2014-08-23
The effects of central bank policy operated through multiple channels under the international gold standard. The most obvious is the domestic inflation rate. As the central bank expands the monetary base, prices tend to rise. As it contracts the base, prices tend to fall. A full account of the consequences of independent central bank policy must be broader than a measure of monetary expansion and...
2014-08-17
Monetarist Business Cycle Inflationary booms are not necessarily followed by deflationary recession. They can have soft landings. Depression is caused by fall in the money stock or, likewise, a rise in demand for money unreciprocated by a fall in prices. (Yeager, Cash Balance Interpretation of Depression) Monetarist analysis relies on the equation of exchange: MV = Py. In the long run, a change...
2014-08-05
The most popular version of the Austrian Business Cycle Theory [ABCT] attempts to explain economic booms and busts as a function of central bank intervention into the economy (For the sake of conciseness, I omit endogenous ABCT). The central bank is said to expand the money stock, creating an unsustainable boom that distorts the relative prices of goods and arbitrarily lengthens the structure of...
2014-08-02
Much of my research focuses on the shortcomings of the international gold standard. This is so much the case that I may come off to readers as opposing any attempts to use gold as money. There is, I believe, an opportunity for individuals to use gold, or really any asset, as money even in the modern environment. I think this would be beneficial for the financial system. Money is itself a medium...
2014-08-01
A popular source among Austrian economists and gold bugs interested in the Great Depression, Banking and the Business Cycle by Phillips, McManus, and Nelson presents a detailed analysis of the Great Depression that is thoroughly steeped in Austrian insights. Its popularity among the groups I mention makes it worthy of investigation. In this post I consider the role of gold in their narrative of...
2014-06-19
In 1935, John Maynard Keynes wrote to George Bernard Shaw: “ I believe myself to be writing a book on economic theory which will largely revolutionize—not, I suppose, at once but in the course of the next ten years—the way the world thinks about economic problems.” After he published The General Theory , Keynes’s formulation of economics was received as though it was revolutionary, especially by...
2014-06-05
“An act of individual savings means – so to speak – a decision not to have dinner to-day. But it does not necessitate a decision to have dinner or to buy a pair of boots a week hence or a year hence or to consume any specified thing at any specified date. Thus it depresses the business of preparing to-day’s dinner without stimulating the business of making ready for some future act of...
2014-06-01
A draft of my paper with Richard Wagner is up on SSRN. Traditional Austrian cycle theory starts from general equilibrium and explains how an expansion of bank credit unmatched by an expansion of saving can create a cycle of boom-and-bust, and with the bust followed by restoration of normality. In contrast, this paper offers a non-equilibrium reformulation of those earlier Austrian insights, which...
2014-05-12
In considering the appropriate framework for modeling a macroeconomics of market processes, consider two Austrian suppositions: humans act purposively and all social and economic phenomena are the result of individual action. As I have suggested before, a rule-based macroeconomics can include both of these. It allows us to include the entrepreneur in our analysis. As equilibrium is not part...
2014-04-24
It has not been unpopular from some scholars to attack methodological individualism as an unnecessary constraint on economic analysis. Individual action does not occur in an institutional vacuum. To reduce economics, or any social science, to only individual choice ignores the significance of emergent phenomena that shape the world we live in. Geoff Hodgson makes a passionate call for a reasoned...