“By ‘Trade Cycle’ we shall mean nothing more precise than the periodic ups and downs of output, incomes, and employment to which modern industrial economies seem to be prone. … The task of trade cycle theory is therefore not confined, as it has been so often in the past, to explaining the similarities of successive fluctuations. The dissimilarities also have to be accounted for. It is certainly our task to indicate causes for downturn and upturn, and to analyse the cumulative processes of expansion and contraction. But on the evidence we have no right to believe that these causes will always be the same, nor to doubt that their relative force will vary from case to case. … The Trade Cycle cannot be appropriately described by means of one theoretical model. We need a number of models each showing what happens when certain potential causes become operative. The many models that have been constructed by economists in the past are therefore not necessarily incompatible with each other. Overinvestment and underconsumption theories, for instance, are not mutually exclusive. None of them of course is the true theory of the Trade Cycle; each is probably an unduly broad generalization of certain historical facts. Once we admit the dissimilarity of different historical fluctuations we can no longer look for an identical explanation. In dealing with industrial and financial fluctuations eclecticism is the proper attitude to take. There is little reason to believe that the causes of the crisis of 1929 were the same as those of the crisis of 1873.” (Lachmann 1978:100–101).Moreover, Israel M. Kirzner seems to have had the same view as Lachmann:
“AEN: Do you accept the idea that interest-rate manipulation by the central bank can cause distortions in the structure of production?Under the sensible viewpoint of Lachmann that the “many models that have been constructed by economists in the past are therefore not necessarily incompatible with each other,” it would seem that Austrians could accept Irving Fisher’s debt deflation theory of depressions or even Hyman Minsky’s development of that theory in the financial instability hypothesis.
KIRZNER: Certainly the Austrian cycle theory showed brilliantly how this can happen. But it’s one thing to develop a theory which could explain a downturn. It’s quite another to claim that historically every downturn is to be attributed to that particular theory. That does not necessarily follow. If one were asked, does this theory necessarily explain each and every cycle, I would say no.”
“An Interview with Israel M. Kirzner,” Austrian Economics Newsletter (vol. 17.1, 1997).
It is curious to me how the view of two leading Austrians like Lachmann and Kirzner that the Austrian business cycle theory (ABCT) is not a universal explanation of all “periodic ups and downs of output, incomes, and employment” in modern economies is ignored by any number of modern Austrians (especially your typical ignorant, internet “pop” Austrian), who instead dogmatically declare that ABCT is a universal theory that must explain every cycle ever seen in modern capitalist history.
Lachmann, L. M. 1978. Capital and its Structure, S. Andrews and McMeel, Kansas City.