You just reposted the same nonsense mickamonics posted before only from a different source (this one being a comment on a blog). These are open problems and questions only to those who are ignorant of Austrian theory.
Nobody is denying that for Keynesians, there are indeed a lot of open problems and questions. Like the more general problem of economics.
What did he post?
I think the keynesians dont agree with this, or at least not all. I think they dont believe the interest rates have a direct impact in the entrepeneurs.
Besides other factors such as the state preferring interventionist economics to Austrian prescriptions, the biggest problem is 1) ABCT/Austrian economics are relatively unknown and 2) ABCT/Austrian economics uses a completely different methodology than neoclassical economics. Mainstream theories rest on a number of mathematical assumptions,functions, aggregates, and other shortsighted empirical analysis that portray the economy much differently than what Austrians envision. The two schools of thought are vastly different when one recommends taking high level calculus classes and even majoring in economics while the other heavily shuns calculus and portraying humans as mathematical functions. Neoclassicism validating the ABCT just wouldn’t damage their business cycle theories, it would tear down their whole corpus of economic thought. They would have to take into account the production structure, savings, interest rates, 100% reserve banking, a multidimensional economy, among other factors just to validate the ABCT. Its not just breaking a window, its more like tearing down a wall.
Because the ABCT condemns government interventionism.
here we go again… everybody is conflating two issues.
Issue 1. ABCT - i.e. the theory that expansion of the money supply causes asset bubbles.
Issue 2. The propensity for Austrian economists to prescribe “do nothing” as the solutions to all economic problems.
My question is about “issue 1” and issue 1 only… but everybody keeps discussing issue 2. Issue 2 may be very interesting, but it is off-topic as far as this thread goes.
Nobody is conflating anything. That remark about government interventionism pertains to issue 1 just as much as it does to issue 2. And by the way, the theory in issue 1 is not the Austrian theory
I don’t think you’re respecting how frequently people’s beliefs “just happen” to coincide with their wishes.
Really? I thought it was. If I’m mistaken, then my apologies… can you clarify…
ABCT is not a theory of intratemporal distortions but of intertermporal distortions. There is a huge difference. The former can be more easily understood by most economists while the latter cannot. The criticism you point to tries to understand the problem by the former and not the latter. They are not familiar with the latter because sequential time is absent from their theories. They lack a capital theory.
There are quite a few economists who condemn intervention, or at least favour something approaching laissez-faire, who aren’t Austrians. David Friedman and Bryan Caplan are market anarchists who think the Austrians are wrong on business cycles. There are probably quite a few others (I think some ex-Austrians, like Dan Klein, Alex Tabarrok - “Masonomics”) who oppose interventions think free banking would be better - I suspect this would apply to many public choice economists (“public choice” is not really a school, but in comparison to Austrian economics, it is bigger and closer to being considered serious economics if you look at rankings of journals and departments, or if you were to talk to leaders of the profession). Finally there is the broader Chicago and new classical macro group. Obviously not monetarists like Milton Friedman, but I’m not sure if there’s anything in new classical macro which supports the view that any intervention is beneficial. I’m not sure if Barro, Lucas, Tom Sargent, Prescott, Kydland etc. have had jobs at the Fed or done anything to suggest this is what they were fishing for. So we should note that condemnation of government intervention does not appear to be the only reason for the rejection of ABCT.
Another significant factor is that Austrian theory does not led itself to formal modelling. This could be because economists believe that doing work on ABCT is too risky if one intends to have a good career in economics. Or it could be because they find Austrian theory is flawed. I would suggest the latter applies to the likes of D Friedman, Caplan and Tullock. But it probably applies to most of them to some extent. Probably the most important factor which is left out of mainstream macro is capital theory, which is of course an important element of ABCT. But aside from that, how close are new classical macroeconomists to sharing the Austrian perspective on the present crisis? I suspect there is a good deal of agreement. It’s been a while since I studied these things though, so it would be interesting if any of you who are taking a freshwater macro course could comment. I think freshwater macro is, as it has been for several decades, the future of the mainstream. Even saltwater macro has little relation to Keynes’ economics. I agree with Peter Klein that Keynesian economics is the beast that won’t die, but this is in the mass media and politics, not so much in academia. Bear this in mind if you wish to debate with serious economists.
The point is that the Austrian framework, and all of its implications, a priori condemns all government interference. It logically destroys every single form of planning and interventionism–there is no way to get around it. Now, there are Neo Classical economists who also oppose such interventions, but their framework is logically unsound. Mainstream Neo-classicism (neo-walrasian and new-Keynesian) can be used to both condemn and justify anything, which is why both Caplan and Stiglitz/Krugman are considered “neo-classical” economists. Either way, most of the “free market” neo-classical economists don’t really oppose market interventionism at all. They still support monetary central planning, some sort of welfare, and in many cases even protectionism. The difference between them and their “left-leaning” counter-parts is one of degree, and not kind.
This means that, if Austrian economics ever became completely mainstream, their would be a vast contraction in the amount of economists. The government and special interest groups support and employ thousands upon thousands of economists who are paid to justify some form of privilege. The answer to this question is obvious if one remains honest:
Another thing to remember is that the average person, who knows nothing about economics, believes that someone/something “must do something.” As far as Caplan is concerned, the man is absolutely clueless when it comes to Austrian economics. I once heard him say that if the rate of interest was too low, that market actors would realize this, take it into account, and adjust their calculation. I mean, only someone who’s never heard of the Wicksellian framework could ever say such a thing. The point is that the interest rate is low if and only if it is below the natural rate. This means that a 15% market rate of interest may be too low, and that a 3% market rate of interest may be too high. There is no way to engage in economic calculation when you have no accurate information signal.
Their positivist methodology, and the various concepts they stole from quantum mechanics, has no place in economics. Formal modeling is entirely inappropriate when it comes to human action. They continuously chase chimeras, while Austrians actually investigate real economic phenomena. There are those who see through their logical fallacies, and because they’ve never heard of von Mises, or Bohm-Bawerk, they turn to Marx.
Bingo. They have no capital theory. They have their meaningless production functions where capital is a homogeneous perfectly supplementary blob.
The synthesis took a bunch of confused economists, gave them a lot of money, and told them to go play with toys and cute models (DSGE). But they would only keep this money if they produced results which could be acted upon.
I think it’s because there are obvious political implications to different theories of business cycles. The austrian theory is less appealing politically.
Why is sobriety not the chosen path of an alcoholic: He believes he is gaining from his destructive behavior. His pursued end is the feeling of drunken disconnect from reality.
Well, wouldn’t you say he’s gaining in the short term?
I have no idea what you are saying.
We know.
Esuric, I agree with you. I’m basically saying that (1) I think we can win the war against mainstream macro, but we have to actually engage with them. There is still a disproportionate amount of focus on Keynes. (2) Politics has undoubtedly perverted economics, but may not be quite so important as some believe.
Also I’d like to suggest there is an important distinction between being correct and selecting some correct arguments to persuade someone. It is probably true that much of macroeconomics exists in its current form because of the existence of extensive government intervention. However, few economists will take seriously anyone who raises this. So if you are simply maintaining the truth of this point on the messageboard, but will focus on capital theory and subjectivism in debates and writing, that is wholly positive. Otherwise the best we can probably hope for is a Pyrrhic victory.
In other words, lets stop asking why isn’t ABCT more generally accepted and instead focus on what can be done to make it more generally accepted? We don’t need a full answer to the former in order to achieve the latter.
LOL, if your in college, go up to your econ proff, and make a comment about one of mainstream econs inconsistencies. you will find very quickly why it isn’t accepted
Hi mickanomics,
The ABCT states that credit expansion distorts the market rate of interest by making present goods appear artificially cheap in terms of future goods. This is an INTERtemporal distortion, because it is a discoordination in the appraisals of goods in BOTH the present AND the future (different time periods). “INTRAtemporal distortion” would imply that the discoordination occurs regarding the appraisals of goods WITHIN the same time period, which is not the case.
For more on this, check out my article Of Time and Marshmallows.
Hope this helps.