Most significantly in its assumption of inherent price inflexibility and some sort of unemployment equilibrium.
I don’t think he described the ‘liquidity trap’ as a change in time preferences. I think he described it to the effect of an artificial miscoordination of time preferences between producers and consumers.
K, well there’s a lie.
Correct. It is a readjustment of capital towards representing the consumer’s time preferences as manifested in their savings patterns. In order for ‘business to go back to business as usual’, non-performing debts must be cleared. That which is unprofitable sold off. You can’t have your cake and eat it too basically. What mainstream economists fail to notice is that the height of the bubble is not something to be re-emulated. It crashed because the inflationary pressure of credit expansion was halted before a crack-up boom. Returning the price level to boom levels does nothing to solve the actual problem: insufficient supply of capital goods for the projects currently in operation.
Notice how in our ‘liquidity trap’ we just pumped stock prices and mortgages back up, but unemployment is still high (don’t bother sending me the BLS headline number as their seasonal adjusments are more active now than ever before in their history). Number of americans on foodstamps is at a record high and the standard of living is sinking from rising prices on essentials. But where’s the recovery? It’s nominal. A situation similar to the Japanese’.
Those are axioms of the model; my claim was that IS/LM is internally consistent, and under those axioms, it is. Whether or not those axioms hold in a particular case is a different issue.
That works semantically. The problem some people have is that they consider uninvested savings during a recession to result from adverse macroeconomic expectations. It’s a little harder to convince these people that you have ideas to end the recession after you tell them that the recession itself to be desireable due to changes in time preference. It is true, but it doesn’t stop people from desiring output growth and low unemployment.
No one (Krugman excepted) desires to recreate a bubble. Countercyclical policy aims at reducing output and employment losses.
Which projects? The ones started during the boom labeled malinvestment? In that case, provisioning them with capital would emulate the the bubble. Otherwise, although price level adjustment does not affect capital shortages, the point of IS/LM is that increases in the money supply do not increase supply or demand in a liquidity trap. Only fiscal policy does.
That is actually what occurs during a liquidity trap- injections of cash into the banking system will not raise output. A liquidity trap is, according to Wikipedia,
The reason why Keynes bothered with IS/LM is to show that fiscal policy is necessary in this instance.
The situations under which monetary policy can raise output are a hot topic in monetarism, if you’d like to go there.
ed:
I don’t think you’ve established that this is necessarily the case. In fact, one argument for countercyclical policy is the depressed restructuring observed during recessions.
Ok well the whole point is to have the system be internally consistent and based on true premises. Logical. What do you mean particular case?
Ha, semantically? How so. If in your first sentence you are saying that demand for cash rises after burst bubbles I agree. This is conducive to a monetary deflation which clears unsustainable debts. Soon a ‘price-level floor’ is hit and there is no longer uncertainty about falling prices. This is how cycles used to be handled in 1945, 1920, and 1907. None of these are historical examples of drawn out depressions but spritely recoveries.
Recessions aren’t desirable. On this any economist can agree. We’re in one even despite the massive monetary stimulus. The idea is how best to leave the recession, or even how to avoid them in the first place.
Ok, hard maybe? So what? Wrong? No. Does Iodine disinfect wounds any less by nature of its stinging? Also the recession is not desireable because of changes in liquidity preference, changes in demand for cash happen because of the recession.
Yes and correctly so
Not unless the rate of monetary expansion at the point in which they were in the bubble were also repeated, which is hardly expedient as it guarantees another crash (with a dip in the rate, more common) or hyperinflation (without a dip in the rate, less common). Again, this rise in prices during the bubble stems from the expansion of money supply. Entrepeneurs begin projects under this credit expansion. Should the credit be reduced they will acknowledge the non-profitability of such projects. Should the credit not be reduced, as happens very often, more and more of their operations are funded on credit until monetary expansion slows and the slowing rise in value of capital goods no longer justifies the borrowing.
Honestly I don’t currently care to if you don’t care to learn Capital-Oriented Business Cycle Theory.
I understand the idea is to “jump in” because business isn’t running anymore, but it only responds to symptoms and not their causes. Sure it’s easily observable in a recession that business activity has declined, but all too rarely do governments seek to know the causes, thinking instead that it’s better to please the masses with a big NowCake. The reality is that those pre-crash activities were initiated under an action which perpetuated indefinitely would result in the end of the currency. So the crash must always occur as long as money supply expansion does not increase exponentially indefinitely. Secondly, the factors of production are scarce so fiscal intervention will ultimately mean that the private sector is less able to continue operations as long as the state spending occurs. Which means that recessions may carry on for much longer than they have to as private employment of capital is not permitted to come back into formation.
Permitting monetary deflation until demand for cash lessens has worked in all cases that I know of them.
There are many instances where sticky prices do hold.
Particular present or historical instances, like the examples we’re discussing.
Killing aggregate demand to bring prices down, rather than just halting the fall, is the hard way to go about things. And only considering those examples out of all the severely deflationary contractions is selective.
If we’re going to start using empirical evidence, we can look back price behavior during the Great Depression, when Hoover wanted to keep output falling until it hit a floor. It may have strengthened the recovery by some definitions, but it took a long time and a lot of output loss to get there.
The point of IS/LM is to raise output until we’re no longer in a recession by taking advantage of low sovereign debt borrowing rates- that’s my idea. There is no fiscal rationale for not passing a payroll tax stimulus at the present time, for instance. The debt you incur from the tax cut can be repaid in a few years with negative real interest.
I’m not sure what you mean. A liquidity trap does not occur during a bubble. It occurs afterwards, and is a situation where changes in the money supply do not increase demand.
A liquidity trap is a justification for fiscal policy. Money supply is irrelevant to the liquidity trap model besides pointing out that MS doesn’t affect demand. If you argue that credit should be contracted during a boom, I agree, and this is why monetary policy aims to be countercyclical rather than procyclical.
I also edited my last post, somewhat regarding this:
I don’t think you’ve established that this is necessarily the case. In fact, one argument for countercyclical policy is the depressed restructuring observed during recessions.
I don’t think you’ve adequately established that this must be true. Malinvestment is possible regardless of growth rate of the money supply, and entrepreneurs can consider factors other than interest rates and credit when deciding on the merits of long term investments.
How, in the present context, is public spending supposed to crowd out private investment in any significant way? Interest rates on virtually anything have been near historical lows, and aren’t anything consistent with what one would expect from a 10% GDP deficit if crowding out was a factor.
If you can provide me an explanation or a link that isn’t five or 500 pages long, I will look into it.
That’s only if the Long Depression, the Great Depression, the Australian land price crash, and any number of sustained deflationary recessions don’t count.
I agree. In places where Labor Unionism is made law (minimum wage legislation and other similar acts). That is no reason to capitulate to economic ignorance.
So this is an assertion…
Are you expecting me to defend hoover? Who started a trade war with Europe while simultaneously disallowing the prices of labor and food to drop? I’d really love to see your sources for “Hoover wanting to keep output falling”. Which output? Hoover strictly IGNORED Andrew Mellon who BEGGED him to allow things to liquidate. So I’ll not entertain for a moment that Hoover somehow was a deflationist. You should read this:
…Back to credit-bubble output wherein the insufficiency of capital goods is masked and capital is consumed…
I’m saying you can not recreate the business activities of during their bubble without the necessary accompanying credit expansion which caused them to behave how they did.
Well I’m convinced…
I’m saying that booms do not exist without credit expansion so you saying “credit should be contracted during a boom” is nonsense. The credit expansion is the boom.
Given the dominance of contra-cyclical politics, I’d ask you to point me to the last liquidationist recession in a dominantly market economy wherein there was depressed restructuring
This is true on an individual scale, but not on a systemic scale. Sure entrepeneurs are fallible, but all of them committing the same fallacy at once makes no sense to me if credit expansion is not the culprit.
Easy, labor and capital are scarce. That which is spent on one thing is not spent on another.
Interest rates are low as deflation is not being permitted anywhere.
Look into it? Or read it? I sincerely hope that it’s the latter:
I’m glad you brought up the “Long Depression” I assume you refer to the one from 1873-1889? The one where there was significant price deflation, highest expansion of production of goods and highest climb in real wages in the economic history of the US? That one? Oh wait it’s a depression because money was gaining value…
read this.
Nope! You’ve got it the other way around. Supply was simply increasing to such an extent that monetary fiddling could not discourage prices dropping. And it was all coordinated without disaster because of a lack of significant credit expansion.
In reference to the Great Depression, I SINCERELY hope you are not referring to that as though prices were allowed to fall. Again I encourage you to read Murphy’s Guide to the Great Depression.
I’m not familiar with the Australian land price crash so I can’t comment right now. What are they other sustained deflationary recessions? It is a contradiction in terms. Monetary deflation does not occur for extended periods of time, it is the correction to a bubble and is reactionary and swift in character unless prevented from functioning.
That’s not the only instance. In fact, assuming market prices adjust immediately to every change in condition is absurd.
I’m a little backlogged, but I’ll think about reading the Murphy book. I appreciate having the link.
In any case, the only really inflationary thing Hoover accomplished was not cutting the budget fast enough to bring it into surplus in the face of huge revenue falls. He increased tax rates during a recession, which is the opposite of countercyclical policy. There were some minor wage and labor regulations he supported, but nothing amounting to fiscal stimulus.
No. Under IS/LM, increases in IS are increases in both investment and output. Net capital formation increases.
ed: I still don’t feel I have much of an idea what ABCT predicts, so I’m not ready to say much more it, but we can look at the predictions (like net capital formation) using the data.
And no one is trying to recreate a bubble, only to lower unemployment to the point where liquidity preferences allow lending to continue. A normal, steady state economy is the goal. Allowing the economy to be perpetually depressed to prevent bubbles is conterproductive in the first place.
Which is why credit growth should be slowed to reduce the boom during this part of the business cycle.
I expect you to explain how the Great Depression didnot occur in a market economy.
Well, sometimes a lot of people get really stupid about the same thing all at the same time. The unrealistic profit expectations from every bubble from the 1929 crash to the dotcom bubble had a lot to do with fantastically unrealistic expectations of what startups were able to accomplish, and not just what interest rates were at the time. You’d be hard pressed to find many talking heads or salesmen telling people to buy dotcom stocks or subprimes back then solely because interest rates were low at the time.
I don’t think we’re on the same page. If borrowing is going to affect the economy at all, it’s going to be through interest rates. Borrowing is only going to crowd out other borrowing by raising interest rates to discourage leverage. How high do deficits have to get before it finally shows up in interest rates?
Thanks for the links. There is a discussion on time preferences again, but that’s really not a good reason why the economy ought to remain depressed if one cares about lowering unemployment.
No, the one from 1873-79, where unemployment reached 14%.
Deflation was 6% annually from 1929 to 1933. I really can’t see how you can take that as prices not being allowed to fall. It was just about the sharpest depression in history, even before Smoot-Hawley.
That is incorrect. You mentioned yourself that prolonged deflation occured in parts of the 19th century. This doesn’t mean deflation is always disastrous, but during a recession it can adversely affect expected real returns on investment.
Here is some information on the Australian land price crash, which involved eight years of deflation.
Stop strawmanning me broseidon. Never said that market prices adjust immediately, just that they adjust. Which should be obvious but somehow Keynes managed to distill in the minds of many economists the idea that prices are inflexible. This would be true upon only the most cursory examination of economic history. For often prices are inflexible because of the ceiling and floors in place.
Sure thing.
He increased taxes at the end of his term in office. Before then it was all deficit spending, and it was
Nope. Read the book. Ever heard of the Hoover Dam?
See: Emergency Relief and Reconstruction Act and the Reconstruction Financing Corporation. The figures on public spending in Murphy’s book should do the rest.
And please don’t try to belittle the price regulations he enacted as minor, it’s an affront to those who suffered from them.
? What. The point is that the bubble is a period of capital consumption because it’s being employed unprofitably and doomed to liquidation.
Keynes defines savings as identical to investment in General Theory anyways so I’m not sure how to answer this. Perhaps phrase it without the macroeconomic entities and I’ll understand it better?
It’s been said many time but here it is again. A governmental policy of expanding credit at an accelerating rate brings about an unsustainable period of malinvestments which will be revealed upon the deceleration of credit expansion or will result in a hyperinflationary crack-up-boom as Mises calls it.
That’s what you were saying in your previous posts and you don’t seem to understand that the business activity during bubbles is neither desirable nor feasible without the conditions of credit expansion, as it is ultimately destructive of wealth.
Please don’t post powerpoints. And did you even click your first link? What does it have to do with the Great Depression? And how do you define market economy? I’m honestly baffled by this comment. It wasn’t a freemarket economy, but neither has the US ever been, which has historically been the closest to a free-market.
Monopoly mergers in the 20’s? Sounds like he’s a little late. The significant mergers occured from 1890-1905. And the “takeovers” had long since occurred before the market crash. I still don’t see what any of that has to do with the crash.
“Yet what sort of ‘depression’ is it which saw an extraordinarily large expansion of industry, of railroads, of physical output, of net national product or real per capita income? As Friedman and Schwartz admit, the decade from 1869 to 1879 saw a 3 percent per annum increase in money national product, an outstanding real national product growth of 6.8 percent per year in this period, and a phenomenal rise of 4.5 percent per year in real product per capita.”
-Murray Rothbard in HIstory of Money and Banking.
Also I’d be curious to see the geographic divisions of unemployment since this was after the Civil War and the South was devastated and many people probably had to move north to find work.
Apparently not enough.
You fail to note the difference between monetary deflation and price deflation.
I wouldn’t say it’s identical to investment, but that’s a workable simplification we can roll with. The micro and macro definitions of savings and investment do not differ, only the scales at which they are examined. Actually, they’re probably pretty similar concepts vis a vis AE.
Take a firm or household earning some revenue or income. The fraction of revenue which is not consumed over a given period is savings. The amount of capital goods purchased over a given period of time is investment. Not all the income in the economy that goes into savings will necessarily end up as investment, but besides these exceptional circumstances (like a liquidity trap), there is an identity relationship between savings and investment: savings = investment. It’s possible for savings to exceed or fall below investment, and Keynes’ definition is a little more involved than what I’m saying, but that’s the gist. Investment saving is just saving that becomes investment.
Note that if investment saving increases income, then it’s possible to increase savings, investment and income all at the same time.
I haven’t read the book yet, but I still don’t think Hoover was much of a big government Keynesian. Government spending as a fraction of GDP under his presidency wasn’t much changed, but in absolute terms he cut overall spending a lot.
Hyperinflation has a pretty specific meaning. 100% or even 500% inflation isn’t hyperinflation. Hyperinflation is usually treated as something like monthly inflation over 50%. A 130,000% annual rate. Saying that hyperinflation is a regular occurence in the business cycle is an exaggeration. But then again you’re using a different definition of inflation than I am, so that’s that.
Whether or not malinvestment occurs during the trough of the business cycle really depends on how much firms depend on interest rates in making their decisions and where exactly this point is where interest rates start causing this malinvestment. Looking at history, I don’t think there was much going in in tech stocks in 1994 or subprimes in 2002, like would be expected if easing during recessions immediately changed financial behavior. Usually, when bubbles occur, they take off pretty rapidly, but a while after the previous recession.
Don’t hold your breath, I got another 800 pages of Human Action to go. So far I’m enjoying it, but it reads like another immense masturbatory tome. I’m waiting for the legit stuff besides how empirical evidence is unsuitable for economics but is okay to use in any other scientific field.
I’m not sure what your alternative is. You don’t seem to have said anything to disagree with monetary countercyclicality in principle. I just don’t think terminating all credit expansion would be a good alternative, or that some alternative system like free banking would be less subject to interest rate swings or periods of malinvestment.
The 1873-79 recession (which Murray isn’t mentioning or specifically talking about) was a global downturn that affected England, the US, and Germany. I don’t have any idea where to find such a breakdown, but I don’t think it would present a much different picture. All regions of the economy were hit, with industrial production falling and the price of cotton decreasing. But I’m just making stuff up here so we’ll move on.
You asked for a source on depressed restructuring- there it is. M&A is cyclical.
If you’re pointing to the recession of 1920, that wasn’t accompanied by anywhere near the debt loads and bank failures seen in a financial crisis. It was something other than deflationary destruction of malinvestment and the financial system that ended the recession. If anything it was a result of the readoption of the gold standard in an already healthy economy.
I’ve suddenly started following this thread with great interest. I hope the discussion remains at least this honest.
I think you have to understand that social sciences aren’t real sciences–anyone except for maybe sociologists (and some economists, and even some historians, believe it or not) will likely tell you that. But even these holdout social scientists will characterize their field as being a “soft” science if you push them, even if only implicitly when they refer to the “hard” sciences. So Mises’ arguments are generally implicitly understood, if not ignored regardless when he writes as you have cited.
IMO this is largely what divides mainstream economists from AE: the Austrian Economist sees the market economy as an ecosystem worthy of intense study/understanding with the economist serving little more of a role than to analyze/educate, whereas the Econometrician of whatever stripe tends to see it all at once as an ecosystem/laboratory/test subject with the economist serving as the scientist conducting the experiments, et al.
I’m waiting for the legit stuff besides how empirical evidence is unsuitable for economics but is okay to use in any other scientific field.
There is plenty of legit stuff in there, but you’ll need to read more carefully if you want to get anything out of it. Mises never claims that empirical evidence is unsuitable for economics, only that it is unsuitable for the development of economic theory. Empirical evidence is extremely valuable for the elucidation of an already deduced, praxeological theory. It is economic theory that allows us to interpret the empirical evidence, as opposed to “the” scientific method of using the data to develop a theory.
Also, I don’t see why social sciences aren’t “real” sciences at root. If science is the pursuit of truth by means of reason and evidence, why do we place such a premium on empiricism? Is mathematical science not a real science either just because it relies on deductive reasoning instead of “testing” hypotheses?
Def: Doublethink - The acceptance of or mental capacity to accept contrary opinions or beliefs at the same time.
I have to ask you to either stop lying or stop talking about that which you are ignorant. Refer to page 48 of Murphy’s text. It is very clear. I don’t know where you learned this but it’s an absolute lie.
By Inflation I’ll take the Misesian definition which is admittedly not perfect but defined as a significant increase in the suppy of money in the broader sense. Now I don’t think you’re taking away the point, which is that in a bubble, the money monopolist may continue the acceleration of credit expansion until the dollar becomes worthless or he may decelerate which then triggers a crash. The deceleration of credit expansion forces the malinvestors to take costs on without ever cheaper credit and the unprofitability of the situation becomes apparent.
There is no ‘set point’ in the interest rates which is too much or too little, because every instance of market occurrence is unique. As such, the interest rate when determined freely by supply and demand may fluctuate. A 7% rate could be just right as could a 4% rate because it accurately conveys to borrowers the real state of savings. Concordantly, a 4% rate may be too high and an 8% rate may be too low. Here the central planner is helpless. On this I’ll ask you to refer to Hayek, but I’ll give it a shot as well:
The end of the entrepeneur is profit, which is obtained by organizing production such it sufficiently pleases the customer. Now, realize the heterogeneity of his costs. His task is to organize out of an unholy jumble of choices of labor, capital goods, and land a line of production. Consider that on top of the complexity of arranging these materials, he is doing so for a future which is unknowable and is at best estimated. Consider now also that it is unlikely in the extreme that entrepeneurs take under these undertakings out of the cash in their pocket. They take out loans to begin their projects. When the market rate of loans is low, the societal time preference is also low, the nearer on satisfactions are valued relatively less than the further off ones. This would be in contrast to a situation wherein the market rate of loans were high. Low time preference reflects high savings which indicates that the resources required for production exist and are more or less ‘waiting’ to be employed.
Since any entrepeneurial undertaking is the arrangement of materials based on an estimation of the future, entrepeneurs do not take on costlier loans for longer-term projects. The further into the future the project will take before its fruits ripen, the more sensitive that project is to the cost of loans. A one year project at a high loan rate is no big deal because the future is easier to ascertain and the structure of production is more straightforward, thus there is a lower risk. A longer project in contrast is more sensitive to the loan rate. The failed entrepeneur will be heavily penalized on a high rate with an unsuccessful long term endeavor.
So when rates are lowered, entrepeneurs are signalled that it is ‘safer’ to initiate projects. The rate of interest on a loan reflects the amount of societal savings as mentioned before. High savings indicate to entrepeneurs that the resources to purchase and fund their projects exist and that they will ultimately be profitable.
State campaigns of credit expansion create the illusion of real savings. The supply of capital goods is not at all more increased than before the campaign of credit expansion. Consider: if the campaign of credit expansion were not undertaken, the entrepeneur would not make those investments. See here after the rate cut in 2001, where clearly investments were undertaken:
I can understand thinking it’s masturbatory. Mises is intelligent and aware of it.
In any other ‘scientific field’. I hope by that you mean you are exlcuding sociology and political science. Those are not sciences as such. The scientific method is perfectly appropriate for the natural sciences wherein variables can be controlled and causality can be established. For those fields wherein those conditions can not be met, the application of the methodology of natural sciences is nothing better than farcical.
Don’t you? I have disagreed with monetary countercyclicality because it ignores the truth of the depression, that the boom itself was the problem and those malinvestments of the boom must be cleared, as I’ve stated previously. Getting rid of the FED for one would be a great start. Ultimately the goal is having banks issue their own currencies. In the chapter on indirect exchange Mises will explain how credit expansion is checked in such a system. Realize that these booms and busts are capital consumptive and it immediately becomes clear that a slower rate of ‘growth’ is desirable, because capital is actually accumulated.
Are you actually? I can’t tell if you’re being snarky or what. No offense meant here, I’m genuinely baffled by this response.
Um, what? How are M&A’s cyclical?
I wasn’t, I was referring to the chart of monetary base around 1929. But yeah go read Murphy’s book. It’s quick. Or even better Rothbard’s (longer).
Y’got sources for those claims? Because me and my stupid numbers indicate that M2 Money supply increased from 16 Billion in 1913 to 35 Billion in 1920 and national debt from 3 bil to 26 bil, and that indicates differently. Oh and unemployment spiked to 12%. I can’t right now find out the bank failure figures for 1920 so I’m curious as to what they are.
I think that your definition of science may be a bit fast-and-loose, because by that premise Law is also a science, as is history. If that’s fine by you then that’s alright, but I think that it’s worthwhile to avoid sociological-style definitions that encompass so much that they become all but meaningless.
That doesn’t mean, however, that I think that a discpline that doesn’t claim the mantle of “science” makes it any less important as a Discipline, by any means.
My point is that I don’t see how making a distinction between natural…“disciplines” and deductive “disiciplines”, and only granting the former the coveted title of “science”, furthers our knowledge in any way. To say that there are many important disciplines, but only a certain percentage get to be identified as science, implies an obvious bias toward empiricism/positivism, since that is the primary distinguishing factor between so-called “hard” and “soft” sciences. I don’t see how bringing other systematic, reason/evidence based fields under the umbrella of science reduces in any way the meaning of the word, nor do I think the term science has more meaning for excluding non-empirical fields. If anything, such arbitrariness makes the concept more confusing.
Bear in mind that their are other fields based on complicated interactions, such as climate science and evolutionary biology. That doesn’t mean we should share time between evolution and creationism in schools just because the empirical evidence can’t conclusively demonstrate how apes evolved into man. The quality of evidence in many natural sciences is almost as bad/good as in economics in terms of making predictions or even constructing theories that aren’t overturned every five years.
The problem is that whenever I point out a prolonged deflationary slump, you can always explain how it’s due to 19th century economies or 1920s America being too statist, not because liquidationism doesn’t work.
Net capital formation? We can look at when, during the Great Depression, NCF resumed- it was under FDR’s inflationary policies.
Well, here, at least, is data on commericial bank suspensions starting in 1921.
Actually, if entrepreneurs invest this credit in capital goods, the supply of capital goods will probably increase. In fact, capital formation does often increase during the boom and fall during recessions. As to whether or not the business cycle is net capital consumptive, it depends on what you mean - relative to what? - or, if you literally mean that the business cycle is net capital consumptive, whether you think history since the creation of the Fed has been net capital consumptive, ie, we have less capital now than in 1913.
But that aside, even if an increase in capital isn’t expected, I still don’t think you’ve established that interest rates are that decisive in investment decisions in a way that entrepreneurs can’t compensate for- there have been recessions in all sorts of real interest rate conditions- or that there is some point where low interest rates become unsustainable and hyperinflationary.
That’s not an accurate definition of the distinction: history, for example, is both inductive and deductive, uses empirical evidence and meshes easily with economics (econometric or otherwise). History, however, is a member of the Humanities class of Disciplines. And I don’t see how that detracts from our knowledge whatsoever or libels the discipline in any way.
Why is the title “science” coveted by all, do you think? I don’t subscribe to that theory, btw. “Even if economics needs to be drastically reformed someday it cannot take the direction proposed by those who use the model of the natural sciences. This idea has been thoroughly refuted forever”, --LvM. Rothbard has written and lectured much regarding the evolution of the social sciences in this regard too–how and why they clamored for the “science” mantle. History fell into this trap as well, then wised up (mostly). However, History is not less important of a Discipline because it isn’t a science.
It seems that you’ve already accepted the bias full-on: “the coveted title of science”…“only a certain percentage get to be identified as science” etc [edit: unless you were using these terms sarcastically…I couldn’t tell]. I haven’t: I don’t believe that History is taken any less seriously because it belongs to the humanities and not to the social sciences or natural sciences.
There are no Disciplines that exist by virtue of their employment of asystematic fantasy and contradictions, thus, arguing that being a science requires only the systematic use of reason/evidence means the automatic qualification of all academic disciplines as science. To me, that’s highly problematic and not helpful.
Mustang, capital is nothing but postponed consumption. More capital is saved when more consumption is postponed (for the future). When there is a lot of consumption postponed then there’s a lot of capital saved to be invested toward satisfying the impending future consumption. When there is a lot of capital saved (available) then overall interest rates go down which entice entrepreneurs to undertake the investments needed to satisfy the future consumption. Then Bernank – central planner par excellence – barges in like a drunk Santa and declares “Interest rates must be SO! And here in my bag I have enough ‘capital’ for both current consumption AND investments (future consumption)”. What say you?
I say that free banking’s record of moderating the credit cycle has been even worse.
The central bank claims to provide enough capital for both consumption and investment insofar that the economy requires a certain amount of both. The problem occurs during a recession when interest rates don’t reach the point where entrepreneurs can utilize the available capital, perhaps becauses it’s being hoarded.
I’m not seeing people disagree with each other here, mustang19. Basically they all disagree with you. I’m curious as to what made you think you’d be able to achieve such an objective in a forum that is hosted on site that promotes a specific methodology and framework to analyze and interpret the world.
