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Business cycle: From birth to the Austrian school theory

Vieru, Elena Bianca (2011): Business cycle: From birth to the Austrian school theory.

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Abstract

Approaching the theory of economic cycle is not an issue that comes in hand! We are permitted to make such a statement based on the idea that explanations concerning the business cycle theory are strictly related to how each school of thought was able to understand the system that makes market, with its habitual basic functions, operate; how was the idea of equilibrium understood and, last but not least, which is the role of the state in this entire „story”. Although some of the doctrines tend to insist on a particular factor, considered to be the most important one and also the one that is responsable for triggering the economic crisis, in fact we can talk about a consistent number of factors that include some worth mentioning like monetary expansion, state interventionism, excessive regulation, lack of regulation, low level of consumption, various changes in consumer preferences and so on. The serious problems that economy had to face during the years rise, therefore, many questions that require a thorough and consistent analysis. The limited space that we have at our disposal determines this essay to be considered only a „superficial” investigation of how the economic cycle can be addressed, from various points of view. Throughout this paper we will make a brief doctrinaire promenade starting with the monetary theory, reaching the Keynesian doctrine and finishing with the point of maximum interest, the Austrian School. Exhaustively passing through the theories mentioned above, along with their fundamental ideas about the phenomenon of economic cycles, does not represent the basis for the current paper. The specialized literature has no shortage of such work. The purpose of this research, as we will try to highlight, is to present the main differences that can be noticed between the ideologies that built, over time, their way into the history of economic thought. We are particularly interested in the problem of business cycle and the recurrence of crises.

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