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Comment by hga | Hacker News Reader

I wasn't aware this would be predicted by Austrian economics, but I don't know enough of it/my study of it was back in the '80s. Could you be more specific?

However, what I generally understand is happening, or rather is not happening, is called "pushing on a string". No matter how low the rates or availability of loans (not so sure that was true in Japan in the '90s), nothing can get a business to borrow money if they don't think they'll be able to pay it back.

I'd also suspect that's somewhere in the priority list of central banks below preventing widespread bank failures (note what happened after it was decided to throw Lehman Brothers to the dogs, albeit we'd better be past that point in the US), and very possibly making it very cheap for the government to borrow money. "Trillion dollar deficits as far as the eye can see" don't hurt so much when interest rates are so low....

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I think its mostly that Austrian economics focuses on the individual and rejects macroeconomics based on aggregate demand. What I really think is going on is not that people really understand Austrian economics and find it logically persuasive so much as they want some reason to ignore Keynesian economics.

However, what I generally understand is happening, or rather is not happening, is called "pushing on a string". No matter how low the rates or availability of loans (not so sure that was true in Japan in the '90s), nothing can get a business to borrow money if they don't think they'll be able to pay it back.

That's exactly right. And that's where a lot of economic theories break down ... because its assumed that firms always maximize profit. If you assume that, firms will always borrow money if money is free (i.e. 0% interest rate), and put the money to use earning >0%.

I think we've seen that's not a great assumption though because firms are not always maximizing profits.

All too often it seems to maximizing egos ... until the firm's Long Night begins....

Going from first principles, the application of "macroeconomics based on aggregate demand" to the microeconomics of specific firms is always going to be iffy.

Zillions of factors, e.g. local demand, regulatory regimes, uncertainty of about the latter and tax regimes, current and future ... heck, I gather the Austrians don't entirely dismiss Keynes's animal spirits concept, they just have some explanations for it, which get harder to apply the more you move away from purely financial considerations.

E.g. if Main Street, these small and medium size businesses, conclude they've been declared Enemies of the People, the animal spirits of the people in them are going to be affected. Not to Godwinize this discussion, but I gather those of the school who survived did so by getting the hell out of Dodge (https://en.wikipedia.org/wiki/Richard_Ritter_von_Strigl#Late...) and that also critically disrupted the school. You can imagine how scholars felt when they discovered von Mises' archives in Moscow after the Cold War....

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