Bubbles

While both caught in a spell of crisp winter, Laura in Nebraska, and I in the South West of Germany, this gentlemen demonstrates how to have fun with snow bubbles.

 

What an odd coincidence that I should have been working on bubbles all day long. In fact, I have been tracing insights into a rather neglected part of the Austrian Business Cycle Theory (ABCT) - the subsistence fund. The central importance of which I have been made aware of by reading the superb articles of Frank Shostak at LvMI. However, I never managed to fully understand his rendering of the theory of the subsistence fund. So I followed the literature that Shostak lists, in particular Richard von Strigl's Capital and Production and two excellent articles by Sechrest. With this preparation, Sechrest's paper Capital, Credit Expansions, and the Subsistence Fund has enabled me to reach a level of comprehension that I am perfectly satisfied with.

Writes George Reisman on the historic significance of the abandonment of the subsistence fund approach, as quoted in Sechrest's paper, where "wages-fund" is basically synonymous to "subsistence-fund" - the latter really being the more accurate term, since businesspeople must compensate the suppliers of any and all inputs, not just the suppliers of labour:

The wages-fund doctrine held that at any given time there is a determinate total expenditure of funds for the payment of wages in the economic system, and that the wages of the employees of business firms are paid by businessmen and capitalists, out of capital, which is the result of saving; not by consumers in the purchase of consumers’ goods….[T]he abandonment of the wages-fund doctrine and with it, classical economics’ perspective on saving and capital, made possible the acceptance of Keynesianism and the policy of inflation, deficits, and ever expanding government spending.

PS

Two personal memorabilia: at the time of my studies at the University of Kent at Canterbury, I knew a lecturer, Cyril Isenberg, who specialised in the physics of bubbles.

To think, I may have ended up a colleague of the superb George Reisman at Pepperdine University. Mind you, I did not know of Reisman at the time. And I do not think I was mistaken in not exploring the invitation any further - in the 1990s, I had not matured enough in my intellectual development to be able to assume an academic position of lasting satisfaction. The whole thing may have turned out quite a bubble.

But this time, it would be different.

Comments

[Laura]

You almost went to Pepperdine? Wow!