Physiocrat, thanks for the link. I’m reading the paper now.
They do. They also maintain that government actions cannot improve on market outcomes. Doesn’t mean one has to believe markets are perfect…
[quoteuser=“Jon Irenicus”]
They do. They also maintain that government actions cannot improve on market outcomes. Doesn’t mean one has to believe markets are perfect…
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Many of them do in journal articles. But often times, they don’t acknowledge it enough. They proceed with their analysis as if sticky prices and other empirical oddities did not exist. That’s fine for pure theory articles. But they often assume perfection even in applied work. So, while I agree that government cannot improve on the market process, there needs to be more applied Austrian analysis of market imperfections.
I’d say that the concept of equilibrium is used more as a metaphor than a strict ‘scientifc’ concept by Mises and other laissez-faire economists who stress the fact that economic conditions and data are ever-changing.
My point was : I think you would grant that Keynes was one of the most important and clever ‘scientists’ doing economic ‘science’ in the 20th century. So “animal spirits”, which seems to be a key feature of his theories, must be a ‘scientific’ concept no ? Since you are now studying mainstream ‘science’ I thought you could provide the ‘scientific’ definition for “animal spirits”.
Alternatively you might want to acknowledge that Lord Keynes was more of a charlatan than a scientist…
Even in a deflationary period, a nominal decrease in wages is equivalent to a real decrease - in the short term. Even if dollars increase in value, fewer dollars are fewer dollars. As such, we can always expect wages to be sticky, just possibly more or less sticky depending on what people are used to.
If a dollar has the purchasing power that $1.25 used to have, how is a 20% decrease in wages equivalent to a real decrease? Fewer dollars may be fewer dollars, but the purchasing power of the fewer dollars is exactly the same.
My bad.
F.A. Hayek uses the concept of equilibrium as a scientific concept upon which he based the analysis of Prices, and Production.
Jon meant : “Austrians do accept that markets are not perfect” ? - is there a contradiction somewhere ?
Its obvious I’ve been looking at a screen for too long now. [:P]
No, for Mises, the evenly rotating economy and the stationary economy are analytical tools that use to examine the nature of profit and aggregate profit in the economy respectively. The nature of the evenly rotating economy makes it a starting point for economic analysis and useful for illustrative purposes. IOW, you’re wrong.
Important and gifted, no doubt. In fact, Keynes was pretty much of one the most important economic theorists in history. As for his abilities as an economist, I’m more doubtful here. I’ll admit, I can’t provide a definition as you wish, but I believe others have, such as the book I recommended to you. However, I don’t see how this pertains to the question at hand.
I’m wrong about what ?
100%-certified, content-free, non-answer. Now, stop playing and provide the scientific definition of “animal spirits”.
Those who utilize equilibrium being positivists.
I’ve said, I can’t.
This confuses me. One of the most important and gifted economic theorists in history, who lacks ability as an economist? And why do you consider him to be so important?
Keynes was certainly an important, if not the most important, economic theorist in terms of impact on the profession. He was definitely a gifted rhetorician. After all, he stole a number of Hayek’s students, such as Kaldor, Lerner, and Shackle, who subsequently worshiped Keynes. As an economist, he is inconsistent at best, and utterly incompetent at worst.
Not true. If menu costs are greater than the discounted value of expected profit from changing prices, then a firm will not do so. If all firms face a minimum menu cost of x, then they will not change prices until the expected stream of profits exceeds x. Therefore, sticky prices are an empirical possibility, especially for small changes in demand. In addition, this shows that expectations will play key role in all economic activity and could hinder the market process. Nonetheless, I still think the mainstream makes too much of menu costs.
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This again not perceiving the unseen: if demand increases and prices do not increase it does not mean that prices are not flexible, the very fact the entrepreneur calculates whether it is worth changing his prices against the cost of doing so shows in fact that he has immediately taken into account the change in demand which is reflected in the prices even though the shop price has not changed. The stickiness relates to real scarcities since it is apart of purposeful human action.
Juan, what did you make of Hulsmann’s paper?
NOE! CANES WAS A SIGNTIST!
[quoteuser=“Physiocrat”]
The stickiness relates to real scarcities since it is apart of purposeful human action.
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Right, that’s certainly true. But I didn’t say that entrepreneurs were unresponsive, I said that prices were. Also, the point about real scarcities may not hold true if entrepreneurs expectations turn out to be wrong, due to psychology or some other reason.
Keynes is of importance for a few reasons. And he was certainly gifted, numerous individuals have said the same of him, read the first chapter of W.H. Hutt’s The Keynesian Episode for something of an overview.
As for his importance, to begin with you can’t really understand modern macroeconomics without understanding Keynes. Firstly, when Milton Friedman said something along the lines of “we’re all Keynesians now” he meant that all macroeconomists uses the Keynesian framework. And this is most certainly true, I think if one compares the difference between Austrian macroeconomics as seen in Hayek, Rothbard and Mises (Garrison not so much, since his work is largely an attempt to put Austrian macro in mainstream words) with the macroeconomics in most textbooks, the differences can be attributed to Keynes. You can’t really look at the development of macro without tracing the responses to Keynesian economics.
Secondly, some would argue that post-Keynesian thought is perhaps the strand of Keynesian thought that is closest to Keynes’ original vision. If we take this as granted and pay attention to the suggestion made by some Austrians that there are indeed gains from trade to be made between Austrians and Post-Keynesians then I’d say that this is another source of his importance. Rizzo has noted that whilst there might not be any grand synthesis of Hayekian and Keynesian thought both asked questions that were far more pertinent to real life than those asked by, say, new classicists.
[quoteuser=“GilesStratton”]
Secondly, some would argue that post-Keynesian thought is perhaps the strand of Keynesian thought that is closest to Keynes’ original vision. If we take this as granted and pay attention to the suggestion made by some Austrians that there are indeed gains from trade to be made between Austrians and Post-Keynesians then I’d say that this is another source of his importance.
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Although I disagree that Post-Keynesian thought is necessarily any more true to Keynes’ original vision in the General Theory, there are definitely some gains from trade between Austrians and Post-Keynesians, especially in the Post-Keynesian analysis of the short run, which is sometimes strikingly Hayekian. For example, they believe that firms follow rules of thumb in pricing products, leading to unresponsive markets and arbitrary profits. As for the long run, I think Austrian ideas give a far better analysis.
For anyone interested, I definitely recommend “A New Guide to Post Keynesian Economics.”