Archive for the 'Austrian Business Cycle' Category

Hayekian Credit Booms

January 26, 2011

by Andreas Hoffmann  

Currently there is an interesting discussion in the blogosphere on how it is possible that in Hayek’s Prices and Production framework consumption and investment can increase at the same time.  

In my opinion they cannot, or only very slightly, but this is not a problem! Read the rest of this entry »

Keynes Versus Hayek: An Empirical Matter

January 22, 2011

by Gene Callahan

Imagine that you saunter to the faculty cafeteria one day and sit down at a table already occupied by two theoretical physicists. You discover them deep in a debate. One says he has developed the wind-driven theory of leaf fall that portrays the path of a leaf, once it has left its parent tree, to be determined almost entirely by the wind. The other fellow has a gravity-driven model of leaf fall, which has it that it is gravity controlling the show. You are somewhat amazed by the fierceness of their debate, and by the fact that they just keep going on at the level of theory. Finally, exasperated, you ask, “Has it ever occurred to either of you that you are both right? Read the rest of this entry »

Heterogeneous Labor

September 6, 2010

by Jerry O’Driscoll  

In the September 4th issue of the Wall Street Journal, Jon Hilsenrath chronicles the debate over the reasons for persistently high unemployment.  What is being described is the problem of heterogeneous labor.

Labor, like capital goods, is specialized and specific to certain occupations. When those occupations disappear in recession, the next best alternative immediately available locally may pay considerably lower wages. Workers may “know” they have better alternatives, but their knowledge capital has also depreciated with the crisis and downturn. They must search for employment opportunities. Read the rest of this entry »

Tyler Cowen’s “Risk and Business Cycles”

July 23, 2010

by Mario Rizzo

I am happy to report that Tyler Cowen’s book, Risk and Business Cycles: New and Old Austrian Perspectives  is now available, as of July 15th, in a reasonably-priced paperback edition from Routledge. (I am sure that Amazon will be making it available soon.)

This is not an orthodox Austrian approach. In fact, Cowen criticizes that version. However, the “new Austrian” inspired version he presents seems especially relevant in view of the widespread, but not uiversal, agreement that the pre-recession period of very low interest rates contributed to the search for yield and greater risk taking. As the title indicates, Cowen’s theory emphasizes the importance of low interest rates on risk-taking.

This book appears in the Routledge series, “The Foundations of the Market Economy” edited by Larry White and me. Tyler’s book is well worth reading as are many books in this series (now approaching thirty books).

Now you can afford to buy it.

Understanding Efficient Markets

June 2, 2010

By Chidem Kurdas

Headline topics like derivatives are part of the larger issue of how markets function.  About this big question there’s been profound confusion in the past two years.  Peter Boettke’s article in the Winter 2010 issue of the Independent Review clarifies the muddle.

A particular mathematical interpretation of what an efficient market is has hogged the limelight.  Read the rest of this entry »

Bleg: What are the Predictions of Austrian Cycle Theory?

May 19, 2010

by Mario Rizzo

If you were going to try to adduce evidence with regard to the Mises-Hayek-Garrison “Austrian Business Cycle Theory” what would you expect to see in the expansion, upper turning point and perhaps in the recession itself? Specifically, what would you expect to see in this most recent episode, the so-called Great Recession?

Unfortunately, it would not be helpful to refer to empirical phenomena about which no data is collected. This is a problem with most attempts to measure the elongation of the production structure, for example.  But be creative. George Stigler used to say that it is no excuse to say, “The data doesn’t exist.” There may be indirect ways to measure.

Any ideas?

Hayek after 35 Years

April 26, 2010

by Jerry O’Driscoll  

Today I reread F. A. Hayek’s Nobel Lecture, “The Pretence of Knowledge.”  Hayek was awarded the Nobel Memorial Prize in 1974 and delivered his lecture on December 11, 1974. I was amazed at how modern it was, and appropriate once again for the times.  

The 1970s were terrible times: stop-go demand management policies had produced stagflation that would continue for the rest of the decade.  Hayek said that “we have indeed at the moment little cause for pride: as a profession we have made a mess of things.” He charged that the mess had been produced by policies the majority of economists “recommended and even urged governments to pursue.”   Read the rest of this entry »

Austro-Wicksellian Theory of the Business Cycle: An Informed View

April 13, 2010

by Mario Rizzo

There has been recent discussion in the blogosphere of the so-called Austrian Business Cycle Theory (ABCT). (We must not forget to give the Swedish economist Knut Wicksell credit as well.) Some of it is interesting (mostly because of the comments) but much of it is ill-informed since the bloggers don’t like to read scholarly Austrian work. For a good blog post with references to what others have been saying, see Pete Boettke’s discussion at Coordination Problem.

The first thing to keep in mind is that while this theory embodies “Austrian” characteristics it is not an official Austrian theory. Read the rest of this entry »

Bleeding the Economy

December 17, 2009

by Roger Koppl

At the Cobden Centre‘s website (and here), Steve Baker discusses recent Fed signals in the context of Big Players theory.  The more active the Fed (or other central bank), the greater the fraction of entrepreneurial attention devoted to Fed watching rather than productive activity.  As Baker says, “traders must pay attention to the Big Player and not the fundamentals.” Read the rest of this entry »

Falling Wage Rates

November 12, 2009

by Jerry O’Driscoll  

In today’s Wall Street Journal, there is an article titled “Returning Workers Face Steep Pay Cuts.”  The article cites research by Kenneth Couch of the University of Connecticut that returning workers are taking on average a 40% pay cut from their old jobs.  This is first and foremost a personal tragedy for those affected.  The question we must ask as economists is why?   Read the rest of this entry »