I enjoy reading your posts. I wanted to add a personal story from my real estate investing career over the past 4 years. Interest rates have risen quickly and I am not sure how you can view this within the context above. Flippers took significant losses due to this. Some didn't because they did solid deals, others lost their shirt! I do think outside of economics, there is something to be said about some people are just better at calculating risk than others and this skill is less a skill and more a trait (meaning it cannot be taught). Keep it up and thanks for always being entertaining and informative.
I've got a question. Do you disagree with David Friedman about anything? I like both of your blogs a lot, and you're both very prominent anarcho-capitalists. Do you know if you have different visions about anarcho-capitalism or anything else?
I think you're right to criticize rational expectations theory but I think it's more accurate to criticize it because of imperfect information than irrationality.
It is difficulty to suss out what is real increased demand versus demand coming from new money entering the economy. To the extent that its duration can be predicted, new money directs real resources to flow to certain areas. For example, if you forsee it as real demand that will last long term you will be more likely to invest in longer term projects and capital. If you guessed wrong then when monetary policy tightens you're left with your pants down.
This should only result in a sectoral contraction offset by other sectoral expansions, but because of wage and price stickiness you historically see recessions due to overtightening, like in 2008.
Under a stable spending regime you can still have sectoral expansions and contractions due to changes in real economic conditions, but I think the Austrian story is that expansionary and then contractionary monetary policy is more volatile and thus more likely to cause business cycles.
I enjoy reading your posts. I wanted to add a personal story from my real estate investing career over the past 4 years. Interest rates have risen quickly and I am not sure how you can view this within the context above. Flippers took significant losses due to this. Some didn't because they did solid deals, others lost their shirt! I do think outside of economics, there is something to be said about some people are just better at calculating risk than others and this skill is less a skill and more a trait (meaning it cannot be taught). Keep it up and thanks for always being entertaining and informative.
I've got a question. Do you disagree with David Friedman about anything? I like both of your blogs a lot, and you're both very prominent anarcho-capitalists. Do you know if you have different visions about anarcho-capitalism or anything else?
I think you're right to criticize rational expectations theory but I think it's more accurate to criticize it because of imperfect information than irrationality.
It is difficulty to suss out what is real increased demand versus demand coming from new money entering the economy. To the extent that its duration can be predicted, new money directs real resources to flow to certain areas. For example, if you forsee it as real demand that will last long term you will be more likely to invest in longer term projects and capital. If you guessed wrong then when monetary policy tightens you're left with your pants down.
This should only result in a sectoral contraction offset by other sectoral expansions, but because of wage and price stickiness you historically see recessions due to overtightening, like in 2008.
Under a stable spending regime you can still have sectoral expansions and contractions due to changes in real economic conditions, but I think the Austrian story is that expansionary and then contractionary monetary policy is more volatile and thus more likely to cause business cycles.