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Excellent. I may use this for my undergraduates.

But I have a question. I have gone back and forth with David Harper on this with no resolution.

Is "capital" the name for all factors of production when you think about them in the context of a plan? There are capital *goods*, to be sure, but they are machines, equipment -- perhaps capital in a Fisherian sense (stream of output).

So when it is said that "capital" is heterogeneous, Austrians mean to say that production plans need factors that fit together properly.

Is this right?

By George (or "by Ludwig" I guess), I think you've got it Mario.

Yes, I think that's right. If capital is "unfinished plans" then it's "all the factors of production when you think about them in the context of a plan."

The basketball team analogy was good however let me give you one for why I'm skeptical.

Imagine a shoemaker needs one machine to make left footed shoes and another to make right footed ones. If he thinks demand for shoes is expanding he will buy one of each machine. Likewise if the cost of capital falls (low interest rates), he will not buy two more left feet machines. He will either buy one of each or look to upgrade both machines to make more pairs.

Why, if interest rates are too low, is capital expanded in such an unbalanced way?

Now suppose the excessive capital is not unbalanced. The shoemaker cannot sell enough shoes to pay off his investment in BOTH a left and right machine. He goes bankrupt, another shoemaker buys the machine for a penny and the number of shoes the economy produces in a year goes up.

"If capital is "unfinished plans" "

But, sadly, it's not.

"Capital" has many meanings, and its meaning in a context must be specified. There are capital goods, capital value, money capital, etc. I don't see the gain in equating capital with all intermediate products plus factors of production.


My question is how to understand the use of the word by Lachmann and others who push the capital heterogeneity point. I agree with you that calling "everything" capital gets confusing. This was part of my point in criticizing David Harper's use of the term in some recent papers of his. Words like capital combinations, capital structure, etc. are unclear to me.


I haven't thought deeply about this in a while. But I can't make sense out of calling capital a "plan." Capital is part of a plan, but not the plan itself.

Capital there means goods and maybe money. I don't see why an Austrian would need to distinguish land and capital. Labor surely is different because only the services can be rented. There is no market for "human capital," and so it is not a catallactic category.

Capital combinations seems commensensical in that setting. It is a grouping or configuration of capital and labor that can be used efficiently to produce desired output. The capital has value only in the context of a plan and for a decisionmaker.

There is no aggregate of capital and the value of capital for different planners and different uses cannot be aggregated. Plans conflict and are only fulfilled (or fail) ex post. Then capital values change.

I share Jerry and Cuttlefish's concerns about relating capital directly to plans. I think it's rigging up capital theory in a special way to try to make it fit better with ABCT.

But, on the other hand we have to talk about many factors of production. In my last job I learnt a lot about designing high-end notebook computers, and so did many other colleagues. I don't think we will be using that knowledge anytime soon. Mainstream economists could say that our human capital has been misallocated. But, that's not a very good way of putting it, as Jerry points out, "human capital" is a dubious term. However, the problem still exists whatever we call it.

The situation is more clear with capital equipment, durable goods and intermediate goods. I think those can clearly all be misallocated. I don't see anything wrong with bundling consumer durable goods and business durable goods into capital goods. We can call them capital goods of different orders. If a restaurant business can buy a frying pan and misallocate it why can't a household do the same. I've misallocated a frying pan before.

" I think it's rigging up capital theory in a special way to try to make it fit better with ABCT."

Actually I think it's more of an attempt to make capital theory fit better certain Lachmannian-Kirznerian preconceptions.

Hey Man from GWAR, the idea of capital as "unfinished plans" is straight outta Kirzner. So maybe it was Kirzner's way of making capital theory better fit certain Misesian preconceptions, eh?

"Capital goods are intermediary products which in the further course of production activities are transformed into consumers' goods...The idea of capital [as opposed to the concrete goods] has no counterpart in the physical universe of tangible things. It is nowhere but in the minds of planning men." [HA p. 514]


"Capital is a praxeological concept. It is a product of reasoning and its place in the human mind. It is a mode of looking at the problems of acting, a method of appraising them from the point of view of a definite plan." [HA p. 515]

Please explain to me how this is relevantly different from defining capital as "unfinished plans."

Yes, Mises distinguishes capital and capital goods, but perhaps, analogously to his critique of Menger's insufficient subjectivism about goods, he is being insufficiently subjective about what counts as capital. The second quote suggests he sort of got it.

In any case, it seems to me that Kirzner's definition is quite faithful to Mises and to the broad Austrian tradition. I also think it's right.

No need to posit any ex post attempt to justify or fit to anything. It's just Kirzner being a good Misesian.

I think Jerry O'Driscoll put it very nicely when he said, "Capital is part of a plan, but not the plan itself." And of course the first Mises quote that Steve provided explicitly calls attention to the "goods" and "products" that are necessary for bringing one closer to a desired end, eg consumption. Even the second quote must be taken in the context that man acts, but he must have *means* to do so. Steve seems to admit this, and it's only by divorcing the second quote from the overall context of Mises' elaboration of praxeology that he's able to obscure this distinction (between plans and the means to plan fulfillment).

BTW Steve, nice catch on the GWAR reference; the Cuttlefish is one of the more obscure entities in the GWAR mythos. You probably know the story; at any rate, you and Oderus definitely could make common cause against the Religious Right.

Let's try a concrete example to see if it makes things clearer....

My uncles shop supplies normal customers and restaurants. If I go there and buy a celery then I buy a consumer good, because I intend to consume the celery. But, if a restaurant owner goes there and buys a lot of celery then he's buying a capital good. It's the different plans we have in mind that make the difference. I want celeryness in something and he wants profit. But, both of our plans are unfinished. The only difference is my process of finishing my plan is completely autarkic.

But, if anything that involves finishing the plan is "capital" then why aren't the restaurant's customers capital? Just to be clear I know you don't mean them to be Steve, I'm just aiming to be more precise. So, what you really mean by capital is "those assets that an entrepreneur plans to use to implement a business plan". But, I don't think it's really every unfinished plan.

Suppose I think of a great business plan, is that "capital"? I don't think so.

Yes, the idea of capital as "unfinished plans" is somewhat metaphorical. Capital is, as Mises points out, always manifest in something specific (although I do not think it has to be tangible). Each of those "things" are pieces of the entrepreneur's overall plan, i.e., means toward that ultimate end. As means toward an end, as they are employed they are the elements of the as-yet-unfinished plan.

I think we're in agreement here TCOC. Capital is indeed means toward the end, or the elements of a plan. That's why, and I may be sloppy here in my own usage, I think Kirzner tends to use the phrase "capital AS unfinished plans" which suggests the metaphor, rather than "is unfinished plans."

This phrase of Mises seems right to me: "a method of appraising them from the point of view of a definite plan."

Fair enough. A question though:

" Capital is, as Mises points out, always manifest in something specific (although I do not think it has to be tangible)."

Can you provide an example here? I would agree that, if someone thinks that employing tangible object X can bring him closer to his desired end, then indeed X is a capital good, even if there is no objective link between X's characteristics to actually realize that end. So subjectivity is indeed key. But how can the capital *not* be tangible?


In the case of celery the accounting term would be inventory which is a type of working capital (items turned into cash in a year or less minus the stuff you have to pay in a year or less).

My understanding of capital is that its 'goods' used to produce either consumption goods or other capital goods. The celery in a restaurant is short term capital used to produce 'meals' (in the case of a restaurant a meal is a combination of actual food and service). The stove, then, is capital as well just one that serves for a much longer period of time than a hundred pounds of celery. This way of viewing things does leave open the possibility that capital could be a type of 'deferred consumption'. If, for example, you buy a lot of meat when it is on sale and freeze it that can be thought of as a type of capital. Once you move beyond a year or two this becomes less of a factor.

I'm not convinced that capital is heterogeneous.

1. While all capital goods are unique and different, they come with a price tag which is almost always in terms of money. An industrial pizza oven may cost $5,000, a left shoemaking machine may cost $5,000 and so may a right shoemaking machine. These are all very different but they share the same price.

2. Capital's returns are in money. The value of the pizza oven is in the estimated sales of pizza it produces, likewise the shoemaking machines. While these are very different things, their market price reflects the best estimate of the homogeneous dollars that will flow to the person that owns them.

3. If the estimated return changes the value of the capital changes. If pizza turns out to fall out of fashion after decades of popularity while everyone suddenly gets a fetish for footware, the price of the capital goods will adjust accordingly. If the oven falls to $3000 the owner sees a loss of $2000 while the shoemaking machines may rise $1,000 each.

But from what I'm understanding here, #3 isn't all happy go lucky. Because the economy overestimated pizza demand and underestimated shoe demand we have more pizza ovens than shoemakers. But what I'm not getting is:

a. Why would this have to be caused by 'too low' interest rates? If interest rates were low but investors correctly predicted shoes would outsell pizzas they would buy shoemaking machines. Why does low rates cause 'unbalanced' capital accumulation rather than simply 'too much' of a balanced mix?

b. Why would the correction require economy wide unemployment and recession? Yes pizza workers will loose their job and shoe machine operators may see higher wages as it takes a while to train pizza workers to use the machines. It seems to me over the entire economy demand should stay the same. The 'misallocation' results not in recession but lower overall economic growth. If the investors had correctly guessed on shoes, the present economy would not dodge a recession but simply be enjoying full employment at a higher rate of growth due to its better choice of capital mix.

c. "More capital" is not always better, but this leaves out the different time periods involved. In the year 1999 the economy produced too much fiber optic cable due to the dotcom boom. In 2001 there was thousands of miles of 'dark fiber'. It sounds like the thinking here is in 2001 the economy should be suffering from this 'malinvestment'. But this forgets that the economy of 1999 already paid the price. In 1999 if people had realized there was no need to lay as much fiber, the people of 1999 could have laid less and enjoyed more Starbucks. The reason they didn't enjoy as much Starbucks is they thought laying the fiber would make 2001 a better year. It didn't but it doesn't follow that 2001 need be a worse year,

What I'm saying in c is I see how 'malinvestment' can slow down growth but turning it negative is a tougher sell. Even though the economy would rather have more shoemaking machines, more pizza ovens still means more pizzas. To really become an economy wide negative the 'malinvested' capital needs to be horribly bad....maybe something like asbestos ridden factory buildings sitting on top of toxic waste infested soil.


When we say capital is "heterogenous" what we mean is that capital goods generally serve quite specific functions. A pizza oven can't be used to make shoes, for example.

For capital to be "misallocated" it isn't necessary for it's price to drop to zero. Only for it to fall, to less than what was expected earlier. Greg mentions somewhere that so much housing was built in California that some of it actually did become worth nothing, but more generally what has happened is that it becomes worth less both in monetary and real terms.

Have you read Roger Garrison's slide decks on ABCT? They explain it quite well.


If you have a link to the deck I'd be happy to review it.

I understand what you're saying about specific functions but I'm not seeing how this 'misallocation' is a negative. The economy that invested in too many pizza ovens enjoys less economic growth as they have to wait around for shoe making machines to be built and installed...but at least they have pizza while they wait. The cost of too many pizza ovens comes not in a recession but in the foregone consumption that the past economy could have enjoyed rather than wasting its output on pizza ovens that would not be utilized fully in the future. That plus the growth that could have been enjoyed if the past economy had correctly invested in shoemaking machines.

To be a negative I believe the capital has to be so noxious that it can't even be ignored and left to rot like the empty McMansions in California and Nevada. It has to be positively so bad that the current economy must bear a cost to remove the bad investment. Here the only example I can think of would be unsafe buildings, land with toxic waste spills etc.

Another factor is that capital is hardly homoheterogenous :) In other words some capital is highly specific and other capital isn't. A screwdriver, for example, comes in handy in a lot of places. A carpenter can go out of business and sell his screw driver to a plumber, or mechanic, or even a computer tech. A volt meter, though, probably has little use to a plumber. If your 'overinvested capital' is highly versatile, it's going to be tougher to make a case for malinvestment as the capital can be put to uses other than what was originally planned for it.

Housing here is highly versatile. Just about anyone can live in a house so even if too much housing was built it still provides a positive contribution to GDP unless its located in such an out of the way area that no one wants to live in it and it must be torn down for safety reasons. As I pointed out on the previous thread, though, there was no real boom in house building. We began the boom with about 2 and a half people per house and we ended the boom with about the same. Most of the housing boom was about increases in prices of existing homes, not mass production of new homes.

(This makes sense as many boom areas had limited space for new housing both in geographic terms and in terms of zoning restrictions. Since new houses couldn't be built the boom resulted in escalating prices of existing homes).


You might find this of interest: http://econlog.econlib.org/archives/2010/07/unemployed_hous.html

If Kling is right, it suggest that houses are much less versatile than you believe they are precisely because of the importance of their complementarity with specific locations. This is a very Austrian point.

Good point, although this is of the form of the pizza oven analogy. Investors build pizza ovens and then discover when the future arrives people want shoes, not pizza. Fine, oven owners take a loss and shoemachine owners make an unexpected gain. But the pizza ovens in themselves shouldn't cause the economy to crash. They still provide a good, even if its not one people want as much. We are a long way from malinvestment that is so bad its very existence is a drain on the economy.

What's interesting about 'sticky' homes is that they do imply that people aren't exactly unhappy with them. If you had a rental house you thought was good what would you do if you couldn't get the price you want? You'd probably let it sit for a while. What does Microsoft do with, say, a machine whose only purpose is to burn copies of Windows 95 and can't be used for anything else? It will sell it for scrap or pay someone to haul it to the dump.

Vacant homes may be a sign that owners do not feel the market is really 'right' and they will hold out rather than panic and take any price they can get. But now you're getting more of a Keynesian view of things.

Is there a link out there for the slide deck?

See http://www.auburn.edu/~garriro/frontdoor.htm

Constant reinvestment is required to maintain and replace capital as it wears out.

Thank you for an excellent deck, that's coming from someone whose powerpoints are never more than a title with bullet points!

If I'm following the triangle correctly, its that investment is made up of a triangle with two legs. One leg is time with investments at one end being far away from final consumption and investments at the other end being very close to final consumption (for example a mining operation at one end and a Wal-Mart store at the other end). Low interest rates cause investment projects to get started at the distant end extending the triangle's lower leg while also, at the same time, spurring consumption. The economy starts a bunch of long term projects that can't be finished because there's no fall in consumption to free up resources to complete them.

This isn't the same thing as a wrong capital mix (pizza ovens instead of shoe making machines). It's more like starting a long term project (like Domino's spending $50M to figure out how to make a better pizza) without being able to bring it to completion (pizza oven makers are booked with orders based on consumption's increase, can't provide Dominos with the new custom built ovens they need to start producing the new pizza they spent $50M to design). Please correct me if I'm wrong...

Yes that's the basic idea. What concerns Austrian economists is the capital complementarity over time, which is what you describe with your example of dominos creating a new line of pizzas.

After the misallocation there are a few different ways that the recession may begin.

Well a few issues:

1. The Fed doesn't lower interest rates, it lowers the 3 month rate. All other rates are set by the market and 'too low' rates will be meet with increasing long term rates. The type of capital where we are talking about malinvestment appears to be long term projects. Those are highly sensitive to long term interest rates.

2. While I can view long term capital projects as a type of investment, it is very hard to see a company essentially borrowing money to fund R&D, which is treated more as an immediate expense. Dominos hypothetical $50M pizza R&D program, as like a pharma company's $500M expense in seeking out useful compounds, appear more like bets than capital investments. The big question is not the cost of capital but the payoff of the bets. If the $500M produces the next Viagra an interest rate of 5% versus 10% or even 15% probably makes little difference. If its Vioxx, though, you wouldn't fund it with an interest rate of 1%. Since payoffs are highly unpredictable, Keynes' 'animal spirits' seems to be more relevant.

The Austrian view to me seems a bit like a special case. For example, why couldn't capital be overfunded due to unreasonable expectations (such as hype the dot com companies don't need profits as they will grow 1000% per quarter) as much as too much money creation by the Fed. That would make more sense in terms of capital complementarity since overestimating the value of a new technology is likely to yield a distorted capital allocation decision. If interest rates are 'generally too low' I'm more likely to simply fund a mix of capital projects that are flexible in their application. For example, a mechanic may simply add to his tool collection under conditions of too low interest rates while under conditions of distorted allocation he may bet the farm on some new dot com company idea. In the first case 'more capital' is indeed better. Even if the mechanic ends up bankrupt and sells his tools at auction the economy has more mechanics tools yielding more 'fixing consumption'. In the second case the mechanics real capital is allowed to waste and at best after bankruptcy he can start doing mechanic work all over again with fewer tools than before.

Reply #1 you give is the reply that economists who favour rational expectations or adaptive expectations give. It's essentially the point we discussed with Tyler Cowen in the next thread.

There are three interconnected problems with this view. Firstly, the market may often come to the correct view that interest rates will rise in the long term future. But, it's doubtful that it will always come to the correct view. Real changes in savings rates and productivity do occur and they're not that infrequent. In some circumstances its difficult to differentiate between these and a temporary change induced by the central bank.

There are two specific reasons why this is likely. In the thread above we discussed the "prisoners dilemma" reason. Let's suppose I know the real interest rate is unsustainable but some others don't. In that case its in my interest to profit from their ignorance by selling them investments at high prices.

Secondly, most businesses don't have good ways to differentiate rise in profit caused by low interest rates from that caused by real factors. Let's suppose there are a large group of lazy people who like pizza and run up large debts. If the fed reduces the interest rate then their payments will fall and they'll be able to afford to buy more pizza temporarily. How can the company that makes pepperoni for pizzas know that? It's profits will rise anyway, its likely to attribute that rise to real long term factors and therefore invest in more capital.

On your second criticism:

Firstly, research and development are not necessarily involved. Those were just an example of a high-order good. There are many other examples. What about a herd of buffalo bought by a farmer to make mozzarella for pizzas?

Secondly, research sometimes is funded by debt. The investors in start-up companies are often leveraged for example.

Lastly, debt and equity are closely related, they are close substitutes. If interest rates are reduced by the central bank and the forces I mention above come into play then profits will also rise beyond what they would have been otherwise.

I don't disagree that R&D can sometimes be debt funded but as you move more and more out on the timeline (or towards 'high order goods' as you say) the interest rate becomes less and less important. The very long term is dominated more by variation in the expected payoffs rather than interest rates IMO.

In the case of a farmer foolishly buying a herd of buffalo to make mozzarella....what happens a few years later? If the farmer goes bankrupt and the buffalo is sold at auction for a steep loss the economy still has more capital in the sense that there's no reason the buffalo won't make mozzarella. The cost of the foolish capital is incurred in the year it was made. Back in the past if the farmer had known there wasn't going to be a sustained pizza craze, he could have enjoyed added consumption or, better yet, wiser investments. Today the farmer's misfortune is matched by some pizza companies gain to get a supply of mozzarella much cheaper than they would have expected.

I think the narrative also fails to explain the bubble nature of many booms. Whether you're talking housing in 2007 or dot coms in 1999 we aren't seeing across the board booms...which is what you'd expect from 'too low' rates. We see booms centered in particular sectors tied to popular stories that explain why that sector has suddenly experienced a breakthrough that merits dramatic expansion (the power of online selling in the 90's, the fact that property 'never goes down' in the 00's). These 'boom stories' imply that returns on these special investments are so high that no conventional interest rates would make them irrational. This would imply that an attempt to prevent booms by raising rates would inhibit not the bubble investments but more modest, 'boring' investments that are probably more essential and rational for the economy's long term growth.

> The very long term is dominated more by variations in the expected payoffs than interest rates IMO.

The narrow part of the Hayek triangle represents reasonably long term investments, but not necessarily very long term ones.

However the forces I describe still apply to very long term investments. Through substitution and other forces the short run interest rate will affect will affect long term projects. For example the reduction in the burden of debt repayments will stimulate some markets, and make long term investments appear likely to be more profitable. As consumer balance sheets improve consumers can spend more on luxuries. That was the point of my pizza example above.

> ...the economy still has more capital in the sense that there's no reason the buffalo won't make mozzarella.

Think about the counterfactual. If the prospects for the mozzarella market had not looked so favourable he would have invested elsewhere perhaps in ordinary cattle. So, the later gain by pizza companies won't necessarily offset the loss. If investors invest in projects that are not complementary to the overall capital structure then they lose AND society loses overall.

Capital is not a big homogeneous ball, it should be thought of more as a jigsaw puzzle. Entrepreneurs have pieces built that attempt to fit holes, if they misjudge and parts have to be cut off to make things fit then everyone loses.

> I think the narrative also fails to explain the bubble nature of many booms.

Even in normal times investment is not uniform across industries, investment is greater in industries with potential for growth and good fundamentals. When the central bank expand the money supply that then stimulates investment in areas that have good fundamentals (or state subsidies) at the time. The unsustainable boom follows the trend of sustainable developments but goes too far.

> These "boom stories"...

I think your taking the sectorial trend a bit too seriously. In the most recent boom there were booms in many other sectors as well as housing. I worked in the computer hardware industry, there was certainly a boom there.

The marketing around investments may play a part in booms. I think that's a problem that should concern us after we've dealt with the distortion of interest rates.

If investors are not wise enough to see through investment marketing, then they are not wise enough to predict when the real interest rate will rise in the future. And they are certainly not wise enough to be able to tell if a rise in profits is caused by a money injection elsewhere.

> That would imply that an attempt to prevent booms by raising rates...

Austrian economists don't favour raising rates as a response to the emergence of a bubble.

What we favour is a credit market free of distortions, one where the real rate of interest is never pushed down to unsustainable lows that must be followed by sharp rises. We don't favour generally high rates.

Think about the counterfactual. If the prospects for the mozzarella market had not looked so favourable he would have invested elsewhere perhaps in ordinary cattle. So, the later gain by pizza companies won't necessarily offset the loss.

Let's say that out of 10 ranchers, 9 are conned into buying Buffalo rather than ordinary cattle. The one rancher who went with ordinary cattle will see that much more of a capital gain on his investment decision. I'm going to guess this should all cancel out. The cost of the poor investment is paid for by the lost consumption the 9 ranchers incurred in the past. Today, because of their poor investment, their consumption is limited to whatever they earn today but the 1 rancher who invested wisely now enjoys the expanded consumption the 9 loss. The production/consumption function of the entire economy has still shifted out due to the additional investment. I agree with everything you say about capital not being interchangeable but the fact is this isn't unique about too low interest rates. At all times investors realize they are taking a risk that they may be misjudging tomorrow's consumption desires. The economy as a whole is almost always better off for investment, though, even if individual investors are not. The only time when an investment is bad when it is so noxious that not only does it provide no goods to consume in the future but it requires that goods be used to counter its ill effects.

Let me give a hypothetical: Imagine an Alaskan 'Bridge to Nowhere' with a vengence. It costs $10B to build and every year it requires $10M to maintain. The bridge must be maintained or else it will start dropping pieces of steel into the ocean and become a threat to boats. To tear down the bridge properly will cost $1B. Only about 50 people a month use the bridge and before they were paying a ferry $10 for a round trip. The cost of building the bridge was incurred the year it was built, in that year consumption on other things could have been $10B higher. The bridge provides consumption of $500 a month or $6,000 a year (the value of the ferry service it replaced) but demands $10M a year to maintain it which means its very existence lowers potential consumption.

Even in normal times investment is not uniform across industries, investment is greater in industries with potential for growth and good fundamentals. When the central bank expand the money supply that then stimulates investment in areas that have good fundamentals (or state subsidies) at the time.

Why? Let's say a new sector (dot coms) is estimated to yield 20% per year. In one world interest rates are purely market set and the market sets them at 8%, in another world a central bank has cause rates to artifically be 6%. In both worlds investment in dot com capital should be the same. Since the capital is assumed to offer yields well above both rates investors will borrow until every available dot com investment opportunity has been purchased.

If investors are not wise enough to see through investment marketing, then they are not wise enough to predict when the real interest rate will rise in the future. And they are certainly not wise enough to be able to tell if a rise in profits is caused by a money injection elsewhere.

Using the term marketing implies that the bubble is simply a firm selling capital that found a good sales pitch. I think more realistically its about herd behavior where the herd crowds into one type of investment. This is not controlled by anyone, there's no 'marketing wiz' who found a killer pitch.

What we favour is a credit market free of distortions, one where the real rate of interest is never pushed down to unsustainable lows that must be followed by sharp rises. We don't favour generally high rates.

Fair enough but the point remains if a 'bubble story' is at play that sector will be perceived to offer fantastic returns. It doesn't require 'too low' rates to take off and even if rates are 'too low' raising them up to an 'undistorted level' will not chock off the bubble.

A nice graphing tool of the components of GDP at www.bea.gov. Here is a graph of real change from preceding year in GDP in terms of percent of gross investment and residential investment:


Several things stand out:

1. During the early 2000-2004 or so period residential invesmtne twas growing at a faster pace than total gross investment. OK makes sense as that was a bubble. POst 2005 investment falls deep into the negative territory. OK makes sense that's a bursting bubble.

2. Compared to 1990-2000 the early 2000's aren't really all that dramatic. Even more dramatic is the change from 1980-3 or so. None of these periods seemed like eras of artifically low interest rates (although I'm not sure how Austrians measure that).

3. Gross investment actually underpaced residential investment. What's curious about this IMO is that gross investment seems like it should pick up with lower interest rates. When the Fed prints money its the short term rates that drop first, the long term rates are most at risk for inflation. As business investment is usually measured in periods of around 5 years, 10 at the most why wouldn't the surge appear in gross investment?

4. Where is the surge caused by 'too low' rates? The 2000's really doesn't look all that different from the 1990's and going backwards into the 1970's investment growth was much larger.

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