June, 2009

The Ordinary Economics of an Extraordinary Crisis

  • Peter J. Boettke

    Director, F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics
  • William J. Luther

Key materials
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Ordinary economics teaches that markets continually adjust to scarce resources. This paper demonstrates how modern economic theory has neglected ordinary economics in favor of static equilibrium analysis, which led to unrestrained government spending and expansionist monetary policy throughout the 20th century. While these interventions prolonged and amplified historic economic downturns, most economists are still unwilling to let free markets correct the malinvestment created by expanionist monetary and fiscal policy. Boettke and Luther argue for a return to the principles of ordinary economics, which use markets to coordinate information, spur technological innovation, and promote economic recovery.

Citation (Chicago Style)

Boettke, Peter and William Luther. "The Ordinary Economics of an Extraordinary Crisis." Working Paper 09-15, Mercatus Center at George Mason University, 2009.