Isaac Chan’s Reviews > Capitalism and Its Critics: A History: From the Industrial Revolution to AI > Status Update

Note 3/3:

But on the other hand, I also note that there's the Austrian perspective, which holds that the boom and bust is caused precisely by excessive optimism and thus malinvestments which are detached from real savings. This perspective would run in the reverse direction.

Note 2/3:
... expected returns plummet - does the same concept apply to the real economy?

I would say - apparently this concept runs in reverse in the real economy. When economic agents are universally pessimistic, they refrain from spending and investing, which results in the paradox of thrift. The economy slumps when people are pessimistic.

Note 1/3:
This commentary of how the surveyed woke elite are drastically pessimistic about world affairs, for example Cassidy's citation here of the 2023 WEF survey, nevertheless calls an idea to mind. It is well-known in finance that return expectations are inverse to expected returns: when market participants are universally bullish, they bid up asset prices, hence the discount rate is low af and objective ...

It is interesting to me that globalization is associated with free markets, which is obviously associated with limited government and the right - but Trump is a protectionist who exploited the political backlash against globalization.

Note 2/2:

Cassidy uses this insight of Polanyi's to explain why Friedman and the Chicago boys' economic project in Chile created certain economic problems. Supposedly, a limit of state power will fail to create the conditions for the free market to thrive.

Note 1/2:

Perhaps ironically, the chapter on Friedman contains a nice one-liner summary of Polanyi's philosophy (outlined in *The Great Transformation*) - which is that historically, it had taken strong states to create the conditions in which free market capitalism could consolidate and thrive. A Smithian economy didn't emerge naturally.

So this is broadly similar to Keynes's economics, then.

Cassidy thinks that Friedman's solution - to raise the unemployment rate back to NAIRU, so as to curtail workers and labour unions' bargaining power to raise wages - was essentially a call to restore Marx's 'reserve army of the unemployed'.

This is such a weird and twisted perspective.

Note 2/2:

So, the 20 golden years of Keynesianism can be seen as merely the short-run tradeoff between unemployment and inflation then, which the Keynesians mistook as a permanent tradeoff. The economy had hit the vertical part of the LRPC by the 70s stagflation years.

Note 2/2:

thought: Wasn't this Hayek's point? Hayek argued in favour of heterogeneous capital, and 1 of the points that he attacked Keynes on was that Keynes (famous for his aggregates) used homogenous capital.

So why, supposedly by the point of the Cambridge Capital Controversy, did Cambridge England attack Cambridge Massachusetts's homogenous capital?

Note 1/2:
On the Cambridge Capital Controversy - according to Cassidy's narrative, the 1st half of this conflict was debates about the nature of physical capital. Cassidy says that Cambridge, England questioned whether it was legitimate to aggregate it into a single whole, as Solow and other neoclassical economists did.

Before I take a side in this debate, I first have a question on the history of economic ...