Austrian Business Cycle Theory

Preface

THIS MONOGRAPH HAS COME ABOUT because of my inability to find a book like this. When I teach Principles of Macroeconomics, I present the topic from several points of view. Modern textbooks tend to cover Keynesianism, monetarism, and (maybe) New Keynesianism and then to offer a modern synthesis of them. Since the Austrian view of the business cycle is always lacking from these texts, I am compelled to assign a collection of outside readings to supplement my lectures. What I would like to assign, something short and up to date, unfortunately does not exist. This monograph, a product of my lectures to my students, is designed to fill that needed gap.

The purpose of this monograph is to construct a model to illustrate macroeconomics from an Austrian perspective. It begins by laying out the foundational components that will be used in the model. Once the foundation is laid, a basic Austrian model of the macroeconomy is presented. To this model more detail is progressively added to construct an intermediate-level model. Advanced questions critiquing the model follow. The questions show that while the intermediate model represents a good principles-level understanding of how Austrians see business cycles, it leaves open many directions for advanced students to explore. At significant points throughout, the Austrian approach is contrasted with the mainstream. Readings for further inquiry and discussion are provided in the final section.

I want to thank everyone who has helped with this project. In particular, I want to thank Brian Balfour, Robert Batemarco, Michael Carpenter, Mateusz Machaj, Daniella Bassi, and Mark Thornton for reading and commenting on the manuscript. My deepest thanks go to my tireless editor (but usually tired wife), Heidi, who helps my dreams become real.