Austrian business cycle theory: Empirical evidence

The Austrian approach to business cycles has been seldom examined in econometric terms. This paper first reviews the essentials of that approach and the recent application of the Austrian business cycle theory in the economics literature. Quarterly data for Germany, USA, England and France, 1980:1 through 2006:1, are used to explore business cycle facts and relations between terms structure of interest rates, relative prices, composition of aggregate expenditure and real GDP. Results are consistent with the hypothesis of the Austrian business cycle theory that monetary policy shocks explain cycles. The changes in term structure of interest rates and composition of aggregate expenditure are large enough to explain changes in aggregate economic activity.

Hayek and Keynes: From a common critique of economic method to different theories of expectations

The methodological positions of Hayek and Keynes contain striking similarities. Both authors opposed empiricist approaches to economics that assign priority to mere observation as the source of knowledge. Both emphasised intentionality, motivation and human agency. Notwithstanding this common ground, they had different conceptions of how beliefs are formed and had different explanations of thought and action in economics. Hayek grounded his explanation on an evolutionary theory of the mind, i.e. on psychological premises, whereas Keynes based his view of belief formation on probable reasoning, where probability is a logical concept. Starting from psychological premises Hayek maintained that individuals act rationally only by following rules. As a consequence, he considered conventional expectations to be the primary guide for agents in economic life. Keynes agreed that conventional expectations actually guide economic behaviour, but he maintained that they are justified only in situations of total ignorance. In conditions of limited knowledge, agents can base their action on reasonable expectations, independently of conventions. Moreover, agents?particularly those institutions responsible for economic policy?ought to shun conventional behaviour in order to counteract its negative social consequences. We argue that Keynes's theory of expectations is well grounded upon his theory of logical probability. Hence his advocacy of discretionary policy is rationally justified.     

Accounting for the business cycle: Nominal rigidities, factor heterogeneity, and Austrian capital theory

An Austrian interpretation of the New Keynesian small menu cost model of the business cycle is proposed. Austrian and New Keynesian business cycle theories share the feature that the cycle is generated by rigidities which prevent the economy from adapting instantaneously to changing conditions. Austrian business cycle theory is capital-based, focusing on credit expansion which artificially lowers interest rates and causes an investment boom and unsustainable business expansion. In contrast, the New Keynesian small menu cost model of the business cycle is based on nominal rigidities which prevent markets from clearing. Small menu costs introduce dichotomous behavior, where firms find it locally optimal to avoid instantaneous output price adjustments in the face of the cost, but this local optimum results in economy-wide output and employment fluctuations which are much greater in relative magnitude. The small menu cost model of the business cycle is extended and reinterpreted in light of Austrian business cycle theory with heterogeneous, multiply-specific capital, thus providing a rigorous formalization of the Austrian business cycle. The Austrian interpretation of this New Keynesian model fortuitously addresses several of its shortcomings. JEL classification B53, E12, E23, E32     

The death of development theory: From Friedrich von Hayek to the Washington consensus

Abstract

Development strategies followed by many countries in the 20th century bestowed a relevant role to the State. During the 1970s, it all reversed, and free markets became paramount to efficiency. F. von Hayek and the Mount Pelerin Society led the way to eliminate the State as a significant economic player, while P.T. Bauer extended such ideas to development economics, which would eventually give way to the Washington Consensus. Beyond actual results of such policies, it is surprising to see the appeal of Bauer’s theoretical approach, considering that it is constructed disregarding both empirical evidence, as well as the abundant discussion on development that was taking place contemporarily. This article explores the theoretical process of such reversal in development economics theory.     

Communicative action and the radical constitution: the Habermasian challenge to Hayek, Mises and their descendents

This paper evaluates Jurgen Habermas's typology of action andhis recent call for a radically democratic rule of law. Thetheory of action that Habermas develops, however, differs significantlyfrom the science of action (praxeology) of the Austrian school.As such, it represents a methodological challenge to Austrianpraxeology. Additionally, Habermas's criticism of the welfarestate is shown to be somewhat consistent with Hayek's criticisms,but his alternative to the welfare state challenges the politicalvision of many Austrian economists. This paper attempts to demonstratethat both Habermas's and the Austrian school's efforts sufferfrom similar weaknesses and epistemological pretences.     

Monetary policy as bad medicine: The volatile relationship between business cycles and asset prices

Austrian business cycle theory has become an important point of focus in controversial mainstream discussions regarding the role of asset prices in monetary policy. In this article, the relation between asset prices and the Austrian business cycle theory is examined. The analysis focuses on how central banking supports optimism, resulting in the redirection of entrepreneurial activity and knowledge via asset price bubbles. The crucial role of credit expansion for asset price booms is also analyzed. Following this analysis, the implications for monetary policy are deduced.

Organizing Economic Experiments: Property Rights and Firm Organization

Many economists, notably Austrian economists, have argued that the market process is essentially an experimental process. We briefly try to clarify this conceptualization, and then argue that we may understand the firm in much the same light. A basic view of the firm as an experimental entity is derived, drawing on property rights insights.     

Lange's 1938 model: dynamics and the “optimum propensity to consume”

Abstract

Oskar Lange's 1938 article “The Rate of Interest and the Optimum Propensity to Consume” is usually associated with the original IS-LM approach of the late 1930s. However, Lange's article was not only an attempt to illuminate Keynes's main innovations but the first part of a wide project that included the development of a theory of economic evolution. This paper aims at showing that Lange's article can help in illuminating critical aspects of this project: in particular, Lange's idea that a synthesis between Kaldor's and Kalecki's theories and that of Schumpeter, might have been possible and that it represented (in intentions) a “modern” and consistent reconstruction of the Marxist theory of the business cycle. Section 2 clarifies Lange's early reflection on dynamics. Section 3 centres on Lange's 1938 static model and indicates the effects of a change of saving on investment. Section 4 suggests a dynamic reconstruction from which are addressed important arguments raised by Lange in a series of papers written between 1934 and 1942.     

中国经济周期波动的制度冲击效应分析

经济制度变革成为中国宏观经济经历的影响最深远的整体性、持久性的外生冲击之一,制度变动的冲击对我国经济周期的变动特征产生了深刻的影响.本文运用经济计量方法对制度冲击改变我国经济周期特征进行了检验,并通过市场化程度、非国有化水平和开放度三个制度冲击变量检验了其与我国经济周期波动的相关性,其结论证明:在我国受政治背景的影响而出台的重大的经济制度改革对经济发展影响巨大而深远,制度变动冲击对经济周期变动的方向及程度起到了较大的决定作用.     

The notion of private information in a modern perspective: a reappraisal of Hayek's contribution

Hayek's critical attitude towards Walrasian modelling was based on informational considerations. In his view, a meaningful notion of equilbrium has to deal with the consistency of agents' plans which information is dispersed throughout the economy. He emphasized that only in this context could the role of market prices as aggregators of information be correctly analysed. Recent developments in general equilbrium theory with rational expectations have taken up the issue formally. In this paper, Haek's main ideas about the competiitive mechanism are compared with these recent results. It is argued that Hayek's notion of private information is different from that used in modern equilibrium theory, not only because of its dynamic content, as many critics observed ex post, as is usually in a general equilibrium framework. This issue of whether modern notions of private information, namel that used in conract theory, are good substitutes for Hayek' notion of personal knowledge is also examined in detail. From this analysis, it is possible to conclude that Hayek's notion of equilibrium neither entails Pareto optimality prperties nor full informational efficiency.     

公平与互惠理论视角的知识员工激励

知识员工的特性使得基于理性人假设的经济契约不能进行有效激励。本文建立了基于知识员工互惠性的委托-代理模型。研究结果显示,新模型的最优委托-代理合约可给委托人带来比传统的委托-代理最优合约更高的利润水平。     

Contemporary Economic thought. The Contribution of Neo-Institutional Economics

This article examines the historical developments of the institutionalist theory of the business enterprise since the early 1900s in order to demonstrate its distinctive characteristics that are often overlooked or belittled by some institutional-evolutionary economists and most mainstream economists. I argue that the institutionalist theory is an evolving and emergent theory, which bears a reciprocal, evolutionary, and cumulative relationship between the business enterprise and society. The institutionalist theory is, therefore, suitable for the understanding of the real-world business enterprise as it can be modified and refined along with the evolution of capitalism. The article begins with a discussion of the present state of the institutionalist theory. The following section is devoted to the major contributions to the institutionalist theory situated in the evolution of U.S. capitalism. The penultimate section provides a critical discussion of new institutional and evolutionary approaches to the firm. The article concludes with a brief discussion as to what should be done for the further development of the institutionalist theory of the business enterprise.     

从冲突到协调:知识型员工的组织认同培育模型

与一般员工不同,知识型员工具有专业认同的内在倾向,在组织无法协调专业--组织冲突的情形下,他们具有较高的流动意向.我国学者对知识型员工的特点、激励和流动成因等进行了比较广泛的探讨,但对知识型员工专业--组织冲突则缺乏深入研究.为此,以西方组织认同理论为基础,通过对知识型员工专业认同与组织认同,以及专业--组织冲突发生机制的分析,得出通过组织认同的培育来协调专业--组织冲突的结论,并提出了知识型员工组织认同培育模型.     

我国农业家庭经营的波动规律与演变趋势

改革开放以来,家庭经营一直受到来自城市化与农业经营环境两个方面因素的外生冲击.按照真实经济周期理论,农户对两种外生冲击预期收益率的变化造成了家庭经营投资费用的波动.首先将改革以来家庭经营波动划分为6个周期,然后运用真实经济周期理论对家庭经营的波动周期、波动幅度与演变趋势进行比较分析.研究结论表明,在新农村建设时期,随着城市化步伐逐步加快,以及政府增加对"三农"的投资、发展现代农业等外生冲击力度加大,传统的小农家庭经营必然向家庭农场制转型.而在家庭经营转型过程中,政府不应干预农户的自主选择,而应通过加大两种冲击的影响力度,引导家庭农场制应运而生.     

Soft budget constraint theories: From centralization to the market

This paper surveys the theoretical literature on the effect of soft budget constraints on economies in transition from centralization to capitalism; it also reviews our understanding of soft budget constraints in general. It focuses on the conception of the soft budget constraint syndrome as a commitment problem. We show that the two features of soft budget constraints in centralized economies – ex post renegotiation of firms' financial plans and a close administrative relationship between firms and the centre – are intrinsically related. We examine a series of theories (based on the commitment-problem approach) that explain shortage, lack of innovation in centralized economies, devolution, and banking reform in transition economies. Moreover, we argue that soft budget constraints also have an influence on major issues in economics, such as the determination of the boundaries and capital structure of a firm. Finally, we show that soft budget constraints theory sheds light on financial crises and economic growth.     

The Austrian roots of the economics of institutions

This paper presents an analysis of the way the Austrian theory of institutions evolved from Menger’s main works. It also tries to advance the idea that the economics of institutions, when it deals with the emergence and evolution of rules and norms from interacting individuals, is inspired by Menger’s work and more generally by the Austrian analysis of the emergence and evolution of institutions. Recent works in the economics of institutions build on this earlier Austrian work to make it more formalized and testable.

The Economics of Karl Marx: Analysis and Applications

Abstract

Controversy focuses on three questions: Is capital a distinct factor of production? Is capital quantifiable in a theoretically consistent manner? Are process stories necessary around convergence to, or changes in, equilibrium interest rates? To all, Kaldor answers ‘yes’ to Knight's ‘no’. The controversy is historically important in: 1) shifting issues in recurring twentieth century capital theory controversies from periods of production to production functions, from roundaboutness to diminishing returns; 2) revealing Knight's position on increasing knowledge offsetting diminishing returns over time as an unacknowledged ‘precursor’ of new growth theory; 3) marking the turning point for Kaldor's attachment to Austrian theory.     

知识资产商务战略:中部崛起的竞争战略选择

在竞争全球化的背景下,中部崛起所涉及到的重要问题是竞争战略的选择。目前全球竞争出现了新的态势,竞争已推进到了最前沿,即知识资产竞争。发达国家政府及跨国公司已将知识资产的竞争作为重要的竞争方式,而将知识资产商务战略作为最重要的竞争战略,知识资产竞争的新理念已被认同。在这一情形下,中部崛起面临的最重要的问题是,必须选择与新的竞争形势相适应的新的竞争战略,这就是知识资产商务战略。     

The power of negative thinking: corruption,perception and willingness to bribe in Ukraine

This study provides an empirical analysis of the association between corruption perception and the willingness to offer bribes, as well as of the influence of different sources of information on corruption perception in the Ukraine. The higher the perceived corruption in an organization, the more probable it is that a person dealing with that organization will offer a bribe, therefore supporting corruption. Since corruption scandals in Ukraine seldom result in legal action, information about corruption in the mass media might actually encourage people to give bribes. This study found that corruption perception is one of the key factors in giving a bribe and that its positive/negative effects strongly depend on institutions and government policies.     

从政府到企业:关于中国民营企业研究文献的综述

在有关中国经济转轨的理论研究中 ,民营企业是最引人注目的领域之一。本文尝试在认真梳理该领域主要研究文献的基础上 ,从另一个侧面勾勒出中国改革进程的大致线索。本文的分析表明 ,从单纯对市场竞争和激励机制的强调 ,到对模糊产权的关注 ,直至地方政府的全面退出 ,中国民营企业的内涵发生了实质性的变化。当民营企业逐渐成为主流经济学意义上的“企业”时 ,它也随之淡出了主流经济学的分析视野 ,文献关注的中心开始从“解释问题”转向“解决问题”。令人感兴趣的是 ,从产权已基本明晰的民营企业发展现状出发 ,将会把我们引导到一种什么样的未来状态 ?目前的经验和对策性研究似乎还无法给出确定的答案。