Very Good Review of Austrian economics | The Austrian Theory of the Trade Cycle and Other Essays

Powerful and Remarkably Timely | The Austrian Theory of the Trade Cycle and Other Essays | Ludwig von Mises, Murray N. Rothbard, ...

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	• The Austrian Theory of the Trade Cycle and Other Essays Ludwig von Mises, Murray N. Rothbard, ... Ludwig Von Mises Inst, 1996 - 125 pages average customer review:based on 7 reviews view larger image
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highly recommended

Austrian macro-economics without any criticisms

A lovely succinct account from four towers in a tradition of economics that is widely represented in the financial markets. Roger Garrison - himself a leading light in modern times - leads off with a brief overview. The nice thing is that Garrison manages to get it all across without resorting to waffle - another Austrian tradition.

In fact, in my view, Garrison is the star of this review since his ability to keep it simple is a tremendous asset. Anyone familiar with the dark mutterings of academics in Austrian academic journals will know exactly what I'm talking about.

Aside from Garrison, the pieces by Rothbard and Harberler are the best since they tackle the central issue of Trade Cycle theory - that any system run by central bankers is inherently unstable since their tinkering with interest rates leads directly to the business cycle. Much better to have a competitive banking system without a central bank and a curency tied to gold. That way credit expansions will never be explosive. Of course, what they don't tell you is that their proposals are inherently deflationary and force deficit countries to do all adjustment when they experience balance of payments problems.

Rothbard's piece sets out the mechanics of the Trade Cycle especially well and everyone should be able to understand what he's getting at without too much difficulty. It's no more difficult than the average economics course on an MBA programme. That's hardly difficult, is it?

Readers wishing to understand the micro-economics of the Austrian school should also check out some of the recent publications of one Israel Kirzner.

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Very Good Review of Austrian economics

Short and concise essay describing the real economic process and why business cycle occurs, contrary to unsatisfactory explanation by Keynesian economics. Recommended to read if you are interested in economics.

Powerful and Remarkably Timely

This is a very insightful collection of essays from many of the leading "Austrian School" trade economists. They run from essays in the 30s aimed at countering the wave of post-depression social planning to essays in the 70s arguing against Keynesian economics. The key economic insight across the essays is the temportal nature of the Austrian view of business cycles. An artificially low interest rate (mandated by banks or the central government) increases investment in primary goods. Before the capacity can be deployed, there's an increase in wages, which causes inflation in end products. The only end is a return to sounder money (the gold standard) and a cut back of the credit. The reader could easily extrapolate the market conditions described in the book to the current situation. As for the solution - it hasn't been tried, and unlike the symptoms of the problem (which have had empirical support), nobody knows if a switch to the gold standard will really solve the problem. Either way, the economics described are thought provoking, and worth a look. It is also timely given Ron Paul's support of these policies.

This recommendation does come with a few caveats... Know what you're getting into. This isn't a "Cover all" for Austrian theory. It's a series of essays, none of which can get into tremendous detail. That said, it's very deep. Even for the initiated, much of the book requires multiple reading to critically understand what's going on. Lastly, like most Austrian works, it is heavier on analysis than empirical data.

In all, it is worth the read to help the reader understand an important view of business cycles.

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Good intro

I'm pretty ignorant concerning economics, so much of this went over my head, but I think it might be about the simplest and most introductory view of the Austrian view you're going to get.

The Austrian School in a Nutshell

At last! An anthology from one of the most important schools of libertarian economics in a portable form! This book can be easily incorporated into a course on economics or banking.
And yet, "The Austrian Theory of the Trade Cycle" is a narrowly useful tool. It's like a tire gauge, that means everything when there's a problem with the tire, but tells nothing about gas or oil levels. I see few times when the average production supervisor, Sunday-school teacher or working mom would have occasion to read it.
In the introduction, Roger Garrison spells out the differences between the Austrian School and other movements in free-market economics. The Austrian School emphasizes the role of time in decision making. To think of an example, Joe wants to buy a car now that the interest rates are low. But if the interest rates are high, he'll put his money in the bank and wait a year until he replaces the family car.
Ludwig von Mises' essay, which lends its name to the book, reveals the international character of the Austrian School. The essay was translated out of the French, points back to the British Currency School, and alludes to the contribution of Knut Wicksell from Sweden. This theory was, nevertheless, developed by Austrians, beginning with Carl Menger. References to the University of Chicago and to the Ludwig von Mises Institute in Auburn, Alabama, bring the movement to a home in America.
The key point is that a boom produced and prolonged by easy bank money with government support will sooner or later contract into a bust when the easy money turns hard. Just ask any farmer who bought machinery on credit years ago, when inflation was rampant.
Gottfried Haberler demonstrates that economics is, in fact, difficult to reduce to mathematics. He points to how money is needed at different times as a product moves out of the ground through its production phases to the end user.
In contrast, Murray Rothbard tells us with sparkling satire why we no longer have "panics" and "depressions." He also gives insight on how a change in time preference changes interest rates; interest rates fall if enough buyers become savers.
Friedrich Hayek points to an insidious effect of inflation. Not is it more fun to be a debtor on a fixed-rate loan when inflation is high, but taxable profits are much higher than the profits are worth in reality. Easy money gives rise to inflation.
Roger Garrison finally draws a couple of price/quantity graphs in his summary, savings/investment graphs to be specific. Money created by the government has the same short-term effect as a genuine increase in savings, but genuine savings are lower because savers are coolly greeted by lower interest rates for their hard-earned money. The bust after the boom is a real let-down.
With my MBA from Campbell, this material is clearer and livelier to me than it would be to the man on the street.

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Booms and busts are not endemic to the free market, argues the Austrian theory of the business cycle, but come about through manipulation of money and credit by central banks. In this monograph, Austrian giants explain and defend the theory against alternatives. Includes essays by Mises, Rothbard, Haberler, and Hayek. In his later years, Professor Haberler distributed many of these monographs to friends and associates. New edition with an introduction by Roger Garrison and an index.

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