Thursday, May 12, 2011

Hit Piece on Austrian Economics by a Real Titan

Congratulations to Richard Ebeling. He has managed to send Regressives into such a dither that they finally sent Salon's Andrew Leonard out shooting. Mind you this isn't the precise double tap shooting that the Seal Team 6 reportedly employed on Osama bin Laden, this is more like shooting in the hood with gang members knocking over tables, hiding behind grocery carts and sticking their arms out with guns in hand and shooting, well, in the air and perhaps hitting Grandma in the butt by accident.

Leonard, focuses on the fact that Ebeling now teaches at, as Leonard puts it with snark bullets flying, "Northwood University, an educational titan..."

Titan Leonard then goes on to tell us that:
Austrian economics may not command the respect of anything close to a majority of mainstream economists (whether they lean toward Friedman or Keynes) -- but it more than makes up for this sad reality via the intensity of its adherents, who are clearly attracted by the intellectual rigor of its hardcore rejection of the notion that the economy should be managed by government under any circumstances.
Leonard neglects to inform that this so-called lack of respect includes the fact that Austrian economist, Freidrich Hayek, was awarded the Nobel Prize in economics and that the "founder" of Austrian economics, Carl Menger, was one of the discoverers of "marginal utility", which is at the bedrock of all economics. Leonard also failed to mention that it was the Austrian economists who most consistently warned about the recent financial crisis.

But to a titan like Leonard, perhaps he suspects that anyone could accomplish these feats, if he spent more than a few minutes on the topic. Afterall, Leonard seems to have garnered his full understanding of Austrian economics by reading a pamphlet on the topic and reading someone else, who may not have even read a pamphlet on the subject. Of his pamphlet reading, titan Leonard tells us:
As Mises himself wrote, in "Causes of the Economic Crisis: an Address," a tract responding to the Great Depression published in 1931, the best economic guidelines included abandoning "the pursuit of policies which seek to establish interest rates, wage rates and commodity prices, different from those the market indicates."
Leonard has the quote correct, but appears to completely fail to understand what it means. He then writes, while pulling a quote from a fellow titan Martin Wolf (who may never have even read a pamphlet on Austrian economics) :
When recession hits or a financial crisis threatens, Austrian theory demands, as summarized by the Financial Times' Martin Wolf, "that the right response is to let everything rotten be liquidated, while continuing to balance the budget as the economy implodes."
What Wolf and Leonard appear to fail to understand is that for the Austrians, the business cycle is not some regular phenomena that occurs in an economy, but it is central bank money supply manipulation and interest rate manipulation that is causing the crises in the first place. Thus, the prescription to stop messing with the economy via deficit spending and, especially, central bank manipulations is after the fact advice, only necessary because too much respect has been given to Friedmanite and Keynesian policies that cause the crises in the first place.

The titan Leonard then moves beyond economics and shares his view on politics, he goes on to tell us that:
But the correctness of Austrian theory is beside the point. Because if it was ever applied in practice by actual politicians, the voting public would become more than just annoyed.
Which I'm guessing means, according to titan Leonard, that even if Austrian theory is correct, it doesn't matter because the public would never go for it, that they would be "annoyed". And yet, while titan Leonard, spits out these words, Rasmussen Reports advises that the most consistent advocate of Austrian economics that is seeking the Republican presidential nomination, Ron Paul, does best against President Obama, head to head. Factual contradictions never bothered Keynes and they seem not to bother Leonard.

Titan Leonard the now expert on business cycle theory concludes with this:
Economic crises and bank panics predated the creation of the central bank in the United States; indeed, to many observers, they seem to be endemic to capitalism and unregulated markets...
Like I said, he has read somebody who has read some body who has read Keynes. That's what "many observers" means. If Leonard ever wants to get serious about his pronouncements about the business cycle, he should actually read about the debate first hand. On the Keynesian side, I challenge him to read The General Theory by John Maynard Keynes and on the Austrian side, he might start with, Austrian Theory of the Trade Cycle and Other Essays, edited by Richard Ebeling, it will hold its own against Keynes.



  1. Sigh...outside of Glenn Greenwald and the occasional post by the pretty funny (but very liberal-democrat) Alex Pareene, Salon has no one worth reading.

    He is right about one thing, Americans are annoyed by anyone who doesn't lie to them and promise them the world conjured out of thin air.

  2. First they ignore you, then they RIDICULE you, then they fight you...