Economic discourse is desperately in need of Austrians. Note that I say Austrians rather than Austrian economics. Economics would certainly have much to gain from adopting Austrian economics, but even in the current "Austrian-less" state of economics they would benefit greatly from including Austrians. The reason for this is Austrians' fascination for, understanding and application of deductive logic, which separates them (us) from all other schools of economic thought.
What reminded me of this today was a 2013 EconTalk podcast from a symposium on "Capitalism, Government, and the Good Society". It features Michael Munger of Duke University, Robert Skidelsky of the University of Warwick, and Richard Epstein of New York University, each with their own perspective on how to do and understand macro economics. Hosted (and masterfully provoked) by EconTalk's Russ Roberts, the discussion is very entertaining and all panelists present arguments that are well thought out and forceful. That is, if one subscribes to their particular set of implicit assumptions.
This is actually what is so illustrative about their discussion. To paraphrase Thoreau's well-known quote, all of them (including the host) were hacking away at the branches of each other's arguments while not paying any attention to the root. In other words, they kept talking past each other.
An illustrative example of this is Munger's bloodletting analogy. I'm paraphrasing:
It is 1820 and your daughter has a fever. You call the doctor, a Dr. Krugman. He takes half a pint of her blood and says she will get better. Several hours later, her fever has worsened. So you call Dr. Krugman again, who again takes a half pint of her blood. Close to midnight her fever is terribly bad, and you call Dr. Krugman again - and he takes another half pint of blood. Again, he promises she will get better. At 4 am she dies. At this point, Krugman says that this could have been avoided had they only drawn more blood.
To this, Skidelsky responds that it is a poor analogy, since Paul Krugman's (and JM Keynes's) policy recommendations are not akin to blood letting. Government spending in times of crisis is more like blood pumping - to get the wheels turning again after they have slowed down or altogether stopped (presumably due to those dastardly animal spirits that keep haunting the economy). Blood letting, Skidelsky emphasizes, is much more akin to austerity measures, which draw from the lifeblood of the economy.
The discussion rather quickly moves on to different matters after the participants note their differences in finding it blood letting or pumping. So which one is it? The answer is: both. Or neither. The reason for this is that they're debating from completely different assumptions.
Munger's starting point is the economy as an ecosystem, to which government provides basic rules. Therefore, any excesses by government is necessarily a burden on the economy since they imply meddling with the market and causing inefficient resource allocations. He made points along these lines in the podcase prior to the Krugmanite blood letting analogy.
To Skidelsky, spending is what drives the economy and the government is an exogenous, correcting force to an imperfect market. In other words, government cutbacks restrict the flow of funds (blood) to the market whereas spending indeed "pumps" more blood into the system.
While the panelists at one point in the discussion almost touched on this fundamental difference in perspective, they never quite made it there. It would have been much more interesting to make it explicit and then focus the discussion on the sickness instead of the throwing-around of data and anecdotes in support of this or another interpretation of various symptoms.
This is where I think an Austrian would have benefited the discussion: Austrians tend to always dig deeper into the logic of the argument. So much so, that we're constantly dismissed as kooks or "economic philosophers" rather than Real EconomistsTM. It may not always be wise to go all "philosophy" on economic matters, but since economists have all but abandoned economic reasoning it is safe to say they would have much to gain from inviting Austrians to the discussion.
