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jmherbener
ParticipantUnemployment can be voluntary or involuntary. Voluntary unemployment is beneficial since it is chosen by persons as their preferred alternative. Some people chose to retire from the workforce and live off their pensions. Millennials are known to take a “gap” year between graduating college and starting a career. Such forms of unemployment are beneficial. Likewise, employers benefit when choosing a preferred candidate over a less-preferred one in filling a position. Since employment requires a mutually-beneficial exchange of labor services between the worker and the employer and searches are required by both parties to find the best “fit”, unemployment during the search process can be chosen by workers and employers and therefore, be beneficial.
Involuntary unemployment harms someone. It occurs, mainly, when the state criminalizes certain terms of employment. A legal minimum wage above the market wage can result in involuntary employment. Both the employer and the worker would benefit from employment, but the employer refuses to hire the worker under penalty of law.
Here is an article on the topic by Hans Hoppe:
ParticipantAn addition to money holdings is not consumption. It is plain saving, which as you suggest, is a present good, but not a consumer good.
If a person’s time preference doesn’t change, then his ratio of Saving-Investing to Consumption does not change. With his time preference constant, for a person to fund an addition to his money holdings out of his given income on anything, he must draw the funds out of consumption and saving-investing in the same proportion. If he draws the funds exclusively from consumption, then the ratio of S-I to C would necessarily change.
ParticipantWell, that’s what the author claims. But I don’t see why it must be so. Time preference determines the price spread between output and input prices. The demand for and supply of money determine the PPM overall. The two are not related in any logically necessary fashion. The author assumes that when the rate of return in money production is increasing from increasing money demand that the rate of return in other lines has stayed the same. In fact, the rate of return must be falling in lines of production in which demand has gone down to allow the increase demand for money. People satisfy their increased demand for money by reducing their demand for, and increasing their supply of, other goods.
In other words, the rising rate of return in money production is balanced by a falling rate of return in other lines so that when the reallocation of resources is finished, the rate of return is the same as it was before money demand increased and demand for other goods declined. As long as time preferences don’t change during the process, the rate of return overall will not change. The only difference between this case and the case of demand shifts between goods other than money, like landline and cell phones, is that in this case the PPM also changes during the adjustment process.
ParticipantThe productivity of a land site or a capital good (or a labor service) determines its price along with the revenue generated by output it produces. The price of a factor of production conforms to its MRP.Investment by entrepreneurs to buy factors of production, however, earns only the rate of interest. Entrepreneurs pay DMRP to buy factors (sooner) and receive their MRP when selling the output (later).
What Rothbard is referring to is the distinction between factors of production that exist in nature, which are land and labor, and factors of production that come into existence through production, which are capital goods. Neither land nor labor needs to be produced to come into existence, so they have gross physical productivity. But capital goods must be produced to come into existence, so they have only net physical productivity. As shown above all factors of production have only net monetary productivity, i.e., investment in them earns only a net return, which is the rate of interest.
ParticipantThe IS-LM model stipulates certain “channels” of influence that one variable has on another. These stipulations are Keynesian and therefore subject to critique from an Austrian viewpoint.
Keynes asserted that the interest rate is determined by the stock of money and the demand to hold money. This effect occurs indirectly as people trade money holdings for bonds in their asset portfolios. People sell bonds to satisfy their demand to hold more money and therefore, interest rates rise as the necessary consequence of bond prices falling.
Austrians counter that as a medium of exchange people hold money in lieu of demand for goods in general and not just bonds. People sell across all goods to satisfy their increased demand to hold money and therefore, prices in general fall.
Furthermore, unless time preferences change during the transition between the original and higher demand for money, the ratio between consumption and saving-investing will not change. Time preferences determine both the pure rate of interest and the ratio of consumption to saving-investing. It doesn’t seem to me that the unnamed author provides an argument to show that time preferences necessarily change in the transition. He has simply stated, correctly, that the composition of investment will shift away from other goods and into commodity money. But commodity money production is no different than the production of any other good in the economy in terms of generating a rate of return. And so, his case is no different than increased demand for smartphones leading to an increase production by pulling capital and labor out of the production of landline phones. Such changes in the composition of investment do not affect the rate of return or the proportion of resources in the economy devoted to saving-investing, both of which are determined by time preferences.
ParticipantThe first chapter of Henry Hazlitt’s Economics in One Lesson is a classic.
You could pick a chapter from Bob Murphy’s book Lessons for the Young Economist.
https://mises.org/system/tdf/lessons_for_the_young_economist_murphy_0.pdf?file=1&type=document
ParticipantBecause business-to-business sales are a multiple of consumer-to-business sales, the bulk of economic activity in the economy is not included in GDP. Consumption is not 70% of the economy (it is 70% of GDP) and therefore, stimulating consumption via fiscal and monetary policy is unlikely to bring an economy out of depression or lead to economic growth. Macroeconomic problems are likely caused by production aimed at satisfying business-to-business sales and not production to satisfy consumer-to-business sales.
https://mises.org/blog/growth-trends-measured-gdp-and-gross-output
ParticipantGDP includes the market value of all final goods and services produced during some period of time. Investment, then, are factors of production (mainly capital goods) purchased by entrepreneurs and used by them instead of becoming part of the product they produce which are sold to someone else who then uses them. “Investment” in GDP accounts for the market value of capital capacity, i.e., assets, owned by the entrepreneur throughout the time frame of production. An auto entrepreneur, for example, owns a factory. He holds onto the factory as an asset for decades across hundreds of production runs for which he is purchasing materials and labor. Thus, his “investment” included in GDP is the market value of maintenance and additions to his capital capacity.
http://www.econlib.org/library/Enc/NationalIncomeAccounts.html
ParticipantGross Output includes the market value of all intermediate capital goods produced during a given time period in addition to the items in GDP. So, not only the market value of automobiles sold to consumers, which is in GDP, but the market value of the iron mined, the steel made, the tires fabricated, etc. are in GO.
http://www.bea.gov/faq/index.cfm?faq_id=1034
Here is Mark Skousen on GO:
ParticipantPrior to 1940, the money stock typically contracted significantly during a bust. People move toward holding currency by cashing out their checking account balances (or, in the 19th century, redeeming bank notes). The money stock shrinks as the bank money substitutes are eliminated.
After the Second World War, the money stock typically does not contract significantly during a bust. The Fed has manged to re-inflate during the bust by expanding its purchase of securities from banks. Even with fiat money, however, it is possible for the money stock to decline during the bust. It depends on the counter-veiling causal factors at work: the Fed’s attempt to re-inflate by expanding bank reserves versus people building cash reserves.
In my reading of the article, the author (p. 305f) is not suggesting what you’re implying. He is merely saying that when a catallactic offer is made it conveys only a promise and likewise with cratic offers.
ParticipantGuido Huelsmann’s book is in print in German. The English edition will be out by the end of 2016.
For accounting book, you might ask Dr. David Rapp.
ParticipantRothbard is referring to the purchasing power of a person’s entire money holdings. For example, at first he held $1,000 and the price of gasoline was $2.00 a gallon so the PP of of his $1,000 was 500 gallons of gasoline. After being visited by Gabriel, his money holdings were $2,000 and the price of gallon of gasoline was $4.00, so the PP of his entire money holdings was still 500 gallons.
What I was referring to as the PPM was the PP of a given amount of money, say a $1,000. After being visiting by Gabriel, the PP of a $1,000 has been cut in half. (500 gallons before his visit and 250 gallons after his visit.) This is the conventional way of referring to the PPM. It refers to the set of goods a given amount of money will buy.
ParticipantFed officials often think of the macro-economy in terms of the Phillip’s Curve trade-off between unemployment and inflation. (Officially, they refer to their “dual mandate” to fight both unemployment and inflation.) When an expansion progresses to the point at which labor markets tighten, the fear of cost-push inflation arises.
Here is Janet Yellen in 2015 on Fed tightening:
http://www.federalreserve.gov/newsevents/speech/yellen20150327a.htm
ParticipantThe claim that “any amount of money is optimal” does not refer directly to the dynamic process of monetary inflation.
Suppose that people have a money stock of $6 trillion and that today they make 1 billion trades. Then, they could still make their 1 billion trades if they had, instead, $3 trillion of money stock. In this case, prices would be roughly half as high. So any amount of money is sufficient for people to make all the trades that they want to make.
An increase in the money stock, with the demand for money given, drives up prices (or what is the same thing, drives down the PPM) permanently. However, the structure of prices will first be distorted and then restored. For example, suppose the Fed prints paper money and the government spends it on corn. The price of corn will rise as will the profit of corn farmers. Eager to earn the additional profit farmers will increase their demand for inputs (workers, seed, etc.) and investors will increase their demand for assets (farm land, equipment, etc.). Producers of those inputs and assets will have greater profit and the same process will occur with their inputs and assets. Having been earned by the producers of these goods, the new money will be spent on a wider array of goods across wider number of industries. Eventually, the additional profit in the areas mentioned will disappear and the rate of return will normalize. This process does not, however, require that the PPM fall back down but only that prices adjust relative to each other.
The same is true in cases of the boom-bust cycle. During the bust, the PPM does not need to fall back down, but the structure of prices relative to each other must normalize.
ParticipantIn a given action, the person chooses the amount of a good that he believes is suitable to the attainment of his end. That amount we call the “unit of the good.” So, in your example, the unit of money is $1,000. If your vacation was the highest-valued use of $1,000 for you and you had another end that could also be satisfied with $1,000, then the second unit of $1,000 would be less highly ranked by you than the first unit of $1,000.
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