Economics Questions

Re: how does austrian economics fix the current problems?

Sean_M — Wed, 16 Jan 2008 06:02:50 GMT

xahrx:
In other words the question he's really asking is: what can Austrian Economics tell me so I can manipulate the world to better suit my idea of what the ideal would be, so the people I think should be poor are poor, but those who I think should be getting by can, etc., etc., etc.

You basically nailed it. He's a junior at a good college who thinks he has all the answers. Thanks for the input all, i was looking at it the wrong way.

Re: how does austrian economics fix the current problems?

xahrx — Wed, 16 Jan 2008 04:28:22 GMT

pairunoyd:
Maybe he means:

If everyone involved in our current economy suddenly fully embraced and perfectly epitomized the Austrian School of Economics, what would be the progression of events, especially as it relates to popularly discussed economic issues, e.g. health care?

It's funny how people think. Yea, I'd be so much happier if Hilary Clinton lived with me and told me how to spend my money. "You should pay Jon $7/hr instead of $6. He is worth it." She knows what I want and what I need better than I do. We are one. She is one with the many.

I think you're a little off. I think his friend sees what he considers imperfections, such as poverty, and wants them fixed. No one can predict the future course of events. Austrian analysis is better suited to explaining why such 'problems' exist and are exacerbated by government intervention. But in that vein his friend is a typical person in that he wants other people's problems fixed. He doesn't think anything he does is unreasonable or in need of fixing. He thinks it's what other people do to him and others that needs changing. In other words the question he's really asking is: what can Austrian Economics tell me so I can manipulate the world to better suit my idea of what the ideal would be, so the people I think should be poor are poor, but those who I think should be getting by can, etc., etc., etc. Which is why the analysis is important, because such people are mostly oblivious of the cause and effect relationship between previous interventions and the current 'imperfections' they want 'fixed'.

Re: how does austrian economics fix the current problems?

pairunoyd — Wed, 16 Jan 2008 00:43:19 GMT

Maybe he means:

If everyone involved in our current economy suddenly fully embraced and perfectly epitomized the Austrian School of Economics, what would be the progression of events, especially as it relates to popularly discussed economic issues, e.g. health care?

It's funny how people think. Yea, I'd be so much happier if Hilary Clinton lived with me and told me how to spend my money. "You should pay Jon $7/hr instead of $6. He is worth it." She knows what I want and what I need better than I do. We are one. She is one with the many.

Re: how does austrian economics fix the current problems?

ViennaSausage — Tue, 15 Jan 2008 11:03:20 GMT

Austrian Economics fixes current "problems" by letting the problems/the market fix itself, rather than have a governmental bureaucracy try to fix it.

Re: how does austrian economics fix the current problems?

Grant — Tue, 15 Jan 2008 09:18:17 GMT

Sean_M:
What are the actual solutions, instead of pointing out flaws?

Actual solutions, to most of Austrian economics, are to be carried out by entrepreneurs. The knowledge to solve many of society's problems is not condensed in any single school of thought, its dispersed among the entrepreneurs, engineers and scientists of tomorrow. If Austrianism believe it had the "solutions" to the world's problems, it would contradict itself. The free market doesn't "act" in itself, it is just a means to let others act and be rewarded for the good that they do.

This, I think, is the fundemental problem with democracy. The masses, whether laymen or specialists, yearn for solutions. Its hard for them to accept the fact that they cannot even hope to understand the solutions to most of the world's problems, and thus are totally incapable of picking someone who will fix them via the democratic process.

Re: how does austrian economics fix the current problems?

ancapgeko — Tue, 15 Jan 2008 08:01:44 GMT

Austrian economics could help in that it would elimate the "boom and bust" cycle. It's important to realize that a market downturn or uptick or whatever you want to call normal fluxuations in the economy are not the same as a "boom" and "bust". In the normal flow of the economy some areas are doing really good while others not so well and vise versa all the time, but with the business cycle artificially high credit in whole sectors of the market create a "boom" ie. the tech bubble, and now the housing bubble. This triggers malinvestment and price inflation which then brings the "bust". Without the fed creating money out of thin air prices would generally go down, but not always; value would generally go up, but not always. The point is that you wouldn't have the business cycle and the monetary inflation screwing things up.

Re: how does austrian economics fix the current problems?

xahrx — Tue, 15 Jan 2008 06:35:17 GMT

Sean_M:
A question was asked of me by a co-worker who had seen me reading a Rothbard essay, after he told me not to waste my time. "How can they fix the problems?"

They can't. The point is the market is self correcting, and interference in the market only delays those corrections and creates more problems as well. Underlying your friend's question is the assumption that anyone can 'fix' the problems. They can't, because technically there are no problems because perfection is not to be expected nor was it ever promised. 'The Market' is simply the sum total of exchanges that take place all the time. Allowing that it is left alone, there is nothing to fix. You may as well try and 'fix' a rock, or a waterfall, or an oak tree.

Re: how does austrian economics fix the current problems?

macsnafu — Mon, 14 Jan 2008 23:28:31 GMT

Sean_M:

A question was asked of me by a co-worker who had seen me reading a Rothbard essay, after he told me not to waste my time. "How can they fix the problems?" If the fed increases money supply when the market is down, hoping for it to balance itself, wouldnt *not* pumping the money supply just lead to a recession at different times? What are the actual solutions, instead of pointing out flaws? What does a free market do, other than changing the timing of booms and busts?

If a recession occurs after an artificial boom, that's simply the market's way of adjusting for the government interference. If there's no boom in the first place, there would be no need for a bust afterwards. Austrian economics is largely laissez-faire, believing that market forces tend towards equilibrium. Changing economic circumstances provide businessmen and entrepreneurs incentives, opportunities (whereas government sees problems) to take advantage of, and in so doing, they help push the economy back towards equilibrium. The free market is the process of counterbalancing supply and demand, providing decentralized information in the form of prices to economic actors.

I tend to think that the economy will always be changing, never actually reaching that equilibrium, but without government interference in the economy, we would be faced with molehills, not mountains--the economic transitions would be smoother and less violent.

Re: how does austrian economics fix the current problems?

Sean_M — Mon, 14 Jan 2008 22:42:05 GMT

well, if everyone's wealth goes to you, then yea you'll have the influence. i was looking for more of a serious answer, or a book recommendation that could answer more modern issues.

Re: how does austrian economics fix the current problems?

Stranger — Mon, 14 Jan 2008 22:10:49 GMT

Sean_M:
Stranger:

Why shouldn't you and I get the money first? We're part of the global market.

because the influence exerted by our financial markets is more far reaching than our simple consumerism. without financial markets, our consumerism is useless due to our trade deficit

Give me a trillion dollars in credit and you'll see how far reaching my influence can get.

Re: how does austrian economics fix the current problems?

Sean_M — Mon, 14 Jan 2008 21:34:01 GMT

Stranger:

Why shouldn't you and I get the money first? We're part of the global market.

because the influence exerted by our financial markets is more far reaching than our simple consumerism. without financial markets, our consumerism is useless due to our trade deficit

Re: how does austrian economics fix the current problems?

Stranger — Mon, 14 Jan 2008 21:24:54 GMT

Sean_M:
Ok, but the economy is 100% dependant on our banks, and the delay in realized ups or downs to the consumer is another symptom of the leveling effect of fed regulation, right?

Shouldn't the banks get the money first since they are the sole reason our economy remains viable in the global market?

Why shouldn't you and I get the money first? We're part of the global market.

Re: how does austrian economics fix the current problems?

Sean_M — Mon, 14 Jan 2008 21:23:20 GMT

Ok, but the economy is 100% dependant on our banks, and the delay in realized ups or downs to the consumer is another symptom of the leveling effect of fed regulation, right?

Shouldn't the banks get the money first since they are the sole reason our economy remains viable in the global market?

Re: how does austrian economics fix the current problems?

Bogart — Mon, 14 Jan 2008 19:56:22 GMT

The first and most importantly point is: The Federal Reserve DOES NOT FIX MARKET DOWNTURNS!!!! It creates money and gives it to banks who get to use it first. Consumers are hurt as they get the money after the banks do and prices have time to rise. There is no better example of this than the housing and petroleum markets that have seen large increases in prices. The result of free money is that the value of money falls. Consumers see this drop in money values and over-extend their ability to pay thinking that the value of money will go down forever. The result is the Sub Prime Melt Down we saw last year.

An Austrian Solution: The Federal Reserve should stop creating money. It should keep the supply of money fixed relative to gold or some other asset. A defacto Gold Standard. Then Congress should repeal the Federal Reserve Act and leave this job up to the Treasury. The Treasury could get rid of the currency and use gold, a real gold standard.

Actually any commodity would do. We could use zinc, nickle, silver, diamonds, etc. It need only have a high cost to acquire. Unlike printed or worse electronically created money.

Ron Paul's Kinder Gentler Soultion: Congress should allow competing currencies. One fellow made his own currency and immediately Walmart and Home Depot said they would accept it. The Jack Booted Feds seized his property and tossed him in prison. (But they were only doing their jobs. by supporting a government money monopoly.)

how does austrian economics fix the current problems?

Sean_M — Mon, 14 Jan 2008 19:34:30 GMT

I might not have a firm grasp on everything, I am just starting to educate myself on the Austrian Economic theories.

A question was asked of me by a co-worker who had seen me reading a Rothbard essay, after he told me not to waste my time. "How can they fix the problems?" If the fed increases money supply when the market is down, hoping for it to balance itself, wouldnt *not* pumping the money supply just lead to a recession at different times? What are the actual solutions, instead of pointing out flaws? What does a free market do, other than changing the timing of booms and busts?