Quotes from Microfoundations and Macroeconomics

By Steven Horwitz (2000)

• By rigidly tying the quantity of money in use to the costs of producing specie, rather than the demand to hold money, 100 percent reserve banking uses signals from another market to guide the production of money, rather than relying on signals that could be provided about the demand for what they are producing in their own market. #
  EconomicsMoney
• Fundamentally, the advantage of free banking over central banking in maintaining monetary equilibrium is that free banking is not dependent on the centralization of information in order to generate the appropriate supply of money.#
  EconomicsFree bankingBanking
• Keynes’ theoretical framework is constructed on the two assumptions of wage and monetary rigidity, without ever asking whether institutional changes that would make those assumptions inappropriate might better address the problems Keynes is trying to solve.#
  EconomicsBusiness cycle
• Where Keynesian approaches would see the difficulty as an inability to demand (a lack of ‘aggregate demand’), Hutt’s approach would argue that it is an unwillingness or inability to supply (at the market clearing price) that is starting the process.#
  EconomicsBusiness cycle
• We can talk of money’s ‘income velocity’, which refers to the demand to hold money relative to income, and we can talk of the ‘demand for money’ in the sense of the absolute amount of money people hold.#
  EconomicsMoney
• The analog of forced saving during inflation, is that there is what we might term ‘forced investment’ during deflation. That forced investment takes the form of unplanned inventory accumulations and unintended excess productive capacity.#
  EconomicsBusiness cycle
• Forced savings are the forced reduction in the purchasing power of non-recipients of excess supplies of money.#
  EconomicsMoney
• The assumption in most textbook Keynesian models of a fixed price level, or of a one-commodity world, is completely consistent with Keynesian treatments of the money- interest relationship. If the results of monetary excesses and deficiencies are all borne by the interest rate, where can one fit in the price level? Conversely, if one assumes the price level is fixed, then the adjustments to monetary disequilibria must take place through some other variable. #
  EconomicsMoneyMethodology
• In Keynesian models, any excess supply of money that finds its way into the hands of consumers will be put into the bond market, driving up bond prices and driving down interest rates.#
  EconomicsMethodologyMoney
• In a world where money was absent, the kinds of intertemporal exchanges we see in a monetary economy, not to mention the very capital goods that are the ultimate objects of those exchanges, would simply not exist. Conducting such a thought experiment seems to assume that the introduction of money would not change the (intertemporal) structure of the economic system. In other words, the system with money would look essentially like the system without it. This seems fundamentally at odds with an Austrian theoretical perspective that views the monetary economy as fundamentally different from a barter world. The existence of money enables the kind of calculative behavior that characterizes successful economic action and would be absent in any ‘realistic’ barter economy. Whatever validity there might be to the intuition behind the idea of the natural rate, from an Austrian perspective it should not be grounded in a money-barter comparison.#
  EconomicsMoney
• The value of capital is often more dependent on the overall complementarity of the capital structure (or its composition) than on the sheer quantity of physical equipment.#
  EconomicsCapital
• The concept of capital refers to the place of particular physical objects within the plan of the actor in question. Thus capital cannot be defined in terms of the physical qualities of the object, but rather its purpose or role in the plans of its possessor.#
  EconomicsCapital

W.H. Hutt, The Keynesian Episode (1979)

• The demand for any commodity is a function of the supply of noncompeting commodities.#
  Economics

Richard Wagner, “Boom and Bust: The Political Economy of Economic Disorder” (1980)

• The way that [national income] accounts are constructed, resources devoted to the correction of error are valued equivalently with resources devoted to other production.#
  EconomicsMethodology

Ludwig Lachmann, Capital and Its Structure (1956)

• As long as we cling to the view that all capital is homogeneous, we shall only see, as Keynes did, the unfavourable effects of investment on the earning capacity and value of existing capital goods, since all the elements of a homogeneous aggregate are necessarily perfect substitutes for each other. The new capital competes with the old and reduces the profitability of the latter. Once we allow for heterogeneity we must also allow for complementarity between old and new capital. The effect of investment on the profitability of old capital is now seen to depend on which of the various forms of old capital are complementary to, or substitutes for, the new capital.#
  EconomicsCapital
• Money is largely, so to speak, a capital good ‘by proxy’. It symbolizes, at the initiation of the plan, those current services we shall need later on but which, owing to their ‘current’ character, we cannot store until we need them. We store the money instead.#
  EconomicsMoneyCapital

Ludwig Von Mises, Human Action (1949)

• The term entrepreneur as used by catallactic theory means: acting man exclusively seen from the aspect of the uncertainty inherent in every action.#
  EconomicsPraxeology

Axel Leijonhufvud, “The Wicksell Connection: Variations on a Theme” (1981)

• If saving and investment are always equal, they cannot govern the rate of interest, nor can the interest rate possibly serve to coordinate saving and investment decisions. Hence the [liquidity preference] theory: money demand and money supply govern the interest rate.#
  Economics