After reading Prices and Production I've noticed what I find to be a considerable difference between Rothbard and Hayek with regards to the business cycle. Rothbard, in America's Great Depression, claims that a greater quantity of credit, so long as it is granted to consumers and not producers will not have the disastrous effects we could expect from extending such credits to producers. I am not sure of the exact wording, but he says that consumer credit expansion would not be as "harmful" with regards to inducing a business cycle. Hayek, on the other hand, makes very clear that he firmly believes that forced savings, whether directed to producers or consumers first, is completely immaterial and eventually will lead to the same outcome. I'd have to say I'm in agreement with Hayek on this one as I feel he has adequately demonstrated that the distortions in the production-consumption ratio are brought about either way and both will wind up altering the structure of production so that certain stages will cease to be profitable after the injections of credit are discontinued. I'm just curious how everybody else feels about this difference of thought between two of the greatest Austrian economists.
In liberty,
Chris
Rothbard isn't saying that credit for consumers doesn't cause a business cycle, he is saying that it doesn't cause as bad of a business cycle. Obviously, when more credit goes towards capital goods sectors, the economy grows much quicker and thus is much less sustainable than just a consumer goods bubble.
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