tag:blogger.com,1999:blog-6245381193993153721.post9030102111329284198..comments2024-03-28T17:08:15.784-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: Is the Law of Demand really Universal?Lord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger55125tag:blogger.com,1999:blog-6245381193993153721.post-6037429154900863992013-02-19T13:46:02.924-08:002013-02-19T13:46:02.924-08:00Anonymous@February 19, 2013 at 1:29 PM
(1) yes, t...Anonymous@February 19, 2013 at 1:29 PM<br /><br />(1) yes, the ceteris paribus does indeed limit the law of demand. But this is my point: what price change in the real world <i>ever occurs with the ceteris paribus condition holding true</i>?<br /><br />(2) also, you do not need central banks as a precondition for asset bubbles. Just look at 19th century economies, e.g., Australia:<br /><br />http://socialdemocracy21stcentury.blogspot.com/2012/05/free-banking-in-australia.html<br /><br /><br />Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-13595315106388403832013-02-19T13:29:26.713-08:002013-02-19T13:29:26.713-08:00Lord Keynes:
'If this were not so, then how d...Lord Keynes:<br /><br />'If this were not so, then how do speculative bubbles ever emerge and develop in economies? If the price of houses is rising sharply, the law of demand tells us that demand should fall."<br /><br />This is not correct. The law of demand does not say that if the price of X rises over time, that there has to be a decline over time in the quantity of X demanded. <br /><br />The law of demand applies to ceteris paribus conditions. In the real world, there is central banking, which adds to the money supply and spending. There are other factors as well. Thus, if the price of X is rising over time, then an absence of a fall in the quantity of X demanded does not mean there is a violation to the law of demand.<br /><br />If all else were held equal, INCLUDING the quantity of money and spending, then it would in fact be the case that if the prices of houses kept going up over time, then the quantity demanded would eventually fall over time.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-9238319154136090672013-01-23T00:26:09.788-08:002013-01-23T00:26:09.788-08:00Not much to add, except a standard 'urgh' ...Not much to add, except a standard 'urgh' at economists trying to make appeals to physics when they quite clearly don't know enough about it.Unlearningeconhttps://www.blogger.com/profile/13687413107325575532noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-55648777197802273912013-01-18T07:07:40.201-08:002013-01-18T07:07:40.201-08:00How many times do I have to say it? The "law&...How many times do <i>I</i> have to say it? The "law" of demand is not a scientific law, it is shorthand for "near universal tendency." Stop engaging in this semantic hairsplitting. Call it a "theory of demand" if you prefer.<br /><br />"Scientific laws [and theories] only EXPLAIN anything on the basis that they're NOT contradicted."<br /><br />What about the theory of reciprocal altruism in evolutionary biology? Surely, it doesn't explain the behavior of every single species (and certainly not the behavior of every single individual organism). Yet would you say that this concept is also pseudo-science and gives us no useful insight? By your criterion, we would.<br /><br />"I do not under-exaggerate when I say that you people are absurd. <i>You really do want to wind the clock back to a time of primitivism and pre-Enlightenment.</i>"<br /><br />Strawman much? I thought hard-core Austrians were the most sanctimonious bunch in economics, but you've upped the ante. <b>Yes, I want to roll back the Enlightenment and return to the Middle Ages.</b> FFS<br /><br />"the intellectual equivalent of creationism"<br /><br />Oh, please, the LoD describes nearly all markets, it is <i>you</i> who is grasping at exceptions which don't even actually exist, like Giffen goods. Again--here's empirical confirmation of the LoD: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1173642<br /><br />Re: financial bubbles--this isn't a fair test of "free markets" b/c <b>we don't have a free market in money, credit, and banking</b> (as described by Selgin & White). <br /><br />"I would usually find it below my standards to even interact with you and would assume that society would chalk you up as cranks."<br /><br />You've summed up my thoughts about you perfectly. John Snoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-49572093621763580042013-01-17T17:07:52.126-08:002013-01-17T17:07:52.126-08:00"It doesn't explain anything?"
No. ..."It doesn't explain anything?"<br /><br />No. It doesn't EXPLAIN anything in a scientific sense. This is obvious to anyone who has even touched upon real science -- as most of us hopefully have. Why? Because its contradicted by other events. Scientific laws only EXPLAIN anything on the basis that they're NOT contradicted.<br /><br />How many times do I have to state this? Honestly, I feel like I've been transported back to 1210AD or something. I do not under-exaggerate when I say that you people are absurd. You really do want to wind the clock back to a time of primitivism and pre-Enlightenment. Honestly, I would usually find it below my standards to even interact with you and would assume that society would chalk you up as cranks. But unfortunately not, apparently... depressing, that the intellectual equivalent of creationism is today spread in our universities... truly depressing...<br /><br />To everyone else I would just say that THIS is the form that real, tangible regressive thought has taken. Think whatever you like politically. This is really primitive stuff. And it is being taught in our classrooms. Frankly, I'm disgusted every time I see this sophistry.Philip Pilkingtonhttp://www.nakedcapitalism.comnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-78295891092898792222013-01-17T11:56:58.497-08:002013-01-17T11:56:58.497-08:00Nice try. Too bad you can't read:
Burden of ...Nice try. Too bad you can't read: <br /><br />Burden of proof: "we must assign value to any claim based on the available evidence, and to dismiss something on the basis that it hasn't been proven beyond all doubt is also fallacious reasoning."<br /><br />So how do you justify categorically rejecting the LoD, when I just gave you an empirical study confirming it?<br /><br />I do apologize for not presenting any evidence as scientifically rigorous as a conversation between two old ladies at the supermarket.John Snoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-27861437701583510062013-01-17T10:19:12.185-08:002013-01-17T10:19:12.185-08:00http://yourlogicalfallacyis.com/ad-hominem
http:/...http://yourlogicalfallacyis.com/ad-hominem<br /><br />http://yourlogicalfallacyis.com/special-pleading<br /><br />http://yourlogicalfallacyis.com/burden-of-proof<br /><br />http://yourlogicalfallacyis.com/strawman<br /><br />NeilWhttps://www.blogger.com/profile/11565959939525324309noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-807471085743605642013-01-17T08:55:22.531-08:002013-01-17T08:55:22.531-08:00So explain why consumer electronics have steadily ...So explain why consumer electronics have steadily and dramatically declined in price w/o citing the LoD. <br /><br />Tell me why iPad will lose its mkt share lead to cheaper Android tablets w/o citing the LoD.<br /><br />Cite 5 current, real-world examples of Giffen goods.<br /><br />Until you address these issues, I will treat your silence as tacit admission of defeat.<br /><br />Empirical confirmation of the law of demand (now it's your turn for epicycles): http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1173642<br /><br />Your previous comment on branded products was one of the few that wasn't completely asinine and made a few interesting points. But you've reverted to your normal, pathetic form here. John Snoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-50996122009395699922013-01-17T06:44:43.643-08:002013-01-17T06:44:43.643-08:00"The geocentric model doesn't have a shre..."The geocentric model doesn't have a shred of evidence to support it."<br /><br />It had the same level and quality of evidence supporting it as the 'law of demand'. The sort of thing you believe in - which are really just the same sort of excuses to explain why the underlying belief has to remain intact.<br /><br />And that evidence was there every day - the sun came up in the East and set in the West.<br /><br />The observations were pretty clear and the mathematics irrefutable.<br /><br />They were replaced in time by a model that better explained the observations with less 'ifs', 'buts' and 'ands'.<br /><br />And it will be the same in this case as well. We will evolve onto a more sophisticated understanding of how trade works - at both a micro and macro level.<br />NeilWhttps://www.blogger.com/profile/11565959939525324309noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-46481799262555675412013-01-17T05:59:58.266-08:002013-01-17T05:59:58.266-08:00Phil,
"So now you're appealing to this a...Phil,<br /><br />"So now you're appealing to this as a common sense principle? That's pretty crass."<br /><br />I was objecting to your use of the word "Everyone." Incidentally, I'm quite sure that a group of 100 MIT/Caltech profs would also agree that when toilet paper goes on sale, ppl buy more of it.<br /><br /><i>Perhaps we can call it a rule of thumb, like the idea that people will generally save more as their income increases. But it does not really explain anything.</i><br /><br />It doesn't explain <b>anything</b>? So the LoD & price competition has nothing to say about why VCRs became massively cheaper and more widespread in the 80s? Or why Android tablets will soon overtake overpriced iPads in market share? Or why China's share of world auto exports will dramatically rise over the next decade? Perhaps I'm missing something, but I don't see how you can explain these phenomena w/o invoking the LoD.<br /><br />LK,<br /><br /><i>Geocentric, heliocentric models</i><br /><br />LK, you're better than this. The geocentric model doesn't have a shred of evidence to support it. The LoD can be seen in action every day (even in your own life--you've never bought something that was on sale <i>explicitly because</i> it was on sale?) Comparing belief in the LoD to geocentrism is just silly.<br /><br />I have found many of your posts enlightening, e.g. Australian free banking, the Long Depression of the 19th century US, criticisms of ABCT, the relationship btw debt and GDP growth, etc. But I find these criticisms of the LoD to be unconvincing and shallow. If they are central to the entire Post-Keynesian framework, then that tempers any enthusiasm I might have for that as well. Certainly, Post-Keynesian views won't make any headway with the mainstream using this line of attack.John Snoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-15571564994791242882013-01-17T03:53:18.867-08:002013-01-17T03:53:18.867-08:00Getting beyond the logical fallacies I do think it...Getting beyond the logical fallacies I do think it can be redrafted.<br /><br />(i) Consumers when faced with two items that they consider to be substitutes will choose the cheaper one. <br /><br />(ii) Producers will use every psychological trick open to them to ensure that their product is in a market of one. (That is what 'unique selling proposition' means).<br /><br />So the usual situation in most products is one of monopoly that exploits the 'status quo' cognitive bias (and a few others to do with group identity).<br /><br />You see this all the time in the supermarkets.<br /><br />I've stood and watch two old dears comparing two bottles of milk - identical except one had a green label priced at £1.55 and one a lilac one priced at £1.00. The conclusion was 'stick with what you know Doris' and the £1.55 one went in the basket.<br /><br />So a 50% mark up is not sufficient to break that monopoly perception.<br /><br />Similarly with plain flour - identical nutritional read outs on a standard graded product. The only difference is in the packaging, where one bag has the words 'everyday value' on it. 'Value' is 0.60 and the other is £1.11 - an 85% mark up.<br /><br />The final one is good old Weetabix. Even the chairman of the company that makes it can't understand why people still buy the stuff in the branded yellow boxes rather than the 'supermarket own' blue boxes. It is literally the same product. Yellow box - £2.39. Blue box - £1.69 - a 41% markup.<br /><br />There clearly is a point where profit gouging breaks the monopoly perception.<br /><br />But if we had economic theory based on this idea rather than pure 'demand and supply' ideology then perhaps we wouldn't have had policy designed badly.<br /><br />Like we have in the electricity and gas 'markets' where lots of people are scratching their heads wondering why people don't switch to cheaper suppliers.<br /><br /><br /><br /><br />NeilWhttps://www.blogger.com/profile/11565959939525324309noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-81216903309261356812013-01-17T03:05:32.577-08:002013-01-17T03:05:32.577-08:00"Really? Let's say we ask 100 people, &qu..."Really? Let's say we ask 100 people, "If an item goes on sale at Walmart, will shoppers buy more of it? Do you believe most people would say no?"<br /><br />So now you're appealing to this as a common sense principle? That's pretty crass. The same people would likely say that if the central bank increases the money supply in the banks the currency would devalue. Not true.<br /><br />You're now trying to appeal to the man in the street. This, again, is beginning to sound like theology. This time the theology of George Berkeley who used to appeal to the common man and common sense in his arguments with Newton at al.<br /><br />@RR - It's implicit in the methodology.<br /><br />State a "law" -- say "law X". Then state exceptions to the "law" -- says exceptions A, B and C. Then continue calling X a law. This trains the student to give up the scientific method and think in logically contradictory terms. The "law" X now contains its own logical contradictions. But these are somehow self-negating as they exist within the "law" but do not overturn it.<br /><br />The next step is that the economists begin to look at the other sciences, as you did with physics, and assume that the practitioners are engaged in the same thing. But they're not. In other sciences and disciplines such thinking would be considered a simple logical error and the proponent would not get a qualification.Philip Pilkingtonhttp://www.nakedcapitalism.comnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-25767707985181217612013-01-17T00:05:16.015-08:002013-01-17T00:05:16.015-08:00"Some of the most orthodox disciples of Keyne...<i>"Some of the most orthodox disciples of Keynes appear consistently to have thrown overboard all the traditional theory of..."</i><br /><br />No doubt supporters of the geocentric theory complained along similar lines about supporters of the heliocentric theory...<br /><br />Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-74848599971231595962013-01-16T14:55:19.709-08:002013-01-16T14:55:19.709-08:00"Some of the most orthodox disciples of Keyne..."Some of the most orthodox disciples of Keynes appear consistently to have thrown overboard all the traditional theory of price determination and of distribution, all that used to be the backbone of economic theory, and in consequence, in my opinion, to have ceased to understand any economics."<br /><br />F.A. HayekAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-19323778348151701822013-01-16T12:13:57.369-08:002013-01-16T12:13:57.369-08:00"What is your explanation of how asset bubble..."What is your explanation of how asset bubbles arise and how to identify, prevent, and contain them?"<br /><br />The "causes" of asset bubbles are completely contingent. The driver in the gold market at the moment, for example, is fear while the driving in the housing market in Ireland from 1999-2007 was rising income and exuberance. Tulips in Holland, on the other hand, seemed to be due to novelty.<br /><br />We cannot, as I've said here in the past, explain WHY asset price price bubbles occur. But we can explain in what type of markets they MAY occur and in what type of markets they CANNOT occur and under what conditions. I'm pretty sure I have a solid theory of this and when it is published I'm sure you can nominate it for a Nobel -- although they won't listen (see below). This is actually more useful information because it shows what type of markets policymakers should monitor. <br /><br />"I will be sure to notify the Nobel Prize committee when you post your response, since you will certainly be a worthy candidate if you can answer these questions with complete accuracy."<br /><br />On this front, I'm afraid, you're quite wrong. They don't give the prize to people who completely contradict certain precepts of neoclassical economics -- and my paper will contradict pretty much all of them. This isn't a science we're dealing with, after all. I'm hoping to have influence not on the clown-like economics profession but on good, rational people in high finance.Philip Pilkingtonhttp://www.nakedcapitalism.comnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-22155835296173361542013-01-16T12:03:14.561-08:002013-01-16T12:03:14.561-08:00@John S
Rawlings compared it to the law of gravit...@John S<br /><br />Rawlings compared it to the law of gravitation, thus comparing it to a scientific law. This is not surprising given that economics uses pretentious terminology persistently in order to give itself an "aura" of scientificness. And then economists -- I've seen this a million times before -- make comparisons like Rawlings just did in a pretentious attempt to move their discipline further from sociology and closer to physics.<br /><br />"One that holds true in nearly every market."<br /><br />The issue is far more complicated than that. The inverse relation between price and quantity demanded holds to some extent in many markets. But it is by no means a general principle and it does not explain much about how shops actually sell goods and services. For example, if we increase the price of a good and move its position in the supermarket we can probably sell more.<br /><br />Perhaps we can call it a rule of thumb, like the idea that people will generally save more as their income increases. But it does not really explain anything. And the way it is taught to students is pretentious and misleading in the extreme and only serves to fill the population with superstitious dullards who worship simple geometrical forms as if they contained some Eternal Truth.Philip Pilkingtonhttp://www.nakedcapitalism.comnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-47692783922085635262013-01-16T11:51:09.706-08:002013-01-16T11:51:09.706-08:00LK, OK, I will concede that one, (I didn't r...LK, OK, I will concede that one, (I didn't read the wikiepdia article closely enough and thought that one of the assumptions was real income, and not money income , remaining constant). <br /><br />PP, It seems odd that I find myself "insulated in the perverse methodology of neoclassical economics" as I do not consider myself an adherent of that school. In any case, I think I must have skipped the "logical contradictions" class - maybe it was too full of post-Keynsians ?<br /><br />Rob Rawlingsnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-88028549467196749472013-01-16T11:40:46.900-08:002013-01-16T11:40:46.900-08:00"Everyone who has not been trained to think i..."Everyone who has not been trained to think in logical contradictions... will see my criticisms as valid."<br /><br />Really? Let's say we ask 100 people, "If an item goes on sale at Walmart, will shoppers buy more of it?" <br /><br />Do you believe most people would say no?John Snoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-66569213699219883712013-01-16T11:26:49.353-08:002013-01-16T11:26:49.353-08:00It's at best a tendency - like all stereotypes...It's at best a tendency - like all stereotypes.<br /><br />That's why it gets warts on its warts as people widen the definition to keep the whole thing from falling apart from the number of exceptions to the rule.<br /><br />You get the same with 'inflation' and 'saving'.<br /><br />Certainly it is no good drawing upward and downward sloping lines and pointing to an intersection. The intersection is in fact anywhere in a huge area.NeilWhttps://www.blogger.com/profile/11565959939525324309noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-35762666869962772732013-01-16T11:24:44.889-08:002013-01-16T11:24:44.889-08:00@ RR
Regarding the Einstein thing as I've poi...@ RR<br /><br />Regarding the Einstein thing as I've pointed out at least three times now: Einstein's law does not CONTRADICT Newton's law, it counts it as a special case. LK's post CONTRADICTS the law of demand -- insofar as we don't engage in the word games that you do to "prove" that it does not contradict it (because the law of demand contains its own contradition etc.).<br /><br />You don't seem able to see that logical contradictions are considered errors in science because you have been trained to think in muddled contradictions, like the theologians (and the Hegelians, by the way...).Philip Pilkingtonhttp://www.nakedcapitalism.comnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-45908195630576655272013-01-16T11:21:43.035-08:002013-01-16T11:21:43.035-08:00"Just to clarify: Do you disagree that loose ...<i>"Just to clarify: Do you disagree that loose money exacerbates asset bubbles "</i><br /><br />No, I do not dispute that in a poorly or ineffectively regulated financial system, easy money might exacerbate asset bubbles.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-6663528797084135852013-01-16T11:21:28.387-08:002013-01-16T11:21:28.387-08:00@ Rawlings
If you genuinely believe in what you&#...@ Rawlings<br /><br />If you genuinely believe in what you're saying then I'm afraid I'll never get through to you. You're too insulated in the perverse methodology of neoclassical economics. ("X doesn't contradict Y so long as we all agree that Y contains X as its own self-negating contradiction" etc.). Everyone who has not been trained to think in logical contradictions (as every other scientific and rational discipline is), I'm sure, will see my criticisms as valid. Perhaps you can find allies with the medieval scholastics. ("God does exist if we take into account that the existence of the idea of his non-existence is proof of his existence due to it already being contained in God's existence in its own self-negating being" etc.)Philip Pilkingtonhttp://www.nakedcapitalism.comnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-1878669660488868532013-01-16T11:14:29.866-08:002013-01-16T11:14:29.866-08:00"Then it's not a scientific law."
N..."Then it's not a scientific law."<br /><br />Nobody is claiming this. #strawman #hair-splitting<br /><br />"It's just a rule of thumb"<br /><br />One that holds true in nearly every market. Btw, you must not have much faith in the entire field of statistics if you believe that all useful propositions about the world must have 100% accurate explanatory power w/o any exceptional cases.<br /><br />[Don't launch into praxeology, anti-empirical Austrians, etc; I'm not a Rothbardian.]<br /><br />You are correct on one point, Philip: economists are definitely sloppy with terminology (e.g. "capital"). The law of demand is certainly not a scientific law in the sense that it tolerates absolutely zero exceptions. But the word "law" is certainly pithier than the phrase "the near-universal tendency." <br /><br />If "law" is not to your liking, what word do you suggest? "Principle"? John Snoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-26589074333300482552013-01-16T10:52:23.729-08:002013-01-16T10:52:23.729-08:00Rob Rawlings@January 16, 2013 at 10:26 AM
I far a...Rob Rawlings@January 16, 2013 at 10:26 AM<br /><br />I far as remember the theoretical and real world possibility of Giffen goods (e.g., Battalio, Raymond C., Kagel, John H. and Carl A. Kogut. 1991. “Experimental Confirmation of the Existence of a Giffen Good,” <i>American Economic Review</i> 81.4: 961–970) already invalidates the law of demand's claim to universality, without violating its ceteris paribus assumption.<br /><br />That is explicitly acknowledged in textbooks.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-79318102697582033002013-01-16T10:26:49.992-08:002013-01-16T10:26:49.992-08:00"Certainly there is nothing in Einstein that ..."Certainly there is nothing in Einstein that CONTRADICTS the law of gravitation, as there certainly is in LK's post that CONTRADICTS the "law" of demand."<br /><br />BTW: You are incorrect about this too - LK doesn't show anything that contradicts the "law of demand" once one takes its assumptions (at least as described in Wikipedia) into account. Rob Rawlingsnoreply@blogger.com