Clarifications of the Austro-Wicksellian Business Cycle Theory

by Mario Rizzo There has been a lively debate on forecasts of high inflation made by those worried about the Fed’s recent policy of quantitative easing. For details I refer the reader to Daniel Kuehn's excellent blog. The question to which I address myself is solely “What do these predictions have to do with core Austrian …

Bo as Emblem of State Capitalism

by Chidem Kurdas The fallen Chinese political chieftain Bo Xilai and his wife are starting to sound like a bizarre combination of Macbeth and his Lady, the US Department of Housing and Urban Development and Fannie Mae—yes, the government created and backed housing finance entity. Under the leadership of the Mao-admiring “new left” Mr. Bo, the …

What Is Old Can Be New

by Mario Rizzo This is the unedited version of my letter which appears in today's (August 9th) Wall Street Journal. The first sentence was edited out. Too bad.  ------------ There is a lot of discussion of the need for "new economic thinking" these days. Henry Kaufman ("Excessive Optimism and Other Economic Biases," August 2nd) correctly …

The Role of the Perverse Elasticity of Credit Money

by Andreas Hoffmann I want to bring a recent comment by Sornette and von der Backe to the attention of the reader (in Nature 471, p. 166, May 2011). Sornette and von der Backe remind us to pay more attention to disequilibria caused by the fractional reserve banking system to explain the emergence of crises. …

Ludwig von Mises and His Grand Tautology

by Mario Rizzo There is a tradition of thought in economics that views the rationality of individual actions as non-falsifiable. There are variations in how this tradition might be justified. These do not concern us to any significant degree here.  For concreteness I shall examine the position of Ludwig von Mises (excerpted below) because of …

What Austrian Economics IS and What It Is NOT

by Steve Horwitz* Since the start of the financial crisis and recession, there has been a renewed interest in the ideas of Austrian economics by scholars, public intellectuals, and even the media.  For the first time in a long time, the analytical framework of Austrian economics is being taken note of, if not taken seriously, …

Happy Birthday to Ludwig von Mises

by Mario Rizzo Today is the birthday of the great Austrian economist Ludwig von Mises (1881 - 1973). For a brief appreciation, I refer the reader to my comments of a year ago.

Austro-Wicksellian Theory of the Business Cycle: An Informed View

by Mario Rizzo There has been recent discussion in the blogosphere of the so-called Austrian Business Cycle Theory (ABCT). (We must not forget to give the Swedish economist Knut Wicksell credit as well.) Some of it is interesting (mostly because of the comments) but much of it is ill-informed since the bloggers don't like to read …

Methodological Individualism Reconsidered

by Gene Callahan Many Austrian economists embrace the doctrine of ‘methodological individualism,’ as I myself did, for instance, in my book Economics for Real People. But subsequent study on my part, most significantly of the work of Tony Lawson in his philosophy of economics project he calls ‘Critical Realism,’ as well as my readings of …

Pigou is the new Keynes

by Sandy Ikeda A full-page article in today's Wall Street Jounal begins: At the Heavenly Models home for deceased economists, an award is being presented to the resident whose work best explains financial crises, global warming, and other pressing issues of today. The winner, according to author John Cassidy, is A.C. Pigou, the new flavor …

Economics To End Economics

by Mario Rizzo   I used to think that Ludwig von Mises was exaggerating quite a bit when he suggested that Keynes was not really an economist. One way he did this was to associate Keynes with infamous monetary cranks like Silvio Gesell. The following quotation will give you a flavor of Mises’s opinion:   “John Maynard …

Mises Featured in the Journal

by Jerry O’Driscoll   In today’s Wall Street Journal, hedge-fund founder Mark Spitznagel celebrates Ludwig von Mises as “The Man Who Predicted the Depression.”  Spitznagel opens by observing that “Ludwig von Mises was snubbed by economists world-wide as he warned of a credit crisis in the 1920s.  We ignore the great Austrian at our peril today.”   …

Mises Was A Scientist

by Roger Koppl Over at Division of Labor, Noel Campbell picks a fight with Austrian fans of Mises.  “I always conceived of Mises’ efforts as attempting to build a logically correct and (therefore) irrefutable description of human behavior. As such, I always viewed Human Action as a work of philosophy, not science.”   Noel hints that …

Ludwig von Mises (1881 – 1973)

by Mario Rizzo Tuesday, September 29th is the birthday of one of the great economists of our time, Ludwig von Mises. He was responsible for one of the two greatest accomplishments of twentieth-century economics. This is the demonstration that rational economic calculation is impossible under socialism, that is, in a world without market prices. For a …

Richard Posner on the Precipice

by Mario Rizzo    Richard Posner's latest conversion is both charming and alarming. It is charming because it exhibits a youthful enthusiasm for a newly-discovered idea: Keynesianism. He just recently read John Maynard Keynes’s book The General Theory of Employment, Interest and Money. Posner’s tone echoes that of Paul Samuelson: “To have been born as an …

Horwitz Says: Let There Be Light. And There Is Light.

by Mario Rizzo   In a series of persuasive posts, Steve Horwitz at The Austrian Economists blog (here, here, and here) shows that Ludwig von Mises’s views on monetary economics were more or less the same as the Selgin-White-Horwitz (and I would argue the Garrison) free-banking, monetary-equilibrium view, rather than the Rothbardian one. This is not surprising …

Bubble or Growth?

by Jerry O'Driscoll In an interview with The Wall Street Journal, German Chancellor Merkel called for an end to risky growth policies built on asset bubbles.  "In recent years we've had the Asian crisis, the new economy crisis, and now this great international financial and economic crisis -- we can't slide into a crisis every …

Exhaustion of the Welfare State’s “Reserve Fund”

by Mario Rizzo   “An essential point in the social philosophy of interventionism is the existence of an inexhaustible fund which can be squeezed forever. The whole system of interventionism collapses when this fountain is drained off: The Santa Claus principle liquidates itself.”  Ludwig von Mises, Human Action: A Treatise on Economics, 3rd edition, p. 858 (1966).   …

Jack Kemp, RIP

by Sandy Ikeda I was a student at Hillsdale College when the Congressman from New York gave a speech there, probably in 1976 or 77.  I remember little about the speech itself -- probably touting tax cuts and supply-side economics -- except that at one point he held up a copy of Human Action and …

Taylor Rule and Fed Witches’ Brew

By Chidem Kurdas Bubble, bubble, toil and trouble—that’s an apt metaphor for the Federal Reserve policies meticulously dissected by Stanford professor John Taylor, in the Wall Street Journal and other places.  He shows that the Fed set the financial crisis in motion and then made it worse. Relative to the pattern that held since 1987 …

Illusion of Confidence and the Confidence of Illusion

by Mario Rizzo   One hears a lot about restoring confidence in the economy these days. What is that? The economy is a complex entity. In fact, Friedrich Hayek wanted to drop the use of the term and replace it with “catallaxy” that is, an abstract order of interpersonal exchanges. The word “economy” has its …

A Keynesian Christmas Miracle: Stones into Bread

by Mario Rizzo Some mainstream opponents of Austrian economics have complained over the years that Austrian economics is a “religion.” I have no doubt that in the hands of some it is so. I shall leave it to others to explore this. However, in this post I want to give the reader a taste of …