Posted on 08/04/2009 1:45:12 PM PDT by parsifal
Mainstream economists dismiss the Austrians as cranks. Nobel economist Paul Samuelson wrote that "I tremble for the reputation of my subject" after reading the "exaggerated claims that used to be made in economics for the power of deduction and a priori reasoning [the Austrian methods]." (1) Noted economist Mark Blaug has called Austrian methodologies "so cranky and idiosyncratic that we can only wonder that they have been taken seriously by anyone Perhaps the defining difference between mainstream and Austrian economists lies in their opposing philosophies towards learning truth.
Mainstream scientists use a well-developed process called the scientific method. This method employs both data and theory. "Data" includes facts, evidence and statistics. "Theory" is the attempt to describe general laws, principles and causes and effects found in the data. Both form a cycle, as data goes into the formulation of theory, whose conclusions then engender more data collection in an attempt to confirm, refute or develop yet more theories. The accuracy of this process is verified by experimentation or prediction. Scientists believe they are on the right path when both theory and data agree; when they disagree, they know something is wrong. It could be the theory is wrong, or the data is badly collected or interpreted.
(Excerpt) Read more at huppi.com ...
I don’t believe specifically in the gold standard, but I like the idea of a “basket” of commodities, but I think the formula should be a public one.
Actually, I assume that this is what they do, except that they don’t publicize what the criteria are. We had a pretty stable dollar from Reagan until the war started, with a very modest inflation during that time.
I find that hard to believe. Please list which of the Mises books you have read and when.
If interested, here is a One World Currency Essay that also a different slant:
Uploaded at docstocs: (view without downloading pdf file)
http://www.docstoc.com/docs/9424575/One-World-Currency509
From my Original blog post:
http://luckybogey.wordpress.com/2009/07/11/the-one-world-currency-has-comith/
Oh I know, fiat currencies always lead to inflation which always leads to collapse, the difference now is there are measures for inflation, sadly .Gov controls them.
Eventually though, reality sets in at the gas pump and grocery store.
Probably ought to remind people that inflation is the increase in the money supply. Increased prices are a result as there are more dollars chasing (roughly) the same pool of goods.
Say what you like about the Austrians, however, Mises predicted the Great Depression and virtually every boom and bust since then has been fully explained and expected by them. In addition, he predicted the downfall of fractional reserve banking, which we are now experiencing. His explanation of the creation of bubbles has never been bested in over 100 years. The fact is that paper money, backed up by nothing, is the bane of man’s existence and the cause of civilizations and empires collapsing.
Only a gold standard, or perhaps bi-metallic standard can prevent these booms and busts and hyper-inflation that we are about to encounter in this country. A fixed money supply, the gold supply expands about 1.5% per year, can prevent politicians from printing money and giving it out to their favorite causes. There is no other way.
From the passing of the Federal Reserve Act in 1913 to now, our money is worth perhaps 1% of what it was in 1913. The times where we encountered major inflations prior to 1913 were the revolutionary war—not worth a continental, the War of 1812—off the gold standard, the Civil War—greenbacks galore. During those prior times, when we returned to the gold standard, an amazing thing happened, no inflation and a return to the prior price level.
From 1790 to 1913, do you know what the average annual inflation rate was, .12 percent per year. This is even factoring in the inflationary war periods. Because as can be seen, inflation will only go so far, then it will be followed by deflationary depressions, 1873, 1893, 1934.
Its all in the history books that our public schools seem to have misplaced. Economic history is a repeat of the same mistakes over and over again. Its like the minimum wage, if raising it to $10 is good then raising it to $50 is even better, right? Well if printing a trillion is so good, lets print 10 trillion, that will make everyone a millionaire. Ah if it were only so easy.
Of course Rockwell and Rothbard are cultists.
But so was Steve Kangas -- the guy who shot himself (apparently) in Richard Mellon Scaife's office bathroom in order (apparently) to fuel conspiracy theories.
Best to just forget him.
“sorry” MC...but that is an outdated measure of inflation.
It assumes only one currency is used to purchase goods, in fact that is not the case in a globalized world.
Then what is inflation if it is not the increase in the money supply?
Austrians are correct, it’s plain, simple, “even a caveman could get it”, sorry keynsianism is just more failed SOCIALISM ;)!
I read them on the von mises website. I think I printed it out about 4 or 5 years ago? I didn’t think the guy was stupid or anything. My whole curiosity here got started because even after this massive screwing by Wall Street, which will probably send our country into a prolonged depression, there were still the folks on FR who were like oblivious to Wall Street playing any part in it. Everything wrong was a result of gov’t or the poor folks. Just anybody but Wall Street, and a lot were like von Mises types, so I got to researching the Austrian School.
Come to find out, with the Austrian Schoolers, EVERYTHING is the gov’ts fault. So I guess if we lived in the Garden of Eden, we wouldn’t need gov’t. But we don’t, so we need something more out of our economists than “it’s the gov’t fault.”
parsy
As a building designer/contractor with a interest in history, I often look for the date embedded on the front of old buildings. On the west coast, I often see 1893 and 1907 ..... perhaps these buildings came about as part of the perceived boom and anticipated increase in demand?
I think I understand what your saying, but the 1934 debt deflation, is that the only one since the founding of the Federal Reserve? Thanks
Modern inflation has as an element the increase in cost of currency exchanges, for example as the dollar loses value via over production, goods priced in Yuan will become more expensive.
I did before I posted the thread. Both Caplan articles are on the link way above, I just can’t seem to get one of them to copy over. It pulls up just fine though. Trust me, I read a bunch of articles before I dared to post off a dang liberal website. I think Kangas is probably dead on on some of his economic stuff, but his views on the military and gun rights are way too lefty by far.
IMHO, Kangas just put it in English so most people could understand it better.
And did Kangas shoot himself, or was it more? I thought the case was still open.
parsy.
That's just it. The case is always going to be open -- on the Internet at least. Supposedly Scaife saw Kangas as a threat and had detectives looking into him.
But the official verdict was suicide. I wouldn't put it past Kangas to do away with himself in such a way as to give rise to a conspiracy theory.
He's better off forgotten, and his stuff belongs with along with other Nineties Internet dreck -- in my book at least.
I agree with you, obviously.
I read his Human Action years ago. Actually, they said my head would explode if I approached him directly so I read Mengers book first, then HA. I was on a project on a remote location with little else to do but read a few pages of HA each evening. I cant claim to have absorbed it all, but I find it pretty easy at the political or philosophical level to understand what is going on around me. I am no economist, but I know enough to understand better what is going on economically than most of what I read in the popular press.
That bar is set pretty low, I realize, but hey.
Ive just about finished up his Liberalism which was clearly written in a different era, but its still good reading. Having the advantage of about 80 years of history since he wrote it, I can quibble with him, he had great faith in the League of Nations, and in open borders. I went through my own open borders period, so I understand where he was coming from. Actually, to be fair, he had great faith in the League and in open borders if classic liberalism were the order of the day. Thats the catch, obviously.
Ive decided in the aftermath of our megastimulus that perhaps its time to approach his Money and Credit.
I dont think any of the Austians would have fallen for either Bushs or Obamas economics. Or, as Von Mises would say, you can do as you like but you cant escape the consequences of what you like. Something like that.
“It’s simple” -—That’s the appeal of the Austrian school. All you have to do is blame the gov’t and you have your answer. And, you never have to do any real research or gather any numbers, because all you need to know is that its the gov’ts fault.
Of course you can’t ever fix anything, because you can never get rid of gov’t and if you do manage to talk someone into deregulating, you can still claim glory, because if something still goes wrong, you can blame something else in gov’t.
parsy.
In fairness, though, you can distinguish between what “von mises folks” say and what he himself wrote.
The current mess is very much tied up with Wall Street, but also very much tied up with the rather toxic connection between Wall Street and government.
I don’t think Von Mises would necessarily disagree with you, his interest was more with the dynamic of what happens in consequence to what. Do x, y results. Without taking necessarily a moral judgement, you can do x if you like. But don’t do it, and then act surprised when y results. If you are prepared to pay the consequences of your actions, you can do as you like. But the effect, or at least the side effect will be y.
He would not have been surprised by either the Fannie Mae disaster, or the failure of the stimulus. Nor were many of us here at FR, although we might not have picked up on the precise trigger for the fall, and I personally always hoped for some kind of miracle to prevent the worst.
I don’t like recoil when I read von Mises or anything. I pick up on some of the real world differences and I tend to regard him as irrrelevent to most situations. As a group, it appears the Austrians are not well respected, and if they were right any significant part of the time, I think they would be held in higher esteem by their colleagues.
And if you are going to be a professional economist, you probably ought to grab some facts and statistics to back yourself up, and to check your theories. If you don’t you ain’t long for academic world.
parsy.
No, it’s simple because Austrian economics is based on simple supply and demand (and a strict adherance that government should only interfere in the market to protect life/property, and enforce contract law).
It’s simple becuase without a national bank, our economy WOULD be much more stable (and 99% without bubbles on which our economy currently rests).
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