Brian Caplan Vs. Austrian econ.

Discussion in 'Politics' started by Stewba, Sep 26, 2010.

  1. Why I Am Not an Austrian Economist
    I was wondering what you all thought of this.

    Entrepreneurs will obviously not "follow this rule", they will make mistakes. I think this would be an example of how coercion by the state can have a bad influence on the economy. Basically, when the interest rates are allowed to go back up, the people who aren't prepared for it will get fucked: malinvestment -- that's what I'm thinking anyway. What do you think?
  2. There's no such thing as a risk free investment.
  3. Alright, but isn't it harmful to cause futher risk by keeping interest rates artificially low for arbitrary periods of time? How are entrepreneurs supposed to accurately predict the interest rates? It will definitely create more bad investments, and it isn't necessarily the fault of the entrepreneur because the central bank can arbitrarily change the interest rates at any time (or am I wrong?).

    There's also the issue that the artificially low interest rates create incentive to make bad investments.

    I'm thinking the central bank messing with interest rates is just bad. Are there benefits?
  4. Yea, that's what I'm saying. Regardless of rising interest rates, allowing for a greater level of risk taking than the market prefers is... riskier. Interest rates should be higher than 0.25% right now, people shouldn't be taking risks so easily.

    That author acts like people choose to make bad investments.
  5. A number of exchanges spawning from the linked critique in the OP between Caplan and Austrians:

    More to the point, Caplan seems to omit a key concept of ABCT on the point quoted above. He suggests that entrepreneurs should still be able to rationally invest in that which will remain profitable despite the interest rate, or alternatively refrain from making bad investments. But this is virtually impossible because of the artificially altered interest rate. When the interest rate is artificially altered, as such, it can no longer serve as the accurate indicator it normally does. There's no longer any accurate way to determine true consumer demands. Malinvestment is thus a necessary outcome.

    How can they determine what investments (or savings) would be profitable if the indicator by which they make such determinations has been compromised?

    Unless I'm missing something, he seems to disregard how the interest rate serves as a market indicator by which to gauge consumer demands (or lack there of). Further, in doing this, he does not consider that an artificially lower interest rate will artificially distort the perceived profitability of a particular market investment--in other words, it appears as though consumers are demanding that which isn't really being demanded.
  6. Shade wins.

    As for Caplan and Austrians in general, it just proves how fragmented the austro-libertarians and Austrian Economists are in general. It's good to see people moving away from the LRC 'I have a persecution complex' crowdand moving onto Austrians who realize that reaching out doing some serious advertising, rather than infighting, is what needs to be done to dethrone the Keynesian religion.

    The always-brilliant Rizzo sums it up pretty succinctly here.

    The Second Austrian Moment « ThinkMarkets

    Normally I don't like to de-rail threads, but Shade summed it up pretty well. Not really a de-rail.
  7. Yeah, agreed. The reason I hadn't replied is because I didn't really have anything to add.

    Thanks for all the good info everyone!
  8. (or vice versa) This.

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