Unit 6: Business Cycle Theory - I
Austrian Business Cycle Theory (ABCT) has its roots in the work of Mises and Hayek. Hayek was awarded the 1974 Nobel Prize in Economic Sciences (jointly with Gunnar Myrdal) for some of his work on this theory. Unit 6 looks at the Austrian Business Cycle Theory as first described by Mises. In this theory, we see business cycles as a result of excessive growth in bank credit due to artificially low interest rates set by central banks. In this unit, Saifedean explains how the expansion of credit causes miscalculation, which leads to malinvestment in a boom cycle. This inevitably leads to an unavoidable bust. We end off by discussing the concept of a crack-up boom.
Completing this unit should take you approximately 2 hours.