Over-Investment Theories of the Business Cycle: The Neo-Wicksellian School

Writers who believe that monetary forces operating under a particular form of credit organisation (banking system) produce the disequilibrium between the lower and higher stages of production.

This type of theory, which is frequently called the "Neo-Wicksellian" school, may perhaps be included amongst the monetary explanations of the business cycle, inasmuch as the active cause which disturbs the equilibrium is a monetary one. But the business cycle is for these writers more than a purely monetary phenomenon. Monetary forces produce a real maladjustment, the consequence of which is the breakdown of the boom. Crisis and depression cannot be explained purely by contraction of the circulating medium, although deflation may come in as a secondary and intensifying element. Among the writers whose theories fall within this group are HAYEK, MACHLUP, MISES, ROBBINS, RÖPKE and STRIGL.

--Gottfried Haberler, Prosperity and Depression: A Theoretical Analysis of Cyclical Movements, 3rd ed. (1943; repr., Lake Success, NY: United Nations, 1946), 31-32.