Why We Need Austrian Economics
Posted by freedomforall 5 days, 3 hours ago to Economics
Excerpt:
"[This article is a selection from the 30-minute interview with Dr. Salerno.]
MCMAKEN: Following the financial crisis of 2008, there never was any sort of real reckoning for mainstream economists, who had totally failed to see the crisis coming or understand its origins. The Austrian School economists, though, immediately understood the problem. What is different about the Austrian School, and how does it give us a little bit of an edge in understanding things better?
SALERNO: Let me just go back for a moment to the financial crisis. In an interview on The Charlie Rose Show in December of 2005—that was right before the financial crisis began to hit and right before people were seeing a financial bubble, and Austrians were already calling what we had a housing bubble—Milton Friedman, who was a leading empirical economist and a leader of the school that believes that you can create economic theory by testing it against the data, claimed that we were in the most productive and the best period of the American economy in his lifetime. He praised in glowing terms Alan Greenspan, chairman of the Fed at the time.
And here we were on the precipice of the explosion of a housing bubble that was going to turn into a financial crisis two years later. Friedman had no clue that that was the case. But people like Peter Schiff, our own Mark Thornton, and a number of others already in 2003 and 2004 were pointing to the fact that we had a growing housing bubble.
Now, they were able to do that because they understood Austrian economics, which begins with human action and deduces a lot of theorems. "
"[This article is a selection from the 30-minute interview with Dr. Salerno.]
MCMAKEN: Following the financial crisis of 2008, there never was any sort of real reckoning for mainstream economists, who had totally failed to see the crisis coming or understand its origins. The Austrian School economists, though, immediately understood the problem. What is different about the Austrian School, and how does it give us a little bit of an edge in understanding things better?
SALERNO: Let me just go back for a moment to the financial crisis. In an interview on The Charlie Rose Show in December of 2005—that was right before the financial crisis began to hit and right before people were seeing a financial bubble, and Austrians were already calling what we had a housing bubble—Milton Friedman, who was a leading empirical economist and a leader of the school that believes that you can create economic theory by testing it against the data, claimed that we were in the most productive and the best period of the American economy in his lifetime. He praised in glowing terms Alan Greenspan, chairman of the Fed at the time.
And here we were on the precipice of the explosion of a housing bubble that was going to turn into a financial crisis two years later. Friedman had no clue that that was the case. But people like Peter Schiff, our own Mark Thornton, and a number of others already in 2003 and 2004 were pointing to the fact that we had a growing housing bubble.
Now, they were able to do that because they understood Austrian economics, which begins with human action and deduces a lot of theorems. "
Now I do have a soft spot for Milton Friedman, there are so many youtubes where he demolishes questions from the Keynsians/ leftists, he does it so well, with such politeness and cool that, well for me, it lifts the heart, puts a smile on the face and a tear in the eye. Maybe I like emotional arguments. Greenspan? I can do without.
The financial crisis of 2008 is now to me a blur, if MF got it wrong, so be it. The Chicago School could not condemn when it should as did the Austrian School.
Looking at what is going on today brings on the same deja vu, we have been here before.
One big improvement step would be to abolish the Fed, easy to say but so many have fingers in the pie.