[A. Pole]

Although classical economists who relied on Smith’s authority have some excuse for being misled by this fallacy modern economists do not. In Prices and Production Friederich von Hayek described in considerable detail the complex nature of the production structure. On page 47 he also pointed out that Smith’s error led to “a justification of the erroneous doctrines of the Banking School”.

The importance of the above is vital if we are to understand what is happening at the moment (not just in the US but also in Australia) and why danger signals are overlooked. Despite evidence in 2000 that the capital goods industries in the US were cutting back, many commentators ignored this trend because consumer spending and retail sales were still holding up.

Bump

[ex-snook]

TFP

Hey, day to day news swaying the market is thin gruel to depend upon. It looks like our yo-yo is just being yanked up and down.

[steve8714]

The main failing of economists is that they regard their science as capable of generating predictable outcomes from actions taken. This makes for the mischief we see four times yearly at the Fed.