Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

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7A CRITIQUE OFMONETARIST ANDKEYNESIAN THEORIESIn this chapter we will criticize alternative theoreticaldevelopments aimed at explaining economic cycles. Morespecifically, we will consider the theories of the two mostdeeply-rooted schools of macroeconomics: the MonetaristSchool and the Keynesian School. According to the generalview, these two approaches offer alternative, competing explanationsof economic phenomena. However from the standpointof the analysis presented here, they suffer from very similardefects and can thus be criticized using the same arguments.Following an introduction in which we identify what webelieve to be the unifying element of the macroeconomicapproaches, we will study the monetarist position (includingsome references to new classical economics and the school ofrational expectations) and then the Keynesian and neo-Ricardianstances. With this chapter we wrap up the most importantanalytical portion of the book. At the end, as an appendix, weinclude a theoretical study of several peripheral financial institutionsunrelated to banking. We are now fully prepared tograsp the different effects they exert on the economic system.1INTRODUCTIONThough most textbooks on economics and the history ofeconomic thought contain the assertion that the subjectivist509
510 Money, Bank Credit, and Economic Cyclesrevolution Carl Menger started in 1871 has been fullyabsorbed by modern economic theory, to a large extent thisclaim is mere rhetoric. The old “objectivism” of the ClassicalSchool which dominated economics until the eruption of themarginalist revolution continues to wield a powerful influence.Moreover various important fields within economic theoryhave until now remained largely unproductive due to theimperfect reception and assimilation of the “subjectivistview.” 1Perhaps money and “macroeconomics” (a term of varyingaccuracy) constitute one of the most significant areas of economicsin which the influence of the marginalist revolutionand subjectivism has not yet been noticeable. In fact with theexception of Austrian School theorists, in the past macroeconomicscholars have not generally been able to trace their theoriesand arguments back to their true origin: the action ofhuman individuals. More specifically, they have not incorporatedthe following essential idea of Menger’s into their models:every action involves a series of consecutive stages which theactor must complete (and which take time) before he reacheshis goal in the future. Menger’s most important conceptual1 For example, when Oskar Lange and other theorists developed theneoclassical theory of socialism, they intended it to apply Walras’smodel of general equilibrium to solve the problem of socialist economiccalculation. The majority of economists believed for many years thatthis issue had been successfully resolved, but recently it became cleartheir belief was unjustified. This error would have been obvious hadmost economists understood from the beginning the true meaning andscope of the subjectivist revolution and had they completely imbuedthemselves with it. Indeed if all volition, information, and knowledge iscreated by and arises from human beings in the course of their free interactionwith other actors in the market, it should be evident that, to theextent economic agents’ ability to act freely is systematically limited (theessence of the socialist system is embodied in such institutional coercion),their capacity to create, to discover new information and to coordinatesociety diminishes, making it impossible for actors to discover thepractical information necessary to coordinate society and make economiccalculations. On this topic see Huerta de Soto, Socialism, EconomicCalculation and Entrepreneurship, chaps. 4–7, pp. 99–273.
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MONEY,BANK CREDIT,ANDECONOMIC CYCLE
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CONTENTSPREFACE TO THE THIRD ENGLIS
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xiiMoney, Bank Credit, and Economic
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xivMoney, Bank Credit, and Economic
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xviMoney, Bank Credit, and Economic
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xviiiMoney, Bank Credit, and Econom
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PREFACE TO THESECOND ENGLISH EDITIO
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Preface to the Second English Editi
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PREFACE TOTHE THIRDSPANISH EDITIONI
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Preface to the Third Spanish Editio
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xliiMoney, Bank Credit, and Economi
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INTRODUCTIONThe economic analysis o
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Introductionxlviiand foreign exchan
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IntroductionxlixThis book comprises
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Introductionrecurrent phenomenon. I
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Introductionand Professors Hans-Her
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2 Money, Bank Credit, and Economic
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4THE CREDITEXPANSION PROCESSThis ch
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The Credit Expansion Process 169dif
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6ADDITIONALCONSIDERATIONSON THE THE
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A Critique of Monetarist and Keynes
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8CENTRAL AND FREEBANKING THEORYThis
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9A PROPOSAL FOR BANKINGREFORM: THE
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A Proposal for Banking Reform:The T
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BIBLIOGRAPHYAbrams, M.A., Money in
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Bibliography 815Bajo Fernández, M.
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Bibliography 817Borch, K.H., Econom
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Bibliography 819Coronel de Palma, L
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Bibliography 821N. Durlauf and Lawr
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Bibliography 823Galiani, F., Della
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Bibliography 825Graham, F.D., “Pa
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Bibliography 827——, Prices and
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Bibliography 829translation by N. K
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Bibliography 831——, “Keynes
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Bibliography 833Russian edition by
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Bibliography 835Keeler, J., “Empi
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Bibliography 837——, “On Crisi
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Bibliography 839——, “Professo
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Bibliography 841Miller, H.E., Banki
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Bibliography 843Neira, Alonzo, M.A.
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Bibliography 845Raguet, C., “Repo
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Bibliography 847——, “The Myth
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Bibliography 849——, “Banking
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Bibliography 851M.C. Marcuzzo (Chel
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Bibliography 853——, “A Critiq
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Bibliography 855Walker, A., The Sci
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INDEX OF SUBJECTSAccelerator princi
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Index of Subjects 859Banking reform
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Index of Subjects 861objection to t
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Index of Subjects 863Goal, concept
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Index of Subjects 865See also Fract
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Index of Subjects 867Plan, definiti
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Index of Subjects 869Tragedy of the
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