Tyler Cowen (Neo-Classical Economist) from LearnLiberty youtube channel just uploaded some videos on business cycle theory, from all the various perspectives. Here’s his take on ABCT
[View:http://www.youtube.com/watch?v=Log_dcRj7HI:640:480 ]
What say you Mises.org? 
I stopped listening after the first sentence. If he cannot explain what ABCT actually is, or insists on using a strawman, then there is no point listening to anything else he has to say on the matter.
I find it very revealing that those who oppose ABCT have never, that I have seen, been able to give a good account of what it actually is.
I find it very revealing that those who oppose ABCT have never, that I have seen, been able to give a good account of what it actually is.
I’m with gocrew on this one.
He starts out with “entrepreneurs are tricked,” which isn’t even necessarily true, and this is his main argument against the theory (i.e. “entrepreneurs don’t have to be tricked; they can watch the news and see that there’s inflation”) along with the assertion (he gives no examples, which would have been nice) that there have been episodes where business cycles are caused by credit contractions.
should he have said that manipulation of credit distorts the market?
his main criticism which was essentially that ‘wouldnt entrepreneurs be austrian economists and know not to overextend or malinvest’ has been addressed ad nauseum in Austrian journal articles and the like. I wonder if he’s read and considered these responses ?
Forget journals. Historian Tom Woods addressed this in his New York Times Bestseller for crissake. Surely someone of Cowen’s credentials is aware of the responses. Or…at least I would hope he would be.
Cowen should probably come hang out on the boards with us.
Hmm, i understand now. The core of ABCT lies not in entrepeneurs per say, since you can still make mal investments when there is no manipulation of credit; its the distortion of the market that causes booms and busts and skews time preferences.
I hope i got it correct or else ill burn my we’re all austrians now shirt.
It’s the expansion of credit beyond what existing resources justify (in the eyes of creditors) which distorts the market communication of savings-consumption ratios that causes the business cycle (simultaneous malinvestment and overconsumption).
Cowen focuses on the entrepreneurs being “tricked.” Entrepreneurs don’t have to be tricked; they can even want credit expansion in hopes that they can finish their projects before rates can change and expenses increase (making profits in the process). Meanwhile, competitors could be making use of the easy money to make short-term gains which puts the squeeze on entrepreneurs who “read about it in the Wall Street Journal” and decide to hold off on further investment.
Ahh yes, the rational expectations religion, where individuals have some mystical and intuitive connection to the great general equilibria. Where prices are of no use and do not convey any knowledge that isn’t already ‘felt’ by us, the super-rational economic actors.
