Author Topic: Von Mises Questions  (Read 3099 times)

Offline cartpusher

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Von Mises Questions
« on: August 21, 2009, 06:44:23 AM »
Hoping that some of you Austrian School folks can clarify some things for me. 

Does the Von Mises crew have any way to deal with monopolies, cartels or collusion involving price fixing, workers rights, unions?  Or is strictly left to the consumers to keep everybody honest with their purchasing choices?

What are their views on global free trade, and thus immigration?

Do they think their policies will increase or decrease the wealth gap?

I am sure I will have more questions as this thread develops, but I wanted to get these out of the way.

Thanks for any light you can all shed on this.

Offline chris

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Re: Von Mises Questions
« Reply #1 on: August 21, 2009, 09:56:25 AM »
Hoping that some of you Austrian School folks can clarify some things for me. 

Does the Von Mises crew have any way to deal with monopolies, cartels or collusion involving price fixing, workers rights, unions?  Or is strictly left to the consumers to keep everybody honest with their purchasing choices?

Monopolies and cartels can ONLY exist with govt force. History bears this out. In a free market, they'd collapse quickly.

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What are their views on global free trade, and thus immigration?

The free market should be free at every level. The various schemes that govts come up with like subsidies and tariffs only hurt the citizens of the country and distort the market. Look online for Bastiat's Econoic Sophisms, it's an easy read and he explains in easy language how most of this works. And he did it 150 years ago. If you had a free market, without all the welfare schemes, then the only people who wanted to come here would be people who wanted to work. What's the problem with that?

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Do they think their policies will increase or decrease the wealth gap?

It depends on what you mean by the wealth gap. If you read how money created by the Federal reserve enters the system and benefits one class over the others, then you'll see how govt is the one responsible for that kind of wealth gap. The inflation created by the govt and Federal reserve is a big part of the wealth gap, as it the brunt of it is borne by the people at the bottom of the economic scale, making a giant hurdle to overcome. Govt has rigged the game.

You will always have winners and losers in the game of life. 99% of that is the fault of the person themself. The free market won't guarantee success, only a system where anyone can succeed if they want to.

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I am sure I will have more questions as this thread develops, but I wanted to get these out of the way.

Keep them coming, I can do this all day.

Offline cartpusher

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Re: Von Mises Questions
« Reply #2 on: August 21, 2009, 10:29:22 AM »
Monopolies and cartels can ONLY exist with govt force. History bears this out. In a free market, they'd collapse quickly.

Yes I have seen this argument and evidence that the biggest tycoons, were the ones pushing for regulation, to burden the smaller companies and squash them.  But say a car company gets bigger and bigger, is under no restrictions, and then they start buying out any small competitor, then they expand vertically and buy up steel plants, etc.  Then they control the rise of any competition.  Are you, or rather the Austrians, saying this can't happen in a free market?  That companies wouldn't price fix either without any regulation?


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without all the welfare schemes, then the only people who wanted to come here would be people who wanted to work. What's the problem with that?

I guess the question I am getting at with free markets and immigration, is right now free trade means, companies can manufacture anywhere, and sell anywhere.  But the workforce is not able to make the same moves.  There are way more barriers on immigrants than companies.  A company can basically trap a workforce in some third world nation.  How can it be free market, without free movement of labor?  And thus lead to a stateless society?  I think this is what they are getting at in their texts, but many others touting free markets also seem to be strong nationalists.


As far as wealth gap, just meant if they predict if the poor would get poorer, and the rich get richer, or if things would swing closer together under free market conditions, not really what might be "fair" or not.   I have read about the redistribution due to fiat currency and inflation, so I get that part.  So would the Austrians predict a general reduction in wealth gap, as I defined, if we got off fiat?  Seems to be that is what they are saying.


Offline cartpusher

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Re: Von Mises Questions
« Reply #3 on: August 21, 2009, 11:20:09 AM »
I meant to add that I have also seemingly witnessed the free market leading to reverse competition for lack of a better word.  One company decides to try to eek out some more revenue and raise their prices.... now all of the competitors raise their prices up a little bit, and it cycles upwards. 

We are sold the concept that in free market economies there will be a price battle to provide the best possible service/good for the lowest possible price.    Well being on the business side, what I witness all of the time is the businesses goal is to maximize profit, this means, provide the least amount of service for the highest possible price.  And I also see equipment reps celebrating the rise in the price of raw materials and thus the blender they rep, because, hey the 30% they make of $1300, is bigger than 30% they would have made on a $1000 machine.   So even with a hard currency, wouldn't you still have inflation due to companies following suit in raising prices to make more $ year over year?   or would there not be an expanding money pool anymore to allow them to succeed with that?

Thanks again for all your thoughts on these questions.

Offline evilphish

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Re: Von Mises Questions
« Reply #4 on: August 21, 2009, 11:44:19 AM »
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But say a car company gets bigger and bigger, is under no restrictions, and then they start buying out any small competitor, then they expand vertically and buy up steel plants, etc.  Then they control the rise of any competition.  Are you, or rather the Austrians, saying this can't happen in a free market?

this can happen in a free market, at least for a while, sustainability would come into question.

good living example is google.  will google still be the top 1-5 years from now?  only the consumers will decide that.

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I meant to add that I have also seemingly witnessed the free market leading to reverse competition for lack of a better word.  One company decides to try to eek out some more revenue and raise their prices.... now all of the competitors raise their prices up a little bit, and it cycles upwards.

yes, pricing structures work both ways,  in a true free market this will happen until a market price is established


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this means, provide the least amount of service for the highest possible price.

my observations have been that companies that do that dont do it for long.  if companies need to improve their margins the prdouct price is only one thing they look at.  do they realy need 50 people on the line or can they do it with 40, they look at other vendors for their materials all of that factors into their margins  the companies that only look into the price of the product are very short sighted. 

Offline cartpusher

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Re: Von Mises Questions
« Reply #5 on: August 21, 2009, 12:04:10 PM »
Under the Austrian School of thought would there be any restrictions on price fixing?  or under free market forces they think it just wouldn't happen or succeed?

Offline chris

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Re: Von Mises Questions
« Reply #6 on: August 21, 2009, 12:07:28 PM »
I meant to add that I have also seemingly witnessed the free market leading to reverse competition for lack of a better word.  One company decides to try to eek out some more revenue and raise their prices.... now all of the competitors raise their prices up a little bit, and it cycles upwards. 

This doesn't happen in a free market, or in common sense, or very often in the real world.

If one competitor raises their prices, then others would stay the same, and sell far more products. This lowers the cost per item (economy of scale) and they'd make more profit. This is why ALL cartels break down without govt intervention. This is why one airline lowers prices and ALL other follow suit.

If you're the lone seller in an area, and you raise your prices, someone else will see the profits to be made, and start selling. If the profits are very high, the new competitor can sell more at a smaller profit and make more money.

Under the Austrian School of thought would there be any restrictions on price fixing?  or under free market forces they think it just wouldn't happen or succeed?

Under a free market there can be no restrictions on price, or it wouldn't be a free market.

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We are sold the concept that in free market economies there will be a price battle to provide the best possible service/good for the lowest possible price.    Well being on the business side, what I witness all of the time is the businesses goal is to maximize profit, this means, provide the least amount of service for the highest possible price.


So how did Walmart beat out all it's competettion to become the largest retailer in the world? Cutting costs and lowering prices. Do you know what the margin is at Walmart? Single digits.

Of course maximizing profits is the goal, it has to be. But there are few industries that you can charge exorbitant prices without a competetitor whipping your ass.

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So even with a hard currency, wouldn't you still have inflation due to companies following suit in raising prices to make more $ year over year?   or would there not be an expanding money pool anymore to allow them to succeed with that?


The common misconception is that rising prices is inflation. It's not. The reason they changed the common usage was to hide what inflation really is. An inflation in the money supply. If the supply of goods is equal, more money (monetary inflation) chasing the same amount of goods will result in higher prices. What you're really seeing is the lowering of value of each money unit compared to whatever you're comparing it against, like a pound of wheat.

If half the countries wheat crop fails, wheat will go up becasue of higher scarcity. But that's not inflation, it's higher prices. If grass fed beef goes into fashion overnight, then prices will go up because demand is much higher than supply. In a few years, producers will produce more to achieve equal demand, and prices will go back down.

Those higher prices are a good thing. They're the signal to a free market that more is needed. Entrepeneurs will see that signal, and move in to produce. Eventually, the profit bottoms out as many competitors come in and all fight for market share with lowest prices. Each will try to achieve higher profits at the same price by innovating and lowering costs. If all the competetors do the same, then they'll cut prices to gain market share and once more profits botom out a lower price.

A snippet from Gary North

A cartel is an association of producers that jointly establishes certain output criteria for membership. The goal of the cartel is for all of its members to obtain net revenues above what would be possible if there were open competition, especially price competition. Members restrict output in order to gain high revenues per unit sold. The cartel's members raise their prices.

A cartel faces competition from members who cheat and from non-members who enter the market. This is why cartels that do not obtain protection from the State in restricting entry into a market eventually break down. Without State intervention, newcomers attract consumers by offering lower prices. Also, some cartel members cheat by secretly increasing their output, lowering prices, or both. The cartels' other members must then cut prices to retain customers. The cartel breaks down.

Whenever you find a cartel that has existed for several decades, begin a search for State intervention: civil sanctions placed on non-members who seek to enter the market through price competition.


Hare of Caerbannog

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Re: Von Mises Questions
« Reply #7 on: August 21, 2009, 12:42:18 PM »
If you like lectures or audio files, Thomas DiLorenzo did a series called Liberty and American Civilization. Included in that series was two lectures, one titled "Protectionist Origins of Antitrust" and the other is "The Myth of Natural Monopoly"

They are on audio or video file.
If my link works, they are free on this page about half way down

http://mises.org/media.aspx?action=search&q=Liberty%20and%20american%20civilization

If this link doesn't work, let me know and I'll try it a different way.

DiLorenzo explains in a very clear documented fashion that government causes monopolies, not the market.


modified for spelling

Offline cartpusher

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Re: Von Mises Questions
« Reply #8 on: August 21, 2009, 01:42:00 PM »
HofC - I will check this video out tonight.

Chris - To clarify, the price fixnig I was talking about was not say the Gov. setting a milk price, but if all the car manufactures get together and say, hey we all agree to raise prices by 20% this year, and keep that agreement secret or blame it on something etc., essentially a cartel.  Is this OK with the Austrians, and would it work.  I know you keep saying it can't work without the gov., but why or how would it fail?

As far as your other comment that a company would not raise prices based on a competitor having a higher price.  I have to disagree.  You don't bid for the cheapest you can do something for, you bid as high as you can, while trying still trying to sneak under their price.  If the competition has raised their rates, you know you can raise yours.  You would, in a business sense, be foolish to leave money on the table. so to speak.    But as I write and think through this, the responsible, educated consumer could keep pushing back, which I do from time to time, when collecting bids.  And keep going back and say hey, so and so is getting me this price, can you do better? and round and round till you hit that bottom price.   This however tends to be viewed as impolite in our business, and often can ruin a business relationship, that you made need in the future, so we use it sparingly.

Also Chris, or anyone I guess - What about the immigration question I posed earlier?  Would free market policy also mean complete freedom of movement for the labor force, regardless of national borders, rather than just companies and goods being able to flow across them?

Offline chris

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Re: Von Mises Questions
« Reply #9 on: August 21, 2009, 02:46:23 PM »
Chris - To clarify, the price fixnig I was talking about was not say the Gov. setting a milk price, but if all the car manufactures get together and say, hey we all agree to raise prices by 20% this year, and keep that agreement secret or blame it on something etc., essentially a cartel.  Is this OK with the Austrians, and would it work.  I know you keep saying it can't work without the gov., but why or how would it fail?


Austrians have no problem with price fixing, since it doesn't work long term. Just as i would have no problem with you kicking a concrete block with slippers on. It's a bad idea and the outcome is totally predictable, but hey, it's a free country.

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As far as your other comment that a company would not raise prices based on a competitor having a higher price.  I have to disagree.  You don't bid for the cheapest you can do something for, you bid as high as you can, while trying still trying to sneak under their price.  If the competition has raised their rates, you know you can raise yours.  You would, in a business sense, be foolish to leave money on the table. so to speak.

If someone finds a price to high, they won't buy it. Business owners know this. If consumers can find a better price somewhere else, the consumer will go elsewhere. Business owners know this as well. No owner wants to leave money on the table, but they also won't price themselves out of the market. Why have so many brick and mortar retailers lost out in the past decade? They couldn't compete on price with online retailers.

This is downward price pressure. You see it everywhere around you, all the time. In a free market system, it would be across the board.

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Also Chris, or anyone I guess - What about the immigration question I posed earlier?  Would free market policy also mean complete freedom of movement for the labor force, regardless of national borders, rather than just companies and goods being able to flow across them?

There's lots of views on that one. As an anarchist, my views wouldn't properly represent most libertarians, or the neo-cons posing as libertarians.  ;)

Offline cartpusher

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Re: Von Mises Questions
« Reply #10 on: August 22, 2009, 06:53:15 PM »
OK - so this is where i am at after our discussions so far.  There are still a couple major holes for me.  And the Austrians seem very utopian because of these.

First - This is a system with allegedly no regulation, you can price fix and whatever.... but there is a major rule, the rule that you can't have rules. And they are big on property rights.   Who, in a free society, free market democracy, would enforce people not being able to collude, and pass some laws and regulations if they wished to do so.  People could, and I am not being sarcastic, form a nation, write a constitution, decide to send representatives, and push those representatives to make socialist reforms.  How would you ever prevent this in a free society. You could advocate against it, but not prevent.  So to me the socialists, rather than the demon of free market, are really just one possible conclusion of the free market, if that makes sense.  Maybe this is covered in The Rise and Fall of Societies, i have only finished part of it.  This doesn't make me think we shouldn't pursue free markets, but the thought that they would fix everything or stay in some utopian static state, doesn't jive for me.  And maybe the Austrians don't have illusions about this, but from what I have seen, they seem to ignore this.

Secondly- For the free market system to function, you would have to have a portion of the population, accept their inability to acquire the goods to survive, and do so, peaceful correct? (unless there is great abundance) Are people going to peacefully starve and say well... it is just a function of the market.

Hare of Caerbannog

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Re: Von Mises Questions
« Reply #11 on: August 22, 2009, 07:22:38 PM »
cartpusher

Every one of your concerns that you have articulated here have been thoroughly covered in a number of well known publications by dozens of authors.
Murray Rothbard covers each of these issues carefully and completely  in "For A New Liberty The Libertarian Manifesto" which is available free as a PDF file or a free MP3 file read by Floy Lilly and available at Mises.org.
Rothbard again covers each and every concern in his "The Ethics of Liberty" also free as a PDF or read by Hans-Hermann Hoppe in MP3.
This and way more is all free at Mises.org.
Little one or two paragraph answers can never compare with a careful examination of the facts by a scholar, as Rothbard was and did.
If for some reason you don't want to deal with Mises.org (I find it hard to navigate) try Free Domain Radio and there you can download free books or MP3s. I would suggest "Everyday Anarchy" by Stefan Molyneux.

Rothbard downloads at Mises.org
http://mises.org/media.aspx?action=author&ID=299

Free Domain Radio
http://www.freedomainradio.com/free/


Offline chris

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Re: Von Mises Questions
« Reply #12 on: August 22, 2009, 09:48:50 PM »
Molyneux is okay if you can stand the 800 lb atheist gorilla in the room, and his constant whining about his FOO. Rothbard is better.

Offline cartpusher

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Re: Von Mises Questions
« Reply #13 on: August 23, 2009, 04:48:01 AM »
HofC - sounds good, thanks.

Hare of Caerbannog

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Re: Von Mises Questions
« Reply #14 on: August 23, 2009, 07:54:49 AM »
Molyneux is okay if you can stand the 800 lb atheist gorilla in the room, and his constant whining about his FOO. Rothbard is better.

I agree 100%.
He's great when he's talking about liberty/government/etc. But when he goes off on one of his Hate God rants he's really pathetic. There's a big difference between someone like Penn Jellett who's and athiest and someone like Molyneux who is an actual God Hater.

Offline TexDaddy

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Re: Von Mises Questions
« Reply #15 on: August 23, 2009, 08:05:12 AM »
I agree 100%.
...like Molyneux who is an actual God Hater.
I don't think you can be an atheist and hate God. This would imply you hate something that exists. Atheist believe God does not exist. I have not read this author, but some do hate some of the effects religion does have on any society. Religion is used for good as well as evil. Good economic theory neither requires nor excludes God.

Offline chris

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Re: Von Mises Questions
« Reply #16 on: August 23, 2009, 08:11:31 AM »
Good economic theory neither requires nor excludes God.

Most certainly.

Hare of Caerbannog

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Re: Von Mises Questions
« Reply #17 on: August 23, 2009, 09:33:08 PM »
Just to give Stef a fair shake, here's how smart he can be when he sets aside his religious prejudices:
True News 50: Ten Lost Years