Wednesday, June 12, 2013


"There is no Austrian Economics- only good economics and bad economics". - Milton Friedman

This seemingly obvious statement actually has profound implications if it is considered carefully.

With Ron Paul becoming more popular more average citizens are becoming aware of economics, in particular Austrian economics.  This is a good thing for many reasons, for example, people are becoming aware of economic law, they are interested in the subject, they are reading solid arguments against government etc etc.  However, there are also some negative side effects to being exposed to Austrian economics as your first school of thought.  The main one is Austrian economists denounce all other schools of thought even if that school has made a large contribution to the field of economics.

One thing that exemplifies this situation is the housing crash in 2007.  Many Austrian economists predicted there was a housing bubble, Austrian economists weren't the only school of thought to predict this however.  That is because good economists practicing good economics can see these types of things.  However, if we look at what happened after the housing bubble popped, there were Austrian economists predicting hyperinflation, some even predicted it as early as 2010.  This was a prediction that, at least from my reading, was exclusive to the Austrian school of thought.  The reason they were wrong about this is not because they are bad economists, but rather they will not accept any theory outside of their own.  If they did accept other theory they likely would not have made this prediction.  This, in general, is why I do not consider myself an adherent of Austrian economics anymore.  Because good economists have absorbed the proper Austrian theory into their own and have advanced it using other methods the Austrians reject, such as mathematical economics.

Not only do they denounce other schools of thought, they lump the people practicing those schools of thought into a single category of statists.  This is not a good thing if we want to advance the liberty movement.  I make this claim because instead of Chicago schoolers, monetarists and Austrian schoolers working together to promote freedom and liberty the Austrians are calling all the others statists.  This creates a battle amongst people that should not be battling.  Think of all the time Austrian's have spent bashing Milton Friedman, and for what cause?  Most arm-chair economists aren't going to read his academic papers on the theory of money.  They are going to read Capitalism and Freedom or Free to Choose. Both of which give tremendous arguments against the state.  These may go unread because of an article that called him a statist (if you want to see why Friedman is not a statist check out this post here).  Furthermore, all the time spent bashing him could have been time spent bashing our real "enemies" of liberty.

So in conclusion, it is good people are being exposed to economics, especially a school of thought which denounces the state.  However, one should always read outside the school of thought they adhere to further their understanding.

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