Speculative holding of goods and the macroeconomic implications of interventions into the pricing process

Two decades after its publication, Steven Horwitz’s Microfoundations and Macroeconomics continues to be essential reading for all serious students of Austrian macroeconomics. One of the important contributions of the book is a detailed and insightful analysis of W.H. Hutt’s main contributions to macroeconomics. Building on Horwitz’s discussion, in this paper I delve deeper into the microfoundations of Hutt’s macroeconomic analysis and focus on three main points. First, I highlight the Wicksteedian foundations of Hutt’s price theory. I argue that the main point of connection between Wicksteed and Hutt lies in their common emphasis on the speculative holding of goods as being essential to the pricing process. Second, I outline the interconnection between this emphasis on speculative holding and three concepts that are fundamental to Hutt’s analysis of employment and idleness: the concepts of pseudo-idleness, withheld capacity, and market clearing prices. And third, I discuss Hutt’s analysis of the connection between interventions into the pricing process and widespread economic waste in the form of idle resources in the short run and the sub-optimal use of resources in the long run.