Enlightenment from the Austrian Economics-Market Road of Elastos’ constructive rationality


By:LaoMao

  1. Integration of Elastos’ construction rationality and free market

Mises’s passage in Liberalism: “Liberalism and socialism, both dedicated to the goodness of all mankind, the difference between them is not in their ultimate goal, but in their use to achieve the means of ultimate goal"
Today, the Internet is staged by centralized organizations, especially monopolistic Internet giants, who have freely occupied personal data and deprived individuals of their private data assets to realize the explosion of online transactions (transaction revolution). They are enslaving consumers in the market,breaking the internet monopoly has been widely agreed by the public. A large number of Cyberliberals are developing various decentralized blockchain application platforms based on the freedom and trust brought by cryptocurrencies and their own unique cognition. For this reason, Elastos has also designed and developed a blockchain-driven intelligent World Wide Web, its architecture has four major technical pillars: 1. Blockchain and smart contracts; 2. Elastos Runtime; 3. Elastos Carrier; 4. Elastos SDK. Based on these four pillars, Elastos has defined the characteristics of the new generation Internet as follows: security, decentralization, user-centricity, and data assetization. Elastos has an original and successfully implemented three-layer distributed consensus mechanism, namely the AUXPoW mechanism jointly mined with Bitcoin, the DPoS consensus mechanism, and the CRC consensus mechanism for community governance. CRC is to imitate representative democracy in the real world to manage community self-government organizations. Its goal is to build a stage on which the modern capitalist market economy is implemented on the Internet, to reconstruct personal private data assets and to provide an environment for creating new business economic models, to form a global new wealth consensus, to achieve a win-win situation and wealth freedom for innovators and consumers on the new generation of Internet.
However, how the constructive rationality of Elastos at the microeconomic level can achieve its preset goals has become the most concerned issue of currency holding investors. Especially in the context of Austrian economics, how Elastos should be integrated into a free and competitive market has become a topic widely discussed by the community.
Nobel Prize winner Hayek believes that the ideological foundation of a planned economy is constructive rationality. Constructive rationality believes that human beings are omniscient and omnipotent, able to gain insight into all aspects of society, and lift people to the height of God, thinking that through rationality, human things can be designed and planned omnipotently. But in fact, it’s not. People are not completely rational. People are purposeful and imperfect creations. Their knowledge is limited and they make mistakes. The existing knowledge is scattered, fragmented, and often difficult to transfer. No one or institution can get all the information in a specific time and space, so it is impossible to make a versatile plan for social development.
The article “The Pretence of Knowledge” provides an epistemological basis for analyzing the causes of constructivism. By distinguishing between complex inorganic phenomena and organic complex phenomena, this article points out that the role of scientific knowledge is limited and can only be applied to “inorganic complex phenomena”, but not to “organic complex phenomena”. Market, order, etc. are all “organic complex phenomena”. The fallacy of constructivism or the emergence of constructivism is applying logical reasoning, mathematical proof and other methods that are only applicable to scientific knowledge to organic and complex life phenomena, mental phenomena and social phenomena.
Hayek pointed out that “because the social sciences must deal with structures that are extremely complex in nature. In other words, the social sciences must deal with structures that can only reveal their characteristics by constructing a model of more variables. For example, competition is such a process, because we know that competition only produces certain results when it is spread among a large number of actors." And "due to such an important problem, That is, the kind of problems that arise when we apply our theory to any particular situation in the real world. A theory that studies phenomena that are particularly complex in nature is bound to involve a large number of specific facts; therefore If we want to infer a prediction from this theory, or to test it, then we have to ascertain and determine all these particular facts… In fact, the real difficulty is to ascertain And determine those particular facts, because, first, science cannot make a difference in overcoming this difficulty; second, sometimes this difficulty is indeed an insurmountable difficulty. What is it? It means that for a phenomenon that is particularly complex in nature, the fundamental research required is to know all the “particular facts”, and these particular facts are due to the existence of independent personal free fields and separate knowledge being mastered As a result, if there is no free existence and the separation of knowledge, under the guidance of a unified plan, there is only an artificial “predictable” quantitative accurate prediction model, without the need to emphasize the importance of individualism.
Furthermore, Hayek pointed out that due to the dispersion of human personality and different knowledge, the prediction will not be “precise prediction” but “pattern prediction”. Although this prediction is a sub-optimal prediction, it has the greatest value. It is because it does not hinder the occurrence of spontaneous and orderly forces, because this pattern recognizes people’s pursuit of their own purposes. Human society cannot be “quantified” like a purely physical phenomenon. It is a failure to replace specific situations with data. Social science itself needs a principled guidance or “pattern prediction” and nothing else. The existence of the so-called omnipotent government will not be tolerated for this reason.
The theoretical basis for a planned economy comes not only from traditional Marxist scholars, but also from mainstream economists in the West. Lange used the neoclassical economic pattern to demonstrate that the planned economy is feasible. He regards the assumptions made by neoclassical economics to prove the effectiveness of the market as reality itself, claiming that the plan can simulate the competitive market system and can allocate resources as effectively as the market. As a result, Lange was regarded as the winner of the great debate on the feasibility of the socialist planned economy and was respected by mainstream economists, while scholars such as Mises and Hayek who opposed the planned economy became the object of sarcasm.
Let’s think about it carefully. How can the planning agency collect so much information? Not to mention, the economy is a dynamic process, and in the absence of markets and entrepreneurs, the envisaged information simply does not exist. Think about it, when the iPad is not produced, how to count the demand for it? Mainstream economists have never understood how the market works, but they think they understand it.
A further theoretical extension is that as long as it is completely cut off from violence, completely separated from the relationship, and follows the rules of the game of free and democratic market economy, then we can and should regard central planning and rational design as a kind of “spontaneous order” and developing forms. Even if the central plan and rational design deviate from the value standards of the above-mentioned established trends of human historical development, as long as the means of violence and coercion are completely removed, they will surely be easily corrected by the “spontaneous order” through the “invisible hand”! It cannot be the sin of “the road to slavery”.
Why do we need a market economy? In fact, it is very simple. Only a market economy can avoid the human disaster caused by the combination of the ignorance of the majority and the shamelessness of the minority.
The market economy has actually reduced our ignorance. In the market, whether the right knowledge is obtained and the judgment of the future is accurate determines the success or failure of the business and the profit. This encourages entrepreneurs to actively reduce their ignorance. The market is a process in which entrepreneurs constantly discover, create, and process information. This information does not exist in a planned economy without entrepreneurs.
The market economy also prevents our self-interested behavior from becoming a shameless behavior that hurts others. In the market, it is up to others to decide whether it is good or not, not by themselves. In market competition, if you want to seek your own interests, you must first create value for others, create value for consumers, and create value for customers. Market competition is competition that creates value for consumers. In a planned economy, the best way to seek personal benefits is to harm others, to grab the fruits of others’ labor, and to take advantage of others. A
To sum up, in our efforts to establish the Elastos Ecological Order, if we will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, we cannot acquire the full knowledge which would make mastery of the events possible. we will therefore have to use what knowledge we can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants, provide an open, fair, and free market environment for Elastos to participate in free competition and spontaneously form rules that are most conducive to the play of personal knowledge and transaction efficiency , which promote the exchange of spontaneous and decentralized personal knowledge. This will be a process of continuous innovation and elimination, as well as a gradual trial and error process.

  1. Encouraging entrepreneurs to participate in Elastos ecological project construction and innovation based on market logic

    What is the logic of the market? The logic of the market is to continuously pursue one’s own happiness without harming others. Humans invented the market economic system to achieve this most beneficial purpose for human beings.
    To this end, Elastos’ high-quality infrastructure development needs to face entrepreneurs engaged in the development of ecological projects, so that they feel that developing ecological projects on Elastos Chain can be handy, improve development efficiency and have long-term value and stability.
    What is the role of entrepreneurs? The core driving force and organizer of the market economy are entrepreneurs. Entrepreneurs are the soul of the market, they are making decisions, organizing production, and innovating. The ability of entrepreneurs determines the wealth and distribution of wealth in society. If you work in an enterprise with high entrepreneurial ability, you can get a higher salary. If you work in a company with low entrepreneurial ability, you can only get very low compensation, and you may even lose your job. But in traditional economics, there is no role of an entrepreneur, and the three words entrepreneurs are not seen in the index of traditional economics textbooks. Because traditional economics assumes that resources, preferences, and technologies are all given, and the future is certain, and all participants in economic activities are as clever as possible, this drives entrepreneurs out of the market, and the market no longer needs entrepreneurs. But in fact, without entrepreneurs, the market cannot function effectively and the economy cannot really develop.
    In the great debate about the socialist planned economy in the 1930s, Hayek had a profound exposition of the nature of knowledge. He simply divided knowledge into two categories: hard knowledge and soft knowledge. Hard knowledge refers to knowledge that can be expressed and disseminated in ways such as language, text, numbers, charts, formulas, etc. This kind of knowledge is available to everyone and can be used intensively. For example, Newtonian mechanics and Einstein’s theory of relativity are hard knowledge.
    Soft knowledge refers to knowledge that cannot be expressed and transmitted by means of language, numbers, words, charts, formulas, etc., such as know-how, which can only be unspeakable. That’s what Laozi said, “Tao that can be described is not universal and eternal Tao
    , Name that can be named is not universal and eternal Name”. Mike Bollani divides knowledge into explicit knowledge and tacit knowledge. Hard knowledge is explicit knowledge and soft knowledge is tacit knowledge.
    The basic feature of soft knowledge is that it cannot be effectively transmitted, but it is very important for decision-making, especially for creative decision-making. Mike Bolany believes that tacit knowledge is the dominating principle of all knowledge, and even the most formal and scientific knowledge, without exception, follows some kind of conscious or creative behavior, and it reflects completely tacit knowledge.
    What is the difference between entrepreneurs and managers? Simply put, the knowledge on which they base their decisions is different. Entrepreneur decision-making mainly depends on soft knowledge, and manager decision-making mainly depends on hard knowledge. The decisions discussed in economics and most management sciences are decisions based on hard knowledge: given goals and alternative means, how to choose specific means to meet a given goal. This is far from real entrepreneurial decision-making.
    The decision of a true entrepreneur is not to choose means to meet a given goal, but to find alternative goals and means themselves. The level of entrepreneurship depends largely on the level of these choices. In other words, managers use tools and entrepreneurs create tools. Managers are to achieve goals, entrepreneurs are to create goals.
    From the perspective of decision-making, if the means and goals are given and the same, then under the same data, all rational people will make the same choice. Just like our exams, given the conditions, there is only one standard answer for each question. If you are not the same as the answer given by others, either you are wrong or someone else is wrong. But when entrepreneurs make decisions, it is precisely the same data and hard knowledge. Different people make completely different choices. You cannot say who is right or who is wrong, and even most people think it is right, but it is wrong.
    Why? Because entrepreneurs’ decision-making depends not only on data and hard knowledge, but also on tacit knowledge. Individuals’ imagination, perception, and judgment on market prospects, technological prospects, and resource availability. The judgment is not calculated. Entrepreneur decision-making is similar to the discovery of scientists, different from the so-called “scientific decision-making”!
    Entrepreneurship is beyond data. Some people think that the emergence of big data may make the planned economy feasible again, which is completely wrong. why? Hard knowledge and data are very useful for entrepreneurs, and entrepreneurs do need data when making decisions, but these data are available to everyone. The true entrepreneurship must be beyond these knowledge and data, and beyond what we are talking about now. Big Data. Decisions based solely on data are only scientific decisions, not entrepreneurial decisions. Entrepreneurs must see what is behind the knowledge and data that most people cannot see, and what different entrepreneurs see may be completely different.
    Traditional economics believes that the main function of the market is to allocate scarce resources, assuming that resources, technology and preferences are given, and then choose the means according to the goals. In fact, the real most important function of the market is not to allocate resources, but to change resources, use new technologies, new products, and new organizational forms to change the availability of resources and even obtain completely new resources. These changes are the innovations we are talking about. The progress of society is largely brought about by entrepreneurial innovations. Such innovations are not provided by data, including big data.
    To understand what entrepreneurship is, you must understand what entrepreneurship is not. Summarize three points:
    First, entrepreneurial decision-making is not scientific decision-making. Scientific decision-making is based on data and calculation, and entrepreneurial decision-making is based on imagination and judgment.
    Second, entrepreneurial decision-making is not a choice under given constraints, but changes the constraints themselves.
    Third, the goal of entrepreneurs is not only profit, but also something beyond profit.
    The market is not given, and the technology is not exogenous, but created by entrepreneurs out of nothing. In recent years, through studying the history of the industrial revolution and the history of technology, it has been found that there is an entrepreneur behind every major technological invention. All new products and industries are created by entrepreneurs.
    We can find that none of the evolutionary results of the industry can be imagined in advance. The future of the industry is uncertain, all industries are grown, and behind the growth is the role of entrepreneurs.
    There is also overcapacity. Overcapacity means that if the capacity to produce products is saturated, the products produced will exceed the social demand, that is, the supply exceeds the demand. A very important reason for overcapacity is that entrepreneurs have not developed new products.
    I believe that with the development of big data and artificial intelligence technology, more and more management decisions can be made automatically by computers, but computers can never replace entrepreneurial decisions, although the scope of entrepreneurial decisions will vary with technology and knowledge. The accumulation has changed. Entrepreneurs are making decisions that cannot be replaced with data and calculations. Any decision that can be made with data is no longer an entrepreneurial decision, but a common management decision.
    why? Hard knowledge and data are very useful for entrepreneurs, and entrepreneurs do need data when making decisions, but these data are available to everyone. The true entrepreneurship must be beyond these knowledge and data, and beyond what we are talking about now. Big Data. Decisions based solely on data are only scientific decisions, not entrepreneurial decisions. Entrepreneurs must see what is behind the knowledge and data that most people cannot see, and what different entrepreneurs see may be completely different.
    Traditional economics believes that the main function of the market is to allocate scarce resources, assuming that resources, technology and preferences are given, and then choose the means according to the goals. In fact, the real most important function of the market is not to allocate resources, but to change resources, use new technologies, new products, and new organizational forms to change the availability of resources and even obtain completely new resources. These changes are the innovations we are talking about. The progress of society is largely brought about by entrepreneurial innovations. Such innovations are not provided by data, including big data.
    As far as innovation is concerned, the help that data can provide is very limited. Before the advent of cars, there were postal carriages. The data on postal carriage transport business could not help Karl Benz, Daimler and Maybach to invent cars. Otherwise, it was the coachman who invented the car, not Karl Bentz and Daim. Le and Maybach. Bill Gates did not create the software industry based on existing computer data. Otherwise, it was IBM, not Bill Gates, who created the software industry. Similarly, it is impossible for Telecom Data to tell Ma Huateng to create WeChat, otherwise it would be China Mobile, not Tencent, who invented WeChat.
    Therefore, entrepreneurs must make decisions beyond data.
    For the construction of Elastos’ ecological projects, if we want to truly promote innovation, the best way is to let the entrepreneurs of ecological projects develop their magical skills just like the eight Chinese immortals crossing the sea, each one perform its special prowess
    and then screen technologies and products through market competition, instead of supporting this or suppressing that by means of subsidies or subsidies
    Any decision that hinders the free choice of entrepreneurs and misleads the judgment of entrepreneurs is not conducive to innovation.

    Conclusion of the article:
    Austrian economics is a theory of human liberty. It starts from the pursuit of the most basic freedom rights in human nature, and takes into account the rule of law and democracy. It reflects the universal values of freedom, rule of law, democracy and equality. Austrian economics integrates philosophy, politics and economy, and builds the social science of the “imperialist” building of economics-humanistic behavior. It can best embody the core idea of blockchain with anonymity, independence, openness, security, decentralization and other characteristics. Looking back at history, many innovations came from the contribution of the Austrian School. Many economic and social crises were foreseen by the Austrian School. The deeper the understanding of the Austrian School, the more the power of the Austrian School can be felt.
    Elastos is currently experiencing a crisis in which the community has not reached a consensus to destroy undropped coins, and ecological applications are not recognized by the market. Pursuing the wisdom footprint of market economy prophets may help us find the right direction to overcome difficulties.
    All crises are crises of human nature. How to recognize and treat human nature is the touchstone to distinguish good thoughts from bad thoughts. The Austrian school has an insight into human nature, but it never caters to human nature.
    Unfortunately, no matter in China or the world today, the ideas of the Austrian school are still in the ivory tower. Only a few scholars and excellent entrepreneurs pay attention to it, study it, and spread it.

(Thanks to Brian for revising part of this article)

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