Tuesday, September 21, 2010

The Austrian Business Cycle

I have to admit that this was probably one of my favorite readings/ listenings of all time primarily because it had graphs involved! In general I followed through pretty easily with what Dr Cwik was talking about. I especially enjoyed listening to the explanations to the graphs that he presented. I had one issue with the graphs, and it stems from what Cwik himself said. Cwik stated that the graphs are accurate, however the market is always changing and therefore this is just a snap shot of what actually occurs in the economy. Well, if that is true, which is absolutely accurate, because otherwise economists would actually be able to predict the future of the economy accurately, then the fact remains that the graphs do not have as much meaning. I understand that they are essential to the understanding of the fundamentals of the business cycle, but when it comes to how applications may be used it seems very inaccurate. There are obviously too many variables to take into account in order to make a graph. For example in the case of the graph which shows what occurs when more people become impatient, well is everyone becoming impatient at the same time? Probably not! Infact Im pretty sure that even if this were true, everyone would have different levels of impatience. Then the problem that comes to my mind is, how does one measure impatientce? Maybe an economist could help me, but how would an economist measure impatience? What would the units be? In general it seems to me that the way that Cwik shows his graphs makes sense, but what I would further like to read about would be how exactly does one apply the concept of the business cycle accuratley to try to predict or understand the state of the economy.

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