The latest EconTalk features Thomas Sowell talking about his new book, Economic Facts and Fallacies. Next week, Vernon Smith talking about Rationality in Economics which will be a conversation about constructed order and emergent order.
where orders emerge
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"Emergent order" seems like the most loaded term one could use with regard to market generated prices.
I mean, Webster's defines the word "order" as "harmonious arrangement" or "a proper or functioning condition". All of these suggest something positive or optimal. Yet, many people (just as smart as Russ or Vernon Smith) would argue that there are many cases when market generated prices will not be optimal (for example, when exteranilities and high transaction costs are present).
Why don't we instead refer to them as "emergent patterns"? Let's remove the latent value-judgements all together.
Of course, I doubt Russ would ever make the switch. In the most hidden parts of his heart, he knows the value of rhetoric in making the soft-sell for free markets.
And before Russ responds that "optimal" is also has its own implicit value judgements, I would like to point out that the term "optimal" has a very precise meaning in welfare economics. This enables one to compare the "optimal" outcome in the textbook with the "optimal" outcome described by their other ethical beliefs.
Russ' "emergent order" has no similarly precise definition. Making it all the more like a slogan "new and improved!" than useful scientific term.
Oh Boy, these two will be terrific. Way to go.
It means what it means in Darwinian evolutionary theory, i.e. whatever happens. That's not very satisfying if you want something specific to happen, but if we believe Darwin (and I do), evolution by natural selection does generate "fitter" organisms.
Competitive, free, capital markets generate more profitable organizations (or continually replace less profitable organization with more profitable organization without necessarily increasing profits overall). That's all I expect from capitalism. This process is useful in terms of welfare, but it's not a panacea. Classical liberals never thought it was a panacea, but liberals are properly skeptical of state solutions to any problem.
Martin:
It's not perfect because unbridled capitalism produces winners and losers. Often the losers will use violence to turn that around.
States decree and enforce monopoly rights, period. States do nothing else. Property rights are themselves monopoly rights decreed and enforced by states.
Martin:
So are you saying the deed I hold on my condo is an unjust monopoly right?
FreedomLover,
well; to be fair, he said it was simply a monopoly right. in some sense, you do have a 'monopoly right' (property right) to develop that property as you see fit (concurrent with restrictions from your condo docs). You used 'unjust', not martin.
shawn:
The problem with Martin is it's easy to infer from him that it's unjust. When he throws around "monopoly" so casually, it starts to mean nothing.
In the "most hidden parts of his heart"? Perhaps I have been paying too much attention, because there did not seem to be anything "hidden" about it. In fact, he is quite explicit in the podcast, and atually wrote a book called The Invisible Heart. Hidden? hardly.
If something is to be said about economics, then it might as well be said as well as possible. God knows that economic fallacies will continue to be said as well as possible, so there is no need to put the good arguments at a disadvantage. In any case, these issues, and their consequences, are made from the kind of stuff that really should arouse the passions.
Lee,
You apparently didn't pay close enough attn to my post. I was not referring to his explicit arguments in favor of a free-market system (as can be found in the Invisible Heart and the Choice among other places).
I was referring to the times when Russ takes off his "advocate" hat and puts on his "economist" hat. Even when he is not explicitly making the hard case for free markets, he's still selling his idea by choosing his words to carefully favor those positions. His frequent frequent frequent use of the term "emergent order" is probably the best example of his (and others) "soft-selling" tacticts.
Student:
I don't get what point you're trying to make. Are you pro/against free trade?
I am against using a value loaded term in a scienfitic setting. I am against mixing advocacy and science.
The term "emergent order" is a very vauge term that's loaded with value judgements when used to describe the emergence of prices in an open market. The question I pose in my first post is how one defines order. Webster's dictionary associates very positive things with the word such as "harmonious arrangement" or "proper condition".
However, many people that are just as smart as Russ Roberts would argue that there is nothing harmonious or proper about prices in the presense of assymetric information or externalities combined with high transaction costs.
A much less value-loaded term would be "emergent patterns". But that's only one suggestion.
The point of my post is that those that prefer the term "emergent order" w/regard to describing prices, use it to softly convey their own prefernces for the market without making any explicit arguments. I suggest we do our best to leave our "advocate hats" off when talking about the science of economics.
The word "unjust" appears nowhere in my post.
All monopoly rights are just. They're just because they're rights, and "just" and "right" are essentially synonymous. Your monopoly of a private place is perfectly O.K. with me, and it should be just in my way of thinking.
I don't therefore conflate your condo with Buckingham Palace. That would be absurdly incredible
Thanks, Shawn. People love leaping to conclusions and bickering with moronic straw men. It's so much easier than communicating.
Capitalism relies on force to establish property in the first instance. Anarcho-capitalism is a contradiction in terms. I don't pretend to be an anarchist. I accept the necessity of a limited state if we want many comforts of the modern, artificial order.
To Martin at 1033. Emergent order in a free market economy does not have anything to do with a seemly corresponding darwinian concept. The "order" that happens in the free markets is not just "what ever happens, happens."
In nature, there is no price system to coordinate the actions of everyone.
In free markets, you have a price system that pushes efficiency. While this process is not always perfect, or optimal, it bears little resemblance to survival of the fittest as known in biology.
No one explains this better than Steven Landsburg. I'd like to hear a podcast with Landsburg and Roberts discussing it.
No. The inference and its ease are yours. You need to distinguish your conclusions from my assertions. My use of "monopoly" is standard. The scope and scale of monopoly is the problem of excessive statism, not the existence of monopoly. Denying that we have monopolies at all is counterproductive, because this denial only encourages states to expand monopolies of the sort we deny.
You start out by saying that a lot of people believe that the standard of living for the average American has not risen for 35 years.
Who are "a lot of people".
Can you provide quotes of economists, newspaper reporters, etc, to support this statement.
Student,
Every "emergent order" is also an "emergent pattern", but not every "emergent pattern" is also an "emergent order". If you think that "emergent order" is a better description of the emergent pattern which arises from the free market, then why not use that term? As long as you can define what you mean by "order" if challenged, then it is much a empirically testable conjecture as any scientific theory.
The whole enterprise of science is conducted because people value truth, knowledge and understanding. Of course, first and foremost, a valuable scientific theory is one which is true, or at least closer to the truth than its competitors, but I do not see why rhetorical impact or aesthetic beauty should be ignored, or denigrated–they are not some kind of "scientific sin".
If people conduct scientific investigation to solve problems which they are passionate about, then they will wish to advocate what they believe to be the solution, or answer, to those problems, because they are passionate about solving those problems. The scientist need only to remain critical, of all theories, including their own, especially their own.
The notion that "emergent pattern" is somehow more scientific than "emergent order" is silly. The term "emergent pattern" is far less meaningful i.e. has far great logical content, than "emergent order". In other words, the latter is more empirically testable than the former, so long as you can define what is meant by "order".
Correction.
Should read:
In other words, so long as you can define "order", where the set of emergent orders are a subset of emergent patterns, then the claim that the emergent pattern of the free market is an emergent order, is a stronger, and more testable, claim than that it is merely an emergent pattern. It is strange to consider the less testable claim to be the more scientific claim, but whatever.
Martin:
There is no such thing as a monopoly on a single property. The term applies to market segments, and you should know that. Your misapplication of the term just muddies the waters. Regarding the requirement for state force to ensure property rights, that's all well and true a long time ago. After all, Americans did steal the land from the Native Americans without compensation. We can debate on that issue endlessly. However, since that is water under the bridge, the real issue is that current property rights involve purely voluntary exchange. Except when the government performs a taking like in the Kelo case.
If you constrained yourself to cases like that, you'd be thought of as less trollish.
Well, whatever happens does happen, but I don't say that it's all simply "random". It's not all simply random. Evolution by natural selection is not all simply random either. Richard Dawkins makes this point routinely.
There are costs, and creatures do account for them along with Nature. Rational cost accounting is why successful creatures have nervous systems. Natural evolution incorporates many signals of cost.
At the risk of provoking controversy (or in order to provoke controversy), that's why I think it's a mistake to lightly dismiss "intelligent design". I dismiss "irreducible complexity", because that's a ghost in the machine, but the development of living forms is certainly a very intelligent process, much more intelligent than you and I.
Prices signal information, and rational actors respond to these signals, but competition and selection pushes efficiency. Without competitive selection, proprietors simply use all available information to organize factors to channel as much entitlement as possible toward them. Price variations don't disappear in this scenario, but efficiency needn't increase regardless of prices.
You might think that rational proprietors always organize resources for greater efficiency to increase the entitlements they can channel their way, but this theory is mistaken. Without competition and selection, organization gets stuck at a local maximum. Established proprietors can't escape the suboptimal organization they create even if they want to escape it. They don't know how, and they can't overcome the force of other proprietors resisting the change. Continual progress requires punctuated equilibrium.
It really does. If it were all about smart people evaluating price signals to make optimal choices, I'd be a socialist. It's not. Markets have a mind of their own, just as Nature has a mind of her own.
I don't want to bicker with you over semantics.
http://www.merriam-webster.com/dictionary/monopoly
"1 : exclusive ownership through legal privilege, command of supply, or concerted action"
I choose to use the word as Merriam Webster defines it here. You do as you please.
Nonsense. I see these uniformed men with sidearms all around me, and I'm supposed to believe that everything is voluntary. You believe whatever you like. I'll go on facing reality.
Like I care what your group-think partisans call me.
Ok, Martin you're correct by the dictionary definition. However, when we talk economics on this blog, monopoly refers to market segments. You should know that, and by trying to muddy the waters, you come across as an agitator, rather then a useful contributer. I think many here will agree with me.
Regarding your disputation of volunatary exchange because you see uniformed officers? Care to explain what you mean by that? Police patrols have exactly what do with daily real-estate transactions? Sorry Martin, but you're coming across as a bit of a loon.
You aren't talking economics here. You're talking politics. You're assuming some legal definition of "monopoly" as used in anti-trust law or something. This definition is bound to serve the narrow interests of the people defining it.
The choir boys don't concern me. Discovery is not a popularity contest, unless you're only discovering what's popular.
They'll harm me if I don't respect your propriety, and they'll harm you if you don't respect mine. We transact with this understanding, and we don't actually define our own proprieties.
The ad hominem only proves that you have no more intelligent reply.
Student, did you actually read the Webster entry?
I don't see anything that implies "optimal". The example of nature obviously isn't (its value-free), and certainly isn't harmonious or optimal from the perspective of the animals within the order of nature.
At any rate, I hardly think you're telling something Russ doesn't know about when you mention externalities and asymmetric information. But markets tend to correct for those problems as entrepreneurs find ways to profit from the alleviation of these problems and reduce transaction costs. I don't see any tendency for the political system to correct for its externalities and asymmetries. Most of the improvements in the principal-agent problem in politics seems to have come from the private sector; e.g. news media.
Student –
First of all, there are certainly cases, such as those with externalities or transaction costs, where an "optimal" price doesn't emerge. I suggest first that even when the price isn't optimal, the fact that a price emerges at all does imply some order. And, second, the very large majority of transactions do not have significant externalities or transaction costs.
The idea of order emerging from what otherwise appears to be chaos happens in all sorts of fields. How your brain has structured itself over time is an example of this, as the behavior of a colony of insects. (See Douglas Hofstadler's Godel, Escher, Bach for a few other examples). The behavior of gases is the same thing — you can make very high-level predictions about how a system will behave even if every element in the system is acting randomly.
You may want to apply a new, perhaps more accurate, label to these phenomenon. But, you're going to have to overcome a lot of intertia.
Martin,
Everything you state about law enforcement protecting our mutual property rights is a case of being Captain Obvious. Do you have any salient points to make?
Martin,
Another thing you always fail to stick to the point of the thread. You always are going off on "monopolies" and other things not salient.
First, it's loony. Then, it's obvious.
My statement was a counterpoint. You broke into the discussion above with some irrelevant comment about your condo that had nothing to do with my earlier post. I'm responding to you.
In reality, I go off on many things and not always on monopolies. The problem here was that you didn't know what "monopoly" means except in a narrowly political sense.
Sowell is certainly my favorite living economist, and it should be exciting to hear him on EconTalk.
EconTalk is also my favorite podcast these days. I always anticipate it eagerly.
Sowell peddles a few of his own fallacies here, but he scores on most of the substantive points. No one resents Oprah's wealth? It's only about Bill Gates? I don't think so.
The stuff about "income distribution" was just silly. This term describes a summary of statistical information, not some program of distributing income. Of course, studying the income distribution is important in economics.
We don't have central planners deciding incomes? This guy apparently never worked for the government.
But that's the politics.
The early discussion of household income and other "household" statistics is worth noting here. I've written for years that household statistics are misleading because household size has fallen and higher income households tend to be larger households. I'm divorced. Only a few years after our divorce, my kids' mom and I were two much poorer households even though we both had higher individual incomes. Naively, owning two homes rather than one is a sign of poverty.
But household statistics also mislead in the other direction, and I've witnessed this direction repeatedly in this forum. Several recent threads use household statistics on median income, rather than the available data on individual incomes. I had to link the individual income statistics myself to make the point that household incomes mask the stagnation of median income.
The net worth statistics discussed here recently are also misleading. The statistic discussed is a time series for the total net worth of all households, not average net worth per household, much less a median, but the number of households increases over time in this series. These data obscures a slowing, possibly even a reversal, of growth in the net worth of households in the last year or two due to falling house prices.
I don't have a dog in the order/pattern fight. But a native German speaker would probably choose 'order', because in German 'Ordnung' is the word for mathematical and social patterns/regimes. 'Pattern' doesn't have a similar direct translation, but the various German words that translate to 'pattern' are usually more physical or superficial in nature.
The usage might just be a result of Austrian economics' Austrian beginnings. I don't think that it's Russ's phrase.
Aber wie immer: jedem Tierschen sein Plasierschen.
Check it out for yourself: dict.leo.org
Martin Brock says:
"The net worth statistics discussed here recently are also misleading. The statistic discussed is a time series for the total net worth of all households, not average net worth per household, much less a median, but the number of households increases over time in this series. These data obscures a slowing, possibly even a reversal, of growth in the net worth of households in the last year or two due to falling house prices."
If you go to the original data (which I haven't had time to post) median net worth of the middle quintile of households has risen since the Fed started gathering these data–1989. I'm sure it's taken a hit over the last year but housing prices are down 5%.
Median individual income does not include benefits and growth is understated because of inaccurate measures of inflation.
O.K. But an unspecified rise over nearly two decades isn't saying much. How much did the 95th percentile rise?
I just don't agree that it's "morally wrong" to ask this question, and I don't agree that forcible propriety has nothing to do with it or that it's all about "free markets" either. I certainly don't live in an anarcho-capitalist utopia, even if such a thing is conceivable. [I'm not attributing anything to you, only making my position clear.]
I accept that inflation is difficult to measure and doesn't well reflect increases in quality, but I'm also skeptical of adjustments. The French now say that GDP doesn't accurately measure their growth. If their GDP were growing more, they'd say something else. We can talk about commodity price inflation, but the concept is bound to be ambiguous otherwise.
I don't know about you, but my fringe benefits in the private sector have fallen in recent years. Defined benefit pension plans are fast disappearing (which is O.K. with me). So is employer health insurance (also O.K. with me), and where it isn't disappearing, employee contributions are increasing. Maybe the value of these benefits is still rising, but I also wonder how this value is measured. The incentive to distort is not all on one side of the equation.
Freedomlover:
Property rights are themselves monopoly rights decreed and enforced by states.
Do you believe you own yourself?
What state decreed that you own yourself?
In the absence of anyone acting to enforce ownership of you by *someone else*, would you not own yourself?
If, in the absence of coercion (in effect, a state) to render you someone else's property, you agree that you own yourself, you have conceded a non-state basis for quite a broad range of property rights.
You have to acquaint yourself with Martin's approach in these discussions. I asked him if he was a lawyer…his dad was, so he speaks with a greater technical accuracy than wich which we are familiar.
So let's state things thusly:
'Monopoly' means exclusive control of a thing.
A 'market monopoly' is a government granted privilege of some portion of the market.
Free marketers do not oppose monopoly, we oppose any property in market share and we oppose authorizing government to grant such privilege.
Will that do?
The state hardly protects my property rights. In fact, not a day goes by when they don't claim, as their prerogative, various pieces of my property.
Common thieves, I suspect, are less deterred by the police than they are of their actual victims. I may have a gun, for example, & no compunction against using it. Plus I'm smart enough to lock my doors & not display my treasures.
The average non-thief probably either has moral objections to thieving or wants to avoid the shame of being known as a thief.
The state steals what it wants under the dubious cover of "legitimacy." If the state really protected my property, why would it have to force me pay for this service? & don't give me that "free-rider" bunk.
I'd also like to add that if the state allegedly was created to protect property rights, then logically property rights preceded the existence of the state.
In the absence of anyone acting to enforce ownership of you by *someone else*, would you not own yourself?
If, in the absence of coercion (in effect, a state) to render you someone else's property, you agree that you own yourself, you have conceded a non-state basis for quite a broad range of property rights.
Posted by: Warrl | Feb 26, 2008 12:18:37 AM
Actually Martin posted that. I believe property rights are natural rights that don't require the force of the state to exist. I believe the right to bear arms is a natural right, and we don't require the 2nd amendment and so on. In practical terms, w/o laws we'd each have to enforce our own rights at the point of a our own guns.
I believe so …
Insofar as persons can be owned and have been owned, the thirteenth amendment to the U.S. Constitution declares that every U.S. citizen owns himself.
The absence of any statutory force (or artificial state) is the state of nature. In nature, the concept of "property" itself does not exist. We have natural territoriality, but that's not property. It's not Lockean property, and it's not "property" in any other common use of the word.
You can call that "property" if you want, but you must understand that if I ever, under any circumstances, "agree" that someone else owns me, I've lied through my teeth for some other purpose. And I would lie this way under various circumstances.
But no, I don't agree that anyone owns anything in the absence of an artificial state, because the whole idea of "property" presumes a standard rule of law; otherwise, I don't know where your property ends and mine begins, unless I just take your word for it.
In reality, I take the statesmen's word for who owns what, and so do your neighbors, and so do you. Everything you currently own you own by these rules. I'm happy that you don't own me, and I'm happy not to own you, but my ancestors only a few generations ago did own people.