The Theory of Interventionism as an Austrian Theory of Slowdowns

This paper addresses the question of whether the Austrian theory of interventionism helps us understand what growth economists call decelerations or slowdowns. It is proposed that the theory of stagnation based on non-productive entrepreneurship (Coyne, Sobel and Dove 2010) complements the theory of interventionism, and when they are combined, a theory of slowdowns is the result. The consequences of this theory are used in an empirical investigation whose strategy is based on two hypotheses. One is that the interventionist process has institutional determinants which can be derived from the theory. The other is that interventionism is the mechanism of the slowdown of economic growth not only for those countries that have experienced relatively high growth rates in the past but also for those with normal growth rates. Using logit regressions it is shown that reductions in any area of economic freedom can be seen as one of the causes of slowdowns