I came to think about one thing: The fact that keynesians seem to be very late with warning people for a coming economical crisis (austrians knew their would be a crisis in 2002, neoclassicals in ca. 2006 and I saw a lot of keynesians denying their was a problem in 2008), could that be due to their perversion with consumption? If they warn people for a crisis, they might cause people to actually begin to save money, which is exactly what these keynesians don’t want them to do. Therefore, they would deny a crisis as long as possible, and be as optimistic as possible as for when the crisis will end, simply so that people will act as they “should” act according to their theory.
keynesians are the last to see because they don’t understand mises theory of the business cycle and because they believe that the boom can last forever if only the state will just spend enough.
Well, they don’t believe in it, and mostly don’t understand it.
Still, I don’t think they want to give advices that goes against their theory, which was what I was talking about. I think that’s an even bigger part of the reason why they are so late. After all, the neo-classicals don’t believe in the austrian business cycle, still they weren’t THAT late. Btw, I found their theory hard to understand… marginalism is from Austria, what more do they have, except an addiction to math?
Everyone here has zillions reasons to hate Keynesians and their fellowtravellers, but it still seems strangely that is the non-Austrian libertarians that have the worst capability to predict asset price bubbles. I think that the models that Monetarists, Supply Siders and Real Business Cycle School uses are so limited that they can only deal economy in perfect equilibrium, so it is very hard for them to see structural inbalances. The Cato Institute has been many times wrong simply because it doesn’t want to be associated with Mises Institute and tries to come to different conclusions at any cost (remember the ongoing whitewashing campaign of Alan Greenspan).
Here are three predictions about housing bubble from year 2005 from free-marketeers:
“I am not yet convinced there is a housing bubble.” - Tyler Cowen in marginalrevolution.com
“‘Housing bubble’ worrywarts have long been hopelessly confused. It would have been financially foolhardy to listen to them in 2002. It still is.” - Alan Reynolds in article “No Housing Bubble Trouble”
“The stability of the economy is greater than it has ever been in our history. We really are in remarkably great shape.” - Milton Friedman in “Charlie Rose”
Robert Shiller seems to bee one exception, although I am not so sure how free market he actually is. Althought keynesians are bad predictors and bad economists, they have slightly better understanding about bubbles than many non-Austrian libertarians simply because they believe that bubbles exist. Many Austrians, such as Stefan Karlsson, for instance agree with keynesian Nouriel Roubini on many of these issues.
If I get this right: The neoclassicals say that the market is in equilibrium, the austrians that the market is moving towards equilbrium, but never really reaches it (or only for a short time), because prices are moving slowly? Was that correct or did I just make a fool of myself?
And since market always is in equilibrium, there is no bubble, but if it never reaches it, there might be bubbles but they are all doomed to pop.