Ok people, here's the deal. The moron in question,one Greg Ransom, in a comment on a post of Tyler's writes:
Tyler,
You're a moron when it comes to the ABC theory. As Hayek explains the theory, massive new global wealth and a desire for additional risk IS ENOUGH IN ITSELF to create an ABC boom and bust cycle -- THAT IS HAYEK, as I explained to you 2 decades ago. You simply don't know your Hayek. Hayek's ABC theory is NOT dependent of central banks and central bank interest rate policies to function.
But I'm guessing you haven't read enough Hayek to know that.
OK, got that? Hayek don't need no stinkin' central bank in his business cycle theory. We clear? Good.
But then I go to Mr. Ransom's (i.e. the moron's) blog and find the following post:
"THE FED CAUSED THE CRISIS: Hayekian wisdom from the magnificent Anna Schwartz:
"If you investigate individually the manias that the market has so dubbed over the years, in every case, it was expansive monetary policy that generated the boom in an asset. The particular asset varied from one boom to another. But the basic underlying propagator was too-easy monetary policy and too-low interest rates that induced ordinary people to say, well, it's so cheap to acquire whatever is the object of desire in an asset boom, and go ahead and acquire that object. And then of course if monetary policy tightens, the boom collapses."Be sure to read the whole thing."
Man, that's a real "what u talkin' about Willis" moment, innit? Central Banks aren't relevant to Hayek's ABC, but the thesis that "the Fed caused the crisis" is "Hayekian wisdom".
I guess that maybe explains why Tyler has published a book on Austrian business cycles while Mr. Ransom rages in all caps on other people's blogs.
Update: People, this just keeps getting better. Mr. Ransom is the first commenter on Tyler's post (the first link at the top of this post) and he says "I am really frustrated with the low level of debate". This from a fellow whose debating strategy can be summed up succinctly: ad hominem
(Of course I am doing the same here, but I freely admit to being delighted by the level of debate)
7 comments:
Without digging too deeply into Ransom's blog, I suspect that if I did, I would discover that the root of all wealth and social progress has the atomic number 79.
The fact the Tyler linked to this provides more evidence that he truly doesn't get it, and truly hasn't read much Hayek
How intelligent to you have to be to be able to distinguish between (1)a contingent explanatory fact identifiable in some but not all cyclical phenomena; and (2) the necessary elements of an explanatory strategy.
THE MANIPULATION OF INTEREST RATES BY A CENTRAL BANK IS NOT A NECESSARY ELEMENT OF THE THEORY, as Hayek DIRECTLY points out.
Pointing out that interest rates set below the natural rate are a central component of the current crisis contradicts this point in no way.
The key thing in Hayek is systematic disorder across the time structure / capital structure of the economy, which can be caused by things other than the interest rate policies of a central bank.
Tyler doesn't get this -- part of my best guess as to why is because Tyler hasn't much studied Hayek -- he read some Rothbard and went to town attacking a crude version of Rothbard.
Tyler has never really engaged Hayek.
That's my opinion, and I have yet to see evidence which might persuade me otherwise.
You know how people use cognitive short-cuts to make sense of the world? For example, I could go read Ransom's entire blog, probably do a bunch of background reading on Austrian business cycles, and then figure out whether he's right about Cowen. Or I could use a simplifying heuristic which goes like this: people who post in all caps in blog comments are usually wingnuts. Sorry, Ransom, maybe you're right, but in my book you've already lost on style points.
Let me make it simpler.
The fact that in this one historical instance artificially low interest rates can be identified as a cause of the systematic disorder in the market doesn't tell us anything about the necessary elements of Hayek's theory of systematic disorder in the economy.
Only someone who has failed logic would think otherwise. But perhaps, given the link provided by Tyler, you are in good company.
Well, I feel like I'm talking to morons, who keep missing the point, and keep failing the demands of basic logic.
HOW ELSE DO YOU GET THEIR ATTENTION.
Is there any source of a cyclical downturn that is NOT consistent with ABC? Or does it "explain" everything? (some recessions with prior monetary expansions and some without). Simple Keynesian models, market clearing RE and early RBC theory went out of favor due to their inability to explain some basic business cycle facts. Since ABC seems to be (ex-post) consistent with everything it doesn't face that problem.
A causal story that provides new insight is always a good explanation.
You have a false model of explanation.
I'd guess that you think Darwinian biology also doesn't "explain" anything, based on your faulty reasoning.
I recommend some good articles or books on the nature of explanation, perhaps by Larry Wright or someone else.
"Is there any source of a cyclical downturn that is NOT consistent with ABC? Or does it "explain" everything? (some recessions with prior monetary expansions and some without). Simple Keynesian models, market clearing RE and early RBC theory went out of favor due to their inability to explain some basic business cycle facts. Since ABC seems to be (ex-post) consistent with everything it doesn't face that problem."
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