Peter Lewin and Nicolas Cachanosky
A comprehensive understanding business cycles needs to account not only for the allocation of resources over time but also for resource allocation across industries at any point…
Abstract
Purpose
A comprehensive understanding business cycles needs to account not only for the allocation of resources over time but also for resource allocation across industries at any point in time. But to properly understand how these “time-distortions” take place and how the price mechanisms that drive them work, a clear and well-defined conceptualization of the “average length” of the structure of production is required. The authors use insights provided by Macaulay’s duration and Hicks’s average period to show that financial duration and related concepts have a direct connection to macroeconomic stability.
Design/methodology/approach
This study uses a theoretical and conceptual approach. It first presents the connection between average period of production and financial duration and then compares and applies this to macroeconomic business cycle theories.
Findings
This study points to important implications for macroeconomic policy. It not only claims that a low interest rate contributes to the creation of asset bubbles but also shows the market mechanism through which the real sector is affected. The application of financial concepts to macroeconomic cycles shows the price mechanism through which resources are allocated across industries.
Originality/value
The financial approach we offer to business cycles is fairly unexplored. As such, this paper offers a novel conceptual and theoretical framework for business cycles.
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This chapter uses Austrian capital theory to illustrate why empirical work can be elusive in typical Austrian themes. It explores the nature of the problem and different…
Abstract
This chapter uses Austrian capital theory to illustrate why empirical work can be elusive in typical Austrian themes. It explores the nature of the problem and different alternative solutions to empirical challenges. This chapter also discusses the Austrian literature’s epistemological approach to empirical work to shed light on the controversial relationship between Austrian theory and empirical testing. Finally, this chapter offers examples of how Austrian and mainstream economics can find a common empirical ground.
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Nicolás Cachanosky and Peter Lewin
In this paper, we study financial foundations of Austrian business cycle theory (ABCT). By doing this, we (1) clarify ambiguous and controversial concepts like roundaboutness and…
Abstract
In this paper, we study financial foundations of Austrian business cycle theory (ABCT). By doing this, we (1) clarify ambiguous and controversial concepts like roundaboutness and average period of production, (2) we show that the ABCT has strong financial foundations (consistent with its microeconomic foundations), and (3) we offer examples of how to use the flexibility of this approach to apply ABCT to different contexts and scenarios.
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Alexandre Padilla and Nicolás Cachanosky
Since Baumol (1990), the economic literature has distinguished between two broad categories of entrepreneurship: productive and unproductive. The purpose of this paper is to…
Abstract
Purpose
Since Baumol (1990), the economic literature has distinguished between two broad categories of entrepreneurship: productive and unproductive. The purpose of this paper is to introduce another subcategory: indirectly productive entrepreneurship. Sometimes, profit-seeking entrepreneurs allocate their talents to indirectly productive activities to mitigate the new costs market participants endure as a result of a government regulation. The resources used to mitigate these costs must be diverted from other uses.
Design/methodology/approach
This paper uses the example of cell phone storage outside New York City’s high schools to illustrate an indirectly productive entrepreneurial activity that mitigates the inefficiencies or costs created by a regulation. These costs and the resulting entrepreneurship would not have arisen absent the regulation.
Findings
These profit opportunities do not result from market entrepreneurial errors or successes but emerge from inefficiencies or unintended consequences produced by government regulations. When evaluating such entrepreneurship, the question is whether such regulation is desirable from an efficiency viewpoint because such entrepreneurship, while making such regulation less inefficient or less costly, diverts resources from other lines of production.
Originality/value
This paper identifies a new category of entrepreneurship: indirectly productive entrepreneurship. This paper also shows that government regulation often deters productive entrepreneurship. However, under some circumstances, regulation can indirectly encourage productive entrepreneurship by creating artificial profit opportunities that would not have existed otherwise.
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A keynote address in which the author looks back at the rebirth of Austrian economics, characterizes its current state, and looks forward to its future development. The early…
Abstract
A keynote address in which the author looks back at the rebirth of Austrian economics, characterizes its current state, and looks forward to its future development. The early years after the rebirth focused on methodology, but as the modern school has development its concerns have become much more varied and connected to specific current issues. The prospects for further development are good as more young scholars arrive.
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This introduction summarizes each of the papers in Studies in Austrian Macroeconomics. It begins with a brief overview of the core ideas and development of modern Austrian…
Abstract
This introduction summarizes each of the papers in Studies in Austrian Macroeconomics. It begins with a brief overview of the core ideas and development of modern Austrian macroeconomics, focusing on its theory of the business cycle. The papers are then discussed by parts, starting with the papers on Austrian monetary and business cycle theory, followed by those addressing the relationship between the US and Canadian economic performance, and concluding with the three papers on the political economy of regulation and crisis.