The Just Distribution of Income and Wealth

by Mario Rizzo

There has been a lot of talk this year, and especially during the holiday season, about the inequities in the distribution of wealth and income. But most of what has been written is quite simple-minded, if the writers mean to convey something more than their own personal preferences for a different distribution.

I have no objection to passive expressions of preference. But I do have objection when people attempt to bolster their case for intervention by the state under the banner of distributive justice, morality, religion or whatever is supposed to evoke some objectivity. Continue reading

Of Interest to All Market Process Economists

by Gene Callahan

Dan Klein responds, on the meaning of economic coordination, mostly to Israel Kirzner, and secondarily to several others, including me. Here is Klein’s abstract:

The Fall 2010 issue of the Journal of Private Enterprise featured a complicated set of papers. The lead article was a long paper by Jason Briggeman and me, on Israel Kirzner’s work on coordination and discovery. The thrust of our paper was an affirmation of Kirzner’s central claims, but with two alterations. First, we propose that the coordination that figures into the central issues ought to be understood as what we call concatenate coordination. Second, the central statements at issue ought not be asserted as holding 100 percent of the time, but rather should be by-and-large statements, making for a strong presumption, not a categorical result. Israel Kirzner then replied to our paper. The pair of papers was then the object of commentary by Peter Boettke and Daniel D’Amico, Steven Horwitz, Gene Callahan, and Martin Ricketts. Here, I respond to Kirzner, and, in an appendix, more briefly to the others.

Phil the Economic Literacy Turtle

by Gene Callahan

My family recently acquired “Phil the High-Yield Turtle.” This came about because a friend of my wife, whom we will call Bill and who happens to trade high-yield bonds, saw Phil being sold on the street, presented in rather bad circumstances by his owner, and felt sorry for him. Bill took Phil and kept him (in much better conditions) in his office for several months before realizing that Phil was running out of space and needed a new home — at which point my wife volunteered to adopt him and… now we are Phil’s caretakers!

Well, Bill’s motives were certainly admirable: he wanted to help an animal he thought was in distress. Unfortunately, Bil”s attempt is likely to have the opposite effect to that he desired, since, by newly entering the market for turtles, Bill shifted the demand curve to the right. And that will increase the quantity supplied. In short, even if Bill had been moved enough and generous enough to buy every single abused turtle on the market, he simply would motivate the sellers to immediately replenish the supply. (Do you recall Milo Minderbinder trying to corner the Egyptian cotton market in Catch-22?)

In fact, the horrible thought came to me that this market could be largely driven by mercy purchases. And furthermore, such purchasers give the vendors a motive to make the conditions in which the animals they are selling are kept as bad-looking as possible!

Ludwig von Mises and His Grand Tautology

by Mario Rizzo

There is a tradition of thought in economics that views the rationality of individual actions as non-falsifiable. There are variations in how this tradition might be justified. These do not concern us to any significant degree here.  For concreteness I shall examine the position of Ludwig von Mises (excerpted below) because of the purity and clarity of his argument.  

Economists want to abstract from any particular theory of human motivation. In particular, in the early years of the twentieth century, they were keen to distinguish between the subjective theory of value and hedonistic (pleasure-pain) theories associated with Bentham and later W.S. Jevons and F. Y. Edgeworth. So they wanted to say that people choose according to whatever standard they might consider important or on whatever deep basis psychologists might discover. This is not the concern of economists (or so Mises and others argued).

Therefore, when economists speak of people seeking to increase their well-being they mean that they do so in terms of whatever they consider important – pleasure, moral values, long-term interests, short-term fancy, and so forth. Economists also did not want to take a position on how carefully individuals choose what goals they want to attain. Thus, an individual increases his well-being, as he sees it, when he drinks away his paycheck as when he spends it on supporting his family.   Continue reading