I Dare Paul Krugman To Debate Austrian Theory

Econophile's picture

How much would it be worth to you to see arch-Keynesian Paul Krugman debate a top-notch Austrian theory economist on business cycle theory?

Krugman has prattled for years about Austrian theory being a flawed dead-end of economics. My guess he has never read anything by Mises, Hayek, or Rothbard, the greatest scholars of the Austrian School. He doesn't understand it in any way; I have read his critiques and they are uniformed.

Robert Murphy, one of the bright young lights of Austrian theory economics, has challenged Krugman to a debate. Now let me say others have tried to draw Krugman out, but he won't do it. Murphy, who got his Ph.D at NYU, has made an offer of debate that Krugman will be hard pressed to refuse. Here's the challenge:

When Krugman agrees to debate Murphy at the Mises Institute, $100,000 will be donated to the Fresh Food Program of FoodBankNYC.org, a non-profit dedicated to feeding the hungry of NYC .

Murphy is soliciting donations for the debate through The Point, a web site that hosts campaigns. Launched only 4 days ago, they already have raised $22,000. I just pledged $100. If Krugman doesn't accept the challenge, I will not be charged. If he does, I get a charitable donation deduction to the Food Bank of NYC.

Here is where you can donate: Murphy-Krugman Debate. Please join me. This will be money very well spent.

Here is a video about it:

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Monk's picture

Austrian Theory is nonsense for obvious reasons, i.e., the general claim that we should have a free market, that it won't lead to the situation that we find ourselves in right now, that market forces will find solutions to various problems, and that it's "all government's fault" because of "money printing."

In reality, we actually start with a free market, until some become stronger than others and soon take over, influencing even the government. Market forces can find solutions to problems as long as there are enough resources available, but that's not the case. Much of total money supply isn't "printed" by governments or central banks but created by commercial banks as they extend credit, and that, too, is one "solution" that's part of market forces.

Even the claim that we should return to some "gold standard" is questionable, i.e., if we have only around 150,000 tons of precious metals (gold and silver) worldwide, which leaves us with 0.7 troy oz. per person.


guccichanel's picture

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Econophile's picture

Here is the real challenge. Most Austrian theory economists and students I have read or met have read Keynes and were brought up on it through Paul Samuelson and other mainstreamers. Yet I can't say I've read or met any Keynesian or neoclassical types that have actually studied the Austrians (Mises, Hayek, Rothbard). Most of them, especially Krugman, don't know what they are talking about when they discuss it yet they feel free to criticize the Austrians. Let me also say that Austrian theory is rather difficult to "get" and explain. Yet Keynesian ideas are relatively easy to explain. Hence its popularity. I believe the level of thinking and scholarship of the Austrian scholars is so much more comprehensive and deeper than anything I've read by Keynes. If you doubt that, read Human Action by Mises or Hulsman's wonderful biography of Mises and then you'll know what I am talking about. And to those of you who think theory of any kind is just bunk, let me say that what you have said is a theory itself and you better be able to defend it through logic and reason rather than BS. Theories and ideas are how the world works.

Sean7k's picture

As much as I have enjoyed the discussion, there is a point that should be made: A good theory lends itself to application in the real world. The results of that application are the best indicator of the benefits of a particular theory.

The theory of gravity is pretty darn useful. The explainability of economic behavior of both Keynes and the Austrians are very good. It is predictability that causes us to give pause. Further, since most economic behavior is driven by monetarists, Keynes can end up receiving a bad rap. 

The predictability is further distorted by the blatant manipulation and disinformation that accompanies most economic reporting. Especially if the predictions are designed to deceive the investor.

In my experience, the Austrian school is a superior predictor of behavior, but it is also handicapped by its' dependence on a free market. Since we never have had one, the predictability is handicapped by the distortions of the FED. 

Fortunately, this leaves one logical path to follow: Sell your soul to the devil, go to work for the elites, do whatever work the require and reap the benefits of knowing what will happen before the general public. You could join a president's inner circle, one of the major banks or the FRBNY. Once you are rich you can attempt to extricate yourself from their organization, take ten showers a day and wonder if you will ever remember what it was like to be clean. You may only get a dip in the hot tub or a flight on Korean airlines or a parade in Dallas or you may hit the jackpot and live to a ripe old age. (sarcasm)

I have settled for the middle road. I won't accept the status quo, but I realize Free Markets will never exist as well. I will do what I can to protect myself knowing that Austrian theory is the best safeguard I can have for my wealth and still sleep at night.

jm's picture

I disagree.  The future truly is unpredictable in the large. One must rely on the predicates of theory to some degree (observation and logic), but more importantly: 1) trial and error and 2) humility.

These two bad boys imply you know you don't know, and you have the flexibility to change when needed.  The best traders have this quality.  Even the best mathematicians have this quality.  I submit the best leaders should have this quality.  

Reliance on theory gives solutions to what happened, not what is coming.  If you think the future is predictable, then you won't agree.

EDIT:  There is a more sinister aspect.  Theory is often just a fascade used to provide justification for the top of the food chain.  While I do not believe this applies to you Econophile, you must admit that harm is often done not by intention but because people want to look good in the eyes of their colleagues and caste. 

In a beauty contest, I'll take Salma over Fred Hayek.



jm's picture

God save us from theory...

Commenters arguing about useless "economic doctrines" and "schools"... what is this, religious class for a catechism?

This stuff makes reasonable people puke.

alagon's picture

The Austrians are wrong because they assume that human action is attracted to gold. This is simply not true.

twittering as stocktradr's picture

“the laws of financial physics can no longer be denied. “  roger that.

from the rat city/rock and roll open source school of stock trading and economics  

you cannot fight gravity.  you cannot fight financial gravity.

what goes up. must come down.

chopper read's picture

Keynesian economics = over the long-term, everyone can have a free lunch.

Austrian economics = over the long-term, there are no free lunches.  

CrockettAlmanac.com's picture

Chicken salad sandwich on toast, please. And hold the chicken salad.

chopper read's picture

sorry, mate, we do not serve Chicken salad at McDonalds.  how did you know that i ride a harley?  am i that transparent?

tim73's picture

Says the gasoline burning Harley owner American! Chopper my ass!

fromthedeepersouth's picture

Even if Krugman accepts, he won't have an open mind and truly debate.  Academics are some of the most closed-minded people around, once they formulate an opinion about how things work, they don't budge.  I know....I've been an academic for over 30 years.  The real beauty in the debate would be how Krugman's flawed ideas would be exposed, which will be readily evident by most americans who are more discerning.

bronzie's picture

this thread is an excellent example of why ALL economists should be shot

what a bunch of mumbo-jumbo and gobbledy-gook!

each of you trying to prove that your theory and intelligence is better than the other guy

perhaps we should ship all economists off to some island where they can play Survivor type games and leave the rest of us alone

fromthedeepersouth's picture

lord bronzie, you should really take a deeper look at Austrian economics because your opinion and theirs are not very far off!!  Your preconceived perceptions don't allow you to see it however.

snowball777's picture

Hmmmm....praxeology (handwaving and homily-ridden bullshit) and a decided lack of experimental research (homework is hard, Barbie! so let's just pretend we've passed).

A school that almost exclusively uses deductive methods and asserts axioms (which are provably false in the real) world. e.g. "humans always take conscious actions towards goals" (EPIC FAIL). This is "having an agenda" and working from it too, kids.

Strict enforcement of contracts, but no government to enforce them (pure genius, that...we'll all hire our own Pinkertons, the ex-military will need something to do when we chop that $700B out of the budget anyway, right?).

To whit: show me any nation that has successfully implemented an Austrian economic policy.

Surely someone has seen the utility in an inelastic, low-growth, nasty recession generating economy by now?

CrockettAlmanac.com's picture

To whit: show me any nation that has successfully implemented an Austrian economic policy.

Nations are tools used by elites to oppress individuals. You might as well ask, "show me a slave owner who has successfully implemented full emancipation?"

Scorecards! Get your score cards! You can't tell the players without a scorecard!

fromthedeepersouth's picture

snowball, some thoughts....First, Austrian experimentation that would satisfy your criticism for lack of research is not funded in universities specifically because any studies that support Austrian economics would spell the demise of academic departments since economists would be generally deemed useless.  Second, Austrians don't argue we need no government, rather, the role for government is to protect private capital from extirpation by predators.  For example, we need a military to protect us from other countries, we need laws and a robust judicial system to allow people to settle their claims of predatory behavior, and if the multitudes agree that we need regulation, then the government should pass it.  But, Austrians are simply arguing we need to empower the little people, not the big corporations that bend laws to their favor at the expense of the little guy, which is why our middle class is rapidly disappearing.  These concepts were supported by the framers of our constitution and Adam Smith, one of the founders of modern capitalism.  Third, all countries that have had rapid and strong economies have done so by giving the little guy freedom to pursue capitalist endeavours and have allowed him/her to keep the fruits of their labors.  As the enterprises of these people expand, they hire more people thus stimulating the economy.  Government intervention in the economy has the opposite effect because the government is much less successful at distributing capital in the most efficient means possible. 

snowball777's picture

First, it was the Austrians themselves who argued that they didn't need experimental evidence of any kind (this could explain their lack of funding, i.e. claiming not to need funding).

Second, so you admit that you want to participate in the Godfather's protection plan at least. Land of the brave indeed. Guys who made sure only white, land-owners could vote 'empowering the little people'? Ever heard of the Alien and Sedition Acts? And Adam Smith would shit himself at the distribution of both wealth and income in this society.

I think you vastly underestimate how many of the things you take for granted would disappear but for the support for government-scale capital at one point or another (air travel and computers come to mind).

It is your belief that the same set of monkeys with two different names have differential ability to 'distribute capital', but you can't prove this. If it's true, then why do we have a 'public' military?

'Spontaneous order' sounds like a bad magic act; the invisible handjob.

dcb's picture

I ope you posted this on your blog

toddcfairchild's picture

Lol, http://krugman.blogs.nytimes.com/2010/10/23/the-worst-economist-in-the-w... I guess Pauly boy doesn't realize HE IS the worst economist in the world.

A choice quote... "we can’t all devalue at the same time."  I suppose he thinks that, hypothetically, if all the governments of the world ran the pressess full speed at exactly the same rate we'd all get richer? 

snowman's picture

Austrian v Keynesian is a complete useless exercise in futility. All economic theories are. Argue proofs instead. I imagine the "debate" will be much like Python's "Argument Sketch" excerpt:

(Walk down the corridor)
M: (Knock)
A:   Come in.
M:   Ah, Is this the right room for an argument?
A:   I told you once.
M:   No you haven't.
A:   Yes I have.
M:   When?
A:    Just now.
M:   No you didn't.
A:   Yes I did.
M:  You didn't
A:   I did!
M:  You didn't!
A:   I'm telling you I did!
M:  You did not!!
A:   Oh, I'm sorry, just one moment. Is this a five minute argument or the full half hour?
M:  Oh, just the five minutes.
A:   Ah, thank you. Anyway, I did.

AnAnonymous's picture

Today, we are going to debate the sex of angels.

-Pete, the memo, the memo...


-Today, in the 21 th century, in modern humanity, we are going to debate austrian school of economics against keynesian school of economics.

Econophile's picture

It would be nice if those criticizing Austrian theory actually knew something about it. So far those that do, don't.

TheMonetaryRed's picture

To "know" and to accept as valid are not the same thing - even if the Austrian School should say they are. 

This Austrian School stuff may be suddenly new and hip to all the young Ron Paulites but it's old hat for some of us.

A hat that don't fit.

But, again, I think Austrians have some interesting things to say. The school is just hobbled by adherence to doctrine. 

SpykerSpeed's picture

It's funny, I've been reading your posts and I haven't detected any specific criticisms of the Austrian school.  Your points are all very general and "safe".  Could you propose a superior alternative to the Austrian value theory?  Or Praxeology?  Or the Austrian Business Cycle Theory?

I'd love to see them, because I consider myself a relatively open minded person.

However, I want to point something out to you:

I recently read a story on the science section of the BBC news website.  In it, it talked about astronomers discovering a massive diamond asteroid, nearly the size of an entire city.  Of course, the asteroid is floating far from Earth.  But how much do you think that diamond asteroid is worth?  It's worth zero, because there's nobody there to claim it.

Value is something that originates in humans.  It is not inherent.

tim73's picture

Typical answer from a cult member, any cult member. "We know the absolute truths and those who do not know OUR absolute truths, are not worthy of it." Your absolute truths are not also subjected to open discussion and you never bother explaining those truths.

You want discussion but you want to set the framework in which those absolute truths are undeniable. If somebody dares to question your absolute truths, it is just because a) they are stupid or b) they work for the enemy!

OldTrooper's picture

Do you think attempting to smear people as 'cult members' proves your argument?

There are thousands of hours of audio and video available explaining 'those truths'.  There are tens of thousands of pages of text available explaining 'those truths'.  And you have the gall to say that 'you never bother explaining those truths'?

No, the difficulty you are running into, judging from your previous posts, is that you are incapable of imagining any life that doesn't involve a 'system' where things are 'planned' and everyone plays their assigned 'part'.  Because you can't (or are afraid to) imagine what free people would create you recoil from even the notion of individual liberty and blame it for the very things your precious 'system' has created.

I'm not closed to discussing the fundamental principles of any of my beliefs and it's fine with me if you question them.  Your problem seems to be with the successful defense of them!

There's no automatic assumption, just because you question something, that you are stupid or my enemy.  You blathering on about how bad individual freedom is, how great 'systems' are and demonstrating a complete inability to observe the world - that is what convinces me you are a) stupid and b) my enemy.

tim73's picture

Well, quantity does not automatically turn into quality.

And Yes, I am product of public schools from an European country. Pretty much DDR style system. But what was good about it was the fact, we get to read even 1984 and Animal Farm and we sure as hell are able to pinpoint Florida or China unlike you idiots before we hit 10. Plus the obligatory (your invention although) Cooper 12 minute tests every fall. 

chopper read's picture

+1, Old Trooper. 

i've got my gold. i've got my guns.  i look forward to seeing this fuckwit in the revolutionary streets someday so he can get the payback for all the misery his viewpoints have caused my ancestors.  damn, i hope it happens in my lifetime.  of course, genocide is a page out of the keynesian playbook, but i may actually make an exception towards this "final solution" when it comes to keynesian economists.  they really are the scourge of the planet. 

chopper read's picture

actually, tim73, you are describing a keynesian.  nobody debates you because it takes valuable energy, and you love to bludgeon your victims into submission with complete nonsense.  Rather, we simply put our money where our mouth is (in physical gold) and laugh all the way to our personal safes and safety deposit boxes.  Keynesians have created the opportunity of a lifetime for "us" (although i do not label myself an "austrian" or anything else, just someone with simple common sense).

The debate is over.  you won it.  america loses.  we become even richer in gold.  simple. 

here's a quarter, call someone who cares. 

tim73's picture

You are typical cult member. Absolute truths cannot be disputed. First you guys wanted a debate but then real world hurt too much and quickly raised your Waco defences.

chopper read's picture

actually, i did not want a debate, especially not with a plumb fool such as you.

as far as Waco goes: they were virtually defenseless against their federal murderers from the Bureau of Alcohol, Tobacco, & Firearms.  do your homework, asshole.  



Dr. Acula's picture

Yeah, economics topics always seem to draw multitudes of morons like moths to a flame.

With voters this dumb, who needs terrorists?


alagon's picture

Lol at all the narrow-minded fools that worship the Austrian School as a religion. I say fuck Keynes, Friedman, and Rothbard.

Spitzer's picture


so fuck the round earthers and the flat earthers ?

Do you think the earth is a square ?

tony bonn's picture

bout time.....but krookman will not debate....he is a deluded dishonest charlatan selling snake oil and carter's pills with a bottle of co-rexit thrown in for good measure.

murphy wrote a nice little volume (big print and lots of pictures) debunking the keynesian myths about the depression...well worth the short read.

Thorny Xi's picture

Quick.  The thing isn't working.  Hand me another thing.  My dogma is better than your dogma.  My plan, and planned economy, is better than yours.  WTF?  The theory doesn't matter; "it's the corruption, stupid."  Corruption, and a pending energy shortage, so let's loot the joint before it's too late. 

chopper read's picture

you're going to need some public coffers to raid.  better join the keynesians. 

tim73's picture

Austrian schoolers are always boasting that their system is better. So which country is implementing your theories? None?

It is easy to critize the current system but Austrian economists never give exact details what kind of system they would implement. So where are the DETAILS! Always some vague notions of gold based money and getting rid of central banks but that is it.

One problem with that would be if GDP of a country rises faster than new gold allocated to it or vice versa. Spain was flooded with gold after discovery of America and it created all sorts of problems.

Another one is ensuring the markets stay free and fair and are not taken over by bigger and/or meaner players. There are no ways to restrict that if the markets are truly free. Bad players might eventually drop off but their power might last still decades before somebody powerful enough would dare to challenge their positions. Usually that would another bad big player. New boss, same as the old boss. Those markets would still eventually need a strong government.

During last decades USA especially wanted financial markets to become really free and guess what happened? Big criminal corporations took over. Now they are screwing the little people with no fear at all. In matter of fact they despise the little people, just like a rich and smart sociopath would do. How is that working for you, Americans?

breezer1's picture

curious to note that when the eastern block banks came over to the western system they had to turn over their central bank gold to the imf. 

Spitzer's picture

There is no choice on systems.

Austrian economics just explains the system. A keynesian or government distortion in a market does not change the system. All the realities of the market stay the same.

TheMonetaryRed's picture

There is no choice on systems.

Now we see the Austrians for the true command economists they are. 


Zer ees no choice. Novone must use your filsy Englander und Amerikanisches moneys. Kold ees zee only agzeptable moneys. Ze market is vat vee say eet ees. You vill obey. 

Ze international kold standard is for ze good of all. Eet ees ze only falid standard possible. Freedom is obedience to zis rule. 

Spitzer's picture

Human action is not a system, it is just reality. You cannot change it.

Sean7k's picture

Command economies are directed by a central power without a market pricing mechanism- which is why they fail. The use of gold or other commodity is not a command economy- even when you attempt to slander it with the bad french accent. 

Austrians always allow for choice, because they believe in the greatest liberty. This was a cheap shot, even for you.

Bear's picture

The bad market players in the last decade were in collusion with bad government, as normal when market thieves, government whores, and media mice all conspire for the same purposes the rest are toast. Everyone was on board with a 'chicken in every pot' (1930's) and a house for everyone (2000's) and both resulted in a depression.

I know it's not that simple, but greed for money, power, or prestige will corrupt any system where the rule of law does not resist or restrict it.

The repeal of Glass-Steagall did us all in because when man's nature takes it course it's usually downhill.

CrockettAlmanac.com's picture

Glass-Steagall was not repealed. It was replaced with much more voluminous legislation. Deregulation was never even considered by the bipartisan politicians who enacted Gramm-Leach-Bliley. It was the rule of laws created by and for government cronies that has lead to the current crisis.

Don't Tread on Me.

Sean7k's picture

There are many books on Austrian theory that clearly describe the how and why. I would recommend Murray Rothbard's works, especially on Man, State and power. Plenty of details.

If the GDP of a country rises, the value of its' currency rises as well. They have goods other people want, so they are purchased. The issue of gold is unimportant. The problem with Spain was they dumped huge amounts of gold into the market. Any Austrian would tell you what would happen- exactly what happened to the Spanish. Huge supply in excess of demand devalues any commodity.

Your understanding of free markets is juvenile. Can't blame you- we have never had free markets. However, understand that Austrians do not say free markets are problem free- they are merely less problematic than the alternative- governments and fake regulation, because admit it- when has regulation ever worked? Why, because the elites can buy control of the laws that run it. 

The US has never sought free markets, merely saying so does not make it so. Any intervention is in violation of free markets. Therefore, the existence of government is a violation of the free market ideal.