wat0n wrote:In these conditions, employment decreases are totally voluntary
That doesnt sound correct, plenty of people who like their jobs get fired during recessions.
wat0n wrote:(people work less because they earn less and thus they opt to leave the job market)
People still have bills to pay and mouthes to feed though (a single mother just scraping by on her paycheck will have to work 30% more if her wage only buys her 70% of normal), I dont think the correlation as this theory puts it forth is all that straight forward.
wat0n wrote:it has empirical support (e.g. if I'm not mistaken these models do well when predicting Chile's economic fluctuations), something that can't be said of the Austrian Business Cycle Theory if I'm not mistaken.
I dont get the impression that austrian economists even try to predict daily ups and downs in the economy because that requires one to be able to be a mind reader in order to get an accurate prediction rate on minor short term behavior.
Now you can probably setup a model that can take guesses at the future but that is all that these models are, they are guesses and sometimes they are wrong, like they were in 2008 where none of these fancy models predicted an imminent collapse like most austrian school economists did (not to mention other economic fluctuations that austrian school economists predicted like the Great Depression, the stagflation in the 70's, the Nasdaq bubble and the housing bubble in the 2000's).
From wikipedia wrote:It is important to note the main assumption in RBC theory is that individuals and firms respond optimally all the time. In other words, if the government came along and forced people to work more or less than they would have otherwise, it would most likely make people unhappy. It follows that business cycles exhibited in an economy are chosen in preference to no business cycles at all.
Now I know for sure that I dont agree with it, human beings dont act optimally all the time, they are just miniscule cogs with limited information in a huge machinery and they do not act optimally all the time, you can see this in all the various economic bubbles that have formed in the past like the Tulip bubble in Holland in the 17th century, the South Sea bubble in the UK and the Mississippi Company bubble in France in the early 18th century, the Nasdaq internet bubble, the housing bubble etc...etc...etc... all these events were irrational and foolish from an economic perspective and yet people still created these economic catastrophes that made alot of people very poor and wasted alot of economic resources.
This theory apparently believes that people choose on their own accord to start these fluctuations meaning it misses the underlying causes for most of this irrational behavior (which is almost always price signals getting jumbled by money creation from a central authority/bank).
Like the wikipedia states this theory shares alot in common with Milton Friedman and his belief that capitalism IE human beings acting in their own interest is some flawless system that always operates optimally.
TropicalK wrote:I hear a lot from many people (especially Austrian economists) that there should be no cyclical unemployment. I do not understand where this conclusion comes from.
Mises believed that if the government didnt create all these disturbances and misallocations of resources in the economy then there would always be capital goods in queue ready to be transformed into tradeable goods if the human labor was available to operate them.
TropicalK wrote:In fact, it could be optimal for a sizable group of people to be on permanent vacation.
Why is that? wouldnt it be more optimal for everyone to work less hours per week instead of having 1 group of the population working and another group being on vacation?