The Great Moderation consensus collapsed in 2008 exactly as Austrian theory predicted
Evidence
This view made it perfectly possible for mainstream economists in the 2000s to talk about “the elimination of the business cycle” while living in a period of “Great Moderation,” where the volatility of the past had been tamed by good central bank policies. And then, of course, the world blew up, right in the middle of this supposed Great Moderation, just as the Austrians would have predicted. And while everyone seemed to know that the explosion had something to do with asset bubbles and banks, at the start of the crisis few had a convincing story about how the banks had caused it. This is where the Austrians came back in. Their writings from the 1930s seemed to describe the 2008 financial crisis perfectly. — Mark Blyth, Austerity, 387
Categorization
- XREF: Blyth’s point that Austrians ‘described’ the crisis but had nothing for the aftermath connects to analysis of how crisis ideas get repurposed in austerity politics (Mattei). — connects to: The 2008 crisis was fundamentally a crisis of economic ideas — Mark Blyth, Austerity: The History of a Dangerous…, 132; The 2008 crisis disoriented the left instead of vindicating its economic worldview — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 46; Austrian business cycle theory blamed politics and left crisis victims unsupported — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 395 (+4 more)
Broader Connections
- Bernanke attributed the Great Moderation primarily to improved monetary policy
#contradicts(0.78) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 503 - The 2008 crisis was fundamentally a crisis of economic ideas
#expands(0.75) — Mark Blyth, Austerity, 132 - Belief in the Great Moderation blinded the Fed to signs of crisis
#qualifies(0.75) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 504 - The 2008 crisis disoriented the left instead of vindicating its economic worldview
#expands(0.72) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 46 - Austrian business cycle theory blamed politics and left crisis victims unsupported
#complicates(0.72) — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 395 - Economists had no consensus explanation for the 2008 financial crisis
#corroborates(0.72) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 448 - Implementing genuine Austrian policy would require abolishing fractional reserve banking
#qualifies(0.72) — Mark Blyth, Austerity, 400