Tuesday, January 27, 2009

Good analogy!

From the commenter "Fundamentalist" on this Mises Blog article:
The “animal spirits” cliché is not an explanation; it is merely a description of the human condition. Keynes invented the term because he didn't want to think about the reasons businessmen do what they do. It was his way of just dismissing the whole topic as unworthy of his time and attention. And if unworthy of his time, then by implication unworthy of anyone else's effort.

Animal spirits are no different as an explanation than is greed. Both may describe human behavior at the moment, but they don't explain anything. Especially they don't explain why animal spirits and greed only cause problems roughly every eight to ten years. Otherwise, those common human traits seem to be under control.

Someone has said that it’s like blaming gravity for airplane crashes. Yes, gravity played a role, but the real question is why gravity was more effective just before the crash that it was during take off or normal flight. In the same way, proponents of animal spirits, greed, etc., must explain why those normal human traits were more effective just before the current depression than during the former 6 or 7 years of growth. The answer is in the Austrian Business Cycle Theory.*

*That's a link to a lecture (MP3) by Paul Cwik on the FEE audio site that I thought was especially clear and rather entertaining - the guy talks like a surfer (he's from North Carolina).

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