A key factor that constrains people’s ability to generate goods and services is the scarcity of funding. Contrary to popular thinking, funding for consumption and production is not about money as such, but about real savings. Note that various tools and machinery or infrastructure that people have created is for one purpose. That purpose is to be
Most economists are of the view that by means of economic indicators it is possible to identify early signs of an upcoming recession or prosperity. What is the rationale behind this opinion? The National Bureau of Economic Research (NBER) introduced the economic indicators approach in the 1930s. A research team led by W. C. Mitchell and Arthur F.
In various writings, Milton Friedman argued that there is a variable lag between changes in money supply and its effect on real output and prices. Friedman held that in the short run changes in money supply will be followed by changes in real output. However, in the long run changes in money will only have an effect on prices. This means,
It is widely believed that resources that are utilized in normal times to promote economic prosperity become underutilized during recessions. Some experts hold that what is required are policies which will increase the availability of credit. On this Ludwig von Mises wrote in Human Action , Here, they say, are plants and farms whose capacity to
On July 11, 2019, before the Senate Banking Committee, the Federal Reserve Board Chairman Jerome Powell said that the relationship between unemployment and inflation in the US has vanished. According to Powell , “The relationship between the slack in the economy or unemployment and inflation was a strong one 50 years ago ... and has gone away,”
For most economists and financial commentators the heart of economic growth is the increase in the demand for goods and services. It is held that increases or decreases in demand are behind rises and declines in the economy’s production of goods and services. It is also held that the overall economy’s output increases by a multiple of the change
There are some signs that the pace of US economic activity is starting to slow down. For instance, the yearly growth rate of industrial production, which closed at 5.4% in September 2018, fell to 1.3% by June this year (see chart). In addition, the annual growth rate of the consumer price index (CPI) eased from 2.9% in July last year to 1.6% by
As long as the pool of real wealth is expanding, easy monetary policy will appear to “work,” and loose monetary policy is likely to be incorrectly held as generating economic growth. Once, however, the pool becomes stagnant or starts declining, the “music stops” and no amount of central bank monetary pumping is going to “work.” On the contrary,
According to Ludwig von Mises’s Austrian Business Cycle Theory (ABCT), the artificial lowering of interest rates by the central bank leads to a misallocation of resources due to the fact that businesses undertake various capital projects that prior to the lowering of interest rates weren’t considered viable. This misallocation of resources is
Conventional wisdom holds that savings is the amount of money left after monetary income was used for consumer outlays. Hence, for a given outlay, an increase in money income implies more savings and thus more funding for investment. This in turn sets the platform for higher economic growth. Following this logic, one could also establish that
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.
