Re: standard of living?

"Jeffrey L. Beatty" wrote:

> Actually, it's a "zero-sum game" primarily in the minds of people in the world-system tradition. The claim of Andre Gunder Frank and others that development and underdevelopment are two sides of the same coin and that, in effect, what one country gains another loses depends upon the assumption that the total size of the economic "pie" cannot increase, i.e., that worldwide aggregate growth is impossible. This argument, in turn, depends upon the assumption that the productivity of a finite set of factors of production cannot be increased by technological change. Is anyone willing to argue that technological change increasing productivity never occurs? If so, is there any economic theory that can explain why or in what sense it never occurs?>

To add to Jeffrey's points, the validity of the "pie" argument also
depends on the assumption that we know what the finite set of factors of
production are, how they can be used to produce goods, an how to cause
them to be used to produce goods. In a market economy, such knowledge is
produced and possessed by almost uncountable minds of human specialists.
It does not exist and cannot exist in the mind of any single person or
central planning committee. Moreover, the knowledge that the separate
individuals have the knowledge and can act on it (i.e., the knowledge of
the knowledge) must be transmitted to others in order for _coordination_
of the factors of production to occur. This information-transmission and
signaling process requires markets and prices and a profit-and-loss
system. The profit-and-loss system assures that the information that
people transmit through markets and prices is regarded by the
transmitter as reliable. It also gives people incentives to use the
items that people judge to be factors of production to produce goods.

It is a common error among socialists to assume that a central planner
or committee possesses super-human knowledge and that he (it) can use it
in an efficient way. For list members who want to see good refutations
of this assumption, they should read:

von Mises, Ludwig. (1981) Socialism, An Economic and Sociological
Analysis. 3rd revised edition. Indianapolis: Liberty Classics.
(Originally published in 1922 under the title of Die Gemeinwirtschaft:
Untersuchungen uber den Socialismus)

Hayek, F. A. (1945) "The Use of Knowledge in Society." American Economic
Review. 35 (4)

Hayek, F. A., The Road to Serfdom, Chicago: University of Chicago Press,
1956. (originally published in 1944)

-- 
Pat Gunning, Sultan Qaboos University, Oman
Web pages on Subjectivism, Democracy, Taiwan, Ludwig von Mises,
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