The microfoundations of the microfoundations of Austrian Business Cycle Theory

Peter Lewin

The Review of Austrian Economics, 2020, vol. 33, issue 3, No 6, 375-382

Abstract: Abstract The Austrian School interpretation of the Keynes-Hayek debate runs counter to the conventional wisdom that Hayek “lost” the debate. Austrians maintain that they have the substantive theoretical high ground and the Keynesian perspective to this day fails to comprehend it. But in all of the many variations and repetitions of the ABCT, though of episodic interest with every crisis, the ABCT has failed to decisively persuade the majority, including even those critical of the Keynesian position. This paper investigates why this might be so. It outlines aspects of Keynes’s challenge to the stability of the free-market that appears to have been mostly neglected by the Austrians. This concerns mainly the question of the absence of futures markets to coordinate intertemporal supplies of and demand for specific goods and services. I consider a different way of looking at the role of financial markets, one that focuses on entrepreneurial competition as an arbitrating process rather than financial markets coordinating entrepreneurial plans over time. Finally, I consider the implications of this view for the ABCT claims about the time-structure of production.

Keywords: Austrian business cycle; Expectations; Intertertemporal coordination; Keynes-Hayek (search for similar items in EconPapers)
JEL-codes: B20 B22 B31 B53 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s11138-018-0430-7

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