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:
“The Spirit of Place [does not] exert its full influence upon a newcomer until the old inhabitant is dead or absorbed. So America.... The moment the last nuclei of Red [Indian] life break up in America, then the white men will have to reckon with the full force of the demon of the continent.”
—D.H. (David Herbert)
“Books, the oldest and the best, stand naturally and rightfully on the shelves of every cottage. They have no cause of their own to plead, but while they enlighten and sustain the reader his common sense will not refuse them. Their authors are a natural and irresistible aristocracy in every society, and, more than kings or emperors, exert an influence on mankind.”
—Henry David Thoreau (1817–1862)
“Perhaps I stand now on the eve of a new life, shall watch the sun rise and disappear behind a black cloud extending out into a grey sky cover. I shall not be deceived by its glory. If it is to be so, there is work and the influence that work brings, but not happiness. Am I strong enough to face that?”
—Beatrice Potter Webb (1858–1943)