Talk:Austrian business cycle theory

Empirical Research

Isn't the idea of supporting Austrian predictions with empirical research self-defeating? The entire status of the Austrian School as a heterodox school is centered around their idea that one can't come to valid conclusions about economics from observation or statistical analysis, so why would an Austrian seek to defend Business Cycle Theory with empirical research? Rana Fuerte (talk) 01:55, 2 January 2010 (UTC)

Krugman

Krugman argues that spending falls during a recession, something that is supposedly not explained by Austrian economics. However, wouldn't this make sense as Austrians agree with Say's Law? If production falls, then demand would as well. Doesn't this make perfect sense then? Phattonez (talk) 07:00, 23 November 2009 (UTC)

ABCT does doesn't explain why total production would fall. Instead they only have a story about why investment demand would fall. If they hold to Say's law, this implies that consumption would rise when investment demand falls. Hence the contradiction. LK (talk) 14:42, 24 November 2009 (UTC)

Hi, LK. Context seems to suggest that your "does" above should be a "doesn't" ?? BigK HeX (talk) 19:45, 9 December 2009 (UTC)

Oops, sorry, my mistake. Fixed.

Central Banks

The role of central banks should be mentioned here somewhere, since the trade cycle first appeared with the creation of national monetary authorities (such as the Bank of england). Earlier cycles where highly localised and overinflating banks were punished by competition (ie: wildcat banks in the US), only wars and major political upheavals could affect time-preferences on a national or international scale prior to the onset of fiat currencies.

Central Banks are important but not necessary for business cycles to occur. The critical feature is the artificial creation of credit by the fractional reserve banking system. Anything which causes interest rates to be lower than the state of supply of savings and demand for credit would produce will result in an inflationary boom and subsequent "recession." The Panic of 1873 was a widespread economic downturn that occurred without a central bank. It was the credit expansion and paper money creation that funded the War Between the States that caused the boom and subsequent bust of that time. "Wars and political upheavals" will not cause inflationary bubbles unless they are accompanied by credit expansion. --Willers32 (talk) 14:12, 26 February 2009 (UTC)

This is a major problem with the current article, which relies heavily on Rothbard, who is obviously wrong, as the 19th century experience of the trade cycle shows. A quick Google finds [1] this assertion that Hayek did not believe a central bank was necessary to produce credit cycles. A radical rewrite is needed, I think. JQ (talk) 00:37, 19 March 2009 (UTC)

I've attributed the claim that business cycles can only occur in the presence of a central bank to Rothbard. It would have been surprising to find it in Mises or Hayek, because they were writing at a time when central banks were new, and the business cycle was very old. But maybe there's an earlier source.JQ (talk) 07:57, 20 March 2009 (UTC)

I have rewritten and referenced the statement, skipping the claim that business cycles can only occur in the presence of a central bank. The way I read the pamphlet in question, Rothbard doesn't claim a boom and bust (the business cycle) can historically only occur due to the actions of a central bank. The business cycle is caused by the expansion of the money supply, which a central bank with its special government-granted privileges makes incomparably easier for the banks. In this pamphlet, Rothbard does not speak about the history of banking before the establishment of the current central bank, but mostly attends to the Great Depression and the monetary situation surrounding it. There, a central bank is all-important. (For comparision, see What Has Government Done to Our Money: "It is true that the interventions of governments previous to the nineteenth century weakened the speed of this market mechanism, and allowed for a business cycle of inflation and recession within this gold standard framework. These interventions were particularly: the governments' monopolizing of the mint, legal tender laws, the creation of paper money, and the development of inflationary banking propelled by each of the governments. But while these interventions slowed the adjustments of the market, these adjustments were still in ultimate control of the situation. So while the classical gold standard of the nineteenth century was not perfect, and allowed for relatively minor booms and busts, it still provided us with by far the best monetary order the world has ever known, an order which worked, which kept business cycles from getting out of hand, and which enabled the development of free international trade, exchange, and investment.") Pestergaines (talk) 13:59, 28 May 2009 (UTC)

The below is a direct quote from the main article... This is just wrong on so many levels, someone with some permission to edit the main page needs to fix this (see explanation below).

"Critics have also argued that, as the theory points to the actions of central banks to explain business cycles, it fails to explain the existence of business cycles before the establishment of central banks. For example, the Panic of 1873 would initiate the Long Depression in US and much of Europe. Additionally, there were also severe market crashes in the United States of the magnitude of the 1929 crash in 1869, 1882, 1884, 1896, 1901, and 1907. These occurred before the establishment of the Federal Reserve System in 1913. In fact, the movement to establish central banking in the United States was in part a response to the business cycle, particularly the Panic of 1907.[39] Mainstream economists believe that economies have experienced less severe boom-bust cycles after World War II, since central banks have started using monetary policy to stabilize economies.[40][41][42]"

173.19.154.89 (talk) 19:31, 16 July 2009 (UTC)There was only a "crash" in 1870s and 1880s in that prices declined rapidly. However,output actually increased dramatically during this period, making it in fact one of the longest sustained economic expansions in modern history. It has become a habit among economists to associate falling prices with recessions and depressions when in fact this pattern is primarily a product of the fractional reserve system and central bank manipulation of the money supply. Logically, assuming a stable money supply, prices should decrease with an increase in output (boom) and increase during a decrease in output (bust).173.19.154.89 (talk) 19:31, 16 July 2009 (UTC) There were central banks prior to all of this listed dates... the FIRST (meaning the first bank established by Alexander Hamilton and co.) bank was a central bank, the FED is A central bank not THE central bank... Countries all over the world have CENTRAL BANKS. The National Banks of the period directly preceding the FED were also a central bank structure. This criticism is pointless, it doesn't belong here, or is it anything that anyone should have ever said. There are fundamental factual break downs that need to be corrected. Austrian Business Cycle Theory was NOT BASED ON THE UNITED STATES, people have tried to apply the model, but the fundamental economics does not come from any country or observed event. A tenant of the Austrian school is that their ideas are based in logic, not observations. User:FtRtrdd —Preceding undated comment added 21:59, 22 April 2009 (UTC).

It's important to realize that no major Austrian economist (Mises, Hayek, Rothbard, de Soto) attributes the business cycle to central banking. They attribute it to fractional-reserve banking, or expansion of credit without actual savings. Even Rothbard, in The Case Against the Fed, only mentions that central banks simply exacerbate the problem. The central bank is not a key part of the ABCT. JonCatalán^(Talk) 17:44, 1 May 2009 (UTC)

I suppose it is bad form to point out that in the article on the Panic of 1873 http://en.wikipedia.org/wiki/Panic_of_1873 linked to in the critique of the ABCT article, speaking of the large increase in the money supply that led directly to the panic, states; "The large infusion of cash was a result of the recently created National Banking System that led to an inflation of the money supply. This was created via the Bank Acts of 1863, 1864, and 1865. With each "national bank" legally required to accept one another's notes at full value, the banks as a group were able to inflate the money supply which led to the boom that preceded the bust. The National Banking System was precursor to the Federal Reserve System." We have thus falsified the critique regarding the Panic of 1873. Shall we continue? Honestly, much of this critique is POV and not substantive criticism of the theory. Vdaliessio (talk) 19:25, 25 January 2010 (UTC)

Looks like the final citation in that paragraph applies to the assertions you quoted, as well, but Rothbard's theorizing still doesn't exactly make for an irrefutable fact. BigK HeX (talk) 23:44, 25 January 2010 (UTC)

With all due respect, the Panic of 1873 article is full of citations of economists independent of Rothbard that anticipate and corroborate his claims, namely that bank-credit inflation, enabled by legalized fractional-reserve banking and facilitated by legal restriction of same to a banking cartel was the proximate cause of an artificially-high (i.e., non-market) rate of money and credit creation.

The ultimate effect of this was to cause and sustain a boom, then, when the credit-creation stops, after a lag, a classic bust.

In the Panic of 1873 and other busts subsequent to it, there was a monopoly cartel on credit creation (the National Banks), but no lender of last resort; after the creation of the Fed, the big banks had no further worry about panics, and so inflated with abandon, into a fulminating, "crack-up boom" and bust, leading to the Great Depression. The Keynesians in government tried, to no avail, to reflate the boom all throughout the 1930's, achieving only a sickly recovery that collapsed in 1937 when stimulus was reined in.

In the current situation, the boom was initiated by credit creation fed by below-market interest rates, which Greenspan held down right until Bernanke's accession. The instant Bernanke got in, he took one look at the incipient inflation which was beginning to spill out of the housing market, and stopped inflating (Gary North pointed this out at the time).

What followed (18 months later, again due to business planning and information-diffusion effects)was a classic bust, exactly as the Austrians since at least Mises have predicted. Further, Rothbard would have predicted the stimulus, the lack of its intended effect, the vast growth in government spending, followed by a growth in deficits, again leading to an anemic recovery that will collapse as soon as the stimulus spending and bank credit are reined in, which they must be to prevent government failure.

The ONLY unknown is whether the collapse will be preceded by a weak deflation, a large inflation (a la 1971 - 1980)or hyperinflation (Zimbabwe or Weimar). I will end with this.151.204.179.162 (talk) 23:09, 4 February 2010 (UTC)

OK, I lied, I can't resist :o). In the instance above, Bernanke's actions upon being appointed Fed Chairman, were, from the ABCT perspective, EXACTLY CORRECT. No Austrian would disagree with his manifest belief in the inflation of the money and bank credit supply as the engine of monetary inflation, nor, I daresay, disagree with his action at that time, stopping artificial credit creation. Where Austrianism diverges from monetarism is the means (raising rates). Austrian Business Cycle Theory says that when artificial credit creation ignites a boom, there are only two possible outcomes; mass- or hyperinflation, or an interruption of credit creation which will result a bust. 151.204.179.162 (talk) 23:21, 4 February 2010 (UTC)

Err ... Wikipedia:NOT#ESSAY. Someone giving yet another (dataless) application of the ABCT is probably not really necessary. BigK HeX (talk) 23:32, 4 February 2010 (UTC)

Sorry BigK HeX, I thought you understood that Austrianism was light on mathematics? What I wrote was to put Rothbard's theory into a temporal context, and apply it to the current business cycle. But I will leave you with this example from my own limited research (I am not an economist but an applied scientist, yes the article is POV and political, but it contains my only published quantitative analysis of the housing boom -backed by the Fed's own statistics - to date); http://www.libertyguys.org/?p=373

"The following analysis clearly shows the effects of Bush Admin economic policies as expressed by his “go out and shop” remarks, particularly with regard to housing, after 9/11 (numbers are in thousands);

Average Monthly Housing Starts, US, January 1959 - September 2001 = 1512

Average Monthly Housing Starts, US, October 2001 - December 2006 = 1874

It’s a pretty big increase, especially considering that except for recessions, the numbers before 2001 are essentially flat, in other words, throughout 43 years of “normal” economic growth, the rate of construction of new houses didn’t rise or fall much outside of recessions, whereas the rate accelerated noticeably after 2001.

Now of course, comes the correction;

Average Monthly Housing Starts, US, January 2007 - January 2009 = 1096

(Fed monetary intervention) essentially pushed housing way above its long-term equilibrium, from which it had nowhere to go but down (the numbers for just 2008 are considerably worse, an average of 870K housing starts, the worst numbers since February of 1982.) In fact, the housing starts for January 2009 - 466,000 - are the worst since the St. Louis fed began tracking these numbers!"151.204.179.162 (talk) 23:46, 4 February 2010 (UTC)

Yes I understand that Austrian theorizing is light on empirical investigation, which is why the indiscriminate application of the ABCT is less-than-convincing. Anyone can come up with an armchair theory on the economy. Maybe the REAL cause for busts is our unconscious response to the alignment of the heavenly bodies!! (lol ... unsurprisingly, I was able to find a website offering such a theory. Without studies designed to falsify such theories, they're all about equally as rigorous.) In any case, I really don't see how your personal essay here is supposed to be advancing the quality of the Wiki article. Are you really just soapboxing?? BigK HeX (talk) 00:09, 5 February 2010 (UTC)

which economic theory is not light on empirical investigation? in principle, many emphasizes the need for observations, but yet the theories are not systematically tested, and to our observations of the world, they don't really match. the predictive abilities of mainstream economy is dubious at best, see the current crisis. and another point: criticizing a theory without having a deep understanding of it is lame. austrian theory is based on some facts we all agree upon, like human beings capable of making decisions to change their environment. you can't tell austrian theory is unconvincing unless you refute one of the axioms, or show the defect in the logical reasoning based upon them. just because the method is different than your method, it is not necessarily wrong. Krisztián Pintér (talk) 07:47, 5 February 2010 (UTC)

I agree that economics generally is light on empiricial investigation. BigK Hex should know this too, but it's clear he's not willing to change his mind on this point. I also don't think someone with an open bias against AS and who equates ABCT with theories correlating cycles to planetary motion should edit ABCT (other than the criticisms section). —Preceding unsigned comment added by 122.105.44.31 (talk) 08:29, 5 February 2010 (UTC)

"I also don't think someone with an open bias towards ABCT and who equates ABCT with The Truth should edit ABCT"

Aren't ad hominems fun! BigK HeX (talk) 13:52, 5 February 2010 (UTC)

No, the logical equivalent of what you're doing here is for me to edit the mainspace of Keynesian economics (putting a critical spin in the intro with something like: "It should be noted that Keynesian policies have been tried in Japan in the 1990s and the UK in 2009 and have proven politically popular short-term expediencies that have failed every single time they've been tried over the long term") and for me to remove "damaging" stuff in the criticisms section in ABCT. I've done neither. "Supporters" of a school can (and should) add to and explain their "pet" theory (who else would know what it's about after all?). I merely suggested above that you and LK and JQ "stick to the criticisms section" (which I think is fair). I never said "don't edit Keynesian economics because you're all Keynesian zealots." That would be unfair. Edit Keynesian economics to your heart's content. Just don't assume you know anything about ABCT. Yet another shocking logical fallacy from BigK. —Preceding unsigned comment added by 122.104.55.158 (talk) 05:30, 6 February 2010 (UTC)

Logically equivalent?? That you think I would limit myself to judging bias and "fairness" by using your opinion as the standard is pretty amusing -- it's clear that you missed my point because you ignore that an overwhelming bias in favor of something is still bias. But, more importantly, for you to continually suggest that bias should be a key factor in determining what a person edits, as opposed to their ability to deliver acceptably-referenced and relevant encyclopedic content is quite illuminating as to your understanding of Wikipedia's policies and goals, and probably explains a lot about why you're in your position with regards to editing here.

Right. So you think someone who is completely disinterested in a topic (i.e. ignorant of it) is the best qualified person to write on the subject? Back on planet earth, we earthlings accept that editors will only voluntarily edit something they have at least a passing interest in (at least when WP isn't paying them to edit). On your planet (Mars?) it may be populated by disinterested all-knowing Gods, who write randomly on topics they have no interest in, just for kicks. But back on planet earth, humans generally contribute on topics they already have an interest (bias?) in. Perhaps as a Martian you are engaged in a long-term random walk on WP, just selecting topics at whim and editing stuff randomly (that would certainly explain your edits both on ABCT and AS). If so, perhaps you're due on another editing planet right now, and should leave this part of the galaxy?

Ahhh... and we're back to one of your mainstays --- conflation. Disinterest** and overwhelming bias are hardly the same things. Feel free to keep slinging those ad hominems though. It surely helps in maintaining the illusion of you just being a poor widdle victim of Wikipedia "tyrants." BigK HeX (talk) 18:11, 6 February 2010 (UTC)

**edit: I meant to type Interest, not disinterest.

What?! I think you're confusing yourself - "conflating" means mistakenly linking too disparate ideas. I never said "disinterest" and "overwhelming bias" are the same. I'm actually putting forward the (reasonable?) view that all editors on a project like WP will have "bias" of some sort or another and the realistic position is to accept this and allow everyone to go "with" their natural biases in the appropriate sections, but prohibit them from removing or censoring stuff in a "foreign" space that they have a vested interest in disparaging or denigrating. Obviously there should be a vast area of middle gound where the "facts" are indisputable. But at the margins (and there appear a lot of "margins" when it comes to AS) this appears to be the best way to resolve the stand-off. However, perhaps I should have been more explicit in my logical argument. I apologize - I don't speak Martian.

• the realistic position is to accept this and allow everyone to go "with" their natural biases in the appropriate sections, but prohibit them from removing or censoring stuff in a "foreign" space

So ... disregard a person's contributions based on characterizations of their positions, instead of what they're actually contributing. In short, policy based on fallacy. Sounds like an excellent foundation! BigK HeX (talk) 04:04, 7 February 2010 (UTC)

This little exchange (and indeed the editing of ABCT and AS generally) should be a case study in how editors "think" they're editing "objectively" - when in fact they are simply entrenching their own prejudices. When someone can't see their own prejudice, it's time to restrict their edits to their own pet subjects (Keynesian economics, central banking, Freemasonry) rather than try to "branch out" and try to keep WP "objective" when that's code for censorship. —Preceding unsigned comment added by 122.104.54.8 (talk) 09:45, 7 February 2010 (UTC)

i have no problem if an opponent is editing the article. but without understanding the basics of it, it can not possibly lead to any improvement. he still failed to notice that austrian economy is a formal reasoning system, like logic or mathematics. in such systems, testing of axioms and statements is not only unnecessary, but makes no sense at all. one only can argue that the theory as a whole does not fit to reality, like euclidean geometry is not a good model for the real world. Krisztián Pintér (talk) 18:18, 5 February 2010 (UTC)

While the "opponents just don't understand" routine is exceedingly common for fans of the Austrian school to toss out, you may find it helpful to know that you have assumed wrongly. I'm well aware that Austrians claim to have a system based on formal logic --- I'm a bit thrown off as to how my posts here indicate that I could not have such an understanding. Noting that Austrians are averse to empirical investigation is not mutually exclusive to being aware of the Austrians' claims of deduction.

In any case, it's kinda ironic to complain about someone attacking an opponent's position without understanding it...... BigK HeX (talk) 06:12, 6 February 2010 (UTC)

if someone says that geometry is light on empirical investigation, thus it is not convincing, then i feel free to assume he does not really understand the place of geometry within the structure of human thinking. again: one cannot attack such a reasoning other than two ways: either you must show that the logic is flawed, or you can show that the resulting model does not fit the observable world too well. attacking geometry on the lack of experiments is simply wrong. —Preceding unsigned comment added by Krisztián Pintér (talk • contribs) 10:06, 6 February 2010 (UTC)

Perhaps you're not aware of it, but I've never said that "geometry was light on empirical investigation." I personally find the continued attempts to create an analogy to Austrian school theorizing to be pretty weak, considering that between the two only ONE of them has been subject to considerable attempts at falsification and also has hordes of people (such as craftsman) finding no real-world disagreement with their basic theories everyday. In short, only one has actually been rigorously shown to disagree little with the real world (given the appropriate domain), and its supporters are happy to disregard its ideas when they are outside of their domain, as opposed to promoting it as a "Universal Truth."

• again: one cannot attack such a reasoning other than two ways: either you must show that the logic is flawed, or you can show that the resulting model does not fit the observable world too well

And again: FALLACY

Though even more curious, I'm not sure why people here basically seem to suggest that ideas like geometry were just mindlessly accepted without supporters extensively showing how it did NOT seem flawed when applied to the real world ... support for geometry grew as thousands upon thousands of people throughout history tried dozens of different attempts specifically aiming at falsification, or finding real-world measurements that disagreed --- but continue to compare this to A.S., if you like. In any case, noting that theories largely considered as unestablished have persisted in being light on the empirical investigation which has been accepted as the best practice (insofar as establishing real-world relevance) IS a recognized critique, even if you may disregard it. BigK HeX (talk) 18:11, 6 February 2010 (UTC)

your point is that geometry is accepted because it was carefully tested. thanks for proving my point about your insight. (hint: no, it is not.) —Preceding unsigned comment added by Krisztián Pintér (talk • contribs) 20:17, 6 February 2010 (UTC)

I suggested that acceptance of geometry's applicability is based on an extensive history of real world evidence, though you seem content to believe that geometry hasn't undergone empirical testing for real-world applicability.

AT the heart of it, you seem to think that the approval of deduction within fields like geometry somehow means an automatic acceptance of real world applicability --- if so, then feel free to believe such, though others do not. Granting such power to deduction would make Euclidean geometry apply perfectly well to energetic spacetime or other such feats. But, alas, you say your point is "proven." BigK HeX (talk) 21:21, 6 February 2010 (UTC)

@Krisztian .... This isn't a forum, so I'm not going to argue points irrelevant to advancing the article, but I will just state my thoughts on a few points you raised and leave them at that. Firstly, that formulating an equivalence of the empirical investigation used by Austrian school theorizing and that of most of the other schools would be a rather impressive feat. And that claiming that Austrian theory is based on "facts we all agree upon" is an awfully strong statement (especially considering that there's a pretty big gulf between "humans act" and the remainder). Moreover, it reeks of fallacy to claim that a theory is sound because it's necessary to "refute one of the axioms." And, finally, yes .... I agree that the methodology with regards to empirical investigation is different from generally-accepted methods, but, even if the "Austrian way" is eventually accepted, it's still not necessarily new. BigK HeX (talk) 13:38, 5 February 2010 (UTC)

Sraffa, Kaldor & Hayek

It's rather surprising that this article makes no mention of Sraffa and Kaldor, who convinced most of the profession (and Hayek) that Hayek's version of the Austrian Business cycle was completely wrong in 1932. James Haughton (talk) 22:32, 29 October 2008 (UTC) The idea that P. Sraffa and N. Kaldor made a positive contribution to the thought of Hayek as in "(and Hayek)" is incorrect. That the expansion of the credit money supply was responsble for the boom-bust of the late 1920s and early 1930's (and that government action in reaction to the bust made matters much worse) was a position that Hayek never moved away from.91.107.84.20 (talk) 14:05, 25 April 2009 (UTC)

ABCT Is Incorrect

I suppose this: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1097803 should not be part of the entry until if and when I get the next revision published. But some of the literature I reference may guide some editing. I see the article now refers to Kaldor and Sraffa, which is good. --RLV 209.217.195.125 (talk) 10:12, 11 November 2008 (UTC)

A good source to cite for arguments about the ABCT: Risk and Business Cycles: New and Old Austrian Perspectives
LK (talk) 04:49, 13 February 2009 (UTC)

Continuous vandal attack

Banned user Karmaisking is mounting continuous attempts to edit this page. More effective protection is needed, but in the meantime, reversion of his edits and those of his numerous socks may cause some problems. That's unfortunate, but maybe some Austrian-supporting editors would like to help put this guy out of business. JQ (talk) 11:19, 25 February 2009 (UTC)

Archiving

I will be establishing an auto-archiver, and removing sections with socks - to the nothingworld when no interaction, to the archive when other editors' contributions need to be read in context. Objections here.--Gregalton (talk) 14:45, 25 February 2009 (UTC)

Murray Rothbard

Wrong about Murry Rothbard.

The article asserts that the late Murry Rothbard blames boom-bust cycles on Central Banks and holds them to be impossible without Central Banks. This was not the position of Murry Rothbard who was a very strong opponent of fractionial reserve banking even without the existance of any government Central Bank91.107.84.20 (talk) 14:02, 25 April 2009 (UTC)

Money Supply and Fiat Money Inflation

This article is really bad, since it largely misses the main point of ABCT - manipulation of the money supply. Until I edited it a moment ago, the article made it sound like the ABCT was mainly about interest rates. But manipulating interest rates is only one of several ways to affect the money supply. Other important ways are 1) simply printing money (or creating money on digital media), and 2) creating government debt (in effect, promises of future inflation). The process, i.e. malinvestment due to misleading price signals, was totally omitted. I fixed the first paragraph, but it looks like a major rewrite is in order. PhilLiberty (talk) 05:22, 18 April 2009 (UTC)

Summary of Murphy's rebuttal

If it is going to get its bit of undue weight, then I hope that it is at least made clear how detached from reality Murphy's theory is -- a theory based on entrepreneurs who suddenly decide to make significant investments into capital that they have no intention of giving proper maintenance. The citation is enough; the summary is overkill in my opinion. BigK HeX (talk) 18:08, 24 December 2009 (UTC)

IP editor says, "the islanders see the increase in sushi and are happy with it; they don't see the malinvestment at first"

The cited paper says, "With only 5 islanders devoted to this task, instead of the original 25, something has to give." BigK HeX (talk) 00:31, 25 December 2009 (UTC)

Right, "something has to give" is Murphy's introduction of capital consumption; the islanders don't realize that "something has to give;" they see more sushi from Krugman's change in production and are happy with the "boom." Also, I think the summary is important because it rebuts the summary of Krugman's critique. If you want to be rid of the Murphy summary, you should also delete Krugman's summary. —Preceding unsigned comment added by 67.86.182.204 (talk) 17:51, 25 December 2009 (UTC)

"Something has to give" is stated as a given, which Murphy seems to believe should be obvious to even the layman reader. I suppose it is possible that laymen are presumed to know more about a business than the entrepreneurs running it. But, fair enough... I'll clarify the passage. BigK HeX (talk) 17:56, 25 December 2009 (UTC)

I don't understand why this "something has to give" phrase is causing so much angst. It surely is an assumption because the analogy of the story is that artificial credit (the fictitious Krugman's motor) is not a true advancement of production. It's sort of like buying lots of stuff on credit; you're not wealthier because you'll have to pay the piper somehow. I think qualifying every sentence makes it very cumbersome; it's easier to say: "Murphy's argument is this," —Preceding unsigned comment added by 67.86.182.204 (talk) 13:51, 26 December 2009 (UTC)

"Something has to give" is referring to a difficulty to perform proper maintenance on the capital used for production. Murphy introduces this assertion as a given, and without explanation it is even implied that the situation should be obvious to a layman reader. In any case, the assertion that the islanders will unquestionably face difficulty in maintaining the capital under their new plan is a critical part of Murphy's theory. I will continue to insist that any "summary" of Murphy's work include the point; I don't see why you would object to having facts pulled from Murphy's paper being included in an article, especially when you are the one who wanted a summary. BigK HeX (talk) 17:48, 26 December 2009 (UTC)

My objection is that your insistence of qualifying each sentence the way you do makes it cumbersome (whether you do it on purpose or not is still unknown). I have rewritten the first statement to say that his assumption is that the fictitious Krugman's production decisions are unsustainable. This is equivalent to saying "something has to give;" I also stated that it is an "initial assumption." Further, his statement is obvious to the lay reader because he explicitly sets his problem up so that the "boom" is unsustainable: people have limited time, so that have to work on the motor or fix the nets, but not both. If that's how the article is written (and it's an article, not a paper), that's how it should be summarized. I have no problem taking the summary of Murphy's article out, as long as you take out Krugman's. I'm trying to make sure both sides get time for each argument. —Preceding unsigned comment added by 67.86.182.204 (talk) 20:41, 26 December 2009 (UTC)

Also, the assumption is not important to refutation of Krugman's critique. I agree that it is central to ABCT as a whole (in that malinvestments create artificial booms), but it doesn't need to be repeated since it is explained above. Rather, it might be easiest to say something like this: "In Murphy's article, he explains in the ABCT, the artificial boom leads to capital consumption, which disrupts the supply of consumer goods and consumption." Logically, this is correct; that is, if we assume ABCT is correct, then consumption is necessarily restricted because of the malinvestment. I think we can replace the entire summary with that one sentence, but I won't change it yet. —Preceding unsigned comment added by 67.86.182.204 (talk) 20:50, 26 December 2009 (UTC)

I, personally, dispute the claim that Murphy's sushi story explains anything of significance to business cycles (or the ABCT or Krugman or reality). So, I certainly would find it less desirable to state, "In Murphy's article, he explains in the ABCT...."

Just as was done for Krugman, a condensed version of his claims should be fine; the reader can draw their own conclusions from it. BigK HeX (talk) 21:40, 26 December 2009 (UTC)

I agree that Murphy offers nothing new to ABCT (or anything else). The ideas of capital consumption and why consumer consumption decreases have been explained decades ago. I've changed it; I think it's decently neutal, at least as neutral as Krugman's critique. —Preceding unsigned comment added by 67.86.182.204 (talk) 21:59, 26 December 2009 (UTC)

The current version of the Wiki article is a fair attempt ... unfortunately, I still have a bit of dispute with it. One problem with Murphy's story is that there doesn't really seem to be any identifiable boom (unsustainable or otherwise). A boom would be apparent if producers were allowed to make plans which should increase output in the long-run (assuming that the external circumstances [like consumer demand] remain favorable). If it is a given that "something has to give" with the maintenance, the producers in Murphy's story inexplicably make a decision which actually reduces output in the long-run, a reduction which is inevitable irrelevant of any changes in external conditions in the future. Murphy implies that demand for fish remains high throughout his story ["...now each roll has less fish in it. The islanders are furious"], and thus his story ultimately suggests that downturns result from disruptions in supply (even in the face of high demand), which seems pretty far divorced from reality ... it would also contradict the wiki article itself ["...that what they thought profitable really fails for lack of demand by their entrepreneurial customers"]. But, this is all my interpretation. Neither of our interpretations should be in the article, so hopefully, we can find an uncontested summary of Murphy's claims. BigK HeX (talk) 22:45, 26 December 2009 (UTC)

The whole theory of the business cycle is that the boom is artificial and inevitable leads to a bust. The summary need not explain the business cycle theory itself, because it's explained above. In the story the "identifiable" boom is the increase in sushi output. The producers in the story don't purposefully reduce output; they must because they don't have the wherewithall to produce it in the first place. The only point that should be made is that the Austrians believe that the capital consumption during a boom disrupts supply of consumer goods. Whether demand falls, rises, or remains stagnant depends on the particular economic event. —Preceding unsigned comment added by 67.86.182.204 (talk) 23:43, 3 January 2010 (UTC)

WRT this Murphy issue, I really don't care what the ABCT says. Your edit claims that Murphy supposedly explains how "an artificial boom leads to capital consumption." He does not. Your questionable claims have been replaced by an actual summary of ideas pulled from Murphy's work -- a summary just like the one that was done for Krugman's theory. So, whether you find your version to be "more concise" is not an overriding concern if that version is misleading. I'd suggest that a we work towards an acceptable compromise, and then worry about how concise it can be later. I'm still waiting to hear exactly what part of my edit you are disputing, and whether you find it misleading or incorrect. BigK HeX (talk) 00:12, 4 January 2010 (UTC)

He absolutely does explain why an artificial boom leads to capital consumption (capital is diverted to poor production practices) and, more importantly for refuting Krugman, explains that this necessarily reduces supply of consumer goods regardless of demand. My version is accurate and not misleading at all. ""If"" you were really interested in a fair compromise, you wouldn't simply revert back to a poor, garbled version, which doesn't make sense. It is misleading because you qualify every statement without realizing that the ABCT already explains capital consumption in works like Human Action, Theory of Money and Credit, and other well-known works. You give the impression the Murphy's little story is the only source of information, even though volumes have already been written about it. —Preceding unsigned comment added by 67.86.182.204 (talk) 00:44, 4 January 2010 (UTC)

"He absolutely does explain why an artificial boom leads to capital consumption"

Well, if you refuse to find a compromise, then you are more than welcome to cite your claims (per WP:RS). Expect that I will continue to remove any uncited interpretive claims. BigK HeX (talk) 01:00, 4 January 2010 (UTC)

He claims that there is an artificial boom: the fictional Krugman diverts resources into poor production practices which temporarily increases production (6 sushi rolls instead of 5). He claims that capital is consumed: because production is diverted, boats and nets are breaking down. This is capital consumption. He claims that as a result, consumer goods must decline: either less sushi rolls, or less fish per roll. I don't see what you're disputing. —Preceding unsigned comment added by 67.86.182.204 (talk) 01:35, 4 January 2010 (UTC)

Your insistence on refusing the reader even the merest elaboration on the theory you've decided to include does not make for much of a summary. If you find a summarization of Murphy's claims to be acceptable, then what is it that YOU are objecting to in my edits? You don't seem to have answered this question yet..... BigK HeX (talk) 03:13, 4 January 2010 (UTC)

I'm concerned with the weight given to relatively minor thinkers, and the constant adding of rebuttals to the majority view that are endemic to this page and the main page on the Austrian school. Specifically, the views of Nobel prize winners should not be followed by rebuttals from minor scholars, to make it seem as if the views hold 'equal weight' in the academic community. LK (talk) 07:37, 4 January 2010 (UTC)

It looks like we agree that Murphy's article is not really credible enough for even a passing mention in the article. I've seen nobody that cites Murphy's theory, unlike the various references to Krugman's rebuke of ABCT. I'm removing the references to Murphy per WP:UNDUE, since there hasn't been any evidence that Murphy's view is discussed outside of these blogs which look to be self-published. BigK HeX (talk) 09:23, 4 January 2010 (UTC)

I'm concerned with the weight given Nobel laureates. Krugman did not win his prize for explaining the business cycle. FA Hayek did. So, if you want to take Nobel laureates words as gospel, shouldn't we delete Krugman's minor (and fallacious) contribution to Hayek's work? Further, you both miss the point. Murphy did not develop a new theory; he is explaining an already existing and complete theory. The ABCT already includes capital consupmtion and reduction of consumer goods. Murphy's article is a story to help clarify it. I also object to Krugman's having the last word in the paragraph, since his critique makes false assumptions. —Preceding unsigned comment added by 128.112.50.54 (talk) 14:14, 4 January 2010 (UTC)

New "Critiques" format

I'm gonna try something different with that section of the article. The posts in the talk page section above seem to suggest that the rebuttals and counter-claim argumentation is unwieldy --- certainly, I feel that to be the case. I've separated the "sides" of the debate. BigK HeX (talk) 18:10, 4 January 2010 (UTC)

Mill quote

The current bit which attempts to relate ABCT and Mill does not have an RS to back the link. Please cite the proposed connection. BigK HeX (talk) 09:30, 25 February 2010 (UTC)

EconStories

I've added this educational video into the External Links because (1) Lots of WP links relate to non-academic sites (2) this has garnered over 1 million hits and has been featured on PBS so isn't in any way non-notable (3) It's educational for the Y and Z generation (4) It's a funny (or at least fun) way of learning about macro (5) It's not really pushing ABCT or Keynesianism but fairly presents both perspectives. I hope this can stay. Thoughts please.