services, through exchange for money, produced by others. I find your above description of the cause and effect relationship between property rights and economic freedom to be a very nice conceptualization.

Also, I agree wholeheartedly with your identification of the religious impulse – namely, the seeking of absolute certainty – and an effortless one at that. This impulse, as you say, explains the difficulty many have regarding the acceptance of a scientific world view, with its relatively slow crawl toward non-absolute certainty.

For this reason, however, I don’t share your enthusiasm that, were (as you argue) economics to become a true science, an economic revolution would necessarily ensue. Indeed, many consider praxeology to be a legitimate science, and we see how unwelcome is Austrian economics.

Which brings me to a question: You’ve made clear above your view that Austrian economics is philosophical, not scientific. And also your view that Menger’s subjective theory of value is incorrect. But were Menger’s value theory acceptable to you, would you then consider Austrian economics to be scientific?

Also, your value theory is still sketchy to me. I know you are keeping it a secret, but I think I’m approaching an understanding. I have one question about one of the causal elements which I will refrain from asking here. However, were you to answer this question for me, I think I may then understand your solution. I must say the theory indeed seems to be sound, and if so, I’m very curious the implications your nimble mind will draw from it.

Many thanks.
Please continue to post in the future.
It appears I have many years of learning ahead.

Stefan

Yes, the ‘magical multiplier’. Rothbard has written about it.

Rothbard’s treatment of the Keynesian multiplier.

******************
The once highly esteemed “multiplier” has now happily faded in popularity, as economists have begun to realize that it is simply the obverse of the stable consumption function. However, the complete absurdity of the multiplier has not yet been fully appreciated. The theory of the “investment multiplier” runs somewhat as follows:

Social Income = Consumption + investment

Consumption is a stable function of income, as revealed by statistical correlation, etc. Let us say, for the sake of simplicity, that Consumption will always be .80 (Income).76 In that case, Income = .80 (Income) + Investment.
0.20 (Income) = Investment; or

Income = 5 (Investment).

The “5” is the “investment multiplier.” It is then obvious that all we need to increase social money income by a desired amount is to increase investment by 1/5 of that amount; and the multiplier magic will do the rest.
The early “pump primers” believed in approaching this goal through stimulating private investment; later Keynesians realized that if investment is an “active” volatile factor, government spending is no less active and more certain, so that government spending must be relied upon to provide the needed multiplier effect. Creating new money would be most effective, since the government would then be sure not to reduce private funds. Hence the basis for calling all government spending “investment”: it is “investment” because it is not tied passively to income.

The following is offered as a far more potent “multiplier,” on Keynesian grounds even more potent and effective than the investment multiplier, and on Keynesian grounds there can be no objection to it. It is a reductio ad absurdum, but it is not simply a parody, for it is in keeping with the Keynesian method.

Social Income = Income of (insert name of any person, say the reader) + Income of everyone else.

Let us use symbols:

Social income = Y
Income of the Reader = R
Income of everyone else = V

We find that V is a completely stable function of Y. Plot the two on coordinates, and we find historical one-to-one correspondence between them. It is a tremendously stable function,
far more stable than the “consumption function.” On the other hand, plot R against Y. Here we find, instead of perfect correlation, only the remotest of connections between the fluctuating income of the reader of these lines and the social income. Therefore, this reader’s income is the active, volatile, uncertain element in the social income, while everyone else’s income is passive, stable, determined by the social income.

Let us say the equation arrived at is:

V = .99999 Y
Then, Y = .99999 Y + R
.00001 Y = R
Y = 100,000 R

This is the reader’s own personal multiplier, a far more powerful one than the investment multiplier. To increase social income and thereby cure depression and unemployment, it is only necessary for the government to print a certain number of dollars and give them to the reader of these lines. The reader’s spending will prime the pump of a 100,000-fold increase in the national income.

*****************
This is Rothbard’s refutation. But, as a matter of fact, it is no refutation at all. The only thing he says is: ‘look, how absurd’, which he hides by using the words ‘reduction ad absurdum’. He appeals to common sense. But both you and I, schooled in mathematics and physics, know that common sense is no reliable guide to the best understanding possible. Things can be completely counterintuitive, and therefore go completely against common sense, and still work. It is, for example, absurd to say that the planets do not revolve around the sun at all, but they are standing still. This is exactly what Einstein’s general theory of relativity, however, is asserting. Moreover, this same theory states that there is no gravity at all. Things do not fall to the floor, but the floor moves up. Therefore it appears to us that the objects are attracted to the floor. This is also, why all objects, regardless of their weight, and released at the same moment, fall with equal velocity and acceleration to the floor. From this insight his whole General Theory of Relativity follows.

There must be something in the argument of the multiplier that made people fall for it. When I worked out my own Capital theory, I began to see what the problem was, and I could show a refutation on its contents. Moreover, I saw what really was happening.

The point is, that the above argument tacitly assumes that most income goes to consumers. Money, however, only has value because of the goods and services you can get in exchange for it. To put it very simple, the value of money lies in what you can buy for it at the moment you have it. But that implies, that the goods and services you can get for money you have now must already have been produced in the past. And that means, that the value money now has, is the result of investment spending in the past. This also implies, that if something is made, and put against money, but it is not yet bought, the money needed to create it, has been spent in the past. This money is therefore investment.

This means, that the analysis has to be different.

The first step:

Social Income = Consumption + Investment

is correct. But then you have to realize that Consumption is equal to money that is spent now, whose value comes form Investment in the past. Moreover, production processes consist of many stages. This means, that if I buy a pencil, then to make this pencil possible, it has been brought to the shop. This requires means of transportation, like trains, ships etc. The graphite in the pencil has to be created, which requires mining and machinery etc. The list is endless if you think about it. But all of this activity is done by entrepreneurs buying and selling to each other, and all of this takes place before the pencil is in the shop. This applies to all other things you can buy for money as a consumer. This means, that you cannot say that Consumption = 0.80 Income. Considering all of the steps leading to the possibility to income, the formula is more like

Consumption = 0.05 Income.

Therefore we get

Income = 0.05 Income + Investment.

0.95 Income = Investment

Or: Income = 1.053 Investment.

Moreover, most of this Income does not go to the pockets of consumers, which the argument implicitly assumes, but it consists of transactions in various stages of production.That is, it consists of businesses buying and selling to each other. Moreover, all of this business activity has to precede consumption spending. That is the inevitable consequence of the fact, that you can only buy something now when it has been produced in the past. In fact, not many people realize, that this is the bulk of all business in a Capitalist society. This means, that the future Consumption must be written as:

Consumption = 0.05 Income = 0.05 × 1.053 Investment = 0.053 Investment.

So if there is growth, then there can be more consumption.

In other words, the income for all consumers together is a small fraction of the total income. It has to be. This is because the bulk of all income consists of businesses buying and selling to each other, to ‘bring the products to the consumers’. Moreover, because the production process consists of many stages, all of the money that makes the whole structure of stages possible must be, of necessity, Investment. This is the inevitable consequence of the fact, that something can only be bought now when it has already been produced in the past.

Or, equivalently, the more we invest now, the greater the amount of products consumers can buy for their money in the future.

This means, that the conclusion has to be the very opposite of what Keynes asserts. There is a multiplier. But it works exactly the other way around. More investment now leads to greater wealth in the future. And this makes sense, because the more investment there is, the more laborers can be hired, the more machines can be built etc. And all of this greater investment will only lead in the future to greater wealth.

This is the real refutation Rothbard should have been given. I know that Keynes has a more complicated theory that Rothbard presents it here, but I happen not only to have solved the value problem of money, but also the Capital Structure problem. My value theory is unique, while my analysis of the Capital Structure has also been found by others. In particular Reisman’s book contains a flowchart at the end, that is much more cumbersome than my own way of picturing it, and that is probably why not many people understand it. But when I saw it, and compared it with my own Capital Theory, I saw that it contained essentially the same insight. Hayek also has come up with a forerunner of this insight.

I have always found it amazing, that economists, even when they were antagonistic to Keynes, as Rothbard and Reisman were, did not come up with the basic flaw in Keynes’ reasoning. Namely, he did not see that products can only be bought by consumers after they have been produced by producers. And that this has the for many devastating consequence, that consumers do not contribute to the production structure in any way. The economic contribution of consumers is exactly zero, zilch, nada, while almost everyone seems to believe the completely wrong exact opposite: that all of the production is paid by the consumers!

The only role the consumers play, economically speaking, is that they form the reason why the production processes are set up. But they do not contribute to the actual realization of these production processes. I have explained this many time to people, and when they really ‘got it’, they were often shocked by it! The response was: ‘can we be that much deceived? Can we be that stupid?’. Yes, you can! Yes, you are!

Everywhere in the media you hear statements like: ‘the economy is stagnating because consumers spend less’. Nonsense! If consumers indeed spend less, then this means, that they do not spend the money they earn. But the greatest part of the market does not consist of consumer buying, but consists of businesses buying and selling to each other. What therefore happens, is that there are more resources available to the business part of the market. This leads to two things. An increase in the number of stages of production. And a lowering of the prices of lower order (more in the direction of the consumer) and an increase of the prices of higher order. In the short run this just means that almost exactly the same amount of goods and services are going to be sold, but at lower prices, adapting to the reduced consumer spending. In the long run this means that the more technically advanced products, those that take more stages to produce, or the more productive methods leading to more mass production become economically viable. So the overall effect is, that the less consumers spend, the more wealth there will be created.

And all of this follows from the simple understanding, that you can only buy now that what has already been produced in the past.

If you are trained in physics, like you and I, then you know exactly what a sound argument looks like. I am also repelled by standard works on economics. I had the good fortune not to have any education in economics from high school or from the university. My first ‘economy’ training consisted of the book: ‘Capitalism, who needs it’ from Ayn Rand. She pointed me to Ludwig von Mises. And to make sense of him, I studied Rothbard next. Rothbard pointed me to Eugen von Böhm Bawerk, and he pointed me to Carl Menger. Later I began to study the others, like Smith and Ricardo. And then I hit on Reisman’s book Capitalism.

Being well trained in applied mathematics and physics, I tried to make sense of it in the terms I was trained to do. And, fortunately for me, I was not exposed to the trash that is now produced in the name of economy in the mainstream. I was not ‘academically imbecilized’. When something did not make sense, I looked at the problem it tried to solve, and solved it myself. I had learnt, through my training in physics, especially through the book: ‘Physics for students of Science and Engineering’, from Halliday and Resnick, which contains several thousands of problems, to solve problems on my own. I had gone through H&R even before I studied physics in Leiden. In fact, I learnt english from that book! I got my high school diploma through buying books and self-study, in three years.

Only much later, after all of this studying, and with making contact with ‘real economists’, I realized that I had solved many problems on my own that were as yet unsolved in economics. And in it there was one biggy, the value problem of money. Moreover, my physics training has given me the ability to see through the mathematics, and see what really has been said, like I just have demonstrated with Rothbard’s treatment of Keynes. I had developed that early on through H&R.

There is one anecdote that might illustrate this. I had just followed a lecture on statistical physics, which, as you know, typically contains lots of advanced calculus. After that lecture I remarked to one of my fellow students: ‘Don’t you find it amazing that so much can be said in a mathematical way about just one molecule in a container?’. He responded: ‘was the lecture about just one molecule?’ Apparently, all of this mathematics had caused him to lose sight of the physics.

Being trained in physics and mathematics gives you one great advantage. It causes you to not be easily intimidated. I have met some students and ex students of economy, who, like you, just could not make sense of economics. But contrary to you, they thought it was their fault. They thought they were too stupid to grasp it, while it was not their stupidity, but mainstream economy itself which is a big mess. But if you are in the position like you, wherein you have mastered a subject that is generally considered to be the toughest there is, you know that it cannot be your stupidity that causes you to be unable to understand economics. It has to be that the economics presented itself must be a mess!

Thanks for your response.

I hope you found this also informative.

Greetings,

Konrad.

I appreciate the immense consideration you’ve given your comments. It is a rare pleasure to watch an interesting discussion unfold.

I especially enjoy your treatment of certain interpretations of economics as religious. I am a recent University graduate (physics and engineering), and thought it would be a good idea to take a class or two in “micro” and “macro” economics. I’m afraid that I didn’t do terribly well. It wasn’t that I couldn’t answer the questions… but I was literally disgusted with the prospect of using the ‘magical multiplier’ and other ridiculous tools. You cannot question the logic of the content… for that would be heresy. Just believe… and you shall receive endless wealth. After all, “we owe it to ourselves”.

it’s almost quaint to read victorian-era novels like hear characters speak of annuities, the income streams of which were reliable enough (in real terms) to guarantee a certain lifestyle for decades in advance.

like an alcoholic, it’s only an epiphany, or a close encounter with death that causes any real change. in the mean time, the best cure is hair of the dog!

Well, what can I say. What you say reminds me of something I heard of Mahatma Ghandi. He was that man with the spinning wheel, and who was pointing out, that people should not be so greedy. One of the things he said: “The world provides more than enough to fulfill the needs, but vastly too little to satisfy the desires of people.” And he demonstrated it in his own life.

But, the funny thing is, that when he had appendicitis, he did not rely on the ‘simple life’ and on meditation, but he ran to the hospital to treat it. In other words, in his normal actions he condemned science and technology, and only allowed the simplest of it for his followers, but when his life was at stake, his behavior showed, that he had more faith in modern science than in his own view.

That is the power of science.

My point is, economy is not yet a science. But when it has become one, even those who express that they are against it, know that it is the only thing that really has demonstrated to work.

BTW. I don’t want “The Truth” either. “The Truth” is a religious concept. The very notion of “The Truth” is an invention of religious people, who do not understand the least thing about how our mind works.

I could produce a huge digression of this point, but I rather refer to a book written by David Deutsch: “The Fabric of Reality”, wherein he explains Popper’s vision. That book made me study Popper. Before that I was a Randian, almost exactly the opposite. I turned to Popper, because Objectivism contained the promise of producing many geniuses, but the only person of any prominence emerging from that group was Alan Greenspan. And we know what his “brilliant insights” “ahem” did for us!

As a physicists I went through three major paradigm shifts in understanding reality, which made me aware that there is no such thing as “the Truth”. The first was the paradigm shift from Aristotle’s mechanics to Newtonian mechanics. The second was from Newtoninan mechanics to the special theory of relativity. And the third was from that to the General theory of relativity.

Let me explain in ordinary terms what these paradigm shifts mean. According to Aristotle, things can only move when a force is exerted on them. In Newtonian mechanics this means F= p. According to Newton, there is no such thing as a state at rest. Whenever you see something that is at rest, you can also see another observer according to which that same something is moving. This vision causes the concept of rest to be integrated with the concept of motion. Therefore a force is not necessary for things to move. What a force does, is causing changes in states of motions, which are also states of rest. So if you want to cause something to move with respect to you, then you apply a force, which causes a change in its state of motion, which you happen to observe as a state of rest, and it changes it in another state of motion, which you then happen to observe as a state of motion in the Aristotelian sense.

In Newton’s languate, a force does not cause things to move, but it causes changes in state of motion. You can express this as F= dp/dt.

With this vision you can understand that planets moving around the sun do not need a force to keep moving. The sun attracts them which causes changes in their states of motion in such a way that they orbit the sun.

Einstein puts another twist on this, by stating that, in the case of gravity, the force given by dp/dt is not really a force, but a ‘dent in spacetime’. Therefore the planets do not even circle the sun, but they are ‘standing still’ in a curved spacetime, which appears to us as orbital motion.

When I went to no less than two major paradigm shifts in my ‘common sense’, I understood that this as such shatters any concept of ‘The Truth’.

I went on to investigate what is the appeal of the concept of “The Truth”. I then saw, that the reason why people want “The Truth” is because they want certainty. And truth promises infinite certainty, but does not deliver it.

I then began to think about certainty as such. Popper showed me, that you can only be absolutely certain when some statement is false!

And then you have the question, how can you use the fact that there can only be found certainty about something being false arrive at a grip on the world? How can you go from understanding of falsities to things that work?

The key word is context. Take, for example, Newton’s theory. We know that it is refuted by quantum mechanics and the special and general theory of relativity. However, these other two theories do not just say that Newtonian mechanics is just false, and we must discard it completely. No, what these other two theories tell us, is that when we apply Newtonian mechanics to objects that are not too small. They must be larger than atoms, say. And when we apply it to objects that are not too large. Say, the size of mountains. We also have to keep the speeds down, say, to no more than 40% of the speed of light. If we then restrict our measurements to an accuracy of only two decimals, it is impossible to construct an experiment that refutes Newton. And that means, that within this domain we can be certain that applying Newton’s theory will work! We can even calculate the certainty, and that is much greater than 2 decimals.

All scientific theories are of this form. All scientific theories do not begin by observation, and then deducing ‘the truth’ from them. No, all theories begin as fantasies. And then you use some scientific method to try to find some domain of validity, some context, wherein you can be certain that this theory works!

It is Certainty what we really are after. Certainty is something that is not identical with Truth. Therefore it is not important that a theory is “The Truth”. The only thing that is important is: ‘if we base our actions on these theories, can we be confident that they produce the results we try to accomplish?. And how certain is this? If you really grasp this, you can be without The Truth altogether. It has no place in science, and it does not have to. I myself even rejoice in understanding this.

Your very example shows this. People stick to socialism and communism, because these promise certainty. But they sell themselves by appealing to Truth.

Moreover, if you understand that there is no such thing as a Positive “The Truth”, then you also understand that you cannot refute a theory believed to be “The Truth” by showing “The Real Truth” that refutes it.

“The Truth” and belng religious are, psychologically speaking, linked to each other. If you accept a theory because you are convinced that it is The Truth, then this acceptance programs your emotionan apparatus in such a way, that whenever you are confronted with something that corresponds to your “The Truth”, it will generate a positive emotion. And whenever you are confronted with something that is in violation with your “The Truth”, it will generate a negative emotion. In fact, this is the psychological source of all arrogance, anger, violence, terrorism, and even war.

In other words, the stubbornness you observe in those who stick to Socialism and Communism, is because they are not scientists. They are not even philosophers. They are emotionally attached to their vision in a religious way. And that makes them to fight for those visions, and to oppose any vision that is different from theirs, with whatever means available to them. The reason why they do this, emotionally, is because their certainty is at stake!

You wrote: “I think economics falls in the middle in the class of attitudes and American economics won’t change until there is a major economic crisis. I think it will take a crisis on par with the Great Depression because it was largely responsible for the major shift to the left in the US. It took 50 years of brutal communism to change the minds of most Chinese. On the other hand, Russians endured 70 years of it and most still haven’t changed.”

There are two reasons for this. The first reason is, that it is better to have something that at least gives some social organization which gives some certainty. A ruled society, in whatever form, at least tells you what to do and what not to do. It gives certainty. Being extremely wealthy, but living in a society that is very uncertain is not appealing. The second reason is, that there was (and is) no alternative. There was (and is) no economic theory that can be called truly scientific. There is no economic theory that promises and delivers the certainty people crave for. Moreover, all economic theories before that of von Mises were, and are religions. They make people accept them as “The Truth”. They do not realize that whatever it is you accept based on “The Truth”, you accept it because of religious reasons. And the deepest core of this is the quest for certainty. All of these theories promise effortless certainty through Truth which is the Great Deception of Religion.

I wish I could be as optimistic. I think you assume that people are looking for the truth. I don’t. If they were looking for the truth, there wouldn’t be any socialists left. The majority of Americans are socialists as are politicians. They don’t want the truth; they want to hear from people who will promote socialism. Simply from a supply/demand perspective, I think the supply of socialist economists will increase because the demand will increase, both from the public and from the state, which employs most economists.

Years ago I read some public relations research that divided ideas into opinions, attitudes and world views. He placed them in concentric circles with world views at the center, attitudes in the middle and opinions on the outer circle. Opinions are the easiest to change. His example for opinions was the choice between brands of toothpaste. Attitudes were represented by the outlook on hygene, for example, the decision whether brushing your teeth is a good idea or not. World views are people’s outlook on how the universe functions. Opinions are easy to change. Attitude changes require a significant personal crisis, or long-term counseling, to change. World views are almost impossible to change.

I think economics falls in the middle in the class of attitudes and American economics won’t change until there is a major economic crisis. I think it will take a crisis on par with the Great Depression because it was largely responsible for the major shift to the left in the US. It took 50 years of brutal communism to change the minds of most Chinese. On the other hand, Russians endured 70 years of it and most still haven’t changed.

You wrote: “However, I am pessimistic about the possibility of change in mainstream econ.”

I am not. The simple fact is, that we have not hit yet upon a theory that is strong enough to defeat the others.

You write: “Natural sciences have controlled experiments; economics has imaginary constructions.”

All sciences only have imaginary constructions. The controlled experiments within natural sciences are only to test whether they work, not to come up with them. Moreover, controlled experiments can only test causal connections. Mathematics has another test, logic. Biology has evolution as its epistemological test.

The reason why there is no change in mainstream economics, is that it lacks an epistemological test like that of controlled experiments in the natural sciences, and logic in mathematics, and evolution in biology. If it has, there will be a major change that is unstoppable. This was so within mathematics since Euclid, within the natural sciences since Galilei, and within biology since Darwin and Mendel fused with the discovery of the DNA molecule, and evolution became irrefutable.

I am glad that I am not a professional economist. I have a very extensive background, both trained in theory and practice. From the practical side, I am an electrician, carpenter, metal worker and musician.

From the theoretical side I am a computer programmer (I have a command over several computer languages), I have studied mathematics and physics for 10 years at the university of Leyden, Holland. After that, I have been studying many things on my own, including such things as philosophy and psychology. My life is much like that of Bastiat, who also was a life long student. A major difference between Bastiat and me is that I have an extensive understanding of ‘the hard sciences’, like mathematics and physics. I am a practitioner of meditation, and have given several courses in formal logic. I am totally independent from any institute.

The reason why I am interested in economy is that a sound economy creates freedom for as many people as possible. It is my mission in life to help others develop their mental powers.

I found out that a precondition to this is freedom from material worries. This is why I do not accept any bullshit theories. I am only interested in theories that work, or at least are stepping stones to theories that lead to this. Austrian economy is my best bet. It is, in my eyes at least, unfinished, but it is the best there is.

It only needs an epistemological criterion with which we can make a distinction between theories that work, and bullshit theories.

So brace yourself! This is coming! Economy has reached a critical mass, and will cause a major explosion in wealth. There is an economic theory coming that will be as unstoppable as Galilei’s method of experimentation was to promote correct theories. Religious people, who had a huge vested interest in false theories, could place him under house arrest, but they could not prevent his approach to become mainstream within the natural sciences.

In the same manner, a sound economic science equipped with a sound epistemological criterion will be just as unstoppable, no matter how huge the vested interests are.

That’s a very important insight. Natural sciences have controlled experiments; economics has imaginary constructions. Mainstream econ deals with imaginary constructs more than they would like to admit. For example, perfect competition is pure imagination with no basis in reality. It is used to demonstrate the effect of price on demand and supply. Unfortunately, some people don’t understand that it is imaginary and think it is the goal and that the state should bring it to reality. But without the imaginary construct of perfect competition, it’s impossible to prove that higher prices reduce demand and increase supply because other factors, such as quality and advertising, affect the results.

I have been re-reading my college text on mainstream macroecon and was pleased to see that it uses imaginary constructs a lot. It holds things like prices and interest rates constant, another imaginary construct, in order to elucidate the effects of the variables under consideration at the time.

However, I am pessimistic about the possibility of change in mainstream econ. The field went through a similar crisis in the 1970′s and didn’t learn a thing. When empiricism failed them during the current crisis, most economists have fallen back on the only theory they know—Keynes.

Notice that the recent pro-Austrian articles have come from the financial media. My guess is that finance will become increasingly Austrian because it works. Econ will spend the next decade trying to rehabilitate Keynes because it can’t afford to admit that it has been wrong the past 70 years and state regulation of the economy is very popular. As a result, the next battles will be between financial econ and mainstream macro econ.

Thank you very much for the material. I am going through Jorg Guido Hulsmann’s article more thoroughly, and also the article of Philipp Bagus looks very interesting.

I shall listen to the audio files later.

Great material!

By pointing to this material you have also directed my attention to the existence of the QJAE.

I am contemplating to write an article for the QJAE wherein I explain my own value theory.

Thanks!

if not, then this:
http://media.mises.org/MP3/mu2005/mu05-Hulsmann.mp3

it’s funny his article seems to have slipped under the austrian radar, and the time preference theory seems to be taken as a given by most of the contributors to the site.

i was quite shocked when i read bagus (one of hulsmann’s students) on deflation,(http://mises.org/journals/qjae/pdf/qjae6_4_3.pdf) and realized how unsatisfactorily the other austrians had treated this issue. ever since, i pay particular attention to jgh’s work.

i look forward to reading more of your work, though i can’t say i understand it all.