A Rejoinder to Mr. Murphy
Victor Aguilar
Conclusion
To get an intuitive feel for what the mean of the DWCS represents, ask yourself, "How much of my wealth is in my house, which is intended to provide shelter for twenty years, how much is in my car, which is intended to provide transportation for five years, and how much is in peaches or fashionable clothes for my girlfriend, which will be valuable for about a week before becoming overripe or going out of style?"
For wealthy people, the mean of their personal DWCS is around twenty years, that is, most of their wealth is in long-term projects. Their interest rate is about 5%, slightly less than what they get on certificates of deposit. For middle-class people, the mean of their DWCS is around five years, that is, most of their wealth is in their car. Their interest rate is about 20%, slightly more than what they pay on their credit cards. For people living in hardscrabble conditions, their horizon does not extend beyond a month and their yearly interest rate is about 1500%. This is slightly more than what they pay at the pawn shop when hocking their possessions. Murphy writes, "Surely there are differences between the capital structure of current America and Bangladesh, that cannot be attributed merely to different A and r" (Murphy, p. 16). I would respond that, no, Bangladeshis are just like Americans, only poorer. If Murphy thinks there is some other difference, I would like to hear what it is.
Murphy concludes, "Aguilar next goes on to demonstrate the superior precision of his own approach, and in particular his ability to determine precisely where the ‘fulcrum' point is when interest rates change. In contrast, the Austrians know that there must be some intermediate stage that is unaffected by the change, yet they can't really say which one. On this point I am in total agreement with Aguilar" (Murphy, p. 9).
Good. I like to hear that people totally agree with me. I was quite proud of locating the pivot point for the Austrians. After a hundred years, it is about time someone found it. And, on that positive note, let's quit. As much fun as it is to pick Murphy's rebuttal apart, I think I have made my point. Murphy has utterly failed to refute any part of my Critique of Austrian Economics. I need a more worthy opponent. Perhaps Roger Garrison would like to take a shot at it? A thousand dollars says he cannot write a better rebuttal than Murphy did!
