Do YOU understand Austrian Economics?

[FrankRep]

Read Economics for Real People . Very good introduction, and easy to read if you have no economics background.

Awesome. I was looking for that.

 

[srmpass98]

Actually I do have some indepth knowledge of Austrian Economics and the philosophy of free markets.

The strange thing I concluded upon intense research is the notion that free markets alone are the solution to a crux of issues; in fact in the absence of even a rudimentary form of regulation free market capitalism in its truest form is either a highly uncompetitive price control oligopoly (as seen in the agricultural markets in the 20's where the industry was as close to free markets as it could be) or its an extremely unstable economic activity which rewards those in fruitful times and devastates those when there is a downturn in productivity and profits.

Remember, in the absence of an external form of control, free market enterprise is championed by the notion of "self interest". It is within the scope of this philosophy that self interest alone can dictate a small amount of competitors to actually "fix" prices that will benefit the profitability of all enterprises involved, instead of the contrary direction where competitors compete on prices to the detriment of profitability. In this case, prices are sticky down which literally translates to price-push inflation as companies would rather cut workers then reduce prices, especially when they are fixed in the free market doctrine of economics.

Be weary of the romanticism of free-markets. It sounds really great but in reality it necessitates some form of external control to prohibit the oligopoly nature that free market enterprise seems to inevitably champion.

 

[MikeFallopian]

Austrian economics is one of the aspects of Paul's platform that I'm skeptical about. It seems (and I'm admittedly basing this off the wiki article, which is all I know about the Austrian school), that the theory comes from deductive reasoning rather than empirical data. As an engineer who loves data, this worries me. It seems a bit like some of Freud's psychological conclusions - very smart and well thought-out, but not quite right when all is said and done. Are there any examples of a (fairly large) modern state that has successfully run on the Austrian principles?

 

[dmspilot00]

Austrian economics is one of the aspects of Paul's platform that I'm skeptical about. It seems (and I'm admittedly basing this off the wiki article, which is all I know about the Austrian school), that the theory comes from deductive reasoning rather than empirical data. As an engineer who loves data, this worries me. It seems a bit like some of Freud's psychological conclusions - very smart and well thought-out, but not quite right when all is said and done. Are there any examples of a (fairly large) modern state that has successfully run on the Austrian principles?

Most Austrian policies have been substantiated with data, except then it's called the Chicago School. But there is nothing wrong with the reasoning. For example, a tax raises the price of a good and thus less of that good is bought and sold. Or, minimum wage causes unemployment, as it raises the cost of labor and lowers the demand. There's really nothing wrong with simple logic.

 

[rwl4]

You can watch Milton Friedman's Free To Choose here:

http://www.ideachannel.tv/

 

[MikeFallopian]

Most Austrian policies have been substantiated with data, except then it's called the Chicago School. But there is nothing wrong with the reasoning. For example, a tax raises the price of a good and thus less of that good is bought and sold. Or, minimum wage causes unemployment, as it raises the cost of labor and lowers the demand. There's really nothing wrong with simple logic.

So then why Austrian instead of Chicago? It seems like the difference is between a philosophical theory of economics vs. a scientific, data-driven one that has successfully been put into practice. Are there any examples of modern states using the Austrian system?

 

[bluemarkets]

the main debate is Austrian vs. Keynesian economics

Keynesian just means that the government can intervene when the economy goes south, in our case affect the money supply through the FED and interest rates.
This causes inflation and makes the economy worse off

Austrian's basic premise is let the free market alone, it will correct itself, ie there should be NO BAILOUTS (paid for by you and me) when companies are in trouble let them go bankrupt, and new companies, smarter and better will emerge.

 

[Todd]

No but I'm learning. And some of what I am learing meets my preconceived ideas of what is healthy.

 

[murrayrothbard]

Our western economic system has been run on Keynesian economic principles since after the Great Depression. Stated simply, the state should run counter-cyclical policies, deficits during the busts and surpluses during the booms, and act to provide a smoothing of the business cycle.

The Austrian School believes that these policies only serve to increase the severity of the eventual downturn as bust cycles are pushed out or attempted to be minimialized. The natural business cycle should be permitted to run its course and clean out the malinvestment during bust cycles to allow the economy to build and invest properly creating the next boom cycle.

The Austrian Theory of the Trade Cycle, or Credit Theory of the Business Cycle, concludes that expansions of credit via fractional reserve banking induces an artificial boom, and since it is artificial, necessarily consists of massive malinvestment in regards to the real demands of the consumers. This sets up a situation where market forces will eventually force these malinvestments to be liquidated in order to restore the production structure to one that is in line with the demands of consumers. This is the recession/depression phase of the cycle. It is a corrective phase. Government intervention in the correction phase can only prolong it and/or increase its severity.

The boom phase only exists due to credit expansion.

 

[murrayrothbard]

So then why Austrian instead of Chicago? It seems like the difference is between a philosophical theory of economics vs. a scientific, data-driven one that has successfully been put into practice. Are there any examples of modern states using the Austrian system?

It is a difference in philosophy and methodology. "States using an Austrian system" makes no sense. There is no program/system to put in to place. The Austrians hold that economics is properly understood as a descriptive science, not a prescriptive science.

 

[murrayrothbard]

Are there any examples of a (fairly large) modern state that has successfully run on the Austrian principles?

All of humanity "runs" on the "Austrian principles". The principle very simply being that human beings act, i.e make use of scarce means to achieve desired ends. Economics is then simply the development of the logical implications of this fact.

 

[stoutmaker]

This Is Perfect!

the main debate is Austrian vs. Keynesian economics

Keynesian just means that the government can intervene when the economy goes south, in our case affect the money supply through the FED and interest rates.
This causes inflation and makes the economy worse off

Austrian's basic premise is let the free market alone, it will correct itself, ie there should be NO BAILOUTS (paid for by you and me) when companies are in trouble let them go bankrupt, and new companies, smarter and better will emerge.

This is the starting basics I need and now, time to do research. thanks.

 

[Broadlighter]

I read the intro essay on Austrian Economics from the Mises Institute. It basically treats money as a product of the marketplace,, not an enforcer for debts as we have in our current system.

It's basically free market economics.

 

[snaFU]

So then why Austrian instead of Chicago? It seems like the difference is between a philosophical theory of economics vs. a scientific, data-driven one that has successfully been put into practice. Are there any examples of modern states using the Austrian system?

There aren't any examples of modern states using it because of it being heterodox. However many investors have great respect for the Austrian theories. Also the Chicago school are monetarists which believe that the federal reserve is bad but that you can find a balance which makes it become ok. The chicago school besides that are pretty good in some respects for example the Coase Theorem is pretty nice stuff coming out of there.

Another thing you must pay attention to when questioning philosophy vs science.
If government has countlessly proven to be a failure in various aspects then why reject the market so quickly when it has already become superior. Remember stagnation of the 70s. The savings and loans crisis. The housing market which is -currently in a depression!


Also doesn't it bother you that Economics is probably the only science where we refuse to study anything beyond a few decades ago? It sounds pretty unreasonable to me since if we are dealing with a science the best thing to do would be to learn every aspect of what we are dealing with.



Also for those who want some starting points on Austrian Theory

http://video.google.com/videoplay?docid=-466210540567002553 - Money, Banking, & the Federal Reserve

http://www.mises.org/store/Economics-in-One-Lesson-P33C9.aspx - Economics in One Lesson

http://www.mises.org/store/What-Has...ase-for-a-100-Percent-Gold-Dollar-P224C9.aspx

-What Has Government Done to Our Money?/Case for a 100 Percent Gold Dollar

http://www.mises.org/store/Austrian-Theory-of-the-Trade-Cycle-and-Other-Essays-The-P46C9.aspx

- Austrian Theory of the Trade Cycle and Other Essays, The

http://www.mises.org/store/Free-Market-Economics-A-Reader-P393C9.aspx

- Free Market Economics: A Reader

 

[clouds]

I've started reading human action. My grandpa's copy

 

[tfelice]

Yes, but 99% of the people watching the debate last night have no idea what he was referencing, and 99.9% of those people will not bother to learn about it.

 

[clouds]

but perhaps they should vote for someone who does?

 

[tfelice]

but perhaps they should vote for someone who does?

That would be nice, but Paul has to convince them to do so. His problem is the ability to explain these economic principles in a way that the average person can understand. Reagan was a master at that.

 

[Trigonx]

no, but i plan to learn all about it and understand. more knowledge is awesome

 

[Knut Schreiber]

Austrian economics is one of the aspects of Paul's platform that I'm skeptical about. It seems (and I'm admittedly basing this off the wiki article, which is all I know about the Austrian school), that the theory comes from deductive reasoning rather than empirical data. As an engineer who loves data, this worries me. It seems a bit like some of Freud's psychological conclusions - very smart and well thought-out, but not quite right when all is said and done. Are there any examples of a (fairly large) modern state that has successfully run on the Austrian principles?

Austrians usually question the use of empirical data in economics for two reasons:
1. An economy is too complex to be described by numbers.
2. There is no control group.