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« Sorry Jonathan Chait, but Labor is NOT Fungible; or Best Blog Comment I Read Today | Main | The Legacy of Smith and Hayek: Free The Market »


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That's great! Thanks!

Where can I find the best Austrian take down of the Lucas inspired claim that economists can never say that the economy is in an Austrian business cycle disequilibrium because, as Stephen Williamson puts it:

"The economic agents living in a model in which a financial crisis can occur know that there is a possibility that this event can happen. But they cannot predict it, otherwise there would be an unexploited profit opportunity. Similarly, a real human being could not have used such a model to predict the financial crisis."

This is but one version of the jumbled Lucas critique / Efficient Market Hypothesis which economists use to say that there can be no systematic distortion in the structure of relative prices across the time structure of production (and consumption).

Again, where can I find the best and most complete Austrian take down of this "critique" of Austrian business cycle theory.


Mario and I dealt with this issue in chap. 9 of Time & Ignorance, "The Microanalytics of Money." See especially pp.213-26, where we deal with rational expectations.

Thanks Jerry. It's been a very long time since I read your book. I'll take a look.

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