The wisdom of “Baldy” Harper on value

In the modern West, where it seems economic discussions are endlessly clouded by the fallacies uttered by cranks of socialistic persuasion, it is a delight to come across material which conveys timelessly truthful concepts in economics reinforcing basic liberty ideals.

And so it was earlier today that I had the great fortune of stumbling across a sixteen-page pamphlet written in 1974 by the American economist Floyd Arthur “Baldy” Harper, providing an introduction to the economic theory of subjective value. I wish to share with readers some telling paragraphs from what is an outstanding short piece of work and, by all means, do bear in mind these passages when considering the efficacy of the numerous policy proposals about to swamp Australian voters over the next few months:

Traders on both sides make a profit in every voluntary exchange, due to the spread between their values and the terms of that exchange.

By the same reasoning, every compulsory or involuntary exchange, where one person confiscates the goods or services of another or dictates the terms of the exchange under force or the threat of force, entails an economic loss for the unwilling participant. Economically as well as morally, all such transactions are the same as outright theft.

It follows that a wholly voluntary economy results in the greatest general welfare to all the persons of that society. In such an economy, every person profits to the maximum, no matter where he plays in the field of economic activity – as employer or employee, buyer or seller, lender or borrower, etc. It likewise follows that in an authoritarian society losses will be the universal experience of everyone except the dictator himself.

(Source: F. A. Harper, 1974, An Introduction to Value Theory, Institute of Humane Studies)

Incidentally, Harper himself left an outstanding legacy for American classical liberals by virtue of his role in founding the Institute of Humane Studies.

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32 Responses to The wisdom of “Baldy” Harper on value

  1. Alex Robson

    As a PhD student I was the recipient of financial support from the Institute for Humane Studies, they do a wonderful job.

  2. Ant

    If only Swanny would try and comprehend it.

    But his brain is full of Springsteenian mush instead.

  3. Pedro

    Many stupid ideas have at their heart the notion that values are objective. But the second paragraph of the quote has the little crack (in interpretation) into which the socialist will forcefully shove the wedge.

  4. Julie Novak

    Hi Alex – a lucky man, indeed.

    Ant – too right!

    Pedro – I actually do suspect that some of the strident advocacy by Labor luminaries (and others) about “jobs created here,” “jobs created there” does stem from their belief in the highly fallacious labour theory of value.

  5. Kruddler

    As Mel Brooks once said ‘It’s good to be the King’

  6. William Bragg

    Traders on both sides make a profit in every voluntary exchange, due to the spread between their values and the terms of that exchange.

    It is always valuable to have one’s attention drawn by a Cat to a powerful, concise exposition of the principles that underlay right-wing thought that is so clear-
    ly wrong. The statement falls in the very first sentence, which fails to recognise that cognitive limitations on the part of agents in a voluntary transaction can lead them to miscalculate the benefits and costs entailed and be worse-off.

    By the same reasoning, people can be made better of through ‘involuntary exchange’. There is thus no firm basis to maintain that “…a wholly voluntary economy results in the greatest general welfare to all the persons of that society.”

    Harper has the partial defence that he was writing in 1974, long before the lessons of behavioural economics became mainstream. By contrast, Julie Novak quoted him, approvingly, on 28 February 2013.

  7. Jc

    behavioural economics became mainstream.

    You mean pop psychology, Braggs? That’s all behavioral economics is by and large. Ask former economist Andrew Leigh who wrote several pop economics pieces.

    Certainly, a person can be made worse off in a voluntary exchange. But one anecdotal example doesn’t make the rule, you fucking idiot. What’s being discussed is what generally applies in big populations. In other words voluntary exchange is superior to involuntary exchange. 70 years of the existence of the soviet union proves it.

    Braggs, you’re better off arguing people that wear more expensive suits than other people to an interview should be taxed, like you did a short time ago.

    You moron.

  8. blogstrop

    Sinc has the partial defence that he tries to give even people like Braggs a chance to speak.
    Cognitive limitations in people entering into voluntary transactions are not something you can trot out as a flaw in the system. It is merely a flaw in the individuals.
    Trying to level everything, to redistribute to those people who don’t succeed in even working for a wage or salary, is the fatal flaw of the socialist lefty like Billy Brags.
    The wholly voluntary economy needs no endorsement from him. And we don’t need the waste of pixels that his presence entails.
    I command this bloggish economy to level or redistribute him.

  9. .

    It is always valuable to have one’s attention drawn by a Cat to a powerful, concise exposition of the principles that underlay right-wing thought that is so clear-
    ly wrong.

    Pro-tip.

    Libertarians are not right wing.

  10. wreckage

    William does not go shopping; the risks are too great. Instead he finds someone who looks clever, gives them a 50 and waits for them to fulfil his needs better than he can. Similarly, he refuses to communicate his emotional needs in relationships, nor to respond to such communications. There’s the real risk of making a mistake; this of course disappears when the decision is put off, handed off, delegated, or fixed into prescriptive legislation.

    I can’t imagine having so little confidence in myself, and so much confidence in the computational intelligence of legislation. It’s sentences on paper. It doesn’t have the IQ of a moderately complex algorithm let alone of a human intellect!

    Imperfect information is an argument FOR free markets, not for control economies, Bragg. It’s the basis of Hayek’s defence of the free market. And it’s a simple, mathematical dead-end for control economies; they simply cannot have the computational sophistication necessary.

  11. Louis Hissink

    Bragg, who the heck asked your lot that we need to be better off? I suspect that once Hindu ascetics were incorporated into your socialist hell, that these ascetics, who prefer to live a life of privation, would be put to death, in a kindly fashion as George Bernard Shaw wrote a couple of centuries ago. Under socialism these ascetics would be expected to live, and live well, but it’s obvious that being ascetics they would reject all that socialist materialism, and incur GBS’wrath.

    If some wants to live the life of an ascetic and remain indigent, in our system that person’s choice is respected; in yours it isn’t.

  12. wreckage

    Under capitalism people like me are useful, under communism we have to be shot.

  13. .

    Braggs, you’re better off arguing people that wear more expensive suits than other people to an interview should be taxed, like you did a short time ago.

    You moron.

    Also: cancer patients receiving blood donations are “free riders”.

  14. Louis Hissink

    Jc, involuntary exchange is theft.

  15. wreckage

    Also: cancer patients receiving blood donations are “free riders”.

    Braggs really, truly, deeply doesn’t understand the word “voluntary”…. does he?

  16. William Bragg

    Certainly, a person can be made worse off in a voluntary exchange.

    Thank you for effectively ackowledging the veracity of my point that Harper’s statement that “traders make a profit in every voluntary exchange” is wrong.

    But one anecdotal example doesn’t make the rule, you fucking idiot. What’s being discussed is what generally applies in big populations.

    Cognitive limitations are not “one anecdotal example”; thet are a class of market failure in which there are numerous examples. In any case, as noted above, Harper said “every” voluntary exchange. It is a matter of basic logic that invalidating that statement requires only one exception.

    Bragg, who the heck asked your lot that we need to be better off?

    The electorate have been voting for parties advocating such policies for some time now. In any case, who asked ahead of time specifically for the mandating of seatbelts? But everyone – including even the most pure and zealous Libertarian, at least in private – recognised in hindsight that such good work made their lives better.

    Imperfect information is an argument FOR free markets, not for control economies.

    Ho hum: time for more Econ 101. Cognitive limitations is not the same as imperfect information. One could have perfect information and still misjudged benefits and costs due to cognitive limitations.

    Libertarians are not right wing.

    I didn’t say that they are, but I do note that many Cats – perhaps reflecting their befuddlement about political philosophy generally – engage in reflexive, knee-jerk support for policies advocated by right wing parties and politicians, irrespective of whether the policy in question adheres to Libertarian principles.

  17. .

    Braggs thinks because the recipients don’t pay and are not obliged to make returns (often if you need blood, such as a cancer patient, you can never give blood yourself), this reduces the inclination of others to donate.

    He also however believes that paying blood donors reduces blood donations.

    What a chucklehead.

  18. William Bragg

    We all know you have problems, Dotty, distinguishing self-evidently nonsensical statements from sensible ones. Still, and although you’ve raised it about a dozen times now as if it were an example of the former, the statement that blood recipients are free riders is not actually that strange – as the various references listed on this link (at 6.45 on the 26th) demonstrate.

  19. .

    the statement that blood recipients are free riders is not actually that strange

    Yes, it is.

    You are a strange person Bragg with vastly overestimated powers of deduction.

  20. Jc

    Braggs, you’re such an intellectual poseur. Tell us, have you even met a gal that liked you?

  21. William Bragg

    Tell us, have you even met a gal that liked you?

    More, one senses, that Libertarians such as you who spend all their time on the internet, beating themselves with their invisible hands.

  22. .

    More, one senses, that Libertarians such as you who spend all their time on the internet, beating themselves with their invisible hands.

    Sure, just tell them you think kids who are leukemia patients are bludgers who are threatening emergency blood supplies because their use and non reciprocation makes donors (like me) less likely to donate.

    No mention of ALP slug Mick Tickner’s 400k+ salary at the ARC.

  23. Jc

    More, one senses, that Libertarians such as you who spend all their time on the internet, beating themselves with their invisible hands.

    Touchy on that one Braggs. Seriously, if you spoke to a gal the way you speak here, I’d reckon you’re still a virgin. In fact I’d lay odds.

  24. John Mc

    Tell us, have you even met a gal that liked you?

    I always thought it was widely known that Bragg putts from the rough?

  25. John Mc

    The statement falls in the very first sentence, which fails to recognise that cognitive limitations on the part of agents in a voluntary transaction can lead them to miscalculate the benefits and costs entailed and be worse-off.

    Maybe once or even twice, which they would then learn from and not do again.

    This type of person doesn’t exist. You’re saying there is a subset of our society that goes about their lives making a living, going about life, otherwise living as a normal citizen, but consistently can’t make rational decisions in basic trades as to what affords value to themselves.

    Firstly, if these people wouldn’t continue to exist. They’d think the little red man meant ‘walk’ and get hit by a bus. Or the poison warning on the label was just for show. Secondly, you seem to have ignored other subsequent factors like basic democracy requiring them to be able to vote in their own interests. Or being able to protect their own wellbeing through complying with the law. If they can’t do these things surely they should not be considered a free citizens and prevented from voting or be institutionalised, lest they do harm to themselves or others?

    Reason suggests that most of the people, most of the time, have enough cognitive capacity to make the basic decisions to get themselves through life, usually advancing themselves in life.

  26. William Bragg

    Seriously, if you spoke to a gal the way you speak here, I’d reckon you’re still a virgin.

    I realise that logic is not your strong point, JC, but while how you might speak to a gal could reasonably be presumed to have an effect on your own sexual activity, it would be extraordinary if it had any impact on mine.

    Still, I guess Cats’ newfound interest in my sex life at least distracts attention from the economics, which given how they’ve fared in it on this thread is an understandable tactic.

  27. .

    Reason suggests that most of the people, most of the time, have enough cognitive capacity to make the basic decisions to get themselves through life, usually advancing themselves in life.

    Except that “economics” means that Bragg should make major and trivial decisions for them.

  28. William Bragg

    Maybe once or even twice, which they would then learn from and not do again.

    Your evidence for this? Behaviourial economics, together with everyday observation, provides plenty of counter evidence. Indeed, spending any amount of time on the Cat, one sees repeated instances of the same cognitive mistakes from the usual suspects.

    PS: Whoops – I misread a statment from JC, so I acknowledge that the first para in my 10.58 response is misplaced, although the latter point remains on the money.

  29. wreckage

    Ho hum: time for more Econ 101. Cognitive limitations is not the same as imperfect information. One could have perfect information and still misjudged benefits and costs due to cognitive limitations.

    The arguments are the same for both and the liberal view wins on both, but hey, quibble if you like.

    By the way? You’re having trouble again with talking too loud about stuff you don’t understand. Econ 101 doesn’t go much into cognitive function. Unless that was a specialist Econ 101 they taught for your Psychiatrist Degree.

  30. William Bragg

    The arguments are the same for both

    No wreck, market failure due to imperfect information can be corrected by providing additional information; market failure due to cognitive limitations can not be. Again, this is just basic logic, but alas it seems to be beyond you.

    and the liberal view wins on both

    LOL

  31. John Mc

    Your evidence for this? Behaviourial economics, together with everyday observation, provides plenty of counter evidence.

    The rise of humanity from the swamp to the stars. Or does your particular version of Behaviourial economics assume this was an accident.

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