MCViewPoint

Opinion from a Libertarian ViewPoint

Three Questions on Austrian Economics; Asked and Answered – LRC Blog LewRockwell.com

Posted by M. C. on November 1, 2021

https://www.lewrockwell.com/lrc-blog/three-questions-on-austrian-economics-asked-and-answered/

Walter E. Block

From: Ash caesar

Hi,

I read your blog post on your website from time to time, and I have to say I quite enjoy it, so keep it up. I have three questions that linger in my head a lot, and It would be a great deal to help me clarify them.

Q1) In a video, you said that capitalists help workers in many ways (I forgot which one). One is that the Capitalist risks their capital to provide production for the workers. However, in my opinion, you only see one side of the equation because the workers also risk something because of their income, housing, and family relay on it. So by that logic, workers should have some say with the capitalist on decision-making.

A1) Yes, the worker, too, takes risks. In Mises’ view, we’re all entrepreneurs: employers, employees, lenders, borrowers, landlords, tenants, buyers, sellers, etc. However, in the case of the business firm, there’s a relevant different between owner and worker. I now set up a company. We make pencils. It will take, oh, a year, before the first pencils come rolling off the assembly line. I have to buy machinery, rent a factory, pay for insurance, pay workers’ salaries, etc. Suppose no one wants to buy the pencils in a year. May I go back to my employees, and say, hey, sorry, I’ve got some bad news for you, the pencils aren’t selling, so, give me back that year’s worth of salary I paid you? No. I’m bearing that risk. The employees may keep their pay for the year.

Q2)In man economy and state, Rothbard states that “There are no ‘objective’ or ‘real’ costs that determine, or are co-ordinate in determining, price” (Rothbard 343). However, in Post-Keynesian Price Theory by Frederic Sterling Lee, he agrees that demand affects the price. But, cost also plays a factor because that is how they determine mark-up prices, which makes up most of the modern economy.

A2) There is indeed such a thing as cost, but it is alternative or opportunity costs. An important aspect of Austrian economics is subjectivism: no one really knows anyone else’s costs. We, often, don’t even know our own costs, can only speculate about them. For example, this is took you about 15 minutes to ask me these four questions. What were your costs in doing so? You probably didn’t think about this when writing up your questions. But what was it? What did you lose by asking me these questions? Money from a job? Sleeping? Eating? Swimming? Who knows.

Q3) Is it possible to say that prices are essential in economic calculation. Still, you can also argue that(in a Walrasian economic model) the economy can be represented in a complex system of equations where one can update them by trial and error, thus finding the right prices?

Q3) The Walrasian system is not too awful when it comes to depicting equilibrium situations. The difficulty is that we’re never in overall equilibrium. We’re always tending in that direction, both from higher and lower than equilibrium prices, but never there.

Q4)Just a side question do you think that the Roman people had more freedom under the late-stage corrupt republic or the dictatorship of Caesar(no relation to my name).

Q4) Sorry, I don’t know anything about this. Ask David Gordon. He knows everything about everything.

Sincerely,

Ash

Best regards,

Walter

Be seeing you

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