Keynes Has Entered The Building

Do you agree with me that the present crisis and its concern with consumption represents a resurrection -- or, at the very least, a renewed explosion -- of Keynesian policy in general, and that TARP represents the first clear and important application of short-term Post Keynesian policy?

Minsky's books have been republished this year with new introductions (pretty much repetitive) that address the present crisis.  Why aren't any Austrian books being republished the same?  Indeed, why aren't there several Austrian books that have been written in the 60's, 70's, and 80's that can play the "I told you so" game, too? 

Forget for now UofC, Princeton, etc presses.  Why aren't we at McGraw Hill now and receiving a more general distribution?

Have we blown it?  Are we blowing it?

Addition: In my opinion our two strongest arguments are the problem of economic calculation (and knowledge in general) and the trade cycle theory.  Although I have specialized (in my own way) on the economic calculation issue, socialism is largely dead.  The trade cycle has been with us for decades, either here or abroad, but few Austrians have written about that.

Comments

[Bob Murphy]

===Forget for now UofC, Princeton, etc presses. Why aren't we at McGraw Hill now and receiving a more general distribution?===

Ask Pete, he'll tell you why. :)

[Bill]

Isn't Tom Woods coming out with something? And apparently Rothbard's AGD is getting around (http://blog.mises.org/archives/008981.asp). Also the fact that Cato Unbound had pretty much no choice but to defer to Lawrence White in there latest series is pretty encouraging. So I think the Austrians are doing okay.

[jeffrey]

Ummm, Austrian books have never been bigger sellers, not only from LvMI (we are working daily to maintain stock levels of everything for Mises to Hayek to Rothbard) but also from other publishers. Have a look around http://www.mises.org/store/default.aspx. A quick estimate of 2008 is that 250,000 Austrian and libertarian books were sold.

[Ian Dunois]

Although I agree that many people are reading Austrian books, it is those who are already part of the circle. Prof. Prychitko is wondering why are the books not being distributed by a large publisher which would lead to their introduction in mainstream bookstores.

When walking down the economics aisle of a Barnes and Noble bookstore, I never see a book by an Austrian. I see Keynes' General Theory at times but never have I seen Mises' Human Action on the bookshelf let alone Economics in One Lesson from Hazlitt. Although on a good day, I do find Friedman.

[Dave Prychitko]

Why McGraw-Hill, etc? Mine was a direct reply to Pete here. Now, why? Because we first need to reach the larger audience. I'm no talking head on TV or radio, but several of us are. So I see you folks going beyond the profession.

But more than that, these more popular press books can get a huge reading (like Minsky's) even though they are not written for the layman.

Finally, younger students will not be looking for and purhasing Princeton books, but they may very well get their hands on McGraw-Hill, Prentice Hall, blah blah publishers... and THESE students are the ones who might then head to Austrian grad programs, and so on.

So yes, Pete, we need the high powered publishers for our Trade Cycle books, but we also need, I believe, these more popular trade books (no pun intended) to reach not simply policy people but younger and potentially promising scholars.

[Dave Prychitko]

Ian: I *know* why. None of us have sent manuscripts to these larger publishers, have we?

But perhaps we can be picked up by them -- but we need relevant books on relevant subjects! (Mine are certainly not relevant in either dimension.) So, back to the trade cycle: show me a book and perhaps we can take it to somebody... at least Cato.

[aje]

I fully agree with your point but I think credit should go to the Mises Institute for recently republishing Hayek's _Prices and Production_.

http://www.amazon.com/Prices-Production-Hayek/dp/1933550228/ref=ed_oe_h

[liberty]

I completely agree with your post, except I have a quibble with your addendum:

I would not separate trade cycle and economic calculation so much. One of the weaknesses of much Austrian writing, in my mind, is that these are so strictly separated for so many Austrians.

ABCT should not explain business cycles with ONLY the interest rate, without consideration of economic calculation problems that come from the distortion of price signals -- it isn't all about time preference and roundabout production.

I know many Austrians recognize this, but still the calculation debate was not ONLY about socialism. It should inform Austrian economics - it should inform ECONOMICS - in every area. It is about what models work, how time and price signals matter to adjustment, it is about (dis)equilibrium and intervention, and it most CERTAINLY can inform bubbles like the housing bubble!

And the notion that "socialism is largely dead" also misses the point that pure systems are hard, if at all possible, to come by. While, thankfully, most of the more extreme versions of government ownership and planning have fallen, the freer markets are right now becoming less free, and a huge number of lower-developed rent-seeking economies still exist, economies that fall half-way between centralized planning and totally decentralized free markets. The calculation and price theory understanding of the calculation debate is critical to analyzing all the above.

[knapp]

Austrian awareness seems bigger than ever. But Minsky's Ponzi finance theory has an emotional appeal to a mass audience that dovetails well with actual events: Bear Stearns, Lehman, and especially Madoff.

Austrians have an opening, given the machinations of Greenspan, Bernanke and Paulson. But as I mentioned in a prior comment, better marketing would help.

Promoting Austrianism on the basis of "economic calculation" and "trade cycle theory" is frankly a boring way to present ideas either to the layman or McGraw Hill.

A "What Has Government Done to Our Wealth" approach would be my suggestion.

[Steve Horwitz]

Liberty: have you read my piece on the costs of inflation? I think it does what you are talking about in applying the calculation debate type thinking to macro phenomena.

http://www.gmu.edu/rae/archives/VOL16_1_2003/5_Horwitz.pdf

[Jay Chambers]

Help a brother (metaphorically speaking) out. What's the best place to turn to for Austrian trade cycle theory? I did int'l affairs along with econ for undergrad and now that I'm done with that and my MS I'm able to start a real education with private reading. I'd like to read more international trade stuff by Austrians if possible. (That is, after I'm done reading everything on banking so I can seriously understand the mess we're in.)

[John V]

Dave says:

I'm no talking head on TV or radio, but several of us are. So I see you folks going beyond the profession.

There is only one true talking head on TV or Radio that argues (loosely) from an Austrian Perspective and that's Peter Schiff. Go to youtube and see if you already haven't.

(Schiff is the president of of the firm EuroPacific Capital and the former economic adviser to Ron Paul.)

He's gets laughed at an awful lot but he's always right...though never seem to admit it or get called our for it.

He's known as Dr. Doom. The ultimate bear.

Kudlow has him on A LOT but he is always a frequent guest on CNN and other finance/economy shows.

I generally find him very knowledgeable and correct although he does say some things that irk me....Like when he says we need to start manufacturing again and stop "borrowing from China". Statements like that make him sound a bit Buchanan-esque (Pat).

But he does gives props to Austrian Economics and mentions it on occasion.

[Zachary Kurtz]

I was in Barnes & Nobles and Boarder's just the other day and was surprised by the Austrian/ monetarist books about the collapse.

the classics: Hernando de Soto, Henry Hazlitt, Ayn Rand/Friedman,

New books - Peter Schiff, Bob Murphy (forgot a bunch but there're out there).

[Dave Prychitko]

As to ec. calc and trade cycle -- sure, of course, they are intricately tied. I realize that. Anyway....

[liberty]

Steve H. : Yes, I remember your talk at FEE, and I had a look at the paper afterward.

As I said, I know some Austrians are doing this, but it still seems like many Austrians divide and narrow these topics, and have not yet taken away all the lessons from that debate and integrated them into theory and policy. This was highlighted to me by the way the addendum was worded.

I thank you for your contributions which have overcome this trend.

[John V]

Perhaps this question may appear naive but is it that impossible, infeasible or pointless to take Keynes's main arguments..as they relate to "solutions" being pushed nowadays...and seriously undermine them or refute them?

Again, perhaps it's a naive question. But Austrian Economists know the preemptive rebuttals to Austrian criticisms of Keynes on a variety of issues. I'm sure many here can basically debate someone like Krugman in their head. They know what he would say to what Krugman would say and so on.

Does Krugman really have stumped or is the endeavor simply too daunting on top of your professional work?

Would a provocative book...ala Hazlitt's critique of Keynes...simply go nowhere?

I listened to Dr. Boettke's recent podcast on ATOTBC at EconTalk. Can't the general premise of that podcast be a launch pad in a longer, deeper work that would force attention to be paid to it?

[liberty]

Indeed, a collaborative book could be written that brought together (1) a traditional-ish ABCT economist, (2) someone like Steve H. who studies inflation and price theory with a Misesian calculation angle, and (3) someone who can bring a Hayekian knowledge / public choice focus into the mix, and put this powerful force to the task of explaining the recent crisis.

That would be brilliant and really put us on the map in this policy debate.

[Mario Rizzo]

Dave,

I think that a new (post-Hazlitt) collection of articles critical of Keynesian economics would sell well now. There are lots of things out there including articles on selected topics by well-known economists that could be included. Look, there is all this stuff pro-Keynes going on but fashions change. In a few months people will be tired of that and be looking for the critics. I have been thinking of something along these lines. It may take us off our more deliberate research plans but opportunity strikes, the iron is hot, etc.

[Grant]

Dave,

I believe Keynesians have the debate framed all wrong. They are claiming aggregate demand dropped (and it did, of course) and that people are saving too much. This all seems to be besides the point if one views the cause of these problems: Drops in house and stock prices have literally destroyed people's savings. It is only rational for those people harmed by this to save more by cutting current consumption.

If you somehow did a study of people who don't expect their incomes and savings to be negatively impacted by this recession, I think you'd find they are consuming more and taking advantage of the lower prices.

knapp,

Among businessmen, Minsky's ponzi finance is well-supported, I think on an intuitive level (as I don't think all that many have read Minsky). I think this is because its true; many specific asset bubbles are ponzi schemes, sparked by ignorant investors attracted to rising asset prices. I believe cheap credit can "fuel" this process by lowering the margin of investors with access to capital. I don't know if many libertarians want to deal with this, because it requires admitting that bubbles can be part of the learning and selection process of markets.

[Ludwig van den Hauwe]

I believe Dave is right. Here in Brussels, capital of Europe, with many individuals working for the EC, the bookshops are plenty of Minsky´s books. To the contrary nothing of the Austrians. I expect to finish a paper shortly about Minsky versus the Austrians on the subprime crisis.

[knapp]

Grant,

Minsky is right - given the non-market institutional structures (such as the Fed)that create the incentives for Ponzi finance. But that is obviously distinct from a true free market.

Austrians need to do a better job of explaining to the businessman/layman the difference between Capitolism and capitalism.

[Richard Ebeling]

We have a strange phenomenon right now.

Peter is correct that if you look at the mainstream media it is dominated by the Keynesian/interventionist perspective and literature.

But on the internet there is a huge "underground" of Austrian-perspective articles, blogs, commentaries.

Part of the problem is that there are very few Harry Browne's writing and publishing books out there, right now.

I mean by this that back in the 1970s, Harry Browne wrote books on "How to Profit from the Coming Devaluation," or "The Monetary Time Bomb."

He presented investment advice, but in the context of teaching readers sound free market economics and Austrian monetary theory (his bibliographies always referenced Mises, Hayek, Hazlitt, Rothbard). And in an easy, readable style.

I'm not saying that the only way to "sell" an Austrian perspective to "the masses" is by appealing to those two motives that advertisers always emphasize: greed and fear.

But there were a lot of "ordinary people," including businessmen, who got "hooked" on free market economics in general and Austrian economics in particular by reading Harry Browne's books back then.

I've met quite a few over the years.

They were interested in getting a readable and clear handle on "what the hell was going on," and how to protect themselves financially. They ended up with Browne's advice about these things, plus an explicit Austrian-oriented conceptual framework that stayed with many of them.

Richard Ebeling

[liberty]

"Austrians need to do a better job of explaining to the businessman/layman the difference between Capitolism and capitalism."

Indeed! Although I had realized it in some form before, I was struck the other day when reading a Market Socialism book, that Marx and the old socialists were really fighting against the former-- corporatism, crony capitalism, whatever-- and that many of their (anti-capitalist) arguments were true if taken in that light. Including, for example, some of their arguments about increasing concentration and "crises" (business cycles).

The Market Socialists writing the book recognized the difference, and broke down the choices into "capitalism" (corporatism), "old-socialism" (planning), "liberalism" (free markets) and of course, "market socialism" which they advocated.

old-socialists did not understand the distinction, but with the abysmal failure of planning, the benefits of markets and problems of central direction are finally coming to light.

Now planning and markets are seen as means, distinct from the ends aimed at, and the distinction between pro-business via government (with the ends of rich businessmen) and free-market (which arguably may have the same result for some businesses) can be explained, because the means are entirely different.

Once the means are distinguished, the ad hominem attacks on free-marketers for being pro-business can be shot down. It can be shown that planning means are often used to help big business and that markets help the entrepreneur, etc.

[Steve Horwitz]

Three quick comments:

1. Richard's last point is a fascinating one that I'd not considered before. I do think "personal finance" work that smuggles in Austrian ideas has been more powerful than we might have admitted and could be a good route to go now.

2. A new collection critical of Keynesian (and New Keynesian) economics might also be a very good idea.

3. Liberty's suggestion for a volume looking at the crisis from an Austrian perspective is also a very good one. No need to divide those three pieces though. A thorough treatment could do all of them. In fact, I'd love to write such a book, but:

a. I have too much teaching for the next few months.

b. I have this other book I need to finish.

c. I do think we, as Pete points out in his podcast, need a little bit of historical distance to really tell a good story.

That said, I am back on sabbatical next year, and if I can get the family book done....

[Bogdan Enache]

Question 1: Yes, I agree. Keynes really is in the building : for instance, the National Bank of Romania (BNR) holds an annual informal seminar with journalists in a beautiful, once royal, mountain resort; guess what they taught this year ? - Keynes, complete with Minsky quotes!

Question 2: Though I'm no encyclopedia of AE literature, there are very few books on ABC and the ones I know are "dated" and sound as if the theory hardly applies to today's economic environment and the practical issues involved.

(Btw, there is nothing wrong with McGraw-Hill publishing, If I may say, the price-quality ration of the product is quite acceptable in my opinion).