[jmherbener]

Rothbard said that we should reject out of hand any inconceivable state of affairs as a goal for human beings and that any move toward such a goal should also be rejected.

http://library.mises.org/books/Murray%20N%20Rothbard/Egalitarianism%20as%20a%20Revolt%20Against%20Nature,%20and%20Other%20Essays.pdf

And just so there’s no doubt about Rothbard’s view that communism is an inconceivable goal for human beings, here is Rothbard on Marx:

http://mises.org/daily/3769

[jmherbener]

Rothbard’s treatment of production in MES is more advanced than Skousen’s. But Skousen wasn’t trying to advance production theory in his book, he was trying to provide an exposition of “capital based macroeconomic theory” as Roger Garrison would phrase it. Garrison had the same project in his book, Time and Money.

[jmherbener]

I can’t find this quote online to read the context. Can you provide a link to it?

Here is the only Rogers’s quote on Marx that I could find:

http://jimrogers-investments.blogspot.com/2010/05/karl-marx-is-probably-dancing-somewhere.html

The statement in the quote you give is just a commonplace: people with wealth influence politics, culture, etc. Such a view is not, then, distinctly Marxist. If Marx repeated commonplace truths, then he got those things right.

Here is one thing Marx wrote about money:

http://www.marxists.org/archive/marx/works/1844/manuscripts/power.htm

If Marx repeated commonplace truths, then he got those things right. But the things that are distinctly Marxist are wrong.

Here is Rothbard on Marx:

http://mises.org/journals/rae/pdf/rae4_1_5.pdf

[jmherbener]

Here is the Bundesbank statement on repatriating German gold:

http://www.economicpolicyjournal.com/2013/01/bundesbank-official-statement-on-gold_16.html

[jmherbener]

The concept of endogenous money is post-Keynesian, not Austrian.

http://www.cfeps.org/pubs/wp-pdf/wp17-wray.pdf

The Austrian Free Bankers have the concepts of Inside Money and Outside Money.

http://oll.libertyfund.org/?option=com_staticxt&staticfile=show.php%3Ftitle=2307&chapter=218696&layout=html&Itemid=27

There are some alleged affinities between Post-Keynesians and Austrians because they both criticize neoclassical general equilibrium.

http://www.thomaspalley.com/docs/articles/macro_theory/endogenous_money.pdf

But the Post-Keynesian conception of endogenous money is traceable to Hyman Minsky and by association, Joseph Schumpeter.

http://en.wikipedia.org/wiki/Hyman_Minsky

Here’s a commentary on the “debate” between Krugman, who is a New Keynesian, and Minsky, who is a Post-Keynesian.

http://www.economonitor.com/lrwray/2012/04/02/krugman-versus-minsky-who-should-you-bank-on-when-it-comes-to-banking/

In answer to your first question, not only is 100% reserve possible, but it was realized in history. For example, the Amsterdam banks of the 1600s were 100% reserve.

In answer to your second question, money substitutes are claims to money payable on demand at par. These are part of the money stock. In contrast, claims to be paid money in the future are credit claims. Normally credit claims do not function as a medium of exchange. Your buddy’s IOU would not be accepted by merchants as a medium of exchange, i.e., the most salable good in the market, under normal conditions. So, credit that comes from someone’s saving does not create money.

[jmherbener]

It’s more than just the rejection of mathematical formalism, but that’s part of what distinguishes Austrian economics from neoclassical. As Mises pointed out, mathematical functions cannot be used in economics theorizing because there are no constants in quantitative relationships generated by human action.

Take a look at Human Action, pp. 347-354; 706-711.

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

More generally, Austrians accept human beings as they are without the reductionist assumptions typical of neoclassical economics. For example, Austrians accept genuine uncertainty as an integral part of economic theory.

While Austrians reject mathematical formalism (and hence, optimization), they don’t reject the logic of economizing. Because of this, Austrians and neoclassicals can produce similar conclusions. For example, both would argue that production in the market economy is regulated by profit.

Thomas Taylor’s monograph provides some highlights of the distinctiveness of Austrian economics:

http://library.mises.org/books/Thomas%20C%20Taylor/Introduction%20to%20Austrian%20Economics.pdf

[jmherbener]

Optimization is a modeling technique. For example, a utility function is stipulated for an economic agent and solved for the maximum utility bundle of goods. A rational economic agent is assumed to be one who would choose the utility maximizing bundle of goods instead of a sub-optimal bundle.

[jmherbener]

It might be better to say that they’re books of economic history with digressions on applied economics.

[jmherbener]

Economic history requires the economist to make judgments whereas applied economics does not, it is a theoretical exercise.

Take the recent housing boom and bust to illustrate the difference.

Economic history requires the economist to make a judgment about the importance of the different causal factors in producing the event. Which was more important, the credit expansion or Fannie Mae and Freddie Mac propping up MBS or various government regulations on mortgage issuers and so on.

Applied economics tries to isolate the effect of each cause, given the other circumstances of the event. Given the circumstances of the American economy in 2000, what would be the effect of a credit expansion.

[jmherbener]

Here is an overview:

http://www.econlib.org/library/Enc1/NeoclassicalEconomics.html

In short, neoclassical economics is the reigning orthodoxy. It centers around modeling as a method of understanding the world. Its major divisions are micro and macro. Macroeconomics does include both Monetarist and Keynesian models. It should be pointed out, however, that there are other Keynesian views which are considered unorthodox.

[jmherbener]

It would take a fancy argument to demonstrate that bailing out Fannie Mae and Freddie Mac and other financial institutions in 2009 somehow revived commercial real estate in 2011.

[jmherbener]

Commercial Real Estate hit bottom in March 2011:

http://www.bloomberg.com/news/2011-05-23/u-s-commercial-real-estate-prices-decline-to-post-crash-low-moody-s-says.html

Most of QE1 took place from late 2008 to March 2009, the entire program was finished by March 2010:

http://www.bankrate.com/finance/federal-reserve/qe1-financial-crisis-timeline.aspx

Aside from this problem of timing, the money was not spent to prop up commercial real estate.

[jmherbener]

Every exchange of present money for future money commands the pure rate of interest. Whether its a consumer loan, the a corporate bond, or the buying of inputs to produce outputs.

An entrepreneur’s Net Income, which is the difference between the cost of buying his inputs and the revenue from selling his outputs includes (but is not limited to) a rate of return that conforms to the rate of interest. The capitalist earns the same rate of interest for lending his present money regardless of what use the borrower has for the funds, e.g., buy a house, build a factory, purchase inputs. This is no different than a steel producer who gets the same price for steel regardless of the use the buyer has for it, e.g., building a building, making a car, producing precision medical instruments. Now there are different prices for different types and qualities of steel, but each unit of a particular type that has a particular quality sells for the same price. Likewise, each unit of present money for the same maturity and same uncertainty (e.g., the uncertainty concerning the likelihood of the payoff) will receive the same rate of interest.

Suppose the production of cotton in America in 1830 is in a maturity and uncertainty class of investments that earns a rate of return of 7%. Also, different land areas (e.g., Louisiana, South Carolina) and different organizational structures (e.g., large plantations with slaves, small farms without slaves) have different physical productivity. If one alternative earned 10% and another 5%, then capitalists would shift their investment funds to the 10% return alternatives and out of the 5% return alternatives. By doing so, they would push up the prices of inputs (in particular, land) in the higher return areas and push down the prices of inputs in the lower return areas. They would continue to shift their investments until the rate of return was a uniform 7% of all investments in that class.

But just as credit card interest rates are permanently above mortgage rates, the rate of return on some investments in production will be higher than the rate of return on other investments. This occurs because investors do not find it advantageous to arbitrage across this difference. They don’t find it advantageous because there are different classes of investments, some with investments have longer time horizons and greater uncertainty than others.

[jmherbener]

Yes, people could negotiate contracts to avoid the ill-effects of a rising purchasing power of money. And, if they still thought it disadvantageous to use gold, they could choose silver or some other commodity that didn’t appreciate over time in a manner they considered troublesome.

Debtors and creditors dealt with the price deflation of the 19th century without the market evaporating.

Production of commodity money on the unhampered market would be regulated by its profitability, just like the production of every other good. If demand for men’s dress shoes (money) increased, then its price (purchasing power) would rise making it more profitable to produce. Entrepreneurs would step up production to earn the profit. Their increased demand for inputs would bid their prices up and their increased supply of output would moderate its price. They would continue their reallocation until production earned the rate of interest again like every other line of production.

[jmherbener]

There is a basic rate of return (i.e., the pure rate of interest) that tends to be the same in all production processes. It is the return to time preference. If it were 10% in one line and 5% in another, then investors would abandon the lower rate line and flood the higher rate line causing the former to rise and the latter to fall. This arbitrage would cease when the rates were roughly the same.

Profit is not a return, but a residual that is earned by entrepreneurs for their superior foresight. Entrepreneurs who anticipate more accurately the demands of consumers will earn profit and those who anticipate them less accurately will not.

The Net Income earned by an enterprise has four sources:

1. Interest from the investment by capitalists
2. Profit from the foresight of entrepreneurs
3. Wages from the labor of entrepreneurs
4. Quasi-wages from the leadership of entrepreneurs

So some lines of production earn more net income than other lines of production, but all lines tend to earn the same rate of return, i.e., pure rate of interest.

Take a look at the lectures on Economic Calculation and the Time Market for more details.

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