Thursday, March 12, 2015

Another Non-Austrian in the Mercatus, GMU, Cato Camp

Economist once described Lawrence White as a sophisticated Austrian-school monetary economist. He is a senior fellow at the Cato Institute, professor of economics at George Mason University and a member of the Financial Markets Working Group of the Mercatus Center at GMU.

But this does not indicate White an Austrian in any sense that would make you think he is aligned with such prominent Austrian school thinkers as Ludwig von Mises or Murray Rothbard.

During a recent interview on Russ Roberts' show, he said the following, which you would never hear come out of the mouths of Mises or Rothbard:
What the Fed should be concerned about is the total amount of spending in the economy, not just the stock of money and not just the price level...if people want to, for whatever reason, want to hold money–they want to hold more money balances relative to their spending, then the Fed should supply the additional money that people want to hold, because the alternative is that spending drops off; and that has real repercussions that we’re better off avoiding...  prices are sticky, I think is a fact about the world we are living in.
There is simply no legitimate role for the Fed in the economy. White is basically denying supply and demand adjustments that take place everyday in an economy and ignoring government regulations that hinder such adjustments. Further, the entire aggregate spending talk is a faulty Keynesian perspective.

GMU Professor Peter Boettke, in his book Living Economics, calls this kind of narrowed perspective "emergency room" economics and correctly notes:
[I]f you don't allow the individuals that populate your economy to learn from market signals, and you don't allow those signals to actually work, then of course the economy won't work!...The Keynesian method appeals to technocrats and politicians.

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