I have long been a great admirer of Professor Reisman and purchased Capitalism a few months ago. It is a thrilling book! Professor Reisman is courageous and uncompromising, very much in the tradition of Mises himself.

“Then, if a socialist economy could establish prices for consumer goods, Mises’s argument would dissolve.”

Question: What “consumer goods” would exist in a fully socialized economy?

What price do we pay for socialized education? What price will we pay for socialized medicine? In a state where all products and services are essentially government issues, what would constitute “consumer goods”?

I recall a Mises statement to the effect that Communists want to limit socialization to capital goods. So, I guess the answer is: Even socialists don’t want a fully socialized economy.

I disagree that Reisman departs from Austrian theory. I have read many claims that Hayek departed from Mises, too, but I can’t see it. Hayek said in an interview that he agreed completely with Mises on everything but not necessarily the reasons behind what he said. The basic truths of economics have been known for centuries, but each economist expresses them in a way that addresses his historical circumstances. Mises was focused for many years on the German historical school and on socialism. Hayek focused on contemporary economists, especially equilibrium analysis as well as socialism. He would naturally express ancient economic truths in a different way because of his focus.

Reisman faces very different historical circumstances than either Mises or Hayek. He adapts the expression of economic truths to those circumstances. Where Mises might not specify the role of capitalists in the progression of prices from the demand for consumer goods to its effect on production, that doesn’t mean he ignored it. Mises emphasized the role of the consumer because that emphasis met the need of the argument he considered important at the time. Mises certainly didn’t think that consumer prices directly and mechanically determine producer prices with no input whatsoever from entrepreneurs. Mises’ writing on entrepreneurs makes this clear. And Mises did not mean that consumer demand was the only factor working to determine producer prices. An important principle of hermeneutics is to avoid taking sentences out of context, not just the immediate context, but the context of the whole book.

In addition, Mises considered capitalists to be consumers, too. People fill different roles at different times. All capitalists are consumers and most consumers in the West are capitalists as well. Mises made it clear that most people are consumers, capitalists and entrepreneurs at the same time. If people choose to save more, you can say that they have chosen to focus on their capitalist side more than on their consumer side. It’s just another way of expressing time value.

As for time preference determining the rate of interest, and the rate of interest determining the allocation of spending between capital goods and consumer goods, I don’t see any disagreement with Mises and Hayek. In equilibrium, profits and interest are identical. Waiting imputes greater value to goods produced with capital, but so does the increased productivity. Classical economists used to refer to profit as interest.

Reisman wanted to revive interest in classical economists like Ricardo, but so did Hayek. Hayek constantly refers back to Ricardo for many truths, such as his Ricardo Effect in business cycles.

Genius isn’t necessarily found in inventing something new or proving old ideas to be wrong. Genius exists in expressing old ideas in new ways so that the present generation understands them, and sees the importance to their situation. For example, Shakespeare never wrote anything that his audience didn’t already know; he just said it better than anyone else and in a way that grabbed them by the throats. Hayek was careful to point out that his economics had roots in the classical economists.

Reisman advances Austrian economics rather than deviating from it. His insights are amazing, but in my opinion, one of his greatest contributions is in explaining economics using accounting methods instead of graphs and algebra. It gives a whole new perspective to the subject and is very powerful.

Agree with Fundamentalist for the most part. Reisman is a genius IMO.

I think Fundamentalist is quite right here. The “imputation” of prices of capital goods by consumer goods was never meant to be rigid in Mises. It isn’t in Hayek either.

YN,

“He claims ( correctly in my view) that an economy can grow with a stationary rate of iterest.”

No-one has said otherwise. It can even grow at an accelerating rate with a stationary rate of interest. The models Hayek makes are pointing to the problems of business cycles, not to general growth theory.

“The second point that Reisman questions (again as I see it) is about the elongation of the capital structure of the economy. It is my view also that it is not necessary for a process to be longer in order to be more productive.”

No it isn’t conventional austrian economics says it was.

Barry Loberfeld: “Meaning that Say’s Law is “Supply creates its own demand”? Mark Skousen thinks this is a Keynesian distortion.”

Loads of economists think it was. Henry Hutt, Steven Kates, Mark Blaug, and many Austrians.

I find Reisman’s treatise extermely useful, and I very much appreciate his treatment of Classical economists. He has got a point here that Rothbard missed in his too harsh criticisms of Adam Smith and Ricardo..