This young Austrian is having quite a year. In July he won LvMI’s 2012 Douglas E. French Prize, “for the student who emerges from the Mises University oral examinations with the best record, as chosen by the examining committee.” And just last week, he won the Society for the Development of Austrian Economics’ 2012 Carl Menger Essay Contest for his “The Long Depression of 1873-1879: An Austrian Examination”. Fantastic work, Patch!
Newman writes: ”Austrian business cycle theory explains the boom and bust that stretched across the time period analyzed. Following a run up in the credit expansion that occurred in the early 70s, a visible widening in both relative prices and production compared to the late 60s emerged that fostered multiple malinvestments, mostly concentrated in the railroads.(...) The bust also showed sypmtoms of an Austrian contraction, with the decline in output concentrated in industries that overexpanded during the boom.”
Newman concludes that ,”the late 1870s was not a period of stagnation and depression”. In other words, the alleged “Long Depression”, as Rothbard also argued, is a myth.
Another economics student congratulated Newman for contributing “the kind of empirical work Austrians need.” But the phrase “empirical work” is misleading, as it conveys an “empirical” approach to developing economics. Newman himself rightly refers to his paper, not as “empirical work”, but as “history”. He stakes out a decidedly Misesian methodological position when he writes:
“It is absolutely imperative to remind the reader that the above study in no way confirms the validity of Austrian Business Cycle Theory. Whether or not a theory is logically correct can only be found via rigorous theoretical testing and scrutiny. The goal of economic history is not to test various theorems but to show that they apply to a specific scenario. And this paper has hoped to provide just that.”
Looking forward to great things from this outstandingly bright Misesian.
