Justin Fox Needs Help!
Justin asks:
The Curious Capitalist Must a journalist listen to the true believers in Austrian economics?
The answer is "No."
An Austrian perspective should be part of everybody's diversified intellectual portfolio. But engaging with the true believers is a fruitless task.
Justin goes on:
Greg "PrestoPundit" Ransom e-mails, with regard to my parsing of the views on recessions of Paul Krugman and Tyler Cowen, which contained a very brief discussion of Austrian business cycle theory:
Krugman's attacks on Hayekian economics are considered ridiculous, embarrassing -- if not brain dead -- by those who actually know Hayek's work. It's pathetic stuff, really. I would be good ethics as a journalist (and scientist?) to report this truth of the matter. And, no, I don't count Tyler Cowen as a reliable reporter of the work of Hayek.... So why don't you go to people who actually know the Hayekian account -- economists like Roger Garrison and Steve Horwitz. This would be honest journalism, and honest science. TIME is known for such stuff, right?
And Justin protests:
All I was doing in my post was comparing a couple of recent opinion pieces by prominent economists, not trying to render a comprehensive verdict on Friedrich Hayek's 1920s writings about business cycles...
Once you have noted that somebody's opening blast is a claim that both Paul Krugman and Tyler Cowen are stupid... well, do you really need to know any more?
And then Justin threatens to disappear into the swamp forever:
I'm not going to do like Krugman and dismiss Austrian economics as "about as worthy of serious study as the phlogiston theory of fire." Just because something is outside the mainstream doesn't mean it's wrong. I guess the best thing for me to do would be for me to read more of the source material myself. I've dabbled in Hayek and Schumpeter and even Rothbard. If I devoured all of Menger's Grundsätze der Volkswirtschaftslehre, in German, that ought to give me a certain authority, right?...
Before coming to his senses:
That's not going to happen anytime soon, so I'll keep relying on Tyler Cowen...
UPDATE: Justin Fox:
Update Lew Rockwell weighs in on my taxonomy of Austrians:
The author hilariously sees Austrian economics as divided into two parts: the nice one, entirely in the super-wealthy Koch Brothers ambit, and the mean one, in mine! A little background: when I started the Mises Institute (an organization unmentioned by Time) 26 years ago, the head of the Koch Family Foundation angrily pledged to destroy me if I went ahead. "We have worked too hard to rid Austrian economics of Mises," he said. Hayek, he claimed, was their man, though, of course, he was far better than that, and a good supporter of the Institute. But the real problem turned out to be Murray Rothbard. It was the greatest of the Misesians and the founder of modern libertarianism whom the Koch World Empire longed to smash, and still does. Murray, founder of Cato, was the one man in the ambit to say no when the Kochs decided to jettison Mises for reasons of DC preferment. Otherwise, they felt, it would be harder to curry favor with the Fed and the Republican party. Hayek's views on central banking, gold, conservatism, and competitive currencies are no more DC-friendly than Mises's and Rothbard's, but they are ignored, and just his name invoked...
And Justin follows up:
Tyler Cowen: Statist, anti-Rothbardian agent of the Kochtopus: I had no idea what he was talking about regarding the billionaire Koch brothers, but a little Googling soon taught me that such salonfähig libertarian establishments as the Cato Institute, Reason magazine, and the George Mason University economics department are all mere tentacles of the "Kochtopus." And Tyler Cowen, who got me started on this whole adventure, is seen by some Austrian true believers of the Mises school as perhaps the Kochtopus's most monstrous creation. To quote (extensively) from David Gordon's history of the Kochtopus vs. Rothbard struggle on LewRockwell.com:
Walter Grinder, working from the Koch-dominated Institute for Humane Studies, promised a "Rothbardianism with manners." In his view, Rothbard had been too acerbic; through a policy of suaviter in modo, Austrian views could better gain access to the mainstream.... Grinder and others in leadership posts at IHS concluded that they should concentrate on elite universities such as Harvard, Yale, and Princeton in the United States, and Oxford and Cambridge in England. If students could be recruited from these universities or, if already sympathetic, admitted to their programs, success was at hand. Grinder placed particular emphasis on Tyler Cowen, a brilliant student who had been interested in Austrian economics since his high school days. Cowen enrolled in an Austrian economics program at Rutgers, where he impressed both Joe Salerno and Richard Fink with his extraordinary erudition. When Fink moved to George Mason University, Cowen moved with him; and he completed his undergraduate degree there in 1983. Grinder considered him the next Hayek, the hope of Austrian economics. In accord with the elite universities policy, Cowen went to Harvard for his graduate degree. There he came under the influence of Thomas Schelling and gave up his belief in Austrian economics.
After he finished his PhD in 1987, Cowen was for a time a professor at the University of California at Irvine, and he used to visit me sometimes in Los Angeles. I was impressed with his remarkable intelligence and enjoyed talking with him. But I remember how surprised I was one day when he told me that he did not regard Ludwig von Mises very highly. Here he fitted in all-too-well with another policy of Richard Fink and the Kochtopus leadership. They regarded Mises as a controversial figure: his "extremism" would interfere with the mission of arousing mainstream interest in the Austrian School. Accordingly, Hayek should be stressed and Mises downplayed.... Cowen eventually returned to George Mason University as a Professor of Economics. He is said to be the dominant figure in the department. Because of his close friendship with Richard Fink, who left academic work to become a major executive with Koch Industries and the principal disburser of Koch Foundation funding, Cowen exerts a major influence on grants to his department. Although he is largely favorable to the free market and believes that the Austrian school has contributed insights, Cowen remains a strong critic of Austrian and Rothbardian views. He has published a book that sharply attacks Austrian business cycle theory, Risk and Business Cycles: New and Old Austrian Perspectives (Routledge, 1997); and in an article written with Fink, "Inconsistent Equilibrium Constructs: The Evenly Rotating Economy of Mises and Rothbard" (American Economic Review, Volume 75, Number 4, September 1985), he argued that a key feature in the economic theory of Mises and Rothbard, the evenly rotating economy, is fundamentally flawed. It was ironic that the hope of Austrian economics, according to Grinder, and the prime ornament of his stress on elite universities, wrote an article for the most prestigious economic journal in the United States critical of the theory Grinder wished to propagate. Cowen has also criticized libertarian anarchism, another fundamental plank in Rothbard's thought. He has defended government funding of the space program and limited government subsidies for the arts.
Now I get why citing Tyler Cowen on matters Austrian so raises the hackles of some Austrian true believers. He's an apostate! Notice how Gordon makes no attempt to explain what's wrong with Cowen's critique of Misesian and Rothbardian ideas--it's enough just to point out that he has strayed from orthodoxy. Theirs is the true path, and all others are in error. As William F. Buckley wrote in his somewhat nasty obituary of Rothbard:
In Murray's case, much of what drove him was a contrarian spirit, the deranging scrupulosity that caused him to disdain such as Herbert Hoover, Ronald Reagan, Milton Friedman, and--yes--Newt Gingrich, while huffing and puffing in the little cloister whose walls he labored so strenuously to contract, leaving him, in the end, not as the father of a swelling movement that "rous[ed] the masses from their slumber," as he once stated his ambition, but with about as many disciples as David Koresh had in his little redoubt in Waco.
That bit about the number of disciples is not as true now as it was in 1995, when Buckley wrote it. Thank (or blame) the Internet for that. I can attest from personal experience that a link from LewRockwell.com, while not nearly the traffic driver that a headline on the TIME.com or CNNMoney.com homepages can be, brings more readers than a link from, say, Andrew Sullivan. Still, just as the great Austro-libertarian statesman Ron Paul's support in this year's presidential campaign turned out to be a mile deep and just a few inches wide, faithful-to-the-Mises-line Austrian economics will almost surely remain a pursuit for a small if enthusiastic minority. Because that's the way the small if enthusiastic minority seems to prefer it.
