Booms, Busts, and the Boundaries of Economics

by Jonathan Newman

Steven Horwitz has written about the limits of Austrian Business Cycle Theory (ABCT). He outlines three limits of ABCT as he sees it:

  1. “[ABCT] tells us nothing about exactly when the boom will break or the precise factors that will cause it.”
  2. “ABCT tells us little to nothing about how the bust will play out.”
  3. “Not every recession requires the ABCT as an explanation, nor can the ABCT explain everything about any particular recession.”

Horwitz then proposes that we take a broader approach to explaining business cycles, including monetarism, regime uncertainty, and the effects of intervention. He has brought up great points that can lead us to a discussion not just on business cycles, but the nature of economics and history.

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