[guest post by Dana]

Will he or won’t he?

The Vice President met privately with Elizabeth Warren on Saturday, a meeting no doubt leaked by the Biden team. The Massachusetts Senator is the patron saint of the Democratic left these days and Mr. Biden would love her support if he does run. Then on Sunday our colleagues in the Journal’s Washington bureau reported that the Veep is leaning toward a run. Other media reinforced the story.

White House spokesman Josh Earnest added to the intrigue when he volunteered to reporters on Monday that President Obama thinks his decision to choose Mr. Biden as his running mate was “the smartest decision he’s ever made in politics.” Mr. Earnest is a careful man who wouldn’t say this without clear presidential authorization.

“The Vice President is somebody who has already run for President twice,” Mr. Earnest added. “So I think you could make the case that there is probably no one in American politics today who has a better understanding of exactly what is required to mount a successful national presidential campaign.”

(That’s funny because clearly Biden has never mounted a successful national presidential campaign…)

For his part, President Obama has not endorsed Clinton, in spite of Josh Earnest noting the president’s “appreciation and respect and admiration” for Mrs. Clinton. But still no endorsement. Given that he’s in legacy mode, it’s a safe guess that the president doesn’t trust or believe Clinton is the one to build on his work:

The President is enough of a cold-blooded politician to know that a considerable part of his legacy will depend on whether a Democrat succeeds him in the Oval Office. Above personal feelings, he wants a Democratic nominee who can win in 2016.

Today, Biden had lunch with President Obama, and according to a senior Democrat, the president gave Biden his “blessing” to make a run for the White House.

But given that Biden has already run twice for president and lost each time, why would this time be any different? Perhaps it has something to do with Clinton’s email scandal:

[w]hat Mr. Biden and Mr. Obama know about Mrs. Clinton’s mishandling of classified information on her personal email server while running the State Department. The FBI is now investigating, and it’s hard to believe the White House wouldn’t have some inkling about the seriousness of that probe.

The FBI pressed investigations that forced two CIA directors, David Petraeus and John Deutch, into pleading guilty to misdemeanors for lesser violations than Mrs. Clinton appears to have committed. FBI Director James Comey and Attorney General Loretta Lynch would be hard-pressed to block an FBI recommendation that sought a misdemeanor plea bargain if it were rooted in solid evidence and consistent enforcement under the law. Such a plea would be devastating to Mrs. Clinton’s credibility even if it didn’t end her campaign.

This could end up being a win-win for Warren. If Biden guarantees to run for only one term and she brings the progressive Run Warren Run vote, then the stage could be set for a possible future Warren presidency. But then, this ignores Sanders and his supporters. Where does the progressive vote go?

It’s anybody’s guess:

Unlike Warren or Bernie Sanders, the Vermont progressive who’s assumed the support of many Warren backers, Biden is a pillar of the Democratic establishment, vice president in an administration that many progressives consider too centrist.

That puts him in roughly the same position as Hillary Clinton: liberal on many issues, but a traditional party loyalist at the end of the day.

Biden, to be successful, would need to appeal to a large majority of progressives who are disenchanted with Clinton, while persuading them that he’s a better vehicle for their beliefs than Sanders, who’s been drawing huge crowds and gaining on Clinton all summer.

Anyway, it’s rich to see another old, white guy consider running for the presidency. Democrats: White Patriarchy!

Predictions?

On the entertainment side, can you imagine a debate between these two?

–Dana

A woman saw Donald Trump’s face in her tub of butter.

It’s the mouth.

Regular readers know I don’t consider the Dow an accurate measure of much of anything . . . but still.

FWIW, this was me at 9:15 pm last night:

Stock market crash begins in earnest tomorrow? All signs point to "yes."

— Patterico (@Patterico) August 24, 2015

This is Part 3 of my ongoing series of posts summarizing Bob Murphy’s excellent book Choice: Cooperation, Enterprise, and Human Action — which itself is a summary of Ludwig von Mises’s classic treatise “Human Action.” The idea of this series of posts is to popularize and spread the word about Austrian economics and educate the public. Part 1 is here. Part 2 is here. Feel free to read them first if you’re just getting started. They’re actually very simple posts, making very simple points — as we are still in foundational mode.

Also, I have created a category for all these posts, called “Human Action and Choice,” so that all these posts can be read (in reverse order) with a single click. Also, let me be clear: any errors in these summaries are mine and not Murphy’s. I am restating his points in my language, and that opens up the possibility of inaccuracy. Should that happen, blame me, not him.

One of the things that the Paul Krugmans of the world mock about Austrian economics is that they claim it is too abstract and has no relationship to the real world. After all, as I explained in previous posts, Mises sees economics as a discipline that derives universal truths from deductive reasoning that has nothing to do with experimentation. Mises tells us that everything we need to know about economics is within us. All we need to do is think about these principles and understand what logically follows from our conclusions. How can that teach us anything about the real world (the Krugman types ask)?!?!

Here, Murphy makes the analogy to geometry. We do not derive the Pythagorean theorem by building 500 right triangles and measuring the angles and the sides. The proof of the theorem does not depend on experimentation. The proof is within us — it is simply a logical chain of thoughts that we need to reflect on.

How can economics be compared to that?? Isn’t economics a discipline depending on endlessly random and changing variables that can never be predicted?

Mises says that’s wrong. According to Mises, there are certain laws of human action that we can derive logically — just as we logically derived yesterday that human action requires a mind, preferences that are ordinal and not cardinal, and a desire to affect the future.

Economics is not physics. Economics does not set up a hypothesis about what will happen in reality if one conducts a controlled experiment in which x does specified action y to object z. In economics, as conceived by Mises, there is nothing to “test.” It is an a priori discipline. Mises did not reject the study of data. But he did reject the notion that principles of economics depend upon on the outcome of data from controlled experiments.

Murphy, in his book, offers a compelling defense of this approach, by challenging the hypothetical classical economist to come up with precepts that demonstrate what it means to “think like an economist.” Murphy quite rationally guesses that even a classical economist would say things like this:

• “There’s no such thing as a free lunch.”

• “People make decisions on the margin.” [Editor’s note: we’ll get into what this means in a future post. The simplest way to illustrate the concept for now is with this observation: the hundredth bite of steak may not be as appealing as the first bite.]

• “Trade is a positive-sum game.” [Editor’s note: socialists and Democrats forget this one all. the. time.]

Pretty much every honest economist would agree with these concepts. But why? Because 100,000 controlled experiments have been run to demonstrate whether free lunches exist? No. These are not observations we think are true because we conduct experiments. They are simply inherent in the process of “thinking like an economist.” These are truths that we know, from being a human being and reflecting on the nature of humans and how they act.

Also important is to distinguish economics — an analysis of human action — from economic history, which is a very different discipline. Again: Mises did not reject the concept of collecting economic data per se. Murphy notes that Mises and his student Friedrich Hayek founded the Austrian Institute for Business Cycle Research in 1927. (Mises predicted that the monetary expansion of the 1920s was going to result in a giant crash, just as followers of Austrian economics like Ron Paul predicted, in the early 2000s, a huge crash from the Fed’s cutting of interest rates — while folks like Paul Krugman were explicitly calling for a housing bubble; no joke!). So: no, Mises did not reject the study of economic data. He just refused to call it “economics.” He just believed that study fell under the category of “economic history.”

So if you think geometry is irrelevant to the “real world” because its truths do not depend on empirical observations or experimental verification, feel free to reject Austrian economics on the same basis. Otherwise, you are compelled to grapple with each grippingly inescapable conclusion on its own . . . even as it follows inexorably from the previous one.

Murphy rounds out the chapter with this observation:

“Subjective Value Theory” Is an Objective Theorem in Misesian Economics

Other than learning the building blocks of Austrian economics, one of the main concepts you might learn from this post (if you are unfamiliar with the concept, which many people are) is the concept of “subjective value theory.” The idea here is that the market price of any good, or service (or stock, or bond) does not depend upon anything objective. The price simply reflects the subjective perspective of consumers in the market. This is not a uniquely Austrian insight, as far as I know; I believe it is universally accepted by all honest economists these days.

And I think the insight is very valuable. I once had someone say to me: “I heard the stock market lost hundreds of millions of dollars in value yesterday. My question is: where did it go?” Before I learned “subjective value theory” I was utterly at a loss. Where had it gone? I had no idea.

Now I know: it didn’t go anywhere. Yesterday, all the people forming the consumers in the stock market collectively thought these stocks were worth x. Today, they think it’s worth x . . . minus a few hundred million dollars. It’s completely subjective.

Again (and I could be wrong here), but while this is a core Austrian concept — and was discovered by the earliest known major Austrian economist, Carl Menger — it was also discovered by others at about the same time . . . and is now (I believe) fairly well universally recognized by all economists, both Austrian and classical.

The point made by Murphy is not to explicate the concept (which is, I submit, an important concept), but rather to note that, within Mises’s framework, this “theory” is not really a “theory” in the way we typically use the term. It’s more like an objective theorem, the way the Pythagorean theorem is a truism and not a “theory.”

Again: economic truths like these just are. They can’t be proven right or wrong by experimentation. They are just there: truths to be discovered through reflection.

Enough for today. Tomorrow we’ll define some more concepts and get into the concepts of diminishing marginal utility (a core economic concept) as well as the central role that time plays in the Austrian vision.

I hope you’re enjoying this. Real economics is one of the most important disciplines you can learn.