The Road Less Traveled: Monetary Disequilibrium, Austrian Capital Theory, and the 'Keynesian Diversion'

34 Pages Posted: 13 Nov 2015 Last revised: 4 Dec 2016

See all articles by Scott Burns

Scott Burns

Ursinus College; Southeastern Louisiana University; American Institute for Economic Research

Date Written: September 26, 2016


For nearly 80 years, the field of macroeconomics has largely been shaped by the aftermath of the Keynesian revolution. Many economists have argued that his revolution and the subsequent internal and external disputes it has sparked have had the unfortunate side effect of crowding out much of what was good in macro-level analysis before it, leading to the dissatisfactory state of macroeconomics we have today. In the search for alternative paths for macroeconomics, I focus on two separate but compatible traditions: monetary disequilibrium theory (MDT) and the Austrian business cycle theory (ABCT). I argue that scholars in these traditions employed a far richer micro-theoretic explanation for the business cycle well before Keynes’s General Theory. Unfortunately, their ideas were not united in time to mount a sufficient counterattack to the Keynesian crusade. My goal is to unite the best elements of these two traditions by providing what I believe is the “missing link” that can help connect these alternative paths: free banking theory.

Keywords: Monetary Disequilibrium Theory, Quantity Theory of Money, Austrian Capital Theory, Austrian Business Cycle, J.M. Keynes, F. A. Hayek, Free Banking

JEL Classification: B10, B22, E30, E42, E50, E58, N10

Suggested Citation

Burns, Scott, The Road Less Traveled: Monetary Disequilibrium, Austrian Capital Theory, and the 'Keynesian Diversion' (September 26, 2016). Available at SSRN: or

Scott Burns (Contact Author)

Ursinus College ( email )

Collegeville, PA 19426-2562
United States
2259371098 (Phone)
2259371098 (Fax)


Southeastern Louisiana University ( email )

Hammond, LA 70402
United States

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

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