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The Dangers of Deflation

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  • Steven Horwitz

Abstract

Beginning no later than Mises’s The Theory of Money and Credit in 1912, the causes and consequences of inflation have been a central concern of the Austrian School of Economics. Unfortunately, that has meant relatively few analyses of the problems of deflation from a distinctly Austrian perspective. Deflation has dangers of its own, and there are important insights that are unique to the Austrian tradition that can add to our understanding of those dangers. This paper explores those dangers, both at the broad macroeconomic level and at a more microeconomic level by integrating the Austrian theory of capital with the monetary equilibrium theory account of deflation. Austrian concerns about inflation should not lead them to overlook the very real dangers of deflation. Copyright International Atlantic Economic Society 2014

Suggested Citation

  • Steven Horwitz, 2014. "The Dangers of Deflation," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 42(2), pages 143-151, June.
    • Handle: RePEc:kap:atlecj:v:42:y:2014:i:2:p:143-151
    DOI: 10.1007/s11293-014-9406-6
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    References listed on IDEAS

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    1. Roger W. Garrison, 2004. "Overconsumption and Forced Saving in the Mises-Hayek Theory of the Business Cycle," History of Political Economy, Duke University Press, vol. 36(2), pages 323-349, Summer.
    2. Horwitz Steven, 1990. "A Subjectivist Approach to the Demand for Money," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 1(4), pages 459-472, December.
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    Cited by:

    1. Ioanna Τ. Kokores & Constantina Kottaridi & Pantelis Pantelidis, 2017. "Intra Eurozone Foreign Direct Investment and Deflation," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 23(2), pages 217-229, May.

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    More about this item

    Keywords

    Deflation; Austrian economics; Capital theory; B53; E31; E41; E58;
    All these keywords.

    JEL classification:

    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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