There are two leading explanations for the origins of large macroeconomic crisis (See Acemoglu 2013). One is, based on the work of Schumpeter (1927) which maintains that crisis is the result of large “exogenous” shocks. The real business cycles literature, pioneered by Kydland and Prescott (1982), provides a prominent example of this approach, taking the origins of all economic fluctuations to be exogenous technology shocks. The other major strand of literature follows Friedman and Schwartz (1963) in emphasizing the role of large monetary shocks as its main underlying cause. Mises (1912) argued that pre-crisis fraudulent liquidity creation of the banking system is the main culprit for large monetary shock.

The presentation follows the logic Mises and argues that the recurring phenomena of economic crisis can be found in the diametrically opposed sides of individual action in relation to flow of information, which causes distortions in the price system. These distortions in the price system are responsible for mal-decisions on behalf of micro-economic actors, and the corrupted signals of the prices system leads to mass-failure of entrepreneurial calculations in the moment of outbreak of crisis.