Hayek, business cycles and fractional reserve banking: Continuing the de-homogenization process

Abstract

Science sinks or swims based on the quality of the distinctions it makes, and social science is no exception to this general rule. It is as important to make accurate differentiations in the history of economic thought as i t is in any other branch of this discipline. In this regard, the accomplishments, writings, and analytic apparatus of Ludwig von Mises and his pupil and friend, F. A. von Hayek, have been widely viewed as all but indistinguishable. And this holds true not only within the profession as a whole, but also among economists associated with the Austrian or praxeological school. There is good reason, at least at first glance, for such a conflation. Both economists shared, or at least appear to share, a philosophical outlook, and a methodology; their views on socialism, government regulation of the economy, the free society, and the causes of the business cycle, were in many ways similar. But there were also some sharp and important differences between them, which are rather technical. Perhaps this is one reason why they have been little appreciated. But these divergences are basic, with implications for the entire corpus of Austrian economics, and, indeed, economics in general. It is therefore all the more important to distinguish between the views of these two scholars.