The idea behind the cuts is more or less that by forceably lowering the interest rates, the costs of businesses and households will fall, consumption and investment will commence, and profits will recover. But why hasn't it worked the former 12 times? Is there something wrong with this idea?
A broader understanding of "Say's Law" would assist those who continued to be puzzled by macroeconomic questions, but even better would be to understand the context in which this Law was formulated. Say not only built a case for the essential stability of a free market (in contrast to the instability of the present mixed economy) but also made the case for the free society against every alternative.
Böhm-Bawerk's critique of the naïve productivity theory of interest was a brilliant leap forward for subjectivist economics, and remains the dominant Austrian view. Unfortunately, its lessons are as little understood yet just as relevant today as they were in the 1880s. Robert Murphy explains why.
In Portland, the restaurant chain Pizza Schmizza offered to pay homeless people a slice of pizza, soda and a few dollars in exchange for holding a sign for 40 minutes on downtown sidewalks that read: "Pizza Schmizza paid me to hold this sign instead of asking for money." Ralph Nader didn't like it one bit.
Most ordinary folk today live far better than did the Sun King himself. That advance in prosperity has not been built on government intervention, on needless consumption, nor on monetary debasement or otherwise the bilking of ones' creditors. It was built on savings being converted into capital.
Some freedom-minded people pin their hope for liberty on withdrawing from an unfree world. We might refer to this as "economic secession." Despairing of advancing the cause of liberty in society at large, they hope to be able to secure their own liberty anyway. This approach is doomed to fail, write Paul Birch and Gene Callahan.
Of all the false charges leveled against capitalism, the indictment of promoting or requiring imperialism and warfare is most certainly the least deserved. Given recent events, this proposition has received much undeserved attention, but is by no means new. This claim has a long legacy, tracing back at least to 19th century critics of Political Economy.
The accusations against Wal-Mart are many, and they include: paying overseas workers too little; not paying benefits to part-time workers; refusing to sell items that don't fall within its criteria for being "family-oriented"; not giving enough back to the community; and discriminating against women. Karen De Coster and Brad Edmonds respond.
Does the phenomenon of "reswitching" refute the Austrian theory of capital and interest? Contra Samuelson, no Austrian ever claimed that reswitching was mathematically impossible, writes Robert Murphy. Indeed, Austrians do not normally think in those terms at all, except when forced to in response to mainstream challenges.
Do deficits cause interest rates to be higher than they otherwise would be? Supply Siders, armed with historical data, say no. Unfortunately for them, writes Christopher Mayer, the conventional wisdom is closer to the truth. Deficits crowd out private investment, fritter away savings, and rob the public of valuable capital.
