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Source link: http://archive.mises.org/12776/malinvestment-not-overinvestment-causes-booms/

Malinvestment, Not Overinvestment, Causes Booms

May 24, 2010 by

The whole entrepreneurial class is in the position of a master builder whose task it is to erect a building out of a limited supply of building materials. Our master builder’s fault cannot be overinvestment, but only an inappropriate employment of the means at his disposal. FULL ARTICLE by Ludwig von Mises


ganpalou May 24, 2010 at 9:53 am

I suppose that von Mises addresses the issue of “externalities” or waste, and its effect on diminishing returns as a part of malinvestment, but I havent bumped into it yet. Does it make the whole concept too complicated? It certainly epitomises Europe, including Austria, and America is running out of “downhill” for the s–t to roll.

Gene Berman May 24, 2010 at 5:20 pm


Externalities and “waste’” are two separate things (unless you are referring to the externality posed by a waste stream generated by a process).

Insofar as are concerned externalities, yes–Mises does, indeed, discuss these. He does not address the matter of waste (in the ordinary sense) by business because, for all practical purposes, profit-seeking business does not waste. I do not imply that business does not make mistakes and take actions or make expenditures which, in the improved view called hindsight, might well be regarded as profligate, unnecessary, i.e., “wasteful,” even in their own view.

The very best way to find out what Mises said or thought about any given matter is simply to read for yourself what he wrote. Can’t get much simpler than that.

The Gimlet Eye May 24, 2010 at 11:39 pm

Now I understand why Mises is so hard to read. The text suffers from being translated from a foreign language (German). This obviously brilliant man may have expressed himself in impeccable German, but the translation into English is missing a step; final reconfiguration into comprehensible, natural, English syntax and style. In other words, there are too many vague modifiers, too many embedded sentences, and, in sum, too much “German” bleeding into the English. This is undeniable testimony that translating is extraordinarily hard work, so I can understand why this is so. Nevertheless, it is a shame that a wonderfully brilliant thinker should have his thoughts obscured in this way.

J Cuttance May 26, 2010 at 6:51 am

damn good call TGE,
the next publishing effort should address these editing issues

cret May 25, 2010 at 2:37 am

would overinvestment be several people say…investing money into a scheme in which they just miscalculated a market desire for???
if 100 people gave up 100 dollars each to create a pet rock factory making 1000 pet rocks per month when more accurate market data would have shown that 20 pet rocks made in someones basement would have met demand…at .50 cents per person investment???

would the malinvestment that you say differs from something called overinvestment operate the same way???

does malinvestmet at a grand scale (the type that mises videos claim cause financial woes) become less prevalent when information can be transferred much more quickly??

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