For nearly 80 years, the field of macroeconomics has largely been shaped by the aftermath of the Keynesian revolution. Many economists have argued that this revolution and the subsequent internal and external disputes it has sparked have had the unfortunate side effect of crowding out much of what was good in macro-level analysis before it, leading to the dissatisfactory state of macroeconomics we have today. In the search for alternative paths for macroeconomics, I focus on two separate but compatible traditions: monetary disequilibrium (MD) theory and the Austrian business cycle theory (ABCT). I argue that scholars in these traditions employed a far richer micro-theoretic explanation for the business cycle well before Keynes’s General Theory. Unfortunately, their ideas were not united in time to mount a sufficient counterattack to the Keynesian crusade. My goal is to unite the best elements of these two traditions by providing what I believe is the “missing link” that can help connect these alternative paths: free banking theory.
The author would like to thank Peter J. Boettke, Lawrence H. White, Kevin D. Hoover, Daniel J. Smith, Patrick Newman, the editor and two anonymous referees at RHETM, and the participants at the Graduate Student Paper Workshop at George Mason University for their helpful comments. The usual caveat applies.
Burns, S. (2016), "The Road Less Traveled: Monetary Disequilibrium, Austrian Capital Theory, and the “Keynesian Diversion”", Research in the History of Economic Thought and Methodology (Research in the History of Economic Thought and Methodology, Vol. 34B), Emerald Group Publishing Limited, Bingley, pp. 337-363. https://doi.org/10.1108/S0743-41542016000034B012
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