SEARCH BLOG: ECONOMICS
The Austrian Economics concept of unrestricted free trade is gaining popularity among some.
Great article on an economics professor who seems to have had the same epiphany I did. Mine was in 1972, when George McGovern transformed me from a liberal anti-war type to a libertarian; his must have been in 1979 or 1980. One by one …. [source]While most people involved in trade are not economists, they understand that unbridled trade can lead to substantial abuses that rival the substantial abuses of over-regulated trade:
Austrian scholars have made important contributions to economics in recent years. I personally am most impressed by the work of Lawrence White and George Selgin on free banking and other monetary issues, though certainly other Austrians have made significant contributions too. Set in historical context, I also consider the economics of Mises and Rothbard to be a great achievement in spite of my numerous reservations about it. Yet all too large a fraction of Austrian research has not been in economics at all, but rather in meta-economics: philosophy, methodology, and history of thought. Admittedly, much of the meta-economics stems out of the work of F.A. Hayek and his numerous interpreters, whose contributions to economics the present essay did not discuss save by implication. But the students of Mises and Rothbard have done more than their fair share of meta-economics too. Neoclassical economists go too far by purging meta-economics almost entirely, but there is certainly a reason to be suspicious of scholars who talk about economics without ever doing it. Paraphrasing Deng Xiaoping, "One should not talk of methodology every day. In real life, not everything is methodology."
While the substantive contributions of Austrian economists to economics are significant, their sum from Human Action on is small compared to the progress that neoclassical economics has made over the same time period. The ten good ideas listed in section 4.3 are only the beginning of what economists have learned since 1949 - in spite of the large deadweight cost of mathematics and econometrics. Mises and Rothbard certainly produced an original alternate paradigm for economics - and applied this paradigm to a number of interesting topics. Unfortunately, the foundations of their new paradigm are unfounded, and their most important applied conclusions unsound or overstated. The reasonable intellectual course for Austrian economists to take is to give up their quest for a paradigm shift and content themselves with sharing whatever valuable substantive contributions they have to offer with the rest of the economics profession - and of course, with the intellectually involved public. In sum, Milton Friedman spoke wisely when he declared that "there is no Austrian economics - only good economics, and bad economics," to which I would append: "Austrians do some good economics, but most good economics is not Austrian." [source]Given that economics theory is pretty much at the same level as sociology and climatology, these all become entertaining discussions that boil down to belief systems more than "scientific" analysis. For my part, extreme adherents to Austrian Economics = alarmists stating CO2 causes global warming... when global warming itself is questionable.
Still, I'm open to long term performance results... not short term cherry picking every time there is a down cycle in the economy.
Meanwhile.... Yes, that's the other extreme. Given that has only had a short time, we can't ascribe its significant success to good theory... or even good practice.