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I am a lead pencil—the ordinary wooden pencil familiar to all boys and girls and adults who can read and write. http://www.econlib.org/library/Essays/rdPncl1.html

I find it unfortunate that an otherwise interesting story is used to convey some silly neo-liberal ideas. Try that getting-stuff-over-the-ocean-cheaply trick without harbors.

OK, I'll bite: which are the silly neoliberal ideas?

"Have faith that free men and women will respond to the Invisible Hand."


Are you saying that people don't act according to their own satisfaction (monetary, emotional, romantic etc)? That human activity is basically Gaussian noise?

That's a strawman - disagreeing with the concept of the Invisible Hand (or perhaps rather, disagreeing with the scale some attribute it) is not the same as saying humans are RNGs.

Yes, it's a leading question.

From the other side of the debate I'd attack the concept of subjective value.

Why do people value this? We don't know. They just do.

How do you know they value it? Because of their actions.

Why do they take those actions? Because of their valuations.

But it's also difficult to argue the counter-case. Outside of corner cases such as depression, psychotic episodes etc, if people aren't acting to diminish discomfort or increase their perceived happiness, then what is motivating them?

The problem with this argument is it's too simplistic. When you respond with "people will sometimes do things against their best interests out of a sense of duty", the counter is to reduce the human to a stimulus-response box and say "aha! but they must be doing that because it benefits some psychological issue, so it is increasing their happiness"

The issue comes when that extremely mangled definition of happiness isn't then injected into economic discourse - it becomes a matter of dusting off the hands and saying "well, we proved that people do what's required to be happy" and go back to the simpler definition.

In any case, reducing everyone to a stimulus-response box and stating that on balance, it must be beneficial to choose action X for the organism turns the definition of 'happiness' into something worthless and actually pretty banal.

Edit: I usually see this argument in the sense of 'maximising profit', but occasionally as 'happiness' or other beneficial emotion.

I agree with the shifting sands of the "self interest" view.

Economists, though, don't fuss as much about motives because they're not observable. I mean you can build a reasonably explanatory model by simply assuming people are greedy hyperrationalists. But nobody really does that because it's just too simplistic.

If I had a point, I guess it's that economics thinking is much more textured and subtle than people give it credit for. "Neoliberal" is a label that was invented by critics and so its meaning is basically "whichever strawman fits right now".

If we're naming names amongst the arch-neoliberals, I think these days I prefer Hayek to almost anyone else. I think he really spent time in the stew of ideas and didn't retreat from the revealed complexity of the world into equations.

Isn't a person acting to fulfill one's duty something they do because they feel it is in their best interest? I would not be using the term "happiness", rather say that a person acts to remove a felt uneasiness.

How do you define "happiness"? What do you propose as an alternative to the subjective theory of value? (edit: if you disagree with it, I noticed it was the other guy hinting at being against it.)

Exactly what I was thinking about. Milton Friedman mentioned that story as well in his talk here: http://www.youtube.com/watch?v=4ERbC7JyCfU

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