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Old 10-14-2012, 09:52 PM   #38
joe
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Default Re: Austrain economics

Quote:
Originally Posted by KevinNYC
Peter Schiff who claims to follow Austrian economics and was an adviser to Ron Paul made such claims in 2009 and did use Zimbabwe as an example.

If they have been predicting it for 30-40 years, that actually doesn't seem to have much predictive value.

If I say in the next 40 years, the Chicago Bears are going to win the Super Bowl, that just doesn't seem to be too useful.

The link above is from a Krugman blog post where he accuses the Austrian of not being empirical, not learning from the evidence.


You do know there were economic failures before the Fed existed?
http://en.wikipedia.org/wiki/Panic_of_1837
http://en.wikipedia.org/wiki/Panic_of_1857
http://en.wikipedia.org/wiki/Panic_of_1873
http://en.wikipedia.org/wiki/Panic_of_1884
http://en.wikipedia.org/wiki/Panic_of_1893

One feature of them is they tended to be long lasting.

There's a lot in this post to respond to.

Economic failures before the Fed:

Most Americans don't realize that the Federal Reserve is not our first and only central bank. We did have central banking in the 1800's, and it caused economic problems. Furthermore, Austrians argue that in the 1800's, many of the panics were actually caused by deviations from the gold standard that occurred throughout the period.

Tom Woods (PhD historian, Austrian economics supporter) did a great speech on that topic: http://www.youtube.com/watch?v=TxcjT8T3EGU


Quote:
If they have been predicting it for 30-40 years, that actually doesn't seem to have much predictive value.

If I say in the next 40 years, the Chicago Bears are going to win the Super Bowl, that just doesn't seem to be too useful.

Austrian business cycle theory does not supply the tools to make short-term predictions. It just doesn't.

But what it can provide, is an explanation for the very origin of the business cycle. They explain how it's central banking- not capitalism- that is the culprit. How federal reserve interventions distort the market, creating lines of mal-investment that infect the entire economy. How the "boom" is actually the problem, and the "bust" is actually the solution.

This very scenario has played out multiple times in American history Every Austrian economist believes it is happening again, right now, on a massive scale across the entire west. Greece, England, Canada, America.

That's a lot of information coming out of one theory. I'm not going to knock it for lacking short term prediction ability. Besides, how can you predict exactly when interest rates on US bonds will rise? Or exactly when the Chinese central bank will stop hoarding dollars? There's no basis for making short term predictions like that.
Quote:
the Austrian/Ron Paul types made some very strong predictions about inflation — and rightly, given their model of how the world works. In their version of reality, it really isn’t possible to triple the monetary base without dire effects on the price level. In my version of reality, of course, that’s not only possible but what the model predicts in a liquidity trap.

So since we did indeed triple the monetary base with nothing much happening to inflation, the right lesson to draw is that their model is all wrong. Unfortunately, I see no hint that anyone in that camp is prepared to consider that possibility.

I'm not an expert on this topic, but as far as I know, most of the money the Fed "prints" is being hoarded by central banks or quasi private banks, like Goldman Sacks. That money won't cause price inflation because it has not gotten into the real economy.

For example, if the Fed printed money and buried it underground, it wouldn't cause price inflation. Obviously. And that's essentially what happens when the Fed purchases assets from private banks. Only when the banks finally spend the money or lend it out, and the Treasury actually prints it, will price inflation occur.
Quote:
The link above is from a Krugman blog post where he accuses the Austrian of not being empirical, not learning from the evidence.

And Austrians accuse Paul Krugman of supporting a failed brand of economics that ignores both history and reality. He said she said.. it won't get us anywhere.

As far as Paul Krugman goes.. were you aware of this?:
Quote:
Austrian economist Bob Murphy has challenged Krugman to a public debate on Austrian vs. Keynesian business cycle theory. He has set up a campaign, which currently has raised $60,000 in pledges. If Krugman actually debates Murphy, then the money goes to a food bank in New York City. If Krugman never debates, no one's credit card is ever charged; people are only going to be charged for their pledge, when Krugman actually debates.

Should be a great debate, almost the exact same one that we're having. Too bad Krugman is either too arrogant or too scared to respond. $60,000 for homeless shelters for a 1 hour debate.. and Krugman won't do it. Hm.

http://krugmandebate.com/
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