I'm brand new here, as this is my first post. I have just begun studying Austrian Economics, and am very intrigued by it. I just found the article, "Why I Am Not an Austrain Economist."
I am by no means vouching for the article, as a lot of it is currently over my head. I was just looking for a knowledgeable Austrian economist to debunk the article. I was wondering whether the article is just plain wrong, misrepresents the Austrain position, or make if it makes valid points.
I think this article has come up before. Maybe searching the forum will fetch it. Walter Block and I think either Bob Murphy or Guido Huelsmann have responded to Caplan's criticisms of Austrian theory. At any rate, it is by no means the last word on the topic.
-Jon
Freedom of markets is positively correlated with the degree of evolution in any society...
Thanks. I tried searching it previously and didn't get again, but I think I erred because now there is 5 pages worth of results. I will dig through those.
Walter Block's response to Caplan's article can be found here:
http://mises.org/journals/qjae/pdf/Qjae2_4_2.pdf
Enjoy
No1ButPaul08:I was just looking for a knowledgeable Austrian economist to debunk the article.
I wrote an essay in response to Caplan after attending the 2006 Mises University. I haven't updated or revised it since the initial edit, but if you're interested, you can download the PDF from my blog.
Caplan raises a number of contentions in his paper, I address only his arguments against Austrian business cycle theory, which for the most part, IMO, are utterly wrong.
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David Z
"The issue is always the same, the government or the market. There is no third solution."
David, could you email me at nskinsella at gmail dot com?
Also, a few comments, which I posted on an email list:
"I just read most of it and skimsellad the rest. This guy is a good, interesting, and clever writer. The piece is good, though it could use some improvement....The paper relies a bit too much on price-signaling/Hayekian knowledge ideas. He also strangely does not cite some key papers in this area like Guido's "error cycles." I don't think the paper goes into the following possible explanation either (not sure b/c i skimmed near the end) ... I can't recall if Guido's or others do either, but the following occurs to me, as an argument as to why ABCT has to be right, that there has to be malinvestment. Let's imagine all entrepreneurs are Barnettian, and can perfectly predict the coming crash. Even the "bad" entrepreneurs have this ability. So they all take the newly loaned fund at the lower rates. They all repay their loans just before the crash. Now the banks have even more money to lend, but few takers. So they offer the money at even lower prices, since demand is so much lower. That means interest rates are even lower. So surely then SOME marginal "very bad" entrepreneurs will take this money and malinvest (these are the ones who are so bad they cannot predict the bubble's end). Ergo, the bubble does happen. Alternatively, I think it's the very completion of early-projects and mass repayment of loans, combined with unwillingness to take further "extra" loans, that would *trigger* or set off the collapse. And since it's impossible for ALL the entrepreneurs to act simultaneously and in perfect unison, there's a sort of Gaussian bell curve here, describing their temporal behavior in their predictions, project completions, or loan repayments--so at some point on the curve, the collapse is touched off, and the remainder are screwed--meaning they did malinvest. So either way, it seems it's impossile to avoid it; which is another way of saying that injecting or creating new money does not create new wealth; which is to say, money is not wealth. That is why I have long maintained taht the central error of freebankers is a mistaken conflation of money with wealth.
Stephan Kinsella nskinsella@gmail.com www.StephanKinsella.com
First - I appreciate the comments!
I don't think I've really looked at the paper since I wrote it two years ago, but I'd be willing to revisit it. I'll send you an e-mail, because I'm always receptive to constructive criticism.
There was a lot of price-theory discussion at MisesU in 2006, and this paper was written shortly thereafter, which probably explains my overemphasis in that regard...
nskinsella:but the following occurs to me, as an argument as to why ABCT has to be right, that there has to be malinvestment.
That is the essential position, that there has to be malinvestment. Caplan disagrees... On pp13 the section on the "Cluster of Errors," I think I tried to get at that, paraphrasing myself:
The ABCT tolerates conservatism among entrepreneurs, while still allowing for the cluster of errors. Able entrepreneurs may in fact become more conservative, they may fear the coming burst of the bubble. These entrepreneurs would refrain from speculative borrowing even if such speculations might yield profits. However, not everyone is afraid of the bubble, some people think they can beat it.The low interest rate also encourages borrowing (i.e., that's the damn point of the fed lowering rates, to "stimulate" investment). All else being equal, additional loans can only be granted to borrowers who are less credit-worth, or to entrepreneurs who are less capable. In a free market, these folk don't have <em>any</em> access to funds, because the cost of capital is too high.
nskinsella:So either way, it seems it's impossile to avoid it; which is another way of saying that injecting or creating new money does not create new wealth; which is to say, money is not wealth. That is why I have long maintained taht the central error of freebankers is a mistaken conflation of money with wealth.
For true! I tell people all the time, that if we woke up tomorrow and found that all the money in all the banks in the world had evaporated overnight, we wouldn't be any poorer. We'd be a lot less liquid, and it might be harder to get things initially, but we still have all our stuff! It's the abundance (or lack thereof) of goods and services which indicates wealth or poverty.
I tolerate the free-bankers only insofar as I believe a free market would not put up with fractional reserve banking. If they're willing to put their money where their mouths are, then they should accept a 100% reserve ratio, as would likely be chosen by the market.