On Jan 15, 2011, at 1:33 PM, Emanuel wrote:
Hi John,
For some time, I've been studying the Austrian Economics literature, and it explains a lot about the business cycle, the price of goods, the Fed, etc. However, there's one thing I don't understand. How can economists and economics professors teach Keynesian economics? How can they believe that central planning works, that the government can stimulate the economy or that tariffs should be imposed to "level the playing field" for competition? Now, I don't believe that they are fools or that there's a conspiracy or that they are paid to lie. I think a lot of them are really believing what they are saying.
***Emanuel,
Well, theya re able to repeat the arguments the system makes. Keep in mind, we all love a system that feeds us.
I think it gets back to security over freedom. The archetype is in 1 Samuel 8, wherein a free people, the Israelites, demand they have a king over them, like the other nations. This is not unique to Jews, just the bible is the first reported instance. The last election is the most recent reported instance. The vast majority want security over freedom.
Second, once the powers that be come to power, they need a system, a philosophy, to rule by. Socrates refused to recognize the state gods, and was anti-democracy. His students overthrew the democracy, but failed to recognize property rights. What a mess!
They got rid of Socrates, but Athens fell anyway.
Up to the Han dynasty China was entertaining the competing ethical systems of Mo Tze and Lao Tze, with Mo Tze’s the more popualr for a while, but Lao Tze’s system, now called Taoism, became the dominant system. Why? It is better for running an empire.
The powers that be get to decide the system we will live under.***
Are they shallow in thinking, choosing to focus only on specific aspects of economics such as labor or tariffs? Don't they see the entire image? How can Austrian Economics have any opposition?
***The only jobs in economics are government jobs. Whether working for the government, teaching, or some sort of banking position interacting with the government, economics largely has to do with relations with the government. If you want to get paid in economics, you better be a keynesian (or lite versions, such as chicago. ) Alan Greenspan was a hard money gold bug and Ayn Rand acolyte that Reagan appointed, and he immideiately went Keynesian.
There are exceptions: keynesian economics cannot measure or track anything, so government data is usually bad. When airlines lost money depending on government statitistics, John Williams made a killing correcting statisitics for the airlines. he now has a booming business just reporting reality. http://www.shadowstats.com/ . Also, there is cottage industry tachign austrian economics.***
Another thing is the following. In your blog, you briefly said that business don't go overseas for cheap labor but for cheap management. Could you please elaborate this? Wouldn't cheap labor or cheap management be the same since they both result in lower costs for American businesses?
***I agree we go overseas for lower costs, which is different that saying we go overseas for cheap labor. The distinction matters because if you go looking for cheap labor, you will end up at the wrong source. If you go looking for the best source overseas, it will never be the cheapest labor source, but the cheapest management source. Does thins make sense?***
John
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