Quarterly Journal of Austrian Economics

Deflation: When Austrians Become Interventionists

The Quarterly Journal of Austrian Economics

Volume 6, No. 4 (Winter 2003)

 This paper examines what Austrian economists think about deflation and offers a critique of their views. This seems to be of particular importance because Austrians differ in their opinions about deflation, quite in contrast to most other subjects, especially inflation. Six Austrian economists, especially Rothbard, refute most arguments that mainstream economists mention against deflation. To differing degrees they are much less deflation-phobic than the mainstream. Nevertheless, when it comes to deflation, they diverge very much and do not staunchly champion the free market. In contrast to their laissez-faire views on most other subjects, in order to fight deflation, they come up with an arsenal of state interventions, like government bailouts, redistribution of gold, amnesty and privileges for the banking system, government-planned monetary reforms, public works, credit expansion, and inflation. Curiously, with these interventions they want to prevent the liberating deflation, i.e., the free market reaction to an abstention of all government interventions into the monetary system, especially the fractional reserve banks’ privileges and  amnesty. They fail to see that deflation is a fast, smooth, direct, and ethical way to a sound financial system. 


Bagus, Philipp.Deflation—When Austrians Become Interventionists.” The Quarterly Journal of Austrian Economics 6, No. 4 (Winter 2003) 19–35.

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