1/15/2022
The Firm as Observer: Data Resources and Firm Longevity in Bylund’s Austrian Theory of the Firm
This paper extends Bylund’s theory of the firm by considering how internalization results not only in the combination of assets required for entrepreneurial innovation but also in the merging of the data streams they generate into a unified view. I argue that economies of scale in analysis imply that the informational resources required for the efficient use of local knowledge will typically only be available within the firm, which may thus be viewed as an institution for facilitating observation, superseding the individual transactor as the essential market participant.
3/29/2021
Regulatory Risk Makes Alibaba a Pig in a Poke
A March 16 People’s Daily editorial had harsh words for China’s internet behemoths, arguing that the platform economy is fast becoming a “rent-collection platform.” This puts companies like Alibaba in the same category as that great villain of pre-1949 China, the “feudal landlord.” Like this evil predecessor, as “rent collectors” they are guilty of reaping where they did not sow, of “exploiting” the masses. From the point of view of “Marxism-Leninism-Mao Zedong Thought,” the Party’s official ideology, this makes them class enemies.
12/28/2020
Alibaba’s Nightmare Before Christmas
The company's troubles go far beyond the latest round of regulatory scrutiny or any personal animosity between its founder and the regulators. The real problem is that its continued existence in its present form is incompatible with Xi Jinping’s famous dictum "North, South, East, West, the Party leads everything." Cyberspace cannot be an exception.
11/21/2020
China’s New Five-Year Plan Exposes the Wishful Thinking behind Socialist Regimes
China’s 14th Five-year Plan, covering the period from 2021-2025, calls for a disengagement from the world economy. Self-reliance in advanced technology and an increased share of local consumption in final demand are to be the new priorities. Yet in the absence of any reduction of the state’s role in the economy, any real move toward autarky will be a move toward Mao-era poverty.
9/10/2020
The Fed’s New Policy Risks a Return of the 1970s
The job of the central banker, as former Fed chair William McChesney Martin famously said, is to “take away the punch bowl just as the party gets going.” Clearly as long as inflation stays below the Fed’s two percent target, there will be plenty of punch for everyone. The new “average inflation targeting” policy would only begin to matter with inflation above two percent. At first, the average would presumably still be below this level, implying that rates would remain unchanged when they might otherwise have been raised. But what would happen if the average then continued climbing until it too exceeded two percent? How abruptly would the punch bowl have to be taken away at that point?
8/18/2020
Why Smarter Computers Won’t Make Socialism More Workable
Austrian economists have traditionally argued against central planning on the grounds that much of the economically relevant knowledge in society could never be made available to a single planning authority. But today, with an unprecedented and ever-increasing volume and variety of data now potentially accessible to the planner, it might seem that an omniscient government may be possible after all. Has the big data revolution rendered the pro-market arguments of Mises and Hayek obsolete?
7/15/2020
Modern Monetary Theory’s Connection to Soviet Era Money
Adherents of modern monetary theory (MMT) argue that money is “a creature of the state” initially coming into existence as a result of government spending and deriving its value from the fact that it can be used to discharge obligations to the government. The policy implication—that we don’t need to worry about the budget deficit, because it can be financed through money printing—has led many to imagine that a panacea for all our economic problems has at last been found. But is the dollar really a creature of the state in the way these economists imagine? There are two serious problems with this idea.
6/12/2020
Government Subsidized Technology Won’t Save China’s Economy
With China facing its most severe economic contraction in decades, Beijing is resorting to infrastructure investment to shore up growth. Officials are claiming that this spending will have a transformative impact on the Chinese economy. But without reforms to the state sector, the transformation they are expecting will prove to be elusive.
5/20/2020
Beyond Calculation: The Austrian Business Cycle in the Socialist Commonwealth
This paper shows why even an ideal socialist commonwealth would not be free from business cycles. Booms and busts are unavoidable under socialism because:
The central planner’s incomplete understanding of the opportunity costs associated with any given rate of growth results in growth targets that are unsustainably high.
The planner will be blind to the resulting imbalances until they became sufficiently severe to become “visible” in the statistical data that form her only picture of the world.
05/12/2020
Fed Funds Futures Signal More Pain For Stocks
There are moments when our new COVID-19 world, with its empty streets, closed shops, and masked, potentially biohazardous pedestrians, strikes me as too bizarre to be real. Last Thursday, I had one of those moments, brought on this time not by the view from my window but by numbers on a screen. Incredibly, all the fed funds futures contracts from the December expiration on were trading above the 100 level, signaling that negative US dollar overnight interest rates - something once all but unimaginable - might become a reality by the end of this year.
05/04/2020
Fear Itself: The Return of Hard Times
“Hard times,” hip-hop pioneers Run DMC warned us back in 1984, “are spreading, just like the flu.” Never has this been more true than today. Hard times are back with a vengeance on Main St and there’s no reason to believe they won’t be coming to Wall St. as well. For investors, fear, not greed, should be the order of the day.
04/22/2020
Messing With Texas: OPEC Scores Knockout Blow
At tremendous cost to itself, OPEC has achieved a goal that would probably have been impossible without the COVID-19 crisis—a lasting victory over the shale patch. While OPEC’s attempt to mess with Texas and the other oil producing states during the 2014 oil price war failed to stop the rise of unconventional production, this time its rivals are down for the count.
04/10/2020
“Light in the Tunnel” is False Dawn for China and the World
Travelling by train through the mountains of China’s Shanxi Province back in 1986, I recall encountering a series of tunnels through steep, forested hillsides. You are plunged into darkness, burst into the sunshine, and then zoom back underground in rapid succession as the tracks make their dizzying way across the precipitous terrain. No sooner have you emerged into the light than the ominous maw of the next tunnel entrance looms ahead of you. A trip like this reminds you that “light at the end of the tunnel”—something many commentators on COVID-19 now claim to be seeing—is not necessarily an “all clear” signal. There may be more tunnels ahead.
03/13/2020
This is the End: The Myth of a Return to Normal
This is the end not only of the “fifth wave” of an eleven-year bull market and an unprecedented US expansion, but also of the “Chinese century,” the global growth story, and the retreat of the state. It may not quite be the end of “everything that stands” or of all “our elaborate plans.” But it is certainly the end of much of what we have gotten used to taking for granted.