Austrian Theory Summary

I wanted to add one more post about the Austrian economist essays. I have come across a number of competing economic ideas that discuss more closely our current situation, but I want to mention the general summary of the Austrian theory put forward by Roger W. Garrison in his essay The Austrian Theory: A Summary.

The Austrian theory of the business cycle emerges straightforwardly from a simple comparison of savings induced growth, which is sustainable, with a credit-induced boom, which is not. An increase in saving by individuals and a credit expansion orchestrated by the central bank set into motion market processes whose initial allocational effects on the economy's capital structure are similar. But the ultimate consequences of the two processes stand in stark contrast: Saving gets us genuine growth; credit expansion gets us boom and bust.

We find ourselves in a reality where economic realities may frown upon savings. It still appeals to me as something that should be held as a guiding principle in private, public, and corporate life.