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Nice.

Kind of off topic, but, my "metro reading" is Bureaucracy right now, and so far I don't think its a great contribution, I guess it was just meant to be popular. But, I do like this line, for succinctness:

"It is well known that profit management is highly unpopular in our age. ... But, at the same time, the same people severely blame the shortcomings of bureaucratism. They do not see that in clamoring for the suppression of profit management they themselves are asking for more and more bureaucracy..."

This is one of the best points you guys make in the macro section of EWOT. It really stuck with my students, especially when coupled with the drinking analogy: the mistake is drinking too much and being hungover is the correction.

Mises's Bureaucracy is a pretty good book when read through the lens of economic calculation issues.

Tullock's The Politics of Bureaucracy is a great complementary book, viewing it through the lens of incentive issues.

I have interpreted the crisis in the austrian theory of the business cycle as the period in with there is a general fall in the expected utility that the economic agents have from the execution of their plans. Lachmann defined the crisis as the period of general plan failure, with I think is a synonymous of my interpretation. That period of general plan failure is positive because expectations are readjusting to reality. The larger the distance of expectations to reality, the larger becomes the degree of inefficiency in the allocation of factors.

What I want to say with this is that only in the subjectivism perspective of economic theory that crisis can be seen as a positive event. In traditional macroeconomics crisis is defined as a decline in the aggregate production, this definition does not distinguish between the underlying data and the current perception that people have of this data.

Rafael you bring up an interesting point. I think Kirzner would say that, even though plans "fit" during the period of malinvestment, they are nevertheless in error and must eventually be revised (or corrected).

The cluster of errors, in my view now, come to be exposed during what is commonly called the "crisis." The "crisis" in this common sense does not, in my view again, create the cluster of errors (general plan failure for Lachmann) but in fact corrects it by weeding out those who malinvested to begin with.

Dave Prychitko:

I view everything through the lens of economic calculation issues :)

I think it isn't a bad book, but I wonder who the audience is. As someone very familiar with the arguments, I find it problematic because a lot is asserted without enough in the way of definitions or investigations, leaving me wanting deeper analysis. Although I agree with the conclusions, I feel it doesn't do either side justice. For those less familiar and who don't want to go that deeply, the assertions may come off as mere polemics. Some readers won't be convinced, simply because too many holes are left open, arguments left unaddressed, and so on. This is in stark contract, for example, to Human Action, which leaves no stone unturned.

That all said, there are little gems in there, and many nice quotes that really sum things up very concisely.

This is one of the things I dislike about Mises: He shows that some types or components of recessions are necissary and good, and then goes to claim (or at least seems to claim in his popular writings) that all recessions are necissary and good. He shows that the "replanning" of the economy is costly and necessitates a downturn. However, this does not mean that all downturns are the result of replanning and readjustment, allowing the Keynesians to make claims on how downturns can (at least in part) be mitigated.

Grant, I am not sure what you don't like about Mises in your comment.
That he thinks recessions are good?

I actually loved Mises' Bureaucracy; not as much as Tullock's but Mises did a fabulous job in placing the argument where it needed to be. Comparing management styles of the government to that of the private industries. When reading Mises this can appear to be redundant, but I think that is what makes it all the more important; that he views the price mechanism as the argument that can not be refuted or answered by government planners.

He sums it all up nicely in his conclusion. I wanted to cite parts but there are too many to choose from so I'll just tag the link.
http://mises.org/etexts/mises/bureaucracy/conclusion.asp

In my view what has happened in this crisis is that a money-substitute has ceased to be a money-substitute. That is interbank credit was once an acceptable money substitute between banks, now it isn't.

If that is true I'm not sure that Austrian theories deal with it properly.

"The cluster of errors, in my view now, come to be exposed during what is commonly called the "crisis." The "crisis" in this common sense does not, in my view again, create the cluster of errors (general plan failure for Lachmann) but in fact corrects it by weeding out those who malinvested to begin with."

Well, I always thought that Lachmann wanted to say by using the words "general plan failure" that people discover that their plans were unattainable. The crisis is this moment, and it is a positive moment because the plans become consistent with the underlying data of the market. And I thought that during the boom phase the plans are consistent in the short run but eventually the real capital constraints are revealed.

My interpretation is that the business cycle works like that:

Boom: Investment plans are based on overoptimistic assessment of the capital that people are wiling to make through reduction in present consumption. Investment plans are inconsistent with the real underlying data of the market.

Bust: The entrepreneurs discover that the capital constraints in the market are smaller than expected. The current investment plans are discovered to be inconsistent with the real state of the market, plans are revised, expected utility from the completion of the action plans is revised downwards, for 2 reasons: malinvestment and overoptimistic perception of resource constraints.

Early recovery: Plans that fit better with the underlying data of the market are carried on. Inefficiency is reduced with the liquidation of the malinvestments and the relocation of resources to satisfy consumer (intertemporal) preferences.

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