Sunday, April 29, 2012

The Austrian School Edge Over the Clueless Keynesians

Chris Rossini emails:

In your description of the Q&A after your speech at the Fed you said (after giving several examples):

"Overall, I was simply amazed at the lack of knowledge of these economists about the Austrian school. It was very close to non-existent."

After pondering this for a bit, I came to the conclusion that this is actually very favorable for the Austrian School of Economics and the future of The Ron Paul Movement.

Let me draw an analogy, imagine the New York Knicks have a game against the 76ers. Prior to the game, the Knicks refuse to watch any tape on the Sixers. They don't want to know anything about them. Even as the Sixers take their warm-up shots before the game, the Knicks turn their backs and shut their eyes.

Meanwhile, the Sixers know the strengths & weaknesses of every Knick on that court. They watch tape, know what they're up against, and are prepared for every game.

It's easy to see who has the advantage here.

This is the equivalent to the situation that these Fed economists (and their cheerleading media) have put themselves in. If their knowledge of the Austrian School is "close to non-existent," then they are closing their eyes to their competition.

Meanwhile the competition's ideas are spreading like wildfire. Thanks to Ron Paul it has reached many millions of people!

At the same time, Austrian School economists like yourself, Lew RockwellMises.orgTom Woods,Robert MurphyGary North, not only know Keynesianism inside & out, but also refute the arguments in public on a continuing basis. Austrians are also not afraid of their readers knowing exactly what the Keynesians are saying and doing. They constantly link to Keynesian websites & news stories. 

The opposition doesn't dare do the same. Like you mentioned yesterday, the media is hush-hush about your speech, yet it's on fire online.

Since as Von Mises pointed out (in the long-run) the world is run by ideas, this situation is to the great advantage of the Austrian School of Economics


  1. Good point. When they have no idea what they are up against, they've already lost. It is this coupled with the fact that most people who tend toward an Austro-libertarian way of thinking didn't do so simply because it was told to them. Rather, they sought out answers and that is where it lead them. While it can be seen as somewhat of a disadvantage that you must really search in order to find Austro-libertarian sources (thus, we are smaller in number), it is also advantageous because you tend to get generally smarter and better-read people on your side. I don't think that people become ancaps because everybody else is doing it. LOL

    I will also say that I probably spend more time studying the opposition than I do Austrian or libertarian theories. I've actually had a few people look at my book collection and ask if I was a "liberal" or a "Keynesian", because I have far more books that fit that mold. Of course, when they find out that I'm an anti-statist that prefers the emergent order of the market, they don't quite know what to say.

    I've always thought that in order to know what to believe you need to know what not to believe. Plus, it helps in debate that you know your opponent's position better than they do. This is not to say that this is always the reality, there are only so many hours in a day, but that is partly my goal.

  2. Exactly exactly exactly. Our opponents know absolutely nothing about us and they are very meticulous and vigorous in maintaining their ignorance. When I bait them (constantly) and point out that they maintain a meticulous ignorance of even the theme of Austrian economics, they NEVER respond with, "Oh no, we know all about Mises etc.., a, b, c, and d." It's always "fringe fringe fringe", you guys don't know math and you guys don't use evidence, blah blah. And that is only if there is any response at all, which itself is rare.

  3. I'm currently in an email debate with a friend who's a devout Keynesian.

    It's painful, because he just puts his (virtual) fingers in his ears and yells "bullshit, bullshit" when I try to make a point.

    It's like a religious thing.

    I think I'm gonna quit trying, 'cause he'll NEVER convert and he's a pretty good friend overall and I don't want to lose that friendship.

    Oh well...

    1. Capn'

      I have friends (and family members) who are the same way. And, yes, the chance of them understanding and accepting something new is slim.

      So I stopped worrying about it long ago.

      However, I do bother when I come across people who have open minds. And I believe there are enough of those types of people around for us to concentrate our energies there.

      We don't need everyone...we just need enough.

    2. I recommend you quit now trying to convert your friend. Been there, done that, made zero progress. My "progressive", Keynesian friend actually has a B.A. in economics, learned his Samuelson in the early 70's, as did I, but has made no effort to learn anything new (his job as a cost analyst doesn't really involve economic thinking). I gave him "Where Keynes Went Wrong" and suggested he read just the first part about what Keynes actually said...nah, too much to expect. He's a good friend, but statist to the core, and without intellectual curiosity.

    3. Thanks for the support guys.
      I was afraid I'd get called out for not stickin' it out.
      In the meantime, I've got a girlfriend, three kids, and ex-wife, etc etc who had of course never heard of Austrian Econ., but now are poisoning the minds of THEIR friends! :)

  4. The fact that you think these professional economists can be meaningfully labelled as Keynesians indicates that your evaluation of them is severely, if not fatally, flawed. Your rhetoric is stuck in 1971. The target has moved.

    1. Could you expand on that, please?

    2. "Your rhetoric is stuck in 1971. The target has moved."

      Someone had better inform Blodget:

    3. Blodget is a journalist.

      I thought your ambitions were higher than arguing with bloggers.

    4. And where did I say Blodget is an economist?

    5. Considering that our financial plight has been completely sculpted by the self-serving money printers, the question we should be asking: “How’s that working out for us?” I think most people inside or outside the FED would have to truthfully answer, “Not well, indeed” unless, of course, they are so afflicted with Fed Think, they have lost any rational mind to conduct such an inquiry.

      So why is it that those of us who believe in real market forces and real consequences for really bad economic behavior should apologize? It seems our Anon friend believes he/they deserve a complete pass-a get out of jail free card. “Keynesians are so misunderstood”.
      No such relief is due them. Keynesians are guilty—caught red handed putrefying the cookie jar. But the reprieve is always, “What if we hadn’t stepped forward and printed a gazillion fake dollars, how economically unbearable would the Great Recession have become? The answer is, “We don’t know”. But it is reasonable to expect the relentless money printing which rocketed us to this horrible place, can, only to fools like Krugman, be considered the solution.

      I am a simple minded guy. Likely many of you will agree with me after this post. I believe economics boils down to three concepts: Maslow’s Hierarchy of Needs, understanding the definition of inflation (too much money chasing too few goods) and a simple supply and demand curve. Beyond those basic rules the rest of economics, at its lowest common denominator, signifies a bunch of PhD’s, desperate to hang some credibility off their worthless intellectual adventures in education. Can't we all just agree, the Keynesian path is a miserable failure?

      In an era when the ideas of von Mises, Hayek and Rothbard are totally unknown or are considered to reside well outside the macroeconomic box, we are all doomed.

  5. This is a very important point.

    In any argument or discussion, it's necessary to understand your opponent's views before trying to knock them down. The Austrians, on net, do a much better job of understanding Keynesians than vice-versa. This is a tremendous advantage (although we can make improvements). Indeed, other than Daniel Kuehn, I haven't seen many Keynesian types state the Austrian view correctly or even give it a good faith effort. If they can't get past this threshold, they can't gain any ground intellectually; all they can do is offer a mindless sneer.

    It's like when Tom Woods debated an economist who said the Austrian School should be ignored "because Austria has a small GDP."

    1. I was there for that Tom Woods debate. I was also probably the only well-read Austrian student in the audience besides Tom. I almost fainted when I heard Tom's debate partner say that. And, the guy wasn't an economist, if I remember correctly. I want to say he was more of a business guy.

  6. I just wanted to add (I'm the anon immediately above) that I find it almost comedic, though mainly tragic, that as the internal logic of RBC theory plays itself out in the profession, illuminating the dead end it eventually leads to, thereby swinging wide open the door to arguments about real (especially policy) shocks, imperfect and asymmetric information, those with something potentially to contribute on that side are busy shadow-boxing dead Keynesians.

  7. I hope most of you guys realize (which none of you will) that most mainstream economists are not in fact Keynesian but are RBC types. (all of whom reject keynesian economics)..

    1. Oh puhleez, dish your nonsense about RBC on some RBC message board, if there is such a thing. The Keynesians, Krugman, Mankiw and Summers, have all written papers attacking RBC.

      Yes, RBC does exist, but it has far from taken over all of economics.

    2. Krugman is not a macroeconomist. Summers nor Mankiw are active researchers. Besides, Summers' and Mankiw's "attack," particularly Mankiw's, is nothing more than criticism within the paradigm. None of them influence the research programs of macroeconomists at graduate schools or the Federal Reserve banks.

      Why don't you look at practicing macroeconomists? How about the two that won the Nobel Prize this year, for example? Look at the textbooks. Look at what gets published in the top journals. "Keynesian" is complete anachronism.

      I've provided multiple links above.

    3. In your original post. you write the absurdity that:
      "Professional economists are self-consciously not 'Keynesians.'" Now you are walking your comment back to research economists.

      The truth of the matter is that Keynesian economics rules the day. Mankiw's text is Keynesian and is the best selling college text. The most popular economic columnist is Krugman, who is completely Keynesian. Summers ran the Treasury and the NEC.

      You may think RBC theory has major, grandiose influence, however, outside of a few ivory towers, it's mostly in your mind.

  8. The challenging thing is that Keynsianism, neo-Keynsianism and MMT are taylor-made for the tax and spend crowd. Regardless if you are on team red or team blue, you want economic theories to line up behind what you do which is to spend money. Making the jump to a logical way of economic thinking has no chance with these types.

    1. Exactly. This is the reason why an Austrian intellectual revolution will of necessity be a popular revolt against the technocratic enablers of profligate political pandering.

      Since Austrian economics doesn't produce Austrian technocrats, this battle won't be fought in the econ depts of the Ivies.