So it’s not true that there is or can be no such thing as a purely free market.

This also refutes your assertion that laissez-faire reigned – if government is controlling the price of something *by definition* it’s not a free market. And money affects every single transaction, so stop blaming unregulated capitalism, and start blaming government interventions.

“The free market failed both economically and socially.”
This relies on your disproved claim that unregulated capitalism, free markets etc. produced the GD.

Intellectual honesty requires that you RE-THINK YOUR CLAIMS thus: “Since my claim that unregulated capitalism led to the GD is factually wrong, what might have been the economic effect of government inflating the money supply?”.

Don’t just react with inflexible prejudice – actually THINK about it.

“how does the free market create stability, I mean apart from attrition--death and misery”
Your question is dripping with bigorty and ignorance, but what do you mean “stability”?

The division of labour increases the wealth of everyone who participates in it – that’s why people do it!

“Laissez [–faire] brought the Western empire to the brink of either a fascist dictatorship”
This assertion depends the above false assumptions which I have disproved.

The Austrian argument is that:
a) inflating the money supply creates the cycle of speculative boom and unjust depression
b) government economic intervention actively worsens the conditions it is supposed to improve
c) protectionism leads to war
d) interventionism leads to fascism.

You observations all along confirm the truth of Austrian theory, and the incorrectness of your own theory, so would you care to RE-THINK YOUR CLAIMS, and actually join the discussion instead of just circularly repeating your demonstrably false assumptions and inflexible prejudices?

“how do you account for the postwar boom if it wasn't thanks to Keynesianism and consumerism?”

Define consumerism.

A boom can either come about by the economic way – capital accumulation – or the political way - inflating the money supply.

In the economic way, people consume less than they produce, and devote the savings to investment. They do this because they prefer the hope ..

…of a greater future good to the certainty of a lesser present good. Profitable (not loss-making) investment increases productivity – output per unit of input. This produces gradually compounding levels of capital, productivity and standards of living. This does not produce the cycle of boom and bust.

The political way is to inflate the money supply either by printing money or lowering interest rates. This produces an artificial boom. It works by diverting real capital away from activities that are profitable – in other words that best serve the wants of the masses as judged by THEM, not by YOU. Inflation misallocates capital into the bubble on the basis of illusory profits based on rising prices. The artificial boom inevitably collapses, causing economic depression. This POLITICAL MANIPULATION OF THE MONEY SUPPLY - not “unregulated capitalism”, is what causes the cycle of boom and bust.

Similarly, inflation promotes CONSUMPTION NOW over investment for the future. Stop blaming “capitalism” for socialist and interventionist economic policies.

I think the postwar boom is partly due to capital accumulation, and partly due to Keynesianism. Keynesianism is corrupt in many ways – it robs savers and everyone who uses money to favour the priviligentsia in big banks and corporations and government; it causes the boom and bust; it is used to fund aggressive war – in fact everything that the anti-capitalist ignoramuses blame on “capitalism”.

“would you still be in favour of free markets if you were a bottom feeder?”
You imply the Marxist premise that free markets make people poorer. This is demonstrably wrong in theory and practice. In theory Marxism depends on the labour theory of value, which is flatly incorrect.

People – including the poorest of the poor – have never been as rich as under capitalism. Contrary to statist fables based on DISPROVED beliefs, the improved condition of the masses under capitalism is not *because of* but *despite* government’s interventions.

Would you rather be one of the tens of millions who starved to death under Mao, or who have left the rice-paddies and are employed now in private businesses in modernising China?

Peter Hume:

<Squeers
You are only confirming my first remarks. You think there is no structure to reality, no such thing as truth, and no such thing as proof. Everything is just a matter of “ideology” and “perspective”>

PH,
apologies for the delay.

This is unfair. To begin with, I'm a materialist (well, sort of), though I am dubious about reality; certainly it has structure, "form", though it seems terribly flimsy, or certainly finite. What is the nature of such an unstable reality I wonder?
But putting that to one side..
I didn't know you were a deist! Though you're an economist, which amounts to the same thing. Do you really think there is an ultimate "truth" about anything? Or that you can prove anything outside a certain context?
Your truths and proofs are no more transcendent than the futures market, they are merely the vulgar currency economists deal in.

Of course I realise I'm just giving you ammunition--well, "caps" anyway.
Obviously I was talking about ultimate truths, or at least truths and possibilities that might go beyond your fiscal reality.
But Peter, you clearly have more time on your hands than I do. Sorry I can't do a point by point.

You've evaded my question btw: “would you still be in favour of free markets if you were a bottom feeder?” Say from sub-Saharan Africa?

"What is the nature of such an unstable reality I wonder?"

Well that's the question, isn't it?

"But putting that to one side..."

We can't; we have to follow where it leads to resolve the issue, because it's about reality.

The social reality is connected to the physical reality.

There is no question of “ultimate” truth, in the deist sense in which runner or AlGoreIsRich believe in God.

It is enough to find objective truth, that is,
a) axiomatic or
b) validly deduced from an axiom, and
c) consistent with the evidence.

By axiomatic I mean either there is no issue since either we all agree, or those who disagree contradict themselves. For example, if the economic proposition is “Human action always involves preferring A to B”. Even those who disagree: “No it doesn’t!” must prefer A to B in order to contest the proposition. Thus they perform a self-contradiction and by their actions affirm the original proposition. So it’s an axiom.

For example Pythagoras’s theorem satisfies that definition of objective truth. There is no need to believe in God to believe it's true.

But the same cannot be said your belief that unregulated markets caused the GD, or that capitalism is exploitative. Your argument does not satisfy any of those three criteria.

Austrian theory satisfies all of them.

The material truths must result in economic truths. For example, we can’t just increase the fertility of land by putting ever more fertiliser on it. This limitation is not caused by “capitalism”, it’s caused by physics and chemistry. Nature imposes limitations on human action and therefore on production possibilities.

That’s precisely the argument against Marxism and Keynesianism. There is not one realm of truth for physical realities, and another one for fiscal realities. The original scarcity of resources can’t be solved by abolishing private property (Marx), by printing more money (Keynes), by forced redistributions (Chris Lewis), or by circularly insisting that capitalism is terrible (you). To say so is not to engage in deism. It is the statists who are the conjurers, the supernatural mystics.

Just because one is ignorant of the truths of economics doesn’t mean they cease to describe human action. Just as the facts of gravitation, or time, affect all human action, so do the principles of economics, which are only the logical implications of the axiom that human beings take purposive action.

Conceitedly and circularly thinking that you are morally superior to everyone else on the planet does not prove the principles of economics false.

Your condemnation of capitalism depends on:
o a non-fact, namely, that unregulated markets caused the GF and GFC. Every one of the arguments you have relied on involves assuming what is in issue, and is therefore a logical fallacy.
You need to deal with the argument on its own terms: to disprove the argument that inflating the money supply causes the cycle of boom and recessions that you are blaming on capitalism.
o Your assertion that capitalism is exploitative. When I asked you to prove it, you said it would be “futile”, claiming to know that I could never be persuaded. This is mind-reading, which is a logical fallacy.
You need to deal with the argument on its own terms: consensual transactions increase the satisfaction of human wants, coerced ones reduce it.

You have marked out an intellectual boundary in which nothing can be proved or disproved but by arbitrary assertion and counter-assertion, larded with a liberal serving of logical fallacy such as Hobsbawm’s assuming what is in issue.

By contrast, the Austrian school of theory provides much surer ground in which things can be actually proved or disproved.

I respectfully commend Chapter 1 of Rothbard to you: http://mises.org/books/mespm.pdf
“Fundamentals of Human Action”

Go ahead - read it. It won’t hurt. Since you claim to disagree with it, see if you can find anything in the theory of it that you disagree with.

P.S.
What’s “bottom-feeder” supposed to mean? A term from your circular economic theory is it? Just check to see you’re not assuming what’s in issue will you?

Peter Hume,
your reasoning, "Even those who disagree" are committed to the reality because they acknowledge the question, is identical to the logic of Althusser (a Marxist, sorry), and is not too remote from what I was hinting at.
My deist allusion pointed toward the economic paradigm you treat as a given--we all have no choice but to recognise as reality. Our reality is an economic reality, not reality per se, or the only possible reality. Nevertheless this economic reality structures our thinking such that we only "hypothesise" outside it, and that with great difficulty. Our economic reality is an epoch wherein, as you say, the logic is axiomatic. Axiomatic to that "language game", as Wittgenstein would insist, though it was Marx who postulated an alternative reality by concretising or inverting Hegel's dialectic. That alternative reality is not available to us to assess (which is fair enough since it doesn't exist) but we can possibly infer its alternative validity by conducting an "immanent critique" of our present reality that structures human life.
Austrian Theory, and protectionism, are obsessed with "this" reality, the best of all possible worlds, but as Marx said, the point is not to explain the world, but to change it.
So your "The material truths must result in economic truths" is back to front.
So ironically I agree with you that economics "do" "describe human action", but they don't have to, or at least the economics can change. This is what we've lost sight of. Our economic reality is not axiomatic in the larger context.
Once again, capitalism "is" exploitative, of a finite planet to begin with, but of human "potential" which can never be realised, perhaps, as things stand.
Thanks for the link, I'll have a look asap.