In any case, because neoclassical is taking a long time to respond to his little debate thread here, I suggest everyone read Garrison’s article on the Austrian theory of the business cycle and the plucking model here: http://www.auburn.edu/~garriro/fm1pluck.htm
Some Roger Garrison articles that neoclassical might be interested in include:
You failed to understand Fama’s point; he says “that’s what I would think it is” if it were to be real, but it isn’t, because “if you could identify it,” you “must have made a lot of money.” Fama is undermining what Cassidy presents as the popular idea of what a “bubble” is.
Whoa! He said Austrian economists don’t use the term.
I disproved that, unequivocally. He then said “old” Austrians didn’t, and you claim it to be a slang. The point stands: he said they didn’t the term, but they do.
If we want to have a debate, we can’t quibble over such patent facts.
No offense but I think you’re being Petty. The ABCT encompasses far more then just a simple concept of bubbles. Arguing that “bubbles” does’t exist does nothing about arguing against business cycles in the austrian sense. Why does it seem like you are desperately grasping at straws?
Bubbles don’t exist. I can’t make it any plainer. No one knows if an asset price is deviating from a “fundamental value” (where a price ought to be).
As soon as you claim, “That price is too high! That’s a bubble!” then you have a great opportunity: short sell the stock and make a profit! Since this doesn’t occur reliably, I am left with one conclusion: no one has the omniscience to know when a price isn’t correct.
Haha what a cop out! How about you reread what I replied to you and respond to my original post in this thread. Unless, of course, you want to be the pussy who couldn’t stand up to a debate when actually challenged to one. I mean, it’s pretty pompous to be challenging Austrian economics on an Austrian econ forum and then just walking away from a debate when challenged. But that’s OK, not everyone has the balls (or brains) to seriously discuss economics.
And just to make it easier on you, I’ll repost my OP and then my subsequent response to you:
P.S. Also, I never said that Austrian economists don’t use the term. I said they eschew it because it is misleading. That means they avoid using it; that doesn’t mean they never use it. Had you ever made a serious attempt at reading a treatise on Austrian economics by an Austrian economist (which I highly doubt), you would have noticed that they tend to avoid using mainstream terms like “bubbles” and “recessions” in favor of “boom” and “bust.” So not only are you a pompous jackass and a pussy, but now you’re also flat-out wrong. I hope you enjoy losing your credibility, because that’s what just happened to you on this forum.
That’s what bothers me about the idea of “fundamentals”. I thought everyone here believes in subjevtive value?
If someone accepts the notion of “asset prices deviating from their fundamentals” then they are disregarding subjective value. What are “fundamentals?” By whose standard?
Just to make something clear, I agree with this. When I was speaking in terms of “fundamentals”, I picture them to be factors influencing the decision of market participants. Interventions would count as “fundamentals”.
And good Austrian economists will agree with you on that point.
That has absolutely nothing to do with the Austrian theory of the business cycle. ABCT is about relative prices.
Austrians agree with you. That’s why ABCT holds true in the face of attacks by economists such as Bryan Caplan: because market participants cannot tell what the interest rate ought to be in the absence of government intervention, the economy is doomed to typical Austrian trade cycles as long as the government continues to tamper with this vital price, which in turn affects relative prices and profits across the entire economy, causing distortions and misallocations of resources.
There is a bit of sophistry going on here. No one was talking about “fundamental values (what a price ought to be)” except to say there is no such animal.
Here is the full Bob Murphy quote: “But when we say that an asset is in a bubble, what that means is that the demanders (i.e., new buyers) aren’t buying because of “fundamental” reasons, but rather for speculative reasons. In other words, they are only buying because they think the price will go up.”
If you go back a few posts in this thread, you’ll find a spot where I spelled out very plainly the difference [which Neo later denied and purposely obfuscated once again] between the two concepts.
As for people saying it may mean “the price it would be but for govt interference”, well govt interference [=money printing] doesnt affect all prices equally. So the q still remains, how do we find out where the bubble is? And the answer is not in th eprice, but in why people are buying. To sell to the next sucker [a bubble reason], or to keep [which they will do from fundamental reasons as explained in that post].
Because he is. Some people are just born cowards. NeoClassical is the passive-aggressive type of coward. He comes onto the Mises Community forum and disrupts the friendly educational process that goes on here by playing semantic games and involving one of our top moderators in a debate. Then, when he realizes he’s wrong, he just plays more semantics in order to cover his trail and lick his wounds. But that’s okay. Not everyone has the intellect to change their mind and not everyone has the courage to admit they’re wrong.
Wait a second. How come I get called out and tsk-tsk’ed privately for being hostile and “intellectually dishonest,” but someone can smear me and use ersatz psychoanalysis to insult me?
Maybe I am contributing to the “educational process” here. In fact, several members have even said so.
Housing prices were exactly what they should’ve been. That said, credit expansion wrecked havoc on the economy by increasing the relative prices of land, housing, and capital machinery to other goods. The result was that as soon as market participants began to re-establish their time preferences, higher order goods began to stagnate/fall in price. The rest is economic history, of course.
Listen, I am not playing “semantics” here or being purposefully evasive.
My argument is defended by very esteemed economists, such as Eugene Fama; a man intellectually at odds with him, Scott Sumner, even believes Fama is right about bubbles: http://www.themoneyillusion.com/?p=3773.
And, to be frank, several representatives on the ABCT here are telling me different things: some believe in animal spirits, others don’t; some believe in bubbles, others don’t. But, through all that, somehow I am the one that doesn’t understand “Austrian capital theory.” Well, considering this community’s dissensus on the topic, I am not sure who actually does.
Finally, simply being in a disagreement does not make the other party ill-intentioned; I am not doing anything other than stating my perspective. If you consider me pathetically unintelligent, then believe so. Of course, I have a different opinion on the matter.
My response wasn’t the first one you almost completely ignored in this thread. Remember esuric? Yeah. You failed to adequately respond him too, and he responded to you on page two. You’re a sophist, I called you on it, and you still haven’t directly responded to my original post in this thread.
Avoiding debate is not educational. I don’t think anyone will disagree.
As I stated elsewhere, “Even replying as often as I can (and doing it more today than anyone else), I can’t answer every single person or criticism. I am trying my best.” I am, and have been for several days, the most active user. I am not having fun, I assure you! I’d rather be less pressured to respond.
Clearly, I am engaging you now that you’ve more forcefully grabbed my attention.
Nope. The prices of “other goods” are irrelevant. The prices of higher and lower order goods are irrelevant. What is relevant are the relative prices. If new money is injected into the economy through credit markets, then that changes the structure of demand and the structure of production (yup, whipping out some old school 19th century econ here). The lower-than-market interest rate encourages the production and purchase of higher order goods at the expense of lower order goods. What that means is that higher order goods are more expensive relative to lower order goods than they otherwise would bein the absence of credit expansion. That’s all that we can know.
If you understand the theory correctly, you’ll understand that it’s practically impossible to empirically verify or deny it. The theory rests on its own.