Influence
The Austrian explanation of the business cycle varies significantly from the current mainstream understanding of business cycles, and is generally rejected by mainstream economists.
According to Nicholas Kaldor, Hayek's work on the Austrian business cycle theory had at first "fascinated the academic world of economists," but attempts to fill in the gaps in theory led to the gaps appearing "larger, instead of smaller," until ultimately "one was driven to the conclusion that the basic hypothesis of the theory, that scarcity of capital causes crises, must be wrong." After 1941, Hayek abandoned his research in macroeconomics altogether, focusing instead on issues of the economics of information, political philosophy, and the theory of law.
Lionel Robbins, who had embraced the Austrian theory of the business cycle in The Great Depression (1934), later regretted having written that book and accepted many of the Keynesian counterarguments.
The late-2000s financial crisis has resulted in a revival of interest in the Austrian business cycle theory, but has also resulted in a revival of interest of theories more critical of Austrian theory, such as those promoted by Keynesian economics. According to Austrian School supporters, over 25 Austrian School economists are publicly on record as having accurately predicted a housing bubble prior to new home prices reaching their peak in March 2007. Austrian economics received media attention after Congressman and Presidential candidate Ron Paul, was praised by MSNBC's Joe Scarborough for predicting the housing bubble and financial crisis and Paul subsequently appeared on Scarborough's 'Morning Joe' show and credited his understanding of Austrian economics for predicting the financial crisis.
Read more about this topic: Austrian Business Cycle Theory
Famous quotes containing the word influence:
“Cultural expectations shade and color the images that parents- to-be form. The baby product ads, showing a woman serenely holding her child, looking blissfully and mysteriously contented, or the television parents, wisely and humorously solving problems, influence parents-to-be.”
—Ellen Galinsky (20th century)
“At present cats have more purchasing power and influence than the poor of this planet. Accidents of geography and colonial history should no longer determine who gets the fish.”
—Derek Wall (b. 1965)
“We could not well camp higher, for want of fuel; and the trees here seemed so evergreen and sappy, that we almost doubted if they would acknowledge the influence of fire; but fire prevailed at last, and blazed here, too, like a good citizen of the world.”
—Henry David Thoreau (1817–1862)