Reply To: Some questions

#18771
kbxcoop
Member

During the 50% sale, I bought Roger Garrison’s “Austrian Macroeconomics: A Diagrammatical Exposition”. The entire model makes sense, except that he gets into the part about the demand for money vs the shift in the curves. From my understanding of the graph, he aggregated the supply of present goods vs the demand of present goods throughout the entire economy. He gets into explaining (pages 22-23) that a shift in the demand for present goods must correspond with a shift for the supply of present goods with no change in the demand for money.

My understanding is that the Demand for present goods (DPG) and the supply of present goods (SPG) is that it can only come from its reciprocals (the demand for future goods (DFG) and the supply of future goods(SFG)). I can only DPG in the time market if I SFG, and I can only DFG in the time market if I SPG. From our discussion above, it makes sense that money demand cannot affect the interest rate, and that prices will adjust to the demand and supply of money, so the affect of the time market from an increased demand of money, all else equals, does not change except for the prices of consumer/capital goods. So is Roger Garrison wrong on this point? Is he mistaking the allocating of resources from consumer goods as present goods in the time market?

What are your thoughts on the model (pg 23)? The usual models I have seen in graphical form is something like https://mises.org/library/marginal-efficiency-capital on Figure 9, with using the Production Possibilities Frontier. Garrison’s model seems better at incorporating the use of time in production (Aggregate production time, increased capital investment increases time, all else equals) and does a good job at showing that the Keynesian consumption function doesn’t make sense.

Thank you for taking the time to answer my tedious questions, but I want to make sure that the reasoning is sound, and that I myself can understand why it makes sense. I don’t like reading about stuff and taking it face value, I like to go through the reasoning so I can draw my own conclusions/defend the logic.