NYT Discovers Austrians as a Sane Antidote to Kondratieff

NYT's Kyle Crichton reports on the fact that because of the current economic crisis the Long Wave theory of Nikolai Kondratieff is gaining in followers again.

Crichton chronicles the life of Kondratieff and reports that Kondratieff, a Russian, was beheaded for bad economics, during a Stalinist purge. He then writes:

Over the years, Kondratieff’s appeal has waxed and waned in counterpoint to the economy, falling out of favor in good times but charging back when things look bleak. But his theory has never been accepted by mainstream economists, who consider it an occult hall of mirrors in which any sort of pattern can be discerned by shifting starting dates and definitions.

Crichton then finds, David Colander, a Middlebury College economic historian and an expert on economic crank theorists, to pronounce Kondratieff, well, a crank.

But Colander then goes on to offer an antidote to Kondratieff, the Austrians.

Writes Crichton:

The Austrian line of thought made something of a comeback in the Reagan years, but never quite gained acceptance in the economic fraternity, Mr. Colander says.

“It probably should,” he says.

“A good profession should take its outsiders more seriously,” Mr. Colander says. “They make you look at things in different ways. The worst thing for policy makers is to think they are right.”

Crichton adds:

Austrian economists tend to emphasize a laissez-faire approach and entrepreneurship (not the most popular policies at this moment) and strict limits on money supply growth, usually by hitching the currency to the gold standard.

While considered outside the mainstream, the Austrian School is far more respectable, counting in its ranks two Nobel Prize winners, Friedrich Hayek and James Buchanan. Peter Schiff of Euro Pacific Capital — an adviser to the Libertarian presidential candidate Ron Paul and one of the most prominent doomsayers in the current collapse — also subscribes to its theories.

Hayek is said to have successfully predicted the Great Depression and some Austrian School devotees are taking credit for calling this one. “The financial meltdown the economists of the Austrian School predicted has arrived,” Mr. Paul wrote in September, 11 days after Lehman Brothers filed for bankruptcy.

(Note: For a thorough devastating critique of Kondratieff see The Kondratieff Cycle: Real or Fabricated? by Austrian economist Murray Rothbard)