Date of Submission
Since the collapse of the housing market in 2007-2008, economists have been faltering to provide basic answers to why and how it happened. Turning back to the history of economic thought, this project examines three models of business cycles: the Austrian business cycle theory, Hyman Minsky’s Financial Instability Hypothesis, and the geoclassical cycle theory. Hypothesizing that mainstream economics has rendered its models irrelevant by abstracting from important concepts such as time and uncertainty, I propose that economics does not need to reinvent itself, but rather revisit its past. Using both logic and historical evidence to evaluate the three theories, I conclude that the geoclassical cycle theory is the best explanation of the both the 2008 crash and historical episodes of boom and bust.
Burress, Sophia, "Renewed Perspectives in Business Cycle Theory: An Analysis of Three Heterodox Approaches" (2011). Senior Projects Spring 2011. Paper 9.