Liquidity Trap Criticism

Quite surprisingly, although there is so much talk about the liquidity trap and its close concept, the zero lower bound (see the definition of liquidity trap), the criticism of these concepts is rather thin. This is even more puzzling since the liquidity trap concept is known for a long time, ever since Keynes proposed it (Rhodes did not find any mention of it in the work By Keynes).

Read more

Modern Macroeconomics and the Austrian School

The ideas of Austrian economic school are becoming more popular. However when you look at the current debates in macroeconomics (especially the academic ones) you will barely find any place for Austrian school ideas. Although most of today academic macroeconomics can be thought of as Keynesian (Greg Mankiw thinks that the old debate between freshwater and saltwater macroeconomics is dead), and although many old ideas have been successfully used recently (like Pigou’s theory of business cycle), there hardly is any place for Austrian ideas.

Read more