Lawrence White on Friedrich von Hayek
I caught this video along with the Keynes video I just profiled. Look at this as a rebuttal to some of the themes Lord Skidelsky went through in that previous video. Lawrence White explains the genesis of the Austrian Theory of Boom and Bust in two parts. The two run fifteen minutes in total, concentrating on Friedrich von Hayek and Ludwig von Mises, two Austrians and Knut Wicksell, a Swede.
My main criticism here is twofold. One, White presents a well-argued view that is geared to explaining how not to let credit cycles get out of control and create a large bust. He also explains why resource reallocation after a bust is necessary to promote longer-term growth. And he does address the concept that fear or ‘animal spirits’ during a depression drive savings patterns below a natural equilibrium level which could create dead-weight losses, extending imbalances and depression. However, I hear White making the intellectual case for quantitative easing at the 2:40 mark in the second video without adequately demonstrating how base money is tied to credit or how QE doesn’t itself distort resource allocation. The second missing element has to do with the focus on the central bank in White’s explanation in the first video for creating a misallocation of capital. In my view, the central bank facilitates or extends this misallocation.
Still, a quick and dirty primer on Austrian Theory. The second video is a bit more technical, however.
More videos on Keynes and Hayek to come.
Ed,
To be fair to White and Hayek regarding this supposed “intellectual case for QE,” they do offer it with the caveat that there are a) legal tender laws and b) a central bank. “Given this,” then attempting to sustain aggregate spending is the ideal policy prescription. I do agree with you though. There’s no reason to think ANY attempt at sustaining aggregate spending won’t disproportionately effect certain prices.
The “Coordination Problem” blog has been ablaze with banter from “minarchist” Austrians like White, Selgin, Horowitz, Boettke who have been accused of supporting QE. But they do so through this same window. As a second best, provide adequate cash for the demand rather than targeting prices.
They argue that they can still offer policy alternatives that are within the current paradigm without actually supporting the paradigm itself. I do agree with that, although I understand how it could be perceived as taking away from the effort by “ancap” Austrians to demolish the central banking, credit based currency paradigm altogether.
BTW – You’ve got two of the same White videos embedded. There are three videos on the econstories.tv website.
Any intervention, whether monetary or fiscal is going to introduce distortions. The question is how effective they will be in breaking through the disequilibrium. I favor a concentration on jobs and infrastructure rather than bailouts or QE because of the unemployment problem. It’s the recalculation, the reallocation of resources which creates mass unemployment. Rather than propping up bloated economic sectors via bailouts or creating a new bubble, why not let the bubble fade but provide some support for employment?
Read interfluidity today because Wakeman has a good post on this just up.
Oh and thanks for catching the video error. It is fixed now.
Ed,
To be fair to White and Hayek regarding this supposed “intellectual case for QE,” they do offer it with the caveat that there are a) legal tender laws and b) a central bank. “Given this,” then attempting to sustain aggregate spending is the ideal policy prescription. I do agree with you though. There’s no reason to think ANY attempt at sustaining aggregate spending won’t disproportionately effect certain prices.
The “Coordination Problem” blog has been ablaze with banter from “minarchist” Austrians like White, Selgin, Horowitz, Boettke who have been accused of supporting QE. But they do so through this same window. As a second best, provide adequate cash for the demand rather than targeting prices.
They argue that they can still offer policy alternatives that are within the current paradigm without actually supporting the paradigm itself. I do agree with that, although I understand how it could be perceived as taking away from the effort by “ancap” Austrians to demolish the central banking, credit based currency paradigm altogether.
BTW – You’ve got two of the same White videos embedded. There are three videos on the econstories.tv website.
Any intervention, whether monetary or fiscal is going to introduce distortions. The question is how effective they will be in breaking through the disequilibrium. I favor a concentration on jobs and infrastructure rather than bailouts or QE because of the unemployment problem. It’s the recalculation, the reallocation of resources which creates mass unemployment. Rather than propping up bloated economic sectors via bailouts or creating a new bubble, why not let the bubble fade but provide some support for employment?
Read interfluidity today because Wakeman has a good post on this just up.
Oh and thanks for catching the video error. It is fixed now.