The business cycle · Course 12 of 15 · Stage 5
The case against the theory
The strongest published objections to the Austrian theory of the cycle, each stated as its author stated it, with the replies where replies exist.
A tradition that only prints its own case is advertising. This course is the condition on which the rest of the track is worth reading, and it holds itself to a rule: each criticism is stated at full strength, in the terms its author used, before any answer is given.
Eight lessons. The first says why the course exists and what standard it is trying to meet. Then six objections, roughly in the order they were made. Sraffa on whether there is a single natural rate to be below. Kaldor on the mechanism and on the evidence. The rational expectations objection, which is the one most economists reach for first. Friedman's plucking model, which is awkward for any theory in which the size of the boom sets the size of the bust. Tullock and Caplan, both writing from inside the liberal tradition rather than against it. Krugman's hangover argument, which is the objection a general reader is most likely to have met.
The last lesson is the empirical record: every published test this course could obtain, with its sample, its period, its method and its result, and no summary verdict at the end of the table.
Where a reply exists it is given and attributed. Where this course could not obtain a paper it says so in that lesson rather than paraphrasing from memory, and where no good reply exists it says that too.
Nothing here is a policy position, a forecast, or a view about any security. ValueScreener is a research tool, and this academy is free to read without an account.
A theory, not a measurement
The case against the theory is 8 lessons on the argument about the theory: what its critics say, what it answers and what it has not answered. A theory you have tested against its objections is still not a measurement, and no filing of yours has been read on these pages.
Related
- What the tests actually found is the lesson to read if you only read one: every test this course could obtain, with its sample and its finding.
- The empirical objection, in full is the method objection, which is separate from the objections here and comes earlier in the track.
See our methodology for how the product reads a filing and what it refuses to compute.