One has to wonder if somewhere deep down a change is occurring in America. While stock prices soar to record highs, it is clear a growing number of 'real' people are realizing the nonsense that watching a 'market' as anything indicative of reality has become. The latest 'shift' is the appearance on New Orleans local TV of a two-minute primer on an "alternative" school of economic thought - Austrian Economics. While the anchor is careful to add the caveat that the mainstream economists think the world would be a terrible place if they didn't help us along, the brief clip begins with some useful common sense, "the market alone should decide the value of products and services. If a company is not successful, it should go bankrupt." Indeed...
Click image for 2-minute clip...
Dr. Walter Block holds an endowed chair at Loyola University and is a faculty member of the Mises Institute. He has taught at several universities and written books about controversial economic topics.
"If government is bad, then a shut-down government is good," he stated. "I wish they would've shut more of it down, they didn't shut enough of it down for long enough."
The Austrian School of economic thought was devised by a handful of economists in Austria in the 15th century; otherwise, it has nothing to do with the country. Free enterprise is the school's main tenet. Austrian theory says regulation is bad for the general welfare, as well as for economic growth and stability.
One thing Block mentioned he would do if tasked with improving the U.S. economy would be to eliminate the minimum wage, because it unnecessarily raises unemployment.
"We believe," he said, "that it really is a law that when you have a minimum wage, you'll create unemployment for people whose productivity is below that level stipulated by the minimum wage."
According to Austrian theory, the market alone should decide the value of products and services. If a company is not successful, it should go bankrupt. Another change Block suggested is to end subsidies for American farmers. If agriculture is not profitable for enough farms, some of them should go out of business, allowing supply to balance out demand and creating prices that are more sustainable.
Austrian economics holds that people should be allowed to make whatever choices they feel are best for them, so long as they do not hurt other people.
Austrian theory is not a mainstream section of economics. Americans tend to believe there is a need for regulation, especially in the financial sector. But Washington state and Colorado have already legalized marijuana for recreational use, and a recent poll suggested that a majority of Americans want marijuana to be decriminalized. Combined with legalized prostitution in Nevada, Block said Americans are pushing for greater personal freedoms.
Politically, Austrian economics lines up closely with libertarianism
The most famous current practitioner of Austrian economics is former presidential candidate Ron Paul. He also wants to shrink the government, get rid of the Federal Reserve, and let people make the decisions that are best for them.
If it is good enough for clothing companies, "why don't we apply it to everything?" Block asked.
The most common criticism of Austrian economics is that it relies solely on logic, and does not seek statistical validation for its claims.
Some people also claim that allowing the economy to move unchecked allows for greater volatility and longer recessions.