Table of Contents: Chapter Six sub. 3: Heritage
3. Controversies Within the Wicksellian Herritage
Page i: par. 1: praxeological
In many of the most prestigious graduate departments of the United States and England, there presently exist brave and brilliant souls who master orthodox economics as well as praxiological economics.
Page 4: par. 2: entrepreneurial
But most of all, as he would later emphasize, Wicksell saw the lower interest rates as fueling an entrepeneurial boom leading to increased factor market activity.
Page 6: par. 1: entrepreneur
But, powered by "more of the same" expectations, entrepeneurs continue their inflationary factor market actions, fully expecting their final product prices to rise (as before), making the higher costs of borrowing affordable.
Page 6: par. 1: scarce
Eventually, the producers no longer can afford, in light of the cost of money, to pressure prices upward for scarse factor services.
Page 7: bottom par.: system
Neutrality in Wicksell's sytem is characterized by the stable price level, the equality of savings and investment, and an interest rate equaling the marginal productivity of capital.
Page 7: bottom par.:
To Wicksell, this not only is the real world counterpart to the Walrasian general equilbrium, but it is also the "ideal position, affording common advantage to the overwhelming majority of the various groups of interests [...]
Page 9: very last sentence: entrepreneurs
If, contrarily, the entrepeneurs had static expectations, reacting to [...]
Page 14: par. 2: entrepreneurial
To ideally find a measure of the yield of real capital, Myrdal postulated a world containing a single factor of production, a single final product, fixed relative prices, a given interest rate, a stable unit of account, and observable and uniform entrepreneural expectations.
Page 15: Right before subchapter 3: Entrepreneur
Entrepeneurs simply respond steadily to depreciation, and, therefore, any tendency toward a cumulative process is aborted.
Page 17: par. 0: entrepreneurs
For instance, imagine, along with Myrdal, that entrepeneurs perceive a more optimistic future, but that capital values remain unchanged by an increase in the market (money) rate of interest.
Page 17: par. 3: discussed
A final and highly important situation, one "often disucssed in the literature", is postulated by Myrdal—an increase in savings. Here, stability is upset since R2 decreases (as discussed above), yet free capital disposal (W) does not.
Page 18: par. 1: scarce
Myrdal was aware of a group of theorists who saw credit as scarse in the depression and alleviated by stronger decisions to save.
Page 19: par. 2: approximately
Deviations from this signal a cumulative tendency away from this and can be approximatley measured by the amount gains and losses regarding revenue/cost and investment.
Page 19: par. 2: anticipated
In the downward phase, revenue and cost gains would be negative while actual investment cost would be less than anticiapted cost.
Page 20: par. 1: entrepreneurs
This required that prices be weighted according to both their "stickiness of reaction" and "relative importance in the calculation of profitability by entrepeneurs and consequently in the volume of real investment."
Page 21: par. 1: normatively
And, normativley speaking, the goal of this equilibrium has been the desire "to eliminate completely or at least to mitigate the business cycle' "
Page 24: Footnote 29: Ex post
Ibid., p. 114. Ex poste, one would always find equality between invested capital and real investment since bookkeeping procedures are used in this way. See pp. 116-118.
Page 24: Footnote 33: Walrasian
Ibid., p. 133. Myrdal seemed to have the Wahasian equations in mind when he spoke of relative price equilibrium.
Page 27: par. 1: entrepreneurs
The eclecticism of Robertson most clearly surfaces when he proffers his analysis of boom and bust. Along Schumpeterian lines, he identifies the boom with ’’numerous errors of judgment and forecast” on the part of the entrepeneurs which lead to an ’’artificial lengthening of the period of production.”
Page 29: list item 3: entrepreneurs
(3) Secondary Savings, which results from the increased incomes (and thus savings) of the entrepeneurs benefitting from the bank’s money and loan policies.
Page 30: par. 0: aggravated + entrepreneur
This upward price movement is aggrevated by the need for more loans by businessmen (from the inflation of costs), the lengthening of the structure (or average period) of production caused by merchants' anticipations of higher selling prices, and dishoarding by the public and entrepeneurs.
Page 30: par. 2: pressures
But the link between monetary policy and the demand for lacking by businessmen is finally secured by Robertson when he admits that an increase in the supply of lacking can come about to meet the demand perssures by "extorting it from the general public through the multiplication of currency."
Page 31: par. 1: Footnote 26 was accidentally "16"
For instance, why was there an increased demand by lacking and what misled the entrepreneurs into overestimating the supply of lacking? And though it was recognized that the output of consumer and capital goods in the cycle was of a "marked difference",16 [...]
Page 39: par. 1: post
Savers and investors themselves lack the "possibility of intelligent foresight designed to equate savings and investment" and cannot ex poste undo the irreversability.
Page 42: after blockquote: Wicksell's
Indeed, Wickell’s previous influence was not to compete with the new directions given to aggregative economics by the 1936 Keynes, for reasons our final chapter will review.
Page 48: Footnote 17: ceterus
Ibid., pp. 177, 194. He argues: "Every effective alteration of bank rate must be associated (ceteus paribus) by some alteration in the quantity of bank money.”
Page 54: par. 3: extension
Mises points out that "the moment must eventually come when no further extention of the circulation of fiduciary media is possible."
Page 56: par. 2: scarce
As before mentioned, the bank inflation, originally causing both capital good prices and profits to swell, leads to higher prices for consumer goods since (1) they lose production resources to higher stages and thus become more scarse and (2) consumer preferences reassert demand to these industries.
Page 58: par. 1: entrepreneurs
In this regard, Hayek makes the distinction between entrepeneurs who are victims of "justified errors" rather than "sheer errors" since they were "misled by following guides or symptoms which as a rule prove reliable."
Page 59: bottom par.: entrepreneurial
Mises, similarly, saw the inevitability of non-neutral money giving rise to entrepeneurial error resulting from bad prices, but believed that systematic error of this kind was possible only from a general credit expansion.
Page 60: Footnote 5: entrepreneurs + that
Ibid., p. 95. The latter possibility of mass error in the face of correct prices by entrepeneurs is pronounced untenable by Hayek on the empirical grounds tht profits are perceived and losses avoided with notable success.
Page 61: Footnote 29: Expectations
Lachmann, Capital, Expectatoins and the Market Process (Kansas City: Sheed, Andrews and McMeel, Inc., 1977), p. 79. This 1943 essay was responded to by Mises in an essay of the same year, " ’Elastic’ Expectations and the Austrian Theory of the Business Cycle", Economics (Aug. 1943), pp. 251-252.
Page 74: par. 0: desperately
The Wicksellian heritage up till now has been mostly a macroeconomic inspired one; toward the future it desparately needs to be a microeconomic tradition as well.
Page 78: Bibliography: Lachmann
Lachman, Ludwig M., Capital and its Structure (Kansas City: Sheed Andrews and McMeel, 1978, 1956).
Missing page 44
Page 13-15: Missing footnote 10
Page 15: Missing a "title" for formula 3?
This book had "* * *" instead of ellipsis (I think). I kept the * * * format.
Underline can easily be changed to italics in the CSS.
I recreated high quality images of formulas #1-#3 on pages 14-15 (This time I exported as "1000 dpi" instead of the 1200px wide (this lead to differing font sizes in the formulas)). I am not too sure about formula 2's exact original intention. In the original, the "e1/r1" has no superscripts, but it "goes to" e^n/r^n...... which makes me think it should have been a "e^1/r^1". Also, in the explanation of the formula, it says:
"ei = net return of firm i, and
ri = the cost of reproducing real capital for firm i."
Should these 'i's be superscript as well so that it becomes:
"e^i = net return of firm i, and
r^i = the cost of reproducing real capital for firm i."
I assume this was just a limitation of the typewriter (or whatever tool was used to originally design this in 1979). If it IS a summation going from i=1 to n, that means that the equation can be simplified to sum of (e^i)/(r^i). I made the change, but just wanted to make note of this just in case I am interpreting it wrongly.
I also tried a little something different with the image resizing, hopefully this code also carries over to the Kindle versions.