Austrian Business Cycle Theory and Sticky Consumption: Reconciling Hayek, Mises, and Schumpeter

32 Pages Posted: 3 Feb 2017

See all articles by Nicholas Adam Curott

Nicholas Adam Curott

Ball State University - Department of Economics

James McClure

Ball State University - Department of Economics

David Chandler Thomas

Ball State University - Department of Economics

Date Written: January 31, 2017

Abstract

Ludwig von Mises considered immediate overconsumption essential to the Austrian Business Cycle Theory (ABCT); Friedrich Hayek never agreed. Examining this disagreement, Roger Garrison concluded that Hayek’s exposition of ABCT (a stages-of-production framing without immediate overconsumption) lacked logical integrity. Garrison’s ABCT stages-of-production model, that incorporates immediate overconsumption as an essential component, has long been, and remains, the theory’s standard exposition. Unfortunately, immediate overconsumption has been rendered empirically untenable as evidence that makes it increasingly clear that consumption is sticky has emerged. By reframing ABCT in terms of the full structure-of-capital, rather than only the stages-of-production, we bring about a reconciliation of Hayek, Mises, Joseph Schumpeter and the empirical literature indicating that consumption is sticky.

Keywords: Austrian Business Cycle, Sticky Consumption, Schumpeterian Malinvestment

JEL Classification: E32, E14, E50

Suggested Citation

Curott, Nicholas Adam and McClure, James and Thomas, David, Austrian Business Cycle Theory and Sticky Consumption: Reconciling Hayek, Mises, and Schumpeter (January 31, 2017). Available at SSRN: https://ssrn.com/abstract=2909141 or http://dx.doi.org/10.2139/ssrn.2909141

Nicholas Adam Curott

Ball State University - Department of Economics ( email )

Muncie, IN 47306-0340
United States

James McClure

Ball State University - Department of Economics ( email )

Muncie, IN 47306-0340
United States

David Thomas (Contact Author)

Ball State University - Department of Economics ( email )

Muncie, IN 47306-0340
United States
408-859-8185 (Phone)

HOME PAGE: http://www.davidchandlerthomas.com

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