The popular press has adopted a more optimistic tone regarding economic conditions. The reasons for this are clear. It appears that the current recovery is picking up pace. Recent reports indicate that second quarter GDP for this year increased by 3.3%, instead of the earlier 3.1% estimate. This is more than double the GDP growth rate from the
As pointed out by Professor Kirzner (2001, pp. 137, 140), Mises did not start out with the intent to develop a theory of the trade cycle. The trade cycle argument first appeared in the last few pages of The Theory of Money and Credit (1912). This early development of Austrian business cycle theory was a direct manifestation of Mises’s rejection of
The current economic conditions in the U.S. compared to the conditions of the period from 1995–2000 have generated, according to Edmund Phelps (” False Hopes for the Economy and False Fears ,” Wall Street Journal , June 3, 2003), two false hopes for the economy and two false fears. But is he justified in his interpretation of these false hopes and
Since the introduction in 1912 of Ludwig von Mises’s Austrian Business Cycle Theory (ABCT) in his book, The Theory of Money and Credit , it has been subject to relentless criticism. According to the ABCT the artificial lowering of interest rates by the central bank leads to a misallocation of resources on account of the fact that businesses
In the Austrian school’s theory of the business cycle, the “boom”—even though it sounds good—is the cause of the business cycle and all its attendant problems. The “bust”—even though it sounds bad—is the recovery where all the problems of the business cycle are put right. The Austrian view is shared by many economy and stock market professionals
The Free Market 21, no. 3 (March 2003) The once unsoiled House of Greenspan, feted as it was by the yeomen of the New Economy with its attendant mythology, now finds itself smeared by criticism that it created the stock market boom and is therefore responsible for the bust that has naturally followed. In Austrian circles, such criticism has
The Free Market 21, no. ( 2003) Three years into one of the most severe bear markets in history, the most striking feature of the typical economic discussion is the persistent state of denial about how perilous our situation truly is. Also notable is the unthinking promulgation of a species of economic fallacies which, though long since
The Free Market 23, no. 7 (July 2003) No one can argue about the current moribund economy, complete with falling stock prices, nonexistent profits, layoffs, airline bankruptcies, and exploding federal and state budget deficits. People certainly have argued about the cause of this downturn, but few people have accurately pointed out why there is
The Free Market 23, no. 8 (August 2003) There is always a bubble someplace. In a world of fiat currency and fractional-reserve banking, where money is effortlessly multiplied and pyramided, the sequence of boom and bust become inevitable, like the sequence of the seasons. In this system, the government cannot prevent the expected corrections
When economic times are good, people pay very little attention to the work of economists. Only when an economy experiences a downturn do people come to economists asking how this latest disaster happened and how do we get out of it. Unfortunately, the economist tends to speak in a cryptic language using references to things like the NAIRU, the
What is the Mises Institute?
The Mises Institute is a non-profit organization that exists to promote teaching and research in the Austrian School of economics, individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard.
Non-political, non-partisan, and non-PC, we advocate a radical shift in the intellectual climate, away from statism and toward a private property order. We believe that our foundational ideas are of permanent value, and oppose all efforts at compromise, sellout, and amalgamation of these ideas with fashionable political, cultural, and social doctrines inimical to their spirit.