Volume 7, No. 3 (Fall 2004)
Comparative analysis, however, could reveal some broader principles by which reform proposals may be evaluated. This exercise might prove to be more valuable than arguments over which theoretical perspective is the correct one. We attempt just such an exercise in this paper. Beginning from a broad definition of “monetarism” coined by Yeager (1997), we categorize various monetary cycle theories according to a common framework, and then use the framework to identify essential components of the Austrian view and assess the macro-economic outcomes they imply under a well-known reform proposal: the free banking system of Selgin (1988, 1997) and Selgin and White (1987, 1994). We find that there is general compatibility between free banking and Austrian thought, so that the efficacy of such a reform does not depend crucially on peculiar assumptions about the nature of macro instability.
