About the Course
This course builds upon the basic analytic principles of Austrian economics, including basic supply and demand analysis and the theories of entrepreneurship and factor pricing, to present the fundamentals of Austrian macroeconomics.
The Austrian approach to macroeconomics was developed by the followers of Carl Menger, and in modern times included most notably Mises, Hayek, and Rothbard. Unlike mainstream macroeconomics, Austrian macroeconomics is not a body of theory separate from basic value and price theory that aims at analyzing the economy as a holistic entity apart the individual households, firms and markets that constitute it. Austrian macroeconomics is only “macro” in the limited sense that it uses general economic theory to analyze specifically those phenomena that pervade individual exchanges throughout the market economy. Thus Austrian macroeconomics is the economics of time and money. Money is routinely traded on all markets and hence changes in its value influence all economic transactions. Likewise, all consumption and production choices must take into account two facts about human action. First, all action takes time; second, waiting longer for the result of action by saving is always less desirable because of “time preference,” but more productive because it permits longer processes of production that increase the scope for the use of capital goods that improve productivity. The interest rate pervades the entire price system because it both reflects all consumption/saving choices and regulates the extent to which capital is used in the overall economy.
This course will provide an overview of several topics, using analysis and case studies. It will cover the origin, nature, and value of money, the various types of money, and the causes of changes in the value of money (that is, “inflation” and “deflation”). It will explain the operation and consequences of fractional-reserve banking and central banking and how intervention into money by governments and their central banks influence its value. The nature and determination of the interest rate and its relationship with the structure of production and economic growth will be discussed. The Austrian theory of the business cycle will be explained and used to analyze how central bank manipulation of the money supply and interest rates causes cycles of economic boom and depression. This will be illustrated by the application of the theory to explaining the housing bubble and financial crisis.
The main textbook will be Murray Rothbard, The Mystery of Banking, Ludwig von Mises Institute 2008, supplemented by the pamphlet Murray N. Rothbard, Economic Depressions: Causes and Cures, Ludwig von Mises Institute, 2009. Supplementary readings will be drawn from: Jeffrey M. Herbener, ed., The Pure Time-Preference Theory of Interest, Ludwig von Mises Institute, 2011; Mark Skousen, The Structure of Production, New York University Press, 1999; and Richard Fink, ed., Supply-Side Economics: A Critical Appraisal, University Publications of America, 1982.
All readings for this course are free, available online, and provided to students in a fully-hyperlinked syllabus.
Independent study courses are courses that were presented live in the past. These courses are now offered at a discount to anyone who wants to study independently. All courses include lecture recordings, slides, a complete hyper-linked syllabus, automatically-graded quizzes, and a discussion forum. Professors are not available for academic support for these independent study courses.