I've been having a friendly debate with somebody these past few days, and he's raised a question that I'm unable to counter due to a pounding headache stripping me of complex thought processes.
"why do middle-stage goods decline in supply, forcing savings and directly precipitating the 'bust?'"
Answers appreciated.
Well, you seemed to at first be at a loss as to what they were at all, and a few of the original posts here, possibly through miscommunication (or a different, possibly better understanding than me!), gave answers that seemed to suggest no concept existed, when that isn't true.
Anyhow, when interest rates are lowered artificially, our consumer is actually motivated to spend even more than before and to save even less, which ends up with him buying more goods than before. Since the higher orders of production are malinvested in other, faulty ventures, the producers of 'middle goods' do not gain enough access to resources to increase their supplies to keep pace with increased demand. As a result, prices rise, savings are forced and the bust begins
Which then would make the analogy appropriate, because Robinson misallocated his resources by investing in a faulty venture based on bad information.
I agree that a fisherman could be misled into a malinvestment ( and more easily if his government issues fake-inedible fish into existence in his stock, they ain't helpin' even if it 'feels good' to wake up to more things that look like fish in your store than you had put there the night before)
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
Well it seems like that was the purpose of the analogy. It was just a crude analogy, but I got the point of it.
He's still whining about the "fatal flaw" of ABCT not properly taking into account middle-stage goods. He pointed out that article about empirically examining the ABCT as proof of middle-stage goods being a key component of the theory. Now he's accusing me of being naive because he's given me a headache from trying to reason with him over his stubborn position. Help?
what is the definition of 'middle stage good' ? higher stage and lower stage are categories to which any good can be related to any other good.
this tree is higher than that log
this log is higher than those cut blocks
those blocks are higher than those carved ornaments.
and the otherway...
These cut blocks are lower than this tree.
This ornament is lower than that log.
how does this work with middle order? does he just mean that the cut blocks are between ornaments and logs.
which is another way to say that its a higher order good than an ornament and a lower order good than a log ?
As I said before, it's just a different way of framing the problem. 'Middle stage goods' refers to that area between the highest and lowest. It's the area that is pulled at by both sides during the boom. Some Austrians prefer to stick with higher v lower, whereas others use the 'middle' terminology. Different names for the same thing.
Don't all goods get pulled depending on how new money is injected to the economy? If below market interest rate loans were offered exclusively to poor consumers, capital structures would shift as if consumers had expressed a higher time preference, leading to fewer long term investments and an eventual general shortage.
Same central bank... same theory about the function of interest rates. Just all depends *how* the credit is injected into the market.
https://mises.org/journals/qjae/pdf/qjae9_2_4.pdf
Makes a reference to middle-stage goods in the ABCT. Then again, it's an empirical examination of the theory, so...
All goods get 'pulled' in some way or another, but the reason for the bust is the inherent tension between the lack of savings and the malinvested funds.
I'm not sure why you've been hung up on this for so long. Middle stage goods is an acceptable term. I've heard it used before and it's not even a big deal. The answer to the question is extremely simple, and I've never even heard a statist/Keynesian counter with anything effective
Believe me, I'm not the one hung up on this. As I mentioned, someone I've been debating with continually refers to middle-stage goods as his "critique" of the ABCT.
Thank you. Indeed, I must admit that I wasn't clear at first myself, and apologize for any misunderstandings or inconsistencies I appeared to exhibit regarding middle-stage goods.