Why free market Austrian economics have inspired a rap video and attracted new fans.
Was the economic crisis caused by fundamental problems with the system rather than a mere failure of policy?
This week, Jamie Whyte and Analysis looks at the free market Austrian School of FA Hayek. The global recession has revived interest in this area of economics, even inspiring an educational rap video.
“Austrian” economists believe that the banking crisis was caused by too much regulation rather than too little. The fact that interest rates are set by central banks rather than the market is at the heart of the problem, they argue. Artificially low interest rates sent out the wrong signals to investors, causing them to borrow to spend on “malinvestments”, such as overpriced housing.