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.
I have my own blog at FSK's Guide to Reality. Let me know if you like it.
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
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).
Equality before the law and material equality are not only different but are in conflict with each other; and we can achieve either one or the other, but not both at the same time. -- F. A. Hayek in The Constitution of Liberty
"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.
Yours in liberty,Geoffrey Allan Plauché, Ph.D.Adjunct InstructorBuena Vista University
"Quis custodiet ipsos custodes?"(Who watches the watchmen?)-Juvenal, Satires VI.347
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.
Not really. The main problem with Keynesian economics is that Keynesians don't have an understanding of the stages of production.
Most Austrian economists work for the government too, following your line of reasoning. George Mason, anyone?
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 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.
You know, because the last three Fed heads weren't monetarists. At all.
Are you the anarchist version of Alex Jones?
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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
To darkness I condemn you...
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. Ok - woah! Thanks, thats the type of stuff I was kind of looking for. No-one can argue with that logic, and thats a real good sell on my behalf - provides incentive for the company hiring. Someone who gives better predictions. Thanks for all the comments, they've been VERY helpful - althought there could have been a better break down of differences, but really how can I expect people to want to learn lies? So thanks again, and keep the good info and comments coming! | Post Points: 5
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.htmlThis 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.htmAbout 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. =)
The problem with Austrian and Rothbardian economics stem from their definition of money. Just like the monetarists, Rothbards also defines certificates of deposits as money. This has far reaching consequences. So why should not credit/deposit be considered money? For one it means counting the same base money more than once. Base money is anything the fed creates, its the bills and coins and electronic bank reserves. Credit is anything a bank or individual people create threw lending. Credit is a promise to repay a loan, its a contract denominated in money. So when you put money in a bank, you are actually lending the bank money on a short term. The bank does not keep it in a vault, it lends it out to long term borrowers. This the fractional reserve banking system works because statistically, a large number of short term lenders behave as one long term lender.. so the short term money can be lent out to long term borrowers. Anyways, so once you put base money into a bank.. it goes right back out circulation. What you are left with is a deposit certificate, its a promise by the bank to pay the holder of that certificate back money on request. This is [not] money. You cant buy anything with it. When you take out money from the bank, you are basically saying to the bank "remember that money i lent you? I need it back now.". If the bank is sound, that is if its borrowers and loans are of high quality, you will get your money back. A similar thing happens when you pay with "plastic", basically just base money (in the form of electronic bank reserves at the fed, gets moved around) . So what does this have to do with anything? Well it shows that no new base money is created by banks. All banks create is credit. People dont actually need a bank to create credit. When you lend your friend beer money. Credit is created. Credit is just a promise (or a contract). Its not money. You cant buy anything with promises. Also since credit is not money, credit creation is not inflationary. It will not lower the value of money. The price of gold will not change. It does not matter how much credit is created.. you can still soundly be on a gold standard.
So with that being said.. Rothbards is wrong in blaiming the great depression on inflation. The only thing inflating and deflating was credit. It did not cause price inflation, and during the credit boom the dollar was still soundly on the gold standard. The credit bust was caused by the damage done to the economy by tariff warefare.. the problem was the tariffs not the credit creation, so the solution would have been to scrap the tarriffs. Dropping the gold standard and raising taxes, to solve things just made the mess worse. The medicine was worse than the disease.
Austrians have a tendency to blame the FED and monetary for economic problems.. that have nothing to do with it.
Anyways I think this guy makes more sense out of economics and monetary policy than most. I found the site after reading his book "Gold: the once and future money". Its really good, it goes threw just about every gold standard in history and the effect of most past monetary and tax policy blunders. Anyways, here are some more posts about credit and the great depression.
http://www.newworldeconomics.com/archives/2007/102007.html
http://www.newworldeconomics.com/archives/2005/121005.htm
Cheers
For quite a good exploration of the different schools of thought historically, this is a great site: http://cepa.newschool.edu/het/thought.htm
The Austrian school of thought can be found in the "Neoclassical schools - Continental" category. It lists the main defining characteristics of the Austrian school as follows:
There's a couple of common huge misconceptions here.
The Federal Reserve was 100% responsible for the Great Depression.
The USA did not abandon the gold standard in 1933. The gold standard was abandoned in 1913, when the Federal Reserve was created. The Federal Reserve was allowed to print more Federal Reserve Notes than there was physical gold in the US Treasury, causing money supply expansion. "Legal tender" laws meant that Federal Reserve Notes traded at parity with gold. People didn't immeditely redeem their Federal Reserve Notes for gold in 1913, because they didn't realize how badly they had been cheated.
In 1933, gold redeemability of the US dollar was abandoned, but the gold standard was abandoned in 1913. In 1971, foreign central banks were no longer allowed to redeem their dollars for gold. From 1933-1971, it was illegal to own gold in most countries, making it a gold standard in name but not in practice.
People falsely say "The free market discredited the gold standard." The reality is that State distortion of the market destroyed the gold standard. A lot of people falsely believe the Federal Reserve was created after 1933, in response to the Great Depression. The Federal Reserve was created in 1913, and caused the Great Depression.
With debt-based money, credit expansion and money supply inflation *ARE THE SAME THING*. This is the whole point of the Compound Interest Paradox. Even though the US dollar was gold-redeemable from 1913-1933, the dollar was still debt-based money during that time. The Federal Reserve was allowed to print more Federal Reserve Notes than there was physical gold in the US Treasury, and fractional reserve banking further expanded the money supply. The average person didn't start figuring out the scam until 1933, when there was a run on the dollar and President Roosevelt defaulted on the dollar. The default on the US dollar in 1933 probably was the biggest credit default ever.
That's the reason I say mainstream economists are useless. Their equations assume money has a constant or slowly decreasing value over time. They don't properly account for the effect of massive money supply inflation, making their calculations meaningless.
There are neoclassical economists who are also libertarians (anarchists, minarchists, etc.) and conservatives. You seem to separate Austrian economics from everything else, when in fact there are neoclassical and monetarist economists who are for less and less government. There are even neoclassical economists who are for the return to a gold standard (or another free market currency)! Take new classical macroeconomics as an example. It is neoclassical macroeconomics and it is very similar to capital-based (Austrian) macroeconomics in its conclusions that government intervention during recessions is bad and that recessions are actually periods of growth (at least in a free market).
Keynesian economics has been long dead. The problem with most mainstream economists is that they don't understand some basic principles that have lead Austrians in the right direction, i.e. the production structure (which really is the key to ABCT).
Funny that you say that, considering that many Austrians are against the government, yet they find employment at public universities like George Mason and University of Nevada. Now that I think about it, it's kind of funny, actually. U of N employs an anarchist!
But agorism is not a school of economics. It is a political philosophy and nothing else. It attempts to define the world in its own narrow ideological view. If agorism is a school of economics, then so are anarcho-syndicalism and anarcho-communism, and I think that we can all agree that they aren't schools of thought in economics but schools of thought in political philosophy.
I've read your blogs, and I was wondering, where do you find the evidence of central banks supressing the price of gold? Do they just sell them steadily? What are your sources?
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