Phelps’ critical paragraph on Austrian “overinvestment” theory does not seem to acknowledge that the market process takes place in real time, not in a diagram, nor does it address consumer time preference. It seems a pure production-oriented critique that leaves out the teleological purpose of production--consumption. Yet, he allows corporate managers to evaluate returns on investment for future production. Thus anticipation of consumer demand appears to sneak in the back door as the brake on what he thinks is a renewal of normal growth rates.
Posted by Sam Bostaph
