To be an Austrian has become oddly fashionable in recent days judging from the number of news reports thus describing commentators on economic and financial affairs. Because there is no trademark on the name, our only real hope is that all these people take time off from talking to the press and spend a bit more time reading. So in the interests of broad public understanding, I present (an admittedly imperfect) Austrian economics in one article. [Full article]
Source link: http://archive.mises.org/2681/to-be-an-austrian-a-primer/
To Be an Austrian: A Primer
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While the piece “To Be an Austrian: A Primer” is on the whole accurate, it is simply wrong, as any familiar with first year price theory would know, to assert that neo-classical economists reject the marginalist revoltion. This is not a distinguishing factor between Austrians and neo-classical economists.
Bravo! Bravo! Mr. Corrigan should deliver this as performance art: 130 years of political economy in 5 minutes or less… While standing on one foot or something.
As I began to read this article I wondered if Mr. Corrigan would adequately convey the way in which the Austrian School is a school of Political Economy, not just Economics. A fully integrated understanding of the State with the pure theory of the Market is a major advantage of this school, and a reason that Austrians are so consistent, relative to other schools, in their opposition to socialism and interventionism. I think Sean has wonderfully captured the interplay between Austrian economy and Austrian political economy.
In regard to Mr. Burton’s concern, I do not see where Mr. Corrigan claimed that neo-classicals reject the marginalist revolution. On the other hand, I am a bit unclear on how a distinctive Austrian understanding of exchange “leads us past the sterile zero-sum games of the neo-classicists”.
In response to Mr. Caron’s comment that he did not see where Mr. Corrigon wrote that neo-classicists reject marginalism, Mr. Corrigan wrote:
“This concept [marginalism] leads us past the sterile zero-sum games of the neo-classicists, since exchange, though conducted at a single price, does not therefore preclude the derivation of mutual benefit from the act.”
QED
Perhaps, Mr. Burton (or anyone else), you can elucidate the neo-classical viewpoint for me a bit more.
What I seem to read in Mr. Corrigan’s article is that there are two separate concepts – a marginalism, whereby an individual evaluates the potential gains of an exchange and decides to follow through with it on that basis, and the valuation of the exchange itself, which shows that either there is mutual benefit or zero-sum gain.
I do not think Mr. Corrigan assert that the neo-classicals reject marginalism, but only that their conclusion from that concept is that there is a zero-sum gain in any exchange. Does this seem correct?
Of course, I don’t really see how a zero-sum gain theory is compatible with the notion that the individual makes choices based on the margin, so maybe he is asserting that neo-classicals do reject marginalism, implicitly if not explicitly.
As short as this is, perhaps it should be called an Austrian Capsule, not a primer.
Sean’s conclusion asks “guess who gets most of the air time”, clearly implying that “the State” can and does control the public agenda. The evidence is quite different.
First the most pervasive and influential allocators of [scarce?] “air time” are or work for international organisations. The power of “the State” to keep subjects/citizens from hearing messages such as the Austrian “consumer sovereignty” message, has been proved inadequate.
Second, the great majority of “air time” actually consumed [ie heard and heeded] explicitly and implicitly panders to “consumer sovereignty”, whether by advertising and by less visible appeals.
So why does Austrian theory get suppressed and discredited?
In answer to Mr. Stewart’s question, the answer is fundamental to the foundation of both Austrian economics and the bureaucratic state and all its branches and tributaries.
Austrian economics is a philosophy of individual liberty and individual choice. Bureaucracy is the essence of anti-individual choice.
The bureaucratic state depends on its ability to tax. Without compulsion, it’s just another service industry.
Since competition is inherently dangerous, one might very well lose their job, bureaucrats of all stripes from politicians to public school teachers, union dock workers to “The permanent undersecretary for bureaucratic affairs” to Evening News anchors, all work to convince the people around them that individual choice cannot actually solve problems.
It’s not a conscious effort on most of their parts, they just cannot condone a philosophy which hazards them (in their thinking). A perfect example of this is tenure.
I needed this article. I’ve only been a Mises subscriber for a few weeks, and I’ve been quite confused by some of the other pieces I’ve read. Thank You Sean Corrigan.
Also, thanks to Curt Howland for “The bureaucratic state depends on its ability to tax. Without compulsion, it’s just another service industry.” Beautiful.
m.astera
Mr Burton is correct, though it appears Mr. Corrigan wrote:
“Austrians know better than to believe in the sterile, zero-sum games of SOME SCHOOLS, since exchange, though conducted at a single price, does not therefore preclude the derivation of mutual benefit from the act.”
not
“Austrians know better than to believe in the sterile, zero-sum games of THE NEO-CLASSICISTS, since exchange, though conducted at a single price, does not therefore preclude the derivation of mutual benefit from the act.”
But beyond this, I believe Austrians make way too much of the positive-sum nature of exchange as a distinguishing mark of Austrianism. Indeed, beyond the Marxists (and even here there is most often a recognition of some mutual benefit)hardly anyone in the entire history of economic thought ever argued the contrary, except for those who took Aristotle’s remarks in the “Nichomachean Ethics” way too seriously (and contrast that with his view of exchange as mutually beneficial in his “Politics”).
While I have been an enthusiastic devotee of Austrian Economics, and of many of the insights of Mises, Rothbard, Hayek, and Kirzner for a long time, I am troubled by a huge logical gap in the Austrian (and neo-classical) outlook.
Tibor Machan wrote about this gap in his book “Capitalism and Individualism: Reframing the Argument for a Free Society” (less than 200 pages). Briefly, the gap consists of the scientism or positivism inherent in the Austrian-neo-classical conception of man’s nature. As seen by neo-classical economists, man is not a thinking, choosing, moral agent characterized by volitional consciousness; instead, man is seen as a being driven by forces beyond his control that manifest in “felt uneasiness”, which leads him to seek to maximize the utility of subjective preference. Hayek came close to explicitly defending determinism, as does Friedman. Ludwig von Mises to my knowlege did not argue on behalf of determinism, but also never wrote about the issue of volition versus eternal utility maximizing.
Moreover, the Austrians, and all other neo-classical economists, explicitly deny the very possibility of the existence of (any)objective values, i.e. moral values, from which are derived moral principles. This denial is never proven, but is simply an extension of the positivism and scientism that influenced Mises and Hayek. Of course, if objective values exist, such values can and ought to be proven to exist, not merely assumed or asserted. However, to assert as did Mises and Hayek that objective values are impossible to man is unproven, and actually, has been shown to be false. (Machan highlights some arguments for objective values in “Capitalism”, and discusses the subject more fully in his other books, including “Indiviuals and Their Rights”. I think his arguments meet the standard of proof.)
Although Mises proved brilliantly and conclusively that only capitalism can produce prosperity, his positivist conception of man makes untenable Austrian arguments for individual liberty. Why? Because arguments for liberty, or for any other social arrangement, are ultimately arguments about moral values, specifically about ethics. But the Austrian conception of man explicitly denies moral, objective values, and volitional consciousness, even as Austrians argue that people OUGHT to understand and implement the insights offered in Human Action. Ought implies the existence of moral value–that which one ought to seek. Ought implies volitional choice–the ability to select the proper alternative. Moreover, those who decline to defend individual liberty and free markets, according to the Austrian outlook, are only maximizing their subjective utility, removing their felt uneasiness. Since moral values are supposed to be non-existent, moral criticism logically has no meaning under the neo-classical framework.
Remember: Austrians and other neo-classicals do not restrict their conception of man to “economic analysis”, but contend that their conception of man is an accurate representation of man’s nature, the only depiction of which “science” is capable. Economics is held to be not simply an analysis of the optimal and necessary conditions for man’s production of wealth; rather economics is supposed to explain all of man’s social interactions, and to be capable of providing all of the answers to social problems, insofar as answers are possible.
However, this conception of man is false as to facts. For very powerful arguments can be made that man does himself cause at least some of his choices, and that some objective values do exist as an aspect of man’s nature. In fact, the same neo-classical economists who explicitly deny objective values and volition argue fervently that others OUGHT to embrace free markets. These economists, who constitute the main line of defense of individual freedom today, make arguments that depend for their cogency on concepts that they explicitly deny.
Machan’s point is that economics ought to be repositioned in the constellation of knowlege, as subordinate and complementary to the philosophy of ethics. If this were accomplished, good things would happen. Most of Austrian ideas would stand intact, making clear to mankind the nature and value of free markets. However, ecomomics would become a specialized branch of the science of ethics, explaining the conditons necessary for the creation of a particular moral value: man’s material well-being. However, economists could ackowlege a fact everyone else knows to be true: material well-being, while an important moral value, is not the ONLY moral value, or even the most important.
No longer would economists need to defend the wrong-headed notion that every voluntary exchange necessarily yields the enhancement of self-interest. For as things stand now, Austrians can’t define self interest, since ANY choice, from popping vitamins to ingesting rat poison is said to enhance self interest. No longer would Austrians be logically forced to defend the voluntary exchange of heroin for sex with a prostitute on the grounds of subjective utility maximizing. No longer would Austrians be logically forced to defend a friend’s selling out a friend for money, on the basis of the seller’s alledgedly unavoidable pursuit of subjective preference. (I am not arguing here that such behaviors ought to be restricted, only that they are wrong.)
Instead, Austrians could arguie cogently and powerfully for the moral value of individual liberty, capitalism, and prosperity.
Mr. Humphrey, economics is a value free science, see Block (“On Value Freedom in Economics”) for an explanation. It is not the place of the economist to speak of what is moral or ethical. Further, Austrian economics does not say anything about the existence of moral values. I personally believe they do exist, but this is not my feeling as a student of economics, but as a person.
As to men being thinking, and volitional, no Austrian would deny this. You seem to be misunderstanding what Austrians mean by utility maximization. It simply means that men make choices that they believe will increase their utility by definition. In many cases, this utility maximization would include following ethical principles.
As to economics being a branch of ethics, such is as silly as declaring that physics ought to be a branch of ethics. Economics (praxeology) is the science of Human Action, ethics is an entirely different field. The lack of value freedom in non-Austrian economics is exactly what allows them to justify state intervention in the economy. Their methods aside, this prevents them from being true economists.
As to your comments on paying prostitutes with heroin, no Austrian would say that such behavior was unavoidable, simply that those involved made those choices with the belief that they would increase their utility. If such were not the case, why would the actors have engaged in such behavior?
As to the morality in question, I agree, prostitution is immoral, but that cannot be said from the economic point of view. I see that you have difficulties with this truth, but shopping for theories until one produces your desired outcome can hardly be called scientific.
I suggest you actually read some Austrian work on this subject so you may more clearly understand the reasoning behind the Austrian position. Theory and History (buy it)although a difficult book, does not require extensive background in economics to understand, and covers this topic quite well.
Mark, this is the third time that I’ve seen you post this (perhaps there are other times that I missed) Are you looking for different responses?
Why not put this on a website somewhere and post a link?
Two things:
1. The appearance that exchanges in a money economy are at “one price” is illusory. There are STILL two prices. Say I buy a bottle of wine for $5 (the good stuff, like I drink). There are TWO prices: I exchange $5, while my supplier exchanges one bottle of wine. This view of money exchange may help us get away from the great illusion that exchanges are based on both parties’ valuing what they give equally.
2. I think the Austrian theories said to have been articulated at “the beginning of the century” must have been articulated at the beginning of the 1900s, the last century.
Dear Mr. Clem:
I don’t understand the purpose of your comment. Why should you care how many times, or in how many ways, I try to make a point that is important, but not widely understood? I thought the purpose of the Mises blog was sharing and discussing ideas.
Well, truth be told Mark, your point is not important. It is totally wrong headed and springs from your total misunderstanding of what economics is about.
As I noted, economics as a branch of ethics makes as much sense as physics (or any other science) as a branch of ethics.
A scientist can speak as much as he would like on the evils of genetic engineering, but this does have any effect on the scientific truths that those in the field of genetic engineering have discovered.
I could be wrong here, but maybe you should read Butler Shaffer’s most recent piece on “The Libertarians’ Albatross” (and Prof. Shaffer albatross, are only bad luck if you shoot ‘em).
Dear Mr. Canning:
Unfortunately, you misunderstand the point I am trying to make. I have read and reread every book published by von Mises and by Rothbard (except his book on ethics). Consequently, telling me to go away and read will not dismiss a real problem built into the neo-classical outlook. With all due respect, please consider my arguments. I admire Mises and Rothbard as much as you do.
The reason that all of neo-classical economics has a built-in problem is that it stands on the “positivism” of Hume. This philosophical outlook holds that the nature of man, like everything else in existence, is essentially matter-in-motion.
As such, the Austrian outlook developed by Mises and Hayek (and their intellectual predecessors) depicts man from the standpoint of scientism. Rather than explaining man as a moral agent with the volitional ability to choose at least some behavior, this outlook sees man as essentially passive–driven by forces to pursue “subjective preference” in eternal pursuit of utility maximization.
Moreover, the scientism of the Austrian tradition precludes the possibility of objective moral values. Mises was very clear that moral values (“the ultimate ends of human action”)could not be proven, and existed only in the minds of believers. Hayek wrote that objective values lacked meaning.
This belief that objective values do not exist fits logically with the views of Mises and Hayek on the issue of determinism. To my knowlege, Mises never wrote about determinism versus volition, apparently because he considered the subject unimportant and irrelevant to economics.
Hayek came close to upholding determinism. Neither attempted to defend the concept of volition, because in a universe void of objective values, whether man is volitional or driven doesn’t much matter. Why? Because man can pursue only subjective preference, and one preference is as “good” (yes, this is a contradiction) as another.
If the economics of the Austrian School were confined to explaining the regularities deduced from the fact that “man acts”, and using this understanding to explain the function of the division of labor in promoting the production of wealth, all would be okay. However, the Austrian outlook (and the outlook of all of neo-classical economics, including Chicago and Public Choice)is, in Machan’s word, “imperial”. That is, according to the this outlook, “science” MUST depict man as void of objective values, and probably of volitional consciousness. Any other view of man, they contend, would be essentially religious, unproven, unscientific. Since ethics does not exist, only the “science” of economics can shed light on the conditions of man’s social existence, and offer solutions to social problems. For such is the nature of man.
However, the claims of Mises and Hayek that objective moral values cannot exist, and that volition is either impossible, or irrelevant to understanding man, are unproven and mistaken. This false concept of man’s nature makes the Austrian defense of individual liberty untenable, because economists must smuggle moral concepts into their commentary. For ultimately, disputes about public policy are arguments about ethics. The science of medicine implicitly upholds human health as a moral value. The science of economics implicitly upholds human material well being as a moral value. However, only economics explictly denies the existence of moral value!!
Of course, economics cannot concern itself with the content of the ends people seek. As Rothbard explained it, economics is the formal spinning out of the implications of the fact that individuals use scarce means to attain their chosen ends, whatever those ends happen to be.
This is not the same, however, as stating that economics is “value-free”. Economics should be concerned with the moral value of man’s material well-being. Why? Because economics explains the nature of human interaction in the production of wealth. Thus, economics ought to be repositioned by economists as a specialized branch of the philosophy of ethics, concerned with proving the processes and conditions necessary to the creation of a particular moral value: human material well-being.
What is so absurd about this proposition? Even the sainted Rothbard argued that economics is not a “science” (as conceived by methodological collectivists and hard-core logical positivists), but is rather a “branch of philosophy”. Philosophy consists of four “branches”: metaphysics, which is concerned with the nature of the universe; epistemology, which is concerned with the nature of knowlege; aesthetics, which is concernd with the nature of art; and ethics, which is concerned with the nature of human values.
Other than ethics, what other philosophical branch could economics elaborate?
Further, even Rothbard himself wrote that economics by itself could not prove the case for individual liberty. Ultimately, the case for liberty depends on arguments from ethics, he wrote. This is why he wrote his book on ethics. This is why one cannot persuade a radical environmentalist of the value of individual liberty and free markets. For hard-core Greens deny the moral value of human well-being!
Walter Block’s writing serves to emphasize the point I am trying to make. “Defending the Undefendable” is the logical culmination of economics as a “value-free” discipline. He defends the pimp, the whore, and the drug dealer’s actions as “desirable” (value-free?), so long as coercion is absent, because any voluntary action supposedly promotes self-interest. However, as I pointed out, neo-classical ecomomics cannot define self-interest, since ANY choice is said to advance it. ANY choice is ok with Walter Block if uncoerced.
But people unconverted to the Austrian view think or sense that objective values exist, and that moral virtues such as loyalty, integrity, and independence are not a matter of personal whim.
They error when they conclude that ethical dilemmas cannot be properly resolved in a free society. However, promoting positivst economics that explicitly denies moral values, denigrates or denies volition, and engages in moral double-talk won’t persuade the unconverted.
Clearly Mr. Humphrey, you do not fully understand what you have read. No Austrian denies choice as you seem to think, they do quite the opposite. They do not see man as “matter in motion.” No Austrian would deny that man can acting according to his moral values.
However, the science of economics does not hold up anything as a moral value. You are very mistaken.
You clearly don’t understand any of what you have read.
I would suggest you read Theory and History, but I doubt a raving Randist of sorts like yourself could understand it.
The important question is this–assuming your points are right, is the objection fatal to Austrian Economics? Or is it merely a side issue? For that matter, is Austrian economics merely what Mises, Hayek, and Rothbard said it was, or is it, like most theories, still developing?
While some of your points seem valid, I’m not convinced all of your points are valid. Economics, whether it is merely philosophy or science, is not ethics. And not all “unconverted” people think that objective values exist, for example.
If Mises said that objective values do not exist, so what? At what point is this a fundamental flaw of Austrian economics? Show me where the economic valuation process necessarily depends upon objective values, and thus affects trade, interest, business cycle, etc.
To say that any human action is desirable as long as it is uncoerced is to make an ethical decision, not an economic decision. What if Walter Block is simply saying that the pursuit of objective values should be left to the individual, and not decided for them by other people? Other branches of philosophy, not economics, should be used to determine objective values.
Or consider this: does the concept of “economic efficiency” imply objective value? If so, then Mises’ own work contradicts his opinion that objective values don’t exist. If not, then where does economic efficiency come from?
There’s nothing wrong with saying that Mises and the others aren’t perfect. Mises built his work on the work of previous classical economists, accepting some of it as being true and rejecting other parts he thought it was wrong.
Likewise, later economists can also revise “Austrian economics”. Hans-Herman Hoppe, for example is an anarcho-capitalist, even though Mises firmly believed in minarchy. Does Hoppe have Austrian economics wrong, or did Mises not figure it out completely?
Dear Mr. Clem:
Thank you for your interesting response to my comments. Perhaps we are 80% in agreement.
I am a defender and devotee of the Austrian School of economics. In my zeal to make clear that Tibor Machan has identified problems, I probably neglected to make clear that I appreciate and (partly) understand the profound insights of the Austrian School–time preference and the theory of the trade cycle, Mises’ regression theory concerning the source and nature of money, the amazingly accurate and sensitive calculus afforded by the price system, the silent, powerful dissemination of knowlege accomplished through free prices and the division of labor, the impossibility of economic calculation under socialism which produces only poverty and regression. My mission is not to weaken the tremendous intellectual horse power of Austrian Economics.
In fact, nearly all of the insights of the Austrian School stand intact, because they have been proven. Let me emphasize again: the deductive reasoning necessarily employed in economic analysis requires that economists ignore the content of the ends actors seek, and make clear the implications, in all their detail, of the fact that individuals use scarce means to attain their chosen ends. I accuse Mises and Hayek of “Scientism”, but their outlook was much freer of this scourge than that of their intellectual rivals. The individualist methodology that is uniquely characterisitic of the Austrian School(about which Mises and Hayek wrote brillinatly)is what makes its insights about the functioning of markets solid, valid, and proven.
However, scientism creeps in through their most fundamental premises, in a way that skews the most basic outlook of these great economists.
I refer, of course, to their false representation of the universe as void of objective human values and human volition. The skewing that results is more than tangental.
I don’t want to pick unfairly on Walter Block, but his “Defending the UnDefendable” (which enjoyed a book-jacket blurb from Hayek) is the logical culmination of this impossible “value-free” stance. As you point out, Mr. Block tries to demonstrate that “the non-agression axiom” is an ethical norm: people ought to be left free to make their own peaceful choices. I don’t know much about what Mr. Block thinks, but he does not prove that the non-agression axiom is an objective ethical norm. For example, what if I want to rob and murder? Why shouldn’t I do so? What if I do not want myself, or other people, to enjoy prosperous, happy lives? The neo-classical outlook insists that no one can engage in meaningful moral criticism of such non-sense.
The answers to such issues are the province of moral philosophy. The answer to the question of: “Should man seek to live a happy, prosperous, life, secure in material well-being?” is not the province of economics, as you point out. Again, this is the subject matter of the philosophy of ethics. This is why I contend that ethics first proves the objective moral value, among other proven moral values, of material well-being. Economics then developes solid, proven insights about the conditions necessary to the attainment of this moral value.
By making economics “subordinate” and
“complementary” to moral philosophy, economics can mount a more powerful and cogent case for individual liberty. Ethics must prove the objective value of that which economics implicitly upholds: prosperity. For if prosperity is not a moral value For ALL Men, why bother to develope the insights of the discipline?
With economics and rational ethics in congruence, free market economists can call on insights from ethics to strengthen and deepen their commentary on behalf of a free society. If a critic of freedom complains that free marketeers condone friends selling out friends for money, since the sale is profit-seeking, and profits are said by free marketers to be good, the economist can offer a rock-solid answer. “It is true that profits are good, because they make economic progress possible. But nothing in economics upholds selling out friends as good, since economics is only concerned with establishing what conditions are needed to enable people to materially improve their lives. Nothing in economics states that moral values, virtues and vices, do not exist; selling out a friend is clearly wrong.” End of discussion.
By “rational ethics” I mean moral principles that are logically spun out and proven to exist, given the nature of human beings. I contrast “rational ethics” with “irrationalist ethics”, moral principles that are simply taken from religious faith, or from one’s feeling about something, or from “the public unconscious”. Since the defense of individual liberty ultimately rests on ethical propositions, the ethics of liberty (Rothbard’s phrase) must be proven. Unproven and competing ethical claims are a dime a dozen, and persuade no one who is thoughtful and smart.
This is why I like Machan’s books. He explains the source and nature of moral principles in a way that has illuminated the subject for me, after years of dismal confusion. A great primer by Tibor Machan on this subject (100 pages)is “The Virtue of Liberty”, avaliable through the Foundation For Economic Education.
Another tremendous book is “Capitalism” by George Reisman. This 1,000 page masterpiece successfully integrates the ethical insights of Ayn Rand with the economic insights of von Mises, with whom Dr. Reisman was associated for a number of years.
Obviously, I don’t know either thinker, and I may not have represented fairly or accurately what they think. For example, I don’t recall Tibor Machan writing that economics is a branch of moral philosophy, but it seems clear to me that it must be, given my understanding of what he wrote about this in “Capitalism”. Dr. Reisman also has also written about this subject in his book.
Quick question to the group. Sorry to bring down the level of discussion but I’m not an economist and only have a layman’s grasp of austrian economics. Having read/observed how the Fed has created much liquidity in the last decade, what would be the austrian response to the lack of strong CPI increase since early 90s? Is it that productivity has created a counterbalancing force (e.g. price level would have fallen X% under a hard money system so a 2.0% CPI is really masking 2+X% CPI). Is it that the money is flowing overseas (e.g., we can buy 3 $200 imported tvs per household instead of paying $800 for an american made one)? I’ve read articles that say it is being absorbed by the stock/real estate market. But, ignoring primary issuance, isn’t this a wash (e.g., if I buy an overvalued share of stock from you I lose liquidity but you gain it, so it is a net wash). This last item has been repeated in WSJ many times and I think the Fed has raised it as well. Please help.
Alexander:
This is a subject that I find confusing as well. What occurs to me is that there are primarily two fundamental issues that need to be resolved, about which there is a lot of confusion.
Because inflation occurs as a result of changes in the supply of and demand for money, both sides of the equation must be correctly understood to figure out what has been happening.
First, the supply of our fiat money must be properly defined, so that one can include appropriate components, and exclude from counting financial assets that fall outside of a correct definition. Frank Shostak has written several articles published by Mises.org explaining the basis for what I am persuaded is a realistic accounting of the money supply. This issue is crucial, because variations in the rate of growth between the various M’s is large. You can find these articles in the archives. Dr. Shostak explains that money, properly defined, ought to include currency, demand deposits, and not much else. I’d guess the growth rate of this series is roughly 5%–in line with the growth rate of the monetary base.
Second, the demand for money appears to be growing, as evidenced by the higher rate of money growth compared with the lower rate of increase in the CPI (which is simply an artificial construct created by the Bureau of Labor Statistics that understates the rate of monetary depreciation for many people.) If the demand for money is, in fact, growing my guess is that it grows in response to economic growth, and increased “turnover”.
The fact that currency, and deposits, get expatriated from the US to foreign countries means we have less inflation for dollars “printed” than we would otherwise have to endure. I would guess this keeps the dollar priced higher against foreign currencies than it would be if foreign dollar holders were disenchanted with the buck. But, a big reason that they are not disenchanted is our low rates of price inflation in the USA.
Finally, to the extent that terror issues keep Americans (or foreign dollar holders) on their toes, the demand to hold dollars tends to be higher.
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