Bill Jamieson writing in The Scotsman proposes 0.0% interest rates , and says: “For a generation of economists and commentators driven by the inflationary crisis of the 1970s into the arms of the Austrian school of economics, this is high heresy. The prime role of central banks was the control of inflation and the very first step was the halting
Not only does Mr. Phelps fail to address the “artificiality” of the boom faces , he blatantly mischaracterizes Austrian Business cylce theory as a theory of overinvestment . Everything I have read regarding Austrian theory explains how malinvestment occurs due to the distortion of the pricing/production process by excess creation of money and
The major point in Austrian Business Cycle Theory (ABCT) that Phelps examines is that it is an overinvestment theory. In other words, the economy goes on a boom that causes an overinvestment in the capital structure, which then must collapse with the downturn. As his analysis goes, he paints a convincing argument if you allow a few
What is the Mises Institute?
The Mises Institute is a non-profit organization that exists to promote teaching and research in the Austrian School of economics, individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard.
Non-political, non-partisan, and non-PC, we advocate a radical shift in the intellectual climate, away from statism and toward a private property order. We believe that our foundational ideas are of permanent value, and oppose all efforts at compromise, sellout, and amalgamation of these ideas with fashionable political, cultural, and social doctrines inimical to their spirit.