With the degree of uncertainty in the current economic environment, I keep coming back to the Austrian school and the economics of time and ignorance as an important starting point for disucssion. Austrians are the subjectivists and market process school of thought for economics. Keynes first discussed the "dark forces of time and ignorance" in the context of a slowdown in aggregate demand. Policies have to be developed to eliminate the decline in demand, but he did not explore the behavior aspects of time and ignorance. This is where the Austrians start their discussion.
The Austrians focus on the problem of coping with real time and radical ignorance in making economic decisions. The Austrian school does not try to supplant the neoclassical tradition but tries to take strong note of the fact that making decision in real time is difficult, subject to error, and requires a significant amount of subjectivity.
Many problems in real time lead to greater subjectivism by economic agents. Because there is a high degree of subjectivism, there will be the potential for greater disequilibrium and greater uncertainty about the link of any government action and the response of economic players. Hence, there is greater risk in the economy because the response of any action is unknown. Equilibrating behavior cannot be taken for granted because the response of agents is unclear. Change will be unpredictable.
We are in a period of unpredictability because the response of agents cannot be benchmarked against past events which have not occurred.
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