This is Scott Sumner (“A New View of The Great Recession”):

”Five years on, economists still don’t agree on the causes of the financial crisis of 2007–08. Nor do they agree on the correct policy response to the subsequent recession. But one issue on which there is almost universal agreement is that the financial crisis caused the Great Recession. In this essay, I suggest that the conventional view is wrong, and that the financial crisis did not cause the recession—tight money did.

This new view must overcome two difficult hurdles. Most people think it is obvious that the financial crisis caused the recession, and many are incredulous when they hear the claim that monetary policy has been contractionary in recent years. The first part of the essay will explain why the conventional view is wrong; monetary policy has indeed been quite contractionary in the United States, Europe and Japan (but not in Australia.) The second part will explain how people have reversed causation, attributing the recession to the financial crisis, when in fact to a large extent the causation went the other direction.”

Would you like to read more? You can if you get a copy of Australia’s leading free market think tank Centre for Independent Studies’ excellent quarterly journal Policy. Policy is edited by Stephen Kirchner. Stephen also blogs at Institutional Economics.

You can subscribe to Policy here.

And there is more good news for the Australians. Scott will soon visit the country Down Under. Scott will attend CIS’s Consilium conference next month.