Don’t forget the Austrian school

Posted on Tuesday, February 3, 2009 at 11:35 am

boudreaux_s.jpgDon Boudreaux: Unlike Keynesians and monetarists, Austrians reject the idea that recessions are due chiefly to aggregate demand being too low. Instead, Austrians focus on the time it takes to correct any misdirections of resources caused by distortions in the complex pattern of individual prices.  We have it on the authority of the late Sir John Hicks, himself a Nobel laureate economist, that in the mid-1930s “the new theories of Hayek were the principal rival of the new theories of Keynes.” Perhaps it’s time to look again, not at Keynes’s work, but at Hayek’s. Here.