If we thought that there were it would be a problem as in public vs. private goods, with no clear distinction between one and another.
First of all, it’s not the same “trick” over and over again; bubbles are not homogeneous phenomena. There are housing bubbles, tech bubbles, railroad bubbles, tulip bubbles, et al. Either way, your argument entirely ignores the function of the price mechanism. Also, for the record, ABC’s aren’t necessarily set off by arbitrary reductions in market interest rates.
If you guys are kicking up a fuss about capital theory, you should at least be able to identify goods in theory as belonging to one or another stage of production. The fact that you can’t even tell me what order it belongs to in such a simple example does not bode well for the possibility of applying capital theory to the real world where matters are infinitely more complex.
You seem rather dense in that case. The good could belong to any number of orders depending on its possible uses, it can both be a higher order good used in varying phases of production and a consumer good in other respects. You’re right that the world is complex (which is why theory is needed to illumine economic facts) but… not in the way you posit. Austrian capital theory is not intended for the utterly mundane purpose of telling you whether a good is of the 4th or 5th order, though quite frankly, it depends on how the good is being used. Merely tossing about disembodied bricks then asking what order they belong to without providing a broader context is meaningless. Now could you tell me what use it is to label a good of nth order? You seem to have no idea what Austrian capital theory is aimed at.
Hayek’s P&P comes straight out of Bohm-Bawerk’s PTOC, specifically pages 114-117. Bohm-Bawerk provided the framework, which was modified (never replaced) by subsequent Austrian economists (Mises, Hayek, Lachmann, et al.). So, essentially, you exposed yourself as a fraud who is entirely unfamiliar with Austrian capital theory, but who pretends to be an authority. Austrian capital theory is by far the most advanced treatment of capital; in fact, the Austrian school is the only school that actually deals with capital at all.
Your position (the mainstream’s position) is essentially this: capital is far too complicated, so rather than actually dealing with it, we’re content to just (a) aggregate and homogenize inherently heterogeneous goods with varying degrees of complementarity, and (b) ignore the element of time completely (the fact that production is a temporal process).
Everything. Expectations is at the very core of ABCT (the fact that they’re manipulated).
Any bets this will fly right over his head too?
Omg I wish I could rss feed Esuric’s posts. He’s just devastating.
http://en.wikipedia.org/wiki/Confirmation_bias
Do non-Austrians really ignore time? C’mon now.
edward_1313, I believe your chief complaint is that the models I use are simplifications. So are all models, including Austrian ones.
Furthermore, if I would concede any tweaking for the sake of realism, then I find New-Keynesian frictions more tempting than any Austrian nitpicking.
Austrians believe that functional economic systems require entrepreneurs and prices in order to organize and accumulate heterogeneous capital goods. In other words, you cannot just “increase the capital stock” (which your models homogenize) and live in prosperity. This isn’t “nitpicking;” this is a fundamental difference between two schools of thought. Also your models (a) ignore absolutely vital economic variables and (b) make unreasonable assumptions–the simplicity is not its major deficiency.
Oy…It’s not simplifications in general. It’s simplification of the precise aspects that would be necessary for modeling a cycle. Take a look at Hayek’s Individualism and Economic Order.
Awwwww…did you reach under your pillow and grab Friedman’s Methodology to remind you of that?
Hehe…Calvo pricing is a small gimmick that disallows a random portion of firms from altering their price each period. If you think this has anything to do with a business cycle, well, then I think we’re all lost. But then again, I think everyone else has already discovered that. I thought you might have something to offer, but you’re all fluff and no substance. This is a waste of my time; I could just grab a first year grad student if I wanted to have this debate.
Or you can try more irrelevant arguments centered upon entomology?
Do you really fail to see the similarity? Would it please you more if I sketched a quick theory for the high and consequent depression that a person experiences when taking certain drugs. The essential process that’s taking place among the inter-connected neurons is in fact very similar to the nature of a business cycle. The mimicking and feedback processes are essentially the same. Complex adaptive systems, take a look. Read some papers from the Santa Fe Institute (btw one of your boys Kenneth Arrow was on the staff of the Sante Fe Institute once he saw that the future wasn’t just his own work).
Just try to open your mind a bit. Imagine that there are general systems that take characteristics independent of the individual elements of which they are composed.
I believe in complex adaptive systems, bro. In fact, I think that’s what we are: dissipative, autopoietic structures.
Why is the common Austrian criticism something like, “I will assume you simply have no idea what I am talking about, look how smart I am”?
In fact, I believe the dynamical neural nets that comprise our brains are essentially “Hayek machines.” But, to use your analogy a bit more: in my worldview, homeostasis is hard to knock off track.
Because you’ve a very thorough history on this forum of showing us that you’ve only recently been introduced to Austrian Economics and have not yet given it a thorough consideration. On your own, reading, studying, ect…
How many previous threads have we had to correct you about the positions of AE, of which you were confused and accidentally misrepresented?
I get your 1930s philosophy. I just don’t consider it sound thinking or science. It’s more obvious that I’ve read Austrian economists than that you’ve read non-Austrian economists.
But let’s keep to EconomistInTraining’s point: are homes, for instance, higher-order goods? If this is subjectively indeterminate, then explain the alleged “housing bubble.”
Sorry, but what else should I think after a comment like:
or your atrocious butchering of the concept of RE, among others. Is it that your feigning ignorance?
And you really shouldn’t dish out criticisms that you’re guilty of:
I never said that homeostasis is easy to knock off track. It requires a very specific type of meddling with the communication mechanism. Otherwise, I’d agree that these systems, human economies, etc., are amazing in their ability to adapt to change.
Moreover, a statement like this seems to conflict with other arguments of yours. Subscribing to a psychological or stampede theory of the cycle is akin to believing a CAS is far more fragile than would be implied by the ABCT.
Durable goods behave like higher order goods.
If there was no “housing bubble” explain why in California real-estate developers demolished hundreds(thousands?) of brand new homes? And explain to us how these homes were not built unnecessarily due to an added available credit.
http://www.youtube.com/watch?v=ZsgOaCZ2Lag
This isn’t about other economics, it’s about AE. Your on a AE bias forum, and your critiquing AE from ignorance, asking us to provide answers for you, which you then critique since we either cannot articulate it, or you don’t understand the underlying concepts that go a long with it.
You’re absolutely right about that, hence I don’t believe in a “psychological or stampede theory of the cycle.” There’s no talk about Keynesian confidence, overoptimism, or irrational exuberance from me. That’s essentially my point: I believe our economy, as a CAS, is too efficiently self-learning to be susceptible to ABCT’s insistence that entrepreneurs can make “malinvestments.”
This is where rational expectations, only casually (not as the hyperliteral version you attempt to pin on me), comes into play: we have economic incentives to rationally accrue information and employ accurate expectations,; such expectations would learn from previous mistakes, especially all systematic disruptions (e.g., lowering the fabled “interest rate”). I don’t believe investors can be systemically misled by a “lowered short-term interest rate” (which, again like EconomistInTraining, I believe is more fabled than real–of course, Austrians self-righteously avoid empiric investigations of how businessment actually operate).
Because you’ve a very thorough history on this forum of showing us that you’ve only recently been introduced to Austrian Economics and have not yet given it a thorough consideration. On your own, reading, studying, ect…
No, it would seem that is a pretty standard response to anyone critical of AE.
As if one needs a total knowledge of AE to understand even a little AE (at least if he wants to be critical). And that AE has all the answers, if you just understood it better.
That’s how biblical scholars talk too… lol and marxists
That seems to be the root psychological assumption of most people here. Well-phrased.
And, how its put into practice: wait for someone like Esuric to come along and clear away your cognitive dissonance with reassuring Austrospeak.