business cycles: the austrian view
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Business Cycles: The Austrian View. M. Rothbard. D. Ricardo. ECO 285 – Macroeconomics – Dr. Dennis Foster. L. von Mises. J. M. Keynes. Special Readings, et al. Mises Wiki on the Austrian Business Cycle: http:// wiki.mises.org/wiki/Austrian_Business_Cycle_Theory - PowerPoint PPT PresentationTRANSCRIPT
Business Cycles:
The Austrian View
ECO 285 – Macroeconomics – Dr. Dennis Foster
D. RicardoD. Ricardo
L. von MisesL. von MisesJ. M. KeynesJ. M. Keynes
M. RothbardM. Rothbard
Mises Wiki on the Austrian Business Cycle:Mises Wiki on the Austrian Business Cycle:http://wiki.mises.org/wiki/Austrian_Business_Cycle_Theory
Murray Rothbard on “Why the Business Cycle Happens”:Murray Rothbard on “Why the Business Cycle Happens”:http://mises.org/daily/1558
Dan Mahoney on “ABCT: A Brief Explanation”:Dan Mahoney on “ABCT: A Brief Explanation”:http://mises.org/daily/672
Patrick Barron, “Fear the Boom, Not the Bust”:Patrick Barron, “Fear the Boom, Not the Bust”:http://mises.org/daily/5150/Fear-the-Boom-Not-the-Bust
Bob Murphy on “Three Flawed Fed Exit Options”:Bob Murphy on “Three Flawed Fed Exit Options”:http://mises.org/daily/5110/Three-Flawed-Fed-Exit-Options
Tom Woods YouTube video on the Austrian Business Cycle Theory:Tom Woods YouTube video on the Austrian Business Cycle Theory:http://www.youtube.com/watch?v=5K4Os5eXPw4
Thomas Taylor, An Introduction to Austrian Economics – Chapter 8 Thomas Taylor, An Introduction to Austrian Economics – Chapter 8 only:only:
http://mises.org/books/introtoaustrian.pdf
Special Readings, et Special Readings, et al.al.
Why are there Business Cycles?
Flaw of Capitalism/Market SystemFlaw of Capitalism/Market System
• Observable since late 1700s.Observable since late 1700s.• Coincides with Industrial Coincides with Industrial
Revolution/Capitalism.Revolution/Capitalism.• Something inherent in the market.Something inherent in the market.• Will worsen until system collapses.Will worsen until system collapses.
K. MarxK. Marx
Why are there Business Cycles?
Flaw of Capitalism/Market SystemFlaw of Capitalism/Market System
• Under-consumption theory.Under-consumption theory.• ““Excessive spending” causes inflation.Excessive spending” causes inflation.• ““Insufficient spending” causes depression.Insufficient spending” causes depression.
– aka, too much saving!!!aka, too much saving!!!
• Need G to stabilize economy!Need G to stabilize economy!
J. M. KeynesJ. M. Keynes
T. MalthusT. Malthus
No, Really, Why are there Business Cycles?
Any theory must explain the following:Any theory must explain the following:
• Tendency towards repetitive cycles.Tendency towards repetitive cycles.• ““Mammoth” cluster of entrepreneurial errors.Mammoth” cluster of entrepreneurial errors.• Why depression is more intense in K-goods.Why depression is more intense in K-goods.• Why retail is the “last and least” to fall.Why retail is the “last and least” to fall.
M. RothbardM. Rothbard
No, Really, Why are there Business Cycles?
Hume/Ricardo & Classical Economics:Hume/Ricardo & Classical Economics:
• It’s not markets, but banking that is the key.It’s not markets, but banking that is the key.• Banks expand credit and fuel inflation.Banks expand credit and fuel inflation.
– Because it is a “fractional reserve” system.Because it is a “fractional reserve” system.
imports, imports, exports, exports, gold outflows. gold outflows.• Banks get nervous, Banks get nervous, credit, causing credit, causing
recession.recession.
D. RicardoD. Ricardo D. HumeD. Hume
No, Really, Why are there Business Cycles?
von Mises & the Austriansvon Mises & the Austrians
• Central bank precipitates cycle.Central bank precipitates cycle.• Effect is to Effect is to interest rates. interest rates.• Leads to unsustainable increase in Leads to unsustainable increase in
Investment.Investment.• Eventually, the recession comes to correct for Eventually, the recession comes to correct for
this unsustainable path.this unsustainable path. Explains all the salient features of cycle.Explains all the salient features of cycle.
L. von L. von MisesMises
F. HayekF. Hayek
How should gov’t. address Business Cycles?
von Mises & the Austriansvon Mises & the Austrians
• Stop inflating money in the first place!Stop inflating money in the first place!• Don’t bail out troubled firms!Don’t bail out troubled firms!• Don’t inflate to get out of the depression!Don’t inflate to get out of the depression!• Don’t encourage more consumption!Don’t encourage more consumption!
L. von L. von MisesMises
F. HayekF. Hayek
What What are are we we
doingdoing??
Business Cycles:
The Austrian View
ECO 285 – Macroeconomics – Dr. Dennis Foster
D. RicardoD. Ricardo
L. von MisesL. von MisesJ. M. KeynesJ. M. Keynes
M. RothbardM. Rothbard