What's the monetarist criticism of the austrian theory of the business cycle?

To me the austrian theory makes sense for one reason.

If you look at the markets, you never see a market rising in a perfectly straight line up. However, that's what countries are expected to do year after year. How do they pull this nonsense? inflation. I've taken 6 collegue courses on micro, and macro. And somehow they always avoid talking of the subject of where is inflation coming from, they'll say from hikes in overall prices... but that's just symptom, not the desease. They dont want to cure the patient, they just want to keep him near dead for as long as posible.

Recesions are a healthy part of economic life, we see them every day when PFE starts dropping like a cent cannonball for no particular reason, or MS stops climbing to drop 50 cents and then resume an UP movement of 2 dollars.
It just happens.
It's not good or bad.
Some people are going to get hurt financially, but they'll find a new job or see this as an oportunity to get off his ass and stop working for someone else.
In a depression [TANK] prices drop sharply. So when things show signs of improvement it's time to start buying, just like you people all do every day. The markets are fractals, a free market will flow in similar patterns regardless of time frame, as long as there is no manipulation of the market. No matter what the time frame is. Countries are no different from companies,or ecosystems, they're just huge inneficient mega corporations that own people, or huge habitats for people.

We have all seen what happens to a market that goes up for too long without correcting in a nice percentage of the climb.

I think is better to have small recessions all the time. With no central bank interfierence. If you remove inflation from the economy, then microeconomic theories start applying to macro theorems, and if you aknowledge the need for cooling down every once in while into the utility curve then you might get better results, it works with sports, cars, companies, and of course, partying.
 
Quote from nevadan:

I'm not sure I'd classify post-communist Russia as a fair experiment in free markets though.
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It was not an experiment, it was just a free-for-all. There was absolute minimum government involvement. Whatever regulations there were, all it took was money to get past them. Connections were a big edge too, but back then just money was sufficient, as long as you knew where to go and what to do. So obviously, those with capital had the edge. Get the point of capitalism yet?

Obviously it was not fair, not even close, but hey, if you want "free markets", then you can't expect big brother to be the hall monitor.

It's a hard concept to swallow for the free market proponents but the facts remain that in Russia during those times, the government was barely existent. When auctions for the country's largest natural resources companies were being held, for about half of them there would only be one bidder. The government never made a peep. What true capitalist in their right mind, would stop to consider whether what they were doing was fair to the rest?

You free market guys keep assuming that the players of the game would be honorable and noble about their business. Even with government regulations in USA, the welfare state, you can barely get even a fraction of these companies to be somewhat considerate, how in the world can you expect these same players to do the same in a free market environment?
 
The idea of calling an auction where one bidder shows up, who in all likelihood was a front man for the entity holding the auction, a free market is absurd. During the collapse of Russia's political system it is hardly surprising that chaos was the order of the day and your characterization of it as a free-for-all is apt. As far as "fair", "fair" is a nebulous concept. Ask 10 people what is fair and you will likely get as many definitions. Fair is what a willing buyer and a willing seller decide to transact, both in the expectation that the result of the trade will be to their own advantage. The concept you seem to want to ignore is that of competition. Buyers and sellers would naturally seek the largest marketplace possible in order to increase the chances of a more advantageous outcome, which when held among players who are able to make decisions based on their own best self interest constitutes a free market.

You'll get no argument from me that unrestrained capitalism is pure Darwin. But then again, a market that contains monopolists can hardly be considered free as the main goal of any monopoly is to eliminate competition. The down side of socialist policies has the same effect when the planners decide what the terms of trade and who the traders will be. And no, I would hardly expect honor and nobility in business, human nature being what it is. There is a place for regulation and the enforceability of contracts to keep order in the markets and allow for reasonable risk assumptions.

As far as Russia's markets go, I expect that they will improve over time. One can hardly expect that people who have never had the chance to make their own decisions will suddenly become a shining example of order and free competition. They went from being impoverished subjects to impoverished comrades, and have no traditions of the possibility of improved conditions as the result of personal initiative. At least until lately. Hopefully they will be able to find their way. I think they will.
 
The concept you seem to want to ignore is that of competition. Buyers and sellers would naturally seek the largest marketplace possible in order to increase the chances of a more advantageous outcome, which when held among players who are able to make decisions based on their own best self interest constitutes a free market.
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Rather, players A and B will naturally seek to work together exclude other players C, D, and E from the market altogether, granting A and B in collusion each a much larger share of whatever advantages (of whatever sort - capital, resources, opportunity, etc.) that C, D, and E are denied access to. Having joined forces in this way, A and B can then sell access to these advantages to C, D, and E over time, rather than run any risk that either of them will be out-competed in the market by C, D, or E.. The best competition for the self-interested is no competition.

As Adam Smith put it: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
 
Rather, players A and B will naturally seek to work together exclude other players C, D, and E from the market altogether, granting A and B in collusion each a much larger share of whatever advantages (of whatever sort - capital, resources, opportunity, etc.) that C, D, and E are denied access to. Having joined forces in this way, A and B can then sell access to these advantages to C, D, and E over time, rather than run any risk that either of them will be out-competed in the market by C, D, or E.. The best competition for the self-interested is no competition.

As Adam Smith put it: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
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So A and B conspire to form a monopoly and satisfy their interests at the expense of all others, and in the process distort the market. Hardly new or unexpected. The question seems to be whether a truly free market is possible. Probably not. Is it a worthwhile objective? Yes.
 
So A and B conspire to form a monopoly and satisfy their interests at the expense of all others, and in the process distort the market. Hardly new or unexpected. The question seems to be whether a truly free market is possible. Probably not. Is it a worthwhile objective? Yes.
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Maintaining the illusory "free market" as an objective to be pursued is every bit as naive and dangerous as the opposite; that is, maintaining some sort of Communist utopia as an objective.

Even in the modern United States, the closest thing this world has ever seen to a "free" market, the government routinely organizes bailouts for floundering airlines, financial institutions, etc. rather than let them be subject to market forces, and passes out billions every year in corporate welfare, both directly and in the form of protective tariffs for e.g. agriculture and textiles. Monopolies and oligarchies routinely fix prices, explicitly or tacitly (gasoline, telecom service..) Insider trading and corporate corruption (options scandals and HP's illegal leak probes, just to name some of the more recent examples) are so routine that they barely even qualify as news. And none of this is new - there has never been anything remotely resembling a free market in the world, and there never will be. It behooves any rational individual to recognize this fact rather than wish it otherwise.

Pretending that there can be a truly free market just provides an intellectual mask for the monopolists and other market manipulators to hide behind while they continue to distort the market to their own advantage. Rather, we must recognize that, since there will always be market manipulators in any case who seek to better their own position exclusively, at the expense of all other potential market participants, strong market regulation is required to dampen this activity, with severe penalties for violators. Purely laissez faire capitalism merely encourages and even legitimatizes parasitic market distortion.
 
Quote from eusdaiki:

Well, Pinochet did lay the foundation for Chile's economic growth...
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Economic policies within Chile and other Latin American countries were greatly influenced by the Chicago School, and that coincident were repressive even murderous regimes is rooted in the Latin American experience and not the CHicago School
 
Quote from Raul641:

Purely laissez faire capitalism merely encourages and even legitimatizes parasitic market distortion.
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So does government redress of parasitic market distortion.

The government is a market participant in a derivative way: certain official policies represent the triumph of special interests.
 
Pretending that there can be a truly free market just provides an intellectual mask for the monopolists and other market manipulators to hide behind while they continue to distort the market to their own advantage. Rather, we must recognize that, since there will always be market manipulators in any case who seek to better their own position exclusively, at the expense of all other potential market participants, strong market regulation is required to dampen this activity, with severe penalties for violators.
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Who´s the biggest monopolist, and market manipulator you´ll find in any given market? The Government. So the first regulation ought a put in place is one that forbits the government from fucking around with the market. Specially during a recession. The second regulation you should have is one that takes away all monopolies from the government. Once you done those two you´ve brought yourself light years closer to perfect competition.
 
Raul641 the points in your last post are well taken. ideologically a free market works perfectly but in the real world it is problematic. A search for remedies to economic inequalities has to come from some perspective--but which? Mercantile patronage? Marxist central planning? Keneysian interventionism? Monetarist meddling which seems to be more benign blend of the previous two, but allows (requires?) endless borrowing and inflation and government growth?

I would still maintain that a free market philosophy will obtain the best results while understanding that a perfect world is unobtainable.
 
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