The View from Vienna: An Analysis of the Renewed Interest in the Mises-Hayek Theory of the Business Cycle

42 Pages Posted: 6 Dec 2013 Last revised: 3 Feb 2016

Nicolas Cachanosky

Metropolitan State University of Denver

Alexander William Salter

Texas Tech University - Rawls College of Business

Date Written: February 3, 2016

Abstract

This paper analyses the renewed scholarly interest in the Mises-Hayek, or “Austrian,” theory of the business cycle since the 2008 financial crisis. Understandably, the economics profession has broadened its search for the crises’s explanation beyond the standard DSGE framework. Austrian business cycle theory, with its emphasis on the importance of the monetary system for resource allocation and the linkage of consumer demand with producer supply through the coordination of the economy’s structure of production, offers a fruitful realm for productive intellectual arbitrage in business cycle research. After reviewing the post-crisis literature that engages Austrian business cycle theory, we discuss what is being said that is correct, what is being said that is incorrect, and what is not being said that ought to be said. This last category is most important largely due to the fact that the post-crisis literature engaging Austrian business cycle theory has not addressed advances in the theory made since the days of Mises and Hayek. We also present modern work being done on Austrian business cycle theory and highlight three key areas of contemporary economics where Austrian business cycle theory has the potential to do significant work.

JEL Classification: B53, E32, E52

Suggested Citation

Cachanosky, Nicolas and Salter, Alexander William, The View from Vienna: An Analysis of the Renewed Interest in the Mises-Hayek Theory of the Business Cycle (February 3, 2016). Review of Austrian Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2363560 or http://dx.doi.org/10.2139/ssrn.2363560

Nicolas Cachanosky (Contact Author)

Metropolitan State University of Denver ( email )

Denver, CO 80217
United States

HOME PAGE: http://www.ncachanosky.edu

Alexander William Salter

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

HOME PAGE: http://awsalter.com

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