Toward a general theory of error cycles

Hülsmann, Jörg Guido

doi:10.1007/s12113-998-1024-1

Cited by 67 publications

(29 citation statements)

References 19 publications

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“…In other words, the opportunity for profit should make entrenpreneurial errors uncorrelated. Clusters of errors are a charasteristic of an intervention hampered economy (Hülsmann 1998;Rothbard 2000), not of a free market. Thus, while a financial intermediary engaging in maturity mismatching in a free market may individually err, there is no reason why all such intermediaries should err systematically.…”

Section: Individual Error and Market Failurementioning

confidence: 99%

Entrepreneurial Error Does Not Equal Market Failure

2016

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Barnett and Block (forthcoming) claim that Bagus and Howden (2012b) support indirectly the concept of market failure. In this paper we show that maturity mismatching in an unhampered market may imply entrepreneurial error but cannot be considered a market failure. We demonstrate why fractional-reserve banking leads to business cycles even if there is no central bank and why maturity mismatching does not per se lead to clusters of errors in a free market. Finally, we assure that, in contrast to the examples provided by Barnett and Block, maturity mismatching does not imply the creation of two incompatible contracts due to the fungible nature of money.

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Section: Individual Error and Market Failurementioning

confidence: 99%

Entrepreneurial Error Does Not Equal Market Failure

2016

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“…Error is a normal condition of human nature, but intervention causes additional errors (Hülsmann, 1998). According to Rothbard (1962Rothbard ( /2001 such a cluster of errors that lead to a crash after a boom could not exist in a free market.…”

Section: The Economics Of Biofuelmentioning

confidence: 99%

The biofuel bubble in northern Sweden and Finland

Walter

2012

International Journal of Energy Sector Management

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Purpose -The purpose of this paper is to offer a critique of government intervention in the production of biofuel in northern Sweden and Finland, highlighting some of the welfare consequences. Design/methodology/approach -After a short review of government interventions, including laws, taxes and subsidies, Austrian economic principles are applied, which lead to universal statements about the impacts of government intervention. Findings -Government intervention on behalf of the biofuel production industry leads to the emergence of an investment bubble, with consequential negative impacts on welfare. Practical implications -The paper informs about the true costs of intervention in biofuel production, which suggests that policy makers may abstain from justifying interventions for the sake of increasing people's welfare. Originality/value -The paper contributes to the research of the production impacts of a new energy technology in the form of biofuel in particular and of governmental intervention in production in general. The paper, furthermore, enhances the use of the method and theory of the Austrian school of economic science.

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“…The only possibility for such clusters of entrepreneurial errors seems to be caused by a credit expansion. For the problem of clusters of errors, see Hülsmann (1998). 39 See Machlup (2002Machlup ( [1931: 96).…”

Section: Credit Expansion As a Necessary Condition For A Sustained Asmentioning

confidence: 99%

“…For the role that illusion plays in error cycles, seeHülsmann (1998).Monetary policy as bad medicine: the volatile relationship between business cycles and asset prices 295…”

mentioning

confidence: 99%