tag:blogger.com,1999:blog-1740670447258719504.post8129877091053707304..comments2024-03-27T03:00:27.024-04:00Comments on Facts & other stubborn things: My Thoughts on GarrisonEvanhttp://www.blogger.com/profile/12259004160963531720noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-1740670447258719504.post-69854066693426654842010-07-22T05:17:54.986-04:002010-07-22T05:17:54.986-04:00The plucking model is more of an empirical observa...The plucking model is more of an empirical observation of Friedman's that a lot of the mid-twentieth century recessions have looked like somebody plucked a string down and it bounced back up to a steady growth path. To put it more formally, he found that the magnitude of upswings in output were far more correlated with the bust preceding the upswing than with the bust following the upswing.<br /><br />This suggests a bust-boom cycle rather than a boom-bust cycle. It's one of the grounds on which Friedman dismissed the Austrian theory and other theories that he perceived to be boom-bust.Danielhttps://www.blogger.com/profile/17192667997950934790noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-86647964159827703692010-07-21T17:37:56.539-04:002010-07-21T17:37:56.539-04:00To be honest, I'm completely ignorant on Fried...To be honest, I'm completely ignorant on Friedman's plucking model so I can't really comment.<br /><br />Let me correct the previous statement, though, that overinvestment accompanies overconsumption. There is no trade-off because they work together.Mattheushttps://www.blogger.com/profile/08674252371229523297noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-43680436277655217102010-07-21T17:12:39.417-04:002010-07-21T17:12:39.417-04:00OK - well we sound decently close then.
Garrison,...OK - well we sound decently close then.<br /><br />Garrison, however, was downplaying the very prospect of overinvestment period (or at least overinvestment that wasn't compensated through underconsumption). He was downplaying the very prospect of a bubble economy in ABCT, in an effort to fit the plucking model. That was the effort that surprised me - not so much the point you're making here.dkuehnhttps://www.blogger.com/profile/10136690886858186981noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-3280323514225303032010-07-21T17:09:05.020-04:002010-07-21T17:09:05.020-04:00I didn't say there wasn't overinvestment; ...I didn't say there wasn't overinvestment; I said that malinvestment does not imply it. That means, while there may be overinvestment in addition to malinvestment, malinvestment is not a problem <i>because of</i> overinvestment. This is the position Krugman took in the late 90s when he "addressed" the Austrian theory. He accused us of presenting an overinvestment story.<br /><br />Now, in the course of a business cycle, is there overinvestment? Absolutely. But that's not the worrisome part of the cycle. It's overinvestment <i>in areas that ought not to have investment</i>. So it's more complicated than a simple overinvestment story (which you agree with).<br /><br />Shostak oversimplifies the theory. The article is focusing on the concept of originary interest and he then brings it in line with intertemporal coordination (which is fine). <br /><br />But this claim: "An overinvestment in capital goods results in a boom, while the liquidation of this overinvestment produces a bust. Hence, the boom-bust economic cycle. " is wrong. It is not the overinvestment of capital goods that produces the boom. Rothbard says something similar, but I believe this to be a case of contextonomy. Rothbard knows it is not a simple case of over-or-under investment that causes cycles.Mattheushttps://www.blogger.com/profile/08674252371229523297noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-53388814600673129152010-07-21T16:41:02.090-04:002010-07-21T16:41:02.090-04:00The concept itself isn't surprising - his emph...The concept itself isn't surprising - his emphasis on it was. I'm well aware it's the distortion of the structure that drives ABCT, rather than any broader overinvestment. That is obvious. That overinvestment would be strenuously repudiated as even an outcome was a little surprising.<br /><br />But I think your point is a little too strong. Frank Shostak seems to think in terms of over-investment as being interchangable with malinvestment:<br />http://mises.org/daily/728#_ftn1<br /><br />And if Shostak is to be trusted, Rothbard thought in those terms too.<br /><br />That was just an early result in a very quick search.<br /><br />I personally don't think the idea of over-investment is all that silly. <i>If</i> interest rates are intertemporal coordinators, why couldn't artificially low interest rates pull more economic activity into an earlier time period, leading to a boom or an over-investment <i>in addition to</i> its distributional effects? Could you explain to me why that's so implausible?<br /><br />Is is it necessary? No. I understand that. But it sounds like a very plausible part of the story - not one to simply be tossed aside in an effort to conform with Friedman's plucking model.dkuehnhttps://www.blogger.com/profile/10136690886858186981noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-26629249544234817412010-07-21T16:24:24.181-04:002010-07-21T16:24:24.181-04:00Malinvestment does not imply overinvestment. You d...Malinvestment does not imply overinvestment. You didn't know this? After all the conversations we've had, and after all the assurances you've given that "you know ABCT," I'm genuinely shocked you found this surprising.<br /><br />Maybe you should take my advice and sit down with Mises/Hayek directly.<br /><br />Some works dealing specifically with ABCT: Theory of Money and Credit; Prices and Production; Money, Bank Credit, and Economic Cycles; and Human Action (specifically the relevant chapters - but, like I always suggest, the whole book).Mattheushttps://www.blogger.com/profile/08674252371229523297noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-67173340252219132872010-07-21T09:01:23.075-04:002010-07-21T09:01:23.075-04:00There - I hope that's better I expanded other ...There - I hope that's better I expanded other points for clarification too.dkuehnhttps://www.blogger.com/profile/10136690886858186981noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-43908833989719097502010-07-21T08:50:34.018-04:002010-07-21T08:50:34.018-04:00Sorry - I wrote up two posts pretty quickly this m...Sorry - I wrote up two posts pretty quickly this morning, in this one just jotting down reactions that have been stewing for awhile.<br /><br />I'm going to read through the whole thing and edit it without explicitly writing an update - not to dodge criticism, but just for the sake of smooth reading.<br /><br />Thanks Natalie.dkuehnhttps://www.blogger.com/profile/10136690886858186981noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-10165442583778423482010-07-21T08:47:55.667-04:002010-07-21T08:47:55.667-04:00"It's no wonder that in the first chapter..."It's no wonder that in the first chapter on Keynes the economy stays at full employment, and in the second chapter on Keynes!"<br /><br />This sentence is confusing.Nataliehttp://www.google.comnoreply@blogger.com