If I Believed in Austrian Business Cycle Theory, part II

Karl, a loyal man, has a request:

In your post from a few years ago, "If I believed in Austrian business
cycle theory," you made some of the most apt predictions you have made
on this blog. Nearly everything has come true. Obviously though you are
not touting these predictions because being associated with the
"intransigent" Austrians will damage your credibility as a hip, quirky
thinker. So instead, can you just give me a socio-economic cost-benefit
analysis of breast implants.

Here is my original post.  Two points:

1. What happened is best thought of as a bubble where loose monetary policy was one of several triggers but the market response was more at fault than was government.

2. Second, one important false market signal was that people thought rising asset prices could substitute for savings out of disposable income.  That is not the Misesian or Hayekian scenario.

My "predictions in the subjunctive" were largely correct — more correct than I knew at the time — but that doesn’t mean Austrian business cycle theory is largely correct.  I would, however, endorse a modified version of the theory which goes beyond the "blame the government inflation" for everything interpretation.

On Karl’s other question, it’s not just a zero-sum game, socially speaking, but my personal preference would be for Q = 0.

Addendum: Walter Block wrote a 58-page critique of my earlier writings on ABC.  He has sent it to me twice and I am happy to link to it.  Update: Here is the correct Block link.


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