Thomas Mayer: “I am an Austrian in Economics”

by Andreas Hoffmann

In today’s publication Thomas Mayer writes that he is “an Austrian in economics.” Mayer is the chief economist of Deutsche Bank Group and head of Deutsche Bank Research. Mayer argues that Austrian theory fits recent events well.  He suggests that

“Failure of the liquidationists to overcome the Great Depression of the early 1930s prepared the ground for an era of interventionist economic policies. Modern macroeconomics and finance nourished the belief that we can successfully plan for the future. But the present crisis teaches us that we live in a world of Knightian uncertainty, where the ―unknown unknowns dominate and our plans for the future are regularly thwarted by unforeseen and unforeseeable events. Continue reading

The Fed Has No Clothes

by Jerry O’Driscoll  

Philadelphia Fed President Charles Plosser gave a major speech on Monday at the Central Bank of Chile.  In the polite language of central bankers, the speech constitutes a systematic criticism of not only current Fed policy but of the Fed’s entire response to the financial crisis. Continue reading

Early Boom-and-Bust Theory?

by Gene Callahan

“As little as steam engines can be quelled, so little is this possible in the behavioural realm: the lively pace of trade, the rapid rush of paper-money, the inflated increase of debt made in order to pay off other debts, these are the monstrous elements to which a young man is now exposed.”
— Johann Wolfgang von Goethe, Wilhelm Meister’s Journeyman Years

Microfoundations are not a “Morality Tale”

by Mario Rizzo

 

In his column today in the Financial Times the often-excellent Martin Wolf drops the ball. He endorses the view which he associates with J.M. Keynes “that one should not treat the economy as a morality tale.”  

The third and most important lesson is that one should not treat the economy as a morality tale. In the 1930s, two opposing ideological visions were on offer: the Austrian; and the socialist. The Austrians – Ludwig von Mises and Friedrich von Hayek – argued that a purging of the excesses of the 1920s was required. Socialists argued that socialism needed to replace failed capitalism, outright. These views were grounded in alternative secular religions: the former in the view that individual self-seeking behaviour guaranteed a stable economic order; the latter in the idea that the identical motivation could lead only to exploitation, instability and crisis. ……

This same moralistic debate is with us, once again. Contemporary “liquidationists” insist that a collapse would lead to rebirth of a purified economy. Their leftwing opponents argue that the era of markets is over. Continue reading