Joe - What we start with this afternoon is the Ludwig von Mises Memorial  Lecture, sponsored by James Walker, and this lecture will be presented by J.  Huston McCulloch. Hugh McCulloch received his Ph.D. from the University of  Chicago in 1973. He taught for six years at Boston College and then moved on  to Ohio State University, from which he retired just last year. He has been an  NBER research fellow and editor of the Journal of Money, Credit, and Banking.  His research interests include money and banking, finance, econometrics, and  industrial organization. He currently resides in New York and is a visiting scholar at NYU. I'm very happy to introduce to you Hugh McCulloch, who will address us on Misesian insights from modern macroeconomics.  

J. Huston McCulloch - Thank you, Joe. I'd like to thank Joe, in particular, the  Mises Institute for inviting me to speak here. It's a great honor to give the Ludwig von Mises lecture. The actually got into economics through von Mises many of  von Mises' books. Like Roger, I got in through the Einarand bookstore angle as  a undergraduate, and so the I think the first book I read in economics was the  Theory of Money and Credit, which was quite a trip. I didn't understand anything  of it at the time, and then I read Human Action, and some of his other books I  liked were the Liberalism and Omnipotent Governments, a very interesting  history of statism in Germany. Actually, in Theory and History is very important  philosophical book. I never actually read socialism through, but it's kind of  summarized. The idea is summarized in human action. It's a very important  concept I'll be getting to in my talk today. I didn't make it to the South Royalton  conference. I did go to the following year's Hartford conference and Larry Moss  gave a follow-up of his magic tricks, and I can see it was indeed a  epistemological crisis from a Miranda's point of view to have Larry pulling all  these stunts off here. Well, today I'd like to talk about. Well, Mises had several  insights for modern economics, I like to talk about four in particular that relate to  modern macroeconomics. There's been an unfortunate tendency, I think, for  Austrians to isolate themselves from mainstream economics. It seems to me  they should be trying to incorporate Austrian ideas into mainstream economics  rather than going off on a pure separate path. The first thing I like to talk about is what he called the historical transmission of the value of money, which relates to the price adjustment mechanism, and a corollary is the concept of market  equilibrium, as opposed to the popular quote rational expectations equilibrium.  So I disagree with Harry about the how great how Austrian the rational  expectations is. Another very important insight is concept of heterogeneous  inconvertible capital, which actually is a this epistemological problems of  economics. The last chapter in that is on inconvertible capital was a very  concise statement of von Mises' view on that, and this contrasts sharply with  neoclassical homogeneous capital. I think is a much better, much more valuable concept, and finally, the nature of the liquidity effect relates the Taylor rule to the 

quantity theory of money. Well, first, the historical transmission of the value of  money. Von Mises had a contemporary named Helferrich who argued that  marginal utility could not explain the general price level. Helferrich, this is a  quote from the Theory of Money and Credit, 24, the 1953 translation of the 24  edition, pages 119 to 20, Helferrich is of the opinion that there is an  insurmountable obstacle in the way of applying the marginal utility theory to the  problem of money. For while the marginal utility theory attempts to base the  exchange value of goods on the degree of their usefulness to the individual, the  degree of usefulness of money to the individual quite obviously depends on its  exchange value, since money can have utility only if it has exchange value, at  least paper money, and the degree of its usefulness is determined by the level of that exchange value. Money is valued subjectively according to the amount of  consumable goods that can be obtained in exchange for it, or according to what  other goods have to be given in order to obtain the money needed for making  payments, the marginal utility of money to any individual-that is, the marginal  utility derivable from the goods that can be obtained with the given quantity of  money, or that must be surrendered for the required money-presupposes a  certain exchange value of money. So that the latter, according to Helferrich,  cannot be derived from the former. So this is what I call the well. This is  Helferrich's argument and equations that marginal utility states that relative  prices are ratios of marginal utilities. If you have two goods I and J, their  endowments kind of determine their marginal utilities, and that's going to  determine the ratio of their market prices. But Helferirch said this is circular for  nominal prices, since the absolute price of good I is its marginal utility divided by the marginal utility of money to be spent on all goods other than good I, which  I've represented by I hat here. Yet that marginal utility is determined by all  goods by the prices of by the same reasoning by the prices of all goods other  than good J, including good I itself. So there seems to be a circular a circularity  here. So I call this the vicious circle of Helferrich. So here's the price of good i is  determined by the marginal utility of money exchanged for goods other than i.  That in turn is determined by the price of good j for i not equal to j, which in turn  is determined by the same mechanism from p i itself. So it seems to be a  circular argument here. Von Mises's reply was that those who have realized the  significance of historically transmitted values in the determination in the  termination of the objective exchange value of money will not find great difficulty  in escaping from this apparently circular argument. It is true that the subjective  valuation of money presupposes an existing objective exchange, objective  exchange value. That means opportunity for exchange, but the value that has to  be presupposed is not the same as the value that has to be explained. What has to be presupposed is yesterday's exchange value, and it is quite legitimate to  use it as an explanation of that of today. The objective exchange value of  money, which rules in the market today, is derived from yesterday's under the 

influence of the subjective values of individuals frequenting the market. Just as  yesterday's, in turn, in its turn, was derived under influence of subjective  valuations from the objective exchange value possessed by money the day  before yesterday. So the added some emphasis here. So this is what I call the  benign helix of Mises. My friend Jim McGinnis said this. You know this diagram  is a little screwy, but anyway, the so the so here I've added time subscripts or  time superscripts on all these prices and marginal utilities. The price of good i at  time t is determined by the marginal utility of money at time t in exchange for  goods other than i, but that's determined by prices of other goods at time some  earlier time t minus lambda, where lambda is the average lag of price  information, which in turn is determined by the price of good I itself, day before  yesterday, time t minus two lambda. So basically, you're when you're the only  thing you know about in the present is what you're currently engaged in.  Everything else you think you know about because of past experience with it. So this morning there was Magnolia Avenue out here in front of the Mises Institute.  For all we know, right now it's a cornfield, but odds are that it's still Magnolia  Avenue. That's the way things usually work. Usually, so usually there's enough  continuity in the economy that yesterday, basically, it was the same people with  the same tastes and the same endowments. Pretty much, was just minor  modifications. So pretty much yesterday's prices, today's prices, tomorrow's  prices are going to be similar to yesterday's prices, maybe adjusted for trends  like inflation. So the so this leads to von Mises theory of how prices adjust to a  increase in the money supply. An increase in the community stock of money  always means an increase in the amount of money held by a number of  economic agents. For these persons, the ratio between the demand for money  and the stock of it is altered. They have a relative superfluity of money and a  relative shortage of other economic goods, the immediate consequence is that  the marginal utility to them of the monetary unit diminishes. As when you get  more money, your marginal utility of that money, which you can spend on other  goods, the drive marginal utility goes down, and they will now express in the  market their demand for the objects they desire, whose quantity and physical  quantity is fixed, and so his marginal utility isn't going to change much. More  intensely than before is the obvious result of this: that the prices of the goods  concerned will rise, and that the objective exchange value of money will fall. So,  the injection of money raises prices that actually reduces. When there's an  excess supply of money, the injection of money raises prices, and will reduce  the real value of that money somewhat, and reduce the excess supply of money somewhat. But then he goes on that the this rise in prices will by no means be  restricted to the market for those goods that are desired by those who originally  have the new money. In addition, those who have brought these goods to  market will have their incomes, and their proportionate stocks of money  increased, and in their turn will be in a position to demand more intensively the 

goods that they want because the marginal utility to them of money has gone  down because they got this windfall profit from the what they thought was a  windfall profit. So these goods will also rise. Thus, the increase in prices  continues, having a diminishing effect until all commodities, to a greater sum to  a lesser effect, are reached by it. So this is, in modern terms, this is basically a  partial adjustment mechanism. That the in the first round of exchange you go a  little bit toward equilibrium, and the next round of exchange, what's left over gets reduced further, and then further. So there's successive price increases, which  successively reduce this excess supply of money, and eventually get the price  level increased more or less in proportion to the money stock. So the So this  leads to what I call the equation I call the moderate quantity theory of money.  This is a partial adjustment mechanism for the price level, kind of based on this  Misesian argument. So in a working paper wrote back in 1980, it's either on my.  I'll check and see if it's on my. Make sure it's on my web page. The inflation rate  at time t pi is inflation is going to be proportional to the excess supply of money.  Is going to be determined by three things. The first is going to be the excess  supply of money, which is this Misesian effect of driving the price level up. In  addition, since we take those prices yesterday and adjust them for any obvious  trends for inflation, this is basically what Jim Grant called Kentucky windage the  other day. I had to look that up, but basically the idea there is if you're pointing at a target and the wind's blowing, you you do a scientific estimate of the wind  velocity, and then adjust your rifle, and then shoot it, and it hits hits the target.  So people use the seat of the pants adjustment for inflation, informing their  inflationary expectations, informing their prices, informing their expectations of  the future purchasing power of money, of the prices of these other goods that  they're going to get to spend their money on if they don't spend it on the  immediate good, and then a third factor is simply micro noise. Most of the price  changes that take place are really just micro noise, so in this paper I tell a story  about what this coefficient would look like. It would depend on the elasticity of  marginal utility with respect to real wealth of the and also real wealth over the  relevant horizon, and also this average lag of price Information, so this is a big  alternative to the real adjustment mechanism that Philip Kagan put forward in  1956, and that people like Chow and Goldfeld have used to estimate the  demand for money. As long as the money supply is constant, it's basically the  same equation. It has the basic the same price adjustment mechanism. But if  the money supply changes. The real adjustment mechanism actually predicts  that the price level will perfectly track the money supply, which is totally  unrealistic and not at all what we want in a partial adjustment mechanism. So  this is a much better equation than this popular real adjustment. Goldfeld  proposed a nominal adjustment equation, which makes sense in a fixed  exchange rate regime, but not when the money supply is exogenous. This is  essentially equivalent to very much like the so-called P-Star model of Hallman, 

Porter, and Small that was in the AER in 1991. So they they didn't mention  Mises, but it seems like it's a very Misesian argument they have that basically  the price level adjusted the monetary disequilibrium. They threw in some lags of  inflation, which are going to pick up the expected inflation. So, so I think this is a  much better approach to inflationary dynamics. And another corollary of this  historical transmission of the value of money is the concept of market  equilibrium, according to fashionable quote rational expect extremist form of  quote rational expectations equilibrium, each agent knows all information about  everyone else's tastes, everyone else's endowments, everyone else's  production opportunities plus. Current policy plus policymakers' intentions about  the future, and then they calculate the equilibrium from all this knowledge. So  that's basically the extreme form that Muth proposed in 1960. Now the von  Mises socialism economic calculation argument points out this is totally  unrealistic. I mean Even government agency with 1000s of economists and  supercomputers can't perform this calculation. Here, Joe Schmoe is supposed  to be performing this calculation when deciding whether to take a $8 job offer or  $8.30 cent job offer, or whether whether or not to take a given job offer, so for  some purposes this could be a useful exercise. I mean, you can make a toy  economy and a toy policy and say, well, does this policy make sense if people  really know how it's going to work? That's a useful exercise, but as a description  of how the economy actually works, it's it's totally unrealistic. And Fritz Machiup  once, an unpublished note once pointed out that the this whole term rational is  misleading in this context. That rationality does not imply omniscience. That it's  an abuse of terminology to call this Rationality. The I'd argue that equilibrium  expectations is a better name for it because it is sometimes a useful exercise.  So you shouldn't say you're going to assume rationality. You should say you're  going to assume endogeneity or equilibriumness. The recently Sargent and  others who among the original proponents of this admitted that this is too  extreme and are starting to advocate what they call bounded rationality. I'd say  that's another misnomer, because if you're if you're only 30% rational, then  you're 70% mentally incompetent. So on the other hand, if you're 30 only 30%  omniscient, then you're 70% human. So, I'd say bounded omniscience is a  better term for what Sargent's talking about than bounded rationality. The I bump into Sargent at NYU occasionally, but I haven't grilled him on this yet. The Mises  offer the alternative that people don't know how the economy works; they just  observe past prices. Vendors observe quantities they themselves were able to  sell, and they trust that future prices will be similar, or at least extrapolated for  obvious trends. And then, if the economy is static, everyone has the same  tastes, same endowments every period. The market will actually find the  equilibrium. If the economy is changing all the time, which it really does, at least  the market is moving toward the equilibrium reasonably efficiently. It doesn't  really get to the equilibrium, but it moves us toward it as well as can be done 

without anyone knowing what that equilibrium is. So, but the expectations of  these agents are basically empirical, not omniscient. They agents determine  forecast tomorrow's price of gasoline the same way economists do they drive by three gas stations and take the median price and that's probably what the price  of gas is going to be tomorrow and so Austrian economics is usually prides itself being theoretical rather than empirical but it's really a theory of empirical agents  I'd argue, because the agents themselves are purely empirical. You say, "Well,  water was $1 a bottle yesterday. It's probably going to be similar today. The  guess I can slow down a little bit. I'm running. Good timing. The third missesing  insight is the concept of heterogeneous inconvertible capital. This contrasts with  the so-called with the neoclassical growth model, according to which  consumption plus investment, the change in capital, is output Minus  depreciation, so here capital is just a homogeneous mass, and it's identical  regardless of the intended product, of what specific product you're trying to  produce, or even the date of the output that you're trying to produce. In fact, in  this formulation, it's exactly the same good as aggregate consumption. So I think if this is a bag of, it's a useful toy economy to try to solve. But it's as if the only  economy, the only good in the economy besides labor, was bags of wheat. You  can either eat the wheat or you can plant it, and if you plant it, it'll. Come up  next year, you can devote a lot of labor to scratching the ground well and  planning it well, or you can so you can have variable proportions of capital and  labor. But it's a very trivial economy. Now, in this essay, inconvertible capital, in  the epistemological problems of economics and elsewhere in human action and  so for in theory remaining credit, he insists that it takes Bumbaverik's concept  that capital is the produced means of production, and also Bumpere's concept  that production takes time and may have several steps that involve the  production of capital types that are specific to the particular type of output that is intended, and if you start with a capital mix that's appropriate for one output mix, and then change your mind and want to build another output mix after you've  already built the capital that was appropriate for the first one. That's going to be  costly, and in itself, this is a macro, a micro problem. But macroeconomically, the intertemporal mix of output also matters, and the capital mix that you are going  to choose is to some extent specific to the intertemporal choice of output that  you want, and if you have a the intertemporal mix is going to be governed by  real interest rates, a little r here. So a disequilibrium real interest rate, due for  example to stop-go credit expansion, is going to cause malinvestment in the  wrong intertem in the wrong mix of capital. It's not too much capital or too little  capital, but the wrong mix of capital because it's targeting the wrong point in the  future. So this malinvestment, Austrian malinvestment concept that Mises keeps Mises and Hayek keep talking about is not even an issue in this neoclassical  growth model because there only is one kind of capital. It's all it's all just one  kind of stuff. You could have a little bit. You could have too much consumption 

and not enough investment, or vice versa. But you can't have the wrong kind of  capital, so Mises was not very graphical at all, or wasn't graphical at all in his  pure theory of capital. Hayek tried to show graphically what was meant by this,  but he wasn't very mathematically adept either, and didn't really succeed in that  and getting across what was meant here. I don't think so. So I think a better way of looking at this is in terms of the production possibility frontier or PPF. This was used in an intertemporal context by Irving Fisher in his theory of interest, which  he dedicates to Boomberg and John Ray, and basically is just Bumbaverik in  diagrams. So I'd say, at least in this book, Irving Fisher is an Austrian economist. The production possibility frontier itself was developed by Edgeworth, who was  more of a Valrasian, but it was generalized to a. It was just a general linear  production model by the Austro-Hungarian mathematician John von Neumann,  who was instrumental in developing linear programming. In fact, the the shadow  prices in linear programming are basically the imputed value Mangarian imputed values from a production context. So his his linear production model includes  incorporates complementarity, substitution, joint outputs, and is really just a  mathematical statement of Menger's Production model, but its hallmark is that  he has production activities, his production activities that use inputs subject to  linear constraints and then produce outputs linearly, and the fact that you're  bumping into these linear constraints means that first off, marginal products are  going to diminish in the Menger type way. Isoquants are going to be quasi concave in the usual manner, and production possibility sets. The set under the  frontier is going to be a convex set. So the convexity is all over the place here.  Basically, using a Mengarian argument, he I don't know that he actually read  Menger, but he collaborated with Oskar Morgenstern and was himself Austro Hungarian. So I'm assuming he did read Menger. Anyway, so the production  possibility frontier. Edgeworth gave some specific examples. Von Neumann's.  Model shows it's very very general, so generally this frontier bows out away from the origin. Producers will try to maximize the the value of their output by picking  the point on this that maximizes the the value of the output. So if y is expensive,  is going to be is costly, you'll pick a point like A. If X is relatively costly, you'll pick a point like B, in order to maximize your profits. You try to get to the boundary of this frontier, the boundary of the set, which is the frontier. Now, the usual story,  like Edgeworth's story, is that okay? Well, it's just capital and labor, and there's  two production functions, one for x, 1 for Y, with different capital intensities, and  so you get this frontier. But there's still only one kind of capital. In fact, no  production of capital. But let's suppose that production has two steps. This is  capitalist production, and the first step that carries you from time from time one  to time two, you use your initial endowment at time one to produce capital types, which become available at time two, and then at time two you use these capital  types to produce either X and or Y at time three. So, if this is the time one  production possibility frontier, at time two you no longer have all these 

production possibilities. You have a subset of them. If you're shooting for point A, you can still produce point A because you produce the capital appropriate for it.  But basically, everywhere else, the production possibility frontier will have  shrunken, and you're not locked into A. You still have substitutability. You can  still change your plan, but you can never get back to point B. It's it's foregone  because you produce the wrong mix for point B. In fact, you can show from this  that if goods are normal, the prices will actually have to overshoot if you were. If  you were expecting these prices to prevail in the market, you would aim for point A. Consumer tastes really were for point B, so these would be the equilibrium  prices. If you were expecting the wrong prices and shot for A, you will produce  A, but then those consumer tastes will put you on this production possibility  frontier, and an even X will become even more more costly than you than it  would have been if you had known the shock for point B, and then was  appropriate for point B, so there's an over actual overshooting of the price when  you correct this way. So this worked. This is just micro for one period, one goods at one point in time. But the same thing. Well, if you were shooting for point B,  then you'd have this green production possibility frontier, and then could not  produce A. So it's important to shoot for the right target to start with. Now,  intertemporally, Irving Fisher used the same context to show the intertemporal  production possibilities. In this theory of interest, he did it for two two points in  time, then for three and end points in time, you need at least three points in time for this to be relevant. So let's say there's three points in time: t1, t2, and t3.  Consumption aggregate consumption is c1, c2, and c3 in those three periods.  So here's c1, c2, c3. Pretty much, no matter what the technology is, any linear  constrained technology is going to give you a convex production possibility set,  and producers will try to maximize the present value of output given period one  interest rates by picking some point like point like point A here on the surface.  Now, when we move forward to time two, in order to hit point A, you have to  conduct certain production activities in time one and in time two. Your time one  production activities are going to produce a mix of capital goods, which are  appropriate for the particular point you're trying to hit, and to a boom of airplane  out, the technology may be quite different for C3 production than it is for C2  production. So you might want to produce fancier capital equipment or  something for more sophisticated capital equipment if you want C3 than if you  just want C2. So, but when you get to period two, you've already chosen your  c1. There's nothing you can do to see. There's nothing you do to change the  amount of c1, so it's given. So if you were shooting for point A back in period  one, you've already produced that amount of c1. But you can still trade off c2  against c3. So in period two, only this section through the original PPF is going  to be relevant. So we'll just focus on that. So just take that slice of this original  curve. We're taking the c1 choice as given now, and now we can trade off c2  against c3. This is the mix that was originally planned. This is the section 

through the period one production possibility frontier. But now, if capital is  heterogeneous, if capital homogeneous, you could still c1 determine period two  capital, and you still have the same PPF. But if capital is heterogeneous and  inconvertible to some extent, then when you get to period two, A is the only point you can still follow through with. You're not locked into A. You can still move  away from A, but you can't get back to the original PPF because you have the  wrong. You have the mix of capital that's appropriate for point A. So, so if it turns out that because of taste you really wanted to be consuming up in here or down  in here, you have imposed a cost on the economy by shooting for the wrong  point originally by having the wrong interest rates originally. So I developed this  in a paper I had in the Journal of Monetary Economics back in 1981,  misintermediation and business fluctuations, which is on my web page. I call this the Austrian capital effect because it's the it comes from the this heterogeneity of capital that Mises is talking about, and shows the cost of not of shooting for the  wrong intertemporal production point originally. So this is central to the Austrian  business cycle theory. I argue in this paper that it would be a problem even in a  Moneyless economy, in which financial intermediaries don't scrupulously match  asset and liability maturities, but the so again, this malinvestment is not an issue in the neoclassical models. This is completely foreign to them, but still, it's just  an objective thing that they should understand, be able to understand, and  agree that this is more realistic than the neoclassical model. Whether or not you, then you can start talking about the Austrian business cycle theory. So Now, this  the interest rate that's relevant here is the terms of exchange between period  two and period three. So it's the the the interest rate in period two for loans that  mature in period three. Those loans existed back in period one as the forward  interest rate between period two and period three, so analyzing this really  involves the term structure of interest rates. There isn't just one interest rate.  Back in period one, there was a whole term structure of interest rates for loans  maturing in period two or period three. Those are not necessarily the same  interest rate, and what's relevant is the ultimate interest rate relative to that  forward interest rate implicit in the term structure. Now, again, the Austrians just  talked about one interest rate. There's no term structure in the Austrian  literature, but there really logically should be a term structure here to to make  sense of or to analyze this kind of problem. Had a student, Kevin Guo from  China, Kevin or Feng Guo, who finished his dissertation in 2013, went back to  China, and kind of analyzed this using U.S. data, U.S. output data, and so the  the latest development on the Austrian capital effect, ironically, was done by  Kevin, who I learned shortly before he graduated, is actually a member of the  Communist Party. So the communists are at the forefront of Austrian capital  theory now. Times have changed. So the and I should have mentioned I'm a  Chicago graduate, so you should feel free to butt in with questions of  clarification as I go along. I forgot to mention that, but so any questions before I 

move on here? The so finally. another insight I get from Mises is the nature of  the liquidity effect. There's a wide, a mainstream, a widespread mainstream  misconception that the liquidity effect of a monetary expansion. Is the reduction  in interest rates that are required to induce agents to hold the new money, given  the price level and the demand for real money balances, given that that probably is has some interest elasticity. So at lower interest rates, people want to hold  more money. You increase the money supply, so interest rates have to go down to where people want to hold that money, now Mises instead would say that this  that the liquidity effect of a monetary expansion through the banking system,  which is just the way it usually works, is the reduction in interest rates required  to induce agents to borrow the new money with the primary intention of  spending it either on consumption or investment, so it's really the loanable funds model, the Irving Fisher Bomberg loanable funds model of interest rates that's  going on here. Banks create new money by making new loans to get people to  take out those new loans, they have to offer lower interest rates. But this is not  an equilibrium situation; it's a disequilibrium situation. And what they've done is  created an excess supply of money in excess of people's demand for it. So it's  it's it's not a doesn't does not reflect an equilibrium in the supply and demand for money. It's disequilibrium supply and demand for money. It's an excess supply  of money, which will persist as long as the real rates below its equilibrium value  and vice versa. So this excess supply of money starts pushing prices up through this price adjustment mechanism, as it does, the real value of the new money  falls, the real value of the new loans falls, and the interest rate that's necessary  to sustain that money, to get people to borrow that money, goes back up to the  equilibrium value. So the as long as the excess supply of money persists, the  real interest rate will be artificially reduced below its equilibrium value, and vice  versa. That the if you use the interest rate as a target, as an instrument instead  of the money supply, by pushing the interest rates down, if the Fed pushes  interest rates down, the Fed does that by buying Treasury bonds, which is  basically lending money to the mining markets. The banks build on that by  making loans to their customers, which is more loans. When they do that, they  are creating new money, which is an excess supply of money, and that Will be  inflationary, so this kind of gives you a rationale for how the Taylor rule works.  Suppose the Fed doesn't know what the demand for money is. I mean,  quantifying the demand for money is tricky. Just measuring is tricky, and it  changes over time. So estimating is tricky. So suppose the Fed completely gives up on monetarism. Say we don't know money demand is. We don't even have to measure money. We'll just look at interest rates. As long as the Fed knows the  equilibrium real interest rate, in principle, it can control the excess supply of  money by manipulating real interest rates has given inflationary expectations by  manipulating nominal interest rates. Now the big if there is the Fed has to know  the equilibrium real interest rate, which it doesn't know either. So the the way to 

find the equilibrium real interest rate is to pursue a neutral policy and see what  the market comes up with, and you don't know whether your policy is neutral,  and the way to find out what the demand for money is is to pursue a neutral  policy and see what price level the economy comes up with. So either way, you  have to know whether your policy was neutral, which you don't really know, and  it takes. There's a long adjustment mechanism, so it takes a long while to figure  out what that equilibrium is, even if, in any event. So, but at least in principle, the Fed could reject monetarism and use Taylorism to to manipulate real interest  rates to manipulate the excess supply of money through the interest rate. So I've been teaching this in my money and banking course. I have a chapter, in fact,  called "Money and Credit. I got borrowed the title from von Mises with some  fancy diagrams of bank expansion and so forth, showing how this excess  supply, the net demand for credit, also for how this, where this excess supply of  money fits in. Okay, so so in conclusion, again, as I mentioned, I think Austrian  economists should seek to integrate Austrian theory into mainstream macro, not  to isolate themselves from or Austrian theory from mainstream macro. And from the macroeconomist's point of view, even even those macroeconomists who do  not endorse Mises' policy recommendations, like no intervention and business  cycle theory and so forth, should pay heed to several of his economic insights,  which are basically useful for mainstream macro, even if you don't buy the policy recommendations. So the paper, the slides are on the Mises website. The  updated the slides this morning or last night, late last night. So if it says has a  little date in the bottom corner, that's the current version of the slides. I'm  working on the paper, so the paper should be on the Mises website soon. I  hope. So, thank you. 



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