# Think Tank > Austrian Economics / Economic Theory >  Austrian Economics - PhD student

## kozel

Hello, I'm a grad student at a top20 in economics... When I was 17 or so, I used to watch Ron Paul videos, etc.. I was one of you guys

But, after being exposed to real economics, I must say. Austrian economics is marginalized, and even made fun of, not because there is a conspiracy going on, but because its un-scientifical, and downright funny. 

So. Stop trolling "keynesian" videos. Stop harassing good researchers. Study "mainstream" before attacking it blindly. Thank you

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## jmdrake

LOL.  Good troll.  "Un-scientifical"  Is that even a word?  But thank you.  You provided good fodder for another thread.

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## brandon

Perhaps you should try to fit a formal logic class into your schedule. And maybe redo english 101?

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## brandon

Appeal to authority, ad hominem, no true scotsman, begging the question, and a red herring all fit inside 4 complete sentences and 3 fragments.  Pretty impressive OP.

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## bbjaylive

> Hello, I'm a grad student at a top20 in economics... When I was 17 or so, I used to watch Ron Paul videos, etc.. I was one of you guys
> 
> But, after being exposed to real economics, I must say. Austrian economics is marginalized, and even made fun of, not because there is a conspiracy going on, but because its un-scientifical, and downright funny. 
> 
> So. Stop trolling "keynesian" videos. Stop harassing good researchers. Study "mainstream" before attacking it blindly. Thank you


The mainstream ain't as great as you make it out to be. Mainstream economics isn't like mainstream science, because mainstream science deals with facts, not theories backed up with insufficient evidence. 

For example, most economists would have you believe that trade started out as bartering, whereas evidence suggests, as mentioned in David Graebar's "5000 Years", that primitive societies used systems of credit and debit as money.

Also, most economists believe the loanable funds theory, that is fractional reserve banking, that deposits create loans, but evidence is mounting up that suggests the opposite, that is that loans actually create deposits and new money is literally created by private banks when they make loans.  This is why Steve Keen calls money 'endogenous', yet people in the mainstream still claim that the loanable funds theory is correct.

Mainstream economics doesn't deal with the operational realities of our economic system, and is mainly prescriptive, but heterodox economic schools of thought are emerging, helped largely by the failure of the mainstream to predict the financial crash of '08.

It's all well and good standing on your 'mainstream horse' and pissing on the Austrians, but don't forget that their emergence is largely down to your group's failures.

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## P3ter_Griffin

> Study "mainstream" before attacking it blindly.


By study, do you mean read Keynes and Marx?  Or do you mean to study the hole Keynesian economics has gotten us in?  I agree with the latter-- although I don't know how much studying you need to do to realize how badly the Keynesians have $#@!ed up the economy--, but to the prior, I'd say, there are too many (endless) worthwhile books to read to waste time reading books clamoring for government involvement in the economy.  The whole world, or almost at least, has tried this big government spend-spend-spend, manipulate-manipulate-manipulate philosophy, and now we find ourselves on the brink of a total meltdown.  If this is success to you-- if this has proved to you that government involvement in the economy works--, you sir are $#@!ed in the head.

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## kozel

> The mainstream ain't as great as you make it out to be. Mainstream economics isn't like mainstream science, because mainstream science deals with facts, not theories backed up with insufficient evidence. 
> 
> For example, most economists would have you believe that trade started out as bartering, whereas evidence suggests, as mentioned in David Graebar's "5000 Years", that primitive societies used systems of credit and debit as money.
> 
> Also, most economists believe the loanable funds theory, that is fractional reserve banking, that deposits create loans, but evidence is mounting up that suggests the opposite, that is that loans actually create deposits and new money is literally created by private banks when they make loans.  This is why Steve Keen calls money 'endogenous', yet people in the mainstream still claim that the loanable funds theory is correct.
> 
> Mainstream economics doesn't deal with the operational realities of our economic system, and is mainly prescriptive, but heterodox economic schools of thought are emerging, helped largely by the failure of the mainstream to predict the financial crash of '08.
> 
> It's all well and good standing on your 'mainstream horse' and pissing on the Austrians, but don't forget that their emergence is largely down to your group's failures.


hahaha thanks for the laugh, endogenous money isn't a novelty at all.. Steve Keen is hilarious, as funny as the Austrian bunch

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## PSYOP

Obvious paid troll is obvious.

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## kozel

> By study, do you mean read Keynes and Marx?  Or do you mean to study the hole Keynesian economics has gotten us in?  I agree with the latter-- although I don't know how much studying you need to do to realize how badly the Keynesians have $#@!ed up the economy--, but to the prior, I'd say, there are too many (endless) worthwhile books to read to waste time reading books clamoring for government involvement in the economy.  The whole world, or almost at least, has tried this big government spend-spend-spend, manipulate-manipulate-manipulate philosophy, and now we find ourselves on the brink of a total meltdown.  If this is success to you-- if this has proved to you that government involvement in the economy works--, you sir are $#@!ed in the head.


Marx mainstream? Keynes was important, but guys like  Lucas and Sargent were more.. 

This is not like Austrian economics, researchers aren't appealing to the General Theory like its the Bible. Different from you guys "Mises says X.. ERGO X is true!! QED"

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## bbjaylive

> hahaha thanks for the laugh, endogenous money isn't a novelty at all.. Steve Keen is hilarious, as funny as the Austrian bunch


LOL, now you're just being a troll.

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## kpitcher

if you're a PhD mind telling us your thesis topic?

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## Danan

How about offering some constructive criticism? How exactly am I supposed to react to your drivel? "No, *you* are wrong!" ?

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## Danan

> LOL, now you're just being a troll.


Steve Keen is indeed utterly overestimated by some people and I disagree with almost all your arguments in your initial response. That being said, kozel is a joke.

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## Seraphim

Bolded really, really ups your credibility.

Well done, well done.






> Hello, I'm a grad student at a top20 in economics... When I was 17 or so, I used to watch Ron Paul videos, etc.. I was one of you guys
> 
> But, after being exposed to real economics, I must say. Austrian economics is marginalized, and even made fun of, not because there is a conspiracy going on, but because its *un-scientifical*, and downright funny. 
> 
> So. Stop trolling "keynesian" videos. Stop harassing good researchers. Study "mainstream" before attacking it blindly. Thank you

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## awake

lol...

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## kozel

aww he made some gramatical mistakes.. nevermind that english isn't my first language and this is the internet

BTW where is the hyperinflation you guys were claiming ??? Where is it??

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## Jovan Galtic

Funny 

"Mainstream economics" is very much like witchcraft. A bunch of nonsense based on superstition.

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## Danan

> aww he made some gramatical mistakes.. nevermind that english isn't my first language and this is the internet
> 
> BTW where is the hyperinflation you guys were claiming ??? Where is it??


I've never claimed hyperinflation was comming. Try again.

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## green73

> aww he made some gramatical mistakes.. nevermind that english isn't my first language and this is the internet
> 
> BTW where is the hyperinflation you guys were claiming ??? Where is it??


http://mises.org/daily/6340/Where-Is-the-Inflation

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## kozel

Wrong.. You can't change the rules of the game. You guys claimed hyperinflation with the current inflation measuring, if you can't win, don't change the rules.

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## green73

> Wrong.. You can't change the rules of the game. You guys claimed hyperinflation with the current inflation measuring, if you can't win, don't change the rules.


Links please.

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## MRoCkEd

Great, you seem to have figured things out at your top school. Do you mind actually posting your arguments against Austrian economics?

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## kozel

Your own "dude" already has provided arguments against it

http://econfaculty.gmu.edu/bcaplan/whyaust.htm

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## MRoCkEd

> Your own "dude" already has provided arguments against it
> 
> http://econfaculty.gmu.edu/bcaplan/whyaust.htm


Not sure how he is my "dude." Are you willing to articulate your own views, or must I assume you agree with everything in that article?

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## enter`name`here

Suggestion: post actual critiques people could focus on and hopefully start an intelligent conversation.

Or

Continue with strawmen and and name calling and watch down on us peasents from up there on your high horse, and expect a reply in kind.

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## revned

> Wrong.. You can't change the rules of the game. You guys claimed hyperinflation with the current inflation measuring, if you can't win, don't change the rules.


You have GOT to be the most obvious troll I have ever witnessed on these forums. Why don't you actually bring logical debate to the argument instead of just saying things are wrong; we love and value debate here, but you obviously don't have the pride to stick by your guns. Only but a few have prematurely claimed hyperinflation and it's because we are very close to the brink of it and now is the time for people to be aware. I don't blame those who have claimed it, but I also don't look to them as the all-knowing either. If that is your argument against Austrian economics, it's a very useless and highly flawed one.

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## kozel

my view is that ABCT assumes that enterpreneurs are making systematic errors (i.e. when CB lowers interest rates, they blindly invest in new longer-term projects, which subsequently become unprofitable when rate goes up) and thus completely ignores the role of expectations. Also, since austrians hate both math and econometrics, they never write a formal model and estimate it - so even if ABCT was true, we have no idea how much of business cycle it really explains.

There are other problematic things with austrian economics (especially with more hardcore part of it, e.g. Mises Institute), like a crazy methodology which refuses empirical testing of theories, general ignorance of any new mainstream economics since circa 1950, and annoying libertarian ramblings. I hope you get the idea.

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## seraphson

> Hello, I'm a grad student at a top20 in economics... When I was 17 or so, I used to watch Ron Paul videos, etc.. I was one of you guys
> 
> But, after being exposed to real economics, I must say. Austrian economics is marginalized, and even made fun of, not because there is a conspiracy going on, but because its un-scientifical, and downright funny. 
> 
> So. Stop trolling "keynesian" videos. Stop harassing good researchers. Study "mainstream" before attacking it blindly. Thank you


I believe you're taught how to write persuasive essay's in middle school. Perhaps now that you finished your PhD you can overview your middle school teachings and (try to)write a proper criticism of austrian economics. At the very least elaborate for a few measly paragraphs. You provide zero evidence for your claims.

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## Jovan Galtic

You cannot build a "formal model" of human action. Humans are not physical particles that abide the laws of physics. They have *reason* and behave differently in each case. That's why you can't "empirically test theories" in economics like they do in physics or chemistry.

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## kozel

That's funny though, isn't it? Austrian models human behaviour, in a very 40's kind of way (ignore rational expectations, assume humans are half-retarded). If it was true that you guys never modeled behavior, what about the "low interest rates causing bad investments" cycle? A very $#@!ty theory, but it does model behavior. You check-mated yourself there

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## Jovan Galtic

Mises, in "Human Action":




> It was a fundamental mistake of the Historical School of Wirtschaftliche Staatswissenshaften in Germany and of Institutionalism in America to interpret economics as the characterization of the behavior of an ideal type, the **** oeconomicus. According to this doctrine traditional or orthodox economics does not deal with the behavior of man as he really is and acts, but with a fictitious or hypothetical image. It pictures a being driven exclusively by "economic" motives, i.e., solely by the intention of making the greatest possible material or monetary profit. Such a being, say these critics, does not have and never did have a counterpart in reality; it is a phantom of a spurious armchair philosophy. No man is exclusively motivated by the desire to become as rich as possible; many are not at all influenced by this mean craving. It is vain to refer to such an illusory homunculus in dealing with life and history.
> 
> Even if this really were the meaning of classical economics, the **** oeconomicus would certainly not be an ideal type. The ideal type is not an embodiment of one side or aspect of mans various aims and desires. It is always the representation of complex phenomena of reality, either of men, of institutions, or of ideologies.


Similar to what I said above - you can't create an "abstract model" of a person and then "deduct" theorems about people's behavior. That's nonsense. And also very dangerous philosophically.

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## brandon

You're not even stating the argument right. The argument isn't that low interest rates are a problem. The argument is that when interest rates are set by non-market forces problems arise. No it's not an empirical model. It's a deductive conclusion.

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## kozel

Uhmm, I'm pretty sure the argument is that low interest rates generate a boom bust cycle..

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## Jovan Galtic

"Low interest rates" are not a problem by itself. The problem is manipulation of interest rates. In a free market, interest rates reflect amount of savings. Think about your personal finances - if you have a lot of money in the bank, you can start riskier, longer-term projects. Interest rate (in a free market with sound money) tells us, as a society, "how much do we have in the bank", "how much we can spend on long-term stuff". Then it's clear why manipulation of interest rates creates business cycle - people undertake longer term projects, we run out of money before they are completed and they have to be liquidated. Companies are closed, unemployment rises etc. And your teachers are stunned and surprised - "how the hell did this happen", "nobody saw it coming"... Right.

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## Danan

> my view is that ABCT assumes that enterpreneurs are making systematic errors (i.e. when CB lowers interest rates, they blindly invest in new longer-term projects, which subsequently become unprofitable when rate goes up) and thus completely ignores the role of expectations. Also, since austrians hate both math and econometrics, they never write a formal model and estimate it - so even if ABCT was true, we have no idea how much of business cycle it really explains.
> 
> There are other problematic things with austrian economics (especially with more hardcore part of it, e.g. Mises Institute), like a crazy methodology which refuses empirical testing of theories, general ignorance of any new mainstream economics since circa 1950, and annoying libertarian ramblings. I hope you get the idea.


https://mises.org/daily/2673
http://www.la.org.au/ipaper/280710/r...s-dilemma-or-n

Why don't you go ahead and formulate the model and test it econometrically if that gives you peace.

Btw, I agree with you that many Austrians are totally ignorant of some neo-classical theories and obnoxiously attacking strawmen. The same goes for most neo-classicals in response to Austrian Economics, though. You are the living proof for that.

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## kozel

> "Low interest rates" are not a problem by itself. The problem is manipulation of interest rates. In a free market, interest rates reflect amount of savings. Think about your personal finances - if you have a lot of money in the bank, you can start riskier, longer-term projects. Interest rate (in a free market with sound money) tells us, as a society, "how much do we have in the bank", "how much we can spend on long-term stuff". Then it's clear why manipulation of interest rates creates business cycle - people undertake longer term projects, we run out of money before they are completed and they have to be liquidated. Companies are closed, unemployment rises etc. And your teachers are stunned and surprised - "how the hell did this happen", "nobody saw it coming"... Right.


Low interest rates were caused by savings, external savings. And btw, you continue to model behavior, going against your own theory "interest rates creates business cycle - people undertake longer term projects" 

Oh, and that video doesn't impress anyone. A broken clock is right two times a day. These guys have been predicting doom for 30 years, eventually you are going to be right.. but what about the other 25 years you were wrong? And anyone who followed his instructions to short on the dollar in 2008 lost a lot of money, not to mentiion the hyperinflation stand-up comedy.

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## wizardwatson

What perplexes me about all this economic theory is this. 

Isn't the necessity and/or usefulness of economic theory directly proportional to the opaqueness of market and monetary data?

Given any economic scenario if we have access to all the knowledge about the resources involved, the "means" and we know what problem we are trying to solve why do we even need economic theory?

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## dannno

> That's funny though, isn't it? Austrian models human behaviour, in a very 40's kind of way (ignore rational expectations, assume humans are half-retarded). *If it was true that you guys never modeled behavior, what about the "low interest rates causing bad investments" cycle?* A very $#@!ty theory, but it does model behavior. You check-mated yourself there


"Everything Else Being Equal" if you lower interest rates it will cause more malinvestment. Malinvestment will occur either way, but lowering interest rates encourage it. 

That is different than trying to model 100 million strands of the economy into an econometrics formula.

But what you don't seem to understand at all is, can you explain what good use an econometrics formula has in a free market economy?

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## dannno

> Low interest rates were caused by savings, external savings.


External? Like the Illuminati or China? Are you a conspiracy theorist? I mean, $#@!, our country is in debt, have you ever looked at a chart? Why do we get low interest rates if we're in debt?

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## Danan

> Similar to what I said above - you can't create an "abstract model" of a person and then "deduct" theorems about people's behavior. That's nonsense. And also very dangerous philosophically.


That's *exactly* what most neo-classical micro-economists do too. You formulate theories based on axioms and deduct what logically follows. To realize the conclusions of your model is not difficult. The task of the economist (according to Mises) is to find out which assumptions apply to a given scenario. Empirical tests can't ever falsify logic, they can only show you that you might have made a mistake in applying your assumptions, by either leaving some out or wrongly assuming others. Most modern Austrians and neo-classicals don't really disagree on micro-foundations very much. Whether you have to call it a priori reasoning or axiomatic reasoning doesn't really matter to me. That's a pretty obscure topic, imho.

The problem with testing those theories, however, is that almost all behavioral economics is based on the *assumption* that preferences never change. You most certainly know that already. Not only is that an assumption that can not be verfied or falsified (thus ironically deviating from the scientific method), but also it is essential for all conclusions drawn from empircal testing. With changing preference relations "everything goes" and no predictions nor meaningful conclusions from empirical data are possible. The problem is, though, preferences do change. So do other factors in the environment. Holding "all other things constant" is most of the times a futile task in economics. Even staunch positivists like Chicago School economists don't believe studies that show that a minimum wage increases employment. But why not? Why do they keep twisting the data until an econometric study shows what they believe to be true? Mises wasn't against this approach because he hated to be falsified. He believed that this method is generally unfit for studies of human behavior and if you fully agree with him or not, he does make a good argument for his case.

Also, not all Austrians are either "Misesians" or "Rothbardians". Personally I don't need a label to feel good about myself. I don't agree with everything Mises and Rothbard said and neither of them would have wanted that to be the case.

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## Danan

> What perplexes me about all this economic theory is this. 
> 
> Isn't the necessity and/or usefulness of economic theory directly proportional to the opaqueness of market and monetary data?
> 
> Given any economic scenario if we have access to all the knowledge about the resources involved, the "means" and we know what problem we are trying to solve why do we even need economic theory?


Isn't what you just described economic theory? Studying the means to obtain objectives with given original conditions.

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## dannno

> Your own "dude" already has provided arguments against it
> 
> http://econfaculty.gmu.edu/bcaplan/whyaust.htm


Uhh ya, his entire argument here hinges on this statement, which is his opinion, and I believe it is wrong on multiple levels:




> What I deny is that the artificially stimulated investments have *any* tendency to become malinvestments.


That's bull$#@!. 

Artificially stimulated investments are investments that come from money that was stolen from people who are productive and given to people who are politically connected instead. 

That is what happens in the real world, I don't care what they write in your mainstream economics textbooks.

Why would you assume that taking money from productive people, which could be re-invested and create more productivity, is going to do any better in the hands of people who are merely politically well connected?

If you can create a logical argument against what I just stated, then I'll be pretty, $#@!in, surprised.. because of all the economics arguments I've had I have yet to hear one.

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## trey4sports

Nevermind the moral arguments against inflating the money supply....

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## Jovan Galtic

> Nevermind the moral arguments against inflating the money supply....


Right. Who cares if it's immoral if it increases capacity utilization...

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## trey4sports

> Right. Who cares if it's immoral if it increases capacity utilization...


yeah and who benefits from the increased enomic capacity that the capitol provides? It's sure as hell not the working man. It's big business. You're devaluing my dollar so GE can keep on rollin'.

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## Danan

> Low interest rates were caused by savings, external savings. And btw, you continue to model behavior, going against your own theory "interest rates creates business cycle - people undertake longer term projects" 
> 
> Oh, and that video doesn't impress anyone. A broken clock is right two times a day. These guys have been predicting doom for 30 years, eventually you are going to be right.. but what about the other 25 years you were wrong? And anyone who followed his instructions to short on the dollar in 2008 lost a lot of money, not to mentiion the hyperinflation stand-up comedy.


Peter is by not an economist. He gets stuff wrong from time to time when talking about economic theory (not that economists wouldn't). I don't really care for his financial advice.

Low interest rates were caused by the Fed. There is no doubt about the fact that the FedFunds rate is responsible for short term market interest rates and also very little doubt about the fact that it severly influences long term interest rates too (until they fore corrections).

Of course in the long term the Fed can't keep interest rates too far away from it's natural rate. Neo-classicals and Austrians agree on that. The biggest difference is that neo-classicals seem to believe that the structure of production can never change because of artificially low or high interest rates. Well, with one homogeneous capital good K I guess that's true.

Ironically, trying to prevent asset bubbles with central bank intervention in the future is now the new focus of modern macro-economists. Many are even blaming the Fed (at least partially) for the last two booms because they kept interest rates too low for too long. Of course they would never admit that this seems very much in line with the ABCT.

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## wizardwatson

> Isn't what you just described economic theory? Studying the means to obtain objectives with given original conditions.


Well that's kind of my point.  I would just say its problem solving. When I try to understand the way they define "methodological individualism" and "praxeology" it just seems like thinking.  It's like instead of saying we're "cleaning" we say we're "practicing the custodial arts". 

I'm not knocking all the observations made I just feel like some of the terminology is unnecessarily obscure.

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## kozel

> Peter is by not an economist. He gets stuff wrong from time to time when talking about economic theory (not that economists wouldn't). I don't really care for his financial advice.
> 
> Low interest rates were caused by the Fed. There is no doubt about the fact that the FedFunds rate is responsible for short term market interest rates and also very little doubt about the fact that it severly influences long term interest rates too (until they fore corrections).
> 
> Of course in the long term the Fed can't keep interest rates too far away from it's natural rate. Neo-classicals and Austrians agree on that. The biggest difference is that neo-classicals seem to believe that the structure of production can never change because of artificially low or high interest rates. Well, with one homogeneous capital good K I guess that's true.
> 
> Ironically, trying to prevent asset bubbles with central bank intervention in the future is now the new focus of modern macro-economists. Many are even blaming the Fed (at least partially) for the last two booms because they kept interest rates too low for too long. Of course they would never admit that this seems very much in line with the ABCT.


Hmm, you still ignore the point that the ABCT models behavior (very poorly), so you can't criticize modern economics for doing so too. 

"Low interest rates were caused by the Fed" Duh? You talk like it doesn't have a targetting policy. The evidence that interest rates were low because of movements of savings and investment (asian's, oil producers' and germany's savings) is blatantly obvious.  

And don't try to speak for the whole profession regarding the crisis cause. Most sane ones blame deregulation, I believe only butthurt John Taylor was talking about "too low rates of interest"

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## dannno

> To:  bcaplan@gmu.edu
> 
> Subject: Austrian Economics
> 
> 
> Hi Brian,
> 
> I was reading your paper that you posted about Austrian Economics here:
> 
> ...

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## dannno

> Hmm, you still ignore the point that the ABCT models behavior (very poorly), so you can't criticize modern economics for doing so too.


Such utter bull$#@!.

Peter Schiff said years ago that our government's reaction to the 2008 crisis would create hyperinflation because they would bail out the banks. That process is ongoing and currently happening. The hyperinflation isn't here yet, but real inflation is clearly much higher than the CPI and you have YET to address a post on page 1 by green73(+rep) regarding existing inflation.

http://mises.org/daily/6340/Where-Is-the-Inflation

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## kozel

> Such utter bull$#@!.
> 
> Peter Schiff said years ago that our government's reaction to the 2008 crisis would create hyperinflation because they would bail out the banks. That process is ongoing and currently happening. The hyperinflation isn't here yet, but real inflation is clearly much higher than the CPI and you have YET to address a post on page 1 by green73(+rep) regarding existing inflation.
> 
> http://mises.org/daily/6340/Where-Is-the-Inflation


What a dumb post. First of all, hyperinflation predictions were based on the current rules (CPI measurement, etc). Not "there will be hyperinflation, but only on non-CPI goods, watch out!!" Besides, since wage negotiation is based upon CPI inflation, if there was a parallel hyperinflation, wouldn't standards of living have dropped absurdly (to Congo-esque levels?) yeah...

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## Henry Rogue

> There are other problematic things with austrian economics (especially with more hardcore part of it, e.g. Mises Institute), like a crazy methodology which refuses *empirical testing* of theories,


What empirical testing did Keynes perform on his premise of "animal spirits"?

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## dannno

> What a dumb post. First of all, hyperinflation predictions were based on the current rules (CPI measurement, etc). Not "there will be hyperinflation, but only on non-CPI goods, watch out!!" Besides, since wage negotiation is based upon CPI inflation, if there was a parallel hyperinflation, wouldn't standards of living have dropped absurdly (to Congo-esque levels?) yeah...


I didn't say hyperinflation has occurred yet, I said current inflation numbers are completely inaccurate, inflation is in fact happening and hyperinflation has yet to occur. Nobody said hyperinflation would occur by 2013, just that it WILL occur at some point after the '08 crash if the government continued to prop up failing financial institutions. Just because you are ADD doesn't mean Austrian Economics is wrong.

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## Jovan Galtic

I lived through a hyperinflation and it is not fun...

It happens only when a government completely runs out of other options. So far, the US is strong enough to keep it contained into isolated "bubbles", but it can't last forever.

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## awake

Last time I checked the debate was hyperinflation vs. straight up default. And the goons in government decide which. As long as there are fools lending money to the US government by the Chinese freighter load, default or hyperinflation can be mitigated to some degree.

At this point Bernie Madoff is a perfect analogy...most people believed in him right up until the very last minute. When it broke it was swift and brutal. The American dollar is as good as a Madoff promise.

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## Danan

> Hmm, you still ignore the point that the ABCT models behavior (very poorly), so you can't criticize modern economics for doing so too. 
> 
> "Low interest rates were caused by the Fed" Duh? You talk like it doesn't have a targetting policy. The evidence that interest rates were low because of movements of savings and investment (asian's, oil producers' and germany's savings) is blatantly obvious.  
> 
> And don't try to speak for the whole profession regarding the crisis cause. Most sane ones blame deregulation, I believe only butthurt John Taylor was talking about "too low rates of interest"


Well that's interesting. How did deregulation lead to a financial crisis if rational business men are supposedely perfectly able to forecast the future (or at least can not be fooled systematically)? You yourself dismissed ABCT on the basis of rational expectations theory. But now blaming the crisis on deregulation is somehow okay?

http://www.imf.org/external/np/semin...es2/pdf/fm.pdf

Mishkin's paper is hardly outside of the mainstream. In fact, I can't imagine any view that would encompass the mainstream more than his. He talks about deflating credit-driven asset bubbles with raising interest rates (while Greenspan always was opposed to it). Of course he doesn't agree (yet) that the initial inflation of this credit-driven boom can be because of artificially low interest rates created by central banks. Go figure out yourself why that might be the case.

With high-powered money the Fed can set nominal interest rates anywhere it wants, from 0-1000% (although they might have to confiscate cash to do the latter), by increasing or decreasing bank reserves. Being a PhD student you should know that already. The equilibrating forces on the foreign exchange market as well as on the goods market (interest rate parity or respectively purchasing power parity) will eventually change real values accordingly. However, especially purchasing power parity does not work instantaneously. That time lag, which Friedman has never been able to fully explain, is responsible for the misallocation of resources in the meantime.

Also, I've never claimed that ABCT doesn't model behavior and neither have I criticized any other economic school of thought because of it. "Modern" economics is a misnomer, btw. There is nothing more modern than my current view.

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## Wesker1982

I realize OP is trolling, but for anyone interested in understanding why Austrian economics is _more_ scientific than the mainstream, these are must reads: 

*The Mantle of Science*  by Murray N. Rothbard

*What Is the Proper Way to Study Man?* by Murray N. Rothbard

*Praxeology: The Methodology of Austrian Economics* by Murray N. Rothbard

*In Defense of Extreme Apriorism* by Murray N. Rothbard

*Praxeology: Reply to Mr. Schuller* by Murray N. Rothbard

----------


## kozel

> With high-powered money the Fed can set nominal interest rates anywhere it wants, from 0-1000% (although they might have to confiscate cash to do the latter), by increasing or decreasing bank reserves. Being a PhD student you should know that already. The equilibrating forces on the foreign exchange market as well as on the goods market (interest rate parity or respectively purchasing power parity) will eventually change real values accordingly. However, especially purchasing power parity does not work instantaneously. That time lag, which Friedman has never been able to fully explain, is responsible for the misallocation of resources in the meantime.
> 
> Also, I've never claimed that ABCT doesn't model behavior and neither have I criticized any other economic school of thought because of it. "Modern" economics is a misnomer, btw. There is nothing more modern than my current view.


Are you always this ignorant? Fed follows a POLICY RULE, it cannot set interest rates where it wants randomly, it sets it according to price level movements. If external savings weren't so high, and fiscal policy wasn't as restrictive in the 90's and 2000's, the rates of interest would have been higher.

ABCT models behavior, so why do they criticize agent modelling by other schools? I was probably referring to an other poster

----------


## Keith and stuff

> Hello, I'm a grad student at a top20 in economics... When I was 17 or so, I used to watch Ron Paul videos, etc.. I was one of you guys
> 
> But, after being exposed to real economics, I must say. Austrian economics is marginalized, and even made fun of, not because there is a conspiracy going on, but because its un-scientifical, and downright funny. 
> 
> So. Stop trolling "keynesian" videos. Stop harassing good researchers. Study "mainstream" before attacking it blindly. Thank you


Some interesting points. If you want to see several of the top Austrian economists in the world... If you want to see an Austrian vs. Chicago debate... I recommend Porcfest 2013.

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## KingNothing

> Hello, I'm a grad student at a top20 in economics... When I was 17 or so, I used to watch Ron Paul videos, etc.. I was one of you guys
> 
> But, after being exposed to real economics, I must say. Austrian economics is marginalized, and even made fun of, not because there is a conspiracy going on, but because its un-scientifical, and downright funny. 
> 
> So. Stop trolling "keynesian" videos. Stop harassing good researchers. Study "mainstream" before attacking it blindly. Thank you


You're going to catch hell for this, but you're absolutely right.

----------


## Danan

Danno, I don't like to be rude or anything, but Brian Caplan has a better understanding of Austrian Economics than you have. He just happens to disagree on several accounts. His disagreements are not so blunt as you might expect them to be. They are indeed (partly) very thoughtful and worthy of consideration. I assure he will not change his views based on your criticism, and rightly so.

It's true that Austrian's criticism of the reference model of government as the benevolent omniscent and omnipotent being has been very important. But Austrian's are not the only school of thought saying that. Many neo-classical schools hold that believe (at least today). In fact, almost no economist would deny that today.

Also, taking from one group and giving it to politically connected has nothing (or little) to do with the ABCT. For the most part the theory does not even deal with the technicalities of banking, where some connected "vultures" might gather some scraps. It's an analytical approach that deals with the economy as a whole. If Austrians criticize the Feds policies than not because they believe that "the banks" are profiting off of the rest of us.

That might or might not be true, but it's almost irrelevant to the broader picture. The distortions of the economy that follow from messing with the most essential price are causing the business cycle, according to ABCT. And those distortions are what Caplan denies based on the theory that business men could not be fooled by artificially low interest rates to engage in unprofitable long-term behavior. I disagree with him there, though.

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## KingNothing

Why not learn as much as possible about the Austrian, Chicago, Keynesian, Mercantilists, Physiocrats, Modern Monetary Theory, etc, etc?  It doesn't hurt anything to learn as much as possible, and I think that when folks deviate from Austrian dogma, they'll see that there really are intelligent people who have researched the topic and STILL disagree with us.

----------


## Danan

> Are you always this ignorant? Fed follows a POLICY RULE, it cannot set interest rates where it wants randomly, it sets it according to price level movements. If external savings weren't so high, and fiscal policy wasn't as restrictive in the 90's and 2000's, the rates of interest would have been higher.
> 
> ABCT models behavior, so why do they criticize agent modelling by other schools? I was probably referring to an other poster


I'm not an expert on the Fed per se. I believe the Fed inofficially follows a Taylor rule. Is this correct? In any event, any policy rule pre-supposes that there is a "right" price level, as well as a "right" level of aggregated real output. Leaving aside the technical problems of measuring either of those, that's a capital error to make such an assumption.

In certain economic environments a rapidly falling or rising price level might be a good thing. Austrians are *not* saying that the Fed wasn't successful in reaching its targets. In fact, the Fed did a brilliant job at accomplishing its objectives. What Austrians are criticizing, however, is that those objectives are arbitrary and damaging the economy.

If we assume that there are huge deflationary forces in the economy (too many endebted consumers, producers and governments without sufficiently profitable sources of revenue to pay it off - due to missallocations of resources) we would *want* a deflationary recession. The process to default on obligations and to dissolve invested capital and labor from less to more profitable uses takes time and causes a drop in measured aggregated output. But in the long run, it would pay off.

----------


## Danan

> Why not learn as much as possible about the Austrian, Chicago, Keynesian, Mercantilists, Physiocrats, Modern Monetary Theory, etc, etc?  It doesn't hurt anything to learn as much as possible, and I think that when folks deviate from Austrian dogma, they'll see that there really are intelligent people who have researched the topic and STILL disagree with us.


Sadly, there is far to little dialogue going on between the various schools. I mean, I can see why. Most economists don't know about the methodological foundations of their own school of thought well enough, let alone that of others, to have constructive arguments. And I don't even blame them for that, because studying that stuff is a whole career on its own.

To me that's mostly a failure of modern philosophy. Philosophers should engage in the epistemological disagreements and questions about the philosophy of science in regards to differing scientific positions in all fields (from climatology over economics to quantum physics). But modern philosophers seem to be more interested in pretty shallow and imho useless fields.

----------


## kozel

> I'm not an expert on the Fed per se. I believe the Fed inofficially follows a Taylor rule. Is this correct? In any event, any policy rule pre-supposes that there is a "right" price level, as well as a "right" level of aggregated real output. Leaving aside the technical problems of measuring either of those, that's a capital error to make such an assumption.
> 
> In certain economic environments a rapidly falling or rising price level might be a good thing. Austrians are *not* saying that the Fed wasn't successful in reaching its targets. In fact, the Fed did a brilliant job at accomplishing its objectives. What Austrians are criticizing, however, is that those objectives are arbitrary and damaging the economy.
> 
> If we assume that there are huge deflationary forces in the economy (too many endebted consumers, producers and governments without sufficiently profitable sources of revenue to pay it off - due to missallocations of resources) we would *want* a deflationary recession. The process to default on obligations and to dissolve invested capital and labor from less to more profitable uses takes time and causes a drop in measured aggregated output. But in the long run, it would pay off.


Haha.. deflationary spiral is a great thing! I mean, greeks and spaniards are celebrating it with fire and broken town squares... That's the problem of ignoring market failures (ie downward rigid wages). Lack of counterfactual hurts bad

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## enoch150

> my view is that ABCT assumes that enterpreneurs are making systematic errors (i.e. when CB lowers interest rates, they blindly invest in new longer-term projects, which subsequently become unprofitable when rate goes up) and thus completely ignores the role of expectations.


I don't think they invest in long term projects blindly. 

I don't bother reading economics books and I've never heard of more than half of the economists mentioned in this thread, but the way think of things is like this:

Lower interest rates spur demand for goods. Partly because consumers take on debt to buy stuff and partly because of the "wealth effect", meaning, people spend more when they feel richer and lower interest rates leads to, for example, more margin buying on the stock market, which leads to higher stock prices and people feeling richer. Lower interest rates means lower savings and more spending in general. Businesses see the increase in sales and invest in long term projects based on a continuation of the sales trend and the fear that if they don't invest in such projects their competitors will, and then they will lose market share. The crash comes when the long term projects come on line and sales fail to materialize because consumers stop taking on debt. That can happen with or without higher interest rates if consumers are tapped out.

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## enoch150

> Haha.. deflationary spiral is a great thing! I mean, greeks and spaniards are celebrating it with fire and broken town squares... That's the problem of ignoring market failures (ie downward rigid wages). Lack of counterfactual hurts bad


Deflation is great for people with savings and income. It's the cut off welfare addicts who are rioting.

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## kozel

> Deflation is great for people with savings and income. It's the cut off welfare addicts who are rioting.


those that somehow are employed right?

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## enoch150

> those that somehow are employed right?


Even in Spain, 75% of the population is still officially employed, and more work under the table.

In part, the government is interfering with the market clearing price of the rest through things like minimum wage laws and employment regulations. In part, it's their own fault, if my understanding of how the Euro zone works is correct. If they wanted to, couldn't they just hop a border to another Euro zone country and get a job there without much hassle?

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## kozel

> Even in Spain, 75% of the population is still officially employed, and more work under the table.
> 
> In part, the government is interfering with the market clearing price of the rest through things like minimum wage laws and employment regulations. In part, it's their own fault, if my understanding of how the Euro zone works is correct. If they wanted to, couldn't they just hop a border to another Euro zone country and get a job there without much hassle?


Wow this guys is a genius.. 20% unemployment isn't bad people.. there are 80% people employed!!

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## enoch150

> Wow this guys is a genius.. 20% unemployment isn't bad people.. there are 80% people employed!!


I didn't say it wasn't bad. I said deflation was good for the 75% who had savings or income. I also said government interference and reluctance to take risks were preventing the labor market from clearing.

For a PhD economics student, you are notably making few economic arguments.

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## Barrex

For a "PhD economics student", you are notably making few economic arguments. 						

Barrex

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## dannno

I got a non-response..




> To: bcaplan@gmu.edu
> 
> Subject: Austrian Economics
> 
> 
> Hi Brian,
> 
> I was reading your paper that you posted about Austrian Economics here:
> 
> ...






> Bryan D Caplan
> 
> to me
> 
> 
> Sorry Dan, I'm too busy to respond.






> I don't need a response per se, I am just concerned about mis-information being spread by those with perceived intellectual authority that represents a top-down tyrannical approach to the economy that re-allocates other people's economic decisions so that the politically well connected can continue to profit over honest working people.
> 
> Again, your entire paper hinged on a false premise, an opinion that you admitted in the middle of the paper that is entirely wrong. If you continue to hold these beliefs and use your PhD status to try and convince people that what I'm saying is wrong, you are going to be aiding in bringing down humanity through tyranny. I see you have a child, I would like to have children too but I don't want to have any in a world where we head toward the conclusion of your misguided thought process. You literally believe in and support theft by the elite and you don't even know it. Think about that. What you believe in is REALLY dangerous, I'm just warning you to take a step back, stop smelling your own farts in a glass (South Park reference) and think about what you really believe in from the Austrian perspective by taking some time to learn what it is instead of pretending you have any clue what Austrian Economics is about. Because I do have a clue, at least about the cornerstone of the entire premise of the thought process, and I completely tore apart that portion of your analysis and you don't get that is the most important part. So please take the time to read what I wrote some day, not for me, for the sake of truth, honesty and everyone.

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## VIDEODROME

The more I study about economics the more I realize I don't have time to read enough material equal to what the OP has done. At most, I'm influenced by Bastiat in a philosophical way regarding the purpose of government. I would only be able to debate the OP if I was also in a degree program for economics, but I'm studying computer security instead.  

So, I guess the position people like myself are in is we shop around for economic advisers that can explain this craziness to laymen. One person I like is Tom Sullivan. He seems like a practical guy who doesn't cling to an economic ideology. I don't think he's Keynsian but I don't think he is Austrian either. I also think Lou Dobbs is a decent business news anchor. 

I guess I'm curious if the OP has observed other people in the media on Talk Radio or in Business Networks who is doing a better job of analyzing the economy and explaining what should be done. Or is there a particular Presidential candidate the OP favored over Ron Paul?  I mean in the end all this political arguing boils down to finding a guy we can feel comfortable backing. 

I mean what if you did convince us Ron Paul was all wrong on economics?  Is there a better candidate you would suggest?

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## libertyjam

> Wow this guys is a genius.. 20% unemployment isn't bad people.. there are 80% people employed!!


Curious to what this person thinks the US unemployment is.

----------


## dannno

> Danno, I don't like to be rude or anything, but Brian Caplan has a better understanding of Austrian Economics than you have. He just happens to disagree on several accounts. His disagreements are not so blunt as you might expect them to be. They are indeed (partly) very thoughtful and worthy of consideration. I assure he will not change his views based on your criticism, and rightly so.
> 
> It's true that Austrian's criticism of the reference model of government as the benevolent omniscent and omnipotent being has been very important. But Austrian's are not the only school of thought saying that. Many neo-classical schools hold that believe (at least today). In fact, almost no economist would deny that today.
> 
> Also, taking from one group and giving it to politically connected has nothing (or little) to do with the ABCT. For the most part the theory does not even deal with the technicalities of banking, where some connected "vultures" might gather some scraps. It's an analytical approach that deals with the economy as a whole. If Austrians criticize the Feds policies than not because they believe that "the banks" are profiting off of the rest of us.
> 
> That might or might not be true, but it's almost irrelevant to the broader picture. The distortions of the economy that follow from messing with the most essential price are causing the business cycle, according to ABCT. And those distortions are what Caplan denies based on the theory that business men could not be fooled by artificially low interest rates to engage in unprofitable long-term behavior. I disagree with him there, though.



No, you are making it too complex. He is completely wrong about and does not understand the main cornerstone/premise of Austrian Economics (which, many people including myself simply describe as "economics"), and it very simply stems from the fact that he made a statement that re-allocating economic decisions of others doesn't lead to less efficiency when that statement flies in the face of everything logical you can get out any study of economics. If people want more apples and somebody else decides to re-allocate to oranges by stealing people's $#@!, that isn't going to lead to more people getting more things that they desire. It really isn't that complex, economists simply get buried too deep in things that don't matter because they want to understand something that can't be completely comprehended. 

Do you have an economics degree by any chance?

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## VIDEODROME

I wonder if some of this comes down to deciding how much Economics is a Science and how much of it is Philosophy.

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## green73

> Sorry Dan, I'm too busy to respond.


Priceless!

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## jclay2

My main concern about modern economics:

You people have some how convinced yourselves that a room full of 12 academic incompetents can decide the most important price on the most abundant commodity on the entire planet, money. (1) How is fixing the price of money not akin to Soviet Union price controls. (2) How does the practice of subsidizing losing firms and never allowing failure create longer term prosperity?.

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## Henry Rogue

> I wonder if some of this comes down to deciding how much Economics is a Science and how much of it is Philosophy.


In my view (whether right or wrong) economics is the study of human nature and how and why it reacts. The economy is society.

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## kozel

> My main concern about modern economics:
> 
> You people have some how convinced yourselves that a room full of 12 academic incompetents can decide the most important price on the most abundant commodity on the entire planet, money. (1) How is fixing the price of money not akin to Soviet Union price controls. (2) How does the practice of subsidizing losing firms and never allowing failure create longer term prosperity?.


Except that money isn't a commodity, funny guy

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## Barrex

> Except that money isn't a commodity, funny guy


Yea... people are stupid.... If money were commodity it would be worth same as commodity of which it is made (paper&ink).... Which obviously is not (seriously?!.)...intrinsic value...  because government says paper with custom made copy of art painting on it is worth 100 $... just like paintings... except I hate modern art...but if government told me copy of Milton Averys painting is worth 100$ I would accept it because government says so... just like government said that marijuana is not a medicine, and no credible research suggest that it is....and that thing that there will be no new taxes... and ....ouch my head hurts for some inexplicable reason I must stop....

Stupid people that dont trust their governments...

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## kozel

> Yea... people are stupid.... If money were commodity it would be worth same as commodity of which it is made (paper&ink).... Which obviously is not (seriously?!.)...intrinsic value...  because government says paper with custom made copy of art painting on it is worth 100 $... just like paintings... except I hate modern art...but if government told me copy of Milton Averys painting is worth 100$ I would accept it because government says so... just like government said that marijuana is not a medicine, and no credible research suggest that it is....and that thing that there will be no new taxes... and ....ouch my head hurts for some inexplicable reason I must stop....
> 
> Stupid people that dont trust their governments...


What is your solution then, an utter failure like gold standard?

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## erowe1

> What is your solution then, an utter failure like gold standard?


In the OP your complaint against Austrian economics was that it was unscientifical [sic]. But here call the gold standard a failure. If you think economics should be done scientifically, then what business would you have calling any policy by a value-laden term like "failure"?

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## kozel

> In the OP your complaint against Austrian economics was that it was unscientifical [sic]. But here call the gold standard a failure. If you think economics should be done scientifically, then what business would you have calling any policy by a value-laden term like "failure"?


Maybe because since we don't have a laboratory to test our science, we have to look at the past and see what failed, what failed miserably, or what failed but becuase of idiosyncratic variables that only existed at that time

In the gold standards case, it falls into the "miserable failure" category

----------


## erowe1

> Maybe because since we don't have a laboratory to test our science, we have to look at the past and see what failed, what failed miserably, or what failed but becuase of idiosyncratic variables that only existed at that time
> 
> In the gold standards case, it falls into the "miserable failure" category


That still doesn't sound very scientifical. I can't imagine a geologist describing big rocks as successes and small ones as failures.

What do you mean by the word "fail"?

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## Barrex

> What is your solution then, an utter failure like gold standard?


*LIBERTY*


You and me will be voluntary slaves to government because we are true believers and let rest of the world (stupid morons and traitors who cant think or choose for them selfs) choose for them selfs (and that traitorous scum can die).... If you promise not to tell government I must confess that if our glorious leaders would allow me I would try to trade in alcohol and implement* alcohol standard* (Beer, Rakija, Whiskey, Vodka, Rum, Huangjiu,Icariini, Kilju, Kumis, Mead, Nihamanchi, Palm wine, Pulque, Parakari, Sakura, Sake, Sonti, Tepache, Wine,)...Guy in a village near my family farm got success doing that. He is trading alcohol that he made for almost anything. He is my hero... oh my what am I saying... I am weak and stupid. I didnt mean that. I need my government to order me not to eat animal excrement and not to lick frozen telephone polls and to pay 8/10ths of my property to government (well more if you count government debt that I will have to repay... it actually amounts to more than 100%)...

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## anaconda

Here is a very sharp anarchist who says that Austrian theory has weaknesses, along with all of the other theories of the business cycle.

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## Danan

> Maybe because since we don't have a laboratory to test our science, we have to look at the past and see what failed, what failed miserably, or what failed but becuase of idiosyncratic variables that only existed at that time
> 
> In the gold standards case, it falls into the "miserable failure" category


http://mises.org/daily/6055/charting-fun-with-krugman
http://www.cato.org/policy-report/no...d-been-failure
https://www.youtube.com/watch?v=xhQCTdZCn04

If the gold standard is a "miserable failure" then the Fed is most certainly one too. Personally I'm for the free market, so I favor neither of both.

----------


## Danan

> No, you are making it too complex. He is completely wrong about and does not understand the main cornerstone/premise of Austrian Economics (which, many people including myself simply describe as "economics"), and it very simply stems from the fact that he made a statement that re-allocating economic decisions of others doesn't lead to less efficiency when that statement flies in the face of everything logical you can get out any study of economics. If people want more apples and somebody else decides to re-allocate to oranges by stealing people's $#@!, that isn't going to lead to more people getting more things that they desire. It really isn't that complex, economists simply get buried too deep in things that don't matter because they want to understand something that can't be completely comprehended. 
> 
> Do you have an economics degree by any chance?


I'm about to get a degree.

Your argument falls apart once you introduce externalities, public goods, several other game-theoretic examples, etc. You basically argue that the prisoner's dilemma does not exist in real life and that it's impossible to construct a scenario where there is a solution which every individual would prefer to the initial situation but which could not come about by free trade. In neo-classical economics the Coase-theorem argues that without transaction costs this would actually always be the case. However, it's pretty easy to argue that in real life there always *are* transaction costs and that the efficiency of free market solutions therefore depends on how low or high they are.

Walter Block and Guido Hülsmann try to adress those issues in their follow-up pieces to Caplan's arguments. You need to go pretty deep into the basics (epistemology, philosophy of science, etc.) in order to get their arguments. What they argue is that there is no way to *know* whether one state is prefered over the other, unless people *act* accordingly. Caplan argues that this does not need to be true. He could rank every imaginable action/allocation/outcome in his head and know that there are some that are better than the one that he chooses, because the better ones are not reachable without the use of force. Dr. Block dismisses this argument because he argues that there is no basis on which to judge whether or not *other* people prefer one state over the other unless they act and he also points out that their preference relations can change as time goes on and that therefore asking them after a forceful redistribution makes no sense. Etc. pp.

They then go on and discuss the difference and importance of analytical / synthetical, a priori / a posteriori statments and probability theory as a foundation for science, etc. The whole debate admittedly goes a little bit over my head (I understand their points but I'm by no means equiped to make a judgement on whose arguments are "correct" or on which side "won" this debate).

Of course I could be misrepresenting their views by shortening it so extremely. Go ahead and read the responds yourself if you're interested.

----------


## Warlord

> That still doesn't sound very scientifical. I can't imagine a geologist describing big rocks as successes and small ones as failures.
> 
> What do you mean by the word "fail"?



It's a failure because you can't print it, create more of it, fractional reserve it, run deficits, wage wars and run Ponzi schemes. 

This is how these stupid idiots think remember.  They believe in death and destruction throughout the world and a massive welfare state at home and crave a way to pay for it all in a dishonest and scheming way which makes society poorer.  Fiat money allows them to do that.

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## erowe1

> They believe in death and destruction throughout the world


That's really what I was getting at. The guy was acting like his objections to free markets were based on some kind of dispassionate pure science. But where he was heading was to show us a set of values that were anything but that.

If a person thinks the health of an economy can be measured with things like GDP and employment, then of course WW2 was great for the economy. But to do that they have to pretend that spending money to blow things up is as good as spending it for anything else, and conscripting someone as cannon fodder is as good as any other job.

----------


## Warlord

> That's really what I was getting at. The guy was acting like his objections to free markets were based on some kind of dispassionate pure science. But where he was heading was to show us a set of values that were anything but that.
> 
> If a person thinks the health of an economy can be measured with things like GDP and employment, then of course WW2 was great for the economy. But to do that they have to pretend that spending money to blow things up is as good as spending it for anything else, and conscripting someone as cannon fodder is as good as any other job.


I dont think they go to war because they think it's good for the economy it's because they're genocidal maniacs and just plain criminals. 

Fiat money lets 'em finance it.

This is just todays sampling:

http://www.ronpaulforums.com/showthr...te-a-War-Crime

http://www.ronpaulforums.com/showthr...s-Tin-Soldiers

----------


## dannno

> I'm about to get a degree.
> 
> Your argument falls apart once you introduce externalities, public goods, several other game-theoretic examples, etc. You basically argue that the prisoner's dilemma does not exist in real life and that *it's impossible to construct a scenario where there is a solution which every individual would prefer to the initial situation but which could not come about by free trade.*


Dude, have you not heard of the stock market? And you're about to get an economics degree? What situation cannot come about by free trade, I have no idea what on earth you are talking about.

----------


## dannno

> I'm about to get a degree.
> 
> Your argument falls apart once you introduce externalities, public goods, several other game-theoretic examples, etc.  In neo-classical economics the Coase-theorem argues that without transaction costs this would actually always be the case. However, it's pretty easy to argue that in real life there always *are* transaction costs and that the efficiency of free market solutions therefore depends on how low or high they are.
> 
> Walter Block and Guido Hülsmann try to adress those issues in their follow-up pieces to Caplan's arguments. You need to go pretty deep into the basics (epistemology, philosophy of science, etc.) in order to get their arguments. What they argue is that there is no way to *know* whether one state is prefered over the other, unless people *act* accordingly. Caplan argues that this does not need to be true. He could rank every imaginable action/allocation/outcome in his head and know that there are some that are better than the one that he chooses, because the better ones are not reachable without the use of force. Dr. Block dismisses this argument because he argues that there is no basis on which to judge whether or not *other* people prefer one state over the other unless they act and he also points out that their preference relations can change as time goes on and that therefore asking them after a forceful redistribution makes no sense. Etc. pp.
> 
> They then go on and discuss the difference and importance of analytical / synthetical, a priori / a posteriori statments and probability theory as a foundation for science, etc. The whole debate admittedly goes a little bit over my head (I understand their points but I'm by no means equiped to make a judgement on whose arguments are "correct" or on which side "won" this debate).
> 
> Of course I could be misrepresenting their views by shortening it so extremely. Go ahead and read the responds yourself if you're interested.


I think it goes beyond Block's argument that there is no way to know. In a free market you get more savers and people who have savings will always be looking to invest, I don't understand this whole notion about being able to do things that a free market could not.

The only thing I can think of that would work in your favor of your argument would be eminent domain, but I think that's immoral, nothing to do with Austrian Economics, you're not going to change my mind on that.

----------


## Danan

> Dude, have you not heard of the stock market? And you're about to get an economics degree? What situation cannot come about by free trade, I have no idea what on earth you are talking about.





> I think it goes beyond Block's argument that there is no way to know. In a free market you get more savers and people who have savings will always be looking to invest, I don't understand this whole notion about being able to do things that a free market could not.
> 
> The only thing I can think of that would work in your favor of your argument would be eminent domain, but I think that's immoral, nothing to do with Austrian Economics, you're not going to change my mind on that.


Neo-classical theory knows a whole host of issues where the free market would supposedly not result in Pareto-efficient states. Public goods, negative externalities, etc.

Personally, I'm an anarcho-capitalist (sort of) and I agree that applying force - even if it where to result in a situation where every single individual is better off - is wrong. But that's not an economic issue, it's a moral one.

That doesn't change the fact that we can concieve a scenario where one good would not be supplied "sufficiently" because of free rider problems, etc. Personally I believe that the free market and private contracts are almost always better suited to resolve those issues than the government (which is by no means efficient itself). And Dr. Caplan might even agree with me here. That's not the issue here.

----------


## Henry Rogue

> Neo-classical theory knows a whole host of issues where the free market would supposedly not result in Pareto-efficient states. Public goods, negative externalities, etc.
> 
> Personally, I'm an anarcho-capitalist (sort of) and I agree that applying force - even if it where to result in a situation where every single individual is better off - is wrong. But that's not an economic issue, it's a moral one.
> 
> That doesn't change the fact that we can concieve a scenario where one good would not be supplied "sufficiently" because of free rider problems, etc. Personally I believe that the free market and private contracts are almost always better suited to resolve those issues than the government (which is by no means efficient itself). And Dr. Caplan might even agree with me here. That's not the issue here.


Yeah that lousy Free Market never would have given us atomic bombs or gas chambers capable of killing millions of people or land guys on the moon and bring them back. I think I would rather risk the Free Market, give it a try once.

Peace.

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## bolil

> What is your solution then, an utter failure like gold standard?


Free markets.  Whatever the most efficient facilitator of indirect transactions happens to be.  Gold, Silver, Salt, and Copper would all be up there, and owing to the advance of technology Lithium would probably be up there too.  Of course localities would probably develop vastly different forms of local currencies, which would suffice for local business.  Even fiat/computer money as we are forced to use now would be seen, except competition from harder forms of money would keep the handlers of such more conservative.   

You love the central bank, that is fine, taking away its monopoly doesn't mean it will disappear.  You would still be able to have circle jerks with your keynsian pals!

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## dannno

> *Neo-classical theory knows a whole host of issues where the free market would supposedly not result in Pareto-efficient states. Public goods, negative externalities, etc.
> *


Yep, and that is the ENTIRE PROBLEM with the the people who preach neo-classical theory, it makes their "God complex" show. THEY cannot PERSONALLY imagine how the free market could take care of 'public goods', negative externalities and free rider problems, so in all of their prideful all-knowingness they declare that a small group of smart people have to make everybody else's decisions for them. That entire concept, if you take it to its logical end, leads to communism. 

Austrians believe that the reason why free markets haven't taken care of a lot of the issues we face in society today comes purely from the fact that government has created barriers and monopolies, including regulations and removing investment capital, from allowing the free market to provide those solutions.

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## dannno

So what neo-classical economists don't realize is that millions of other people working on solving those market problems which they cannot personally solve in their head can lead to market solutions which can be implemented and adopted universally and voluntarily. These systems will be much better, ultimately, than anything a group of government bureaucrats will come up with.

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## jclay2

> So what neo-classical economists don't realize is that millions of other people working on solving those market problems which they cannot personally solve in their head can lead to market solutions which can be implemented and adopted universally and voluntarily. These systems will be much better, ultimately, than anything a group of government bureaucrats will come up with.


Right on Danno! Government fails at everything it does, yet I am supposed to be convinced that I need more government and higher taxes. What modern economics fails to see is that the macro economy is a larger representation of the micro economy. They will say that borrowing a couple thousand on a credit card is bad for an individual but borrowing tens of trillions as a nation (100s of thousands per individual) is ok.

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## cubical

The entire idea of you calling out an economic school of thought for not being scientific is a huge part of your problem.

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## BAllen

> Low interest rates were caused by savings, external savings. And btw, you continue to model behavior, going against your own theory "interest rates creates business cycle - people undertake longer term projects" 
> 
> Oh, and that video doesn't impress anyone. A broken clock is right two times a day. These guys have been predicting doom for 30 years, eventually you are going to be right.. but what about the other 25 years you were wrong? And anyone who followed his instructions to short on the dollar in 2008 lost a lot of money, not to mentiion the hyperinflation stand-up comedy.


 I agree with you on that. These doomsday predictors have been playing that broken record for some time now.

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## cubical

> I agree with you on that. These doomsday predictors have been playing that broken record for some time now.


Didn't you see 2008?

What the doomsday predictors like Schiff are predicting are once in a generation kind of event. He had been harping about the housing bubble for years before it happened. To say during those 5 or so years "Oh Peter, eventually you will be right" is stupid. Housing bubbles like he nailed and the debt bubble he is now calling aren't items that come around once a decade or so.

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## tmg19103

Why is it only the Austrian's saw this mess coming?

http://youtu.be/2FyfAQ75GaQ

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## dannno

> In the gold standards case, it falls into the "miserable failure" category


Why would you assume anybody here supports the gold standard? Ron Paul is against the gold standard.

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## wizardwatson

I'm calling it.  Troll wins.

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