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Reminder that this, protege of von Mises, is the culmination of the Austrian school: Fritz Machlup, who wrote his magnum opus on the preeminent importance of the stock market in capital formation, and price-information as an economic resource. 1/pic.twitter.com/lJgbhbXpTC
Like von Mises he was Jewish; proposed 'knowledge' as an economic resource, adding another layer of tautology onto the already-burdened dismal science, by which speculators every successful move would, by its profit, axiomatically validate itself as socially useful. 2/
For Machlup, the secondary market in equities is the Sine Qua Non of capital formation. For without it, how would investors know which were the most valuable channels in which they ought to invest?? But of course the obvious truth, which everyone knows ... 3/
Is that Investment Capital is itself a SCARCE resource and for every dollar spent on secondary market equities, is not spent on capital formation. Thus the stock market is axiomatically a drain on capital formation. As is clear to us now, it represents a channel through which 4/
Investors can place their capital without actually endangering it in the illiquidity, the uncertainty, and the scarcity reduction of tangible capital formation; every investors worst nightmare: physical capital. The stock market is precisely the opposite of Machlup's idea. 5/
Machlup is the inescapable conclusion of Austrian thought. Hayekian Knowledge Economy carried to its logical end. Treating Investment Capital like an unlimited resource in order to produce "Information" rather than "Food" or "Housing". Yes thank you Fritz.
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