Robert Murphy addresses Australian economist John Quiggin’s recent critique of the Austrian theory of the business cycle on the Mises Daily blog, explaining the problems with the objections coming from Quiggin, who writes:
To sum up, although the Austrian School was at the forefront of business cycle theory in the 1920s, it hasn’t developed in any positive way since then. The central idea of the credit cycle is an important one, particularly as it applies to the business cycle in the presence of a largely unregulated financial system. But the Austrians balked at the interventionist implications of their own position, and failed to engage seriously with Keynesian ideas.
The result (like orthodox Marxism) is a research program that was active and progressive a century or so ago but has now become an ossified dogma. Like all such dogmatic orthodoxies, it provides believers with the illusion of a complete explanation but cease to respond in a progressive way to empirical violations of its predictions or to theoretical objections.
Murphy is careful to note that he does not propose to hold up the Austrian theory as an infallible “work of art that has no flaws,” but he provides an able and helpful defense which may be read in full here.Published in