Questions about the acceptance of Austrian Economic Theory...

[smsnead2]

Why don't Austrian economists get more respect and notoriety? Why do they seem to be outnumbered by the Keynesians by a such a large margin? What I have read so far makes so much more sense from an Austrian perspective and I fail to see why there seems to be such a huge disparity in the number of Austrians vs' Keynesians. How have the Keynesians won the PR battle? What are there counterarguments to Austrianism that have made them more accepted? I just don't get it. Can someone please explain this to me?

[danberkeley]

Why don't Austrian economists get more respect and notoriety? Why do they seem to be outnumbered by the Keynesians by a such a large margin? What I have read so far makes so much more sense from an Austrian perspective and I fail to see why there seems to be such a huge disparity in the number of Austrians vs' Keynesians. How have the Keynesians won the PR battle? What are there counterarguments to Austrianism that have made them more accepted? I just don't get it. Can someone please explain this to me?

It's not taught in public schools, for one.

[sam9657]

Its actual very simple. Austrian economists want sound money and for the market to set interest rates. Most importantly Austrian economists believe the Fed should be abolished. Since the Fed sponsors most of the economic research in the US, Austrian economists will always be shunned.

[icon124]

It's not taught in public schools, for one.

that's not 100% true...we brushed through it during a History of Economic Thought class haha

[danberkeley]

that's not 100% true...we brushed through it during a History of Economic Thought class haha

Did they teach you the ABCT?

[IChooseLiberty]

It's not taught in public schools, for one.

Yeah, I actually just recently finished Macroeconomics at my local community college and my professor was a self-proclaimed Classical economist. The college actually forced him to present both perspectives, Keynesian and Classical, which I suppose is a good thing.

[smsnead2]

Do you guys ever bring up Austrian Economics in your classes? If so, how do your instructors respond?

[IChooseLiberty]

Do you guys ever bring up Austrian Economics in your classes? If so, how do your instructors respond?

Well, Classical = Austrian. So yeah. He tried to remain neutral and just present the material. He did present Keynesian economics and stated that it could work in theory, similar to communism; But, he didn't believe that Keynesian economics could work in the real world because gov't/central banks are not disciplined to control the money supply efficiently due to a conflict of interest. Not to mention that gov't is generally incompetent and should not be trusted with regulating the money supply.

He would hand out articles with each week's powerpoint presentation and one of the last articles was something along the lines of "Sound Money: The Only Solution"

So I'd say he was pretty positive toward Austrian economics.

[IChooseLiberty]

This was the actual article he handed out.

Stable Money Is the Key to Recovery
http://online.wsj.com/article/SB122663373660027575.html?mod=googlenews_wsj

Pro-Gold standard =)



Perhaps I was just lucky... I actually expected to get a Keynesian professor.

[icon124]

Did they teach you the ABCT?

lol, do you really think we went over the Austrian cycle?...

We did talk a little about Hayek though...probably only because he won the nobel prize.

[surf]

Keynes has grown in stature as many of the annointed "geniuses" are Keynesians (Bernanke, Greenspan in his latter years, Paulson, Geithner, Barney Frank...). Keynes uses bogus high-end mathematics to attempt to quantify things that are not quantifiable. it's the ability to put a number on things that makes Keynesians feel that their answers are more legit than an Austrian that believes in lassiez fare (sp?) outcomes and that one can not predict where the ball will end up.

i had to drop a grad-school econ class because of a Keynesian professor. But there in lies some of the prevelance for Keynesian professorships: imagine writing your doctoral thesis on the neglicence of government spending when all you can really say is that "it's f#cking dumb and leads to defficient allocations of capital" while your peers can pull a slew of numbers out of their asses and construct ridiculous equations showing the "benefits" of building a new bridge or subsidizing public universities....

edit: i still consider myself incredibally lucky to have learned about the Austrian School in (a public) high school from a great teacher

[krazy kaju]

There are Keynesians, monetarists, new classicals, institutionalists, and others. The Austrian school has a lot of competition and a lot less sympathy from government and pro-government political movements.

[Anti Federalist]

From Glen Allport at Strike The Root...

The Year Ahead: 2009 (http://www.strike-the-root.com/82/allport/allport6.html)

(snip)

The global financial crisis now underway is larger and deeper than any in living memory; it will be talked about for millennia, assuming mankind survives that long. Yet most economists and talking heads in the lamestream media, including print as well as television, failed to see it coming, just as they missed the call on the housing and dot-com bubbles. Paul Krugman confessed last week on the NY Times Opinion page that ". . . the failure [of economists] to see the most obvious bubble of my lifetime remains a puzzle."

It may be a puzzle to Krugman, but the answer is simple: Most economists and paid commentators are Keynesians (see also this video on the results of Keynesian policy; 7 min 29 sec) who believe in government economic intervention (i.e., control via taxation, regulation and spending) combined with central banks and fiat currencies. In short, Keynesianism consists largely of central planning (the lynchpin of the old Soviet Union and Red China under Mao, although Keynesianism allows for a semi-market economy) combined with heavy taxation and epic levels of unrestrained counterfeiting, with the wealth thus extracted from citizens being spent on more central planning and, in the case of the United States in particular, on war and on maintenance of an empire; for example, on our 750+ foreign military bases (see also here) around the planet. The wealth thus drained from the lower and middle classes flows to favored corporations, government agencies, and other special interests. Overall, the wealth extracted from citizens is redirected to those who already have wealth and power, for they control the system. What little does flow to the lower and middle classes (Social Security, Medicare, "free" education, welfare payments, etc.) has the added benefit, from the elite's point of view, of making the great mass of citizens ever-more dependent upon the State; eventually, the helpless, infantilized citizenry looks to the State for nearly everything.

No wonder Keynesians have been so clueless: Those mechanisms and their side-effects are the cause of the present crisis.

Why, then, do so many economists and commentators hold Keynesian views? Because those same mechanisms are also the core of the elite's wealth and power, and since the elite control the major broadcast and print media and most universities, any economist or paid commentator who does not champion the Holy Trinity of government intervention, central banking, and fiat currency is shut out of the system. Gary North describes the process, especially in regards to academia, in a reality-based horror story titled How Academic Guilds Police Higher Education.

I have previously described the effect of misperceiving reality due to inaccurate mental frameworks in Blinding by Paradigm. Such misperception is especially common, and highly destructive, in regards to politics and the nature of coercive government itself.

As a paradigm, Keynesian economics is on a par with the divine right of kings: an idea (or set of ideas) so shockingly dishonest and out of synch with reality that it clearly exists only as rationalization for thuggery, theft, and fraud. No wonder those who see the world (or at least describe the world to others) in terms of this paradigm so often miss the obvious. Getting things right is not the purpose of this paradigm; the purpose is keeping things right – that is, keeping the powerful in power and the masses in their place.

One bright spot in the current storm is that intelligent and honest commentators such as Congressman Ron Paul, investor Jim Rogers, and economist Peter Schiff are getting more respect and exposure as a result of having been consistently right on where we were headed (links are to videos). All three of these men, in particular, have been repeatedly interviewed on national television lately and the point has often been made that they predicted the current crisis years in advance while most other commentators were denying or downplaying the problems and sometimes literally laughing at the men who we now know were right.

There is no mystery to how Paul, Rogers, and Schiff saw the future with such clarity: they simply used a more accurate paradigm for understanding human action and the markets. Such (largely) Austrian-oriented bears as these three are likely to continue their dour "winning" streaks, because 2009 looks to be even harsher and scarier than 2008.

[Knighted]

IMO, the Austrian school was probably a lot more valid around the time it was developed than it is today. I think it is still a good foundation but that it is too simplistic to account for a lot of factors present today as a result of globalization.

I think that the two best concepts from the Austrian school that are still valid today are (to some extent) praxeology and also the support of a strongly laissez faire approach to the economy (which is desperately needed now).

[Brassmouth]

IMO, the Austrian school was probably a lot more valid around the time it was developed than it is today. I think it is still a good foundation but that it is too simplistic to account for a lot of factors present today as a result of globalization.

I think that the two best concepts from the Austrian school that are still valid today are (to some extent) praxeology and also the support of a strongly laissez faire approach to the economy (which is desperately needed now).

:rolleyes:

And just what is "simplistic" about it and why is that a bad thing?

[danberkeley]

IMO, the Austrian school was probably a lot more valid around the time it was developed than it is today. I think it is still a good foundation but that it is too simplistic to account for a lot of factors present today as a result of globalization.

I think that the two best concepts from the Austrian school that are still valid today are (to some extent) praxeology and also the support of a strongly laissez faire approach to the economy (which is desperately needed now).

Meanwhile, Keynesianism is completely wrong.

[ghengis86]

Meanwhile, Keynesianism is completely wrong.

okay, that was funny.

dan and the autrians 1, knighted and the J.M Keynesians, 0

[Mitt Romneys sideburns]

The guvment is going to print out whatever economic text books fit the best with whatever they are trying to sell as the "American way". Currently, they spew out propaganda of a "mixed market", so naturally, the econ text books are Keynesian.

[Knighted]

And just what is "simplistic" about it and why is that a bad thing?

It's simplistic because it assumes that our economy is living in a bubble and is unaffected by the actions of other foreign monetary policy makers and the state of other world economies. When Austrian school was founded, globalization was in its infancy, but no longer. Now, the boom/bust cycle would remain and perhaps even be worse if we were still on a gold (or other) standard.

A pure laissez faire economy without any regulation would also fail in many ways. As one example, there are too many variables in play to simply eliminate regulation and pray everything works out for the better. People's rights would be trampled upon. Relying on the legal system to sort out all matters of pollution, property violations, etc. would never work given the laughable state of the current legal system.

[Andrew-Austin]

Because the Austrians are radical, and this tends to hurt people's feelings.

[Mini-Me]

It's simplistic because it assumes that our economy is living in a bubble and is unaffected by the actions of other foreign monetary policy makers and the state of other world economies. When Austrian school was founded, globalization was in its infancy, but no longer. Now, the boom/bust cycle would remain and perhaps even be worse if we were still on a gold (or other) standard.

A pure laissez faire economy without any regulation would also fail in many ways. As one example, there are too many variables in play to simply eliminate regulation and pray everything works out for the better. People's rights would be trampled upon. Relying on the legal system to sort out all matters of pollution, property violations, etc. would never work given the laughable state of the current legal system.

Frankly, I think the reverse argument is stronger: There are too many variables in play for central planners and regulators to take into account...which means that there are too many variables in play to think that any attempts at centralized regulation* wouldn't backfire with horrible and disastrous side effects much worse than the problems they're meant to solve.

*Beyond laws that actually protect people's rights...though I consider "regulation" to be all of those laws which violate people's rights to some degree in order to pursue some other economic goal. You brought up pollution as an example, but fighting pollution via the enforcement of property rights (and actually codifying them into law in a meaningful way...) does not rely on the legal system any more than fighting pollution through regulation (because the legal system must be used to judge/punish violations). Ultimately, no matter what kinds of laws are on the books (regulatory or not), the legal system is the only real governmental mechanism for enforcing them. We're currently pursuing a regulatory strategy to fight pollution, but all of the loopholes written into laws, selective enforcement, etc. all demonstrate why it's such an unworkable and inevitably doomed strategy anyway. We'd do a much better job fighting pollution by simply erasing the law books and starting from scratch with a few strong, simple, and sensible laws regarding property rights.

[danberkeley]

It's simplistic because it assumes that our economy is living in a bubble and is unaffected by the actions of other foreign monetary policy makers and the state of other world economies.

No it does not.


When Austrian school was founded, globalization was in its infancy, but no longer.

Nations have been trading with each other for hundreds of years.


Now, the boom/bust cycle would remain and perhaps even be worse if we were still on a gold (or other) standard.

Please explain.


A pure laissez faire economy without any regulation would also fail in many ways.

How so? A free market would develop regulation without the need of the state.


As one example, there are too many variables in play to simply eliminate regulation and pray everything works out for the better.

That's management speak. Please clarify.


People's rights would be trampled upon.

Sure. Free markets dont promise that no one's rights will be violated. Btw, the state tramples upon people's rights while claiming to protect them.


Relying on the legal system to sort out all matters of pollution, property violations, etc. would never work given the laughable state of the current legal system.

More ambiguity. Please clarify.

So far, you have made a bunch of bold statements with no supporting statements.

[Mini-Me]

No it does not.
Sure. Free markets dont promise that no one's rights will be violated. Btw, the state tramples upon people's rights while claiming to protect them.
Reading your post, I agree, but I wanted to touch on this comment: Just so people don't take your viewpoints the wrong way, you might want to clarify statements like these to indicate you don't actually agree with people's rights being violated, and that you believe in justice and compensation for victims (regardless of whether the government or free market courts decide the matter). That comment just jumped out at me as something that people who don't know you and non-libertarians ("lay" people in general) might almost universally misunderstand and take as an excuse to dismiss everything else you say...and, well...that would suck. ;)

[demolama]

Its real simple... Austrian requires common sense... and Keynesian requires math, statistics and science... thus they don't want to teach Austrian because then economics wouldn't be considered a "science" and the "scientists" would be without their big heads

[jclay2]

The reason Austrians are shunned so much is basically about political views more than anything else. Virtually every university in the United States is filled with liberals who believe the Government can save anything and is the best thing since sliced bread. Naturally, this view flows over into their economic views and heavily distorts the truth.

[Knighted]

Please explain.
Nations are far more interdependent on each other than ever before in history. The level of trade in the 1800s for example was nothing compared to what it is today. The actions of monetary authorities in other countries affect both our economy and our monetary system. Reinstating the gold standard would open up yet another can of worms as gold is subject to supply/demand pressures. The US controls only around 25% of the world's gold today if I remember correctly. A gold standard today would make the US economy a puppet for the other countries around the world to pull the strings.

[danberkeley]

Nations are far more interdependent on each other than ever before in history. The level of trade in the 1800s for example was nothing compared to what it is today. The actions of monetary authorities in other countries affect both our economy and our monetary system.

Correct.


Reinstating the gold standard would open up yet another can of worms as gold is subject to supply/demand pressures.

:confused:


The US controls only around 25% of the world's gold today if I remember correctly.

Please clarify. The US government? The Fed? The US population? All three?


A gold standard today would make the US economy a puppet for the other countries around the world to pull the strings.

How so??