Hans Herman Hoppe's reply (Must Austrians Embrace Indifference?) to Nozick's criticism of the idea of homogeneity in Austrian economics is great, but I have to say the first time I read it I was utterly unconvinced that it really explained the difference. But after I'd done some thinking and come up with an idea of my own, I returned to the article and found that it suddenly made perfect sense and had only been presented in a way that could have been a bit clearer.
I'll put forward my interpretation, which is essentially the same but easier to grasp:
Each object has a set of properties whereby it is defined.
No two objects in the world have the exactly same set of properties, because that would imply that they, for instance, occupy the same space at the same time, are made of the same piece of material that existed in the past, and so on.
Or, in a more relevant way, no economic actor can think of two goods between which he must choose as having the same properties, because in that case the actor has no way of distinguishing between them (even calling one good "good 1" and another good "good 2" ascribes certain properties to these goods - the properties of being, respectively, the first and the second good).
Now the actor does not possess full knowledge about all the properties of a certain good - that stems from the fact that, ultimately, the set of properties of each good is infinite, as every detail of a particular good's existence is a property of the good.
Every actor has preferences in reference to mutually exclusive properties - e.g. "the item on the left" over "the item on the right"; "blue" over "red" over "blue-red striped".
A set of goods is homogeneous for an economic actor (of course it can't be objectively homogeneous if we stick to our Austrian guns) if and only if the actor possesses knowledge of only those properties that do not allow distinction between them. When a merchant buys goods, he is concerned only with a certain set of characteristics that is universal to all of these goods. He cannot distinguish between them, because he knows no characteristic features that would allow him to do so.
Now the objection is - what if an actor has to choose between goods belonging to homogeneous set? The answer is: the question is inherently contradictory.
As we've already established, in order to make a choice, the actor first has to distinguish in some, any way between the objects of choice - and if he can make such a distinction, the goods are not homogeneous.
The merchant mentioned above cannot choose between a good and another good. He has to choose between Good A and Good B and if he can make such a distinction, he is not indifferent between those goods (and these goods are not homogeneous to him)
That's why Walter Block's response wasn't entirely correct - Block said that a distinction is always made after choice enters the arena. But the thing is, it makes no sense whatever to speak or even think of choice if the objects of our choice are not distinguishable to the actor.
And thus we come to a very Austrian point - that indifference is not only praxeologically unobservable, it is logically contradictory and may be rejected via rational analysis.
This conclusion rests on a single premise that sounds sensible, but I haven't come up with a way to prove which - that people are never indifferent between two distinguishing (mutually exclusive) properties. The classic example is tossing a coin - the actor demonstrates the preference of the good designated by one side over the other even though the particular choice has absolutely no impact on the life of the actor. And most goods are distinguishable enough so that the actor can make a more, say, conscious choice.
[Technorati: Austrian economics]
Monday, January 8, 2007
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