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John Maynard Keynes often employed flowery language like “animal spirits” and “liquidity trap” to describe things he did not understand. He was, after all, more of a bureaucrat than an economist. In fact, he would best be described as an anti-economist because he eschewed things like supply and demand and held the opinion that government could run the economy. 
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18 Responses
I’m not sure which planet you are living on.In a democracy a politician’s power rests in his ability to get elected and reelected.Its all very well to propose ideal scenarios but when the media and the unemployed bear down with wrath real and contrived on the hapless politician what then? It seems to me that Austrian economics will always remain academic and pie in the sky till it grapples with political and social realities or proposes a political process that eases pressure on politicians in hard times or gets everybody to think as you do clearly an impossible task!
John Maynard Keynes is to Economics what Jean Dixon is to Astronomy.
“It seems to me that Austrian economics will always remain academic and pie in the sky till it grapples with political and social realities or proposes a political process that eases pressure on politicians in hard times or gets everybody to think as you do clearly an impossible task!”
The “reality” is that these people are monkeys with wrenches who rely on faulty, even fraudulent, theories. If anything Austrians should be relentless in combatting this nonsense.
Quote from Sumant Rawat: “It seems to me that Austrian economics will always remain academic and pie in the sky till it grapples with political and social realities or proposes a political process that eases pressure on politicians in hard times or gets everybody to think as you do clearly an impossible task!”
You touched on the base political problem: democracy. I think the anarchists on this blog have given a very reasonable way of limiting the pressure on those poor politicians: Take away their power to do anything.
The political and social reality is that too many people support nonsensical, Keynesian economic policies by government. The only practical way to combat that is through education and culture. People who don’t expect government to “do something” when the economy takes a downturn, or people who understand that government policies led to that economic downturn in the first place will put pressure on politicians and bureaucrats to do the right thing or recognize the immorality of governmental policies. A site like Mises IS a practical and worthwhile contribution towards educational and cultural change.
“It seems to me that Austrian economics will always remain academic and pie in the sky till it grapples with political and social realities or proposes a political process that eases pressure on politicians in hard times or gets everybody to think as you do clearly an impossible task!” – Sumant Rawat
As a committed Austrian, I think there is a great deal of Truth in this statement. It is not that the Austrian view is incorrect, it is just that it is being ignored. It takes time and effort for people to learn the Truth, even when they are actively pursuing it. It is far easier to just believe all the nonsense we were taught in school and that is constantly reinforced at all levels of the media. Austrians face an uphill struggle to be sure. The natural and uneducated tendencies of people run in a manner that supports an ever expanding state and continued belief in economic fallacies. Politicians know this and will continue to use it to their advantage to increase their power and control.
The only way to get people to take serious the claims of the Austrians is to get them to see how it is relevant to their daily lives and to their pocketbook. The ability of the Austrians to give very clear and easy to grasp explanations for what we see going on around us is powerful. Leave the intricacies to the academics and focus on the fundamentals and it can change people. I have had great success doing this and have seen quite a few people abandoning their pro-state views in favor of the Austrian view. I just keep pointing them to articles here and on LRC, as well as doing a good bit of my own writing. It takes time and patience and there are times when I wonder if we will ever be able to reach a critical mass, but there is nothing else to do if we wish to respect the rights of others to believe as they want rather than imposing our views on them with force. I can only imagine what Mises or Rothbard must have felt like in their days. We have opportunities now that they could not have even dreamed of having!
“I’m not sure which planet you are living on.In a democracy a politician’s power rests in his ability to get elected and reelected. – Sumant Rawat
Mises.org lives on a planet where truth has higher value than political expediency.
If you want to read political hackery, there’s plenty of other sites to visit on the web.
Great article–great comments. I’d like to add my two cents for whatever it’s worth (amateur economist joke–ha ha).
I agree with Scott Friday–focus on the fundamentals and leave the intricacies to the academics. There are very intelligent people out there who do not have the time (what with job and family obligations) to immerse themselves in economic debates. They are going by the assumption that our government officials 1) know what they are doing and 2) are working for the good of the people (as opposed to their own political gain).
It is a tough pill to swallow to realize the extent of enslavement into which we have put ourselves and how much we will have to work to get out again. Many people retaliate with emotional arguments mainly fueled by fear. Don’t challenge the fear–it is valid. And don’t talk down to them–they may shut you out. Just explain calmly and logically why, even though the idealized world promised to us looks wonderful, the policies created by our government to get us there will actually take us in the opposite direction.
It was Friedman who said, “The argument for collectivism is simple if false; it is an immediate emotional argument. The argument for individualism is subtle and sophisticated; it is an indirect rational argument. And the emotional faculties are more highly developed in most men than the rational, paradoxically or especially even in those who regard themselves as intellectuals.” (from his introduction to Hayek’s The Road to Serfdom) Plus we have been trained by our culture to favor the immediate and emotional, but it can be chipped away at if we are persistent.
It’s an interesting era, isn’t it? Real change CAN come if we keep sharing knowledge with people.
This writer says that Bush followed Keynesian economics. Really? What a joke. Also, we already DID let the free market do its thing and look where it got us. This type of advice simply reiterates the clearly failed and bogus ideas of Friedman. However, it does play right ino the hands of the largest oligopolies and richest powermongers. Allowing the market to be unregulated has turned what used to be a free competitive market into an oligoply market and now we are paying the price. The consumer is the great engine of the economy and by consolidating the wealth into a few hands of the very rich, the genius “Friedman” monetarists have choked off demand. What we see today is a classic case of oligoply and choked off demand caused by what this so-called ‘economist’ suggests. Like President Harrison said, “Prosperity is just around the corner.” If we believed that we would still be in poverty. Thanks to the likes of this writer our economy has tanked and collapsed and he wants us to believe that its working just fine and all we should do is watch it fall further and somehow (although he fails to explain how) it will magically correct itself. Yeah, just like the Wall Street financiers ‘self- regulated’. What a cynical and destructive philosophy. One has to wonder is this writer actually being paid off by Murdoch or the likes OR is he just ignorant of the facts, even when they are slammed in his face. Look at history and please refrain from the mindless gibberish that got us to the brink of economic ruin in the first place> BY the way, your point is not helped by your arrogant tone; as if you know how to solve all economic problems with a simple one-liner sound bite. I suppose you also believe in the only other Friedman concept, “No more taxes”. Taken together, “No more taxes” amd “Let the market be”, this two-bit excuse for an economic theory is nothing other than “give all your money to the rich and it will trickle down to the poor,” clearly disproved by current events.
What the government is doing is using the economy to further its power. I don’t think for a second they care one way or another who survives economically as long as their political agenda is realized, and they can gain credit for salvation by having their hand in the very engines that will start the recover without them.
Obama’s actions are a man bent on buying future votes with a government check, because the economic downturn would have been wasted had he done nothing and it would have recovered through all the things you mentioned.
He is not, by his actions concern one bit with America saving itself without the government stealing the credit for it. This is not about Keynes this is about Marx.
We would be safer if this was merely about economics because then when they failed at their present path they would cease their ridiculous spending, but they won’t because it isn’t.
When it comes to progress, using Marx to make right Engles is just Stalin !
Politicians do NOT believe Keynesian policies will enable/cause the economy to recover (and they don’t especially care what will/would). They believe (correctly) that such policies enable them to do favors for economic interests that have rewarded them in the past, and will so in the future if the efforts to preserve them (at the expense of the rest of us) are successful.
In short, Keynesianism aggrandizes the power of the (incumbent) political class. That has ALWAYS been its appeal to the many governments that have enacted them, and look as though they will continue to do so.
It is not the ignorance of politicians – it is their corruptness, which is an unavoidable consequence of the incentives they face.
One of the funniest things is how mainstream bureaucrats pretend to flirt with Austrian economics for street-cred without ever embracing nor understanding it. One of the sad things is that such Statist bureaucrats run foundations devoted to entrepreneurship, as Carl Scrhamm does at the Kauffman Foundation, where he has dome far more harm than good by trying to take creidt for the Austrians’ work while opposing it:
http://entrepreneurshipeconomist.wordpress.com/
“Can Carl Schramm win a Nobel Prize for discovering the Mises Insititute via a search engine? Does discovering Hayek’s page on wikipedia constitute original “growthology” research for Dane Stangler?”
While the Mises Institute dwarfs growthology in popularity and traffic, Dane Stangler and the well-funded Schrammenomomics disciples refuse to acknowledge/link to it:
http://www.alexa.com/siteinfo/mises.org+growthology.org
It is simply amazing what Schrammenomics will do–the vast and sheer power of Schrammenomics to influence the young mind. Because Schramm sits atop a $2.5 billion foundation, he has the power to deter a young lad from seeking the truth himself and googling the following without Schramm’s permission: http://www.google.com/search?hl=en&q=mises+entrepreneurship&btnG=Search
Dane Stangler is definitely working for Schramm’s comedy team. He is now responding directly to this blog, trying to claim that Schrammenomics is actually all about Austrian economics (via backdating phantom research), even as Kauffman/Growthology refuse to link to or cite mises.org. Schramm mentioned neither Hayek nor Mises in his book GOOD CAPITALISM BAD CAPITALISM, while wiring hundreds of millions to univeristy Statists who oppose Austrian economists in all their actions, while also never teaching nor reading the Austrians, as Schrammenomics redefines entrepreneurship in S?chramm’s/the Statist’s image.
In his most recent post at the “growthology” blog which was launched on Kauffman’s dime in a web 2.0 attempt to cloak Schramm’s incompetence and gloss over the seven-year erosion of the economy and spirit of entreprenuership by anti-intellectual/anti-entrepreneur/anti-Austrian, pro-Statist Schrammenomics, Stangler writes, “A generation of entrepreneurs becomes the next generation’s elite, the position of whom is then challenged by newer entrepreneurs. Henri Pirenne knew this; Joseph Schumpeter and his intellectual cousins, the Austrian economists and German historicists, knew this. We are apparently rediscovering it today. (AHAHH HA HA HA ! HAHAH HA!) Research we have been working on the Kauffman Foundation, soon to be released, will confirm this broad theme.”
http://www.growthology.org/growthology/2009/04/the-next-economic-wave.html
The blog post is so hilarious, I don’t know where to begin. Stangler ways “We are apparently rediscovering it today,” and by “We” he means the three anti-intellectual lawyers/anti-economists who just learned how to google “Austrian economics entrepreneurship” and think that that counts as a “discovery,” just because they are funded by Kauffman’s misappropriated millions to gloat about their “discovery.”
http://www.google.com/search?hl=en&q=austrian+economics+entrepreneurship&aq=f&oq=
Look at how much traffic Mises.org gets compared to Growthology.org:
http://www.alexa.com/siteinfo/mises.org+growthology.org
Stangler saying that he and his Kauffman/Schrammenomics cohorts are the first to “rediscover” Austrian economics is like Carl Schramm walking outside his lavish office/Schrammenomics/Kauffman compound and stating “I have discovered America!!”
I can see Stangler applying to the Nobel Committee as he and Schramm patent thier use of google to search “austrian economics entrepreneurship,” being the very first maverick pioneers to discover the over 65,000 results.
Stangler is a classic Statist in training. Truth and wisdom do not derive from the individual, but they must wait for Schrammenomics-funded Stangler to discover it on google, whereupon it then becomes offical State wisdom, just as long as he wears a tie while blogging about it. Without Kauffman’s/Schammenomic’s billions backing it, the research has not yet gained its apotheosis. It is not until the Austrian views on entrepreneurship are distilled, dumbed down, edited, deformed, destroyed, and repackaged by Stangler et al that they become worthy of the world’s Statists. It is not until the Austrian wisdom, born by free-thinking rugged individuals such as Mises and Hayek who never received posts nor salaries such as Schramm’s multi-million-dollar CEOship, it is not until the Austrian wisdom is quoted by one of Schramm’s employees that it becomes pertinent and real. It is not until Schramm and his Harvard MBA’s/JD’s coin a buzzword such as “growthology” and slap it on the Austrian’s work that the Austrians have any use or merit. It is not until Schramm announces to the group that Hayek and Mises are OK to talk about that the group is allowed to talk about Hayek and Mises without fear of their funding being cut. For Schrammenomics is a benevolent beast. Whereas Hayek and Mises were individuals who found it difficult to find univeristy posts and employment, Schramm is the superior man–the CEO and groupthink leader–the second hander and distiller who makes the individual glory, genius, and intellect of Mises and Hayek safe for the Statist, by eroding it, disparaging it, and destroying it–in the same way Schrammenomics has eroded the academy and economy. Hayek predicted what would happen to both Kauffman and the US Economy under Schrammenomics:
How does Schramm expect to win the Nobel prize by funding a team of lawyers to “discover” all that he has been ignoring and rejecting throughout his entire life, as well as throughout the past seven years of Schrammenics whence a vast and great opportunity was lost to inspire entreprenuership across the land. Schram could have saved the economy by funding not arrogant Dane Stangler lawyer/conformists/Scrhammenomics research-backdating cleanup crew/PR specialists, but by funding entrepreneurs and innovators. Dane has the hardest job in the world–ignoring the beuaty and glory of the Austrians for the sveen years of Schrammenomics while backdating Kauffman research to make it look like Schrammenomics embraced the Austrian economists all along, while, in reality, you will find not one mention of Hayek nor Mises in his book GOOD CAPITALISM, BAD CAPITALISM. How the hell one could write a book on modern capitalism WITHOUT MENTIONING HAYEK AND MISES is beyond us, and it is certainly an accomplishment in itself.
A great thing about Schramm stepping down from Kauffman is that he will take Stangler et al with him, and rather than focusing on campaigning for the Nobel in economics while ignoring the intellectual giants who defined modern free markets, the new president will be able to invest in entrepreneurs and innovators instead of Stanglers. A thousand flowers will bloom when Schramm steps down, and no longer will Kauffman be defined in an opaque, undefined manner, as Schramm took great pride for in a recent WSJ article, but Kauffman’s definitive vision of supporting entrepreneurs and entreprneurship–of supporting wealth creation and education–as opposed to Schrammenomics–will be realized.
Just as ethics have corroded in our corporations, ethics have corroded in our Foundations. Hayek notes that when the truth ends, the worst rise to the top, and by suprressing Hayek’s and Mises’ beuatiful truth, genius, and wisdom, Schramm rose to the top in a characterless, Machiavellian, doublespeaking, anti-intellectual manner; refusing to hire/fund anyone smarter than him, while employing conforming PR lawyers/MBAs to laud Schrammenomics. He is campaigning for the Nobel in eocnomics via corproate methods, as he truly thinks that Scholariship does not derive from the individual and original thought, but that it best defined by funding Stangler lackeys to pen PR and backdate Kauffman research as they are the first to “discover” Austrian economics. Schramm lacks both the character and intellect to a) admit to his blown opportunity which resulted in the Schrammenomics devastating our academies and economy while placing students and the nation in unprecedented debt and b) truly embrace the Austiran economists on any profound level which will actually change the course of Kauffman. You can’t teach an old dog new tricks, and although you can lead a horse to water, but you can’t make in think. The fact that Schramm was allowed to run Kauffman for seven years while ignoring/rejecting the Austrians is related to the fact that under his leadership and the era of Schrammenomics, entrepreneurship and academia have been dumbed down, as rather than funding courses on Austrian economics, Schramm wired hundreds of millions to college adminsitrators/MBAs putting on the best dog and pony shows and coming up with new buzzwords such as “growthology” which means growing Schramm’s chances for the Nobel in economics by backdating Kauffman research which Schramm never performed in the first place, as Schrammenomics completely ignored Hayek and Mises in his lackluster one-star book which helped creater the economy by its very indecipherableness, which displaced the Austrians on the bookshelves due not to Schamm’s intellect and vision, but dude to the fact that he commandeered the a $2.5 billion foundation to poer his Austrian-free, Orwellian-entrepreneurship vanity press: Good Capitalism, Bad Capitalism. Good Capitalism is Schrammenomics–using words to obscure and deceive and never define (as Schramm takes great pride in in the WSJ), failing to match word and deed and hiring corporate laywers to backdate research while exiling Austrian economists for over seven years. Bad Capitalism Schramm defines as honest, rugged risk taking, independent, individualistic thought, innovation, and growing the economy via innovation, which is why Schramm refuses to fund innovation and innovators but only corporate lawyers/Harvard MBAs/policy wonks who make him look good and allow him to take credit for entrepreneurship’s true glory as the economy declines.
Schrammenomics = backdating Kauffman research to make him look good while ignoring the Austrians for decades and then suddenly “discovering” all those who did the research by googling “Austrian economics entrepnereurship.” Can Schramm win a Nobel Prize for discovering the Mises Insititute via a search engine? Does discovering Hayek’s page on wikipedia constitute original “growthology” research?
Schrammenomics = ignoring intellectual giants such as Hayek and Mises in penning a book about economics.
Schrammenomics = wiring hundreds of millions of dollars to univeristy adminsitrators who never read nor teach the classical economists, rewarding them for raising student tuitions and ugmenting student debt in an unprecedented manner, as they dumb down the campus by teaching Schrammenomics instead of Hayek and Mises
Schrammenomics = campaigning for the Nobel prize not by standing upon the shoulders of giants so as to see further, but by a) ignoring them and then b) trying to take creidt for everything that was already said far better.
Schrammenomics = campaigning for the Nobel prize utilizing cut-throat corpoate methods, hiring a team of Kauffman laywers/PR specialists to backdate research and say “really we were working on this all along, but Schramm is a humble man and did not want to share his genius, lest it seem prideful.”
Unless I miss my guess, Stangler’s “research” will be a dumbed-down survey of the Austrians, taking them out of context and using them not to inspire an entrepreneurial renaissance, but only to serve his boss’s campaign for the Nobel in economics.
It is hilarious that Kauffman’s “best and birghtest”, handpicked by Schramm who refuses to employ anyone smarter them himself who might outshine the master, are just now realizing that there is a School of Auistrian Economics, after Schramm spent seven years dumbing down univeristy campuses and funding programs excluding Austrian economists to please his Statist friends, wiring hundreds of millions to university administrators who throw him lavish parties for his speeches, hoping to get a cut of the $2.5 billion, while, like Schramm, never reading Hayek nor Mises.
Is it ethical for Stangler to backdate unreleased research with “Research we have been working on the Kauffman Foundation, soon to be released, will confirm this broad theme,” while Schramm has been consitsently and constantly ignoring and rejecting the Austrian economists in his books and works, while wiring hundreds of millions to the Statists who also oppose Austrian economics by their very nature–by their very actions? After seven years of Orwellian Schrammenomics, look at what has happened to the economy, to the DOW, to the national and personal debt, and to entrepreneurs and small businesses which are now reuglated more than ever, as Schramm wires hundreds of millions to univeristy administrators and legal scholars, as opposed to entrepreneurs and those who respect them, such as Hayek and Mises.
http://www.marketwatch.com/news/story/A-cult-finance-protecting-failed/story.aspx?guid={A581A991-DEB6-4DBE-ADC2-316FDD493450}&ref=patrick.net
While Schramm funds statists and anti-intellectual, innovation-free goryupthink growthology buzzword bloggers, Mises rewards entrepreneurs:
http://www.youtube.com/watch?v=InVKpxhsUus
I challenge Stangler to link to any of this, as although it might seem like a sure bet to a lawyer/Statist, I am not sure ho wmuch longer Schrammenomics will be allowed to erode the economy and spirit of entrepreneurship.
It is time for Schramm to step down and liberate Kauffman’s funds from his single-minded, anti-Austrian, anti-intellectual, anti-entreprenuerial campaign for the Nobel Prize/Statist approval, and let Kauffman’s vision be realized. A thousand flowers will bloom when Shramm steps down and entrepreneurs are given the chance to define entreprnuership, rather than Schramm’s handpicked “growthology” Schrammeconomists.
Sorry, Jeff Rock, but it was not unregulated free market capitalism that got us in this mess. At best, it was government privilege without responsibility. Did you just Google this and decide to post? The Mises site has done numerous articles about the alleged “unreglated market” that caused the crisis. And many here are critical of Friedman and Chicago-style economics, even though they purportedly support the free market.
Government regulation and privilege are largely behind-the-scenes, and thus unseen by the majority of people, unless it directly involves you, but plenty of stuff is right out in the open, and under your nose, if you just look for it. The actual evidence, in spite of what what clueless commentators say, clearly shows that what you say simply is not true, that it was not an unregulated free market that we experienced. Thanks for visiting–maybe you should stick around and read some more of the vast literature and posts available at the site.
Jeff Rock– have your even read any other article on this amazing site? Your comments lead me to believe not.
So, according to you, “the consumer is the great engine of the economy” and the problem is “choked off demand”? Wow! So all we need to do is buy stuff? I really wish it were that easy because I love buying stuff! America has been doing this for decades–your ‘solution’ is the very crux of the problem.
Jeff Rock has been using the Crack Rock
But no, seriously guys… I think that Batman COULD beat Superman, IF he was given enough time to prepare.
Matt your comment is wasteful, deconstructive and should be stricken from the comments.
Everyone is entitled to their intellectual, constructive opinion regardless of whether it is accurate in its facts or not. They are after all, opinions. Scott is correct as is Sumant in their implications.
It is not whether or not Austrian Economics is wrong, it is that it is not being used in a sufficient fashion in order to prove or disprove itself in today’s economic climate. The only way to change that is to educate others, without force, without arrogance and with consistancy and a true desire to educate.
Moreover, Sumant’s comment reflects reality by raising the question of whether or not Austrian Economics is truly a complete solution by bringing up the fact that it does not, nor does any other theory adequently address and solve the political portion of the equation that is here to stay.
Politics will always be a part of the equation, no matter how distasteful or wrong it may be to some. For those that take the position and shout “Take away their power to do anything.” they are also doing nothing to advance their theory and search for an economic theory of everything, a theory that must include politics because it will always occur.
Do such shouters really believe that even if goverment were disbanded, there wouldn’t be those that would fill the vaccum and begin a modified form of political system based on power and greed. Of course there would be. For the world is what it is. Human beings are what they are. And unless some evolutionary change takes place to redirect the thought process of modern man, politics will remain a key part of the equation that must be resolved.
And at this point in time, no economic theory adequately addresses politics and the role it plays in skewing all theories when the citizenry tries to accurately implement them. Perhaps one will never be found, because it would have to take into account human behavior and the vast numbers of situations that politicians find themselves in. it is worth a try though.
In conclusion, from time to time our emtions get the best of us, but regardless of what school of thought someone believes in, it does their interests justice to focus on solutions. Emotional arguments are a waste of time, money and intellectual energy. Leave that sort of garbage to Jerry Springer and Oprah.
I will remind you that Austrian economics is not politics and urge you all to read William Hutt’s book, Politically Impossible?