Reply to: Businesses should be allowed to turn away women, gay and black people

[Mich the Tester]

Sure it has happened. But only at the small/local level. I actually know a couple who lived in one for a few years.

That's perhaps because it's a voluntary agreement, like a cooperative business. I can think of a few successful co-operative businesses and approaches to living together (Co-op, Rabobank (which has unfortunately fallen from grace), Univé (Dutch insurer), John Lewis, the Kibbutz system), but what defines them is that they are voluntary cooperatives where you can join, leave, you can decide it's not for you, and you can raise issues and persuade other members to make changes; state socialism always involves force and I just don't believe that can work very well because the key is attracting people who want to cooperate with others.

State socialism fails because it requires coercion to make people who don't want cooperation, or who want more or less cooperation, to fall into line with a centrally dictated level of cooperation and 'sharing', or a supposedly democratically decided level of sharing. I wonder how democratic it really is that in countries where a minority works (ageing European societies), the non-working population can coerce the working population simply by means of having more electoral power. People then find ways to contribute the minimal possible amount of work, money or ideological enthousiasm, not necessarily because they don't want to help others or don't care about society, but perhaps because they don't like being bossed around. Of course, sometimes you get the next stage where states actively prevent people leaving to seek an alternative, by building big walls and shooting anyone who tries to cross them, or building starvation or work camps to 'reeducate' those who don't fall into line.

I say a big yes to cooperatives and sharing, and no to coercion.

[d000hg]

Look at the ideal of communism - lovely principles where everything is held in common and all power is shared but, unsurprisingly, it has never happened, all communist states have been one party dictatorships.

Sure it has happened. But only at the small/local level. I actually know a couple who lived in one for a few years.

[DodgyAgent]

That could also mean employers would free to discriminate and request foreign workers only. Be careful what you wish!

We are free to discriminate anyway. We just need to dress up the excuse for not hiring.

[doodab]

Logical reasoning and validity (which is what you're referring to as mathematical rigour, i.e. conclusions flowing from the premises) have been understood for thousands of years. I'm not sure what 'innovative' tools you think it is modern economists use. Neoclassical economists still utilise verbal assumptions (a.k.a axioms) and arguments which are then parsed into formal/symbolic logic, which can add rigour. I assume this is what you're referring to. Game theory was known by the likes of Mises etc. but was not a tool he made much use of. Game theory may be a more recent novelty, although its origins go back to Hobbes and perhaps even further backwards. It's just a particular mode of analysis, and like any argument, to the extent that it is valid, its conclusion will flow from its premises. Game theory doesn't really play much of a role in neoclassical economics, except in analysing firm behaviour under oligopoly and in public choice economics, where it does see heavier use. The fact that Mises (or many other great economists, including Hayek and probably most who have won the Nobel Prize; it's not like their contributions were thrown out the window because they didn't use game theory or other formal models) did not make much use of game theory does not mean they're "handwaving philosophers". In the end, the theories put forward by neoclassical economists still live or die based on how well their assumptions fit reality. Formal modelling can help tighten the argument up but not using it does not mean the argument is false.

I think your just showing your ignorance here, your trying to enlarge what is known as game theory in order to include all manner of things that have later been analysed using it as a tool. There is also no way that von mises would have had knowledge of more recent results from e.g. Rubenstein, as he was dead by then. You'll find many Game Theorists have won nobel prizes BTW, John Nash, Harsanyi, Thomas Schelling and others. This is actually quite surprising when you consider there is no Nobel prize for Mathematics.

I know what you said. I am asking how game theory leads from that, to the assumption that governments are required and are able to escape the problems that hypothetically plague firms on the market.

I never said it did. I said that power is inevitable and cannot be made to disappear (your assertion was that "that there doesn't need to be any power anywhere" and free markets will make it disappear) and that game theoretic analysis of a particular market where power is not symmetrically distributed shows that one side can effectively drive leaving the other powerless. Simple observation of reality will reveal the same thing often occurs in practice, so in that respect game theory is a red herring and TBH I wish I'd never mentioned it as it has clearly confused you.

Yep, but assuming that, we could still question whether in such cases the government is fit to deal with the issue, or whether other alternatives, such as voluntary unionisation (i.e. workers' cartels), would achieve better outcomes.

Go ahead and question it then rather than going off on unrelated tangents. I think you need to start by explaining how in your theory free markets give everyone equal bargaining power and how they maintain that equal distribution of power over time. Because of course if they don't maintain it over time power will be asymmetrically distributed whatever the initial conditions.

Alternatively you can admit you're wrong on that point and argue for some alternative to the concentration of power in a democratically elected, albeit corruptable state. My feeling is that's the best place for it, given the track record of monopolies, oligopolies, cartels and unions in the real world. Governments, after all, have evolved. People seem to prefer having one to not.

[Zero Liability]

That may well be so, but their arguments are not going to be mathematically rigorous, by definition, and I'm not examining the reasoning of what you describe as "real free market advocates" anyway, as it appears to consist entirely of what I refer to as "handwaving".

I'm making the point that the arguments in favour of free markets that are mathematically rigorous (not to mention any analysis that could actually be used to build a useful quantitative models) are reliant at least in part on Game Theory, which is in part the mathematically rigorous treatment of human decision making. You perhaps need to appreciate that this branch of mathematics didn't really exist before the second world war, if it had then Von Mises and other handwaving philosophers would most likely have seized upon it as a useful tool.

Logical reasoning and validity (which is what you're referring to as mathematical rigour, i.e. conclusions flowing from the premises) have been understood for thousands of years. I'm not sure what 'innovative' tools you think it is modern economists use. Neoclassical economists still utilise verbal assumptions (a.k.a axioms) and arguments which are then parsed into formal/symbolic logic, which can add rigour. I assume this is what you're referring to. Game theory was known by the likes of Mises etc. but was not a tool he made much use of. Game theory may be a more recent novelty, although its origins go back to Hobbes and perhaps even further backwards. It's just a particular mode of analysis, and like any argument, to the extent that it is valid, its conclusion will flow from its premises. Game theory doesn't really play much of a role in neoclassical economics, except in analysing firm behaviour under oligopoly and in public choice economics, where it does see heavier use. The fact that Mises (or many other great economists, including Hayek and probably most who have won the Nobel Prize; it's not like their contributions were thrown out the window because they didn't use game theory or other formal models) did not make much use of game theory does not mean they're "handwaving philosophers". In the end, the theories put forward by neoclassical economists still live or die based on how well their assumptions fit reality. Formal modelling can help tighten the argument up but not using it does not mean the argument is false.

I am assuming of course you're referring to formal modelling here of the sort that neoclassical economists are wont to use in framing their theories, and not the set of statistical techniques known as econometrics, which don't really play a role in generating theories so much as predicting certain market outcomes (commonly in macro), and even then, with limited success. Economists have come under fire for how they've abused econometrics, overplayed the concept of statistical significance and for allowing a good deal of professional journals to measure the worth of an article based on the number of equations in it, which often has very little to do with the soundness of the underlying argument, and here predictability of future actions is certainly relevant. This is what Spontaneous Order is getting at. So I suspect you're talking at cross purposes, as you are correct that for the neoclassicals, whatever criticisms one may have of their models, their use of formal modelling methods does not imply anything regarding the predictability of human preferences one way or the other, unless the economist explicitly makes such an assumption. Even the likes of Friedman do not make extensive reference to such formal modelling methods when advocating markets, because they are analytical tools and are not required to advance these arguments.

What I said is that most real world situations are not symmetrical.

I know what you said. I am asking how game theory leads from that, to the assumption that governments are required and are able to escape the problems that hypothetically plague firms on the market.

That's true whether you apply game theory to them or not. A low wage worker has more to use than an employer who can easily find another one, for example.

Yep, but assuming that, we could still question whether in such cases the government is fit to deal with the issue, or whether other alternatives, such as voluntary unionisation (i.e. workers' cartels), would achieve better outcomes.

I also said that you can model a market as a game. For example, you might consider a situation where you have two parties trying to agree on something (e.g. a price, or how to divide a sum of money) and assign a payoff for each player in the case they reach an agreement and the case that they don't. In the case of say wage bargaining or price determination you would consider the repeated version of the "game", which means that considerations such as reputation, willingness to adhere to a contract etc are factored into the payoffs. That's a useful way of thinking about a lot of real world situations, and if you accept the basic premises that the parties can either agree or not agree, and there is a value each party associates with agreeing or not agreeing, there are a lot of things you can say about which agreements are viable.

I'm not dismissing the usefulness of game theory. I am questioning why you think the arguments it provides are that strong, particularly because of the amount of sheer disagreement over what it implies for political theory. That said I am saying this without sight of the particular game-theoretic model you have in mind.

Selective quoting of a single word. I referred to "mathematically rigorous arguments". These are arguments that can be considered watertight if you accept the assumptions upon which they rest. I was referring in particular to mathematically rigorous arguments in favour of free markets, such as the proofs that they are pareto efficient under certain assumptions. To be fair some of this goes beyond game theory and requires quite a lot of mathematical background.

It's clear enough to me what you mean by the term now.

But who is limiting it to one off games here? Only you. The fact that some people make simplistic arguments by applying a mathematical tool incorrectly doesn't make it useless anymore than a trying to open a tin with a hammer means hammers are useless.

I was checking we're on the same page.

[vetran]

FTFY

from what I heard they didn't ban you for shirtlifting they just asked you not to do it in the Fruit aisle in ASDA.

[doodab]

No. Prices signal the relative desires of billions of people around the world when it comes to bidding for scarce resources with alternative uses. Free from forceful manipulation, equilibrium is found at the point where resources find their way to where they are relatively valued the most, in the most efficient manner possible. We're a long way from finding a more efficient model, and when we try to the market finds an unnatural and relatively unsustainable, and hence more volatile, point of equilibrium.

Rather avoiding the point I was making that what people would "ascribe to a state of equilibrium" is somewhat different than the technical meaning of price equilibrium in a market.

Anyway I'm bored now.

[doodab]

And 90% of free market advocates would describe those arguments as hogwash, believing that human action is not mathematically predictable

I doubt it's anything like 90%, unless by free market advocates you mean only the tiny fraction who adhere to your own dogmatic viewpoint. Also, nothing in the maths assumes that human action is entirely predictable, only that people make choices, from which we can infer that they have preferences and people prefer that which they chose over that which they didn't.

and as such a natural price mechanism - which we couldn't hope to match with all the computational power in the world today - is the best way to see to it that scarce resources with alternative uses end up where they are valued most, in the most efficient way.

The existence of a "natural price mechanism" that results in efficient allocation of resources is exactly what the maths predicts. I'm not suggesting we "match it" or try to replace it with computational power in order to decide how to allocate resources, simply pointing out that it can be modeled and understood using mathematics.

More to the point, how does your proposed "natural price mechanism" work if humans don't make choices?

[SpontaneousOrder]

Which is rather a different meaning of equilibrium than intended in the sense of a market finding an equilibrium isn't it?

No. Prices signal the relative desires of billions of people around the world when it comes to bidding for scarce resources with alternative uses. Free from forceful manipulation, equilibrium is found at the point where resources find their way to where they are relatively valued the most, in the most efficient manner possible. We're a long way from finding a more efficient model, and when we try to the market finds an unnatural and relatively unsustainable, and hence more volatile, point of equilibrium.

[SpontaneousOrder]

I'm making the point that the arguments in favour of free markets that are mathematically rigorous (not to mention any analysis that could actually be used to build a useful quantitative models) are reliant at least in part on Game Theory.

And 90% of free market advocates would describe those arguments as hogwash, believing that human action is not mathematically predictable and as such a natural price mechanism - which we couldn't hope to match with all the computational power in the world today - is the best way to see to it that scarce resources with alternative uses end up where they are valued most, in the most efficient way. It's a bit of a straw-man, but an understandable one you might expect from someone who does more handwaving than that have done study of the subject.

[doodab]

With a national debt of substantially more than 1 trillion pounds something very volatile in nature is going to occur some time soon which I wouldn't imagine many people would ascribe to a state of equilibrium.

Which is rather a different meaning of equilibrium than intended in the sense of a market finding an equilibrium isn't it?

[SpontaneousOrder]

You're clearly confused. An equilibrium point will be reached regardless, it may well be different in a market in which the state interferes than one in which it doesn't, but there will be equilibrium. That really has nothing to do with the distribution of power (i.e the ability to influence where that equilibrium point is) at all.

With a national debt of substantially more than 1 trillion pounds something very volatile in nature is going to occur some time soon which I wouldn't imagine many people would ascribe to a state of equilibrium.

[doodab]

You'll find that the vast majority of free market advocates reject mathematical models for the same reason that Austrians reject the idea that there is such a thing as macro economics. A great many, if not most free market advocates will have based their arguments on the same kinds of theory you'd find in Von Mises' 'Human Action'.
I think you're very much missing the point when it comes to examining the reasoning of ('real' as in NOT your Greenspans etc).

That may well be so, but their arguments are not going to be mathematically rigorous, by definition, and I'm not examining the reasoning of what you describe as "real free market advocates" anyway, as it appears to consist entirely of what I refer to as "handwaving".

I'm making the point that the arguments in favour of free markets that are mathematically rigorous (not to mention any analysis that could actually be used to build a useful quantitative models) are reliant at least in part on Game Theory, which is in part the mathematically rigorous treatment of human decision making. You perhaps need to appreciate that this branch of mathematics didn't really exist before the second world war, if it had then Von Mises and other handwaving philosophers would most likely have seized upon it as a useful tool.

[SpontaneousOrder]

I was referring in particular to mathematically rigorous arguments in favour of free markets,

You'll find that the vast majority of free market advocates reject mathematical models for the same reason that Austrians reject the idea that there is such a thing as macro economics. A great many, if not most free market advocates will have based their arguments on the same kinds of theory you'd find in Von Mises' 'Human Action'.
I think you're very much missing the point when it comes to examining the reasoning of real free market advocates ('real' as in NOT your Greenspans etc).

[doodab]

That asymmetrical power you keep referring to is as a result of the state, not the market.
Free markets, like most natural systems tend to do, comprises of complex feedback loops such that a spontaneous order emerges. It's only forceful interference which disturbs the tendency towards equilibrium.

You're clearly confused. An equilibrium point will be reached regardless, it may well be different in a market in which the state interferes than one in which it doesn't, but there will be equilibrium. That really has nothing to do with the distribution of power (i.e the ability to influence where that equilibrium point is) at all.