Talk:Austrian business cycle theory/Archives/2008/November

Great Depression

Mark Skousen writes that: "During the 1920s, there was a school of economics that did predict a monetary crisis: specifically, the up and coming generation of Austrian economists, Ludwig von Mises and Friedrich Hayek. Mises and Hayek argued, contrary to Fisher, that monetary inflation and easy-money policies are inherently unstable and create structural imbalances in the economy that cannot last. […] When the dire predictions of Mises and Hayek came true in 1929-32, the economics profession paid attention." This is confirmed by The Royal Swedish Academy of Sciences when they say: "He tried to penetrate more deeply into the business cycle mechanism than was usual at that time. Perhaps, partly due to this more profound analysis, he was one of the few economists who gave warning of the possibility of a major economic crisis before the great crash came in the autumn of 1929." So please explain why is contentious to say that Mises and Hayek predicted the Great Depression. Also, Block and Barnett do not say that the ABCT was never discussed by mainstream economists. The ABCT was very much in spotlight during the Great Depression, and only with the rise of Keynesianism it fell out of the focus. -- Vision Thing -- 11:46, 26 October 2008 (UTC)

We cannot say that they predicted the Great Depression. We can say that people believe they did, or that they believe they did. I'll grant you that they predicted a financial crisis, sure, but whether they predicted the Great Depression is impossible to say -- especially since the consensus of mainstream economists is that the policies advocated by Austrians (tightening the supply of credit) actually caused the Great Depression. II | (t - c) 20:52, 29 October 2008 (UTC)

Ok, I suppose that saying that they predicted a "major economic crisis" would be a more correct way of presenting this. -- Vision Thing -- 18:14, 1 November 2008 (UTC)

If you predict a "major economic crisis", eventually one will happen. Doomsayers can always point to some prediction that they made correctly, but they don't mention those that they did not get right. Austrians also predicted a major economic crisis in the early 1990's following the easy money policies in 1989. What happened instead was a long period of sustained economic growth, budget surpluses and an improvement of the trade deficit.LK (talk) 03:04, 13 November 2008 (UTC)