The Economic Schools of Thought

Whats the Difference between the Economic Schools of thought?

There is a high up Market Analyst my dad knows, who puts out a wide spread newsletter analyzing the markets, sectors, shares, etc. with ratios, charts etc. He's never heard of the Austrian School before, as my dad was telling him about me I gather... anyway so he wants to have a talk about it.

Dunno when that will take place, but I hope to do market analysis or at least in some way get paid for doing what I love - so I hope to impress this guy. But then I started to think, well.. how you could apply it to the markets? I can show this guy the business cycle shouldn't exist etc.. but he's just going to be like, 'ok - but it does' lol.

There is a business cycle unfortunately, so how can Austrian be used, or be of any benefit in analysis etc? I mean, we know the REAL truth - but how to apply it, benefit from what we know? How do I show the guy I'd be of use to him and his company..

And just more widely, what avenues are there for the Austrian school of thought in jobs, in terms of becoming adapt with Austrian economics? Financial companies hire people, and if you have a niche you're all the better for it... and I love economics, so I kind of want to pursue this Thanks

Keynesian Economics is "mainstream" economics.  If you hear "X is an economist", it's most likely "X is a Kenyesian Economics".

Keynesian Economics is nearly 100% lies and propaganda, used to jusify fiat debt-based money and government intervention in the market.

Most Keynesian Economists work directly or indirectly for the government.  For example, a professor at a university is a essentially a government employee; he's dependent on government grants for tenure and promotion.  People who work at "think tanks" are indirectly government employees, if you trace the flow of money.  Keynesian Economics will help you exploit a corrupt economic system for your personal benefit, so most quants/economists at a bank are Keynesian Economists.

If you want a job working as an economist, you probably have to learn Keynesian Economics and be able to pretend it isn't a bunch of nonsense.

If you want to learn "true economics", you should study Austrian Economics or agorism.  An Austrian Economist says "Instead of following a corrupt monetary policy, government should adopt a monetary policy similar to what would exist in a free market."  An agorist says "Who needs a government at all?"  Once you realize "Taxation is theft!", you can't morally support *ANY* form of government.

I identify myself as anarchist/agorist rather than "Austrian Economist", but I understand Austrian Economics reasonably well.

Keynesian Economics is "useful", because the people at the Federal Reserve who control the US economy are themselves following Keynesian Economics.  Keynesian Economics has "predictive power", because the people who are pulling the strings are following nearly the same algorithm.

Are you interested in money or knowledge?  The bottom line is that, if you want to work as an economist for money, you need to learn Keynesian economics.  If you learn "real economics", there isn't much of a market for that.

fsk:

Keynesian Economics is "mainstream" economics.  If you hear "X is an economist", it's most likely "X is a Kenyesian Economics".

Keynesian Economics is nearly 100% lies and propaganda, used to jusify fiat debt-based money and government intervention in the market

They might learn some Keynes, but it's neo-classic stuff for the most part. Public goods, Pareto efficiency, welfare, etc are all taught in microeconomics.

Poster, if you are starting in economics, I'd recommend Economics for Real People (if you prefer it in print, checkout the Mises store).

"Are you interested in money or knowledge?  The bottom line is that, if you want to work as an economist for money, you need to learn Keynesian economics.  If you learn "real economics", there isn't much of a market for that."

I'm interested in both.. I'm sure there is a market for it, I've just got to figure out how I can find it. Haha.

"Poster, if you are starting in economics, I'd recommend Economics for Real People (if you prefer it in print, checkout the Mises store)."

I've recently just found the real deal. Via Ron Paul. Anyway, I've order like 30 books over the last few months. So my real education has just begun. I know that this is the only true school of thought.

I was wondering though, if there was any good article out there comparing them all. Like whats the difference between the Chicago and Kenyesian schools? And is there another? I'll check out economics for real people btw, thanks :D

Conza88:

I've recently just found the real deal. Via Ron Paul. Anyway, I've order like 30 books over the last few months. So my real education has just begun. I know that this is the only true school of thought.

Is Peter Schiff's Crash Proof one of them? His application of Austrian economics to investing seems right up your alley.

No actually... But I'll definitely put that on the list. :D

fsk:

Keynesian Economics is "mainstream" economics.  If you hear "X is an economist", it's most likely "X is a Kenyesian Economics".

False. Neoclassical economics is the mainstream school of economics.

Keynesian Economics is nearly 100% lies and propaganda, used to jusify fiat debt-based money and government intervention in the market.

Not really. The main problem with Keynesian economics is that Keynesians don't have an understanding of the stages of production.

Most Keynesian Economists work directly or indirectly for the government.  For example, a professor at a university is a essentially a government employee; he's dependent on government grants for tenure and promotion.  People who work at "think tanks" are indirectly government employees, if you trace the flow of money.  Keynesian Economics will help you exploit a corrupt economic system for your personal benefit, so most quants/economists at a bank are Keynesian Economists.

Most Austrian economists work for the government too, following your line of reasoning. George Mason, anyone?

If you want a job working as an economist, you probably have to learn Keynesian Economics and be able to pretend it isn't a bunch of nonsense.

Nope. Again, the orthodox school of economics is the neoclassical school. Monetarism is also quite popular (Bernanke, anyone?).

]If you want to learn "true economics", you should study Austrian Economics or agorism.  An Austrian Economist says "Instead of following a corrupt monetary policy, government should adopt a monetary policy similar to what would exist in a free market."  An agorist says "Who needs a government at all?"  Once you realize "Taxation is theft!", you can't morally support *ANY* form of government.

No, Austrian economics isn't a political philosophy and agorism isn't an economic school of thought. Rothbard was an anarchist, yet he was also an Austrian economist. Hoppe is an anarchist, as is Walter Block.

I identify myself as anarchist/agorist rather than "Austrian Economist", but I understand Austrian Economics reasonably well.

I wouldn't identify you as an Austrian economist either, because you clearly don't have a PhD nor do you seem to know a lot about the field of economics.

Keynesian Economics is "useful", because the people at the Federal Reserve who control the US economy are themselves following Keynesian Economics.  Keynesian Economics has "predictive power", because the people who are pulling the strings are following nearly the same algorithm.

You know, because the last three Fed heads weren't monetarists. At all.

Are you interested in money or knowledge?  The bottom line is that, if you want to work as an economist for money, you need to learn Keynesian economics.  If you learn "real economics", there isn't much of a market for that.

 

 Are you the anarchist version of Alex Jones?

 In terms of understanding the various schools of thought, I recommend Mark Skousen's books "The Making of Modern Economics" and "Vienna and Chicago: Friends or Foes".

i'd also recommend that book, with one caveat; Skousen is not good on methodology, and grossly misinterprets Mises's views regarding it. Anyone reading the book should also read David Gordon's review of it.

Krazy kaju, I don't think one needs a PHD to be an economist. Fsk seems more than knowledgeable enough to qualify.

-Jon

I think FSK is equating "money" and "job." Can Austrian economics help us to be better investors? I'd suggest it can't hurt to know how economics works if you want to invest. That doesn't mean equating the political philosophy many Austrians hold (which isn't statism, by the way) with Austrian analysis. For instance, an Austrian investor most certainly does not say "In the free market, there's no business cycles, so I'll invest as if there weren't any." Instead, the Austrian knows the cause of business cycles, and then proceeds to analyze the current financial situation with that knowledge in mind. The Keynesian or neoclassicalist, on the other hand, has a false theory of business cycles, and then analyzes the current financial situation with his theory in mind. Who is more likely to make successful predictions?

I wasn't aware of the distinction between "Keynesian economics" and "neoclassical economics".  I don't bother categorizing each separate type of lies and propaganda.

No, I don't have a PhD in economics.  I need a license from the State in order to think about economics?

I'm not equating "money" and "job".  I make a clear distinction between "money" and "wealth".  "Wealth" is useful stuff, like food or a car.  "Fiat money" are pieces of paper with a number printed on them.  "Sound money" is a form of wealth.  For example, if I have a silver coin, I can melt it and use it to build electronics or other things.

When you have a "job", you are creating wealth but not money.  *ONLY* a bank has the power to create fiat money.  This is a common misconception.  "Wealth" and money are different.  Since banks have a monopoly of money creation, banks are *GUARANTEED* approximately 10% of the producitve value of the economy.  It's built into the rules of the monetary system!

Agorism is a school of economics, in the sense that it's a way to organize an economy that hasn't been tried yet.  Agorsm is not a school of economics, in the sense that I can get a grant from the government in order to study it.  Government funding of economic research distorts the market for economic research.  Why would the government give grants to study a theory of economics whose conclusions are "Government is immoral!"?

What is the best investment?  I've been analyzing it, and I'm wondering if physical gold in your possession is the best investment out there.  Over the past 10 years, gold has outperformed the S&P 500!  A comparison going back more than 10 years isn't valid, because it was illegal to own gold for most of the 20th century and central banks have been selling/leasing their gold reserves to keep down the price of gold.

fsk:

I wasn't aware of the distinction between "Keynesian economics" and "neoclassical economics".  I don't bother categorizing each separate type of lies and propaganda.

Neo-classics were started by Fisher and co. that tried to apply physics to economics. But meanwhile they have adopted Austrian stuff like marginal utility and made valuable contributions as well (with new areas of study like game theory). Just because Austrians see statistical tools useful only to illustrate a theory, not to base it from, it doesn't mean they can't be used to make actual assessments. Mises daily articles use them when they are reporting about some policies. Stalerno says in this video that Mises already considered Austrians to be close to maintream. I certainely don't think that economists consider Austrians to be that fringe of a group (maybe only in that there is a high concentration of anarchists ;)).

Mainstream economists, especially those in universities, tend to use very advanced Mathematics and sophisticated mathematical models.  Such calculations are useless when your underlying assumptions are wrong.

If you believe things like "Taxation is not theft." and "The Fed Funds Rate is the fair market-determined interest rate." and "The CPI is a fair and unbaised measure of inflation.", then no amount of Mathematical calculation will get you an answer that isn't nonsense.

fsk:

Mainstream economists, especially those in universities, tend to use very advanced Mathematics and sophisticated mathematical models.  Such calculations are useless when your underlying assumptions are wrong.

If you believe things like "Taxation is not theft." and "The Fed Funds Rate is the fair market-determined interest rate." and "The CPI is a fair and unbaised measure of inflation.", then no amount of Mathematical calculation will get you an answer that isn't nonsense.

Yupp, keynesians and monetarists deserve some serious bashing. Mises sure was a great economist.. some of his fans though (like Rothbards) seem less than great. There are some problems with Austrian (Rothbards) economics.. and i'm not just saing that to be rude.

"The Credit Boom-Bust Cycle"
http://www.newworldeconomics.com/arc...07/081207.html
This article explains why the Austrian concept of credit/debit as money is wrong.. and why every economic problem is not a monetary problem.

"Where the Rothbardians Went Wrong"
http://www.newworldeconomics.com/arc...006/041506.htm
About the faulty analysis of the great depression. (Basically again why credit booms and bust are not inflationary/deflationary.. and how the cause for the recession was not monetary)

There are lots of posts on that site about how the gold standards worked (and why paper money only needs to be pegged to the price of gold, why it does not need to be "backed" by big gold reserves), how banks work (and why reserve banking is not evil), how credit/debit is not money.. etc.. I havent read all of the posts yet.. almost there.

Cheers

DriftWood:

and why paper money only needs to be pegged to the price of gold, why it does not need to be "backed" by big gold reserves

The problem of linking a currency to gold, like you suggest, is not economic, but political. It requires a central bank, tempting politiceans to use it. If they can't borrow from China enough, you can be sure they'll do some monetization. ;) This is why Bretton Woods failed -- not for economic reasons, but for political ones.

The article oversimplifies Austrian theory, especially terminology, and the funny part is it doesn't even seem to address it. This is all it has to say about it: «It seems to be very tempting for people to associate the boom period with monetary inflation, and the bust period with monetary deflation. This is the "Austrian theory of the trade cycle" in a nutshell, and at times it has validity. Accompanying this idea is the notion that "banks are creating money from nothing" during the credit expansion, which today is wholly untrue.» And then goes on to talk how he imagines the Austrian theory was created, and goes on to relate Austrians to Greenspan and monetarists (which he fastly disproves with some silliness as well). Anyway, would be great if someone more comfortable with Austrian economics actually addresses the points made in the article.

DriftWood:

why every economic problem is not a monetary problem

What a brilliant guy -- who would suppose that not every economic problem was a monetary problem? Someone please get the man a Noble. =)