Hayekian or Keyesian?

[Kevin_Kennedy]

Austrian economists have insisted that the Federal Reserve Bank helped cause the subprime housing boom that led to the financial crisis of 2008, and we are not alone in this opinion. According to Treasury Secretary Timothy Geithner, Federal Reserve policy was "too loose for too long." Some of us see Geithner's remark as both a mea culpa on the part of the federal government and a confirmation of Austrian business-cycle theory. A more general examination of Geithner's remarks on the subprime boom and bust, however, reveals the influence of Keynes, rather than Hayek.

Secretary Geithner believes that the subprime housing boom was caused by three factors: loose monetary policy; executive compensation that encouraged excessive risk taking by banks; and a slow, weak reaction to the subprime crisis by federal authorities last year. The excessive risk taking by banks led them to be overleveraged, and allowed Americans to assume too much debt. Geithner sees loose monetary policy as a contributing factor, but he lays most of the blame on Wall Street.

Secretary Geithner: Hayekian or Keynesian? - D.W. MacKenzie - Mises Institute

 

[Agnapostate]

I've long been hoping for an improvement from Cwik's observation that "[t]he Austrian business cycle theory (ABCT) has been criticized for not being a true theory of the business cycle. The main emphasis of the ABCT has been on the theory of the upper-turning point—the artificial expansion of credit, the manipulation of interest rates, the malinvestments committed by entrepreneurs and then the credit crunch and/or real resource crunch."

However, socialist economics has enjoyed more recent benefit from a Hayekian perspective than the Austrian school has, given the development of post-Hayekian market socialism.

 

[Kalam]

Marxian.