Re: standard of living?

Carl Dassbach wrote:

> > 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.
> 
> Huh?  I don't understand what is meant by the validity of the pie argument -
> does that mean the belief that the pie CAN  be expanded or the belief that
> it CAN NOT be expanded.  Moreover, I don't see how this and what follows
> (which I have deleted) relates to the point above.

Actually, it refers more generally to the validity of the idea that it
make sense to conceive of the the satisfaction of wants by means of the
market economy as a pie. To employ this metaphor, we look at history and
we observe that goods and services were produced. We call the complex of
those goods and services a pie. We expect that the future will be like
the past and refer to the future as a time at which a pie will have been
produced. Then we try to conceive of ways in which the "future pie"
could be better distributed.

But we lose sight of the fact that the goods and services would not be
produced if it weren't for the knowledge of the specialists and their
incentives to acquire the knowledge and to act on it by producing goods
and services. And we neglect the system of signaling that is required to
coordinate the knowledge and actions of the specialists.

Some of these points are discussed in greater depth in a chapter of a
microeconomics textbook draft called "Coordination in the Market
Economy."

http://www2.cybercities.com/g/gunning/knowent/mi-7.htm

-- 
Pat Gunning, Sultan Qaboos University, Oman
Web pages on Subjectivism, Democracy, Taiwan, Ludwig von Mises,
Austrian Economics, and my University Classes
http://www2.cybercities.com/g/gunning/welcome.htm
http://www.fortunecity.com/meltingpot/barclay/212/welcome.htm