Thursday, December 11, 2008

Thoughts on Austrian Economics

Austrians tend to think of markets as an incredibly wise mechanism for allocating resources. Austrians also tend to think that increasing the money supply produces tough economic adjustments and perverse prices. Resources are not allocated well as a result, which is why they champion the gold standard.

But if markets are so wise, shouldn't markets be able to accomodate an increase in the money supply quickly and painlessly? If the money supply doubles, markets should quickly double all prices.

It often appears Austrian thinking is less about economic theory and more about political ideology.

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