That is my 1998 book on business cycles. Mario Rizzo writes:
I am happy to report that Tyler Cowen’s book, Risk and Business Cycles: New and Old Austrian Perspectives is now available, as of July 15th, in a reasonably-priced paperback edition from Routledge…
This is not an orthodox Austrian approach. In fact, Cowen criticizes that version. However, the “new Austrian” inspired version he presents seems especially relevant in view of the widespread, but not uiversal, agreement that the pre-recession period of very low interest rates contributed to the search for yield and greater risk taking. As the title indicates, Cowen’s theory emphasizes the importance of low interest rates on risk-taking.
This book appears in the Routledge series, “The Foundations of the Market Economy” edited by Larry White and me. Tyler’s book is well worth reading as are many books in this series (now approaching thirty books).
Here is another blog post discussing the book. Here is the Amazon listing. At the time this book was published, it was unpopular to suggest that everyone simply might take too much risk at once, leading to an eventual overextension and collapse. Yet theories of that nature have held up relatively well, in light of the financial crisis.
My one-sentence summary of the book is that it offers various accounts of how an economy might end up in the position of taking too much risk and how that can help explain business cycles. And since these scenarios involve risk, rather than direct negative productivity shocks, they can look fairly innocuous in advance.
No kindle version?
So, TODAY’S low interest rates are causing us to engage in risky activity (not sex, of course). Or, is it just during an expansion. Or during a recession. Or both.
The summary sounds somewhat behaviouralistic: “it was unpopular to suggest that everyone simply might take too much risk at once, leading to an eventual overextension and collapse.” The herding behaviour of crowds?
Sounds somewhat Shillerian, not Austrian.
Or, is it Austro-Shillerian?
Can someone shed some light on the long conversation related to the sole review on Amazon? Too arcane for me to follow.
@Tyler, Cool. Look forward to reading it because anything that doesn’t take into account the capacity for human misjudgment doesn’t account for the real world, in my misjudged opinion.
How can one hold a belief in the efficient market hypothesis (EMH) and at the same time recognize that “that everyone simply might take too much risk at once” when interest rates are low, leading to a collapse. Overshooting shouldn’t happen with EMH, so I am glad there is a behavioural aspect to your work because you would have a hard time explaining any business cycle if the market contained all the information and we had rational actors. We would be living in a utopia, and a boring one at that.
You haven’t read the stories about senior citizens having to supplement their CD income with prostitution?
Would be interesting to see publishers reaction following the imminent deluge of requests for the Kindle compatible format.
An economy takes too much risk!
Isn’t that a cluster of errors?
I don’t see a Kindle edition available yet.
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