Who Were the Sea Peoples?

"One group of theories, which includes the writings of W. S. JEVONS, H. S. JEVONS, and H. L. MOORE, seeks to account for the periodicity of business cycles by establishing the existence of a similar periodicity in agricultural output. The chain of causation runs from cosmic influences to weather conditions, from weather conditions to harvests, and from harvests to general business." -- Gottfried Haberler, Prosperity and Depression , p. 151 This type of theory fills in the box for "truly cyclical but also exogenous." These are true cycle theories: there is a real causal explanation of the economy coming around to what is in some ways the "same" state: the economy cycles because, say, for W.S. Jevons, sunspots cycle. But obviously sunspots are about as exogenous as a cause of economic events can be. By the way, just what constitutes a cycle, in the sense of going back through the "same" states, is going to be somewhat in the eyes of the theori...

As long ago as 2003 , in response to some Austrians whom I saw mocking "psychological" takes on the business cycle, I was stressing that there is no reason to view structural or monetary theories and psychological theories as rivals: they can complement each other, as Roger and I argued in the paper linked to above. But, once again, Gottfried Haberler beat me there: "But the distinction between the writers who give prominence to these 'psychological' factors and the writers so far reviewed is, taken as a whole, a distinction of emphasis rather than of kind. The 'psychological' factors are put forward as supplemental to the monetary and other economic factors and not as alternative elements of causation, while on the other hand they are in no sense overlooked by the writers of the other group, or most of them, though they may be assigned a less prominent place in the chain of causation." -- Prosperity and Depression , p. 150

Imagine a bunch of nutritionists, each one of whom kept insisting that there was only a single form of nutritional problem. One tells us: "It's overeating! People only go wrong nutritionally when they have too many calories." Another says: "No, it is undereating! People become too frail." Yet another insists that the only problem is a diet with too much protein and not enough carbohydrates, and yet another that the only difficulty is the reverse. I think that this is analogous to wars (often ideological) over the theory of the business cycle. Why should we believe there is only a single way in which the macroeconomy can become "ill"? And Gottfried Haberler agrees: "Vertical maladjustments of each type on the one hand and horizontal maladjustments and insufficiency of total demand (insufficiency of money supply) on the other are quite compatible. To a certain extent they probably always go together and are frequently difficult to distinguish....

Mr. LOVEDAY then points out that for various reasons these financial rigidities have increased. "In recent years, the joint- stock system, under names varying with the law in different countries, has replaced to a constantly increasing extent the more personal enterprise. . . . Gradually with the growth of the big industrial concern, with the extension of the multiple shop . . . a greater and greater proportion of the population has been thrust out of positions of direct, independent control into the mass of wage-earning and salaried classes. Such persons can no longer invest in themselves; to the extent that they play for safety or apparent safety, and give preference to fixed-interest-bearing obligations over profit-sharing equities, they inevitably add to the rigidity of the financial system. Many forces have induced them to prefer safety to profit..." -- Prosperity and Depression , p. 117 Wilhelm Röpke referred to the treatment for this as the "de-proletarianizati...

Haberler said much the same thing as I was pointing at yesterday , of course having arrived at this opinion decades before I did: It is true, a horizontal maladjustment alone (that is to say, an over-delopment of a particular branch of industry) can explain only a partial -- as opposed to a general -- depression for the reason that, if industry A is over-developed, there must be an industry B which is under-developed and, if A is depressed, B must prosper. But the same is true, as we have seen, of a vertical maldistribution of the factors of production. In order to explain a general depression, it is necessary to recognize that a deflationary cumulative process can be set in motion by partial dislocation of the productive process. If this is accepted, there is no difficulty in assuming that such a vicious spiral of contraction may be started by a horizontal, as well as by a vertical, maladjustment in the structure of production. -- Prosperity and Depression , p. 111

""The most valuable and original contributions of the monetary over-investment theory are (1) the analysis of the maladjustment in the structure of production brought about by the credit expansion during the prosperity phase of the cycle and (2) the explanation of the breakdown as consequent on that maladjustment. But our analysis has also shown that the theory is not in all respects complete. The claim to exclusive validity is open to doubt. It is a little difficult, for example, to understand why the transition to a more roundabout process of production should be associated with prosperity and the return to a less roundabout process a synonym for depression. Why should not the original inflationary expansion of investment cause as much dislocation in the production of consumers' goods as the subsequent rise in consumers' demand is said to cause in the production of investment goods?" -- Prosperity and Depression

The Mises Institute claims the following about Prosperity and Depression : "Professor Gottfried Haberler, an exponent of the Austrian theory, wrote a full and wonderful treatise on the topic... In the course of his narrative, he gives a full and robust presentation and defense of the Austrian perspective..." Is this so? Well, I can certainly say that Haberler takes Austrian Business Cycle Theory as a serious option on the table -- as do I, and as, I think should any scholar dealing with this topic. But is he an "exponent" of it? Does he "defend" it? Let us look at some passages from Haberler's discussion of Austrian cycle theory: "In the specific case of the American boom of 1925-1929, the [Austrian] authors are emphatic that the same thing applies to an expansion which does not lead to a rise in prices, but is just enough to prevent a fall in prices that would otherwise have taken place because of a continuous increase in the volume of pr...

I found this passage very interesting: Bookkeeping is more or less based on the assumption of a constant value of money. Periods of major inflations have shown that this tradition is very deeply rooted and that long and disagreeable experiences are necessary to change the habit. One of the consequences is that durable means of production--such as machines and factory buildings--figure in cost accounts at the actual cost of acquisition, and are written off on that basis. If prices rise, this procedure is illegitimate. The enhanced replacement cost should be substituted for the original cost of acquisition. This, however, is not done, or is done only to an insufficient extent and only after prices have risen considerably. The consequence is that too little is written off, paper profits appear, and the entrepreneur is tempted to increase his consumption. Capital in such case is treated as income. -- Prosperity and Depression , p. 49

"The various theories under review here have been examined, as far as possible, under the following heads: General characteristics. Explanation of the upswing (prosperity). Explanation of the upper turning-point (crisis). Explanation of the downswing (depression). Explanation of the  lower turning-point (revival). Reasons given for recurrence, periodicity, etc. International complications." -- Prosperity and Depression , p. 13