RE: [lpsf-discuss] Invitation from Jeff Hummel

Jeff's talk was over my head, too, but it wasn't the math part--as befits an Austrian, there wasn't anything but simple proportions--but the verbal. M2 and M3, seignorage, and monetary base were the terms of the day, whose meanings were presumed understood. (You also had to know whether upper- or lowercase were conventionally used for nominal vs. real wage rates, which made the equations more of a challenge.) Jeff was addressing problems with Austrian business cycle theory, and I hadn't even been aware of any problems. The main one, as far as I could tell, was that Austrian theory assumes a stable economy onto which cycles are imposed. Jeff was raising the question about a continuous rate of expansion--10%, say, or 90%: whether there were anything that would necessarily trigger a contraction. He appeared to agree with the Chicago school that the only such event would be a change in monetary policy, such as occurred in 1928. He had a very interesting exchange with David Friedman, who argued, as far as I could tell, that Jeff was right but wasn't saying anything about business cycle theory. In response to Kelly's request for him to explain the causes of the Great Depression in nontechnical terms, Jeff said wryly that every mistake that could be made was made, and therefore the Great Depression could be used to illustrate all eight theories of the business cycle.

Bryce was the only one of the four of us who was tracking the talk; I hope he'll find time to contribute an intelligent commentary.