[pacopasa]

Theoretical question:

If all entrepreneurs understood Austrian Business Cycle Theory would that prevent booms and busts?

[jmherbener]

ABCT, like all economic theory, gives us the general cause-and-effect structure of human action and interaction. To understand the particular, concrete aspects of human action and interaction requires human judgments, which vary from one person to another. Even if all entrepreneurs understood ABCT, each of them would have a different anticipation of how monetary inflation and credit expansion will be manifest in the particulars of time and place. Given that there is a spectrum of entrepreneurs from superior to inferior, the boom-bust will result from monetary inflation and credit expansion.

Take a look at Lucas Engelhardt’s article:

https://mises.org/library/expansionary-monetary-policy-and-decreasing-entrepreneurial-quality

[pacopasa]

Thanks for the article. It appears to me that in his conclusion he states it is theoretically possible that one day all entrepreneurs would understand the distorting effects of monetary policy but it is realistically impossible. The insight that it is not that entrepreneurs become fooled but that fools become entrepreneurs seems to sum up the reality.

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