Economics Dictionary of ArgumentsHome
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| Crises: Crises are sudden, unexpected events or situations that pose a serious threat to individuals, groups, or society as a whole. They can be caused by a variety of factors, such as natural disasters, economic downturns, or political instability._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Crises - Dictionary of Arguments
Rothbard III 535 Crises/Rothbard: The case of the retrogressing economy is [an] example of what we may call a crisis situation. A crisis situation is one in which firms, in the aggregate, are suffering losses. The crisis aspect of the case is aggravated by a decline in production through the abandonment of the highest production stages. The troubles arose from “undersaving” and “underinvestment,” i.e., a shift in people’s values so that they do not now choose to save and invest enough to enable continuation of production processes begun in the past. We cannot simply be critical of this shift, however, since the people, given existing conditions, have decided voluntarily that their time preferences are higher, and that they wish to consume more proportionately at present, even at the cost of lowering future productivity. Once an increase to a greater level of gross investment occurs, therefore, it is not maintained automatically. >Economy/Rothbard, >Productivity/Rothbard, >Capital consumption/Rothbard, >Production structure/Rothbard, >Economic cycles/Rothbard. Rothbard III 852 Crises/Business cycles/Rothbard: Historical events can be explained by laws of praxeology, which isolate causal connections. >Praxeology/Rothbard. Some of these events can be explained (…): a general price rise could result from an increase in the supply of money or from a fall in demand, unemployment from insistence on maintaining wage rates that have suddenly increased in real value, a reduction in unemployment from a fall in real wage rates, etc. >Money supply, >Demand for money, >Wages, >Unemployment. Free market: But one thing cannot be explained by any economics of the free market. And this is the crucial phenomenon of the crisis: Why is there a sudden revelation of business error? >Free market/Rothbard. Crisis: Suddenly, all or nearly all businessmen find that their investments and estimates have been in error, that they cannot sell their products for the prices which they had anticipated. This is the central problem of the business cycle, and this is the problem which any adequate theory of the cycle must explain. Interventions/pattern: (…) since the eighteenth century there has been an almost regular pattern of consistent clusters of error which always follow a boom and expansion of money and prices. In the Middle Ages and down to the seventeenth and eighteenth centuries, business crises rarely followed upon booms in this manner. They took place suddenly, in the midst of normal activity, and as the result of some obvious and identifiable external event. Thus, Scott lists crises in sixteenth- and early seventeenth-century England as irregular and caused by some obvious event: famine, plague, seizures of goods in war, bad harvest, crises in the cloth trade as a result of royal manipulations, seizure of bullion by the King, etc.(1) >Interventions, >Interventionism. But in the late seventeenth, eighteenth and nineteenth centuries, there developed the aforementioned pattern of the business cycle, and it became obvious that the crisis and ensuing depression could no longer be attributed to some single external event or single act of government. >Depression. „Overoptimism“/“overpessimism“: We must search for the objective reasons that cause businessmen to become "overoptimistic." And they cannot be found on the free market.(2) >Business cycle/Schumpeter. 1. Cited in Wesley C. Mitchell, Business cycles, the Problem and lts Setting (New York: National Bureau of Economic Research, 1927), pp. 76-77. 2. See V. Lewis Bassie: The whole psychological theory of the business cycle appears to be hardly more than an inversion of the real causal sequence. Expectations more nearly derive from objective conditions than produce them.... It is not the wave of optimism that makes times good. Good times are almost bound to bring a wave of optimism with them. On the other hand, when the decline comes, it comes not because anyone loses confidence, but because the basic economic forces are changing. (V. Lewis Bassie, "Recent Development in Short-Term Forecasting," Studies in Income and Wealth, XVII [Princeton, N.J.: National Bureau of Economic Research, 1955), 10-12)_____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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