The role of ideal types in Austrian Business Cycle theory and how it relates to the 2008 recession
On Wednesday and Thursday I read Steven Horwitz’s working paper “The Microeconomic Foundations of Macroeconomic Disorder: An Astrian Perspective on the Great Recession of 2008” and Horwitz and Gene Callahan’s working paper “The Role of Ideal Types in Austrian Business Cycle Theory.” If you have the time and interest I’d recommend checking them out 40 pages combined, with references. The reason I’m bothering to post about them is that they both cover, in different ways, misunderstandings of the Austrian business cycle theory and it amazes me that after nearly 100 years in existance in one form or another there is still such a difficulty. It’s as if Krugman and others never even bothered to read Mises and other’s works. Perhaps they didn’t and that’s the problem.
However, it could be more than that. Perhaps written economic theory isn’t as far along as I thought. For years I’ve talked about how government indecisiveness on policy and the fact that there are large market players (ie the Federal Reserve) likely helped prolong the Great Depression along with other panics in which those two got involved. I figured those were well established theorys but it turns out that it was only in 2006 that Robert Higgs coined the term “regime uncertainty” and in the 90’s and 00’s ideal type of the “Big Player” by Koppl, Yeager and Butos. Perhaps it just took a while till someone actually wrote papers regarding those topics… but it seems odd that those concepts aren’t more established. Then again I could just be ignorant of their history. I’ve not done any addition research into them.
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