For most experts a key factor that policy makers should be watching is the gap between the actual real output and the potential real output. The potential output is the maximum output that the economy could attain if all the resources are used efficiently. The gap is labeled as the output gap. In June this year the output gap - expressed in
In his speech on April 7 2010 at the Economic Club of New York the President of the New York Fed, William Dudley argued that asset bubbles pose a serious threat to real economic activity. The New York Fed chief is of the view that the US central bank should develop effective tools to counter this menace. According to Dudley, it should be the role
In order to gain insight into the future state of an economy, many economists refer to a variety of consumer and business surveys. Randomly selected consumers and businessmen are asked to provide their views about where the economy is heading. Thus, if a survey shows that the majority of the surveyed express optimism it is regarded as good news
In the New York Times September 14, 2018, in an article “We’re Measuring The Economy All Wrong,” the writer of the article David Leonhardt complains that despite strong gross domestic product (GDP) data most people don’t feel it. The writer of the article argues that, The trouble is that a handful of statistics dominate the public conversation
According to mainstream thinking, economic slumps are caused by various shocks. This means that these slumps are caused by unexpected events, which by implication are not known beforehand. Obviously if reasons behind various shocks cannot be established beforehand it makes sense to look at various symptoms of the emerging economic slump. Based on
It is a well-known belief that by means of monetary policy, the central bank can influence the rate of real economic expansion. It is also held that this influence however, carries a price, which manifests itself in terms of inflation. For instance, if the goal is to reach a faster economic growth rate and a lower unemployment rate then citizens
Various assumptions employed by mainstream economists appear to be of an arbitrary nature. The assumptions seem to be detached from the real world. For example, in order to explain the economic crisis in Japan, the famous mainstream economist Paul Krugman employed a model that assumes that people are identical and live forever and that output is
Most economists concur with the view that what keeps the economy going is consumption expenditure. Furthermore, it is generally held that spending, rather than individual saving, is the essential condition for production and prosperity. Savings is seen to be detrimental to economic activity as it weakens the potential demand for goods and
According to the Austrian Business Cycle Theory (ABCT) the artificial lowering of interest rates by the central bank leads to a misallocation of resources because businesses undertake various capital projects that prior to the lowering of interest rates weren’t considered as viable. This misallocation of resources is commonly described as an
In his writings, Professor Milton Friedman blamed central bank policies for causing the Great Depression. According to Friedman, the Federal Reserve failed to pump enough reserves into the banking system to prevent a collapse in the money stock. In response to this failure, Friedman argued the money stock M1, which stood at $28.264 billion in
What is the Mises Institute?
The Mises Institute is a non-profit organization that exists to promote teaching and research in the Austrian School of economics, individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard.
Non-political, non-partisan, and non-PC, we advocate a radical shift in the intellectual climate, away from statism and toward a private property order. We believe that our foundational ideas are of permanent value, and oppose all efforts at compromise, sellout, and amalgamation of these ideas with fashionable political, cultural, and social doctrines inimical to their spirit.
