Austrian Business Cycle Theory

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Also known as ABCT. A series of sham theories supporting conservative ideological positions.

Links

Austrian Business Cycle Theory: The Various Versions and a Critique [More...]
10 versions of ABCT over roughly 100 years, and how they all suffer from 4 theoretic flaws.
My Posts on the Austrian Business Cycle Theory (ABCT) [More...]
About 30 posts critical of ABCT by Lord Keynes (pseudonym) at the blog "Social Democracy For The 21st Century: A Post Keynesian Perspective".
The Hangover Theory: Are recessions the inevitable payback for good times? [More...]
Call it the overinvestment theory of recessions, or "liquidationism," or just call it the "hangover theory." It is the idea that slumps are the price we pay for booms, that the suffering the economy experiences during a recession is a necessary punishment for the excesses of the previous expansion... hangover theory is disastrously wrongheaded.
What was the Greatest Mistake of Lionel Robbins’s Life? [More...]
Lionel Robbins (who brought Hayek to LSE) recanted his opposition to Keynes and support of Austrian business cycle theory, considering it the greatest error of his career.


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Quotations

The book, as it stands, seems to me to be one of the most frightful muddles I have ever read, with scarcely a sound proposition in it beginning with page 45 [Hayek provided historical background up to page 45; after that came his theoretical model]... It is an extraordinary example of how, starting with a mistake, a remorseless logician can end up in bedlam...
John Maynard Keynes, criticizing Hayek's "Prices and Production" in "The Pure Theory of Money: A Reply to Dr. Hayek".
... I think the Austrian business-cycle theory has done the world a great deal of harm. If you go back to the 1930s, which is a key point, here you had the Austrians sitting in London, Hayek and Lionel Robbins, and saying you just have to let the bottom drop out of the world. You’ve just got to let it cure itself. You can’t do anything about it. You will only make it worse. You have Rothbard saying it was a great mistake not to let the whole banking system collapse. I think by encouraging that kind of do-nothing policy both in Britain and the United States, they did harm.
Milton Friedman, interviewed in Barron's (August 24, 1998)
"Austrian theory" of the business cycle -- a theory that I regard as being about as worthy of serious study as the phlogiston theory of fire.
Paul Krugman, "The Hangover Theory: Are recessions the inevitable payback for good times?"