Handbook on Contemporary Austrian Economics

122 <strong>Handbook</strong> on contemporary Austrian economics
effects of non-super-neutral money has yet to occur. Given that money is
non-neutral in Austrian explanations of the business cycle, it seems likely
that integrating the effect of non-super-neutral money will not be difficult.
It may offer new insights into how changes in the growth rate of the money
supply affect the evolution of economies over decades.
The improved psychological foundations of economic theory offer
an opportunity to reassess Austrian monetary theory. Given the limited
capabilities of economic agents to understand all the interdependencies of
a modern economy and the emergence of interest in Hayek's writings on
psychology, a new look at the Austrian macroeconomics may be in order.
Hayek's introduction of neutral money into macroeconomic analysis
greatly improved understanding of business cycles. The larger project of
developing the implications of non-neutral money in the short and long
run offers many avenues for further inquiry. Various schools of thought
have offered explanations for the non-neutrality of money. The Austrian
school will, in all likelihood, continue to make contributions to the development
of empirically supported macroeconomic theory and insights into
the evolution of the macroeconomy.
Notes
I. Thornton (2007) offers compelling evidence that Cantillon's significant essay influenced
Hume. Hayek suspected this to be true. Humphrey (1984) documents a number of
reasons offered by the Classical econQmists why money had non-neutral effects.
2. Tract on Monetary Reform (1923), Chapter 3.
3. Freeman and Kydland (2000) offer empirical support for the claims that changes in
output lead to changes in the money supply.
4. Of course, there are exceptions. See Cochran (2001).
References
Cant ilion, Richard. [1755) 1931. Essai sur la Nature du Commerce en General. New York:
August M. Kelley.
Cochran, john. 2001. "Capital-based Macroeconomics: Recent Developments and
Extensions of Austrian Business Cycle Theory," Quarterly Journal of Austrian Economics
4(3): 17- 25.
Freeman, Scott and Finn Kydland. 2000. "Monetary Aggregates and Output," American
Economic Review 90(5): 1125-35.
Friedman, Milton. 1963. Inflation: Causes and Consequences. New York: Asia Publishing
House.
Friedman, Milton and Anna Schwartz. 1963. A Monetary History of the United States.
1967- 1960. Princeton: Princeton University Press.
Garrison, Roger. 2000. Time and Money: The Macroeconomics of Capital Structure. New
York: Routledge.
Haberler, Gottfried. 1980. "Critical Notes on Rational Expectations," Journal of Money.
Credit and Banking 12(Nov.): 833-6.
Hayek, F.A. 1935. Prices and Production. New York: August M. Kelley.
Hayek, F.A. 1952. The Sensory Order. Chicago: University of Chicago Press.
Horwitz, Steven. 2000. Microfoundations and Macroeconomics: An Austrian Perspective.
New York: Routledge.