tag:blogger.com,1999:blog-1740670447258719504.post6826814066250618742..comments2024-03-27T03:00:27.024-04:00Comments on Facts & other stubborn things: Robert Murphy on the Austrian School and KeynesianismEvanhttp://www.blogger.com/profile/12259004160963531720noreply@blogger.comBlogger20125tag:blogger.com,1999:blog-1740670447258719504.post-39510884304577247462010-10-20T17:17:59.123-04:002010-10-20T17:17:59.123-04:00Yep - it was an interesting interview. I mentione...Yep - it was an interesting interview. I mentioned it here:<br />http://factsandotherstubbornthings.blogspot.com/2010/10/of-streetlamps-and-macroeconomics.html<br /><br />When I discussed the Caballero WP - you might be interested in that one.Danielhttps://www.blogger.com/profile/17192667997950934790noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-87187159752947041232010-10-20T17:14:55.460-04:002010-10-20T17:14:55.460-04:00Meyer on macro, etc.: http://www.clevelandfed.org/...Meyer on macro, etc.: http://www.clevelandfed.org/forefront/2010/09/ff_2010_fall_02.cfmXenophonhttp://myob.myob.myob.myob.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-47696936191200407812010-10-20T16:37:28.956-04:002010-10-20T16:37:28.956-04:00"The point is, the capital structure can'..."The point is, the capital structure can't just pivot - the slope of the capital structure can't just be reduced - the level itself has to actually increase."<br /><br />I'm not sure what you are trying to say here.<br /><br />"If ABCT is driven by "low interest rates increase investment" what is it really adding? "<br /><br />In what regard? It illustrates the effect of an increase in investment without a previous increase in the volume of real accumulated capital.Jonathan M.F. Catalánhttp://www.economicthought.net/noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-25165646247024655292010-10-20T15:53:07.589-04:002010-10-20T15:53:07.589-04:00Name me an economist that won't tell you that....Name me an economist that won't tell you that.Danielhttps://www.blogger.com/profile/17192667997950934790noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-37451108428393608622010-10-20T15:52:49.084-04:002010-10-20T15:52:49.084-04:00Didn't we come around to the idea that we agre...Didn't we come around to the idea that we agreed on this point when we talked about it before? The point is, the capital structure can't just pivot - the slope of the capital structure can't just be reduced - the level itself has to actually increase. That's all I'm saying which I think is what we eventually determined you were saying too. That's fine, but that's not uniquely Austrian Business Cycle Theory. If ABCT is driven by "low interest rates increase investment" what is it really adding?Danielhttps://www.blogger.com/profile/17192667997950934790noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-23575767948059898702010-10-20T15:47:20.154-04:002010-10-20T15:47:20.154-04:00I still don't understand why you think that we...I still don't understand why you think that we need an overinvestment theory to supplement that of malinvestment in order to explain the "breadth" of unemployment. I have already explained it within the parameters of malinvestment. If you think it's wrong or insufficient then fine, but at least explain why this is so, instead of ignoring it and claiming that we need more.<br /><br />Also, you officially win: I am back to responding here. :) The dark side is too appealing!Jonathan M.F. Catalánhttp://www.economicthought.net/noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-64674498249500825712010-10-20T15:14:41.732-04:002010-10-20T15:14:41.732-04:00Why haven't you discussed Wilkinson's take...Why haven't you discussed Wilkinson's take on DeLong's remarks?<br /><br />http://www.willwilkinson.net/flybottle/2010/10/09/the-elite-economist-revolving-door-problem-delong-edition/Xenophonhttp://myob.myob.myob.myob.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-52473316043437804192010-10-20T14:43:22.797-04:002010-10-20T14:43:22.797-04:00You can't talk about capital structure without...You can't talk about capital structure without discussing the government's efforts to manipulate it.Xenophonhttp://myob.myob.myob.myob.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-82606899190742476122010-10-20T14:27:44.965-04:002010-10-20T14:27:44.965-04:00Xenophon - Nick is talking about changes to the ca...Xenophon - Nick is talking about changes to the capital structure... I'm not quite sure what the interventions you're talking about has to do with that. Could you explain?Danielhttps://www.blogger.com/profile/17192667997950934790noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-6001369651396177272010-10-20T14:25:10.217-04:002010-10-20T14:25:10.217-04:00nickn,
Well, not just flipping, but government en...nickn,<br /><br />Well, not just flipping, but government encouragement of home equity loans was also a big part of it. The government did its level best to encourage lots of private debt; it continues to do so, but lots of Americans have opted out of that con.Xenophonhttp://myob.myob.myob.myob.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-9870220092104784432010-10-20T14:10:56.396-04:002010-10-20T14:10:56.396-04:00Maybe - explain that more. Houses are an odd-ball...Maybe - explain that more. Houses are an odd-ball thing to talk about to begin with becuase it's sort of mixed consumption and investment.<br /><br />The idea being the production process of a house for final sale is lengthened because the flipping process is part of the production process?<br /><br />I could see that. But I'm guessing this has more to do with trends in house prices than changes in the interest rate, wouldn't you think?<br /><br />True - there would be more flipping under low interest rates than under high interest rates, holding prices constant. But was that really the source of all the flipping? I doubt it. I'm guessing it had more to do with speculation on the value of the house itself.Danielhttps://www.blogger.com/profile/17192667997950934790noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-73446846513666618722010-10-20T14:04:35.479-04:002010-10-20T14:04:35.479-04:00At the risk of moving the goalposts, couldn't ...At the risk of moving the goalposts, couldn't you consider the increase in people "flipping" houses as a lengthening of the structure of production?nicknnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-17827505905043668492010-10-20T13:21:51.339-04:002010-10-20T13:21:51.339-04:00Lawrence Reed has a great podcast on stimuli, defl...Lawrence Reed has a great podcast on stimuli, deflation and the Great Recession on a FEE podcast: http://fee.org/media/stimuli-deflation-and-the-great-recession/Xenophonhttp://myob.myob.myob.myob.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-58432274131777183062010-10-20T13:13:48.641-04:002010-10-20T13:13:48.641-04:00Attack, criticism, whatever.
"And btw, citin...Attack, criticism, whatever.<br /><br />"And btw, citing two centuries of intervention doesn't do much to isolate the causes of a bubble that occured in a matter of years in the early twentieth century."<br /><br />The bubble began in the mid to late 1990s actually. You can argue with Vernon Smith on the subject: http://online.wsj.com/article/SB119794091743935595.html<br /><br />Anyway, it does a lot to isolate the causes of such; the causes always lay with the government trying to promote one or another interest in the name of one cause or another (helping the poor, promoting transportation, paying for the war effort), which naturally attracts a flood of speculative money, which in turn leads to lots of malinvestment.Xenophonhttp://myob.myob.myob.myob.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-82699432202880879632010-10-20T13:02:20.086-04:002010-10-20T13:02:20.086-04:00It's not an attack, Xenophon.
"Because t...It's not an attack, Xenophon.<br /><br /><i>"Because the government is so heavily involved in its promotion; and that has been the case for all of the 20th century and much of the 19th century."</i><br /><br />OK, but this isn't ABCT anymore. And btw, citing two centuries of intervention doesn't do much to isolate the causes of a bubble that occured in a matter of years in the early twentieth century.Danielhttps://www.blogger.com/profile/17192667997950934790noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-90623506715369867062010-10-20T12:59:48.726-04:002010-10-20T12:59:48.726-04:00"It's plausible, but if it were a major f..."It's plausible, but if it were a major factor you'd think that bubbles would consistently be in the early stages of the production process..."<br /><br />I've never found this to be a very convincing attack on the malinvestment theory. The question has more than adequately addressed by a number of Austrian economists. <br /><br />"Why should housing be especially prone to malinvestment?"<br /><br />Because the government is so heavily involved in its promotion; and that has been the case for all of the 20th century and much of the 19th century.Xenophonhttp://myob.myob.myob.myob.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-11152506048568624312010-10-20T11:39:45.764-04:002010-10-20T11:39:45.764-04:00I don't really know and I have yet to find a r...I don't really know and I have yet to find a really solid treatment of this.<br /><br />It's plausible, but if it were a major factor you'd think that bubbles would consistently be in the early stages of the production process, or in especially round-about production processes. Do we see this? I don't think we do. Usually the real destructive bubbles (from an AD and from an output perspective) are in assets.<br /><br />Why should housing be especially prone to malinvestment? If anything the production process for housing is SHORTER now than it was before. Pre-fab/McMansions/big developments, etc. This is not an obvious candidate for ABCT malinvestments, is it?<br /><br />I would love to do a detailed empirical study on the actual distortions of the capital structure - not just plotting employment changes for three different industries - and see how big these processes really are. Because really I feel like we don't know. I suspect they are there, but they are negligible. It's worth looking into.Danielhttps://www.blogger.com/profile/17192667997950934790noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-91702770175942366122010-10-20T11:32:32.755-04:002010-10-20T11:32:32.755-04:00To what extent do you think malinvestments [as a r...To what extent do you think malinvestments [as a result of credit expansion and interest rate manipulation] contribute to the bubble, if any? Could they at least provide the initial catalyst for a bubble, with bubble psychology taking over afterwords?<br /><br />Thanks for your input.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-61263957863481556252010-10-20T11:05:02.750-04:002010-10-20T11:05:02.750-04:00Well, I don't reconcile the two theories as th...Well, I don't reconcile the two theories as the Austrians usually think of them.<br /><br />What I think is reconcilable is the impact of central bank activity on the capital structure. The fact that that process is real does not mean it is the dominant driver of the business cycle - I don't think it is.<br /><br />My position is that, yes, we may have these adjustments of the capital structure in response to central bank actions and that's interesting and that's real, but the problems associated with that discoordination pale in comparison with the problems of a central bank not providing an adequate money supply.<br /><br />So I accept ABCT as a theory of the business cycle, not as "the" theory of the business cycle.Danielhttps://www.blogger.com/profile/17192667997950934790noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-45067494994873770882010-10-20T09:58:53.612-04:002010-10-20T09:58:53.612-04:00Cool, thanks for taking a look at this article.
I...Cool, thanks for taking a look at this article.<br /><br />I'm a little confused as to how you reconcile the two theories though -- ABCT paints the central bank as a chief cause of the business cycle, but the central bank is essential for Keynesian theory.Anonymousnoreply@blogger.com