Austrian theory unfolding before our eyes

In my “Rethinking the State” column in this week’s Old Gold & Black, I attempted to explain the basics of the Austrian theory of the business cycle. One of the points I tried to highlight was the Austrian theory’s idea that during the government-generated boom, there will be a massive over-investment in capital goods like buildings and land. Thus during the bust, which is actually just the market trying to apply accurate prices to goods which were overpriced due to excessive demand during the boom, these capital industries (along with banks, which were the medium of the boom) will be hit the hardest. Well guess what industry is really getting hit hard these days? You guessed it — construction. A CBS affiliate in California has reported that a huge amount of former construction workers now seem to be permanantly unemployed. Multiple other sources, such as Reuters and Colliers CRE, confirm that this massive hit taken by the construction industry has occurred nationwide. While many are scrambling around unaware of why such a thing would occur, libertarians of the Austrian School of Economics are watching unfold exactly what they have seen coming for a long, long time.

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