Debate @ LSE

The much anticipated debate between George Selgin, Jamie Whyte and Lord Skidelsky, Duncan Weldon will air today at 3PM EST. You can listen online.

Round Two

Dilbert on Austrian Business Cycle Theory (or Recalculation Theory)

I think that would be a fair assessment, given that it says "New Capital Investments," but I'll let actual Austrians/Recalculationists clarify in the comments if needed.

Note: There are 3 panels, you will have to click on the comic to see the full thing. Sorry.

Quantitative Easing Explained

I disagree with both of the following videos. But the question I pose to TPS readers (and co-bloggers) is: which of the two videos more accurately describes your position on quantitative easing. Alternatively, feel free to post what you hate about each video.

Printing Press for the $100 Bill is Broken

Insert your own government spending joke, then proceed to this link:

As a metaphor for our troubled economic and financial era -- and the government's stumbling response -- this one's hard to beat. You can't stimulate the economy via the money supply, after all, if you can't print the money correctly.

Because of a problem with the presses, the federal government has shut down production of its flashy new $100 bills, and has quarantined more than 1 billion of them -- more than 10 percent of all existing U.S. cash -- in a vault in Fort Worth, Texas, reports CNBC.

I await an Austrian response on whether or not a interrupted printing process is good or bad in ABCT. My guess is that, unless its permanently broken (and only then in ABCT), this is a bad turn of events under any theory of the business cycle.

Working Paper: The Great Recession and its Aftermath from a Monetary Equilibrium Theory Perspective

Steve Horwitz links to our working paper, so I guess I should do the same. Here's the abstract:

Modern macroeconomists in the Austrian tradition can be divided into two groups: Rothbardians and monetary equilibrium (ME) theorists. It is from this latter perspective that we consider the events of the last few years. We argue that the primary source of business fluctuation is monetary disequilibrium. Additionally, we claim that unnecessary intervention in the banking sector distorted incentives, nearly resulting in the collapse of the financial system, and that policies enacted to remedy the recession and financial instability have likely made things worse. Finally, we offer our own prescription to reduce the likelihood that such a scenario occurs again by better ensuring monetary equilibrium and eliminating moral hazard.

The paper is slotted to appear in the second volume of Macroeconomic Theory and Its Failings: Alternative Perspectives on the Global Financial Crisis, edited by Steve Kates. My contribution to that volume (co-authored with Pete Boettke) can be found here.

Are Zombies an Economic Indicator?

Source and story: Wired

What I'm Reading

Blockquoting X

X = Russ Roberts:

When your teenager drives drunk and wrecks the car, and you give him a do-over—repairing the car and handing him back the keys—he’s going to keep driving drunk. Washington keeps giving bad banks and Wall Street firms a do-over. Here are the keys. Keep driving. The story always ends with a crash.

Theories of Jupiter Cloud Belt Disappearance

On Facebook, Matt blames Earth's global warming for the disappearance of the Jupiter Cloud Belt. The data, however, makes me skeptical:

"The SEB fades at irregular intervals, most recently in 1973-75, 1989-90, 1993, 2007, 2010," said John Rogers, director of the British Astronomical Association's Jupiter Section. "The 2007 fading was terminated rather early, but in the other years, the SEB was almost absent, as at present."

Contra Matt, I would point to the fact that three of the first four SEB fades occurred during the year of a NBER business cycle peak: 1973, 1990, and 2007. Whether the Jupiter cloud belt is a lagging or leading indicator, I cannot be sure. Regardless, I think the writing is on the wall (er, Jupiter atmosphere) that we are about to experience a double-dip recession.

Ordinary Economics

As Emily mentioned earlier and Steve at TAE mentions today, I have a working paper with Pete Boettke on the recent financial crisis. The paper will be included in Steve Kates' edited volume The Meltdown of the World Economy: Alternative Perspectives on the Global Financial Crisis, published by Edward Elgar. It is also a part of the Mercatus Center Financial Markets Working Group.

Here's the punchline:

The financial fiasco that has followed the bursting of the housing bubble is not a consequence of market instability, but the inability of government to engage in apt intervention. Politicians presume they have the necessary knowledge to effectively tackle the problems that, ironically, they brought about. In reality, they do not possess this knowledge. They cannot possess this knowledge. This knowledge is dispersed throughout society, with each market participant holding information of a particular time and place that is often unknown to others and, in some respects, impossible to articulate. Even if politicians were capable of collecting the necessary knowledge—and, to reiterate, they are not—that knowledge would be outdated before it could be used. We live in a dynamic world where things are constantly in flux. And, to the dismay of politicians, the instantaneous collection of knowledge by one entity—which would be required for apt intervention—is beyond the realm of possibility. Breaking down the institutional structures of an economy to engage in apt intervention when it is impossible to aptly accomplish what is intended ends predictably in catastrophe.

Since we at TPS revel in shameless self-promotion, I'll throw up a link and suggest you read the whole article.