The Foundation of Ludwig von Mises’s Business Cycle Theory: Real Analysis as a Chain of Tautologies

Abstract:     
This paper addresses Ludwig von Mises’s business cycle theory at maturity, as advanced in his opus magnum Human Action. In this work, Mises embeds the business cycle theory which he initially developed in Theorie des Geldes und der Umlaufmittel into the broad context of his methodological convictions. Whereas the initial outline of his cycle theory strongly relies on Bohm-Bawerk’s capital theory, its mature version is build upon a signifcantly altered framework of real analysis. The paper describes and evaluates the impact of Mises’s praxeology on his conceptualization of real analysis; it provides a simple model to depict and clarify Mises’s outline; it draws implications for his business cycle theory and its core prediction that ‘any money-induced traverse by necessity reverses’; it argues that Mises’s core prediction ultimately depends on his barren analytical device; it concludes that Mises’s mature business cycle theory is a regression.

Number of Pages in PDF File: 22

Keywords: Mises, evenly rotating economy, rate of time preference, originary interest, business cycle

JEL Classification: B25, B31, B41, B53

working papers series