Hayek's early writings on business-cycle theory and the Great Depression argued that cyclical downturns, including that of 1929-1931 were caused by unsustainable elongations of the capital structure caused by bank-financed investment exceeding voluntary saving. Believing that monetary expansion...

Even when all past and present information is known, individuals usually remain uncertain about the permanence of observed variables. After reviewing the history and role of adaptive expectations and its statistical foundations in modeling this permanent-transitory confusion, the paper...