http://econlog.econlib.org/archives/2010/09/rothbard_on_the.html
His two main points (which I think he stole from me) are:
The best response, so far, comes from andy:
"My main problem with the Austrian theory is that it presumes that businesses are highly myopic. An entrepreneur should be able to tell when the central bank is keeping interest rates too low. In that case, he should not say, "Oh, boy. Let me commit to long-term production based on these low interest rates." Instead, he should say, "I'd better be careful. These interest rates are artificially low." "
There are 2 problems with this objection: * Market price is both 'result' of market forces and 'incentive' to do some things. If government starts influencing the rate, you may know that this signal is wrong. But you do not have a better signal. It's like driving an airplane with totally non-sensical speedometer. The fact that you know that some information is wrong doesn't mean you know the correct information.
* The lower interest rate *means* that money is more available. The whole notion is based on the fact that prices do not change instantly. More money available means that more people have incentive to invest. However, if we assume good investors decide not to invest, the bad investors get the money.
One of the reasons market works is that it directs money from bad investors to the good investors. If the good investors know about the problem, they will refrain from investing - and the money can go to bad investors. If it still doesn't work, the Central bank WILL lower the interest rate further to make them invest.
It's a kind of prisoner dilemma.
"I'm not a fan of Murray Rothbard." -- David D. Friedman
Bryan makes an argument for Bayesian knowledge; never ever ever have I encountered something like that in any of my mainstream readings. Admittedly; I've read them whole, but would you say that the major economics textbooks incorporate thinking like that?
Neoclassical methodologists have long subscribed to some version of logical positivism that working economists routinely flout.
Strangeloop:Would you prefer I did not keep the Austrians here informed of critiques from economists?
Your points #1 and #2 are strawmen. You call that informative?
"The market is a process." - Ludwig von Mises, as related by Israel Kirzner. "Capital formation is a beautiful thing" - Chloe732.
You're missing two points:
I do believe the second point (i.e., entrepreneurs are assumed to be unusually stupid when low interest rates are introduced) can be considered a straw man. However, I do disagree that the first point is: many Austrian economists have been far too quick to predict doomsday economic disasters and history hasn't been kind to them (e.g., I've repeatedly shown a clip of Peter Schiff--allegedly one of the best prophets--making an outrageously chicken-little prediction in the early 2000s that never panned out).
StrangeLoop:I was presenting Arnold Kling's critique (hence stating "Your points #1 and #2 are strawmen" is a bit misleading).
StrangeLoop:His two main points (which I think he stole from me) are:
Sometimes I wonder whether or not you're a foreigner using Google Translator to crudely understand what I am saying.
I have presented these points before (hence I made note of it), but this thread is dedicated to Arnold Kling's critique--not mine (nor for me to defend that critique, actually).
StrangeLoop:Sometimes I wonder whether or not you're a foreigner using Google Translator to crudely understand what I am saying.
Maybe chloe is also a foreigner!
You should put a disclaimer in your sig, "Posts may be too intelligent for non-native english speakers, Google Translate need not apply."
StrangeLoop:I have presented these points before (hence I made note of it), but this thread is dedicated to Arnold Kling's critique--not mine (nor for me to defend that critique, actually).
You said he stole his ideas from you. Either way, they are ridiculous, as Peter Klein indicated.
The problem with me-tooism is that sometimes one may end up attaching to a greater fool.
The dot-com bubble was in the process of bursting. Perhaps he didn't imagine the government would be as suicidal as it proved to be in reinflating it into the housing bubble.