I’ve read parts of Rothbard’s America’s Great Depression and he disqualifies the overproduction theory by stating that prices would fall to levels that people would purchase at and inventories therefore would empty. But, why can’t the same happen to higher order goods?
The inventories of higher order goods would empty if the suppliers/owners lowered the price. The point is that the calculations of these suppliers/owners would be proven incorrect by them lowering the prices and selling goods at losses. So the investments that took place prior to the price reductions would be malinvestments.
Rothbard is trying to counter the fallacy that overproduction of goods is an inherent part of the free market when actually it is the intervention of the government in the areas of subsidies or increased money production that causes overproduction.
Chapter so I confirm with his text. But he is saying who defines overproduction? If we live in a world of scarce resources and unlimited wants how can anything be overproduced? If it doesn’t sell then the price is too high.
And it does happen to higher order goods. Where does he say it doesn’t? The demand for higher good goes down. Since producers already own the capital to produce at an “overproduction” level why would they continue to buy higher order goods to produce more? So i a company is “overproducing” ie producing at an unprofitable level, $1 is so much to produce more of it. Producers of higher order goods simply refuse to sell their products for free to clear inventory.
Correct me if anyone disagrees. I haven’t read that book yet, I’m going off his theory of taxes in power and market.
Sorry for all the typos. This forum is horrible to operate on an iPad.