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De Omnibus Dubitandum - Lux Veritas

Friday, September 13, 2013

Only Austrian Theory Can Explain and Expose Booms and Bubbles

Mises Daily: Friday, September 13, 2013 by Mark Thornton
Mises Institute: While elected officials and various pundits are clear that they believe the Keynesians can solve the current crisis, do the Keynesians have a theory that explains what caused the crisis in the first place?
Mark Thornton: Keynesian business cycle theories are based on the idea that cycles are caused by changes in aggregate demand. This theory, however, provides no purely economic cause for business cycles. The instigator or cause in Keynesian theory is a psychological factor that is driven by so-called “animal spirits.” Small changes in entrepreneurs’ optimism and pessimism affect their investment decisions and can spread and snowball out of control causing sharp increases and decreases in aggregate demand, profits, and employment…..To Read More….

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