I have identified seven serious problems with Austrian economics. 1) As discussed in Section II, Hayek was unclear whether his structure of production represents a yearly flow of goods or a distribution of wealth. Mises and Rothbard, like Hayek, seem to mean one and also the other. Skousen is at least consistent but, unfortunately, he is consistently wrong. He definitely means the amount of goods flowing by every year. This author’s work (1999) is about stock, not supply.2) As discussed in Section III, Hayek’s triangle is printed sideways and backwards. The former problem can be corrected by rotating the graph but the latter problem is more fundamental. Hayek is speaking from the perspective of the owner of the final product looking back on his costs of production. He is speaking from Marx’s perspective. The perspective that we want is from right now, at time zero, looking forward into the future.3) As discussed in Section IV, there must be some temporal measure or the Austrian’s incessant references to “lengthening the period of production” would not mean anything at all. Their theory of business cycles depends on credit expansions lengthening the period of production and on the inevitable contraction shortening it. It is impossible to talk about something being lengthened or shortened unless one knows how to measure it.4) As discussed in Section V, Austrian theory depends entirely too much on the specificity of capital goods. In reality, many companies make products or provide services which are used in all of Hayek’s five stages – and they experience cyclical behavior too. Rothbard was wrong when he said “To the extent that the new money is loaned to consumers rather than businesses, the cycle effects do not occur” (1970, p. 940 footnote).5) As discussed in Section VI, Garrison’s conceptions of the natural rate of interest is faulty. The Austrians are naïve to cling to this mythical concept. There is no such thing as a natural rate of interest. In any case, credit limits are more important than interest rates. The necessity of a bust following boom times is adequately explained by the transfer of capital from smaller companies to larger ones.6) In Garrison’s own words: “the [Austrian] theory of the business cycle is a theory of the unsustainable boom. It is not a theory of depression per se. In particular, it does not account for the severity and possible recalcitrance of the depression that may follow on the heels of the bust” (2001, p. 120). In 1930, Hayek could explain how the depression started. In 1936, he could not explain why it still persisted. See Section VII.7) Austrian economists seem naïve because their belief in a natural interest rate implies an ethical judgment on what is natural or unnatural, their discussion of the inevitable collapse of a credit expansion is typically presented as a sort of morality play and because they advocate an impractical 100% reserve requirement based solely on ethical considerations. See Section VIII.Seven strikes and you are out! Hayek’s horse fell dead underneath him in 1936. Seventy years later, his followers are still beating that horse saying “Get up! Get up! We have to finish the race!”

QuoteOriginally posted by: torontosimpleguyMan, can you behave conventionally? Why do you post the same axioms in every post? Can you express your ideas in plain English and write them only once? Nobody wants to read them again and again.You will be pleased or perhaps appalled to learn that here is yet another post that does not list my axioms.Is my English not plain enough for you?While not one of those dreaded axioms that you so fear, I did introduce a new concept: The Distribution of Wealth over the Capital Structure.

Hello Grozny,I am curious to know if you are interested purely in Axiomatic Economics, or if you also watch the markets and develop trading strategies as well.For example, would you see some potential in Deltas of TARNS by the Pathwise Method?Cheers,mackbar

QuoteOriginally posted by: mackbar I am curious to know if you are interested purely in Axiomatic Economics, or if you also watch the markets and develop trading strategies as well.For example, would you see some potential in Deltas of TARNS by the Pathwise Method?In general, I am only interested in proving theorems within my axiomatic system. I never offer specific advice on investments. The internet is full of people - mostly charlatans - touting investment newsletters, and I want to distinguish myself from them. I will look at Amin's PDF. At this time, though, I have no opinion on it.In the preface of my book and also in the abstract of my Simplified Exposition of Axiomatic Economics, I specifically state that I do not "propose to tell the reader how to make money in the framework of current financial institutions." I write:"I have written a book entitled Axiomatic Theory of Economics. This book is about a new economic theory. It is not a simplified version of mainstream economics. It does not predict the future, calling neither prosperity or ruin in America. It is certainly not in the 'how to be a salesman' genre, nor does it propose to tell the reader how to make money in the framework of current financial institutions. It is an abstract treatise. The purpose of this book is to give an axiomatic foundation for the theory of economics. The success of the axiomatic method employed by Euclid (in geometry), Kolmogorov (in probability), and others is well known and I claim that similar success can be realized in economics. However, by defining economics to be concerned with the creation of wealth rather than the allocation of scarce resources, I have not only solidified it but have shifted its basic paradigm. I address the issue of price and stock. Supply and demand does not work. This is a fundamental departure from mainstream economics comparable to that of Copernicus in astronomy."