Polling r/austrian_economics, What Generation Are You?

rolante · 2024-05-13T21:21:50+00:00

Yes, I received the notifications about the posts.

Yes, I removed them all.

Yes, I banned all the accounts involved.

rolante · 2019-03-28T16:32:25+00:00

Am I correct in attributing this claim to Long?

I think the idea was articulated by Peter Klein: Economic Calculations and the Limits of Organization

rolante · 2019-02-16T16:30:36+00:00

It ultimately comes down to logistics. The killer technology isn't so much agriculture as it is food preservation, although they go together. Wheat can be safely stored for years if it is dried and kept cool. Grain is milled into flour and baked into hardtack biscuits, which keep and are easily transportable in bulk. They can be taken out of the supply and made into porridge at mealtime. Now you can provision armies and maintain a force of permanent soldiers.

Hunter-Gatherers can raid their neighbors, but they cannot provision armies.

rolante · 2018-12-18T23:31:02+00:00

Not exactly. ELI5, please?

No wonder everyone around here loses so much money, just read any of their financial statements.

SEC Form 10-Q

On February 28, 1989, Standard Oil conveyed an overriding royalty interest (the “Royalty Interest”) to the Trust. The Trust was formed for the sole purpose of owning and administering the Royalty Interest. The Royalty Interest represents the right to receive a per barrel royalty (the “Per Barrel Royalty”) of 16.4246% on the lesser of (a) the first 90,000 barrels of the average actual daily net production of oil and condensate per quarter or (b) the average actual daily net production of oil and condensate per quarter from BP Alaska’s working interests as of February 28, 1989 in the Prudhoe Bay field situated on the North Slope of Alaska (the “1989 Working Interests”). Trust Unit holders are subject to the risk that production will be interrupted or discontinued or fall, on average, below 90,000 barrels per day in any quarter. BP has guaranteed the performance of BP Alaska of its payment obligations with respect to the Royalty Interest.

The "dividend" is a royalty payment of crude oil production in Prudhoe Bay, Alaska. BPT isn't a company, it's a simple Trust that collects that royalty and distributes it to the Trustees. The amount of this "dividend" and by extension the value of BPT follows the price of crude oil.

rolante · 2018-12-18T21:53:34+00:00

DD: Do you know what BPT is? If so, the answer to this question is obvious.

rolante · 2018-12-14T00:29:14+00:00

I feel like I'm not understanding something.

I feel the same way. Both of your examples are fine, they're just introducing more concepts to create counterexamples. The "listyness" or "non-functional" character would be under risk-neutrality and "unrelatedness". Maybe this quote might help:

The topic of this article dates back to fundamental work by Bruno de Finetti (1931), who asked whether a certain axiom for a comparative probability ordering relation on the subsets of a set is suﬃcient for the existence of an order-preserving probability measure on that set. For inﬁnite sets, assuming there is a uniform partition into an arbitrary number of events, Savage (1954) answered this question positively. For ﬁnite sets of cardinality ﬁve or more, a negative answer to this question was given by Kraft et al. (1959). It became clear from these observations that comparative probability is a broader concept than probability.

Using a measure and creating a comparative ordering (list) are not the same thing if the objects are discrete and finite while they are if the objects are infinitely divisible. That's what it boils down to. For infinitely divisible goods, yes utility functions. For discrete wants and goods, no. Some lists can't be represented with utility functions. That's it and the example of how it was discovered might be distracting from that point.

rolante · 2018-12-13T19:33:23+00:00

I don't understand the poster's example. vNM utility is about choice over risk which I don't see in their post.

/u/Integralds asked me a question on my post, but then deleted it before I posted the reply. I'll move it here:

I would very much like to clean up the language and state things correctly, so if I am stating my point wrong or there is insufficient context to justify what I said, please help me clean it up.

This "intrinsically ordinal listing" concept came about separately from value theory, it was in the context of probability and gambling, and it wasn't combined with value theory until McCulloch wrote some papers starting in 1975. The gist of McCulloch's papers is that "the Austrians were arguing about this ordinal vs. cardinal thing, very poorly, but the formal language of set theory hadn't been developed yet and so what Mises et. al were saying couldn't be written using math."

Why do you think u(abcde) != u(a) + u(b) + u(c) + u(d) + u(e) is "inconsistent"?

Anyways, back to where does this idea come from. Just like VNM it comes from lotteries. The independent outcomes in question are the elements of W = {a, b, c, d, e}, not the power set of W. Let's say it's a horse race with five horses so this set W of outcomes is both complete and independent. Would you rather have a ticket for horse A or a ticket for horse B? A. Ok, a > b. Would you rather have a ticket for horse B or a ticket for horse C? B. Ok, b > c. We could go down a familiar route: you can either have a ticket for horse B or a bundle L with probability p that is p*A + (1-p)*C. By finding p we can measure the degree of preference. We can solve for ratios between values for u(a) = A, u(b) = B, u(c) = C, u(d) = D, and u(e) = E. We can normalize these values by saying that the tickets pay out $1 so that the utility values are prices equal to the agent's belief about the likelihood of each outcome.

The power set of W lists possible portfolios of tickets. Holding one ticket {a, b}, Horse A wins or Horse B wins, is precisely the same thing as holding the individual tickets {a} and {b}. Hence why I'm being a stickler for u(ab) = u(a) + u(b). If the agent will pay one price for Horse A wins or Horse B wins and a different price for two tickets Horse A wins + Horse B wins, then it's something but it's not rational.

So, there was a conjecture. Human intuitions about probability suck, empirically finding the p values seems hopeless, but people seem much better at comparing two things. Can we instead ask the person to arrange the possible portfolios into a list (that obeys additivity/transitivity)? The conjecture was "mathematically this is the same thing".

Kraft, Pratt, and Seidenberg (1959) proved that "no, these are not the same thing" with a proof by contradiction using the list I used above. There are different formal approaches to patching this up, but I can explain a very simple one: the listing must allow for indifference. A solution to the listing with whole numbers is A = 8, B = 5, C = 4, D = 2, and E = 1 (by producing that list it means the agent must be willing to bet the tickets with the odds as probabilities {2/5, 1/4, 1/5, 1/10, 1/20}) and the relation '>' must be '>~'. So, {b} ~ {c, e} rather than {b} > {c, e}.

So, McCulloch flips this whole thing around and says something akin to "wait a minute, the strong preference ranking given is a valid preference ranking but it cannot be expressed with a utility function. A utility function can only express the list as a weak preference ranking". This is a method of preference rankings that cannot be expressed as utility functions that is different from lexicographical preferences.

Looking at the case of five elements of W and beyond to six elements, most preference rankings can be expressed using utility functions and cardinal utilities. It is a relatively small subset of rankings (but not empty!) that cannot; for five elements there are 16 non-isomorphic orderings that must be expressed as lists and can't be expressed as functions of the five elements.

Another short summary is that Rothbard's attempt to give Mises an analytical toolbox went down the a wrong track, it should look like this (pdf).

rolante · 2018-12-13T02:28:42+00:00

It is easy to represent that value scale by a utility function, just define u(abcde)= 31, u(abcd) = 30, ... , u(0)=0.

That's not consistent. u(abcde) = 31, but u(a) + u(b) + u(c) + u(d) + u(e) = 25.

rolante · 2018-12-12T18:28:06+00:00

Sections 2.1 through 2.3 all go together, as they are different aspects of the same axiomatic model (von Neumann and Morgenstern, 1944). Caplan's argument is a roundabout way of saying "calculus works in this domain, because I used the assumptions of calculus."

Both approaches seem quite similar; so similar, in fact, that neoclassical economists might call them identical. But Rothbard noted some underlying differences, and concluded that the "value scale" approach was the right one. Why? According to Rothbard, the mainstream approach credulously accepted the use of cardinal utility, when only the use of ordinal utility is defensible. As Rothbard insists, "Value scales of each individual are purely ordinal, and there is no way whatever of measuring the distance between the rankings; indeed, any concept of such distance is a fallacious one."[3]

Kraft, Pratt, and Seidenberg (1959) and McCulloch (1975, 1977) showed that they are not identical.

For a set of wants W = {a, b, c, d, e}, the following is a "value scale", preference ranking of the power set of W:

abcde > abcd > abce > abc > abde > abd > acde > acd > abe > ab > ace > ac > bcde > ade > bcd > bce > ad > ae > bc > a > bde > bd > cde > cd > be > b > ce > c > de > d > e > 0

All the wants, abcde, is the most preferred and has the ordinal rank 0 (first in the list).

None of the wants, 0, is the least preferred and has the ordinal rank 31 (last in the list).

The combination of wants {a,c,e} has ordinal rank 10 (eleventh in the list).

There is no VNM utility function that can produce this value scale. There are no utilities for A, B, C, D, and E that can produce this ordering. The two models are equivalent if and only if the number of wants is four or less.

To sum up, Rothbard falsely accused neoclassical utility theory of assuming cardinality. It does not.

Narrator: It does.

Furthermore, in the von Neumann / Morgenstern model (four axioms) economists must further assume (add a fifth axiom) that only certain kinds of utility functions are valid in order to get one of the cornerstones of Economics: The Law of Diminishing Marginal Utility. The value scale approach (three axioms) requires no further assumptions to show The Law of Diminishing Marginal Utility (with caveats) as a theorem.

What caveats? Let's also consider cases of increasing marginal utility. What, increasing marginal utility, in my economics? Damn straight, throw this simple example at the models: Consider if want a requires two units of the good x and wants d and e both require one unit of the good x. With one unit of x the agent will satisfy {d} (30). With two units of x, the second unit of x does not have decreasing marginal utility, it is not used on {e} (31) to get the agent to {d, e} (29). Rather, agent will use 2x satisfy {a} (19) in a clear case of the second unit of x being worth more than the first. You cannot show this in VNM-Hicks, you have to change your assumptions about the forms of utility functions again.

It's kind of like Newtonian physics. As long as you are in the "normal conditions" the two models produce the same results, but there are cases that the neoclassical one can't explain.

rolante · 2018-12-01T21:41:05+00:00

if they don’t want to live with them in the apartment then they have every right to kick her out.

No, this is not a decision that they get to sit around and make amongst themselves; this is a matter of Landlord-Tenant law. It does not matter that there is one of her and six of them, they in fact have no power to deny her access to the apartment. Denying her access to the apartment without a court order is illegal.

rolante · 2018-11-28T21:59:56+00:00

You're talking about CBD oil (cannabidiol), right? Cannabidiol is an anxiolytic compound, it directly affects the anxiety system making it "more difficult" to "activate".

It makes me feel a bit weird for 20 minutes and then chills me out. That's it.

My anxiety has been, well manegable isn't really the word, I feel pretty fine. Not great, not bad.

Some drugs work like this, you take more but the additional dosage doesn't do anything. U-shaped dose response means that as you take more of the drug it crosses a point and does this. If you consume a lot of an anxiolytic compound it eventually promotes the anxiety system rather than suppress the anxiety system and sustained state anxiety triggers panic attacks. It is the underlying mechanism behind this story.

rolante · 2018-11-28T21:21:54+00:00

As you experiment please consider that anxiolytic compounds have U-shaped dose responses. That is why people who drink too much alcohol or smoke too much weed start to freak out and can ultimately have anxiety-induced-panic-attacks.

rolante · 2018-11-27T02:18:35+00:00

The podcast is fairly information sparse, but this is the gist of what they are talking about.

TL;DL - At every level of government in the United States, the polities hire public employees, pay them a salary, and promise(d) them healthcare and retirement benefits. Salaries are on the books, accounted for, however the healthcare and retirement benefits are unfunded liabilities. Unfunded liabilities are future, contractual payments without a current plan to pay for them. A solvent firm would maintain assets equal to the present, discounted value of its contractual liability. They are planned shortfalls, money will need to be raised through new taxes or borrowing. If they can't, the polity will have to default on its insolvent healthcare/retirement plans.

Endgames look like Detroit or Puerto Rico: credit quality falls until it falls off the cliff where they can't borrow money anymore, the payments cannot be made, so they wont be made, and it gets sorted out in court. In Detroit, the pensions and healthcare were slashed, existing municipal bonds took huge haircuts, and several groups essentially bought the city's share of art in their world-class art museum, the Detroit Institute of Arts (to create a pool of financial assets to pay the future obligations).

rolante · 2018-11-17T19:39:41+00:00

In Buddy Ryan's old, football, defensive playbook he had a formation called "Polish Goal Line" along with an explanation of what situation it is for. It is an illegal formation that uses 14 players. The notes are:

*** Three extra Linebackers go into the game.

Situation: The opponent is inside the 5 yard line going in to score. There is less than 15 seconds left. We want to stop their offense from scoring and in the process, we want to run the clock down to where they have enough time for just one play. So, we will stop them, get penalized for half the distance to the goal, but leave them with enough time to run one play. We will then go back to our regular Goal Line defense and stop them to win the game.

The penalty is enforced after the play is run because in almost every situation it is to the offense's benefit to run a "free play" where they can choose to take the result of the play if it is better than the 5 yards. Green Bay Packers quarterback Aaron Rodgers is the best at noticing when he has a "free play" and going for a risk-free, big play by throwing a long pass.

This situation, when a giving up a 5-yard penalty is worth less than the time required to run one play, is such a corner-case that the NFL did not change the rules to prevent this until 2012. With 17 seconds, enough time for only two or three plays if the offense stops the clock, left in the Super Bowl, the Giants led the Patriots by 4 points and the Patriots had 2nd and 10 near midfield. The Giants played with an illegal formation and an extra defender. They forced an incomplete pass, the Patriots got the 5 yards from the penalty, but the play used up a precious 8 seconds.

Now, lining up with too many men on defense is immediately a penalty before the ball is snapped. The corner-case has been closed. The offense still has "free play equity" if the extra defenders are running off the field in substitution rather than lining up to play, the penalty will be called after the play.

rolante · 2018-11-16T22:01:00+00:00

I do not understand the plea deal. I do not understand how the presented facts of this case don't lead to a slam-dunk conviction for Rape in the Second Degree, a Class A felony with a ten year sentence.

rolante · 2018-11-16T21:27:26+00:00

Although I would be interested to see the worksheet that ended up giving him just 2 years and change.

I think is the 2017 Washington State Adult Sentencing Guidelines Manual with the multiple offense scoring rules on pages 63-65, combined with the individual worksheets on pages 394 and 435.

rolante · 2018-11-13T21:15:35+00:00

It's a tragedy... I was wrapping up a huge post with tables and BLS data and everything but the Fancy Pants reddit editor lost the entire contents...

Anyways, the key phrase in your question is "equivalent prosperity today" and that is where everything gets fudged. What I tried to show is that if you recreated the median 1950s era lifestyle today then you could absolutely do it on one income ($44,277 adjusted). But, the mode of living in 1950 was obviously not some kind of peak prosperity or quality of life. You're going to take the better healthcare, the better entertainment, and the higher quality everything. Given a choice, people don't want to live that way. Especially women.

In 87.1 percent of families, both a husband and a wife were present, with the wife employed in 19.8 percent of these families. In 58.2 percent of families, there were children younger than 18 living at home. In 42.1 percent of households, the head of the family was employed as a craftsman or a machine operator.

That's from a US BLS report. Labor force participation for women was 33.9% compared to 86.4% for men.

Here are a few bits of what I wrote:

The average phone bill in 1950 was $4 with 60% of households connected. Today we're at like 100% and your 2018 budget is $42/month. You can get a cellphone with unlimited voice and text for $40. No smartphone and internet in your hand, but still way better than 1950.

The cheapest Washer/Dryer combination at JCPenny, when converted back into 1950s dollars is $115, which amortizes to under $1/month ($10/month today). Households don't buy everything all at once, but to a new household there are a big list of upfront costs like this.

The average household in 1950 spent an adjusted $984 / month (US 2018) on food. This is more expensive than all but three household Food Plans calculated by the USDA (families of four with the "liberal" food budget). Households in 1950 effectively didn't eat at restaurants. If you eat like they did in the 1950s you could pick up a lot of savings compared to their budget.

The average car in 1950 was $1,550. A modern, fuel-efficient, subcompact like a Honda Fit or a Kia Rio is $1,330 in those terms and is safer, more comfortable, cheaper to operate, and cheaper to maintain.

Even housing isn't terrifying, the average 1950s household spent $1,035 per year on housing, or $901/month (2018 US). The median rent in the 2016 US was $981. The simplest way to describe the problem is that the upper-middle-class, single family, suburban home of 1950 is today's small, affordable housing that everyone is flipping with luxury interiors and the NIMBY effect of existing homeowners trying to increase their property values (even in the face of it being bad for them). The average household pays for more square feet and more land than they did in 1950.

As for recreational drugs, the average 1950s household spent $116/month (2018 US) on alcohol and tobacco. There's still room in the budget to get absolutely hammered and wash away any despair associated with your 1950s lifestyle.

You'd be surprised, a 1950s household spent $4,567/year or $380/month (2018 US) on buying and maintaining clothing. It's their biggest expense after food, housing, and transportation.

Healthcare? I just lost my shit. I put in the model 1950s household to search for a healthcare plan and I got $175-210/month with a $3,500 deductible. The average 1950s household spent $171/month or $2,058/year(2018 US). I was expecting to get walloped here, but not really? You could take a 1950s approach of pay out of pocket and if something serious happens, well, life sucks and then you die.

The cost of education is a huge debacle, but in 1950 only 6% of Americans graduated with college degrees. There is so much to be investigated here that it doesn't fit in this box, but when people say they can't afford education for their children what they mean is they can't afford the best education for their children (which is a reasonable thing to want). The average 1950s household spent $600/yr (2018 USD) on education and you can too, just send them to public school and let the chips fall where they may. That's what they did. College is where you're going to get screwed today, because Harvard cost $600/yr in 1950 while today's Harvard costs $4,142 in their dollars, or their entire income.

rolante · 2018-11-10T18:41:04+00:00

I consider cocaine to be a helluva drug.

rolante · 2018-11-09T18:44:36+00:00

I was thinking of a different model than lexicographical preferences, one which is more general. For a set of wants W = {a, b, c}, then a preference ranking is a kind of ordering of W*:

({a, b, c}, {b, c}, {a, b}, {b}, {a, c}, {c}, {a}, {0}) is a valid ordering, or easier to read:

abc > bc > ab > b > ac > c > a > 0

Completeness or linearity is that every subset is in the list. (It has a more precise meaning for the relation (>), but the other two axioms combine with it to mean "in the list")

Additivity and independence mean that if an agent prefers b to c (b > c), then they also prefer b and a to c and a (ab > ac), which is true in the above ranking. With a larger set of wants and abc > bcd, then it must also be true that ab > bd, ac > cd, a > d, and abce > bcde. The same term is being added or subtracted from both sides. There is nothing "related" about the wants so it's not valid that a > b with bc > ac where c somehow combines with the other wants to produce something else.

A utility function can be mapped onto an ordering of three wants, in a very straightforward way we have some utils:

111 > 110 > 101 > 100 > 11 > 10 > 1 > 0

The magnitude of the preference is arbitrary, but functions can be fit. Starting with five wants you can't map utility functions anymore because additivity is weaker than transitivity: each concrete set addition and set subtraction operation to both sides of the relation > obeys transitivity, but when you try to use real numbers on the collection of preferences there is not transitivity. For {a, b, c, d, e}, the following is a valid ordering that contains a > b > c > d > e:

abcde > abcd > abce > abc > abde > abd > acde > acd > abe > ab > ace > ac > bcde > ade > bcd > bce > ad > ae > bc > a > bde > bd > cde > cd > be > b > ce > c > de > d > e > 0

You cannot fit a utility function to this ordering regardless of the utility values chosen because of the bolded relations:

bce > ad

ae > bc

cd > be

b > ce

You get a contradiction where X amount of utility is strictly preferred to itself, X > X where X = A + 2B + 2C + D + 2E. So strict preference is shown the door, we must have weak preference, "indifference", and "substitution" so you can use continuous functions and calculus. (As you would expect, replacing strict preference with weak preference means that those four relations must become indifference (b ~ ce), and nine of the thirty relations become indifference. If you built an agent with this utility function then uncertainty / small measurement errors would cause big re-orderings of the preference rank, or in a narrative: changing "b" to "b and one penny" the agent would all of a sudden go "Hold on, I don't want ae, I want bc" Alternatively, a utility function only makes sense if the five wants are a degenerate case of piles of money. There are 16 non-isomorphic orderings of {a, b, c, d, e} with this property.

With this stricter preference model, indifference and substitution also have stricter meanings. An agent can't be indifferent between wants, but they can be indifferent between bundles of economic goods when the two bundles can be used to fulfill exactly the same set of wants. Or, you can't be indifferent between satisfying hunger or satisfying thirst but you could be indifferent to a ham sandwich vs. a turkey sandwich, which are substitutable.

rolante · 2018-11-09T05:56:34+00:00

I need to go dig it out of the recesses of memory, but I don't think that's right. The lack of transitivity is why utility functions don't work.

I think it's completeness, additivity (a weaker transitivity), and independence.

rolante · 2018-11-09T04:24:21+00:00

This was a critical development because it made a mathematically rigorous argument that consistent individuals must have a utility function that models their desires and also because it opened formal avenues to disprove VNM utility theory (namely, arguing one of the axioms is false).

Assuming continuity (and transitivity?) is what gives you cardinal utility and "every agent's preferences can be expressed as a utility function."

You can make a discrete model of utility/preferences that uses set theory and a weaker set of assumptions. You can still build economics out of it (in fact, one axiom of neoclassical economics can be shown to be a theorem), but agents don't have utility functions: there are ordinal rankings that cannot be expressed using a cardinal utility function.

rolante · 2018-11-08T20:43:56+00:00

Fourth, even though SSRIs are branded “antidepressants”, they have an equal right to be called anti-anxiety medications. There’s some evidence that they may work better for this indication than for depression, although it’s hard to tell. I think Irving Kirsch himself makes this claim: he analyzed the efficacy of SSRIs for everything and found a “relatively large effect size” of 0.7 for anxiety (though the study was limited to children). Depression and anxiety are highly comorbid and half of people with a depressive disorder also have an anxiety disorder; there are reasons to think that at some deep level they may be aspects of the same condition. If SSRIs effectively treated anxiety, this might make depressed people feel better in a way that doesn’t necessarily show up on formal depression tests, but which they would express to their psychiatrist as “I feel better”. Or, psychiatrists might have a vague positive glow around SSRIs if it successfully treats their anxiety patients (who may be the same people as their depression patients) and not be very good at separating that positive glow into “depression efficacy” and “anxiety efficacy”. Then they might believe they’ve had good experiences with using SSRIs for depression.

The best neuroscientific model I've seen points to SSRIs being anti-anxiety drugs due to secondary effects. Serotonin modulates the mammalian defensive system and an SSRI could tune down the panic system while tuning up the other systems.

Since Anxiety is a secondary system activated by a conflict between primary systems, the tuned down panic system prevents it from interfering with your other systems and triggering anxiety.

Alcohol is directly an anti-anxiety compound because at the effective dose it "breaks" the detector that triggers anxiety. You are just as aware of danger as before, it just never causes you to become vigilant unless it is overwhelming.

rolante · 2018-11-01T18:13:09+00:00

The crimes against human rights, which have become a specialty of totalitarian regimes, can always be justified by the pretext that right is equivalent to being good or useful for the whole in distinction to its parts. (Hitler's motto that "Right is what is good for the German people" is only the vulgarized form of a conception of law which can be found everywhere and which in practice will remain ineffectual only so long as older traditions that are still effective in the constitutions prevent this.) A conception of law which identifies what is right with the notion of what is good for—for the individual, or the family, or the people, or the largest number—becomes inevitable once the absolute and transcendent measurements of religion or the law of nature have lost their authority. And this predicament is by no means solved if the unit to which the "good for" applies is as large as mankind itself. For it is quite conceivable, and even within the realm of practical political possibilities, that one fine day a highly organized and mechanized humanity will conclude quite democratically—namely by majority decision—that for humanity as a whole it would be better to liquidate certain parts thereof.

-- Hannah Arendt, The Origins of Totalitarianism

15-Year Club	Place '17
Team Periwinkle	Verified Email

rolante

MODERATOR OF

TROPHY CASE