Brunswick on Nostr: Skepticism of Aggregates: Most Austrians, would be wary of oversimplified ...
Skepticism of Aggregates: Most Austrians, would be wary of oversimplified macroeconomic aggregates such as the velocity of money. The velocity of money is calculated as the ratio of nominal GDP to the money supply, but an Austrian might argue that it obscures the nuanced, individual decisions about saving, spending, and investing that drive economic activity.
2. Focus on Individual Action: Austrian economics emphasizes methodological individualism—the study of economic phenomena as the result of individual choices. An Austrian would likely point out that the velocity of money is a statistical artifact that cannot fully explain the dynamic processes of human action and market coordination.
3. Misesian Critique: Following Ludwig von Mises, An Austrian would argue that money's demand and supply are what matter most in determining purchasing power. The concept of velocity might give the impression that money is somehow circulating faster or slower independent of human action, which is misleading in the Austrian view.
4. Time Preference and Capital Structure: An Austrian would likely stress the importance of time preference (how individuals value present goods versus future goods) and the structure of production in the economy. Changes in what mainstream economists interpret as changes in velocity are more accurately reflections of changes in individuals’ saving and spending behavior, driven by these deeper factors.
5. Critique of Keynesianism: An Austrian would probably critique Keynesian economics for treating the velocity of money as a variable that policymakers can influence to achieve desired outcomes like increased GDP. From an Austrian perspective, this approach neglects the distortions that monetary manipulation can create, particularly in capital markets.
6. Role of Cantillon Effects: An Austrian might emphasize Cantillon effects—how new money enters the economy and impacts different sectors unevenly—over the simplistic notion of velocity. The path of new money matters far more in Austrian theory than the aggregate measure of how often money "turns over."
2. Focus on Individual Action: Austrian economics emphasizes methodological individualism—the study of economic phenomena as the result of individual choices. An Austrian would likely point out that the velocity of money is a statistical artifact that cannot fully explain the dynamic processes of human action and market coordination.
3. Misesian Critique: Following Ludwig von Mises, An Austrian would argue that money's demand and supply are what matter most in determining purchasing power. The concept of velocity might give the impression that money is somehow circulating faster or slower independent of human action, which is misleading in the Austrian view.
4. Time Preference and Capital Structure: An Austrian would likely stress the importance of time preference (how individuals value present goods versus future goods) and the structure of production in the economy. Changes in what mainstream economists interpret as changes in velocity are more accurately reflections of changes in individuals’ saving and spending behavior, driven by these deeper factors.
5. Critique of Keynesianism: An Austrian would probably critique Keynesian economics for treating the velocity of money as a variable that policymakers can influence to achieve desired outcomes like increased GDP. From an Austrian perspective, this approach neglects the distortions that monetary manipulation can create, particularly in capital markets.
6. Role of Cantillon Effects: An Austrian might emphasize Cantillon effects—how new money enters the economy and impacts different sectors unevenly—over the simplistic notion of velocity. The path of new money matters far more in Austrian theory than the aggregate measure of how often money "turns over."