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Simpson to Publish 2 Volumes on ABC Theory

May 20, 2014 in Economics

By Mark Thornton

Brian Simpson of National University provides a description of his two-volume book project on the Austrian Theory of the Business Cycle:

Members of this list might be interested in the book I have recently completed. It’s a two-volume book on Austrian business cycle theory (ABCT). The main title is Money, Banking, and the Business Cycle. The subtitle for volume one is Integrating Theory and Practice. The subtitle for volume two is Remedies and Alternative Theories. The book provides a comprehensive presentation and defense of ABCT and a free monetary and banking system. Volume one was published in April and volume two is due out in July. The publisher is Palgrave Macmillan.
Each book contains two parts. Part one of volume one focuses on my exposition of ABCT. In addition to the traditional presentation that shows how manipulations of the supply of money and credit by the government cause changes in interest rates that generate the cycle, my presentation incorporates the effects of changes in the money supply on spending, business revenues, and profits and the rate of profit in the economy and the role these play in generating the cycle. I show how the responses of businessmen and entrepreneurs to changes in both interest rates and the rate of profit produce the cycle. In part one I also defend ABCT from criticisms, including the criticism based on so-called rational expectations, the claim that ABCT places too much emphasis on interest rates, and the claim that it misidentifies the relationship between interest rates, inflation, and/or investment. I defend the theory from other criticisms as well.
In part two, I apply the theory to U.S. history to illustrate the explanatory power of the theory. I use extensive data for the U.S. from 1900 to 2012 to show how the theory can be used to explain specific episodes of the cycle. I use interest rate data, the rate of profit, money supply data, the velocity of money, industrial production, GDP/GNP, gross national revenue (a more comprehensive measure of spending and output than GDP/GNP), and other data. As a part of this effort, I show how the data illustrate changes in the structure of production that ABCT predicts. I also demonstrate the explanatory power of the theory using the Mississippi Bubble in 18th century France.
Part one of …read more


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