Economic Growth Quote of the Day
20 January 2011 at 10:05 am Peter G. Klein 1 comment
| Peter Klein |
The path of economic progress is strewn with the wreckage of failures. Every business man knows this, but few economists seem to have taken note of it. In most of the theories currently in fashion economic progress is apparently regarded as the more or less automatic outcome of capital investment, “autonomous” or otherwise. Perhaps we should not be surprised at this fact: mechanistic theories are bound to produce results which look automatic.
— Ludwig Lachmann, Capital and Its Structure (1956), pp. 36-37.
Entry filed under: - Klein -, Austrian Economics, Myths and Realities.
Organizations and Markets 
1.
Michael E. Marotta | 24 January 2011 at 11:07 am
One of those automatic mechanisms is spending, especially public spending. (Investment is different, though to the mechanist, it looks the same: cash goes in.) If spending (increase in price) produced supply, most of our problems (education, healthcare; lunar colony…) wouild have been solved a generation ago. And why not spend money on time travel or faster-than-light travel (perhaps two sides of the same coin, or two hyperspaces on the same hypertesseract).
While those may seem intuitively impossible, what made vitamin drinks possible as a consumer good. If economists fail to grasp the nature of uncertainty and risk (not the same thing), in sociology, the ignorance is deeper: we learn that businesses use mass marketing to trick people into buying things they neither want nor need and this is the road to success in a capitalist society. To counter that, I brought in articles about failed consumer goods The best of them was from a marketing magazine in 1988 that wondered how on Earth anyone could be so silly as to imagine that people would buy “Vitamin Water” a failed product.
Of course, in addition to vitamin waters, my classmates of 2009 were drinking bottles of plain water and “energy” drinks loaded with caffeine and B-vitamins. Who would have thought? …
Toss a baseball and plot the curve. The path is determined and constrained. Invent a product — heck, take a popular existing product … The outcome is not guaranteed.