Ahiakpor on Mises and “Forced Saving”: A Rejoinder

Professor Ahiakpor’s (2008) comment on my article (Garrison, 2004) warrants a comprehensive response. Ahiakpor questions the validity of my use of the production possibilities frontier, the plausibility of the market mechanisms illuminated by my analytical framework, and my interpretation of Ludwig von Mises’s notions of “forced saving” in connection with business cycles. According to the Austrian theory, a credit expansion orchestrated by the central bank gives rise to an unsustainable boom. An artificially low rate of interest steers the economy onto an internally conflicted growth path, which leads ultimately to a bust. Different writers, Mises among them, have introduced some notion of “forced saving” as essential to our understanding of the market process that traces out the boom-bust sequence. The substantive issues raised by Ahiakpor concern the particulars of the sequence and the meaning of “forced saving” in this context.