Another example of Keynesian-Austrian tension in the market today is demonstrated by two articles respectively written early this year. Matthew Yglesias wrote the January 6 article, What is “Austrian Economics”? And Why is Ron Paul Obsessed with it? and Sheldon Richman wrote the January 13 article, Austrian Economics Hits the Headlines: Critics Ought to Understand it First.
Reading the above two articles is like watching an online debate between a misinformed critic and a well-grounded defender of the Austrian school. The first article is an example of a prevailing misconception and misrepresentation of Austrian economics. Richman recommends it as “highly informative – about what Austrian economics is not.”
My intention in this article is not to repeat Richman’s refutation, but to limit myself in an overview of just three discrepancies of ideas between a Keynesian and an Austrian when it comes to economic issues.
First, Yglesias describes Austrian economics as Ron Paul’s “idiosyncratic passion” and “set of beliefs that put him at odds with the vast majority of well-known economists of all ideological inclinations.” Well, that is true, but this lone politician at least knew long beforehand and anticipated the 2008 crisis that those “well-known economists” caught unprepared and at a lost to provide clear and believable answers to the American public and the world.
The critic portrays the Austrian school next as “a set of classical liberal thinkers with diverse interests who came out of the Austro-Hungarian Empire.” Sheldon Richman replied that such piece of history is inaccurate. Instead, the Austrian pioneers are actually neither interested with politics nor in government economic policies. Their common goal was to provide a sound theoretical basis of market operation: good, value, exchange, price, commodity, and money.
And finally, Yglesias argues, “…along with rejecting the legitimacy of any intervention to protect the poor or regulate anything… Austrians reject the idea that there is anything at all the government can do to stabilize macroeconomic fluctuations.” There is an omission here. We are not sure if it is deliberate or the writer really does not know anything about the Austrian idea identifying the government itself as the primary source of economic crisis. Of course, the government can do something to address the situation; Austrian just do not believe that the government’s action could “stabilize macroeconomic fluctuations.” At best, what the government can do is to stop stimulating the money supply and reduce spending.
Richman identifies other misconceptions in Yglesias’ article. His refutation is really and highly informative of what true Austrian economics is. Those who want to know Richman’s informed refutation can personally read the article here.
Note: Posted last July 23, 2012
I am just starting to learn about the Austrian School. I believe they have it right. I came across them when checking out the different economic thoughts on our current crises. I knew Keynesian was a total fraud advocated by scammers and con artists. Keynesian head snake oil guy Krugman got a nobel prize which I believe is worth just as much as the nobel prize Obama got. - Comment by Liberal Rater
ReplyDeleteWe are both on the same page LR and I share your disappointment with Krugman and Obama. In my case, my first encounter with the Austrian school was way back 2006 when I was taking units in Ed.D., but I never really explored what this school is all about. It was my encounter with the works of both Edward Griffin and Gary North as well as the existing economic situation that just this July, I finally decided to take a serious look at this school. Thanks for your visit! ^_^ - My Response
ReplyDeleteI came across Peter Schiff who had been warning about the bubbles for years. I watched some of his interviews on youtube. It is amazing how often he gets trashed by just about all the so called ‘experts’ back then. Even now, he is probably not taken seriously by the lamestream liberal media. They are still fawning over Krookman’s borrow spend tax and repeat mess of an economic model. - Response of Liberal Rater
ReplyDeleteI first watched Pete Schiff’s video in late 2010. You’re right, he was considered a “caveman” back then. But when his predictions happened, the mainstream media began to listen to him. However, his economic solution appears to be too radical and impractical with the present monetary system that we have. And besides, Keynesian experts like Stiglitz and Krugman are giving different diagnosis and solution, but as Ron Paul keeps on saying, “you cannot spend your way out of recession.” - My 2nd Response
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