Saturday, August 04, 2012

Austrian Business Cycle Analysis Is A Part Of The Human Civilization Equilibrium.

World over there is only one explanatory economic theory that truly and truthfully identifies the cause and effect of intervention, yet it cannot break through the unfathomable uncertainty inherent in the world and so the exact time and the intensity of the inevitable correction is not known. The intensity is related to the degree of the distortion of the equilibrium forces and how close to the entropy of equilibrium the system returns.  No one knows what the trigger event will be and no one knows how much cascading will take place.

The one explanatory economic theory that provides this great insight and offers viable and ethical solutions is the Austrian Business Cycle (ABC). This is the theme of the work that won Fredrich von Hayek the Nobel Prize in 1974.

The boom of the cycle is caused by economic intervention which stimulates overconsumption and malinvestment. The bust is the recession and depression that follows. If the bust is interrupted by economic intervention in an attempt to artificially stimulate the economy then the even more severe consequences are simply pushed into the future. The longer the correction is delayed the worse it will be and the less effective will be the attempts to artificially get out of the bust.

One interesting discovery in the divine economy theory is the broad view of the human civilization equilibrium. What is significant about the concept of the human civilization equilibrium is that all intervention into the economy not only disrupts the economy but it also disrupts liberty, order, peace, justice, law, ethics and morality!

The divine economy theory shows scientifically that laissez-faire is not only the most efficient economic system but that with laissez-faire all facets of human civilization are kept in balance optimally. No claims can be made that any other way - the various types of interventionism - can yield more liberty or more order or more peace or more justice or more ethics or more morality!

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1 comment:

Veres P said...

How could we speak about laissez-faire if economic actors are not equal. Think about kapital and labor, multinational kapital and SME-s, small and big, developed and developing countries.

Why do you think, that actions of economic actors are not special kind of "intervensions".

Why do you think, that institution of market is and ideal one when it is dominated by national and multinational mononopolism and oligopolism.

We should not go back but ahead understanding the real market situation and the role of state and stakeholder organisation. Austria is a good example how can organised stakeholders (labor and kapital) act (interven) as part of the economic system.