How does the free market rectify hyperinflation?
Through its existence. Free market = competing currencies.
Wait. This guy is seriously an…
So-called sticky prices are a result of intervention. It’s a concept that is basically meaningless in an actual free market.
And that’s where I disagree with “Austrians”.
Prices and wages are sticky for a lot of reasons but one of the major reasons is because people prefer stability and convenience.
No one wants to renegotiate their wage once a month, once a week or once an hour. It’s just easier to roll with the flow and renegotiate on predetermined intervals.
But that’s not stickiness, per se. Austrians understand that principle and lay it out in the ordinal ranking of subjective preferences and with regards to marginality. But stickiness is a persistence not a hesitation, and it is specifically an extra-market (meaning outside of the market) failure. That’s why “sticky” prices are almost always referencing wages - because of all of the governmental costs and “protections” involved. I think Bob Murphy has written some solid stuff on sticky prices.
Also, why scare quotes for Austrians? What’s that all about, bro?
It’s still stickiness. It unchanging prices even with the information as to why they should change being known.
There are a lot of reasons why stickiness occurs and one of the big ones is incomplete or unknown information.
I guess you can argue (and I’d agree) that if everyone had perfect information then they could in theory instantly eliminate stickiness, if they wanted. But ten our brains would also have to be able to adapt to all the complex math that would have to go into that.
And it’s not just “government costs and protections”. Free markets have contracts and agreements and those contracts carry set prices. Unless you make contracts completely flexible in pricing (price fixing is a major component of contracts, then what’s the point of contracts, really, other than guaranteeing delivery?).
Also, I know we separate wages because it’s the purchase of a specific and important type of good & service, but wages are prices. Wages are nothing more than the price of labor.
I’d love to read what Murphy wrote. I like his work and I think he’s got an advantage over others due to his dual education.
I put “Austrians” in quotes because of a few reasons. #1, it’s a title given to a group based on their overall theories, and not a reference to citizenship of a specific country. #2, not all Austrians share all the same beliefs on all topics and I was pointing out that this is one that I diverge from the mainstream on. I don’t mean to offend or anything, just thought it was applicable.
Another thing I diverge from the typical Austrian economist about is that Gold or Silver is the solution to currency manipulation (you can still have inflation or value dilution with a gold standard) or that gold & silver have intrinsic value (they don’t).
Anyway, price stickiness is very real and possible to eliminate but not probable. Humans themselves would practically have to evolve into quantum calculators to solve that issue. I know why Austrians think stickiness can be eliminated (In a perfect system with perfect info, blah blah blah), but isn’t the entire point of Austrian Economics the idea that it’s not a perfect system and that human action is the driving force and that humans are flawed and that we can’t always scientifically map or predict human action? Why all of a sudden flip the philosophy?
What I don’t get is why Austrian Economics just won’t let this one thing go. I don’t see why “unstickiness” is so important that they can’t just say, “yea, stuff is sticky because it’s easier that way. end of story, bros”.
Perhaps I’m just ignorant to how unsticky prices relates to the overall Austrian theory.