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The Review of Austrian Economics

, Volume 19, Issue 1, pp 5–15 | Cite as

From Keynes to Hayek: The marvel of thriving macroeconomies

  • Roger W. Garrison
Article

Abstract

Inherent ignorance of and uncertainties about the future may translate into doubts about the overall viability of market mechanisms. However, these doubts are quelled by a broad empirical observation: market economies thrive. Hayek sometimes abstracted from such ignorance and uncertainties in order to identify the market mechanisms that are essential to thriving economies. His often-overlooked “interest-rate brake,” for instance, keeps the rate of implementation of new technologies in line with peoples willingness to save. A careful reading of macroeconomic history suggests that artificial booms often ride piggyback on genuine booms. During a period of technological breakthroughs, the central bank's adherence to the Real Bills Doctrine overrides the interest-rate brake and engenders an unsustainable boom.

Keywords

Ignorance Dispersed knowledge Interest-rate brake Austrian theory of the business cycle 

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Copyright information

© Springer Science + Business Media, Inc. 2006

Authors and Affiliations

  1. 1.Department of EconomicsAuburn University AuburnAL

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