09
Apr
2013
Cool Quote From Mises
Came across this while reviewing something for a client…
We are the lucky heirs of our father and forefathers whose saving has accumulated the capital goods with the aid of which we are working today. We favorite children of the age of electricity still derive advantage from the original saving of the primitive fishermen who, in producing the first nets and canoes, devoted a part of their working time to provision for a remoter future. If the sons of these legendary fishermen had worn out these intermediary products—nets and canoes—without replacing them by new ones, they would have consumed capital and the process of saving and capital accumulation would have had to start afresh.–LUDWIG VON MISES
This quote reminds me a bit of the “debt debate(s)” a while back. I am not sure if the analogy entirely fits, but it seems to me that what underlies the notion that “debt doesn’t matter, we owe it to ourselves” would be equivalent to “capital goods do not matter, we own these ourselves”.
Nobody said “debt does not matter.” They merely made others aware of who was lending the money. Saving money usually creates debt for someone else.
We are the lucky heirs of our fathers and forefathers whose capital investment was made possible by fractional reserve banking and its creation of new credit to use resources that may well have gone unused.
Mises assumes total or near total use of resources at all times.
You are assuming that through credit expansion capital drops down “like manna from heaven”, or that there is no opportunity cost in using resource X for Y. In any way you are assuming that at least interest rates are no real (market) prices and can in whatever arbitrary way be manipulated by a CB.
When has a central bank ever set the interest rate in a “arbitrary way”?
When market interest rates are arbitrarily too high.
If 12 people gather in a room and vote on how high the FEDs fund rate should be and maybe also other rates and set actions to reach that goal (like buying bonds, MBS or whatever), then is this not arbitrary (whatever way or formula or voting/decision mode they finally apply doesn’t matter)?
Uh, no he doesn’t.
Hmm, it was my understanding that Mises was very much in-line with Hutt, Lachmann, and Hayek in regards to idle resources. In fact, that idleness itself was a crucial element in the Austrian theory of the market process.
Mises assumes total or near total use of resources at all times.
[Citation needed]
Badly invested resources due to credit expansion should go unused and should be liquidated.
It’s better to figure out how a resource can be used to satisfy actual consumer temporal preferences, then for them to be put into yet another use that isn’t in line with said preferences.
You are implicitly presuming that making a bad investment now is better than making no investment now. That’s a smuggled in value judgment, which you ought to realize as being constrained by all other individual value judgments, which of course you aren’t concerned about, because the state’s value judgments are primary.
Doesn’t the “progressives'” insistence upon putting “idle resources” to use just for the sake of putting them to use cause Global Warming?
Only if greedy capitalists are the ones putting them to use.
I mean, I never hear from progressives that the former Soviet Union was one of the most polluted, if not the most polluted, countries in world history.
It can’t be polluted, because there was “rational”, “non-chaotic”, “collective” control of industry.
There must be FRB in order for the human race to have economic progress. However, the FRB must be “regulated” by a government regulator because we all know a priori that government regulators are omniscient, wise and benevolent while economic actors themselves are emotionally and intellectually stunted fools incapable of managing their own affairs.
FRB must be prevalent, we need it to be present, so that when the regulators fail to “control” it, we can blame neoliberal ideology for corrupting the good hearts of the regulators.
It’s a get out of jail free card held up the sleeves of statists who have accepted ABCT.
Thanks, MF. I FINALLY GET IT!
Government regulators of FRB can effortlessly preclude booms and busts (except the perpetual “good” type of boom desired by Keynes) just like the regulators in the USSR were able to prevent all pollution because, as government regulators, they are omniscient, wise and benevolent.
Close.
It will be effortless as soon as we can get the neoliberal ideology out of Washington.
Then the omniscience of regulators can finally be manifested, they will be able to “correctly” slow down the credit growth when the neolibs say keep going, and they’ll be able to “correctly” speed up the credit growth when the neolibs say slow down.
If it weren’t for antagonizers of statism, statism would work.
Wait a minute…
Nice quote. Reminds me of how money isn’t neutral even in the long run.
The point is the accumulation of capital, not money. Capital is heterogenous and is accumulated in an emergent way based on dispersed information about the value of different types of capital goods.
Money affects capital.
Where did you find this gem, Bob? A quick Google search didn’t tell me.
It’s from Human Action, chapter 18, part 3.
http://mises.org/humanaction/chap18sec3.asp
Thanks!