by Rothbard
[Title Page and Publication Information]: Title page and publication details for Murray Rothbard's essay on economic depressions, including publisher information, subscription rates, and editorial credits for the Constitutional Alliance. [The Semantics of Economic Downturns]: Rothbard critiques the linguistic shift from 'depression' to 'recession' and 'slowdown,' arguing that modern economists use euphemisms to mask economic failures. He introduces the Keynesian 'New Economics' approach to managing booms and busts through government spending and taxation, while noting the shared interventionist mindset among contemporary economic advisors like Paul McCracken. [The Failure of Market-Based Explanations and the Entrepreneurial Function]: The author examines the origins of business cycle theory, noting that while Marx correctly identified the timing of cycles with the Industrial Revolution, he wrongly blamed the free market. Rothbard argues that general economic theory cannot explain the recurring 'cluster of error' among entrepreneurs during depressions, nor why capital goods industries are hit harder than consumer goods, suggesting that standard underconsumption theories are insufficient. [The Ricardian Theory of Banking and Credit Expansion]: Rothbard traces the roots of a correct depression theory to Hume and Ricardo, focusing on how commercial banks expand credit beyond their gold reserves. This expansion leads to an inflationary boom, a deficit in the balance of payments, and an eventual gold outflow that forces banks to contract credit, triggering a necessary but painful depression-adjustment period. He emphasizes that this cycle is enabled by government-sponsored central banking rather than the free market. [The Austrian Theory of the Business Cycle]: This section details the 'Austrian' theory developed by Mises and Hayek, explaining how central bank intervention artificially lowers interest rates below the level determined by time preference. This misleads businessmen into overinvesting in higher-order capital goods (malinvestment) for which there are insufficient real savings. The depression is revealed as the market's way of liquidating these unsound investments once consumers reassert their actual consumption-to-saving preferences. [The Misesian Cure and Historical Application]: Rothbard outlines the Misesian prescription for depression: a strict 'laissez-faire' policy where the government stops inflating and avoids propping up failing firms or wages. He reinterprets the Great Depression not as a failure of capitalism, but as a result of 1920s credit expansion followed by the interventionist 'New Deal' policies of both Hoover and Roosevelt. He concludes by calling for a renaissance of Austrian theory to replace failing Keynesian models.
Title page and publication details for Murray Rothbard's essay on economic depressions, including publisher information, subscription rates, and editorial credits for the Constitutional Alliance.
Read full textRothbard critiques the linguistic shift from 'depression' to 'recession' and 'slowdown,' arguing that modern economists use euphemisms to mask economic failures. He introduces the Keynesian 'New Economics' approach to managing booms and busts through government spending and taxation, while noting the shared interventionist mindset among contemporary economic advisors like Paul McCracken.
Read full textThe author examines the origins of business cycle theory, noting that while Marx correctly identified the timing of cycles with the Industrial Revolution, he wrongly blamed the free market. Rothbard argues that general economic theory cannot explain the recurring 'cluster of error' among entrepreneurs during depressions, nor why capital goods industries are hit harder than consumer goods, suggesting that standard underconsumption theories are insufficient.
Read full textRothbard traces the roots of a correct depression theory to Hume and Ricardo, focusing on how commercial banks expand credit beyond their gold reserves. This expansion leads to an inflationary boom, a deficit in the balance of payments, and an eventual gold outflow that forces banks to contract credit, triggering a necessary but painful depression-adjustment period. He emphasizes that this cycle is enabled by government-sponsored central banking rather than the free market.
Read full textThis section details the 'Austrian' theory developed by Mises and Hayek, explaining how central bank intervention artificially lowers interest rates below the level determined by time preference. This misleads businessmen into overinvesting in higher-order capital goods (malinvestment) for which there are insufficient real savings. The depression is revealed as the market's way of liquidating these unsound investments once consumers reassert their actual consumption-to-saving preferences.
Read full textRothbard outlines the Misesian prescription for depression: a strict 'laissez-faire' policy where the government stops inflating and avoids propping up failing firms or wages. He reinterprets the Great Depression not as a failure of capitalism, but as a result of 1920s credit expansion followed by the interventionist 'New Deal' policies of both Hoover and Roosevelt. He concludes by calling for a renaissance of Austrian theory to replace failing Keynesian models.
Read full text