NYT on the Austrian School … "It was 'The Road to Serfdom' by Friedrich Hayek that became the ur-text of Mr. Paul's emerging ideology, introducing him to Austrian economics and its Manichaean choice between laissez-faire capitalism and a government-run economy destined for disaster. (Mainstream economists have long dismissed the Austrian school, but it retains a devoted following among libertarians and some conservatives.)" … I guess it depends what you mean by "mainstream" and "Austrian school," given those Nobel prizes for Friedrich Hayek, James Buchanan, and Milton Friedman. I'm not saying that the Austrian school is dominant or anything like that, and there are many –sometimes conflicting — views that one might identify as Austrian, but this strikes me as awfully glib, no? – Jonah Goldberg / National Review blog
Dominant Social Theme: Well, the Austrians have gotten a little bigger and a bit more noticed. OK.
Free-Market Analysis: Many years ago, conservative pundit Jonah Goldberg lost his temper and wrote that Lew Rockwell (of LewRockwell.com and Mises.org) and his libertarian colleagues could fit into a "phone booth."
Not so fast. Today, those who have a lively interest in Austrian free-market economics or who are outright supporters of the magnificent ideas inherent in "human action" and free-market money are a forceful factor throughout the blogosphere.
Goldberg, in this blogsite squib, belatedly seems to acknowledge this (see excerpt above). Of course, in our humble view he still gets it wrong, conflating Friedman with Hayek, which is a little bit like lumping Judas in with the rest of the Disciples.
Friedman, as time goes on, is seen more and more as an apologist for central banking; and the Chicago Freshwater School itself may be seen as laissez-faire lite – sort of a "CATO" by the Great Lakes.
It is fine to rave about government interference in the marketplace as Friedman often did. But his "serious" writing constantly advocates for fiat-monopoly money within the context of a "steady state." By this he meant that central bankers should inject enough money into the economy but not too much.
He even had a number picked out. Say what? Well … Friedman believed for the longest time that one could approach something called the "economy" using the "science" of central banking. Like so many other apologists for state power, he believed central bankers could fix prices but that they simply weren't doing it properly.
As Friedman's star continues to decline, we see evidence that Austrian economic guru Ludwig von Mises' continues to rise. History is funny that way, often rewarding in the long term those who best present reality, whether or not that reality is recognized in their lifetimes.
Do an Internet search for Mises and you'll come up with maybe three million direct cites. Keynes has only a few hundred thousand more. But a decade ago, you'd have been hard pressed to come up with more than a few dozen cites for Mises – probably all of them generated by the two founders of the Mises foundation, Lew Rockwell and Murray Rothbard.
The growth of the Austrian school has been nothing short of phenomenal. It is EVERYWHERE on the Internet where people interested in ideas gather to exchange views. Even those who are pro-statist and anti-freedom need to deal with the Austrians now. They need to deal with the concepts of Human Action and the acute analysis that modern economies are run into the ground on a regular basis by the central banking-fueled business cycle.
These two concepts, human action and the modern business cycle, are demolishing conventional wisdom about the economy. They are unstoppable truths that undermine the foundations of elite Keynesian economics the way water undermines the foundation of even the most impressive edifice.
It is the Anglosphere power elite that has painstakingly built up modern economics – and what a meretricious construct it is. At its heart lies the enormous lie that good, gray central bankers can fix the price of money on a daily, weekly, monthly and annual basis.
Of course, every price fix is a marketplace distortion, transferring wealth from those who earned it to those who didn't and are less well equipped to utilize it productively. Over time, this wealth transfer creates market bubbles and then ruinous depressions. We're living through one now.
Austrian economics is part of an economic conversation that goes back 500 years or more (in its modern evolution anyway). It was an Austrian that conceptualized marginal utility, the idea that prices are fungible at the "margin" and only the Invisible Hand can determine them.
The concept of marginal utility is the dividing line between the static "old school" of classical economics (think Malthus and Marx) and the dynamic "new" economics of the neo-classical school.
Interestingly, almost all reputable economists claim to be neo-classical now. But it's simply a rhetorical statement. The Germans and British reclaimed the stubborn, old classical economics with their reliance on econometrics.
Econometrics is the idea that one can predict human behavior if one applies properly complex equations to an adequate amount of data. Econometrics is applied throughout the world by governments large and small to justify new laws and regulations.
But common sense tells us that econometrics cannot work any better than any other kind of forecasting device. As soon as people experience the regulatory fiat, they will react and change their behavior. In fact, they will often change their behavior even BEFORE the laws and regulations are written.
It was the Germans who, when confronted with Austrian, free-market analysis, lost their collective temper and labeled the laissez faire school "Austrian" in contempt. But the original Austrians themselves adopted the name proudly as a badge of honor.
The reason that Austrian economics has swept the blogosphere is because it is the only school that tells the truth about the world. Most people in this world are apparently damaged in childhood and grow up wanting to control other people. Going into politics and writing laws is a good way to do this.
Austrian economics confronts these damaged people – who compensate for the lacunae in their own souls by attempting to control others – with the truth about their behavior. It is hard to tolerate exposure and powerbrokers often react petulantly to economic truths by attacking the messenger. This is why Austrian economics, as it grows ever more popular, is increasingly being attacked by low-level supporters of Anglosphere elite policies.
The Anglosphere itself – the top central banking families – are obviously involved in a campaign against Austrian economics as well. They are using sub-dominant social themes – fear-based promotions – to try to cast aspersions on the school.
Whether or not Goldberg has actually apologized for his initial statement, what cannot be denied is that Austrian, free-market economics is "sweeping the board." It is not doing so because it is somehow a backhanded elitist plot (a part of a larger dialectic) but because it provides people with something very rare in this world: The truth.