Austrian Economist Quotes

Sadly for Bitcoin, most Austrian economists aren’t fans – even as Bitcoiners remain huge fans of Austrian economics.27 You will find Austrian jargon in common use in the cryptocurrency world. Proponents of Austrian economics include the fringe economics blog Zero Hedge, which has confidently predicted two hundred of the last two recessions. Zero Hedge covers Bitcoin extensively, and Bitcoiners are fans in turn.

One of the key lessons that Charles Koch took from the Austrian economists von Mises and Hayek was that markets never stood still. The status quo never survived. Markets always build up and then tear down. It was an evolutionary process that never ended, and companies that tried to fight the process would only be devoured by the forces of change in the end.

Many thinkers have tried to “naturalize” consumerism in that way, including most social Darwinists, Austrian School economists (Ludwig von Mises, Friedrich Hayek, Murray Rothbard), Chicago School economists (George Stigler, Milton Friedman, Gary Becker), Darwinian libertarians, globalization advocates, management gurus, and marketers. Their model (which I call the Wrong Conservative Model, because I think it’s wrong, and because it’s usually advocated by political conservatives) is: human nature + free markets = consumerist capitalism

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist. (The General Theory of Employment, Interest, and Money)

If interest rates are kept below their natural level, misguided investments occur: too much time is used in production, or, put another way, the investment returns don’t justify the initial outlay. ‘Malinvestment’, to use a term popularized by Austrian economists, comes in many shapes and sizes. It might involve some expensive white-elephant project, such as constructing a tunnel under the sea, or a pie-in-the-sky technology scheme with no serious prospect of ever turning a profit.

The form of argument used by Farjoun and Machover is rather alien to the tradition of political economy. The later has tended, from its inception, to look for explanations in terms of the actions of rational profit maximising individuals directing the economy towards some sort of equilibrium. Instead Farjoun and Machover, who were mathematicians not economists, imported the form of reasoning that had been used in thermodynamics or statistical mechanics. This branch of physics deals with the behaviour of large complex systems with huge numbers of degrees of freedom. The classical example of this type of system is gas composed of huge numbers of randomly moving molecules. In such a system it is fruitless to try and form a deterministic and microscopic picture of the interaction of individual molecules. But you can make a number of useful deductions about the statistical properties of the whole collection of molecules. It was from the statistical properties of such collections that Boltzmann was able to derive the laws of thermodynamics[Bol95]. What Farjoun and Machover did was apply this form of reasoning to another chaotic system with a large number of degrees of freedom : the market economy. In doing this they initiated a new discipline of study : econophysics. This, in a very radical way, views the economy as a process without a subject. It assumes nothing about knowing subjects, instead it attempts to apply the principle of parsimony. It assumes nothing about the individual economic actors. Instead it theorises the aggregate constraints and and statistical distributions of the system that arise from the assumption of maximal disorder. A such this approach is anathema to the subjectivist Austrian school9.

Bitcoin is based on ideas from a particular subculture of cryptographers, the “cypherpunks” of the 1990s, who were into the “anarcho-capitalism” of heterodox American economist Murray Rothbard and the Austrian School of economics.46 The key concept is extremist libertarianism. Not just less regulation, and more freedoms for business — but no regulations, and total freedom for business. Somehow, complicated social property rights would still exist without any government

This ability to look beyond the obvious of the immediate seen and to foresee its later outcomes was, in Bastiat’s view, the true differentiator. “Now this difference is enormous, for it almost always happens that when the immediate consequence is favorable, the ultimate consequences are fatal, and the converse. Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, at the risk of a present small evil.

If every person has the right to defend―even by force― his person, his liberty, and his property, then it follows that a group of men have the right to organize and support a common force to protect these rights constantly.” ~ Frederic Bastiat (1801-1850) French Politician & Economist Forefather of Libertarian Ideals & Austrian Economics Theory of Thought

Mises, perhaps the greatest economist of all time, broadened the thinking among his students; the market could not be viewed as or contained by a mere static thing or physical location, but rather as the actions of countless people

Some economists became obsessed with market efficiency and others with market failure. Generally held to be members of opposite schools-"freshwater" and "saltwater," Chicago and Cambridge, liberal and conservative, Austrian and Keynesian-both sides share an essential economic vision. They see their discipline as successful insofar as it eliminates surprise-insofar, that is, as the inexorable workings of the machine override the initiatives of the human actors.

the only way in which a whole country may save is by reducing its consumption.  Consumption is therefore the destruction of wealth, whereas savings makes it possible to multiply it. Let us take a similar example to that given by the great Austrian economist, Eugen von Böhm-Bawerk, to illustrate how underconsumption —savings— is what permits the formation of the so-called “capital goods”, which are so necessary to increase productivity as well as future consumption.[12]

Entrepreneurs continually demonstrate that faith and imagination are the most important capital goods in a changing economy, and that wealth is a product less of money than of the mind to create, produce, invest, and, in the often-repeated expression of Austrian economist Joseph Schumpeter, to creatively destroy (to shut down businesses that are not working).

In a passage often cited by Western conservatives and especially loved by American libertarians, the Austrian economist F. A. Hayek wrote in 1960: “The greatest danger to liberty today comes from the men who are most needed and most powerful in modern government, namely, the efficient expert administrators exclusively concerned with what they regard as the public good.

Value is subjective, as the Austrian economists say. We make value by our thinking, and our thinking is notoriously unpredictable.

Thomas Piketty, the economist of the moment, writes that after he obtained an economics doctorate, and spent several years teaching at M.I.T., “I was only too aware of the fact that I knew nothing about the world’s economic problems.” Piketty goes on, “To put it bluntly, the discipline of economics has to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences.” The student group agrees with Piketty. In the open letter, the students argue that an economics degree “should include interdisciplinary approaches and allow students to engage with other social sciences and the humanities.” But the students’ main beef is that, even within the subject of economics, the standard curriculum is overly restrictive, and excludes much that is valuable. The letter calls for students to be exposed to “a variety of theoretical perspectives, from the commonly taught neoclassically-based approaches to the largely excluded classical, post-Keynesian, institutional, ecological, feminist, Marxist and Austrian traditions—among others. Most economics students graduate without ever encountering

The Austrian economist Eugen von Böhm-Bawerk stated that the cultural and political level of a nation could be discerned by its interest rate: The more advanced the nation, the lower the loan rate.

Mises and Hayek Beginning with Ludwig von Mises and F.A. Hayek, the links between liberalism and the Austrian School become intense and pervasive, since these two scholars were themselves at once the outstanding Austrian economists and the most distinguished liberal thinkers of the twentieth century. The American academic world, however, deemed none of this sufficient for them to be accorded the kind of positions to which they were clearly entitled.50 They, and in particular Mises, were also responsible to a greater degree than is generally appreciated for the upsurge of the free-market philosophy in the second half of the century.51 But since the views of the two great men are so often amalgamated, it should be emphasized that not only did they differ to an extent on economic theory (Salerno 1993; see also Kirzner 1992c: 119–36), but, more pertinently to the theme of this essay, they exhibited a sharp distinction in the degree of their liberalism. What follows refers to Hayek’s political attitudes, not to his contributions to economic science. These were highly significant and valuable in the earlier part of his career, as he together with Mises built the theoretical foundations of the modern Austrian school.52 While Mises was a staunch advocate of the laissez-faire market economy (Mises 1978a; Rothbard 1988: 40; Hoppe 1993; Klein 1999), Hayek was always more open to what he saw as the useful possibilities of state action. He had been a student of Wieser’s, and, as he conceded, he was “attracted to him . . . because unlike most of the other members of the Austrian School [Wieser] had a good deal of sympathy with [the] mild Fabian Socialism to which I was inclined as a young man. He in fact prided himself that his theory of marginal utility had provided the basis of progressive taxation . . .” (Hayek 1983: 17). Early in his career, Hayek stated that the lessons of economics will create a presumption against state interference, adding: However, this by no means does away with the positive part of the economist’s task, the delimitation of the field within which collective action is not only unobjectionable but actually a useful means of obtaining the desired ends. . .the classical writers very much neglected the positive part of the task and thereby allowed the impression to gain ground that laissez-faire was their ultimate and only conclusion . . . (1933: 133–34) This remained Hayek’s standpoint throughout his long and richly productive scholarly life. It is regrettable, but typical, that a great many confused commentators continue to characterize him as a advocate of laissez-faire.53 In fact, he

The champions of socialism call themselves progressives, but they recommend a system which is characterized by rigid observance of routine and by a resistance to every kind of improvement. They call themselves liberals, but they are intent upon abolishing liberty. They call themselves democrats, but they yearn for dictatorship. They call themselves revolutionaries, but they want to make the government omnipotent. They promise the blessings of the Garden of Eden, but they plan to transform the world into a gigantic post office.” —Ludwig Von Mises (1881–1973) Austrian Economist

Of all the tragedies wrought by this collective amnesia in economics, the greatest loss to the world is the eclipse of the “Austrian School.” Founded in the 1870s and 1880s, and still barely alive, the Austrian School has had to suffer far more neglect than the other schools of economics for a variety of powerful reasons. First, of course, it was founded a century ago, which, in the current scientific age, is in itself suspicious. Second, the Austrian School has from the beginning been self-consciously philosophic rather than “scientistic”; far more concerned with methodology and epistemology than other modern economists, the Austrians arrived early at a principled opposition to the use of mathematics or of statistical “testing” in economic theory. By doing so, they set themselves in opposition to all the positivistic, natural-science-imitating trends of this century. It meant, furthermore, that Austrians continued to write fundamental treatises while other economists were setting their sights on narrow, mathematically oriented articles. And third, by stressing the individual and his choices, both methodologically and politically, Austrians were setting themselves against the holism and statism of this century as well.

When the central bank lowers interest rates below what they would have reached on the market, it sets in motion a series of responses by investors and consumers that will prove to be incompatible. The result is the recession, which is the economy’s return to health: the economy’s unsustainable configuration is unwound, and resources (including labor) are reallocated to lines of production that make sense in terms of resource availability and consumer preferences.

When the central bank lowers interest rates below what they would have reached on the market, it sets in motion a series of responses by investors and consumers that will prove to be incompatible.

Long after Rockefeller had exited the industrial scene, various economists, while espousing the general superiority of competition, conceded the economic wisdom of trusts under certain conditions. The conservative, Austrian-born economist Joseph A. Schumpeter, for example, contended that monopolies might prove beneficial during depressions or in new, rapidly shifting industries. By replacing turmoil with stability, a monopoly “may make fortresses out of what otherwise might be centers of devastation” and “in the end produce not only steadier but also greater expansion of total output than could be secured by an entirely uncontrolled onward rush that cannot fail to be studded with catastrophes.” Schumpeter imagined that entrepreneurs wouldn’t commit large sums to risky ventures if the future seemed cloudy and new competitors could easily spoil their plans. “On the one hand, largest-scale plans could in many cases not materialize at all if it were not known from the outset that competition will be discouraged by heavy capital requirements or lack of experience, or that means are available to discourage or checkmate it so as to gain the time and space for further developments.