tag:blogger.com,1999:blog-6245381193993153721.post6014725799562512862..comments2024-03-17T00:23:24.896-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: Austrian Business Cycle Theory: The Various Versions and a CritiqueLord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-6245381193993153721.post-39949087957957723952015-05-21T21:37:03.403-07:002015-05-21T21:37:03.403-07:00I always thought the problem with the theory is th...I always thought the problem with the theory is the problem with monetary theory in general - that if the Fed pushes the interest rate lower than the natural rate for too long, banks would raise their rates (expecting inflation) and there would be no malinvestment.<br /><br />I suppose what makes the Austrian theory different is they try to get some malinvestment out the time lag that a low interest rate would produce. But controlling the discount rate doesn't have any effect on the time structure of investment - which is my interpretation of what you are saying.Davidwnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-2662800570884225672012-03-22T19:25:54.027-07:002012-03-22T19:25:54.027-07:00LK,
I would argue that critique 3 is the only rel...LK,<br /><br />I would argue that critique 3 is the only relevant one. Garrisons theory of ABCT relies heavily on this, but when one assumes levels of employment above or below NAIRU (or the tangent point of the PPF line for Garrison), the entire theory falls apart.<br /><br />What is ironic: Garrison allows for government interest rate "manipulation" to push unemployment below NAIRU, but never above it? This then implies that market forces can never move the level of employment above or below NAIRU, which is absurd. <br /><br />Moreover, the production possibilities frontier implies the NAIRU. Since his theory specifically uses PPF, he accepts the NAIRU, and all of its corollaries.Anonymousnoreply@blogger.com