[jmherbener]

In criticizing indifference curve analysis, it’s important to remember, that neoclassical economists don’t claim that people think in indifference curves, but that the economist can model human action by the behavior of economic agents that do so. In any case, Austrians make several points against indifference curve analysis.

Here is a short note by Peter Klein:

http://web.missouri.edu/~kleinp/misc/giffen.pdf

Here is longer piece by Walter Block:

http://www.walterblock.com/wp-content/uploads/2009/06/Reply-to-Caplan-on-Austrian-Economic-Methodology.pdf

[jmherbener]

The IS-LM model has been a staple of mainstream, undergraduate macroeconomics for several decades.

The IS curve purports to plot all points of the rate of interest (i) and the level of income (y) which are brought about by equilibrium between saving and investment. Investment is inversely related to i and saving is directly related to y. At a larger y, saving will be larger and therefore equal to investment only at a lower i. The IS curve, therefore, slopes downward to the right when plotted on a graph with i on the vertical axis and y on the horizontal axis.

The LM curve purports to plot all points of equilibrium between i and y which are brought about by equilibrium between the money stock and money demand (so called, liquidity preference). Although the money stock is independent of either i or y, liquidity preference varies directly with each. With a given money stock, the increasing effect of a larger y on money demand would have to be offset by a decreasing effect of a higher i to maintain equilibrium. The graph of LM slopes upward to the right when superimposed on the IS graph.

The intersection between IS and LM illustrates the only combination of i and y that has the entire economy, both the “real” and “money” aspects, in equilibrium.

The fundamental problem with IS-LM is the erroneous theories underlying it. Time preference determines both the interest rate and the extent of saving-investing. Money demand relative to the stock of money determines the purchasing power of money. Furthermore, it has no theory of production, no capital theory.

Roger Garrison compares and contrasts the Austrian, Keynesian, and Monetarist approaches to macroeconomics in his book, Time and Money. Here is an overview by Garrison:

http://www.auburn.edu/~garriro/b6time.htm

[jmherbener]

Like our Fed, the Bank of England targets the interest rate banks pay to borrow reserves from other banks. In the U.S. this rate is called the Federal Funds Rate. In England it’s called the Bank Rate. When the central bank targets the rate, they strive to keep it at the target by offsetting any change in demand banks have for reserves by increasing supply through the purchase of assets from banks.

As I understand its official release on the policy, the Bank of England has decided not to expand the quantitative easing program. The QE program was a special program to counter the financial crisis. So, if it wants to increase bank reserves to keep the Bank Rate at 0.005, it can use the regular program of purchasing bank assets.
In the U.S., the regular program is called “open market operations.” Technically, it’s a separate program from the QEs.

http://www.bankofengland.co.uk/publications/Pages/news/2013/002.aspx

[jmherbener]

Two sources you might consult are Gabriel Kolko’s book, The Limits of Power: The World and United States Foreign Policy 1945-54 and Michael Cox’s article, “The Tragedy of American Diplomacy? Rethinking the Marshall Plan,” Journal of Cold War Studies 1 (2005), pp. 97-134.

Here are two pieces that cite Cox and Kolko:

http://www.sscnet.ucla.edu/polisci/faculty/trachtenberg/cv/jcws%28marshall%20plan%29.pdf

http://nevinpower.weebly.com/uploads/6/0/5/3/6053998/the_marshall_plan_-_the_extension_of_empire.pdf

[jmherbener]

Perhaps it is because economic theory is about the universal causal structure of human action and marketing is about how some people persuade other people to take particular actions in particular circumstances. If so, then, it’s likely that psychology would develop more insights about marketing than economic theory.

Austrian economists have written a lot about entrepreneurship. So that might be the literature to read to investigate what insights can be drawn in economic theory about marketing. Here is a start:

http://library.mises.org/books/Peter%20G%20Klein/The%20Capitalist%20and%20the%20Entrepreneur%20Essays%20on%20Organizations%20and%20Markets.pdf

And here’s an article advocating developing an Austrian economics of marketing, advertizing, and other business practices:

http://www.mises.org/journals/qjae/pdf/qjae5_2_4.pdf

Also, there have been attempts to develop marketing theory along Austrian lines:

http://edoc.hu-berlin.de/diplom/broeckelmann-philipp-2004-05-17/PDF/Broeckelmann.pdf

[jmherbener]

What made the Great Depression great was that regime uncertainty suppressed investment so that not only did the mal-investments not get liquidated but the capital stock was consumed overall from lack of investing.

During WW2, government policies consumed even more of the capital stock as the capital structure was re-oriented toward war production. What led to the post-war boom was the reasonable expectation on the part of capitalists and entrepreneurs that the regime would be moving toward freer markets.

During the bust after the post-WW1 boom, the Harding administration moved toward freer markets and the liquidation and reconfiguration of the mal-invested portions of the capital structure was over rather quickly.

[jmherbener]

Richard Cantillon wrote about the non-neutrality of money in the first full treatise ever written on economics. Here is a new translation of the work, written in the early 1730s and published posthumously in 1755:

http://library.mises.org/books/Richard%20Cantillon/An%20Essay%20on%20Economic%20Theory.pdf

In fact, the non-neutrality of money, i.e., the production effects that occur when the money stock is increased, are called, “Cantillon Effects.”

[jmherbener]

Mises addresses this in chapter one of Human Action:

http://library.mises.org/books/Ludwig%20von%20Mises/Human%20Action.pdf

[jmherbener]

Again, this seems like a commonplace to me. Why couldn’t Marx recognize, like anyone (regardless of their political thought) can, that if people won’t accept their government’s money the country is in trouble?

It’s a daunting task to read all of Marx to see if he said such a thing. Instead, you might send Rogers an e-mail and ask him for the citation.

Here is a short commentary on Marx’s theory of money:

http://internationalviewpoint.org/spip.php?article286

[jmherbener]

Here are a few pieces to get you started. An article by Jeff Tucker:

https://mises.org/freemarket_detail.aspx?control=120

Henry Hazlitt wrote on the Marshall Plan:

http://mises.org/daily/5922/Will-Foreign-Loans-Make-Us-Rich

Tom Woods wrote on the Marshall Plan in his Politically Incorrect Guide to American History:

http://www.lewrockwell.com/woods/woods35.html

[jmherbener]

No one can understanding the meaning of human action by external observations. Empirical evidence is about activity, not meaning. For example, while I’m in Wal-Mart I see someone pick up a tube of toothpaste, put it in a cart, hand it to a clerk, who puts it in a bag, and so on. I interpret this activity as human action because I presume the someone I observe is a human person like me. So, I infer that this person has an end he is trying to achieve with this activity and that he is employing means to do so on the basis of assessments he has made in his mind about the value he perceives in different courses of action.

We don’t observe human action in others, we infer that the activity we observe others engaged in is human action and we interpret this activity according to the meaning of human action which we acquire, not by observing others, but by reflecting on our own human actions.

[jmherbener]

When the Fed’s monetary inflation generates a credit expansion through the banking system as it does during a boom, entrepreneurs who borrowed the new money buy capital goods driving up their prices. As asset prices rise, claims to those assets also rise in value, i.e., stock prices rise.

Even when the Fed’s monetary inflation does not generate a significant credit expansion as is happening now (i.e., in a bust), investors who have liquidated their assets earlier in the bust and are holding cash begin to invest in assets and claims to assets in anticipation of their prices rising from the impending monetary inflation. Prices of commodities, land, houses, stock, etc. begin to increase even without improvement in the underlying economic conditions.

There are scenarios in which monetary inflation does not boost stock prices. For example, if price inflation is already raging, then more monetary inflation can collapse stock prices as in the 1970s.

[jmherbener]

Yes, reading in the Mises line gives you the foundation. If your interest is more in economics than other related subjects, you might even consider reading Rothbard’s book, Man, Economy, and State before tackling Mises’s book, Human Action. Having mastered the main line, then move on to Hayek’s economics (for example, his book, Prices and Production).

http://library.mises.org/books/Murray%20N%20Rothbard/Man,%20Economy,%20and%20State,%20with%20Power%20and%20Market.pdf

http://library.mises.org/books/Ludwig%20von%20Mises/Human%20Action.pdf

http://library.mises.org/books/Friedrich%20A%20Hayek/Prices%20and%20Production.pdf

[jmherbener]

After the war, the government was rolling back intervention, i.e., freeing markets and private enterprises, and returning assets, wealth, and income to the private sector. Before the war, the government was increasing government intervention, i.e., restricting markets and private enterprises, taking assets, wealth, and income from the private sector.

Robert Higgs’s articles on Regime Uncertainty in the G.D. and Reassessing Wartime Prosperity are essential reading:

http://www.independent.org/pdf/tir/tir_01_4_higgs.pdf

http://www.independent.org/newsroom/article.asp?id=138

[jmherbener]

Carl Menger founded the Austrian school. Two lines of thought came from his work. The main line was developed by Boehm-Bawerk and Mises. The branch line was developed by Wieser and Hayek,

Joe Salerno has written about the differences between the two branches:

http://mises.org/journals/rae/pdf/rae6_2_5.pdf

[Author]

Posts