1) As discussed in Section II, Hayek was unclear whether his structure of production represents a yearly flow of goods or a distribution of wealth. Mises and Rothbard, like Hayek, seem to mean one and also the other. Skousen is at least consistent but, unfortunately, he is consistently wrong. He definitely means the amount of goods flowing by every year. This author’s work (1999) is about stock, not supply.
2) As discussed in Section III, Hayek’s triangle is printed sideways and backwards. The former problem can be corrected by rotating the graph but the latter problem is more fundamental. Hayek is speaking from the perspective of the owner of the final product looking back on his costs of production. He is speaking from Marx’s perspective. The perspective that we want is from right now, at time zero, looking forward into the future.
3) As discussed in Section IV, there must be some temporal measure or the Hayekian’s incessant references to “lengthening the period of production” would not mean anything at all. Their theory of business cycles depends on credit expansions lengthening the period of production and on the inevitable contraction shortening it. It is impossible to talk about something being lengthened or shortened unless one knows how to measure it.
4) As discussed in Section V, Hayekian theory depends entirely too much on the specificity of capital goods. In reality, many companies make products or provide services which are used in all of Hayek’s five stages – and they experience cyclical behavior too. Rothbard was wrong when he said “To the extent that the new money is loaned to consumers rather than businesses, the cycle effects do not occur” (1970, p. 940 footnote).
5) As discussed in Section VI, Garrison’s conceptions of the natural rate of interest is faulty. The Hayekians are naïve to cling to this mythical concept. There is no such thing as a natural rate of interest. In any case, credit limits are more important than interest rates. The necessity of a bust following boom times is adequately explained by the transfer of capital from smaller companies to larger ones.
6) In Garrison’s own words: “the [Hayekian] theory of the business cycle is a theory of the unsustainable boom. It is not a theory of depression per se. In particular, it does not account for the severity and possible recalcitrance of the depression that may follow on the heels of the bust” (2001, p. 120). In 1930, Hayek could explain how the depression started. In 1936, he could not explain why it still persisted.
7) Austrian economists seem naïve because their belief in a natural interest rate implies an ethical judgment on what is natural or unnatural, their discussion of the inevitable collapse of a credit expansion is typically presented as a sort of morality play and because they advocate an impractical 100% reserve requirement based solely on ethical considerations.
I found these critiques of Hayek and the Austrian school at another site, any responses?
I was under the impression that Hayek was really more of a forefather to Austrian economics.
Is this a serious question of is it yet another attempt at trolling by crazy stalkers?
Just asking because the nut-case who wrote this was spamming the forums a while back and I don't want to waste my time if the thread is going to get deleted. Not saying you're a crazy stalker...well, unless you are of course.
I don't see a real critique here, as opposed to misunderstandings of Austrian theory, or perhaps even outright lies. It could be from that crank/troll, now that I see one of the tags; maybe Angurse stumbled across his website.
-Jon
Freedom of markets is positively correlated with the degree of evolution in any society...
I haven't read Murphy's response to Victor Aguilar yet.
Someday perhaps.
A lot of his 'critiques' are just downright petty like Hayek's triangle not pointing the correct way or Rothbard being against econometrics, or whatever Vic calls 'mathematical economic', but his books are full of diagrams.
I like his link to Bob Murphy's capitulation where I successfully posted a comment as "Bob Murphy"...too funny.
Hilarious. That guy is such a loser.
Anonymous Coward:Is this a serious question of is it yet another attempt at trolling by crazy stalkers?
No, no its a serious question. I just wanted to see some legitimate responses to his critique.
Same here, although I can already see errors in his statements (e.g. his dumb critique of the use "natural", a word many economists use in connection to the interest rate.)
I heard somebody criticise the ABCT in regards to the current "crisis" saying it's wrong because houses are consumer goods not capital goods, any answers to that?
"You don't need a weatherman to know which way the wind blows"
Bob Dylan
I think we should give some credit to the OP. This is mainly because Hayek has written some works that don't emphasize free-market and liberty as Rothbard does, because Hayek's a bit more conservative.
For example, while Hayek advocates for competitive currency, he does not think gold would succeed as one. Instead, he would rely on paper money and have the money supply be adjusted in order to maintain stability. However, Rothbardian economists believe this is wrong.
They're durable consumer's goods. It'd be a curious fact that any Austrian economist would adhere to the ABCT if there were really such an obviously glaring mistake. Obviously, there isn't, and the ABCT is more nuanced than what they'd think it is.
As for the OP, it's a rather general "critique" of the Austrian School, even if it focuses on Hayek.
Jon Irenicus: They're durable consumer's goods. It'd be a curious fact that any Austrian economist would adhere to the ABCT if there were really such an obviously glaring mistake. Obviously, there isn't, and the ABCT is more nuanced than what they'd think it is. As for the OP, it's a rather general "critique" of the Austrian School, even if it focuses on Hayek. -Jon
Thanks, that's basically what I was thinking. In any case it wouldn't "falsify" an a priori true theory but I was just wondering.
Yeah. I'm not saying that is the correct answer, but it's worth keeping in mind that they're durable, unlike most consumers' goods and I think the answer lies in that direction. As for the person venturing the criticism, it makes me wonder how ill-informed they've decided to remain, as when I usually see an obvious mistake in a theory I will usually read up to see if it actually perpetrates the "mistake" at all.
Actually, thinking about it, it makes no sense to criticise Austrian theory as a result of this because a number of Austrians predicted this exact thing.
However, why would it matter that they're durable goods? Simply because they require large amounts of savings and the lowered interest rates would fool entrepreneurs into thinking more saving was going on than there actually was.
Anonymous Coward: I haven't read Murphy's response to Victor Aguilar yet. Someday perhaps. A lot of his 'critiques' are just downright petty like Hayek's triangle not pointing the correct way or Rothbard being against econometrics, or whatever Vic calls 'mathematical economic', but his books are full of diagrams. I like his link to Bob Murphy's capitulation where I successfully posted a comment as "Bob Murphy"...too funny.
Econometrics and mathematical economics are totally different things. Mathematical economics is simply stating economic theory using mathematical notation and models. Econometrics is basically a combination of statistics with economic theory (although sometimes they throw out the theory altogether).
"I cannot prove, but am prepared to affirm, that if you take care of clarity in reasoning, most good causes will take care of themselves, while some bad ones are taken care of as a matter of course." -Anthony de Jasay