Well, in bad times people tend to be more into fringe tendencies. The Austrians are no different, ironically they label others as being cranks with abandon.
They also seem to have successfully written out of history the awkward fact that von Hayek was defeated in the business cycle debates of the 1930s. Kaldor and Sraffa exposed the logical failings in his theories, the former making Hayek rewrite his first attempt but refuting the second! Then Hayek essentially gave up...
Still, it is unlikely that any government would embrace that particular dogma for two reasons.
Firstly, no ruling class will stop interfering in the economy. Their class interest is against it.
Secondly, capitalism would quickly implode if they did.
A market based gold-standard system would not see the end of credit creation simply because banks are capitalists and want to make money.
I suppose Rothbard's notion of making fractional reserve banking fraud may help, but then lack of credit would reduce economic activity massively (credit is created in response to demand). Not to mention the costs of regulating that particular law. And the regulation would accelerate to keep up with the credit inventions the market would produce to get round the initial regulations.
So, regardless of the logical problems (and the ignoring of wage labour and struggles over control of output), the Austrian solution could only work if the banking system were not capitalist....
Hi Ian, I really enjoy your replies, as you seem to be a guy with some strong background in libertarian theories.
Have you ever read about the economic theories of Antal Fekete? He advocates a 100% gold standard, but he does recognize that Rothbard's system wouldn't be able to acommodate to a high level of investment and/or quick shifts in consumer demand, so he found in the Real Bills Doctrine the solution. He developed a theory of interest and discount that, in my opinion, improves a lot from the Austrian orthodox view.
Well, in bad times people tend to be more into fringe tendencies. The Austrians are no different, ironically they label others as being cranks with abandon.
ReplyDeleteThey also seem to have successfully written out of history the awkward fact that von Hayek was defeated in the business cycle debates of the 1930s. Kaldor and Sraffa exposed the logical failings in his theories, the former making Hayek rewrite his first attempt but refuting the second! Then Hayek essentially gave up...
Still, it is unlikely that any government would embrace that particular dogma for two reasons.
Firstly, no ruling class will stop interfering in the economy. Their class interest is against it.
Secondly, capitalism would quickly implode if they did.
A market based gold-standard system would not see the end of credit creation simply because banks are capitalists and want to make money.
I suppose Rothbard's notion of making fractional reserve banking fraud may help, but then lack of credit would reduce economic activity massively (credit is created in response to demand). Not to mention the costs of regulating that particular law. And the regulation would accelerate to keep up with the credit inventions the market would produce to get round the initial regulations.
So, regardless of the logical problems (and the ignoring of wage labour and struggles over control of output), the Austrian solution could only work if the banking system were not capitalist....
Iain
An Anarchist FAQ
Hi Ian, I really enjoy your replies, as you seem to be a guy with some strong background in libertarian theories.
ReplyDeleteHave you ever read about the economic theories of Antal Fekete? He advocates a 100% gold standard, but he does recognize that Rothbard's system wouldn't be able to acommodate to a high level of investment and/or quick shifts in consumer demand, so he found in the Real Bills Doctrine the solution. He developed a theory of interest and discount that, in my opinion, improves a lot from the Austrian orthodox view.