How Do Keynesians View Austrian Economics?


For you to consider yourself an Austrian in ECONOMIC theory, the minimum requirement is to subscribe to 1) the subjective theory of value, 2) the austrian theory of the business cycle and possibly 3) that money is non-neutral. That is all that would differentiate you from a mainstream economist.

Mainstream economists TEND to argue that macro monetary policy is ‘above’ all of that:

i) that the business cycle MAY be affected by the government, but that the net result is actually still better than it would be if we constrained the government.

ii) The idea that we push problems down the road is fine, because in the progressive view, technology will save us in the future. (Really.)  

iii) that individual benefits are distributed by complex means, so that in the end, it all works our if they take your property and give it to someone else, and increase risk and government debt.

iiii) Austrian economics is logical, but does not place an emphasis on the empirical, or at least, casts doubt on the empirical statements mainstream economists make. And since economics as a discipline is actually econometrics then this means you have no place in economics departments.

You would CHOOSE to study Austrian economics only if you either have a) a moral objection to Keynesianism, or b) it violates your observation about human nature, or c) the externalities it will produce accumulate into even more serious problems than the business cycle. (That’s what libertarians argue.)

The reason some of us tend to choose Austrian economics is because we have a political interest in the long term effects of policy on society. And because we think norms and institutions are not arbitrary.  This category of questions is in the domain of POLITICAL ECONOMY, not really that of monetary economics.  And as such, most of us would recommend that you study Austrian economics in the context of political science, or ethical philosophy, rather than monetary economics, and do so in support of a political science degree where first year macro and micro economics really are sufficient.

GMU does teach Austrianism and their program is competitive, and their students are sought out precisely for that reason. The developing world, where corruption is a serious problem, also tends to have austrian influence, because it explains at least in part, why these countries remain poor: they don’t have property rights.

The truth is that in our advanced countries, where we do have at least marginal property rights and limited corruption, Austrian principles are not as important as macro principles.  So I think it is more that Austrianism is an early stage way of looking at the world, and once you’ve succeeded with institutions at the austrian level you can more easily make use of macro institutions without such substantially negative externalities. Although most dedicated austrians (the ideological kind) might disagree with me, I kind of doubt that I’d lose the argument.)  🙂 

Curt Doolittle
The Propertarian Institute

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