Saturday, June 1, 2013

Influence of the Austrian School

This is the continuation of “My First Article.” At least, I kept my promise to myself that I will read the first three articles I got from Google Reader before I sleep.


The first article I read was“The Austrian School of Economics.” This article was written on August 20, 2011 by Manoj Singh, an Investopedia writer. He provided a rough overview of what the Austrian economists do. At the outset, the writer claims that the Austrian school is radically different from conventional economists that we hear today.
Most present-day economists are difficult to understand (I thought at first that it was only the theologians and philosophers who are difficult to understand by the public). The public find them speaking “alien” words with their sophisticated graphs, complex formulas, and difficult terms. To me, they serve as great tools to hide the real world from the people.
The writer claims that our society is being deprived from the insights coming from Austrian economists; insights, which are very critical to assist us in addressing vital economic issues in our time.
In the first section of the article, we find the names, the books and the main ideas of the pioneers of the Austrian school: Carl Menger, his Principles of Economics (1871), and his idea about “diminishing marginal utility;” Ludwig von Mises, The Theory of Money and Credit (1912), and Friedrich Hayek. He forgot to mention Murray Rothbard.
The main content of the article centers on the primary ideas of this school and their distinction from more popular thoughts of economics. They include the methodology, the way to determine prices of goods, interest rates, inflation, business cycles, and creation of market mechanism.
The writer concluded with an invitation to learn Basic Economics. I planned to accept his invitation after finishing my reading of the remaining two articles.
The second article, Austrian Economics and Modern Monetary Theory was written last June 20, 2011 by Robin Koerner of Huffpost Business. The article has two main sections. In the first section, he praised the Austrian school. He mentioned about its rise to popularity, its ability to see the problem in existing monetary system, and its promotion of the free market. The writer also identified favorite themes today, which were exposed due to Austrian influence. They include issues like the government and the bankers’ manipulation of money supply, fractional reserve, and fiat money.
In the second section, the writer introduced the idea of “Modern Monetary Theory” (MMT). He mentioned the weakness of Austrian school to grasp the complete picture of existing monetary system. This is where the Austrian school needs MMT. The writer proposed an interaction between the two with the hope of seeing a synthesis expecting to find a solution to our economic problem. After reading the writer’s explanation of the pros and cons of MMT, personally, I am not impressed. I still go with the Austrian school.
The third and last article was written just two months ago, May 7, 2012 by Brian LaSorsa. It is a very relevant article for it concerns the upcoming US election. The title of the article is Bachmann, Ludwig von Mises Would not Endorse Romney. The writer shares the story about Bachmann’s inconsistency between her claim that Ludwig von Mises is one of her favorite economists and her support to the candidacy of Mitt Romney. LaSorsa then provided his evidences that Bachmann’s support for Romney shows that she really knew nothing about Mises. He provided four important issues where Romney’s position is different from Mises. They include drug prohibition, Federal Reserve, war, and taxes. If Bachmann’s claim that Mises is one of her favorite economists, she should have supported the Tea Party candidate, Ron Paul.
So far, these are the insights I glean in reading the first three articles on Austrian school of economics. Summing up the three articles, we find that in the first article the Austrian school is mentioned to promote a course in economics; in the second article, the Austrian economics is mentioned as part of the solution to economic crisis, and; in the last article, we read how a prominent figure in the Austrian school was used in politics. So these three fields – investment, finance, and politics – are now experiencing the pressure and influence of the thoughts of the Austrian economists.
Grace and peace!
Note: Posted in my WP blog last July 19, 2012