I think that the mass psychological explanations are not undervalued by austrians, just given their right prominence. We all know that errors in allocation of capital and pricing of assets happen all the time in the market. But, most errors are corrected as information manifests to reprice them and reallocate resources, from losing actors to winning actors and everyone learns a lesson. What the austrian business cycle explains is the systemic errors (Called the cluster of errors) that happen when central banks allow the errors to propagate and grow by effectively delaying and amplifying their propagation manipulation of interest rates and money supply.

Personally, I think that Austrian economists generally undervalue empiricism. Ludwig von Mises himself wrote of his theory: ”Its statements and propositions are not derived from experience... They are not subject to verification or falsification on the ground of experience and facts." and F.A. Hayek wrote that any theories in the social sciences can "never be verified or falsified by reference to facts."

Shitty stereos on the 80s. Brands 'mimicked' themselves to get extra profit since consumers signaled off of the logo, the chrome and heft not the sound.

I think that the austrians would respond (and, again, I'm not an orthodox austrian) that value is subjective and, if consumers find that chrome and logos are what make stereos valuable, then that's the way it is. Perhaps the social-marker value when less knowledgable friends visit, or the general aesthetic look of their living room, is what's important to them. After a while, if the consumers really could tell the difference in sufficient numbers to warrant large scale production, superior stereos should win out.

I dislike shoddy stuff generally and how much brand matters (it matters to me, too, why oh why!?) so I don't intrinsically like that argument, but I understand the rational power of it. It implies, in as much as we should be angry with someone, we should be angry at ignorant consumers, rather than evil producers for shoddy stuff. And the stunningly great news is that we can fight that problem by simply blogging about what we are passionate about.

This is one of the great benefits of the internet I did not expect: the spread of knowledge across consumers has dramatically increased the quality of many things. To pick a few examples:

- I can get a cappuccino in Sacramento, CA that would have been available in only a few cities in the world two decades ago.

- There are more beers worth drinking being brewed within 50 miles of my house right now than there were in all of California in the 70's.

- There has been an absolute explosion in high quality, low cost mechanical watches in the last ten years (see stowa, chris ward, and steinhart, to name a few)

EDIT: I pick these examples to show how the internet has improved even old-fashioned, extremely non-digital things through the spread of knowledge.

In any event, I'm drifting dramatically OT...

I am not blaming anyone. Stereo equipment got very popular in the 70s and in the 80s it became very cheap to produce good enough electronics, so high valued brands effectively did a hostile takeover of themselves and burned their product lines down making things that mimicked their earlier higher quality goods.

There are a relatively small number of participants in any system doing stuff that is new or truly creative, everyone else copies the leader.

First it was netbooks, then it was tablets. Markets I think are sprouted by first movers, who after fail, and truly grown by an army of mimics.

Also, if some producers misunderstand consumer preferences, thinking that they would want a shiny stereo when in fact they wanted a better sounding stereo, those producers would be out of business or forced to eliminate their product line. That is why it is stupid to impose third party valuation of consumer preferences. If most people want shiny stereos that sound horrible, that is what should be produced (the moral argument), whether or not a few connoisseurs like it.