Economists have long settled the issue of the economic determinants and consequences of migration (Mises [1919] 2006, [1949] 1998). Labor and capital will tend to move to the countries where wages and returns on investment, respectively, are highest, leading to an overall increase in productivity and the optimal use of natural resources. Although this analysis is correct, it must be extended in order to deal with the problems of migration in the actual world. Among Austrian economists, Hans-Hermann Hoppe (2001a, 2001b) has pointed the way to the correct solution, but although we agree with his overall argument, there are still important details missing. In the present article, we will attempt a thorough analysis of the drivers of migration, what we call the political economy of migration. We will first briefly restate the Misesian analysis of migration and show how, in a world of free trade and capital mobility, there is very little economic benefit to migration. We will then look at which factors in the interventionist economies of the developed world drive immigration. Capitalists with fixed investments are one group, and the state and its beneficiaries are another, but both are interested in the inflow of economically productive laborers. A third group within the state apparatus, what we may call the welfare bureaucracy, has a clear interest in unrestricted immigration of unproductive individuals, as this increases its own power and incomes. This bureaucracy has also been a clear driver in producing an “immigration ideology” justifying policies that increase their own position at the expense of other parts of the ruling class and at the general social cost of both more parasitic behavior in the form of increased welfare payments from taxpayers to newly arrived beneficiaries and more antisocial behavior.
The contemporary macroeconomic literature has documented a now-classic empirical regularity: Intense credit expansions are followed by more severe recessions (Jordà et al. 2013). The debate on the mechanisms that explain this correlation remains open, and the dominant hypotheses (credit channel, financial accelerator, Minsky’s financial instability hypothesis) share an aggregate focus that does not address the allocative dimension. This article argues that Austrian business cycle theory (ABCT) contains a proposition—intersectoral malinvestment—that offers that dimension and is well positioned to participate in the debate but has been largely absent from it. We argue that this disconnect stems from two causes: the logical-deductive character of Austrian methodology, which has traditionally shied away from empirical work, and a methodological difficulty in the few existing empirical attempts, derived from the ambition to validate the theory as a whole. The proposed path consists in isolating the mechanism, testing malinvestment separately from the rest of the Austrian cycle by exploiting a feature of the theoretical framework itself. We present two illustrative methodological decisions—an initial temporal window (start-up window) and the use of relative wages between productive stages—and apply them to the Spanish credit cycle of the first decade of the 2000s. The purpose of the article is to articulate a research program that enables the Austrian tradition to participate in one of the most relevant debates in modern macroeconomics.
This article examines the business cycle with US macrodata using two techniques. First, aggregate consumption and investment are analyzed for substitution and complementarity over expansions and contractions. These results are used to assess empirical support for Keynesian, monetarist, and Austrian business cycle theories. Next, sectoral capacity utilization rates are examined with Hurst exponents to assess how different industries behave during the unsustainable expansion which precedes a downturn, after the crash, and during the recovery. Many asset prices and stock indices have fractal properties. One interesting result is that virtually all macroeconomic time series are antipersistent, suggesting that entrepreneurial experimentation drives even aggregate metrics. This finding presents extraordinary difficulties for new classical business cycle theories such as real business cycle theory, which requires that labor productivity and other factor productivity series exhibit persistent long memory. Over fifteen years of data have become available since the onset of the Great Recession. In particular, there is a need to analyze the causes of the Great Recession and the COVID-19 recession as well as the nature of the subsequent recoveries.
