Talk:Austrian business cycle theory/Archives/2010/January

Summary of Murphy's rebuttal

If it is going to get its bit of undue weight, then I hope that it is at least made clear how detached from reality Murphy's theory is -- a theory based on entrepreneurs who suddenly decide to make significant investments into capital that they have no intention of giving proper maintenance. The citation is enough; the summary is overkill in my opinion. BigK HeX (talk) 18:08, 24 December 2009 (UTC)

IP editor says, "the islanders see the increase in sushi and are happy with it; they don't see the malinvestment at first"

The cited paper says, "With only 5 islanders devoted to this task, instead of the original 25, something has to give." BigK HeX (talk) 00:31, 25 December 2009 (UTC)

Right, "something has to give" is Murphy's introduction of capital consumption; the islanders don't realize that "something has to give;" they see more sushi from Krugman's change in production and are happy with the "boom." Also, I think the summary is important because it rebuts the summary of Krugman's critique. If you want to be rid of the Murphy summary, you should also delete Krugman's summary. —Preceding unsigned comment added by 67.86.182.204 (talk) 17:51, 25 December 2009 (UTC)

"Something has to give" is stated as a given, which Murphy seems to believe should be obvious to even the layman reader. I suppose it is possible that laymen are presumed to know more about a business than the entrepreneurs running it. But, fair enough... I'll clarify the passage. BigK HeX (talk) 17:56, 25 December 2009 (UTC)

I don't understand why this "something has to give" phrase is causing so much angst. It surely is an assumption because the analogy of the story is that artificial credit (the fictitious Krugman's motor) is not a true advancement of production. It's sort of like buying lots of stuff on credit; you're not wealthier because you'll have to pay the piper somehow. I think qualifying every sentence makes it very cumbersome; it's easier to say: "Murphy's argument is this," —Preceding unsigned comment added by 67.86.182.204 (talk) 13:51, 26 December 2009 (UTC)

"Something has to give" is referring to a difficulty to perform proper maintenance on the capital used for production. Murphy introduces this assertion as a given, and without explanation it is even implied that the situation should be obvious to a layman reader. In any case, the assertion that the islanders will unquestionably face difficulty in maintaining the capital under their new plan is a critical part of Murphy's theory. I will continue to insist that any "summary" of Murphy's work include the point; I don't see why you would object to having facts pulled from Murphy's paper being included in an article, especially when you are the one who wanted a summary. BigK HeX (talk) 17:48, 26 December 2009 (UTC)

My objection is that your insistence of qualifying each sentence the way you do makes it cumbersome (whether you do it on purpose or not is still unknown). I have rewritten the first statement to say that his assumption is that the fictitious Krugman's production decisions are unsustainable. This is equivalent to saying "something has to give;" I also stated that it is an "initial assumption." Further, his statement is obvious to the lay reader because he explicitly sets his problem up so that the "boom" is unsustainable: people have limited time, so that have to work on the motor or fix the nets, but not both. If that's how the article is written (and it's an article, not a paper), that's how it should be summarized. I have no problem taking the summary of Murphy's article out, as long as you take out Krugman's. I'm trying to make sure both sides get time for each argument. —Preceding unsigned comment added by 67.86.182.204 (talk) 20:41, 26 December 2009 (UTC)

Also, the assumption is not important to refutation of Krugman's critique. I agree that it is central to ABCT as a whole (in that malinvestments create artificial booms), but it doesn't need to be repeated since it is explained above. Rather, it might be easiest to say something like this: "In Murphy's article, he explains in the ABCT, the artificial boom leads to capital consumption, which disrupts the supply of consumer goods and consumption." Logically, this is correct; that is, if we assume ABCT is correct, then consumption is necessarily restricted because of the malinvestment. I think we can replace the entire summary with that one sentence, but I won't change it yet. —Preceding unsigned comment added by 67.86.182.204 (talk) 20:50, 26 December 2009 (UTC)

I, personally, dispute the claim that Murphy's sushi story explains anything of significance to business cycles (or the ABCT or Krugman or reality). So, I certainly would find it less desirable to state, "In Murphy's article, he explains in the ABCT...."

Just as was done for Krugman, a condensed version of his claims should be fine; the reader can draw their own conclusions from it. BigK HeX (talk) 21:40, 26 December 2009 (UTC)

I agree that Murphy offers nothing new to ABCT (or anything else). The ideas of capital consumption and why consumer consumption decreases have been explained decades ago. I've changed it; I think it's decently neutal, at least as neutral as Krugman's critique. —Preceding unsigned comment added by 67.86.182.204 (talk) 21:59, 26 December 2009 (UTC)

The current version of the Wiki article is a fair attempt ... unfortunately, I still have a bit of dispute with it. One problem with Murphy's story is that there doesn't really seem to be any identifiable boom (unsustainable or otherwise). A boom would be apparent if producers were allowed to make plans which should increase output in the long-run (assuming that the external circumstances [like consumer demand] remain favorable). If it is a given that "something has to give" with the maintenance, the producers in Murphy's story inexplicably make a decision which actually reduces output in the long-run, a reduction which is inevitable irrelevant of any changes in external conditions in the future. Murphy implies that demand for fish remains high throughout his story ["...now each roll has less fish in it. The islanders are furious"], and thus his story ultimately suggests that downturns result from disruptions in supply (even in the face of high demand), which seems pretty far divorced from reality ... it would also contradict the wiki article itself ["...that what they thought profitable really fails for lack of demand by their entrepreneurial customers"]. But, this is all my interpretation. Neither of our interpretations should be in the article, so hopefully, we can find an uncontested summary of Murphy's claims. BigK HeX (talk) 22:45, 26 December 2009 (UTC)

The whole theory of the business cycle is that the boom is artificial and inevitable leads to a bust. The summary need not explain the business cycle theory itself, because it's explained above. In the story the "identifiable" boom is the increase in sushi output. The producers in the story don't purposefully reduce output; they must because they don't have the wherewithall to produce it in the first place. The only point that should be made is that the Austrians believe that the capital consumption during a boom disrupts supply of consumer goods. Whether demand falls, rises, or remains stagnant depends on the particular economic event. —Preceding unsigned comment added by 67.86.182.204 (talk) 23:43, 3 January 2010 (UTC)

WRT this Murphy issue, I really don't care what the ABCT says. Your edit claims that Murphy supposedly explains how "an artificial boom leads to capital consumption." He does not. Your questionable claims have been replaced by an actual summary of ideas pulled from Murphy's work -- a summary just like the one that was done for Krugman's theory. So, whether you find your version to be "more concise" is not an overriding concern if that version is misleading. I'd suggest that a we work towards an acceptable compromise, and then worry about how concise it can be later. I'm still waiting to hear exactly what part of my edit you are disputing, and whether you find it misleading or incorrect. BigK HeX (talk) 00:12, 4 January 2010 (UTC)

He absolutely does explain why an artificial boom leads to capital consumption (capital is diverted to poor production practices) and, more importantly for refuting Krugman, explains that this necessarily reduces supply of consumer goods regardless of demand. My version is accurate and not misleading at all. ""If"" you were really interested in a fair compromise, you wouldn't simply revert back to a poor, garbled version, which doesn't make sense. It is misleading because you qualify every statement without realizing that the ABCT already explains capital consumption in works like Human Action, Theory of Money and Credit, and other well-known works. You give the impression the Murphy's little story is the only source of information, even though volumes have already been written about it. —Preceding unsigned comment added by 67.86.182.204 (talk) 00:44, 4 January 2010 (UTC)

"He absolutely does explain why an artificial boom leads to capital consumption"

Well, if you refuse to find a compromise, then you are more than welcome to cite your claims (per WP:RS). Expect that I will continue to remove any uncited interpretive claims. BigK HeX (talk) 01:00, 4 January 2010 (UTC)

He claims that there is an artificial boom: the fictional Krugman diverts resources into poor production practices which temporarily increases production (6 sushi rolls instead of 5). He claims that capital is consumed: because production is diverted, boats and nets are breaking down. This is capital consumption. He claims that as a result, consumer goods must decline: either less sushi rolls, or less fish per roll. I don't see what you're disputing. —Preceding unsigned comment added by 67.86.182.204 (talk) 01:35, 4 January 2010 (UTC)

Your insistence on refusing the reader even the merest elaboration on the theory you've decided to include does not make for much of a summary. If you find a summarization of Murphy's claims to be acceptable, then what is it that YOU are objecting to in my edits? You don't seem to have answered this question yet..... BigK HeX (talk) 03:13, 4 January 2010 (UTC)

I'm concerned with the weight given to relatively minor thinkers, and the constant adding of rebuttals to the majority view that are endemic to this page and the main page on the Austrian school. Specifically, the views of Nobel prize winners should not be followed by rebuttals from minor scholars, to make it seem as if the views hold 'equal weight' in the academic community. LK (talk) 07:37, 4 January 2010 (UTC)

It looks like we agree that Murphy's article is not really credible enough for even a passing mention in the article. I've seen nobody that cites Murphy's theory, unlike the various references to Krugman's rebuke of ABCT. I'm removing the references to Murphy per WP:UNDUE, since there hasn't been any evidence that Murphy's view is discussed outside of these blogs which look to be self-published. BigK HeX (talk) 09:23, 4 January 2010 (UTC)

I'm concerned with the weight given Nobel laureates. Krugman did not win his prize for explaining the business cycle. FA Hayek did. So, if you want to take Nobel laureates words as gospel, shouldn't we delete Krugman's minor (and fallacious) contribution to Hayek's work? Further, you both miss the point. Murphy did not develop a new theory; he is explaining an already existing and complete theory. The ABCT already includes capital consupmtion and reduction of consumer goods. Murphy's article is a story to help clarify it. I also object to Krugman's having the last word in the paragraph, since his critique makes false assumptions. —Preceding unsigned comment added by 128.112.50.54 (talk) 14:14, 4 January 2010 (UTC)

New "Critiques" format

I'm gonna try something different with that section of the article. The posts in the talk page section above seem to suggest that the rebuttals and counter-claim argumentation is unwieldy --- certainly, I feel that to be the case. I've separated the "sides" of the debate. BigK HeX (talk) 18:10, 4 January 2010 (UTC)