The American History Podcast, season three, episode two, an introduction to Austrian economics part two.

Welcome to the American History podcast.

Hosted by Sean Morswick.

Thank you. hosted by Sean Worswick. Okay, so welcome back.

Now, the previous episode was part one of your introduction to Austrian economics, and today we're going to wrap that introduction up.

Now, it might not be readily apparent as to exactly why this is important or why I'm doing this, but I think it helps to understand a lot of what we're going to be talking about if one has a grounding in economics, specifically the Austrian school.

Today, we're going to discuss the Austrian business cycle theory and money. And who doesn't like talking about money? I mean, come on. I know you're excited, right? Okay, so without further ado,

let's get started. All right. So it's normal for a business to close.

Businesses, after all, come and go all the time.

This is because it is impossible for us to know the future with any certainty.

But when large numbers of businesses suffer losses or close the doors all at once, well,

this should surprise us.

Why is it that in a bust so many businesses all at once fail?

And remember, the market weeds out the week, or those who are poor stewards of capital and forecasters of consumer demand.

These folks are punished with losses, and if they don't quickly get their house in order, they're going to go out of business.

So why is it that suddenly well-established businesses, those who have proven they can pass

the test of the market, suddenly all of them make the same errors as the rookies, so to speak.

Now Lionel Robbins, a British economist, refers to this as the cluster of errors.

And it demands an answer.

Quote, why should the leaders of business in various industries producing producers' goods make errors of judgment at the same time and in the same direction, end quote?

This is referred to as the business cycle.

According to Karl Marx, this cycle of boom and bust is inherent to the market economy.

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