“I still maintain that economic calculation has absolutely nothing to do with ‘a price vector that will clear all markets’ and neither does the Hayek quote you constantly present. A 20 year unsustainable Keynesian boom would have had ‘market clearing prices’ for 20 years right up until the bottom drops out.”The “Hayek quote” referred to here is this passage from a talk by Hayek, but the stupidity, incoherence, and ignorance displayed by the author of this comment simply boggles the mind.
The vulgar Austrian who wrote these words repeatedly accuses non-Austrians of being unable to understand “basic Austrian concepts” and Austrian economic theories, but it is very clear that he himself has no proper understanding of those things.
A “market-clearing price,” in the conventional sense, is a price at which the quantity demanded of a good by buyers exactly equals the quantity supplied by sellers in a particular product market.
This is how Austrian economists define the term:
“A surplus (or a ‘glut’) occurs when producers are trying to sell more units of a good or service than consumers want to purchase (at a particular price). A shortage occurs when consumers want to buy more units than producers want to sell (at a particular price). In this context, the equilibrium price (or the market-clearing price) is the one at which the amount supplied exactly equals the amount demanded. If the market is in equilibrium, there is no surplus and no shortage.” (Murphy 2010: 156–157).If, as in the original comment above, “market-clearing prices” in this sense existed all throughout a boom (say, the 2000s US boom), then there could not have been any excess demand or excess supply of goods in markets, and even a kind of stationary supply and demand equilibrium in all markets (including the housing market) for years on end.
As anyone familiar with basic concepts in economics can see, this is an utterly stark, raving mad idea. Any person who thinks this is ignorant, not just of basic Austrian economic theory, but any kind of basic economic theory.
The 2000s boom was not a period of supply and demand equilibrium in all or most markets, and indeed an actual supply and demand equilibrium in any one market is no doubt a very rare and temporary occurrence, if it happens at all.
The depths of ignorance that one will meet when debating internet Austrians often renders actual debate with such people a complete waste of time. It is perhaps better to expose that ignorance as a testimony to why so much internet libertarianism and Austrianism deserves no response, because it does not even rise to the level of idiocy.
“Vulgar Austrians do not Understand Austrian Price Theory (Updated),” July 10, 2014.
“Hayek on Market-Clearing Prices and Wages in his 1975 Talk to the American Enterprise Institute,” February 7, 2014.
“Misesian Economic Calculation and Coordination in Market Economies: An Overview and Critique,” May 11, 2013.
“Vulgar Austrians, Economic Calculation and Capitalist Economies,” December 12, 2012.
“Mises on Mixed Economies and Socialism: He is Incoherent,” March 24, 2013.
“Mises and Rothbard on Communist Prices,” January 5, 2014.
“Reality versus Rothbard: Prices, Demand and Production in the Real World,” May 27, 2014.
Murphy, Robert P. 2010. Lessons for the Young Economist. Ludwig von Mises Institute, Auburn, Ala.