Volume 4, No. 3 (Fall 2001)
I would like to emphasize two implications of my argument. First, the concept of secular growth as an uncaused phenomenon contradicts the Mengerian method of analyzing dynamic market processes as well as modern Austrian capital and interest theory and should be purged from capital-based macroeconomics. In its place should be substituted a causal analysis that accounts for the stylized fact of a steady secular growth trend in industrial economies in terms of the dynamic coordination of entrepreneurial plans with the historical development of time preferences, the size and quality of the labor force, natural resource endowments, and technological progress. This substitution can easily be made without in the least affecting the basic structure of the Garrisonian analytical framework. Second, and more important, the analytical simplification of the loanable funds market, while it may be a useful component of capital-based macroeconomics in treating the effects of changes of preferences and policies that impinge on the supply side of the intertemporal market, is liable to be dangerously misleading when dealing with demand-side influences on the capital structure. Consequently, perhaps a richer conception of the time market could be formulated and incorporated into capital-based macroeconomics without seriously damaging its potential appeal to mainstream macroeconomists.
