Finn Kydland and Edward C. Prescott (KP), the 2004 Nobel laureates in economics think that technological shocks can explain 70 percent of economic fluctuations in postwar US data. Unfortunately their quantitative methods are simplistic and ignore the real problem: central banking.
Central banks have done nothing to end the boom-and-bust cycle. Instead, their unscrupulous interventions in credit markets just prolong the boom. But it's a huge mistake to assume that bringing market interest rates to zero will create a perpetual boom.
Brazil's most severe recession in over a century, which lasted over two years and saw unemployment of nearly 12 percent, offers empirical support for the Austrian business cycle theory.
While Otaki appropriately criticizes stimulus spending, he inexplicably attributes Japanese stagnation to the failure to follow Keynes.
Can policy-induced deviations from the natural rate of interest increase roundaboutness in production? Mark Gertsen studies 28 developed economies using an ARDL model, and finds Austrian boom-bust dynamics.
Tomáš Frömmel contends that a negative inflation target combined with the Taylor Rule can be a non-distortionary monetary policy consistent with Austrian business cycle theory.
Even if the central bank policymakers could implement policies without error, Milton Friedman’s and Robert Lucas’s monetary schemes could not secure stable economic growth.
It is a huge mistake to call the repeating cycle of boom and bust a business cycle. That name implies the bust is the failure of markets and capitalism. But it is really due to monetary and credit inflation licensed and promoted by governments and central banks.
Easy-money policies pushed by central banks may be redirecting wealth away from investment, and toward greater production and consumption of cheap consumer goods. That's not "green."
A closer look at differences between Mises's and Schumpeter's economic theories suggests that their fundamental divergences have their origin in methodological and epistemological questions.
