Finn Kydland (Carnegie Mellon) and Edward Prescott (Arizona State) have been awarded the Nobel Prize, according to the Swedish Academy of Sciences, for their work on time-consistent policy and the generation of the business cycle. While Austrians have cited their work in criticism of countercyclical policy, Austrians have criticized “real business cycle theory” as not providing a full account of cause of fluctuations. See John P. Cochran: “Capital Based Macroeconomics: Recent Developments and Extensions of Austrian Business Cycle Theory“; and Roger Garrison: “The Austrian Theory of the Business Cycle in the Light of Modern Macreconomics.” Kaza shows that while Prescott and Kydland have largely ignored the Austrian contribution, apart from citing Haberler, other New Classicals have criticized the Austrians; Garrison responds in defense of the Austrian theory. Fritz Machlup (1976) (cited in Garrison) sums up the difference in outlook: “Monetary factors cause the cycle but real phenomena constitute it.” Go here for a full look at Austrian theory.
Source link: http://archive.mises.org/2587/economics-nobel-2004/