Keynesian vs. Austrian Economics - The Infographic
There has been an unsettled debate among economists for a century now of whether government intervention is beneficial to an economy. The heart of this debate lies between Keynesian and Austrian economists (though there are other schools as well).
In order to get a full understanding of the two schools of economic thought, we offer the following via The Austrian Insider...
And some responses to popular criticisms:
- “Animal Spirits is misrepresented” – I just personally thought explaining that further would be too much text. If anyone would like to get a full explination of what Keynes meant by this term, read this Wikipedia article on Animal Spirits
- “This is biased towards the Austrian School” – Well I am obviously an Austrian economist, so there is only so much I can argue with that point. That said, I HONESTLY tried to represent Keynes properly and would love to hear from any Keynesians what can be changed to help represent them properly.
- “Malthus was not an economist” - He may be more of a philosopher, but many consider him an influence of Keynes.
- “Ron Paul is not an economist” - Just because he is a doctor and politician by profession does not mean he is not a well known Austrian Economist. He has many books on the subject, is a senior fellow of the Mises Institute, and has personally got many individuals to research Austrianism further
- “It should not be total utils, but marginal utility on that graph” – It is supposed to represent the marginal utility graph, I just didn’t label it. The graph should show total utility marginally decreases with each dollar increase. The printable version has the entire chart labeled.
- “Praxeology is not the right term to describe the whole organizational pattern of the social order. It refers only to the logical implications of human action that can be known through deduction.” - Well put. Just hard to figure out how to graphically represent that...
(24 votes)
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There is a lot to read at the link I provided. It's obvious you made no effort.
It takes time and effort to punch through all of the theoretical underpinnings of money systems.
I've done that.
I'm pointing you in the right direction, so you don't have to waste years reading and being confused by false doctrine. I've wasted those many years -decades ...so don't do it.
New Credit Theory, or Sovereign money comprehends the "morphing" nature of money. Ledger, or credit as money is best understood by NCT.
For example, De-Soto does not understand modern money mechanics. Huber points out the exact circumstances.
There is also modern monetary theory or MMT. They also makes some mistakes, but they are much closer to the truth than both Austrians or Keynsians.
You gave a URL after saying that it gave a better presentation than what was discussed in the article. A few lines down you talke about DeSoto. Forigve the confusion there. Do appreciate the link, however, and will take a look at NCT.
It takes time and effort to punch through all of the theoretical underpinnings of money systems. I've done that.
So have I and I disagree with you. The fatal flaw in any debt based system has to do with time value. The present has a higher value than the future. With debt, the real costs are pushed into the future. This encourages misallocation of capital.
Desoto argued that banks should be split into two distinct functions, one for savings and the other for loans. In a savings bank, savers pay storage fees. Loan banks make money from interest charges. In this way a bank cannot risk a saver's money on loans that may go bad.
Whether debt was the first form of money does not prove debt is the best form of money. Cycles are an integral part of any monetary system. They cannot be eliminated because errors have a way of accumulating with time. The question is whether the amplitudes of boom-bust cycles can be minimized? A system based on savings does it best. A system based on debt does it worst. There is a lot of history to back that up.
It seems to me that these debt based theories are another attempt to rationalize the present debt based monetary system which is now in a state of collapse.
You would know that NCT, or sovereign money is NOT A DAMN DEBT BASED money system, then wouldn't you?
NCT, or sovereign money is legal money issued as seigniorage. FROM then on, it is floating money used as a tool by the population. This type of money does not come into existence as debt.
Spirit, you havee not done your homework, despite what you say.
Canada had a system like this from 38 to 74 and it worked well.
So, I am not just theorizing and BS'ing. This is actual proven science.
Ben Franklin's Philadelphia Colony had something similar, and it also worked well.
Generally, when a sovereing system is implemented, it gets attacked by outside forces, to then dismantle it. Mammon can broker no competition, and he wants to keep people as slaves.
You would know that NCT, or sovereign money is NOT A DAMN DEBT BASED money system, then wouldn't you?
Are we talking about the same thing? The dollar is created from nothing out of loans to government, business and consumers. Because all loans carry an interest charge, the money supply has to grow or it collapses. It is the way dollars are created that make them a unit of debt.
Generally, when a sovereing system is implemented, it gets attacked by outside forces, to then dismantle it.
"Attacked" has it reversed. Nobody wants to lose out on a currency they don't trust. So they exchange for something safer.
why are you trying to have a well-considered conversation on Zero Hedge? Hahahah.
ZH is a relief valve for angry white men.
ZH is a relief valve for angry white men.
That and Kung Fu movies.
NCT, or sovereign money is legal money issued as seigniorage. FROM then on, it is floating money used as a tool by the population. This type of money does not come into existence as debt.
I like to think in terms of balance sheets - assets and liabilities, with net worth being the difference between the two.
Huber's introduction says that plain sovereign money "circulates as a liquid asset only. In no balance sheet whatsoever does it appear as a liability."
Question: if this money is not anybody's liability, and it has no intrinsic value, how can it be an asset of the holder? If the government can create new assets without anybody's liabilities increasing, that's claiming that the government can effortlessly create wealth without limit.
Or do you think that, just perhaps, the fact that new money doesn't appear as a liability on anybody's balance sheet is just a pretence that these real liabilities somehow don't exist?
If I take out a mortgage from the bank to buy a house, and I record the house as an asset on my balance sheet, but don't record the debt to the bank as a liability, does that mean that I am suddenly much wealthier? Or does it mean that I'm just fooling myself?
While still sobering up from New Year's... I'd like to say that...
I don't like Austrian economics because Hitler was Austrian, and..
I don't like Kenyan economics because of Obama.
[hick]
An Austrian economist and a Keynsian economist walk into a bar...
The Keynsian asks for a drink on credit, then proceeds to drink himself to death.
The Austrian asks for a drink, pays for his drink and drinks his drink, then he gets up to leave.
Bartender says to Austrian, "Hey what about your buddy's tab?"
Austrian to the bartender, "He's your buddy now."
The problem with economic models derived from theories pre 1972 is that the base unit of account has changed, money no longer is created at the Treasury, limited in amount to gold supply, money can be congered into existance and manipulated. So all the models that economists use are flawed at the outset, and every decision made based on these models can't possibly be sound.
Higher education is probably the most debilating of things to those that haven't seen things in the real world, the embracing of theoretical models without a sound assessment of the basis of the models, coupled with the group think and praise of the scholars in the past gives the present group of higher learners an arrogance that allows them to be completely wrong in the real world while maintaining the aura of absolute piety.
Both theories seem to be out of touch, but Keynsianism is workable and is needed more because the private sector can not be trusted. Capitalists have their own segment of corrupt players that tend to bring the system to the point of complete world-wide destruction as we've seen twice and not counting recession after recession caused by bubbles. But, there wouldn't be a need for intervention if the USA imposed the "Single Tax".
The only way out is the system the founding fathers put in place but was destroyed when the rich bribed and paid off Congress to enact an income tax for the first time in 1913. Before that, the only time an income tax was implemented, was strictly to pay off a war...and never permanent. The USA became an economic powerhouse with zero income taxes from 1787 to 1913. Ninety percent of taxes were from property and ten percent from excise taxes.
The nation was founded on the principle that those who owned the wealth producing assets (anything that could be monopolized upon ownership, like land) should pay all the taxes. Not some, ALL TAXES. Taxing assets also destroys all bubbles as speculator parasites can not hold assets very long while being taxed. The asset must be used and the economy expands.
Paying zero income taxes allowed and incentivized those owners to bring their property to highest use...a piece of land would see factories, food or housing created...and jobs to do it all to RECOUP taxes paid. Both progressives and conservatives like this idea.
We need the "Single Tax" now...Tax assets, NOT INCOME.
http://www.henrygeorge.org/pdfs/PandP_Drake.pdf
Both theories seem to be out of touch, but Keynsianism is workable and is needed more because the private sector can not be trusted.
The private sector cannot be trusted? I guess that's supposed to mean the private sector should learn to trust the public sector.
We need the "Single Tax" now...Tax assets, NOT INCOME.
By now you should realize this is politically impossible. The "trusted public sector" [sic] has taxed, borrowed and spent far beyond the means of the private sector.
Toncruz,
I noticed you got a lot of downvotes, even though you are exactly right.
People knee jerk to the term tax.
Tax is force, but so are prices. Prices jacked up due to rents are even more pernicious than taxes. Why? Because getting screwed over with high prices is a hidden mechanism.
Personally, I like to know who has mounted me from behind.
Paying land taxes, and other rent taxes is something like draining blood from a tumor. Rent taxes are taxing away the free lunch, and negating bad behaviour.
Somebody who has some land and they just sat on their fat ass and didn't work it. Yet, the land appreciated?
Their inputs had not a damn thing to do with the appreciation in price. The free lunch should be taxed.
I think the downvoters would like free lunches... secretly they don't want to work for a living.
It's the same thing, as what is saved is invested, and returns can only take place if investments lead to more production which has to be sold. And if sales go up, so does spending.
BOTH ARE
BULLSHIT!
both are theories. mental constructs. with all the inherent limitations on that. but that's the way we humans think... when we do that
Truth is in action, not thought, theory, intention or belief. We are what we DO.
Individual actions accumulate to define the collective action.
To my way of thinking, the basic premise of Keynesian economics is for the collective to define the individual while Austrian economics expects the individual to define the collective.
How do I ACT? I act to further my own best self interest. My actions are Austrian. Most people do the same so the Truth (action) is Austrian.
The conundrum is that it is often in my best self-interest to TAKE from the collective. Thus, my Austrian actions promote an expanding and unsustainable Keynesian collective. This was best expressed at Wal-Mart by a simple person using a SNAP card to pay for his munchies when he said, "If they are dumb enough to offer it, I am smart enough to take it".
For either theory to work in practice, the collective has to be smart enough not to offer it. That can only occur under a LIMITED government that does NOT have the power to grant unstainable benefits.
If anyone understands that, they understand US Conservatives.
Which comes across as saying you know nothing about economic theory and it's too much trouble to learn.
On the contrary, Spiritof42, I have learned way too much, while the more one learns, the worse that gets!
I have previously repeated my kinds of comments regarding the tempest in a teapot debates regarding Keynesian versus Austrian schools of economics many times under appropriate articles previously published on Zero Hedge, and I have recorded those in this thread: Some Monetary System Articles.
That thread is also linked under this colleciton of Excellent Videos on Money Systems.
OVERVIEW:
The essential problem is that, due to the inherent mathematics, endless exponential growth was always NOT possible. Had we gone to space and colonized the solar system, or even other solar systems, we could ONLY have postponed facing those fundamental facts. BY DEFINITION, the more artificial the environment that human beings live in, then that requires even more intense artificial selection. Any possible colonizing of outer space would require artificial environments, which would require even more intense artificial selection systems. At the present time, Neolithic Civilization's social pyramid systems have developed artificial selection systems primarily operated by the ruling classes upon those they rule over, which systems are based on backing up lies with violence, and so, are operated by the best available professional hypocrites. Hence, the basic facts regarding natural selection's evolutionary ecologies tend to be denied and suppressed by the currently established artificial selection systems.
BY DEFINITION, what stops exponential growth ARE the death control systems. The essential political problems that civilization has always faced were the death control systems, and those have been compounded and confounded by the ways that the most successful human murder systems became based upon the maximum possible deceits and treacheries. Furthermore, that included that all of the publicly significant controlled opposition groups, which stayed within the same bullshit frame of reference regarding the murder systems actually being operated by the central core of the best organized gangs of criminals, who actually did the murder, that backing up the money, more than anyone else.
Hence, I REPEAT, we are stuck in vicious ruts, going around and around in spirals amplified by progress in physical science, without progress in political science, BECAUSE the essential problem that confronts civilization is to develop better human murder systems, after the development of weapons of mass destruction, while all of the actual murder systems are now being operated by the best available professional hypocrites, who do what they do through the most extreme possible deceits and treacheries, including that the most important politicians, who are bankster controlled puppets, routinely engage in the most extreme possible treasons, and continue to get away with those.
One can not fully imagine the degree to which the ruling classes have becoming increasingly psychotic psychopaths, while the matching developments have been the degree to which those ruled over have become impotent, incompetent political idiots. But nevertheless, despite those being the current social facts, theoretically speaking the only way that a technological based civilization might survive developing tools that are trillions of times more powerful and capable than ever before in human history would be by going through series of intellectual scientific revolutions, which were applied to political science in general, and to the combined money/murder systems in particular. However, at the present time, the degree to which there is no publicly significant genuine opposition to the bankster controlled governments means that there are no rational public debates about how to operate better death control systems.
Instead, we are headed towards the entrenched debt slavery systems generating numbers which have become debt insanities, which are going to provoke death insanities. The ONLY, albeit remotely possible, ways that civilization could survive is to develop better death control systems, which would have to be based upon series of profound paradigm shifts in the ways that we perceive death control systems. The main challenges in the foreseeable future will amount to attempting to steer the eruptions of death insanities towards the possible development of better overall death control systems. While that is theoretically possible, that appears to be politically impossible at the present time, due to the established sociopolitical systems being operated by the best available professional hypocrites, who deny the facts regarding what the actually existing death control systems are, and/or, continue to promote false fundamental dichotomies, and impossible ideals, such as there should not be any death control systems, or at least none that human beings are consciously operating.
The established sociopolitical systems where quite paradoxically driven by natural selection pressures through the history of successful warfare based on backing up deceits with destruction, morphing to become successful finance based on enforcing frauds, to become systems of artificial selection which deliberately ignore and/or misunderstand natural evolutionary ecologies, due to those sociopolitical systems NOT wanting to admit and address what they are really doing, since their social successfulness has depended upon a long history of becoming as dishonest as possible about doing that, while those lies were backed by violence, so that those bullshit social stories became the biggest bullies' bullshit, which dominates all sociopolitical systems, and therefore, all of those systems continue being operated by the best available professional hypocrites.
THE VICIOUS SPIRALS OF POLITICAL FUNDING ENFORCING FRAUDS GO AROUND AND AROUND AND AROUND, GETTING WORSE, FASTER! Human beings operate their artificial selection systems in the most deliberately dishonest ways possible, and that applies to BOTH the core groups of organized crime (currently the bankster controlled governments) AND the various layers of controlled opposition groups that surround that core of organized crime.
In order for technological civilization to survive, Neolithic Civilization must become Translithic Civilization, which requires that the currently existing, oxymoronic scientific dictatorship be transformed into being a genuinely more scientific society, that uses more information, enabling higher consciousness, in order to operate its death control systems. The artificial selection systems should become better reconciled with the natural selection systems. The human evolutionary ecologies ought to be better done, within a more scientific society. However, the first and foremost developments of the actually existing artificial selection systems were actually driven by the principles and methods of organized crime, operating on larger and larger scales, pumped up and UP by progress in physical science, while political science continued to be so totally dominated by the biggest bullies' bullshit world views, that the philosophy of science was more forced to compromise with the biggest bullies' bullshit, rather than the progress in physical science was able to change the degree of sociopolitical domination done by the best available professional hypocrites, operating through their relative social successfulness based upon backing up lies with violence, gradually becoming the currently existing systems of legalized lies, backed by legalized violence.
The deeper reasons for how and why militarism is the supreme ideology should be better understood and embraced. AGAIN & AGAIN, natural selection pressures drove the development of artificial selection systems to become deceits backed by destruction, then the enforcement of frauds, all of which were socially successful through those core groups of organized crime, operating on larger and LARGER scales, being able to effectively control the layers of bogus "opposition" groups that surrounded that core of organized crime. Hence, we continue, more and MORE, to live in Wonderland Matrix Bizarro Worlds, where everything is publicly presented in the most absurdly backward ways possible, and that includes the bogus "solutions" to those problems, which continue to operate inside of the dualities of false fundamental dichotomies and the related impossible ideals. Instead of developing better death control systems, which are the ONLY genuine solutions to the existing problems, we continue to be stuck in the deepening ruts of the actually existing systems operating the actual combined money/murder systems being based upon the maximum possible deceits and frauds.
Therefore, the world of POLITICAL ECONOMY tends to continue get away with deliberately ignoring the environmental ecologies as much as possible. It now looks like it is politically impossible for civilization to develop better artificial selection systems, because all of the deeply entrenched, established systems are operated by the best available professional hypocrites, whose social successfulness is based on being able to operate through integrated systems of legalized lies, backed by legalized violence. That the ONLY connections between human laws and natural laws are the abilities to back up lies with violence tends to be deliberately ignored and denied, and misunderstood and misrepresented, as much as possible, by the sociopolitical systems actually doing that. Since that violence never stops those lies from still being false, but nevertheless, those frauds are effectively enforced, civilization as a whole become increasingly psychotic.
Keynesian theories were cherry-picked and promoted by the banksters as excuses to create ever more of the public "money" supplies out of nothing as debts owed to those banksters. Austrian theories were slightly better criticisms of that, but nevertheless, still way too superficial. BOTH OF THOSE THEORIES, AS INDICATED IN THE FIRST LINE OF THE CHART EMBEDDED ABOVE, START WITH PRESUMING "ECONOMIC GROWTH" IS THE GOAL. Neither comes within light years of the need for series of intellectual scientific revolutions and profound paradigm shifts regarding the limits to growth, or how to cope with the strip-mining of the planet's natural resources reaching those limits in the form of diminishing returns, which limits end up having paradoxically counter-intuitive results, since those are being channeled through fundamentally fraudulent financial accounting systems.
Meanwhile, that situation makes it appear to now be politically impossible to stop VICIOUS SPIRALS OF POLITICAL FUNDING ENFORCING FRAUDS automatically getting worse, faster ... so that the most probable futures are psychotic breakdowns, crazy collapses into chaos, and severe series of social storms blowing through, due to the natural selection pressures building up and UP inside artificial selection systems which adamantly refuse to admit and address those issues in any other ways than even bigger lies, backed by more violence, despite that having become globalized electronic frauds, backed by the threat of force from atomic bombs!
A more genuinely scientific society, contrary to an oxymoronic scientific dictatorship, would better understand the relationships of artificial selection systems inside natural selection systems. However, the currently existing kinds of scientific dictatorship continue to be as deliberately unscientific about themselves as possible, since their social successfulness depends upon the vast majority of people not understanding themselves any better, and moreover, feeling like they do not want to understand themselves any better. For all those reasons, our current kinds of technological civilization is rushing toward self-destruction, (to the degree that it seems practically pointless to bother to try to explain that to people who do not want to understand that!)
Ever think of infiltrating the Federal Reserve in order to take care of things?
Hah! I would prefer the political fantasy that enough of the people in the military systems would change the ways they think, over the fantasy that enough of the people running the monetary systems would change the ways that they think. Indeed, nobody else needs to change the ways that they think more than those who actually have access to weapons of mass destruction!
However, within the combined money/murder systems, those who are the most socially successful tend to be the best professional hypocrites, with the least willingness and interest in changing the ways they think.
Hence, the Einstein quote:
"The unleashed power of the atom" was nade possible by profound paradigm shifts in the ways that Einstein thought about the time-space continuum. Since entropy is the way that energy is distributed in time and space, that should have already resulted in profound paradigm shifts in our conception of entropy. However, pretty well NONE of that has happened in any politically significant way. The monetary system has become electronic, while almost nobody running those systems have changed the ways they think according to the progress in quantum mechanics. The military system has been capped by atomic bombs, but almost nobody running those systems have change the ways they thing about time and space or entropy.
The vast majority of people want to continue thinking that the world is still the same as when there were paper frauds backed by gunpowder weapons, rather than electronic frauds backed by atomic weapons. Meanwhile, it is mostly a waste to time to attempt to tell people that ... "and we thus drift towards unparalleled catastrophe."
While I have more irrational hope in some members of the ruling classes becoming revolutionaries, rather than hope those who are ruled over will be, I am unable to hold on to any rational hope ... Rather, I believe "we thus drift towards unparalleled catastrophe."
In that context, in my view, comparing different old fashioned schools of economics is merely more of the metaphor of "rearranging the deck chairs on the Titanic."
I'm in general agreement with you. I thnk human society is entering a dark period that hasn't been seen for 400 years. It'll probably cut the population substantially below seven billion.
As to Austrian Theory presuming indefinite economic growth, that is not true. The theory accepts cycles as a natural outgrowth of market economies it goes on to explain why government intervention exacerbates the highs and the lows.
"Human society is entering a dark period that hasn't been seen for 400 years."
According to the wild speculations
regarding Solar Flare Co-incidences:
The Sun looks like it is going to go to sleep, to a degree which has not been seen for about 400 years, since the Maunder Minimum, also known as the "prolonged sunspot minimum", as the name used for the period starting in about 1645 and continuing to about 1715 when sunspots became exceedingly rare, as noted by solar observers of the time.
400 years minus 2015 is 1615.
Most of the Doomsday prophets that I respect have a consensus that it will take about 20 to 30 more years for the collapse of civilization to work its way in from the periphery to the core, and up from the bottom to the top, of the currently established, globalized, social pyramid systems ???
Some interesting co-incidences,
in light of your 400 years figure.
P.S.
Spiritof42 seem to know the Austrian economics much better than I do! For what it is worth, I think Austrian economics is better than Keynesian.
That's what was on the back of my mind. Add that to the economic collapse, the increase in warfare and the end of antibiotics. They are all verging.
The author of http://iceagenow.info/ has written two books. I Strongly recommend.
Rolf Witzsche is another good source. So is Suspicious Observers. The last two can be found on U Tube.
A Hayekian is shown two fractions: 1/2 then 5/10. He replies that these are identical and can be expressed in a number of different ways such as .5 or 50%.
A Keynesian is shown two fractions: 1/2 then 4/10. He ignores the denominators and calls it an increase.
Excellent representation! And a hat tip for the reference to Bastiat's "broken window fallicy" (Keynesians' dirty little dishonesty at the heart of their ideology).
Well its down to a whirling 11th round here in Keynes vs Hayek.
Keynes has been using the headfake for the past 6 rounds looking upward towards some reality while Hayek is being booed by the referee.
Keynes has been using the "Boy Who Cried Rate Hike" technique for a few rounds but the fans are still loving it. The fans love the spinning machines in the corners of the arena filling the place with green bubbles as the crowd starts to eat one another in celebration of the large, falling numbers on screen.
Thanks to the sponsors.
Keynes calls time out and is handing the referee a small stack of cash.
Hayek's dancing around the ring like Spiderman and Keynes - Keynes is running for cover into and out of the corners and WHAT, he's on the phone? He's apparently calling in a sell order of his mortgage-backed derivatives.
What's this? And now another cell phone? He's calling the fed to induce a buy order on the same derivatives he just sold. Desperate boxing technique, indeed.
Ooooh, Hayek throws an Austrian upper cut and a right cross -- WOW, Keynes is blind sided. Hayek walks toward the corner and his manager is handing him something, its Hayek's gold bricks, he's parading his victory. He's pretty confident.
The ref is counting 1, 2, 3 - whats this? Keynes gets up, staggering toward the corner and now he's -- loading paper into a wheelbarrow and
ohhhh MY GOD, the fans are rushing for the exits!!
The doors are being blocked by the bodies of crushed arena ushers, Oh, the carnage!
OH God Folks, it appears that one too many people yelled "fire" at once.
The jumbotrons are flashing signals to stay calm but to no avail, its just the smell of burning flesh in here!!
OK, we'll be right back after these messages!
Was at a party the other day and we were talking economics (yes, Im Mr Exciting), i was saying that GDP is a hoax and misrepresents econmic strength. One bloke walked away (i think in disgust, he is an accountant) and the others looked at me as if i had just sworn. I also commented on a chart I had seen where seasonal rainfall was mapped against political party in Australian history (and a definite pattern exists), by this time my wife was looking at me and hinting if u keep this up it will be time to leave. Maybe i live in a parallel universe.
as usual both wonderfully colorfully intellectually dissect, explain and understand the apple falling from the treee
neither system accounts for how that apple got up in the tree in the first place
"the economy" that most of us would think we know of is an abstraction and only half of "the picture" at best... of a created, one-way transient, discontinuous universe of heat death cosmogeneic concept
men want to depart from two-way universe of love (sincerity, responsibility, commitment, sacrifice) create systems that enable them to be like God it's their prerogative as we all have free will - just pick and choose what you want in your life
nothing is free in this world, however
try to escape the truth... the UNtruth is there waiting sorry to tell you
The Yin and Yang of economics. Keynesian boom is followed by an
Austrian "BOOM" (debt bust).
We know there are various schools of economics, each with smaller sub-divisions.
These schools are based on radically different ideas as to how an economy works.
If one school was even close to being right, it would have quickly supplanted all the other schools.
But Economics is in the dark ages, with no school being able to supplant the others as each is right some of the time; nearly right some of the time and wrong the rest of the time.
Economics is not even close to producing a set of assumptions that complex mathematical models can be built upon.
No one ever really understood a national economy, if they did they would have run far more smoothly without booms and busts.
With this level of ignorance, we decided to form a global economy.
It was asking for trouble.
When national economies are more separate, the elites of one nation can be following one set of half-baked ideas and another nation a different set.
When the inevitable crash happens, hopefully you can trade your way out of trouble dealing with another nation that is doing well.
When there is one school of economics that has supplanted all the others due to its consistent and accurate forecasts, which has enabled a national economy to be run smoothly without constant booms and busts we will be ready for a global economy.
Until then, it is better if every nation follows their own set of half-baked economic ideas and when they go wrong, hopefully another nation will be doing well, so that they can trade with them to get out of the current mess.
If one school was even close to being right, it would have quickly supplanted all the other schools.
On the contrary. What it demonstrates is that government pretty well monopolizes the entire school system, both public and private. Austrian Theory is regarded as heretical in the same way atheism is heretical to Catholicism.
Economics is not even close to producing a set of assumptions that complex mathematical models can be built upon.
Austrians point out time and time again that the theories that embody the scientific method do not apply to human action because there are no constants.
"Economics is not even close to producing a set of assumptions that complex mathematical models can be built upon.
No one ever really understood a national economy, if they did they would have run far more smoothly without booms and busts."
Woefully inaccurate statement.
Should read "Politics is not..... mathematical models..."
This is why most people dont understand economics. they think its about mathematical models (a Keynsian idea, btw, that the economy is mathematical in nature), when its about politicians trying to impose their ideas on how the world is supposed to work. A politicain will support any economist whos ideas match their own, hence the relationship between Central Banks and Keyenesian economists, for example.
Any approcah that something has to be modelled with math, is doomed to failure, given that "a person is not predictable, and populations are probaility matricies."
It it possible to model a probaility matix, with unknown outcomes?
Hence why the Austrians refer to economics as the study of human interaction and dont bother to model mathematically, iirc.
When you hear government band wagon "Moral Highground", you know we are all Keynesians now.
This is a good representation of the 2 theories but I'm afraid at this point both are pretty old hat. Our leaders chose keynesianism a very long time ago. We are now experiencing the extreme end result of keynesianism, what I call post-keynesianism where the government intervention has increased exponentially with the need to suppress the consequences of prior intervention. Right now the government represents a significant portion of both supply and aggregate demand in our 'economy'. Natural principles can no longer apply. Both supply and demand are maintained by a continuous stream of borrowed/printed paper and military force.
We are now in uncharted territory, neither Keynes nor Von Mises ever envisioned such a scenario and neither man's ecnomic theory can be relevant, except as a historical reference for where we went wrong.
Excellent article! I will visit Mises Institute in Auburn in a few months. Krugman is quite the useful idiot, isn't he?
"To sterilize the vast sums of money that would otherwise circulate throughout the economy and cause price inflation, the Fed pays an above-market interest rate of 0.50% to banks on reserves, or digital cash, held at the Fed. Currently, banks are holding $2.5 trillion at the Fed and are paid $34.5 million per day in interest."
(a no-shit sherlock moment) this whole charade of qe was never about sparking the economy. they pay off the banks to cooperate. i don't think this falls under the keynes or the mises trains of the thought.
https://finance.yahoo.com/news/federal-reserve-will-pay-banks--12-billio...
Fed gives money to criminal banks, Fed counterfeits money to pay interest to criminal banks on money it gave to them in first place.
Result: Banks get to counterfeit hundreds of millions of dollars a month while providing no value to Americans/Consumers or anyone.
They dont even lend the fucking money out to be productive or give tax payers a break/haircut on their debts/mortgages.
One of the conditions of the bailouts should of been to expunge all public debt/CC debt and mortgages in order to receive TARP funds.
The way the bailouts were done.....Its like the tax payers bought the rope for the bank to hang taxpayers with.
You have to have money before you can spend.
SO if you cant save to have money to eventually spend money, you have to borrow money.
If you have to borrow money to spend, you have to spend more to repay the debt.
If you repay the debt you gave the bank back more money than you borrowed.
So in the end you spent money, by borrowing money and paid more for goods and services than you would have if you just saved first.
If everyone is borrowing and spending together that causes inflation, which makes it impossible to afford things through saving.
Which makes the value of savings worthless.
Which shrinks the economy in the long - run as people lose the ability to borrow more.
The best economy is one which people work->Save->Spend->Work->Save-Spend, its "Incremental growth".
An economy based on debt expansion is exponential growth in short bursts and then a crash that re-distributes wealth upwards, (the people borrow and leverage themselves beyond their ability to repay and all the wealth generated through their suffering trickles up to the lenders through mechanisms like "foreclosure").
Keynesian systems ensure wealth trickles from the masses to the elite, thats why we have such a system, to keep people poor.
A theory is as good as the practical experience it engenders. That is a fundament of Western philosophical mindset as practiced in its historical timeline since Aristotelian logic took over the analytical mantra of socio-political constructs in the West.
Fact bows to no theory; and between two opposing theories one has to bow to pragmatism if neither fits the bill. The golden Mean.
Austrian economics have been very little applied in the western timeline. (Keeping in mind Oriental economics never got into this line of thinking except for a short period of Arab thinking when they practiced a form of Austrian logic under the Fatimids : No credit without full collateral. Interest was zero as Sharia forbade it but risk premiums were measured in terms of return; aka the lender acted not as a commercial bank but more as an investment bank.)
Having affirmed that (arguably as a subjective truth), what is missing in this analysis is the INTERPLAY between the Political Power philosophy and financial theory. Economic theory is a TOOL for social constructs. It does not live in a vacuum.
All Political structures through time : Kings, empires, city republics, brutally controlled the money line to their advantage. Money was minted then often debased. Money was borrowed and never repaid. So politics always dominated the moneylenders upto the capitalist age. As might ruled economic logic.
Financial acumen came into its own when the industrial age was born as the huge leverage that capitalism gave the entrepreneur was outside the reach of political constructs. The private Capitalist now led the venture not the state in transcontinental ventures; think Suez Canal etc. They had huge geopolitical consequences outside the reach of a single sociopolitical construct.
This capital intensive model, based on social pauperisation, has instilled in it the seeds of its own demise; as Marx has pointed out. It leads to overproduction and a battle for resources; aka for competitive advantage for the Capitalist class.
And Austrians will not understand or admit that, whereas Keynes did. Austrian logic has no inbuilt mechanism for finding resolution between labour and capital EXCEPT SOCIAL war! We saw that post 1929 freeze up of private investment.
Its a question of belief systems and with the Austrians we are in DENIAL of the reality of social antagonisms inherent in any capital dominated society which is irreconcilable with the social compact of a true political democracy; given that markets work on power levers that have nothing to do with economic THEORY of one man one vote being applicable to market logic.
The small guy loses out in market based capitalism as power gets inevitably concentrated via social and material inequality. WHATEVER may be the GENERAL GOOD for the needs of the individual voter. His power in the market is infinitessimal.
Keynes has found the best compromise to that dichotomy via State standing up to the Oligarchical market; and the Austrians have never been able to match his acumen. Here again its a question of balance. A state cannot live beyond its means. And taxes have to be used efficiently.
Today, in the Pax Americana construct, we live in the age of the demise of neo-monetarist hubris which is a bastard child of the INTEREST rate cabal linked to risk asset pumping essentially based on FREE money; FRIEDMANITE logic based on a hegemonial fiat system; the very opposite of a global equal opportunity construct.The USD today is a bald, two faced lie.
Von Mises's logic is a chimera that will never see the light of day.
Human constructs do not relate to its Dogmatic affirmations; totally unproven in industrial capitalism's march since 1830 when it was born.
The Von Mises Koran is as outdated as the other one.
1. The Von Mises Koran is as outdated as the other one.
That's like saying Newton's Laws of Gravity are outdated because of Einstein.
2. Austrian logic has no inbuilt mechanism for finding resolution between labour and capital EXCEPT SOCIAL war!
You confuse economic theory with political theory.
3. Von Mises's logic is a chimera that will never see the light of day.
You mean political acceptance will never see the light of day. No argument there.
Those are three examples which tell me you have no idea what you are talking about. All you are doing is throwing shit on the wall hoping something sticks.
1° Newton's Laws apply to EXACT science. Economics is not an EXACT science. Your analogy has a false premise. Von Mises's theory was DISPROVEN in 1929. That is FACT.
2° I don't CONFUSE economic theory and political theory. I say ONE cannot LIVE without the OTHER. Please pull your head out of your theoretical cloud, which seems to be as polluted as the Beijing sky. I've based my affirmation on historical analysis. You have presented no fact, as you only talk about two theories.
3° I mean since 1830 when people tried it, and especially since post 1929, the gold standard without fiat linkage is considered a CHIMERA. Please prove the Contrary on a factual basis. Where is YOUR counter argument based on fact?
No kidding, but the shit is not where you think it is. DENIAL is your strongest suit. And its a bluff like a puff of unholy smoke.
1° Newton's Laws apply to EXACT science. Economics is not an EXACT science. Your analogy has a false premise. Von Mises's theory was DISPROVEN in 1929. That is FACT.
Of course Austrian Theory is not an exact science because there are no constants in human actions. What you call "disproven" only highlights the difference between the two methodologies. Austrian Theory is underpinned by one observation that cannot be disproven: that humans act to improve the future over the present; it's a deductive science. What critics see as its flaw is its strength.
2° I don't CONFUSE economic theory and political theory. I say ONE cannot LIVE without the OTHER. Please pull your head out of your theoretical cloud, which seems to be as polluted as the Beijing sky. I've based my affirmation on historical analysis. You have presented no fact, as you only talk about two theories.
You say one cannot live without the other; I say they can. A valid economic theory has to be impartial to who the actors are.
3° I mean since 1830 when people tried it, and especially since post 1929, the gold standard without fiat linkage is considered a CHIMERA. Please prove the Contrary on a factual basis. Where is YOUR counter argument based on fact?
That kind of gold standard was an attempt at price fixing. It's unworkable. It is impossible for a government to apply Austrian Theory because its very existence as an economic manipulator is contrary to Austrian Theory.
DENIAL is your strongest suit.
The economic planners have had every chance to prove their theories. Perhaps you haven't noticed the progression of the worst economic collapse of all time.
Perhaps you haven't noticed the neo-Keynesian plays were an ELEVENtH HOUR strategy of November 2008 to stem the tide of ACCUMULATIVE Friedmanite plays that started in 1971...
What Paulson did was to push the shit under the carpet and that started the mad rush to neo-keynesianism; like a serial killer trying to play at being a federal agent. Some sleight of hand by the neo-cons! Madoff was outdone by Geithner and Ben.
Your historical perception borders on amensia.
Now you are bringing Friedman into this? He was a political hack. Far from an Austrian.
You're only making my point. By any name, government is ill-equiped to manage a market economy. All they know how to do is pile more debt on a problem created by debt. How much more proof do you need?
hahaha..The Chicago school produced : Hayek, Friedman and Greenspan and they all believed in the interest rate cabal; as detailed in this article.
For a guy who SPOUTS theory and skips facts and reality you are as slim as a wafer!
Did you read it? Or are you still in the fog of smog?
Friedman won a Nobel; something Hayek never even wanked to his lapel as the "prize" in his wildest dreams.
You're reaching for straws. I've been explaining the theory which is independent of the personalities you bring into this conversation.
Did you read it? Or are you still in the fog of smog?
It would take to long to debunk your entire post. Three was enough to make my point.
I'll state the main point again: it is impossible for a government to manage a market economy.
like I said : its all theory, the guys I mention RAN the real economy.
If its impossible for government to run the economy-- you have just provided the rope to hang your own idea of markets, the real ones, that CAN'T work without regulation by the elected, as the history of any known nation state can prove-- then we should wait for Donald Duck ! Maybe he has Uncle Scrooge hiding in his sleeve!
Good luck in Hopium with the quack-quacks.
the guys I mention RAN the real economy.
Are you blaming them for the collapse?
that CAN'T work without regulation by the elected,
Who regulates the regulators? In case you haven't been paying attention, those people are bought and sold by the same businesses they are regulating.