“Modern-day Austrian economists such as O’Driscoll and Rizzo believe in an economic world where there is an immutable external reality similar to the way nineteenth-century physicists viewed the working of the physical world. In their emphasis on uncertainty, however, Austrians often differ from mainstream Old and New Classical theorists. Many Austrians believe that the external reality may be predetermined by Mother Nature but this reality is too complicated for any single human being ever to process the information being sent out by market signals. The free market is the Austrians’ deus ex machine that provides the (in principle calculable) relevant probabilities and prediction to coordinate the plans and outcomes via a Darwinian process in a would of epistemological uncertainty and a programmed external reality” (Davidson 2002: 63).The Austrians adhere to the concept of epistemological uncertainty, whereas Post Keynesian economics stresses the notion of ontological uncertainty (Barkley Rosser 2010: 171). This is an important difference and I will have more to say about it in the future.
BIBLIOGRAPHY
Barkley Rosser, J. 2010. “How Complex are the Austrians?,” in R. Koppl, S. Horwitz, and P. Desrochers (eds), What is so Austrian about Austrian Economics? (Advances in Austrian Economics, Volume 14), Emerald Group Publishing Limited, Bingley, UK. 165–179
Davidson, P. 2002, Financial Markets, Money, and the Real World, Edward Elgar, Cheltenham, UK.
But Say's law still holds and prices provide the anchor for a tendency to equilibrium (which is never reached). This does not mean that sectoral imbalances, debt deflations, credit crunches, liquidity traps, etc. can't occur. It only holds that they won't keep there indefinitely.
ReplyDelete"It only holds that they won't keep there indefinitely."
ReplyDeleteThere is no tendency to full employment equilibrium, and - as Keynes said - free market economies can get mired in a sub-optimal equilibrium for long periods.
What does Keynes means by "sub-optimal"?
ReplyDeleteWhere there is significant involuntary unemployment, idle resources and unused capacity.
ReplyDelete"Where there is significant involuntary unemployment, idle resources and unused capacity."
ReplyDeletewhat is the problem with that. automation will mean full employment will only be reached at a time when it is profitable. idle resources and unused capacity is what certian owners of capital decide to do as is their right to their wealth. human labour is the cause of all wealth and human labour being unprofitable is only a temporary situation as each capitalist tries to work out how to exploit labour profitably. that is why there is a tendency to full employment equilibrium in the long run like a lifetime.
"idle resources and unused capacity is what certian owners of capital decide to do as is their right to their wealth. "
ReplyDeleteAnd they might decide to sell them to government or people employed by government in a stimulus. You can't object to stimulus on that ground.