Austrian School of Economics: Not Tough Enough

The war between socialism and free market capitalism has been raging for almost 200 years – and far longer than that, if you toss aside those particular monikers and go straight to the ideological conflict that has pitted economic and financial entrepreneurs against collectivists since the dawn of human history. But never has the war been more pronounced – nor more critical – than in the current economic crisis in which the world finds itself mired.

Good article, but I’ll quibble a bit.

He says its pointless to be right if no one is going to listen to the solution anyway. I’m not sure what to make of that other than he is giving vent to his frustration. But he’s right, no one is listening and no one is going to do what it takes. We’re going in exactly the wrong direction, and the more it doesn’t work, the more they pile on more steam. When you tell a lemming that he’s headed for a cliff, a lemming runs faster. He can’t help it. He’s a lemming.

So what to do?

At this point a little clarity is in order, and its the best you can do. Understand that things are going to get worse before they get better, and start doing what you can to protect your self and your family. He says buy some gold. I say buy some chickens.

I acquired two degrees in economics and received at most one minor hint of the Austrian viewpoint. It is not main stream. Like it’s greatest proponent, it has been shunned. I consider Ludwig Von Mises to have been the greatest of the Austrian economists. I’ve delved into his book Human Action. For me, the book is very impressive, and refreshingly different in its deductive method. It is brilliant, and what’s more, it is right on so many things. I don’t think anyone had a more complete intellectual commitment to laissez faire economics.

There is Mises, and there are the “modern” Austrians. Perhaps if Mises were alive today, he would review their work and say that he is not an Austrian. Some modern Austrians were against the war in Iraq (for “theoretical” reasons). I was not. Now, some Austrians argue that the current crisis is monetary only. I think Mises would also fault the government’s repeated intervention in the housing and financial markets.

For myself, I’m Austrian to the extent of saying we don’t need anti-trust policy. We don’t need 90% of our regulations. (Would it be 100% for Mises?) I have enough devotion to the US Bill of Rights, including the 10th amendment, to reject 90% of Federal EPA regulations as unconstitutional. Color me extreme. However, I can not agree with those who suggest that all of our problems are due to the Federal Reserve System and easy money. Do you really think that socialists are only capable of one mistake?

Human Action and Hazlitt's Economics In One Lesson are the 2 basic texts for anyone wanting to learn how things work but is not ready to go for a degree. Hazlitt's little book is especially good for introducing one's children to the subject. It doesn't so much teach Economics as it teaches economic reasoning. If your child reads it seriously he will not ever be snowed by fallacious claims and emotion again. My 4 all were required to read it once in Middle school and again in High School. They are all grown now and successfully inoculated.

“And yet, his ‘solutions’ pack no real punch because they fail to reflect realistic outcomes in any kind of meaningful way”

This is true of virtually all free-market solutions. Which of our ideas has been truly successful? Tax-cuts? They only seem to go over when they are promoted as a means of increasing government revenue. Deregulation? It has obviously come under attack recently by people scrambling for some way to blame the 2008 meltdown on the market. Never mind a handful of repealed laws, has the market become more or less regulated since the Reagan revolution? School choice? Ha!

Milton Friedman was probably the most successful libertarian of the last century. He gets a lot of credit for not being as radical as the Austrians, and for speaking the same language as Keynesians, meeting them on the grounds of gentlemanly debate, and submitting his economic arguments to endless empirical tests. Yet, one can make a very strong argument that he was largely responsible for the bailout, since Bernanke and Paulson shared Friedman’s irrational fear of deflation. What was Milt’s most lasting contribution to politics? Tax witholding. Enough said.

We must face the truth that we live in a statist world. Goevernments are here, and they live to grow. All the great thinkers to assaulted the state at its root, from Plato to Marx, somehow only managed to explode its power to extents before unseen. Such radical worlviews remain on the fringe, except in revolutionary times, when they surge. Less radical promotions of state growth, like Keynesianism, are with us always. And they are always popular. Not because they’re right, but becuase they root for what the government wants to do anyway.

Unfortunately, free marketeers stand athwart History. Ours is one of those “eternal vigilence” movements, and forever will be. Get used to it.

We may not need extraterrestrial colonies. Any third world nation could rise to the top with a good Constitution and the will to abide by it. If a third world nation became a secure place to invest and a tax haven, its future would be secured.

We might want to remember this before we become a third world nation ourselves. If we become a third world nation (as we once were?), we might want to regain our appreciation of the “sanctity of property” and the benefits that come from low taxes.

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