Wednesday, November 25, 2015

Steve Keen on Austrian Economics

Steve Keen gives an interesting lecture below on the Austrian school of economics.

Some critical points:
(1) it is an oversimplification to say that Austrians do not support equilibrium as the essential feature of a capitalist economy (see 2.20 onwards), though admittedly there is some balance in this point later on. In fact, it is really only the stream of Austrian economics connected with Ludwig Lachmann that questions whether a tendency to general equilibrium is a feature of real world capitalism. The other streams of Austrian theory are fully on board with the idea that capitalism has an inherent tendency towards an equilibrium state (usually Mises’ final state of rest), even if it never reaches it (see also here).

However, it is very curious indeed that Carl Menger’s original Austrian theory seems to have shunned modern general equilibrium theory in important ways.

(2) I am very much afraid that in a talk on Austrian economics a disproportionate amount of time is spent on Schumpeter. Schumpeter was not an Austrian, but an idiosyncratic neoclassical.

(3) for a more wide-ranging critique of Austrian economics, see my post here.

1 comment:

  1. The only Austrians whose work contains insights that are relevant to the way real-world economies work are Lachmann and Schumpeter, and vulgar internet Austrians either never bother to read either or repudiate them as non-Austrians since they were not acolytes of the Mises/Hayek circle and since their theories largely conceive of economies in rather post-Keynesian terms, i.e. as dynamic disequilibrium systems.

    Although I think Eugen Böhm von Bawerk's concept of 'spontaneous order' and his critique of Marx are also worth reading. Laughably, the standard vulgar internet Austrians usually haven't read him either. They just read the fallacies of Mises and Hayek, take them as holy writ, and don't bother reading anything that might challenge their anointed scriptures and their warped view of the way the world works.