Quotes from “Austrian Cycle Theory: Saving the Wheat while Discarding the Chaff”

By Richard Wagner (1999)

• If there is any merit in Austrian cycle theory, it resides not in an explanation of booms and busts but rather in an explanation of structural shifts in the pattern of economic activity without aggregate implications.#
  EconomicsBusiness cycle
• The specific Austrian story of a shift in the structure of prices due to an expansion of credit is simply one particular way of recognizing that the central focus of macro theory should be on coordination, because macro variables are not objects of choice but only emergent outcomes.#
  EconomicsMethodology
• A cycle theory that depends on the inability of people to distinguish, in the aggregate, between an increase in personal saving and an increase in central bank holdings of government debt must rightfully be dismissed on the grounds that it fails to incorporate any reasonable requirement of individual rationality in economic action.#
  EconomicsBusiness cycle
• Walras’ Law does not deny the possibility of miscoordination, but only notes that miscoordination will always have a kind of symmetrical character.#
  Economics
• The standard variables of macroeconomics, rates of growth, levels of employment, and rates of inflation, are not objects of choice for anyone, but rather are emergent outcomes of complex economic processes. Governments may do things that might influence the subsequent measures that are assigned to those variables, but this is a very different thing from choosing values for those variables.#
  EconomicsMethodology
• Observed variability in aggregate data might be a sign of avoidable and correctable miscoordination, but it can also be a sign of progress in an interdependent world with capital complementarity.#
  EconomicsBusiness cycle
• An increase in the volume of miscoordination in a society will shift the pattern of activity in a society, but it need not alter the total volume of activity,and would represent a meaningful notion of waste instead.#
  EconomicsBusiness cycle
• It does not follow that nonsustainable price signals must show up as variations in aggregate series through time. It is conceivable that miscoordination could increase without any impact on aggregate time series. Miscoordination induces revisions in plans. Labor is shifted from the execution of plans to the revision of plans. It is conceivable that this shift of labor can be accommodated within an unchanged aggregate volume of employment.#
  EconomicsBusiness cycle