events archive

Austrian Economics

Writer and libertarian Christian Michel will introduce a discussion on Austrian Economics.

7:00pm, Tuesday 10 December 2013, London

Recording of the discussion:

The Austrian School has been an undercurrent in the economics field after the 1930s, first eclipsed by Keynesianism, then enjoying a brief revival of interest following Friedrich Hayek’s Nobel Prize in 1974, and shadowed again by the Chicago School and Milton Friedman’s Monetarism, and the Washington Consensus and new neo-liberalism (all theories the Austrians firmly opposed). The present revival is a consequence of the financial crisis. The Austrians correctly predicted it (and for the right reasons, unlike others). The crisis seems an empirical demonstration of what the Austrians’ literature have been describing all along.

The talk will briefly show the original historical contribution of the Austrian School (the ‘subjective theory of value’, which completely refuted Marx’s ‘labour theory’). It will move on to show how other analyses, the non neutrality of money (against J B Say), the ‘problem of knowledge’, and the psychological dimension of time preference cause an unavoidable misallocation of assets in regimes of fractional reserve banking – besides the ethical problem of the practice. This misallocation of financial assets creates, in addition, serious income inequality, illustrating the ‘Cantillon effect’.

The whole Austrian ‘business cycle theory’ (of ‘boom and bust’) explains more phenomena taking place in the decade before the 2007 crisis and since than rival Classical, Keynesian and Monetarist theories. Probably the weakness of the Austrian model for policy-making is that it prescribes, “don’t start from here”. We should, indeed, prevent booms if we want to avoid busts, but what to do when you are in the hole?

SPEAKER(S)

Writer and libertarian Christian Michel will introduce a discussion on Austrian Economics.

READINGS

The topic has generated so much literature in the last 140 years that it’s impossible to make a non arbitrary selection. So with all those limitations, this is Christian Michel’s:

The foundational text is Carl Menger’s Principles of Economics, Vienna, 1871, but like all bibles, people use the comments, extract quotes, but never read the original (that goes for Marx’s Capital, of course). The other canonical book is Ludwig von Mises’s daunting Human Action, 1949. Same remark as above. Both authors, and the ones in between, studied in Vienna, hence the label ‘Austrian School’.

For baby steps into the subject, I suggest the following readings:

Dr Eamonn Butler, Austrian Economics, a Primer, a 100-page easy read, published in booklet form by the Adam Smith Institute, and downloadable free in pdf format.

A long-time classic is Faustino Ballvé‘s Essential of Economics, a brief survey of principles and policies, first published in Mexico, 1956, republished many times, and translated into several languages. A free, English-language version exists as an e-book.

Another good place to start, if one has time for a 200-page book, is Economics in One Lesson, 1962, again a favourite of Austrians, many times republished, also available free online.

The economics of the Austrian School (more like Marxism, and unlike Keynesianism and Monetarism) are part of a whole epistemology. Probably the best approach is to be found in Hans-Hermann Hoppe’s Economic Science and the Austrian Method, 90 (dense) pages, available in paper form from the very active Ludwig von Mises Institute, and in a free download.

Of course, the Austrian School itself and all the above authors, as well as the works mentioned are the subjects of Wikipedia entries and innumerable posts on blogs and forums.