Thursday, June 06, 2019

Refutation Of Austrian Business Cycle Theory

Those who understand price theory reject the theory of the Austrian Business Cycle (ABC). I am thinking here that its logical invalidity follows from post-Sraffian capital theory. It is also wrong because of its reliance on the concept of the natural rate of interest.

Some years ago, I tried to get published a demonstration that ABC theory was in error. I forget how many journals rejected it. Four or five articles here are from this series of revisions. The rejections from the journals more sympathetic to Post Keynesians generally said that everybody knows that ABC theory is wrong. The rejections from the journals more sympathetic to the Austrian school said that I ought to read more and more obscure literature. Some of this was helpful for my understanding of the history of ABC theory, but none really addressed my points.

Anyways, my favorite revision is the last. I think this is fairly good, but, as of now, do not intend to resubmit it anywhere. I find that recently some articles on the Cambridge Capital Controversies have been published in the Review of Austrian Economics.

References

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