Occam’s Razor in Economics

If we ever chose to apply Occam’s Razor to economic theory, it’s clear that Austrian business cycle theory would win over all other cycle theories.

A response to ABCT from the typical person is a “well duh, of course if banks create money out of thin air, creating more claims on their supplies then they actually have, people will realize their insolvency and there’ll eventually be a bank run.”

Or “of course interest rates are a price just like any other price and coordinate market activity, and if you essentially place a price control on interest rates there’ll be unintended consequences.”

ABCT is common sense applied to economics. The reason that business cycles occur is not that complicated.

Photo Credit: photosteve101 via Compfight cc

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Posted on October 4, 2013, in Economics and tagged , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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