Does Haberler Defend Austrian Business Cycle Theory?

The Mises Institute claims the following about Prosperity and Depression:

"Professor Gottfried Haberler, an exponent of the Austrian theory, wrote a full and wonderful treatise on the topic... In the course of his narrative, he gives a full and robust presentation and defense of the Austrian perspective..."

Is this so? Well, I can certainly say that Haberler takes Austrian Business Cycle Theory as a serious option on the table -- as do I, and as, I think should any scholar dealing with this topic. But is he an "exponent" of it? Does he "defend" it? Let us look at some passages from Haberler's discussion of Austrian cycle theory:

"In the specific case of the American boom of 1925-1929, the [Austrian] authors are emphatic that the same thing applies to an expansion which does not lead to a rise in prices, but is just enough to prevent a fall in prices that would otherwise have taken place because of a continuous increase in the volume of production. For reasons which will be expounded in the subsequent pages, it seems, however, that the undertaking to prove this latter point rigorously has not been made good."

"as Professor Neisser has shown, there is no reason to expect this return to the old arrangement, if the new roundabout methods of production have been brought to completion."

"We may conclude that the [Austrian] theory under review is bound either to assume that the former proportions between capital and income will be restored by actual capital consumption or that the expansion must be discontinued before the new processes have been completed --or rather before all the new processes, have been completed. This latter qualification seems to be called for, and is important, because it sheds doubt on the contention that no permanent extension of the process of production can be effected by a credit expansion."

"It is evident that no collapse would occur if the credit expansion could go on indefinitely. It follows--the point is made by Professor Hayek himself--that a crisis is equally inevitable in the case of voluntary saving if the flow of saving is suddenly reduced. It is, however, asserted--although the reasons given are not always quite convincing--that sudden changes are not likely to occur in respect of voluntary saving, while forced saving must come to an end abruptly."

"In respect to both factors, Professor Hayek's argument makes implicitly certain assumptions, the bearing of which is not quite clear. The problem has not been either clearly visualised or explicitly stated. The concrete circumstances by which the magnitude of the two factors is determined are left in the vague."

"In any case, the [Austrian] theory in its fully developed form seems to make the emergence of a serious disequilibrium dependent upon relatively small fluctuations in the rate of forced saving. This being so, the question arises whether fluctuations of this order of magnitude are not equally likely to occur in the flow of voluntary savings. If they do occur, evil consequences must be expected, even in the absence of credit inflation. (We shall see, in connection with the discussion of other theories, that there are numerous other disturbances possible which may interrupt the upswing and start a vicious spiral downward--disturbances which are probably of the same, or even a higher, order of magnitude than the fluctuations in the rate of forced or voluntary saving above concerned.)"

What I read in the above passages is the opinion of a critic who takes Austrian cycle theory seriously, but thinks there are important issues that theory does not handle adequately. In this post, I do not wish to evaluate Haberler's critiques -- perhaps they are on target, perhaps not -- but to wonder why the Mises Institute chose to carry this book, and promote it as a defense of Austrian business cycle theory? Obviously, LVMI had the option of simply ignoring the book, or, if it felt it had to address it, do so by claiming something like "Haberler sold out to the mainstream." Instead, it chose to carry the book, and promote it as a defense of ABCT, despite the fact that anyone who actually bought it and read it could easily see that Haberler was not an "exponent" of ABCT.

So, what was the strategy here? Or was it simply that the people who wrote the blurb had no idea what was in the book they were promoting?


  1. I think you're last suggestion is unfortunately the most likely.

  2. Or it's possible that whoever wrote that (I really don't know who it was) saw Haberler's essay in the collection from Ebeling where Haberler said this:

    It is a great advantage of this more refined monetary explanation of the business cycle, over the traditional one, to have cleared up these non-monetary, "real" changes due to monetary forces. In doing so, it has bridged the gap between the monetary and non-monetary explanation; it has taken out the elements of truth contained in each of them and combined them into one coherent system..

    ....The crucial point and also the point of deviation from Mr. Keynes's analysis is to understand well that a reaction must inevitably set in, if this productive expansion is not financed by real, voluntary saving of individuals or corporations but by ad hoc created credit. And it is practically very important--the last boom should have brought this home to us--that a stable commodity price level is not a sufficient safeguard against such an artificial stimulation of an expansion of production. In other words, that a relative credit inflation, in the above-defined meaning of the term, will induce the same counter-movements as an absolute inflation.

    I hope that I have been able to give you a tolerably clear idea of this improved monetary explanation of the business cycle. Once more I must ask you not to take as a complete exposition what can be only a brief indication. A sufficiently detailed discussion of the case could be only undertaken in a big volume. Therefore, I beg you to suspend your final judgment until the case has been more fully presented to you.

    Look Gene, suppose I died next week from a karaoke accident, and then the LvMI described me as a champion of ABCT against Keynesians. If you grabbed quotes from my dissertation, it would sound like I had all sorts of objections to ABCT. But I myself would say I am a champion of ABCT, even though I have all kinds of technical complaints about its exposition in the scholarly journals. Isn't that what's happening here with Haberler?

    1. OK, Bob, you are citing something written 25 years *before* the edition of his book that I am reading. I think we can say that, in 1932, Haberler *was* an exponent of ABCT. But I have just posted his summing up of ABCT in a new post tonight: take a look at that. I think we can say that, while he still finds it valuable, he is no longer an "exponent" of it. Tell me what you think.


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