I’ve recently been made aware of a new paradigm in economic theory, set forth, as far as I know, by a Don Byrne, PhD, who teaches at the University of Detroit Mercy, and Walsh College of Business & Accountancy. In a nutshell, it is:

“We are increasingly experiencing an evolution toward competitive free market capitalism. Growing competition reduces market power of both firms and the resources they employ. As costs rise and profits decline, the old remedy of raising prices to increase revenue becomes less and less effective in raising revenue and restoring profits. Economic theory tells us that as competition increases, price elasticity of demand at each price increases. The rationality of price increases in terms of maximizing profits declines. When competition increases, prices become more flexible downward as firms lose their control over pricing. As prices become less rigid downward and firms have less power to raise prices, the inflationary bias weakens. As firms lose their power to protect price by reducing output, and output cuts are moderated by falling prices, the recessionary bias is lessened.(source)”

A very important implication of this theory, especially as far as the Austrians & Keynesians (and most other economists who venture to tackle the Business Cycle) is the belief that – yes, the Business Cycle will continue to exist. But cyclical economic changes are no longer relevant, as the pace of technology has increased, the effects of structural changes have come to dominate the effects of any cyclical change.

I should have the opportunity to attend a week-long seminar on Monetary & Fiscal Policy, presented by Dr. Byrne, in a few weeks. It will cost a pretty penny, and in return, I’ll get three graduate credits that I don’t need.

Someone needs to be the student that surpasses the master…