econ: The Economic Blogs Take on Hayekian Macroeconomics

Talented mainstream economists like William White, chief economist of the Bank of International Settlement, used “Austrian” thinking about the relation between monetary and fiscal policy and the time structure of production and investment as part of their modeling strategy to warn about the massive and unsustainable disequilibrium building in the economy across the 2000’s — and the inevitability of the coming bust. This fact has a lot of people worked up — people with little or no understanding of Hayekian economics are now flailing about attempting to come to terms the economics of the economists who told everyone in advance what turned out to happen. Some of these folks are genuinely sincere in their efforts to understand this alien microeconomic-based approach to macroeconomic problems. Others, let us say, are a bit more ideologically motivated in their “investigations”. All of them, I would suggestion, could do better reading the work of Lawrence White, Roger Garrison, George Selgin, Steve Horwitz, and other, rather than what many of them are trying to do, which is pick up “Austrian” economics from blog post commenters and, well, guessing. Read the real stuff, guys.

In any event, let me bring to your attention the postings of U. of Chicago trained macroeconomist Scott Sumner and “heterodox” / social-democrat economist John Quiggin.

If anyone has any other links or tips to economists attempting to come to grips with the alien economics of Hayek and the Austrian, send me a heads up or let us all know about it in the comments section.

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13 Responses to econ: The Economic Blogs Take on Hayekian Macroeconomics

  1. Bill R says:

    I don’t know about *honestly* “attempting to come to grips with the alien economics of Hayek and the Austrian”

  2. Greg Ransom says:

    This is a massive shift for DeLong, actually acknowledging that disequilibrium sectorial shifts with macroeconomic consequences actually take place. But as usual DeLong is blatantly lying when he implies that this is Garrison’s — or any Austrians — full story of the current situation.

    The big problem with DeLong isn’t so much he’s a bad economists, the problem is that he’s a such a dishonest guy. So much a political hack far more than he is a scholar, a historian, a scientist, or a gentleman.

  3. der says:

    Quiggin is a first rate knuckle head. Why are you even bothering with the twit?

  4. fundamentalist says:

    To me, Sumner doesn’t appear to be trying to come to grips with Austrian econ. He refuses to read anything but what people post and he insists on interpreting everything in mainstream terms. He’ll never understand it that way. When you come from a mainstream econ background, as I did, it takes longer to grasp Austrian econ than it does for someone with no background in economics. That’s because with an econ background you have so much to unlearn. Mainstream economists would pick up Austrian econ faster if they would simply suspend judgement until they have read at least one whole book, and then try to fit it in with mainstream macro. Of course, they’ll have to learn a lot of new concepts that mainstream macro doesn’t have.

  5. fundamentalist says:

    Quiggin doesn’t seem to want to give it a fare shake either. Why are these guys so intellectually dishonest? They create a straw-man version of Austrian econ and then procede to valiantly do battle with it.

  6. Pat K says:

    Why are these guys so intellectually dishonest?

    That’s their genetic disposition.

    Don’t forget that the Deshorts and the Quibblers of this world earn a great deal of their keep by prostituting themselves to left wing groups for a dollar. So the chances of any of you ever converting these creeps would be like trying to convert Bin Ladin to the Uniting Church. It just isn’t ever going to happen.

    Don’t forget that their social standing amongst other lefties is important to them. So the are not turning.

    I don’t know why you would even bother. The best thing to do is to continue using a cow prodder on the dishonest lunatics until they can’t take it any more. If they scream, just do it again.

    Don’t take any insolence for these charlatans.

  7. Pat K says:


    It doesn’t appear to me that Quibbler is that smart. I think he has a text book mentality and goes from there.

  8. fundamentalist says:

    I assume these guys are smart because they have PhD’s. I think they’re very lazy and don’t want to take the time to learn real economics. As I wrote, I have an MA in mainstream econ and I found Austrian econ much more difficult to understand because it is much more comprehensive, but very rewarding. And I think arrogance and prejudice jump in there somewhere.

    What irritates me is that I took them seriously as wanting to understand Austrian economics. What a fool I was.

  9. D.W. MacKenzie says:

    I would not call it laziness or stupidity. I got my M.A. at mainstream program (UConn), and all the incentives point towards ignoring AE. Grad students don’t have much time for extra reading. Mianstream ideas are not that hard, but doing all the math is time consuming. I first learned AE after I was done with grad classes at UConn- at a FEE seminar.

    As an untenured instructor all the incentives were to teach mainstream stuff. I taught some AE anyway, but after a few years the influence of my one week at FEE was minimal. For a PhD I initially took two econ classes at Rutgers, where I learned pure mathematics, litereally no economics. So I decided that I had to go elsewhere to learn real econ. Auburn folded, so GMU was my one and only option.

    Given that there is only 1 PhD program in the world where you can learn AE, the bias towards Neoclassical economics is overwhelming. There is path dependency here, and I am not sure how to break this inertia. It personally makes sense to go with this flow as an economist.

    There is path dependency in AE too. Most of my research challenges convetional SDAE views on economic calculation, equilibrium, and public choice. SDAE Austrians generally object to my work, but wihout raises substanative objections. Aside from Roger Koppl and a few others SDAE Austrians have either spouted nonsense or ignored my work. Is this because they are lazy or stupid? No, these are busy people with little personal incentive to rethink the prevailing rivalry-alertness-process paradigm. So it seems clear to me that changing any paradigm is very difficult, Austrians are no different than Neoclassicals in this regard.

  10. Jayson says:

    W. Leontief said: “economics departments are preparing a generation of scholars stupid, esoteric math whiz, but real children in terms of real economic life.”

    That’s the That is the mainstream

  11. First of all, I formally published the theses of inevitable failure in 1979: a) that any pretended economy subject to interest inevitably terminates itself under insoluble debt; and b) that there is one and one only integral solution to the categoric faults of the imposed systems: 1) inflation and deflation; 2) systemic manipulation of the cost or value of money or property; and 3) inherent, irreversible multiplication of artificial indebtedness by interest.

    Secondly, I furnished the Reagan Administration with computer models which projected the present failure, proving the first thesis (a) — which models c) you can still download, complete with source code from our pages; d) run 1980s data; and e) still project that the present failure will occur at approximately 2010 AD.

    Thirdly, it is utterly preposterous that any Austrian “economist” could have projected the present failure; and every person here with the least familiarity with this pseudo science knows why:

    The Austrians routinely reject mathematics; and they in fact exalt interest — the very cause of failure!

    The reason nonetheless that Austrians and Hayek in particular exalt interest (with no mathematic or rational defense whatever), Hayek himself tells us: It makes “banking” (obfuscating the promissory notes of the people) “an extremely profitable business.” (See Mises page, reproducing Hayek’s article: “A Free-market Monetary System.”)

    “Freedom” is Hayek’s first lie, for there is no freedom even from terminal exploitation, when the purported “Free Market Monetary System” is imposed upon the people despite political promises to the contrary, and when it can only multiply artificial indebtedness in proportion to capacity to pay, as the unassenting subjects are forced to maintain a vital circulation by perpetually re-borrowing principal and interest as ever greater sums of artificial debt, perpetually increased so much as periodic interest on an ever greater sum of debt, until of course the sum of artificial indebtedness exceeds their (finite) capacity to pay, destroys their credit-worthiness to maintain a vital circulation — and you have what you have right now, everywhere around you.

    That’s freedom, Mr. Austrian “economists?”

    In fact the lie of your pretended economy can only multiply artificial cost!

    Now, to say you predicted the present failure, even as it is the one possible fundamental consequence of the interest you advocate — that is one of the greatest lies in history.

    But it won’t fly.

    mike montagne — founder PEOPLE for Mathematically Perfected Economy, and original architect of mathematically perfected economy (1979)

  12. PS. If you’d like a “heads up,” you’ll have to email me; and in fact I DO suggest we get together over Skype, if not telephone.

  13. Jack says:

    Obviously, if Austrian School thinking does not even recognize the causes of our problems, it is not only impotent to solve them; it may even be opposed to doing so. Potential instances of predisposition against solution are its favor toward unearned gain and interest. Yet perhaps even more adverse to solution is the Austrian School’s wholesale rejection of mathematics, either for analysis or solution. The typical Austrian School adherent casually asserts for instance there can be no such thing as a mathematically perfected economy, because (they assert) it is impossible for mathematics to account for indeterminable human behavior. When you apprise them that on the contrary, usury or perfected economy instead comprise the limitations to which human behavior is subject, they want to change the subject.

    According to its own descriptive material, Austrian School *thinking* is a branch of heterodox “economics” — which is all branches of thinking falling outside of the ostensibly orthodox thought now imposing usury. A principal reason there is so much disagreement between Austrian, heterodox, and orthodox schools of thinking however, is they are all pseudo sciences. All are totally bereft of formal proof and theorem.

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