"the methods used by much of mainstream economists have little to do with acting people, and so these methods do not yield conclusions that have the ring of truth."
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The central questions of economics have concerned the greatest thinkers since ancient Greece. And today, economic thinking is broken into many schools of thought: the Keynesians, the Post Keynesians, the New-Keynesians, the Classicals, the New Classicals (or Rational Expectations School), the Monetarists, the Chicago Public Choicers, the Virginia Public Choicers, the Experimentalists, the Game Theorists, the varying branches of Supply Sideism, and on and on it goes.
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The Theory of Money and Credit, published in 1912, elaborated on Menger, showing not only that money had its origin in the market, but that there was no other way it could have come about. Money and banking ought to be left to the market, and that government intervention can only cause harm.
In that book, which remains a standard work today. He argued that when the central bank artificially lowers interest rates, it causes distortions in the capital-goods sector of the structure of production. When malinvestments occur, an economic downturn is necessary to wash out bad investments.
They showed that the central bank is the source of the business cycle. Their work eventually proved to be most effective in combating Keynesian experiments in fine-tuning the economy through fiscal policies and the central bank.
Keynes won the day by arguing that the market itself is responsible for the business cycle. It didn't hurt that Keynes's theory advocating more spending, inflation, and deficits was already being practiced by governments around the world. |
