Austrian business-cycle theory has a submerged US history dating to the 1920s via Schumpeter
Evidence
It is hardly surprising that these arguments resonated in America after the crisis. They have, after all, a submerged prior history in the United States stretching back to the 1920s via Schumpeter. Indeed, as a description of what went wrong in 2007–2008, these ideas seem to fit the facts rather well. Banks, the dangers of debt, excessive leverage, asset inflation, a collapse of savings: it’s all there. The “don’t bail them out” message taps into a strong current of populist American opinion. Meanwhile, the “don’t intervene/let it run its course” message found strong support in the right wing of the Republican Party and among elements of the financial community that were not too big to fail, particularly hedge funds. Why, then, apart from few key high-profile figures such as Glenn Beck, Peter Schiff, Ron Paul, and (the younger) Alan Greenspan, is it difficult to find mainstream economists, even in America, who publicly accept the Austrian theory of the business cycle? To see why, we need to look at the assets and liabilities side of the Austrian explanatory balance sheet. — Mark Blyth, Austerity, 397
Categorization
- QUESTION: Why do mainstream economists reject Austrian cycle theory despite its apparent fit with 2007-08 facts? The author poses this as the chapter’s pivot question.
- XREF: connects to: Austrian economics waxed and waned across decades in America — Mark Blyth, Austerity: The History of a Dangerous…, 385; Monetarism mainstreamed Austrian and ordoliberal economic ideas — Mark Blyth, Austerity: The History of a Dangerous…, 412; A planned-economy socialist shared the same seminar table as Mises and Schumpeter — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 57 (+2 more)
Broader Connections
- Austrian economics waxed and waned across decades in America
#expands(0.85) — Mark Blyth, Austerity, 385 - A planned-economy socialist shared the same seminar table as Mises and Schumpeter
#expands(0.80) — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 57 - Monetarism mainstreamed Austrian and ordoliberal economic ideas
#corroborates(0.75) — Mark Blyth, Austerity, 412 - Neoliberals abandoned Schumpeter’s fatalism for Mises’ political-contingency view of entrepreneurship.
#corroborates(0.75) — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 288