Rejected Hayek List post

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

A Hayek list is not my ususal watering hole.  But I was invited to
participate in a seminar on Steve Keen's book.   Two of my three posts
were rejected without explanation.  Here is one of them:

>From Amazon.com:

Debunking Economics: The Naked Emperor of the Social Sciences
by Steve Keen (Paperback - March 2002)
Avg. Customer Rating:  5 out of 5 stars
Limited Availability
Editions: Hardcover | Paperback
New: $49.99
Used: $65.00

Faulty mathematics or not, this is real life market data - supply/demand
pricing
at work.  Used copies of Steve's book is selling at a 30% premium over
the list
price for new copies.
For a Heyekian list, this should be recognized as individual market
participant
vindication. Hayek maintains that only free markets (assuming they can
exist),
with individuals making disaggregatd decisions in their narrow
self-interest,
can generate the information necessary to intelligently coordinate
social
behavior. Freedom of individual choice without "distortive" regard for
social
impacts is considered as necessary input for an efficient economy that
would
lead to prosperity. Hayek argues that free market prices are the true
expression
of a rational economy.

For three decades after WWII, reality ran counter to Hayeks' theories.
Even
conceptually, macro-economists began to suggest that with the aid of
computerized macro input/output models, central planning can accomodate
the very
information problem that Hayek had raised. Afterall, if the boundless
comlexities of fluid mechanics in producing a silent-runing submarine
propeller
can be simulated by mathematical models, why not the dynamics of a
planned
economy. Mathematics was challenging ideology in the evaluation of
theories in
economics. Paradoxically, Hayek, who implies scientific determinism in
his
ideological argument for free market, is unsympathetic to the efficacy
of
applying the sophisticated tools of the physical sciences to the social
sciences. So it is rather ironic to see acholarly defense of models on a

Hayekian list.  While central planning is out of fashion on the
government
level, it has been developing under the name of strategic planning on
the
corporate level.

I am not a scholar nor a mathematician.  I have been unable to follow
this
discussion on monoply and its math models.  Yet I have considerable real
life
experience in large enterprise strategy on competition and pricing, as
well as
competition policy on the national level.  I also have considerable
experience
with the use of math models. For example, I have no difficulty
understanding the
math behind the Black-Scholes model pricing of futures, because they
deal with
market implications, not assumptions or predictions.  I am even profited
very
handsomely from paricipation in a "quant shop".  I am of average
intelligence.
And I readily admit that discussions I cannot follow may be simply be
beyond my
mental capacity.   Yet I am generally a fast learner and a have good
grasp of
the overview.  But the issues of this thread have been so obscure and
the
arguements so esoteric that I am now at a total loss.  Who cares how
many angles
can dance on the head of a pin and what math best simulates that
phenomenon?

Monopoly is a serious but messy issue.  When the supply of a product is
controlled so that purchasers cannot buy it elsewhere and are forced to
meet
terms of sale laid down by the owner, a monopoly is said to exist.
Governments
have often created this situation by law, excluding copmpetition from an

economic sector, thus operating a public monopoly.  Natural monoploies
are ones
where conditions of the market, or the nature of the product or services
make
unified control necessary in the public interest,  Defense is an obvious

example. Few government prermit the existence of private armies.  Crime
prevent
used to be on, but privatization pressure on police is now commonplace.
Similarly, the psotal service and telecommunication and energy.

Socialism advocates the extension of the principle natural monopoly on
all means
of production in the public interest.  Private controlled monopolies not

supported by political authority are rare in history. However, the
control of
supply by a few, oligopoly, is quite common, operating as cartels.  In
the US,
an oligopoly wave is in process through mergers and acquisition, through
the use
of holding companies with interlocking direcorates, bypassing regulatory

restriction, reversing antitrust and conflict of interest limiting
trends set by
the New Deal. Finance institutions like CitiGroup now insures your risks
through
Travelers, intermediate credit throught Citibank, raised capital through
Saloman
seeling stocks and engage in structured finance as over the counter
counterparty
with notional values larger that the GDP.  GE does all that plus selling
you
consumer and capital goods.

In history, monopoly has often been the vehicle of oppression.  The
Eqyptian
pharaohs controlled food, and in England, royal charter were granted to
the
King's favorites, until Parliament limited the practice in 1624. The
Industrial
Revolution was born in a flower bed of monopoly and oligopoly
arrangements in
the name of orderly markets. Under globalized finance capitalism,
competition
takes on a new and different meaning through market power created by
vendor
financing.  The EU's recent rejection of the GE-Honeywel merger is a
classic
example of this concern.

Steve's book is sold out and created an appreciating secondary market
not
because his math is flawless (which it may be, I wouldn't know), but
because the
main theme of his book answers an obvious hunch by real life market
participants
who have left most neo-classical economists in the dust.  Intellectual
gaints
should be respected for their original contribution in breaking new
grounds, not
as icons of obsolete ideas that restrain new ideas.  Yes, thousands of
respected
economists of the past decades can be wrong, just as thousands of
ancient
geopgraphers were wrong about the earth being flat.  But I hear that
90%  of the
economists in the world are still living.

Henry C.K. Liu


Peter J Boettke wrote:

> John,
>
> I would have thought you would have been aware of the paradox of
perfect
> foresight anyway.  And also if you would take some time and read the
> analytical arguments behind the Hayekian/Kirznerian position rather
than
> worry about the policy conclusions about entry as opposed to
regulation,
> perhaps we could have a fruitful dialogue.  This of course has been
the
> problem with the Post-Keynesian/Austrian dialogue for two decades.
Davidson
> never got it, of course Shackle always did.  Gary Mongiovi and Steve
> Pressman seem to get it, but other don't.  I proudly served on the
editorial
> board of ROPE for many years.
>
> BTW, this is not just limited to the Austrian/Post-Keynesian dialogue,
it is
> also true concerning the Austrian/Institutionalist dialogue --- Warren

> Samuels and Malcolm Rutherford are ideal examples of how scholars are
> supposed to interact with one another, William Dugger and Marc Tool
less so.
> Of course, Austrian economists are just as guilty of jumping the gun
and
> forgetting to be scholars.
>
> But perhaps if we go and look at Hayek's argument in The Meaning of
> Competition, or Economics and Knowledge, then perhaps we could have a
real
> conversation rather than a psuedo-conversation about the illogic of
the
> orthodoxy and the wickedness of Maggie Thatcher!
>
> Pete
>
> Peter J. Boettke, Deputy Director
> James M. Buchanan Center for Political Economy
> Department of Economics, MSN 3G4
> George Mason University
> Fairfax, VA 22030
> PHONE: 703-993-1149
> FAX: 703-993-1133
> EMAIL: pboettke@xxxxxxx
> HOMEPAGE: http://www.gmu.edu/departments/economics/pboettke
> ----- Original Message -----
> From: "John M. Legge" <jlegge@xxxxxxxxxxxxxx>
> To: <HAYEK-L@xxxxxxxxxxxxxxxxxxxxx>
> Sent: Saturday, March 16, 2002 11:59 PM
> Subject: [HAYEK-L:] KEEN SEMINAR
>
> > I find it oddly soothing to realise that entrepreneurs in a Hayek
world,
> who
> > lack perfect information and perfect foresight, and must test their
> > environment and respond to it, come to a better (for them)
equilibrium
> that
> > the perfectly foresighted and infinitely knowledgeable inhabitants
of
> > neoclassica.
> >
> > Doesn't the proverb say that "God looks after fools and small
children?"
> >
> > On and off list postings have made it clear that the postHayekian
approach
> > of "suck it and see" leads oligopolists to a profit maximising
(almost)
> > state, while algorithms that make assumptions about the market's
structure
> > converge on the analytic Cournot equilibrium.
> >
> > While this area is of keen interest to Steve (sorry!) it is not the
basis
> of
> > his book but of a forthcoming paper.  The book is about logical
> > inconsistencies in the standard neoclassical model, mostly arising
from
> > plain bad maths: or in some cases, maths that can only be related to
the
> > real world by ludicrous assumptions.
> >
> > Chris Auld notes than many thousands of academic economists ignore
the
> > logical inconsistencies and accept the ludicrous assumptions of the
> > neoclassical model.  "Practical" economists, i.e., entrepreneurs,
business
> > development managers, and marketing managers often treat academic
> economists
> > with excessive respect, but they take no notice of them in their
business
> > decisions.
> >
> > Those academic economists who have managed to include Schumpeter,
Sraffa,
> > Chamberlin and Robinson in their reading may still have some
difficulty in
> > interpreting the real world, but they may start with fewer plainly
> > ridiculous assumptions.  (Hayek should probably be on the list too,
but he
> > is still mainly in my future reading plans, and I hesitate to
recommend to
> > others what I have not done myself.)  Schumpeter was relieved that,
by
> 1942,
> > economics had advanced beyond structures based on the assumption of
> perfect
> > competition.  His relief may have been premature, but Steve's book
is a
> push
> > in the right direction.
> >
> > JML
> > John M. Legge
> > Associate Professor (adjunct)
> > Graduate School of Management
> > La Trobe University VIC 3086
> > Australia
> > Tel: +61 (0) 3 9479 3128        Fax: +61 (0) 3 9479 3144 Mob: +61
0409 133
> > 323
> > (Home office +61 (0) 3 9899 5646)
> > jlegge@xxxxxxxxxxxxxx
> >