Austrian Utility Theory (long)

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Jason Kuznicki

Jason Kuznicki is a research fellow at the Cato Institute and contributor of Cato Unbound. He's on twitter as JasonKuznicki. His interests include political theory and history.

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  1. Avatar Ethan Gach
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    Excellent post Jason.

    Some questions and comments.

    “In a cardinal-utility world, utilitarianism would be an exact science: If my copy of Human Action endowed me with 9523 utils, and if burning it left me with an added deficit of 123 utils, and if burning it would give a socialist 9647 utils, then the result would be a one-util improvement in human welfare. Obviously we should proceed, assuming the opportunity costs and externalities were negligible or favorable. Marshall’s simplification was an attempt to deliver something at least a little bit like this result.”

    Is there an account of future utility? For instance, the likelihood that certain actions will lead to certain future actions, with an attempt to take the various net utilities of those outcomes into affect as well?

    “But to make a man act, uneasiness and the image of a more satisfactory state alone are not sufficient. A third condition is required: the expectation that purposeful behavior has the power to remove or at least to alleviate the felt uneasiness. In the absence of this condition no action is feasible. Man must yield to the inevitable. He must submit to destiny.”

    This would seem to imply that someone cannot know a course of action is hopeless and yet still pursue it in order to obtain a certain outcome. This seems a very psychological question, regarding the unity of our experience and consciousness. Is there much that delves into that territory to give a thorough psychological account on that front?

    “Following David Hume, Austrians agree that reason is the slave of the passions, and the work of practical reason is to seek out methods of satisfying the uneases that our passions entail. And we may of course settle on unfit means, owing to errors of knowledge. The knowledge problem thus appears at the very foundation of Austrian economics.”

    I’m curious then, does this account subscribe more or less to Hume’s working definitions of passions and reason, or does it have its own modified definitions of those two things?

    “How do we know how strongly we feel “unease” about various prospects? In our speech we may order our feelings however we like, including inconsistently or incoherently. But we order our feelings in our lives by deciding the order in which to act upon them. We cannot do otherwise. Whatever we are doing right now is definitionally the thing that we believe will remove the most unease on net and at the present time.”

    What exactly is meant here by “believe?”Report

    • Avatar Jason Kuznicki in reply to Ethan Gach
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      Is there an account of future utility? For instance, the likelihood that certain actions will lead to certain future actions, with an attempt to take the various net utilities of those outcomes into affect as well?

      There would be, but I was trying to simplify. I left out expected chances of failure and the like, but of course if one takes the trouble to consider them, they can and should reorder one’s preferences. The trouble though is always that probability is a judgment based on frequency of past events and their expected likelihood of making future events more or less probable. And that again depends on our knowledge.

      This would seem to imply that someone cannot know a course of action is hopeless and yet still pursue it in order to obtain a certain outcome. This seems a very psychological question, regarding the unity of our experience and consciousness. Is there much that delves into that territory to give a thorough psychological account on that front?

      In those cases, the outcome sought is not the one that’s hopeless. It’s something else — an attempt to appeal demonstratively for outside aid perhaps, or maybe just a response to the unease that one might feel at dying dishonorably.

      One of the first things I started noticing after reading Human Action was the way in which this account of utility and action threw mindstates into a different light. They change all the time, very rapidly, very unpredictably. There is almost no other way to account for who we are and what we do.

      I’m curious then, does this account subscribe more or less to Hume’s working definitions of passions and reason, or does it have its own modified definitions of those two things?

      For Mises at least, reason is what compares the fitness of various means to the ends for which they are proposed. Ultimate ends are not the province of economic science, but of moral philosophy, and Mises just doesn’t want to do moral philosophy (or psychology, for that matter). I might have wished that he had, on both counts.

      What exactly is meant here by “believe?”

      Something like the otherwise clunky “manifest revealed preference for,” and bearing in mind that actions speak louder than words.Report

    • Avatar MFarmer in reply to Ethan Gach
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      I take believe to mean that we think it will but don’t know for sure, although the not knowing for sure doesn’t have to be a conscious knowledge of not knowing for sure.Report

  2. Avatar sidereal
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    Greatly enjoyed this overview (thanks!) and, as an occasional Buddhist, I’ve long felt that neoclassical and main street economics aggressively glosses over the interactions between suffering, desire, and trade. It sounds like the Austrians have their fingers closer to that pulse.

    But I did find that the description here of the interaction between unease and action was pretty circular, especially around the topic of intransitivity. If you say that you know that the thing you’re doing right now is the thing that reduces the greatest unease because it’s the thing you’re doing right now, you haven’t really said anything. You could just as well assert that the thing your’e doing right now is the thing that God most wants you to do or the thing that the chemical dice in your head landed on. Unease can only convincingly enter into it if you can measure unease by some mechanism other than in observing what you’re doing, and then demonstrate that you consistently do the thing that reduces the most unease.Report

  3. Avatar BlaiseP
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    Very interesting. Thank you for writing it. A few reactions from where I sit:

    For the non-Austrian, happiness is irrelevant. People make choices. Those choices are revealed in buying patterns and other aspects of their lives. There are no maximums or minimums. Time is the one thing money won’t buy. Half of life is doing what you want and the other half is being able to afford that lifestyle. There’s your hedometer, rather like running the top command in Linux, we see all the running tasks with their associated resource costs.

    This business about Models is simply not true. I build models. I can tell you for a fact it isn’t true. Model-building works backward from what is to what might explain it. Of course model-building requires tuning the model but we don’t need perfect knowledge. Models, if they’re any good, are predictive. So are theories. I predict all sorts of stupid things people do. I’m integrating the price of gasoline and unemployment statistics to predict the next election: these aren’t under the president’s control and every intelligent person knows it. I’m working from the reality that people are stupid and respond to pain at the pump.

    No man is content with his state of affairs. The Buddhists and Christians both teach us we’re constantly hungering and thirsting and desiring and generally going from one need to the next, servicing those needs as we can with the time and resources available. Man doesn’t submit to destiny, he writes his own story, every day, every minute. Not making a choice is also a choice.

    But mankind is bedevilled with all sorts of fallacies, chief among them is what the Buddhists call Maya, the sickness of desire which arises from the illusion of the self. Happiness can only be perceived as an afterthought, a summary. Percy Shelley said man is happiest when he’s least aware of himself.

    The Util isn’t quantifiable. People make dumb choices. They lie, both to themselves and to others. They act against their own best interests. They don’t understand cause and effect but advertisers do. People who eat too many Reese’s Pieces will find themselves regretting it later. The Reese’s Piece is not a Utility Photon. It’s both a particle and a wave: I’ll grant you it can’t be effectively subdivided. But the two-slit experiment shows the photon’s a wave and so’s that Util.Report

    • Avatar Patrick Cahalan in reply to BlaiseP
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      Quibble about modeling:

      Modeling is a specific discipline in mathematics. What you do, Blaise, is a subset of modeling, actually. Not all models are built to be predictive … many of them are built to be either explanatory or descriptive, but not predictive in the classical sense because you’re modeling an open system, so you’re not going to get much in the way of predictive capabilities.

      In addition, some models are built from a theoretical framework, not from empirical data. You try to posit the theory that might explain a data set, build a model based upon the assumptions in the theory, and run that baby and compare to empirical data.Report

      • Avatar BlaiseP in reply to Patrick Cahalan
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        Yes and no. The problem I’m addressing is this:

        This assumption has allowed a great deal of model-building, generating many interesting and plausible claims about happiness, among other things. Mainstream economics still depicts actors as satisfaction-maximizers whose first resort is to the monetized market. It adds epicycles to explain divergences, and the most interesting research today is often precisely on these epicycles.

        … and that’s not true. People think they’re buying happiness. They’re buying Stuff. An advertiser isn’t going to extol the virtues of his product on any meaningful, real world basis. He’s going to sell a lifestyle choice. The old Madison Avenue maxim: sell sizzle, not steak. There’s a guy I know, a food photographer. He paints the food. Yeah. Paints it. To make it desirable, he makes it inedible.

        Epicycles my ass. You can never overestimate the power of stupidity: it’s more powerful than Gravity, it’s Entropy made real in our lives. The Austrians don’t understand models and therefore complain about them.

        Here’s the No part. I question this business about theoretical frameworks: if I confine myself to abstractions, I can trot an arbitrary set of integers through a function to see how it behaves, but all theories are predictive. The Austrians are very big on Praxis and Praxeology. This arises from their insistence on the purposefulness of human behaviour. History and literature give us ample proof mankind has no sense of purpose.

        Since the time of Plato and Pythagoras, man has been trying to justify the world according to his own lights with the net result that we now have some idiotic Mind-Body Distinction treated as an article of faith. And there’s Gautama the Buddha, telling us sensual passions are the first enemy. There’s Jesus Christ, telling us the Kingdom of God lies within us. The only epicycles I see are those who would try to tell us that Happiness can be Quantified.Report

        • Avatar Patrick Cahalan in reply to BlaiseP
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          This was more of a point of clarification about modeling in general, not an observation regarding the general (or specific) uses of modeling in the discipline of economics.

          There are fairly accurate models regarding base commodity prices, like worldwide wheat prices given production numbers and whatnot. They’re reasonably predictive in a short time frame given a reasonably small number of variables.

          There’s also fairly accurate models regarding certain types of luxury goods, given certain types of auction scenarios and participants and whatnot.

          The number of limitations that you need to put on each of those models is rather large, to get a decent amount of predictive power. Opening either of those models to systemic influences by other competing models rapidly turns into something of a computational complexity that crushes modern computing devices, though.Report

          • Avatar BlaiseP in reply to Patrick Cahalan
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            Prediction, as I see it, is modelling how markets behave, how they respond to an arbitrary stimulus, almost like coming to know a person. A model for a fast-trending market like platinum can’t be re-used for wheat futures, say. It’s not really a process of limits, though there are some intrinsic limits — a market which moves to limit down or limit up will stop trading.

            Long-term weather forecasting, a very different animal than short-term forecasting. Large-scale phenomena such as El Niño or solar maxima matter to the long-term forecaster. I don’t need much data to work out when the next El Niño will be, I have enough data to say it’s a five year cycle. Global warming seems to be impacting that cycle.

            The future can’t be predicted. But reactions can be predicted.Report

        • Avatar b-psycho in reply to BlaiseP
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          There’s a guy I know, a food photographer. He paints the food. Yeah. Paints it. To make it desirable, he makes it inedible.

          Averting an unappetizing reality by providing an impossible and worthless vision of perfection…

          That can represent so damn much.Report

  4. Avatar Patrick Cahalan
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    It’s Monday, so apologies if this is difficult to parse.

    I generally agree with the idea of framing utility this way, but I think it loses value to assume that all utility is ordinal.

    I think there’s something to be said for taking a more nuanced approach. I mean, the classic approach to value of labor (I’m thinking of Locke, here) was very handwavy, because it presupposed that you’re talking about non-scarce value. It’s okay to give the apple-picker ownership of the apples, provided he didn’t take all of the apples and leave none for anybody else.

    I realize that value != utility, but I think the problem with “utility”, as a term, is that people *want* to jump to the idea that all utilities are equal (’cause they have to be, because we measure them all with money, and we’re trying to build models, etc…) If we can’t get some sort of predictive power, what’s the point of trying to study this stuff anyway?

    I think there’s some predictive power possible in stuff down at the bottom of Maslow’s, when compared to economic transactions that take place down in the bottom of Maslow’s. I think there’s predictive value up at the top of Maslow’s, too… when you’re just looking at the economic transactions that take place up at the top of Maslow’s.

    It’s when you’re trying to compare things across the entire spectrum of Maslow’s (because we use money as a proxy, and we want to build models, etc.) that you get wacky results.Report

    • Avatar Jason Kuznicki in reply to Patrick Cahalan
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      I generally agree with the idea of framing utility this way, but I think it loses value to assume that all utility is ordinal.

      I would say that we are on solid ground when we discuss utility as ordinal. When we construct models using cardinal numbers, including those with money as a proxy and otherwise, we are on much less solid ground.

      That’s not a reason to avoid such work. On the contrary, I had quite a few positive things to say about it. But we should recognize that our models here can be wrong for two different types of reasons. First, they can be wrong because models of complex phenomena can always be wrong, cardinal or not. And second, they can be wrong because the model always involves the kind of approximations we wouldn’t dare to make if we actually had cardinal values at hand, which we don’t.

      I think there’s something to be said for taking a more nuanced approach. I mean, the classic approach to value of labor (I’m thinking of Locke, here) was very handwavy, because it presupposed that you’re talking about non-scarce value. It’s okay to give the apple-picker ownership of the apples, provided he didn’t take all of the apples and leave none for anybody else.

      You’re talking about original appropriation and property rights theory, am I correct? I’d say that’s several steps beyond what I meant to get at in the above. Answering why original appropriation can be just, and when, involves a lot of additional work, and this post was long enough as it was.

      If I’m misunderstanding you, and if you mean to talk about Locke and the labor theory of value, then that’s yet another can o’ worms. Locke did not have a clear idea of the market value of goods, let alone labor, let alone the concept of marginalism. Or the concept of comparative advantage, which would be the start of the solution to his difficulties with original appropriation. There were just too many holes in his economic thought.

      I think there’s some predictive power possible in stuff down at the bottom of Maslow’s, when compared to economic transactions that take place down in the bottom of Maslow’s. I think there’s predictive value up at the top of Maslow’s, too… when you’re just looking at the economic transactions that take place up at the top of Maslow’s.

      You may very well be right. Perhaps one of the reasons why economic models work at all is because within a given nation, most people want very close to the same menu of goods and in rather close to the same order. As an added benefit, in countries like the United States, there is still quite a large middle class, and they are all chasing some fairly similar goods together.Report

      • Avatar Patrick Cahalan in reply to Jason Kuznicki
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        I would say that we are on solid ground when we discuss utility as ordinal. When we construct models using cardinal numbers, including those with money as a proxy and otherwise, we are on much less solid ground.

        That’s not a reason to avoid such work.

        I agree with this, totally. I think it’s kind of blinking obvious, actually.

        The rest of the comment, I’ll see if I can chew whatever thoughts are running around in my brain into something that makes sense.Report

  5. Avatar James K
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    Actually Jason, as a mainstream economist I don’t see a lot to disagree with here. I was taught ordinal utility theory, not cardinal, and as far as I’m aware that’s the norm in the mainstream.

    As for unease, well we don’t really bother trying to assign emotions to utility, utility is merely a system for ranking people’s alternatives (based on their knowledge, endowments and preferences) so as to describe what decision they will make. Whether the top-ranked alternative is one that makes the person most happy, or least unhappy or whatever really doesn’t matter. The point is to look at their decision, not the specific emotion behind it.

    The two points on which we disagree is Buddhism and intransitivity. For me, the problem with Buddhism is that it looks like a divide-by-zero error. Our desires define us, they make us distinguishable from things without desires, like rocks. A state of sublime desirelessness would be hard to distinguish from a Persistent Vegetative State.

    As for your take on intransitivity, while that would explain intransitivity away, it doesn’t really help. A person who’s utility function is that rapidly and predictably unstable still has a major problem with their decision-making apparatus. And ultimately all you’re really doing is trying to define intransitivity out of existence, which doesn’t strike me as reasonable.Report

    • Avatar MikeSchilling in reply to James K
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      When I tool Econ 101 in college, cardinal utility was mentioned as something that might be cool if there were any way to measure it. I can still recall the prof’s explanation:

      “How are you today?”

      “12!”

      “You’re lucky, I’m only 7.”Report

      • Avatar Jason Kuznicki in reply to MikeSchilling
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        And yet I find it remarkable that so much of economic modeling proceeds as if utility were cardinal. Here, just for example. (Yeah, Wikipedia, sorry.) There are a lot of other questions I’d like to answer more fully this afternoon, but I’m just not going to be able to.Report

        • Avatar MikeSchilling in reply to Jason Kuznicki
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          The article you link to measures everything in money, not in utility (the basis of the various criteria being what would one party be willing to pay the other party to effect or disallow a proposed change.) Money is much simpler than utility: it’s cardinal, it has no odd order-theoretic properties (more is always preferred to less), and, as a simplifying assumption, it’s possible to ignore the points you made about a dollar’s variable utility. If by “cardinal utility” you mean “money”, yeah, it’s everywhere.Report

        • Avatar Brandon Berg in reply to Jason Kuznicki
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          Mike’s right. Kaldor-Hicks efficiency is explicitly not about utility (see the Criticisms section in the Wikipedia article).Report

          • Avatar Jason Kuznicki in reply to Brandon Berg
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            I am aware that money is cardinal. I made quite a bit about that in the original post.

            Now here’s a question: Why is it that we are trying to find what we call an “optimal” distribution of goods, with values denominated in money? Why, in other words, are we trying to maximally satisfy people’s desires?

            There’s a word for that. But I’m afraid it starts with a u.Report

            • Avatar Brandon Berg in reply to Jason Kuznicki
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              Kaldor-Hicks efficiency is also explicitly not about distribution. It’s purely about what will increase aggregate wealth, as measured by willingness to pay.

              Maybe you’re thinking of a case where someone invoked the concept of Kaldor-Hicks efficiency incorrectly? The concept itself is perfectly sound, but I can see how some people might abuse it.Report

              • Avatar Jason Kuznicki in reply to Brandon Berg
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                I am struggling to understand in what sense Kaldor-Hicks is not about distribution, understood in the broad sense of who ends up being allocated what. I’m not sure I’m following you here.

                Also, while I agree that the concept is sound as far as it goes, it’s the move from dollars to utility that is less apparent to me, and in fact seems unsound.Report

              • Avatar Brandon Berg in reply to Jason Kuznicki
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                Questions of distribution don’t come into play at all when evaluating Kaldor-Hicks efficiency. A change can still be a Kaldor-Hicks efficient even if it makes the rich richer and the poor poorer, provided that the aggregate gain to the rich is more than the aggregate loss to the poor.

                That this doesn’t account for diminishing marginal utility or heterogeneous preferences is an acknowledged shortcoming. The justification for using it anyway, I believe, is that when this approach is used consistently the distributional inequities will tend to cancel each other out—many Kaldor-Hicks improvements with varying distributional effects will likely sum up to a Pareto improvement.

                Stringham’s objections are valid, but I think irrelevant in many cases. Kaldor-Hicks analysis works well in many cases, and, significantly, it’s easy to distinguish the cases where it works well from the ones where it’s on shakier ground.Report

              • Avatar Brandon Berg in reply to Jason Kuznicki
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                Also, it’s not clear what alternative Stringham proposes. What does he have in mind that works better than Kaldor-Hicks analysis?Report

              • Avatar Jason Kuznicki in reply to Brandon Berg
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                As a bit of a follow up, consider this article as well. There are a lot of assumptions built into Kaldor-Hicks, including stability of desires over time, the coincidence of declared preference with revealed preference in situations that could have taken place but didn’t, and the extension of both of these out effectively to an infinite number of possible worlds.

                And we must make a further assumption — that dollars more or less track utility — if we want to use the criterion as a way of doing welfare economics. Yet to assert that this isn’t done seems clearly false to me. Economists do it all the time.

                A final word about that article — the bit about permissibility of murder strikes me as a needlessly low blow. Alas typical of some strains of Austrian econ, and partly responsible for its not being taken seriously. The rest of the article seems very compelling to me.Report

            • Avatar Robert Greer in reply to Jason Kuznicki
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              I think you’ve hit upon an interesting critique of money. Economists talk about money as if it had the usefulness of ordinality, but in reality it trucks in cardinality because it compares ordinal preferences between individuals. This is to my mind a serious lacuna in Hayek’s epistemology of economics: It just can’t account for how differences in wealth can skew the market’s allocative power. When money is synonymized with utility, the wealthy become utility monsters.

              This also poses a thorny dilemma within libertarianism, because it pits its free-marketism against its individualism, and therefore remains a pivotal internecine battleground for Austrians.Report

              • Avatar Patrick Cahalan in reply to Robert Greer
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                I’ve been here for a while, I haven’t figured it out yet.Report

              • Avatar Jason Kuznicki in reply to Robert Greer
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                says:

                It is a critique of money, but it’s also a critique, and a much more serious one, of anything less than money.

                Money allows each of us to make contingent, individualized claims that are testable through action. We may claim—and better still we may show through our actions—that we prefer one bundle of dollar-denominated goods over another by at least a certain amount.

                Here’s what I mean: In the abstract, I like the prospect of having a TV. Also in the abstract, I dislike the prospect of parting with cash. But if I like the one more than I dislike the other, then the possibility exists for a sale at some price point. Can the market provide it, or not?

                Finally we have something that can be worked on, and tested empirically, and even falsified, rather than just whined about. (And also: Rather than just consisting of formal, nonfalsifiable, a priori ground work, as was much of the above.)

                Are money calculations of utility perfect? Hell no. Can they be improved? Always. And they are the only kind that can be. The term “pissing contest” applies to just about every other attempt to get at the problem. Money doesn’t measure utility cardinally, but it does allow comparison claims using a universal scale of value, and that’s something pretty important.

                Chapter 7 of Human Action, particularly part 1, explains all of this much more rigorously than I could, and in much greater detail. I cannot recommend it highly enough.Report

              • Avatar Robert Greer in reply to Jason Kuznicki
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                I don’t think I’ve fully communicated my qualm with money. I agree that money is a nearly-ideal tool to empirically measure the preferences of a single person. But libertarian economists usually conceive of money as much more grand, hailing it as a wondrous tool for measuring preferences between individuals — a “universal scale of value,” in your words. It isn’t.

                For example, if I’m willing to pay more for a TV than for a book, then I think you have enough evidence to say I value that TV more than that book. But if I’m willing to pay more for a TV than you are, that’s not enough evidence to say I value the TV more than you, although libertarian economists usually assume so. After all, I may have more disposable funds than you do, in which case our wealth disparity skews the signaling power of the comparison between our personal demand curves.

                The standard libertarian response to this is to introduce the labor/leisure tradeoff and conclude that you value leisure more than I do. However, this is only a satisfactory response when everyone in the economy is a wage laborer and there’s no such thing as capital gains or inherited wealth.


                On a somewhat-unrelated note, I’m still a little skeptical about your main thesis that the Austrian theory of “utils as unease-reducers” is fundamentally different and superior to mainstream economic utility theory. Classical economists often conceived of the world economy as trending toward a state of ease — a general equilibrium. How would you respond to someone who sees the Austrians’ distinction as without much of a difference: that they’re talking about electron holes, and while this may be methodologically more convenient than the conventional model in certain instances, it isn’t necessarily uniformly superior?Report

              • Avatar Brandon Berg in reply to Robert Greer
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                See my comment below. This isn’t something we’ve overlooked. That the price system weighs the preferences of the rich more heavily than the preferences of the poor isn’t something we’ve overlooked—it is in fact key to the functioning of the economy.

                Consider the alternative. If goods and services were allocated purely according to preferences (assuming, for the sake of argument, that this were actually possible), then money would have no value. This amounts to a de facto 100% marginal tax rate on all forms of income. In a one-off game, this produces a welfare-maximizing allocation of goods and services, but in an iterated game it leads to disaster because there’s no incentive to produce anything.Report

              • Avatar Brandon Berg in reply to Robert Greer
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                It just can’t account for how differences in wealth can skew the market’s allocative power.

                Differences in wealth are supposed to skew the market’s allocative power. That’s the entire point. If money didn’t enable you to influence the market’s allocative power, then money would be worthless.Report

  6. Avatar Chris
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    Have you read Kurt Lewin’s A Dynamic Theory of Personality? It’s vector-theory is very similar to contemporary findings on goals, motivation, and preference. I suspect it’s relevant.Report

  7. Avatar MFarmer
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    The problem is that people don’t make the right choices. People’s stupidity has to be managed or else most of the world will be affected by stupid choices. You might ask who I am to make such a judgement. I’m one of the smart people. I don’t hate stupid people– I feel sorry for them. I know they choose because they think that their choices make some kind of sense to them, but they are wrong, so people like myself have to help the stupid people make better choices, or at least prevent them from making stupid choices that are not good for them.Report

    • Avatar Patrick Cahalan in reply to MFarmer
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      > The problem is that people don’t make the right
      > choices.

      Yep.

      > People’s stupidity has to be managed or else most
      > of the world will be affected by stupid choices.

      Overgeneralizing, but not always untrue.

      > You might ask who I am to make such a judgement.
      > I’m one of the smart people. I don’t hate stupid
      > people– I feel sorry for them. I know they choose
      > because they think that their choices make some
      > kind of sense to them, but they are wrong, so people
      > like myself have to help the stupid people make
      > better choices, or at least prevent them from
      > making stupid choices that are not good for them.

      And… there’s the strawman.Report

      • Avatar MFarmer in reply to Patrick Cahalan
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        Strawman? Who will make the choices, then? It has to be smart people who make the choices. I don’t see any other way to keep stupid people from making choices of which we don’t approve.Report

        • Avatar Patrick Cahalan in reply to MFarmer
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          Just because a problem exists doesn’t mean that there is a suitable solution. I may have said that before, seven or eight thousand times.

          You’re confusing, (a) “There is a problem”, with (b) “There is a problem and there is a solution”, and furthermore with, (c) “There is a problem, and there is a solution, and the solution itself doesn’t cause any additional problems that are worse.”

          And you’re saying that anyone who thinks (a) must necessarily think (c)… and gee, aren’t those people barking mad? There’s the strawman.

          Dude, people make terrible economic decisions. This is not news, and pretending that it isn’t the case is seriously sticking your head in the sand about how people that surround you act on a day to day basis. It shows a fundamental unwillingness to accept the fact that most people are flawed.

          This doesn’t necessarily mean that I want to make any decisions for them, let alone some decisions for them or all decisions for them… or that me (or anyone else) making decisions for them will make this problem go away, or not create other problems.

          On the other hand, pretending that they’re all rational, self-aware, optimizing self-interested individuals is crazy talk.Report

          • Avatar Brandon Berg in reply to Patrick Cahalan
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            On the other hand, pretending that they’re all rational, self-aware, optimizing self-interested individuals is crazy talk.

            And also the basic idea behind democracy.Report

            • Avatar Michael Drew in reply to Brandon Berg
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              says:

              You mean behind most prominent, influential economic thought and theorems.

              Democracy just says that if you’re person (well, a member of the polity), there needs to be a way for you to make it matter (though only a relatively tiny bit) in determining what those with power do. As has been often pointed out, no particular outcomes are guaranteed or even claimed to be made more likely under democracy, and there’s certainly no assumption of the kind you describe that underlays democracy. A pure democrat understands that various craziness, in addition to self-satisfaction and public-mindedness, will be part of the democratic inputs that influence outcomes but that the imperative for individuals to nevertheless have that influence over governance (just because) overrides the prudential concerns that obviously arise from a full embrace of that view, while in our tradition, republican democracy, the assumption is that members of the polity must be guided not by rational utility optimization, but rather by principled public-mindedness nearly alone. (Obviously, that’s fairly tenuous in its own way.)

              To my knowledge, no argument for democracy makes a formal assumption that polity members will, in their ultimate behavior be “all rational, self-aware, optimizing [and] self-interested individuals.” Indeed, it’s precisely critics of democracy who point out that those are more realistic assumptions about how individuals will act than are the ones on which arguments for democracy tend to be based, thus making them unpersuasive arguments in practice.Report

          • Avatar MFarmer in reply to Patrick Cahalan
            Ignored
            says:

            “On the other hand, pretending that they’re all rational, self-aware, optimizing self-interested individuals is crazy talk.”

            Oh my — you took what I said and concluded this is my point. You certainly can’t make any decisions for a while, not until you’ve been examined. I don’t know how you got there, but talking about crazy…uh….seriously. But back to my main point.

            What I’m saying is that people make all kinds of choices, and it’s up to the smartest among us to prevent the stupid choices — maybe nudge when that works, then a little shove if needed, then a sledge hammer for the most stubborn and stupidest. We can’t have people making all types of irrational, stupid choices — it would be too chaotic and messy. Besides, those who control the wealth have to control choices as best they can so that the country/economy runs as smoothly as possible. It’s in everyone’s best interest for the elite few to run things, especially the big things. Average, stupid people can have their little freedoms, like marryting a redhead or choosing to wear socks with sandals, but on the big fucking deals, it takes brains and vision, my friend. Maybe you don’t want to make decisions for others, but some of us take our responsibilities seriously.Report

    • Avatar BlaiseP in reply to MFarmer
      Ignored
      says:

      Stupid is always a matter of perspective. Causality tells us about consequences. We arrive at the conclusion a choice is Dumb or Smart based on outcomes. You might look at the same outcome and come to a different conclusion. Of course, when those outcomes affect more people than they who made those choices — and should those affected people say “there ought to be a law against that sort of behaviours” — we may always rely on someone who wasn’t affected to poke his head in the window to tell those who were affected that they’re just being Statist Swine.Report

      • Avatar MFarmer in reply to BlaiseP
        Ignored
        says:

        Yes, That’s what I’m saying Blaise — some of us have to look at the consequences, and if we don’t like the consequences, then we have to prevent stupid people from making the choices that lead to the consequences. Like healthcare — stupid people can’t make smart healthcare choices, not can they make smart financial choices, nor energy consumption choices, nor hiring choices — stupid business owners can’t be trusted to pay their employees a fair wage. It goes on and on — there is no end to the stupid choices we have to intervene in and correct. Even in other countries we have to intervene and correct the choices of stupid foreigners.Report

        • Avatar Patrick Cahalan in reply to MFarmer
          Ignored
          says:

          Clearly the only possible response to anything is anarchism or fascism. I see no possible ground in between the two.Report

        • Avatar BlaiseP in reply to MFarmer
          Ignored
          says:

          Do people have Healthcare Choices when a single illness can drive them into bankruptcy? That’s a choice, too. Do people have Financial Choices when, as you say, owners set wages arbitrarily? That’s not a choice. Energy consumption choices are somewhat limited when the electric company shuts off the power and heat in the middle of winter.

          In terms of what we do overseas, I’m not sure we have much say-so. But I gather it’s okay to have children smearing toxic glue onto the soles of shoes with their bare hands or send them into coal mines. We used to do that sort of thing here in the USA.

          All this tough talk would be amusing if we hadn’t actually made laws against them on the basis of consequences, very bad consequences. Now I’m sure you walked six miles to school through the icy blizzards of yore, uphill both ways. You’ve never needed a dime’s worth of government assistance. For you, with your head poked in the window to cast aspersions on any such assistance, your problem is simple: you never lived in such a world. These consequences are meaningless to you. They’re complete abstractions.Report

          • Avatar Brandon Berg in reply to BlaiseP
            Ignored
            says:

            Do people have Financial Choices when, as you say, owners set wages arbitrarily?

            Do owners have Financial Choices when employees set wages arbitrarily?Report

          • Avatar MFarmer in reply to BlaiseP
            Ignored
            says:

            “All this tough talk would be amusing if we hadn’t actually made laws against them on the basis of consequences, very bad consequences. Now I’m sure you walked six miles to school through the icy blizzards of yore, uphill both ways. You’ve never needed a dime’s worth of government assistance. For you, with your head poked in the window to cast aspersions on any such assistance, your problem is simple: you never lived in such a world. These consequences are meaningless to you. They’re complete abstractions.”

            True dat, mostly. I’m one of smart, fortunate one, so I’ve never cast aspersions. I come with compassion in my heart to help the unfortunate avoid making bad decisions. I only want to help the stupid among us, because if we don’t help them, what will be come of them, and what will become of us if their decisions cause us to suffer too many bowling alleys when clearly the right choice is more art museums? Blaise, I’m all about helping the little people, so your cruel depiction of me as a hater hurts me to my core.Report

        • Avatar Jason Kuznicki in reply to MFarmer
          Ignored
          says:

          Yes, That’s what I’m saying Blaise — some of us have to look at the consequences, and if we don’t like the consequences, then we have to prevent stupid people from making the choices that lead to the consequences. Like healthcare — stupid people can’t make smart healthcare choices…

          Um, is that you, Barack? What did you do with the real MFarmer?Report

  8. Avatar MikeSchilling
    Ignored
    says:

    There’s a simpler example of intransitivity, and it’s not even uncommon. We’ve all know people for whom the grass is always greener, so that when they have an A, they really, really want a B instead. When they get rid of their A and finally get a B, guess what? They want their A back.Report

  9. Avatar Fnord
    Ignored
    says:

    Your description of the “relieving unease” model seems problematic.

    It would be one thing if you were using it sort of like utility is used. If, by definition, actions are driven by the need to relieve unease, and unease is that which actions are taken to relieve. It’s less of a model and more of a definition of the word “unease”, but there’s nothing per se wrong with that.

    But that doesn’t seem to be what you’re doing. You say that “unease” is vague, and it is. But you do distinguish “relieving unease” from “increasing happiness”. And then you imply that people always do the former and never do the latter. That doesn’t seem consistent with the idea that Austrian economics about making fewer assumptions about human nature.

    Austrian Economist: “Want some ice cream?”
    Me: “Sure”
    Austrian Economist: “I’m sorry that your lack of ice cream is making you feel uneasy.”Report

  10. Avatar James Hanley
    Ignored
    says:

    Damn, no time to read and think about this carefully right now. But my pre-emptive thanks for writing it, and by Thursday afternoon I’ll give it a good read, and I confidently expect being further enlightened about Austrianism.Report

  11. Avatar wardsmith
    Ignored
    says:

    Awesome post Jason, and I mean really awesome!

    Haven’t had time to dig through the comments yet, wanted to comment and congratulate as soon as you’d put this up but it was far too deep and too thoughtful to merit a thoughtless comment in response. And here I made a thoughtless comment anyway… sighReport

  12. Avatar LarryM
    Ignored
    says:

    Off topic, but I am honestly curious: I would expect, given his past statements and integrity, that, given the take over of Cato by moral monsters, Jason will be terminating his ties with said institution. Question – has it happened yet?Report

    • Avatar Jason Kuznicki in reply to LarryM
      Ignored
      says:

      LarryM thinks I’m a great guy.

      He thinks I’m such a great guy, in fact, that surely I must agree with him. I must agree with him even to the point where I would bear a personal and family hardship that he, LarryM, would probably never even consider.

      And why? All in support of a throwaway zinger line at the bottom of a comment thread on a blog. That’s just how great a guy LarryM thinks I am.

      That’s not quite your everyday ad hominem, but an ad hominem it is.

      I welcome your judgment of my actions, LarryM. But my actions aren’t necessarily over.

      Hell, to be perfectly honest, my fact finding isn’t even over. If you think I’m going to quit my job and sacrifice my family’s well-being over rumors, innuendo, and the grins that you’d personally get out of it, then you’re out of your goddamn mind.Report

      • Avatar MFarmer in reply to Jason Kuznicki
        Ignored
        says:

        “Hell, to be perfectly honest, my fact finding isn’t even over. If you think I’m going to quit my job and sacrifice my family’s well-being over rumors, innuendo, and the grins that you’d personally get out of it, then you’re out of your goddamn mind.”

        Pow!Report

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