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The microfoundations of the microfoundations of Austrian Business Cycle Theory

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  • Peter Lewin

    (University of Texas at Dallas)

Abstract

The Austrian School interpretation of the Keynes-Hayek debate runs counter to the conventional wisdom that Hayek “lost” the debate. Austrians maintain that they have the substantive theoretical high ground and the Keynesian perspective to this day fails to comprehend it. But in all of the many variations and repetitions of the ABCT, though of episodic interest with every crisis, the ABCT has failed to decisively persuade the majority, including even those critical of the Keynesian position. This paper investigates why this might be so. It outlines aspects of Keynes’s challenge to the stability of the free-market that appears to have been mostly neglected by the Austrians. This concerns mainly the question of the absence of futures markets to coordinate intertemporal supplies of and demand for specific goods and services. I consider a different way of looking at the role of financial markets, one that focuses on entrepreneurial competition as an arbitrating process rather than financial markets coordinating entrepreneurial plans over time. Finally, I consider the implications of this view for the ABCT claims about the time-structure of production.

Suggested Citation

  • Peter Lewin, 2020. "The microfoundations of the microfoundations of Austrian Business Cycle Theory," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 33(3), pages 375-382, September.
    • Handle: RePEc:kap:revaec:v:33:y:2020:i:3:d:10.1007_s11138-018-0430-7
    DOI: 10.1007/s11138-018-0430-7
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    References listed on IDEAS

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    1. Carilli, Anthony M & Dempster, Gregory M, 2001. "Expectations in Austrian Business Cycle Theory: An Application of the Prisoner's Dilemma," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 14(4), pages 319-330, December.
    2. Peter Lewin, 2016. "Plan-coordination: Who needs it?," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 29(3), pages 299-313, September.
    3. Lawrence H. White, 2008. "Did Hayek and Robbins Deepen the Great Depression?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(4), pages 751-768, June.
    4. repec:ucp:bkecon:9780226320625 is not listed on IDEAS
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    More about this item

    Keywords

    Austrian business cycle; Expectations; Intertertemporal coordination; Keynes-Hayek;
    All these keywords.

    JEL classification:

    • B20 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - General
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian

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