[New post] Notes on a General Theory of the Social Cycle

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From: ThinkMarkets
Date: Wednesday, March 21, 2012
Subject: [New post] Notes on a General Theory of the Social Cycle
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New post on ThinkMarkets

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Notes on a General Theory of the Social Cycle

by gcallah

by Gene Callahan

Monday past at our colloquium Andreas Hoffman presented a fascinating paper attempting to depict Austrian Business Cycle Theory as a special case of a more general business cycle theory based upon Hayek's later work on spontaneous orders. Hoffman's general idea (I won't do it justice in this brief summary, so please have a look at the paper) is that business cycles occur when a "displacement" creates a situation in which people are uncertain how to make "adjustments" to move back closer to equilibrium. The period during which people are groping about for what to do creates the slump, and the upturn comes, of course, once they have gotten the hang of the new situation.

A lively discussion followed, during which Israel Kirzner, Mario Rizzo, and others pressured Hoffman on just what he meant by an "adjustment," a "displacement," and why these things would create a cycle, rather than merely ongoing "churning," to use Kirzner's word. (He also mentioned Lachmann's notion of the "kaleidic society" in this context.)

Riding home on the subway afterwards, what struck me was that we lacked a general framework of accepted definitions for talking about things like adjustments, displacements, and social cycles. (I will justify the use of "social" later.) As soon as I noticed this, the following thoughts entered my mind, essentially all at once. Some of them were drawn directly from the discussion. And they are all very preliminary: but that is one thing that blogs are for, is it not? In any case, feedback on these presently sketchy ideas is welcomed. Read more of this post

gcallah | March 21, 2012 at 2:11 pm | Categories: Austrian Business Cycle, Austrian Economics, Hayek | URL: http://wp.me/pmseG-1mr

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