“The Mises-Hayek theory of the business cycle — and of our recent housing bubble in particular — is gaining more and more adherents in the “real world.” To give anecdotal evidence: Five years ago, when I’d write a Mises Daily article, the fan mail would pour in from college students. But now, I get questions from hedge-fund managers and others working in the financial sector. Austrian economics is no longer a hobby; this is serious stuff.
Because of the popularity of the Austrian message — where Exhibit A is the Ron Paul campaign — mainstream economists are taking the time to explain why (in their opinion of course) the Mises-Hayek theory is nonsense. In the past I’ve answered Tyler Cowen and Paul Krugman’s objections, but today’s focus will be the recent critique penned by Australian economist John Quiggin.
Quiggin’s piece deserves careful scrutiny. In the interest of brevity, I am going to dive right into his objections. If you need a more introductory exposition of Austrian business-cycle theory (ABCT), try this collection or, if you prefer a PowerPoint presentation, check out Roger Garrison’s amazing creations.” (Read more from mises.org)