As I am sure you are aware the Austrian school of economics seems to becoming the new popular school of thought for free market economist. What I a not sure of is whether you are aware that the basic philosophy is based on Thomas Aquinas a catholic saint who studied concepts of thought and the nature of God. This is most predominantly expressed in his explanation of the four laws of the universe. Now I know a lot of you will disagree with what he says. You have to admit though that this is pretty heavy thinking for some one in the 12th century. Whatever your opinion is it is important you know the basis of the school of thought. As it lays the foundations to the most likely future view on economics. For info on Thomas Aquinas follow the link below. It is only a wiki link but gives you the overview. http://en.wikipedia.org/wiki/Thomas_Aquinas
It's "popular" for the same reason Ayn Rand's mutterings are "popular" - it is so far disconnected from reality that it can't be implemented, which means it's not falsifiable, which means people will forever be able to convince themselves it could actually work.
Good post. I personally have no real view on Austrian economics. I just think it will be the next big thing whether we like it or not. My own view is that economics should be about the mechanisms used to control the variables to suit the situation in society at that time, because society changes. (One example is interest rates to control inflation. A real economic progress is to develop another method of controlling inflation other than interest rates that does not have the negative affects. If society changes you would then have the interest rate mechanism and the method to control inflation. There is greater ability to manage the situation that occurs whatever it is. This is real economics not opinions on how the current mechanisms should be used, although that is important.) I do however like the thoughts of Thomas Aquinas due to deep thoughts on knowledge and understanding of the universe. This is were it fits in with Austrian economics because it is based on human actions, which Aquinas states is partly based on the observations of the natural law. Yes I agree with you a full implementation of the school of thought is not possible however it was not possible with monetartism and when it was attempted it had its limitations. All we can hope is that the fundamental thinking of the school of thought is used in such a way that any attempts of implementation are beneficial to society. In short you will never get things all one way but you might get enough to make a positive difference.
Truly free markets are impossible in a global economy, with entities such as nepotistic central banks, the IMF, The World Bank, and many, many other arbiters of interference acting in self-interest and at the behest of those who are in the inner circle. Whoever controls deflation and inflation cycles rules all. They know when to inject and withdraw liquidity, and when to sell and buy. They are the ultimate market timers, creating and bursting bubbles, always getting in and out at the optimum time.
That's right, bro. I've said that for a very long time. Few people 'get it'. Its really obvious. Banks that control credit, make a long-term plan, then execute. They control the Macro, then trade it/position themselves accordingly. This is whats meant by a rigged game, in the long term. Short-term, markets can be rigged to some extent, as well. PPT, Central Bank intervention (I'm sure there's no tip-offs to FED shareholders there) etc
I am confused. Do you mean that it doesn't matter how inflation is controlled due to the people who control it use it to their advantage. Or do you mean that free markets cannot exist thus Austrian School will not work. Also my concern is this regardless of your point about whoever controls the mechanism used for deflation/inflation the problem is the interest rate is not viable to do so any more, at least not in the uk. For example if interest rate rises to reduce inflation bankruptcies and repossessions records would occur. If interest rates are lowered to decrease deflation there is no incentive to save,the investment and saving mechanism stops, no new business is generated and businesses cannot operate. Either way it is a lose lose situation. Another mechanism that does not use interest rates could be used to control inflation deflation and not have that affect on the wider market. This is my point no matter how the mechanisms are used they are not sufficient to meet the needs of the sovereign power and thus they will lose power as the needs of the people will not be met and they will revolt. I don't know if that explains my position as I am not sure what your response was related to as explained above.
No argument. Monetarism suffers from the same fundamental flaw as Austrian and most other economic schools of though - it ignores the brutal reality that most people, most of the time, will fuck over their neighbors, their city, their state, their country - anybody and everybody - if the financial rewards are high enough. Any economic system that does not start with an understanding that we humans have a fundamental and deep and strong tendency to "informed selfishness" (ie, like sinning with full knowledge) is doomed to fail.
We HAD a gold standard. The unfortunate thing was that MORONS like FDR, etc followed the keynesian bulsh!t. The problem was NOT that there was not enough gold - the real problem was that those dumb sh!ts had raised the leverage levels too high (or said another way - the fraction of the fractional reserve was way to low) - and they had the balls to blame the amount of gold available - that was chutzpah! -gastropod
It didn't work. It didn't stop the business side of America from racking up enormous external debts, which cascaded into massive outflows of gold, which cascaded into extreme pressure on the US dollar, which cascaded into the Fed evolving along roughly along the lines we've come to know and love it. Gold standard CANNOT work as the more ardent monetary theorists envision unless you outright ban all credit/debt. Which is impossible. All you end up with is (even) more violent economic dislocations than the one we are currently experiencing, on a more frequent basis. Yes, the current system too will eventually fail in one giant ball of fire. But it's not because of the system, it's because of the nature of people. EVERY monetary system will fail. Austrian economics only works well in one place - academia. Cheers.
I don't think it works there either. Academia has discounted it as a crackpot cult who is too stupid to be able to use even the simplest math. Austrian political economy is probably a more accurate description.