ROUTLEDGE 2001
Time
and Money
The
Macroeconomics of Capital Structure
Roger W. Garrison
A
Synopsis
Time and Money
presents a new macroeconomic framework for dealing with the perennial issues
of economic growth and business cycles. With attention to the time element
in the economy's production process, the logic and the graphics of capital-based
macroeconomics highlight the contrast between genuine growth and unsustainable
expansions. Constructed to capture the insights of the Austrian economists
Ludwig von Mises and Friedrich A. Hayek, this same interlocking graphical
framework demonstrates the coherence of Austrian macroeconomics and facilitates
the analysis of deficit spending, credit controls, tax reform, and more.
An alternative, labor-based framework is presented to depict the failure-prone
macroeconomy of John Maynard Keynes's General Theory. With key relationships
common to both frameworks, the playoff between them allows Keynes and Hayek
to go head-to-head. This exercise in comparative theories holds promise
for a final resolution of the critical Keynes-Hayek debate of the 1930s:
Does a market economy have self-regulating tendencies? Keynes said no;
Hayek said yes. The Keynesian labor-based framework, demonstrably truer
to Keynes than the more conventional ISLM and Aggregate-Supply/Aggregate-Demand
frameworks, also allows for a unified treatment of Keynes's policy recommendations
for stabilising the macroeconomy and his more lofty proposals for fundamental
social reform.
After suggesting that the Keynes-Hayek debate can be resolved in favor
of Hayek, both frameworks are used to trace and evaluate the developments
of modern macroeconomics, including two different strands of monetarism
and some essential aspects of new classicism and new Keynesianism. The
increasing sterility and irrelevance of modern macroeconomic theorizing
is ultimately attributed to the inadequate treatment of the time element
in macroeconomic relationships or, more pointedly, to the neglect of the
issue of capital structure and intertemporal coordination. The suggested
remedy entails reintroducing the time element in the form of a thoroughgoing
capital-based macroeconomics.
Preface
PART
I: FRAMEWORKS
1.
The Macroeconomics of Capital Structure
The Long and the Short of It
What's in a Name?
Labor-Based Macroeconomics
Money-Based Macroeconomics
Capital-Based Macroeconomics
An Exercise in Comparative Frameworks
Point of Departure and Style of Argument
A Readers' Guide
2.
An Agenda for Macroeconomics
What About Expectations?
The Keynesian Spur
Meeting the Challenge to Austrian Theory
What About Capital?
PART
II: CAPITAL AND TIME
3. Capital-Based
Macroeconomics
The Elements of Capital-Based Macroeconomics
The Market for Loanable Funds
The Production Possibilities Frontier
The Intertemporal Structure of Production
The Macroeconomics of Capital Structure
The Macroeconomics of Secular Growth
4. Sustainable and
Unsustainable Growth
Changes in Technology and Resource Availabilities
Changes in Intertemporal Preferences
The Macroeconomics of Boom and Bust
The Elasticity of Expectations and the Lag Structure
5. Fiscal and Regulatory
Issues
Deficit Finance
Deficit Spending
Inert Government Projects
Nationalized Industries
Infrastructure
Credit Control
Smith's Usury Laws
Broad-Based Usury Laws
Tax Reform
6. Risk, Debt and
Bubbles: Variation on a Theme
Three Components of the Interest Rate
Risk Control and Risk Externalization
Fiscal Excesses in Perspective
Domestic Savers
The Federal Reserve
Foreign Savers
The Dynamics of Deficit Accommodation
Coping Without a Crystal Ball
Booms and Busts in the "Emerging Nations"
PART
III: KEYNES AND CAPITALISM
7. Labor-Based Macroeconomics
The Elements of Keynesian Economics
The Labor Market
The Wage Rate
The Structure of Industry
Income and Expenditures
The Production Possibilities Frontier
The Market for Loanable Funds
Contrasting Visions
8. Cyclical Unemployment
and Policy Prescription
From Accident to Design
Prospects for a Spontaneous Order
The Paradox of Thrift
Keynes and Hayek: Head to Head
9. Secular Unemployment
and Social Reform
The Fetish of Liquidity and Secular Unemployment
The Distribution of Income and Secular Unemployment
Lenders' Risk and Decentralized Decision-making
Full Employment through Centralization
PART
IV: MONEY AND PRICES
10. Boom and Bust
in the Monetarist Vision
Monetarist Frameworks
Patinkin's Model
Short-Run/Long-Run Phillips Curve Analysis
Resolving a Seeming Contradiction
Boom and Bust in the Labor-Based Framework
Boom and Bust in the Capital-Based Framework
Monetarist and Austrian Visions: A Reconciliation
Morphing from Friedman to Hayek
11. Monetary Disequilibrium
Theory
Friedman's Plucking Model
Levels of Aggregation
Macroeconomic Data and Microeconomic Doubts
Ceilings and Asymmetries
Depressions as Monetary Disequilibrium
Plucking in the Keynesian and Austrian Frameworks
Rival Theories?
Interlocking Pieces in Macroeconomic Puzzle
PART
V: PERSPECTIVE
12. Macroeconomics:
Taxonomy and Perspective
Capital-Based Macroeconomics in Perspective
Visions, Frameworks, and Judgments
BIBLIOGRAPHY
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