A Reply to Aguilar
Robert P. Murphy
Part I: The Legacy of Friedrich Hayek
Section VII: The Severity and Recalcitrance of Depressions
In this section Aguilar raises conundrums that are, ironically, easily solved by remembering the specificity of capital goods. In particular, on page 23 Aguilar asks, "How do [Austrians] explain the fact that we have seen depression/recession conditions long after a spike in interest rates was brought back down to more normal, low rates?" and "But, after interest rates came back down, would not the structure of production have just lengthened again and the laid-off workers re-hired?"
What is particularly ironic is that Aguilar considers himself to have found a novel solution that the Hayekians overlooked: "The key to explaining the longevity of recessions is that capital has been wasted".The nation is doomed to recession until they can liquidate their foolish ventures" (pp. 24-25). This is certainly correct, but it is exactly what Skousen was getting at in his quotation (which Aguilar criticized). Come to think of it, why doesn't the dot-com "counterexample" refute Aguilar's explanation of recessions? After all, how can a website be "wasted"? Why wouldn't it just be relocated to a more appropriate use?
