I originally found the Mises community through V. Aguilar’s site on his “axiom” economics. So what of his theories?
Hm, that is some interesting and radical stuff. I’ve been looking at this page:
And its alternative ideas are interesting, although a few of them strike me as incorrect (like the denial of a “natural” rate of interest… it seems to me that you may as well deny equilibrium prices as well!). In addition Austrians have had some very good explanations for why the depression didn’t end – I just recently listened to a lecture by Garrison (who the author of that site seems to like to poke at) about why Roosevelt caused the great depression to continue.
Also, I can’t say I enjoy his tone (wreckage, really?), but that’s just me. I’ll continue to read the rest of his stuff.
EDIT: Hoo boy, I checked the OTHER thread Google turned up and I think he has more problems than just his tone:
That said I’ll still give his stuff a fair shake, but I’m not going to enjoy it.
Excerpts from Critique of Austrian Economics From 1930 To 1990
Of Mises, Hayek, Keynes and Kirzner, only Mises is close to this author’s position that the severity and recalcitrance of recessions is explained by the wastage of capital. Hayek describes a rather mechanical shuffling of wealth back and forth between the higher and lower stages of production. Keynes conjures up animal spirits to explain something that he clearly does not understand. And Kirzner is just expressing the blind faith in the market and denials of depression that make the so-called classicals such an easy straw man for Econ. 101 students to slay. But Mises was adamant that his theory was about malinvestment, not overinvestment, and made the quality of loans central to his thesis. The principle difference between Mises and Hayek is that Mises focuses almost entirely on malinvestment and capital consumption (i.e. waste) during the boom period. There is nothing in Hayek’s triangle about the quality of investments, only about the relative quantity allocated to the several different stages. Hayek and his followers focus on the lengthening and shortening of the period of production and on talking around the fact that they do not know how to measure it.22
Aguilar doesn’t know what he’s talking about. He’s obviously never tried to tackle Hayek’s Pure Theory of Capital which goes much further than average period of production. Furthermore, what is the difference between overinvestment and malinvestment?
Much of what Rothbard, Garrison and other Hayekians write sounds more like moralizing than analyzing. Credit expansions should collapse so they docollapse – inevitably. They are unsustainable! It is this sort of moralizing which makes so many people feel that Austrian economists are naïve.
He doesn’t even understand ABCT. Definite reasons are given for the crash, Austrians don’t just say that they should collapse.
Now a quote from his Simplified Exposition of Axiomatic Economics.
To attack the root cause of unemployment, the government must be prevented from wasting the capital of the nation. Piecemeal elimination of obvious boondoggles is a move in the right direction.
Umm, I would think that wasted capital would be unprofitable and so would liquidate itself.
Wasted capital doesn’t just get liquidated, does it? Depending on the circumstances malinvestments with re-allocated capital can bring in relatively more drastic devaluation than the initial capital and the process’s value it took to re-allocate and invest this capital in the aforemented “boondoggle”. I mean look at the Greek stimulus and entitlement programs. Apparently borrowing nulls the sharpest and most pronounced negative effects on the behavior of capital when it is malinvested. It draws out the time under which a service is no longer a reasonable investment to the majority of capitalists. So going along with that and Arguilar’s statement it seems that the amount of capital that gets liquidated in the end doesn’t necessarily correlate with what went into the program to begin with. Saying that the capital would automatically liquidate itself is sort of simplistic. He has a valid point, at least there.
How to measure waste?