"Last Knight" Live Blog 11 — Ransom
How To Learn Economics
If you want to understand how an economy works, forget your mathematical models and your econometric textbooks. People who learn economics that way often can’t explain how an economy actually works. If you want to learn economics try this. Master the fundamentals of the logic of choice and the theory of money — then go to war and be charged with coming up with fixes for all of the disastrous economic policies the war state has invented to sustain itself and impoverish the people.
This is basically the education that turned Ludwig Mises from a top notch monetary economist into the leading scientist writing on socialism and the interventionist state. Economists who suggest that Ludwig Mises wasn’t empirically based are usually folks whose only contact with an economy outside of the university comes at the grocery store. It seems like the best economics education you can possibly have is to see the government up close and personal try every economics intervention imagined by man — and every monetary manipulation open to government — and then see the consequences of that action in the horrible deprivations falling upon neighbors, family members and millions of citizens from every land under the realm.
This sort of thing seems to work for everyone whose name isn’t John Kenneth Galbraith — which tends to confirm that idea that a mastery of the fundamentals of the logic of choice and the theory of money are prerequisites to getting anything out of the wartime controlled experiments into price controls, currency manipulation, and industrial cartelization. Theory comes before perception, learning via experience is only possible because of prior theory, and all that.
The key fact which comes through in the Hulsmann biography is that Mises had massive empirical experience with a dizzying array of complex economic interventions and monetary manipulations by the Austro-Hungarian state and the Austrian successor state during and immediately after the war. These were far more complex and diverse than seen in most any other country at the time, due in part to the extraordinary economic complexity of the various relations between the various authorities and interest groups in the Austro-Hungarian Empire and its conquered territories before and after the war — and its extremely complex relations with the victorious Allied powers and affiliated states after the war.
It’s safe to say that few economists in history have had as much empirical experience with “natural” economic experiments as did Ludwig Mises during and immediately after WWI. I’ll get into some of the details in a later post.
But here’s the take-away lesson. You can laugh out loud at anyone who tells you that Mises wasn’t an empirically grounded economist. There are few economist in history who’ve had a much up-close-and-personal empirical experience with the direct causal consequences of nearly every one of the “natural” economic “experiments” a state can come up with through economic intervention and monetary manipulation.