ABSTRACT
Austrian business cycle theory states that left to its own devices, a market economy will generate savings just equal to the proper amount of resources to allocate to real investment. Minsky supplemented the Keynesian approach by arguing that during a boom period, the private sector will figure out ways and means of expanding credit and financial leverage that defeat attempts at regulation. Freidman’s intellectual descendants include the rational expectations school, which made useful additions to the basic classical approach. The United Kingdom did not have inconsistent monetary policy prior to the financial crisis. Robert Lucas has argued that an unforeseeable shock, the bankruptcy of Lehman Brothers, caused a collapse of the money supply.
