OKAY, I'm drunk, and I was drunk last night too, and when I was I was all, "I have nothing to do at 8 am, so lets sit through 4 hours or whatever of Austrian economics tomorrow morning at the Southern Economics Association." And then, unfortunately, I did. Upbeers to the left <-----

Some notes: In both sessions there were about 25-30 people, with a min of one of them where females, and a max of 3. Theoretical econometrics sessions across two days had similar turn outs, a better male/female ratio, and better minority representation as well (probably 90% were white men at the Austrian sessions, but I didn't take an explicit count like I did with female attendees.

There were, at the end of the day, 7 papers discussed across two sessions, "Austrian Macroeconomics" (compared to the New Austrian Macroeconomics that I skipped yesterday), and "Monetary Economics." Below is my drunken write up of my non-coffee supported notes for the wee hours of this morning. Please enjoy.

Note, for the most part the papers were not "bad economics," many were simply not translated from informal language to formal modelling techniques that would otherwise be common in theory circles. But simply get a beer yourself and enjoy. Papers that didn't get presented but where on the schedule are stricken through, as well as papers whose title/topic changed.

Austrian Macroeconomics

"Putting Capitalism Back into Capital" by Peter Lewin, and Nicolas Cachanosky,

This paper was fucking weird. First Lewin (the presenter) started off with discussing neo-ricardian (????) discussion of the cambridge capital controversy and reswitching (??). He then discussed how early Austrians' tried to estimate some notion of "time value added," which would be after how many time units someone earned some value unit, broadly construed to be a dollar per unit of time. He then basically said, we don't have capital, only capital goods, and QED the Austrian Business Cycle Theory is proven. (more or less). This was by far the worst and weakest paper of the day. I have no idea in hindsight what the hypothesis/theory/etc was.

"The Wisselbank and Amsterdam Price Volatility: A Fractal Test of the Austrian Fractional-Reserve Banking Hypothesis" by Robert Mulligan and Christopher Guzelian

Robert was presenting. The argument was basically that when the Amsterdam/Dutch central bank went from a 100% reserve ratio to a 20% reserve ratio, goods prices faced excess volatility compared to earlier time periods. He largely put up pictures of the 4th Dutch-Anglo war (hey, Renaissance art is pretty!) and argued heuristic facts relating to the effective Dutch central bank started to debate it's currency around the 18th century or whatever. He then tried to estimate an empirical model around the volatility of good's prices. HOWEVER, he didn't mention what his model was, or actually have a slide with any of his results. Just spend 0.3 minutes saying what his results were, and then went back to posting more Renaissance art of naval battles. Further, he failed to identify what parts were due to war-time effects versus debasement effects, as there were significant blockages on the Dutch at the time of his estimation.

"Malinvestment" by Randall Holcombe

Holcombe was arguing that when there is a difference between the central banks interest rate and the real rate of interest, that we can try to heuristically back out the prevalence of malinvestment due to the uncertainty that investors face when trying to estimate the real market rate of interest. The nominal hypothesis here being "why do investors not believe in the Austrian Business Cycle Theory?" He presented relatively solid reasoning (praxxing) on why investors who even under rational expectations of the real market rate might continue to over and under invest. But I wasn't sold that those who have a "bad" project will overinvest under RE and those with a "good" project will underinvest in these situations (good and bad being relative to if they had been successful under the true market rate of interest). This paper was marginally interesting as it related to topics I've thought about before, and could easily be formatted into a mainstream situation.

"Giving Credit Where Credit is Due: The Macroeconomic Benefits of Bank Credit" by Scott Burns and Cameron Harwick

These authors both presented, doing a proverbial batton pass following the introduction and literature review. They argue that private money, i.e. bank loans that extend the money base beyond the level set by the federal reserve, can still be good. These banks face local knowledge over good and bad investments, and are more responsive to changes in money demand. However, theory has shown (forget by who) that they face bad incentives when it comes to changes in liquidity demand. They tried to argue that the benefits that private banks have in responding to changes in money demand make them a net positive even after controlling for their bad changes w.r.t liquidity demand. The idea being the legislation that tried to restrict the scope and power of private banks, even under a fractional reserve system, should be opposed due to their local knowledge.

Austrian Money

1. Permanent versus Temporary Monetary Injections: Implications for Monetary Policy David Beckworth, Western Kentucky University

An Introduction to Monetary Policy Rules "Polycentric Banking and Macroeconomic Stability" by Alexander Salter

Salter argued that macroeconomic stability, largely in the form of "stable and growing aggregate demand" is a public good. From this, we can characterize free banking and central banking as two types of system analysis within the Elinor Ostrom framework. As a result, Salter argued that central banking faces "bad" incentives in the form of information, forcing individuals to watch the fed, public choice/cronyism problems, "no incentive to innovate," that publishing in the JMCB is a central banking cartel (i.e. publishing free banking papers in top macro journals is stopped due to the nature of central banking structure and influence over academic monetary economics), and that the choice in being a central banker is endogenous. Comparably, free banking backed by torts, common law, and contracts as rules, shows that free banking (i.e. no central bank, totally private individual banks backed by commodity currencies) better support Ostrom's desires for a polycentric governance of a common good (aggregate demand) than the central bank mandate. Concluded by discussing ways to support central banking ideals in a modern, centrally bank dominated, society.

"Money as Meta-Rule: Buchanan's Constitutional Economics as a Necessity for Monetary Stability" by Daniel Joseph Smith, Alexander Salter, and Peter J. Boettke.

Daniel Smith was the presenter. The idea was that there is an emerging debate at whether or not the fed was responsible for the great recession/corruption in the fed, and how we can enforce consistent rules in fed behavior to improve market functions around it. Smith argued that Central Bankers were particularly bad at adhering to rules that they supported pre-being a central banker, and that we should try to find ways to constrain federal reserve action to constitutionally enforced rules, "we should constitutionalize money in a way politicians can't change." He further claimed that non-constititional constraints were not effective in determining future central bank behavior both domestically and internationally, as a way of arguing why we should have such consititutional provisions. Thus, we should force some sort of meta-rule on the federal reserve.

Adam Smith's Real Bills Doctrine Nicholas Curott, Ball State University

"Money, Liquidity, and the Structure of Production" by Joshua Hendrickson and Alexander Salter

Joshua presented. Joshua extended Kyland and Prescott (1983 or whatever) into a general money search mainstream model with time to build and enter/exit times of firms. The aim was to try and put Austrian ideas in a way that was tractible to mainstream audiences, while still seeing if they supported Austrian (particularly Hayekian ideas). Below is my brief sketch (since this was the most interesting paper to me).

• Monetary search model with time elements of production
• two assets money and bonds, money has no rate of return but is liquid, and bonds have a rate of return but are illiquid.
• firms choose time to build (with production function that is concave in TTB), as well as entry and exit times.
• Important facts: interest rate influences TTB and entry/exit times. Household portfolio choices requires rate of return and liquidity.

Result: Higher inflation causes households to hold more bonds, and reductes interest rates (resembes Hayekian forced savings). As real interest rates fall, required entry productivity falls, and firm stay in the market longer. As a result, both increasingly patient consumers and high inflation cause time to build to increase, which is what Hayek claimed.

THESE ARE MY DRUNK NOTES, I HOPE YOU ENJOYED.