Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

438 Money, Bank Credit, and Economic Cyclestheir pockets, in a way that makes it impossible forthose very jobs to be profitable. Hence the only laborpolicy possible is to facilitate the dismissal and rehiringof workers by making labor markets highly flexible.(c) Likewise, any policy aimed at restoring the status quowith respect to macroeconomic aggregates shouldalso be avoided. Crises and recessions are by naturemicroeconomic, not macroeconomic, and thus such apolicy is condemned to failure, to the extent it makesit difficult or impossible for entrepreneurs to reviewtheir plans, regroup their capital goods, liquidatetheir investment projects and rehabilitate their companies.As Ludwig M. Lachmann articulately puts it,[A]ny policy designed merely to restore the statusquo in terms of “macro-economic” aggregatemagnitudes, such as incomes and employment,is bound to fail. The state prior to the downturnwas based on plans which have failed; hence apolicy calculated to discourage entrepreneursfrom revising their plans, but to make them “goahead” with the same capital combinations asbefore, cannot succeed. Even if business men listento such counsel they would simply repeattheir former experience. What is needed is a policywhich promotes the necessary readjustments.36Therefore monetary policies intended to maintain atall costs the economic boom in the face of the earlysymptoms of an impending crisis (generally, a downturnin the stock market and real estate market), willnot prevent the recession, even when they are sufficientto postpone its arrival.(d) In addition the price of present goods in terms offuture goods, which is reflected by the social rate oftime preference, or the interest rate, should not be36 Lachmann, Capital and its Structure, p. 123.