Hayek's Theory of Business Cycles: Theory That Will Remain Obscure
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Issue Date
2014-03
Authors
Bilo, Simon
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Keywords
Hayek , business cycle , expectations
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Abstract
Hayek’s theory of business cycles has been criticized for its unfeasible policy prescriptions, weak empirical support, and lack of technical rigor. Although the theory can be defended against these criticisms, it violates the rational expectations hypothesis, a criterion by which economists tend to judge the quality of economic arguments. Since Hayek and his followers failed to remedy or justify the violation, the theory cannot capture the interest of the economics profession today. To change this outcome, Hayek’s theory either needs a satisfactory restatement, or it has to wait until economists change the criteria for judging the quality of arguments.
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Economics
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This paper is under review. Contact the author for further use of this material.
Citation
Bilo, S. (2014). Hayek's Theory of Business Cycles: Theory That Will Remain Obscure. Available at SSRN: http://dx.doi.org/10.2139/ssrn.2412162
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Original manuscript prior to peer review (preprint)