When a presidential candidate declares, as Ron Paul has, “We’re all Austrians now,”  it’s inevitable that his critics would try to discredit him—whether they understand what he’s talking about or not. That’s what Matthew Yglesias does in his Slate piece “What Is ‘Austrian Economics’?”

I recommend the piece because it’s highly informative—about what Austrian economics is not.

We’re off to a rocky start with this: “The Austrian school originally referred to a set of classical liberal thinkers with diverse interests who came out of the Austro-Hungarian Empire.”

The earliest Austrian economists did not make their mark by advocating free markets and other classical-liberal ideas. They did so by proffering a revolutionary positive (not normative) theoretical approach to understanding how markets work, focusing on value, price, and capital, theory. What Wikipedia says is consistent with my understanding of the matter: “When Carl Menger, Eugen von Böhm-Bawerk, and [Friedrich von] Wieser began their careers in science, they were not focused on economic policy issues, much less in the rejection of intervention promoted by classical liberalism. Their common vocation was to develop an economic theory on a firm basis.”

Economics vs. Politics

Yglesias thus conflates Austrian economic theory with libertarian political theory. In fairness, he is not alone in committing this error. Many libertarians do the same, which is unfortunate. Austrian economic theory describes how purposive action by fallible human beings unintentionally generates a grand, complex, and orderly market process. An additional ethical step is required to pronounce the market process good. Economic theory per se cannot recommend but only explain markets. This is what Ludwig von Mises meant when he insisted that Austrian economics is value-free. Anyone of any persuasion ought to be able to acknowledge that economic logic indicates that imposing a price ceiling on milk will, other things equal, create a shortage of milk. But that in itself is not an argument against the policy. Mises assumed the policymaker would have thought that result bad, but the economist qua economist cannot declare it such. As Israel Kirzner likes to say, the economist’s job in the policy realm is merely to point out that you cannot catch a northbound train from the southbound platform.

Yglesias writes: “Austrians reject the idea that there is anything at all the government can do to stabilize macroeconomic fluctuations.” It’s odd to say this without also pointing out that Austrians believe that government causes the instability of inflationary booms, recessions, and depressions. In light of that point, the suggestion that government is capable of stabilizing the economy may be seen in its proper light.

That said, Yglesias’s statement is not quite right. Some prominent Austrian macroeconomists think that in a second-best world, the central bank (which of course wouldn’t exist in a first-best world) should counteract a sudden and substantial monetary contraction. In other words, deflation is not necessarily a cure for inflation. Mises made the point metaphorically in 1938: “If a man has been hurt by being run over by an automobile, it is no remedy to let the car go back over him in the [opposite] direction.” (See Steven Horwitz’s “Deflation: The Good, the Bad, and the Ugly.” )

Distorts Markets

“In the view of the Austrians,” Yglesias goes on, “practically every economic policy pursued by the federal government and Federal Reserve is a mistake that distorts markets. Rather than curing recessions, claim Austrians, stimulative policies cause them by producing unsustainable bubbles.” Well, yeah, and it’s amply demonstrated by George Selgin, William D. Lastrapes, and Lawrence H. White in“Has the Fed Been a Failure?” (See my summary, “‘F’ as in Fed.” ) As they put it:

Drawing on a wide range of recent empirical research, we find the following: (1) The Fed’s full history (1914 to present) has been characterized by more rather than fewer symptoms of monetary and macroeconomic instability than the decades leading to the Fed’s establishment. (2) While the Fed’s performance has undoubtedly improved since World War II, even its postwar performance has not clearly surpassed that of its undoubtedly flawed predecessor, the National Banking system, before World War I. (3) Some proposed alternative arrangements might plausibly do better than the Fed as presently constituted. We conclude that the need for a systematic exploration of alternatives to the established monetary system is as pressing today as it was a century ago.

Yglesias understands that the Austrian theory of the business cycle has something to do with artificially low interest rates breeding malinvestment, but he thinks it can’t be right because “it’s hard to understand why business people would be so easily duped in this way. If Ron Paul and Ludwig von Mises know that cheap money can’t last forever, why don’t private investors? Why wouldn’t firms avoid making the supposedly dumb investments?”

Gerald P. O’Driscoll and Mario Rizzo addressed this long ago in The Economics of Time and Ignorance:

[T]here are profits to be made from exploiting temporary situations. . . . Though entrepreneurs understand [the macro-aspects of a cycle] they cannot predict the exact features of the next cyclical expansion and contraction. . . . They lack the ability to make micro-predictions, even though they can predict the general sequence of events that will occur. These entrepreneurs have no reason to foreswear the temporary profits to be garnered in an inflationary episode. . . . From an individual perspective, then, an entrepreneur fully informed of the Austrian theory of economic cycles will face essentially the same uncertain world he always faced. Not theoretical or abstract knowledge, but knowledge of the circumstances of time and place is the source of profits.

Spending Shifts

Puzzlingly, Yglesias also thinks he can refute the Austrian theory by noting that “[s]pending patterns shift all the time without sparking a recession.” To which, Peter Klein replies, “Of course, Yglesias’s breezy summary of the theory skips over the time structure of production, the difference between consumption and investment, the role of interest rates in securing intertemporal coordination, the problem of expectations, and the other basic elements of the theory, which ten minutes of Wikipedia browsing could have explained.”

Yglesias reveals his unfamiliarity with the Austrian literature when he writes, “Many of the original Austrians found their business cycle ideas discredited by the Great Depression, in which the bust was clearly not self-correcting.” Considering that Herbert Hoover’s and Franklin Roosevelt’s New Dealimpeded the market’s correction process, one wonders how the 1930s could possibly have discredited the Austrian theory of the origin of recessions.

Finally, Yglesias contends that “the Austrian school . . . preaches despair and demands no action at all.”

Balderdash. Since it explains that busts are central-bank-caused and hence avoidable through market-based money and banking, its implicit message is one of hope and optimism. And as for demanding no action, on the contrary, it puts forth a long list of actions for those who want stable economic growth—all of them designed to dismantle the interventionist state.

Sheldon Richman is editor of The Freeman, where this article originally appeared.

Source: Reason.

My Two Cents: It’s official, your tax dollars have spawned the worst rap song in history. Thanks federal government! Run-DMC wrote a song about the EPA; it was called “Sucka M.C.’s” End Two Cents.

EPA Rap Song:

Run DMC – “Sucka M.C.’s” (LIVE): Lol.. is that Vincent Gallo (known here as Prince Vince) in the beginning of the video? Why yes it is!

*Written by Rob Rimes.

Let me start this bitch off with a bang and keep it real, Earth Day is lame as fuck. It is a stupid ass tradition that pretty much forces the whole world to participate in this anti-human “we’re all evil” hippie asshole festival. I don’t know about you but I’m not a hippie nor do I want to be forced to party with them and plant a fucking tree to replace the one I cut down because I thought it was in the way. Wait, I think you plant a tree on Arbor Day. Why do we have two of these stupid hippie holidays? One of them is fucking more than enough! Besides, have you ever been around a hippie? They talk stupid, act stupid and reek like the area between the ball sack and the asshole of a sweaty gorilla.

You see, it is not global warming, pollution and deforestation that we need to worry about. The real enemies here are the crazed anti-human eco-fascist environmentalists who want to force us to put the rights of a leaf before our right to freedom and our right to live. Why do I say such insane and outlandish things? It’s pretty easy to have this opinion when you’re sporting a fair amount of common sense like myself.

Environmentalists aren’t concerned with a clean Earth and making the world better. They are about “saving the planet” but they want to save it from the evolution of the human mind. They want to limit humanity and its greatness by punishing innovation and technology. Earth Day itself isn’t a celebration of the planet, it is a call to arms against human beings, the greatest thing on this planet.

It has become the “Great Holy Day” for sick sadistic eco-nuts that worship the Earth like religious zombies. They feel the void due to a lack of Jesus and can’t handle it, so they have their green religion to help make them feel relevant. Why can’t they be more like me? I have a lack of Jesus and I’m just fine. Well, that’s because I stopped having faith in an imaginary friend and started having faith in myself. Environmentalists have no faith in themselves; they are sad shitty joiners looking for a morally superior, holier-than-thou cause to make them feel important. Their parents failed to give them enough love.

You can’t look at Earth Day without looking at why it even exists. It was created over 40 years ago by Senator Gaylord Nelson, who was an environmentalist. Yes, Gaylord. It grew in popularity from its creation in 1970 and all the hippie leftovers from the 1960′s latched onto it like hideously disgusting barnacles. The hippie leftovers created a large movement towards “saving the planet” and Earth Day was a seemingly harmless way to get the country to participate and learn about environmentalism.

Considering it was a leftist movement, it wasn’t hard to get this crap in public schools where the masses could be indoctrinated from the very beginning of their educational process. They always made me participate in this idiot holiday when I was in elementary school and that was before Earth Day was even an international phenomenon. I was just taught that Earth Day is something we celebrate because (insert scary environmental threat here) was real and we had to appreciate Mother Earth and repent our green sins. I didn’t know it at the time because I was like 7 and shit, but I was being indoctrinated with green guilt and the pseudoscience faux-fact that mankind was evil and not respecting the rock it was raping like drugged Vegas hookers.

When I was in 4th grade, Florida Governor Bob Martinez came to my school to celebrate Earth Day. I was all excited because he was the governor and I had never met a politician before. He wasn’t even a Democrat but apparently he had bought into the Earth Day scam. It was 1989 and the Republicans had already become victims of this anti-human epidemic. Oh, how the epidemic would evolve.

Earth Day and the environmental movement are part of a long-term plan. This is a plan to make money. While they attack big business, technology and innovation, they have become a big business and utilize technology and innovation in their own way. The environmental movement has poisoned government and now eco-fascist bureaucrats have implemented governmental regulation and meddling that stifles the market and every industry in it. The environmentalists practice the worst kind of crony capitalism.

Now these eco-fascists want to force us to conform to the threats of global warming, now known as “global climate disruption” because the term “global warming” just doesn’t fly anymore. Why the change? Well, we have had record cold winters lately. However, the whole cold thing is caused by the whole warming thing or so they say. They can never get their story straight. Just like the oceans are going to rise a hundred and seventeen feet in six weeks but Al Gore, the greenie messiah, is buying beach front property. The hypocrisy between their scary rhetoric and their actions is pretty clear to anyone not wearing green goggles.

To give you an idea of how evil this movement is here is an excerpt from environmentalist philosopher Paul Taylor’s book “Respect for Nature: A Theory of Environmental Ethics”:

The ending of the human epoch on Earth would most likely be greeted with a hearty ‘Good riddance!

In 1989, biologist David M. Graber wrote this in the Los Angeles Times:

Human happiness (is) not as important as a wild and healthy planet…Until such time as Homo sapiens should decide to rejoin nature, some of us can only hope for the right virus to come along.

In response to these two insane passages, Dr. Michael Berliner of the Ayn Rand Institute wrote:

Such is the naked essence of environmentalism: it mourns the death of one whale or tree but actually welcomes the death of billions of people. A more malevolent, man-hating philosophy is unimaginable.

Pretty profound shit, eh? Dr. Berliner’s statement is spot on. These eco-tyrants are calling for the death of mankind! Whether they have completely succumbed to green guilt or they are evil architects working the minds of the masses into accepting a green police state doesn’t really matter. The fact is, the essence of this movement is pure evil.

Environmentalists put scrub jays, fire ants, mice and trees before homebuilding, industrial development, practical energy sources, medical research and human ingenuity. If they had it their way we’d all be living like Ewoks in hippie communes worshipping snails. Environmentalism is the enemy of humanity. Therefore, I refuse to ever celebrate their anti-human holiday, Earth Day.

I hate the fact that kids in public schools and many private schools are seemingly forced to participate in the festivities. Unfortunately, most parents and people in general are completely ignorant to the real green agenda and are already buying into the green message. God forbid they leave behind a giant carbon footprint. All that carbon must be horrible to trees since that is what they breathe naturally. I mean, oxygen is horrible for humans, right?

The thing is, the fucking Earth has been here pretty much forever. Humans have been on this planet a fraction of that time. Man made global warming is bullshit and even if we are slightly warming the globe, big fucking deal. It is a massive and complex ecosystem that can self-correct and adapt. The Earth goes hot and cold all the time and not because of man. The global warming data.. sorry, global climate disruption data has been manufactured by dishonest scientists. This fact has been out for quite some time now, yet the masses and the media like to ignore it because no one wants the truth, they just want to believe in the romanticism that comes with “saving the planet”.

The weather changes and species die without human intervention. Nature does its thing. I’m not saying that we shouldn’t be conscious of what we do. We have to be responsible and respectful to our environment but we don’t have to be fascist fucking morons. The world isn’t going to end tomorrow because you forgot to recycle that tuna can. In fact, the world won’t even notice.

All this movement is, is a way to control you. The green disease starts in your mind and before you know it, they own your body. In a green utopia, there would be no innovation, no human rights, no progress and no future. They want your bodies and they want your money. Sounds like the ultimate system for tyranny to me and there are more of you that are on board with it than those of us who aren’t.

So if you love tyranny and hate human rights, celebrate Earth Day. If you hate that shit, kick a fucking tree in the face. End of rant.