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Risk and Business Cycles: New and Old Austrian Perspectives (Foundations of the Market Economy) Reprint Edition
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Top Customer Reviews
The Austrian capital theory of business cycles proposes that significant positive shifts in the money supply lead to systematic errors in the structure of production. The shift from short-run to long-run investment results in an economic boom, followed by a bust when the process reverses.Read more ›
Cowen is correct to want to improve this highly unsatisfactory ,theoretical position.Unfortunately,Cowen attempts to reformulate Austrian business cycle theory by basing it on rational expectations .Rational Expectations is based on the assumption that price and/or profit changes in all markets are normally (log normally)distributed.Benoit Mandelbrot had already proven in 1963,some 34 years before Cowen wrote this book,that practically all markets are correctly modeled by the Cauchy distribution,not the Normal distribution.Cowen's measure of risk, the variance,does not exist .Both the mean and variance converge to infinity for the Cauchy distribution.This simply means that risk can't be measured by one variable alone .Read more ›