I am writing thesis about Financial Crisis from the viewpoint of the Austrian Business Cycle Theory. My main proposition is that last crisis can be explained by using ABCT. I am aware that Austrian School doesn't accept empirical verification of theory. Using indexes like Gross Domestic Product is not a good idea. And I haven't got a clue how to show the lengthening of the producture structure in US economy. One of subsections of de Soto Money, bank credit and economic cycle is Empirical evidence for the theory of the cycle. Do you know any other works about this topic - Empirical evidence for the theory of the cycle? I really appreciate your help and any suggestions.
here's a couple that may be helpful:
Robert Higgs Anatomy of the Current Recession
Robert Higgs mises blog
come to think of it, check out Murray Rothbard's The Great Depression
Final Sales of Domestic Product began increasing above trend from 2003 to 2006. That would normally indicate loose money, but it may have just corrected for previous falls below trend. Moreover, the rise in Final Sales does not seem significant enough to account for the housing bubble. Perhaps loose monetary policy exacerbated the situation, but other factors may have been more important.
Thank you for all sugestions. I agree with Modus Tollens that other factors can be more important and I can paint myself into a corner. Maybe I change the topic and write about crisis in which it is clearer that it was caused by monetary policy. For example Japan crisis in 90' should be easier to explain by ABCT.
Bob Murphy: Putting ABCT to the Test
I think you will like this: http://www.gmu.edu/depts/rae/archives/VOL14_4_2001/5_keeler.pdf
I agree with NewLiberty.
Murphy's idea using the percent change in employees in the different stages of production is a quick way to look at where resources are being directed.
Murphy's graph in his article shows the construction sector bust. For your purposes, I would extend the series to show the build up in construction (blue line) without a corresponding decline in retail (purple line). This is a period of over-consumption and over-(mal-) investment.
One thing that I should add: The ABCT is a real economy theory. The financial crisis (credit crunch, financial institution turmoil) was a symptom of the real economic crisis (mis-allocation of resources).
A point to make is that there is no such thing as empirical evidence or verification for a praxeological theories. Some of our assumptions in describing economics (the existence of multiple people and money) are empirical claims, but even there, the arguments derived from these are not.
What historical data can be used for is to be analyzed from the perspective of theory, or used as an illustration thereof.
I am aware of austrian methodology. However, in my university where keynesian economics dominates my thesis have to be based on statistic data and touch on real economy. I insist on writing about business cycle, but I can't just introduce theory and that's it. My thesis supervisor doesn't accept this. So I would write about Japan crisis in '90 according to ABCT.