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« How Obama Got Rolled By Wall Street | Main | CHART: FDIC WATCH LIST: 829 problematic banks in Q2 (Now More Than 1 In 10 U.S. Banks In Trouble) »
Tuesday
Aug312010

Austrian School Cat Fight!

Professor Peter Boettke of George Mason University.

###

By Dr. Pitchfork 

---

Last week, the Wall St. Journal published a glowing profile of George Mason University economics professor, Peter Boettke (pronounced "bet'-key").  Boettke is one of the leading academic economists working in the Austrian tradition and he writes frequently for Coordination Problem (formerly known as The Austrian Economists blog).  The WSJ article notes that "as the economy flounders, debt mounts and growth—revised downward Friday—flags, Mr. Hayek and his Austrian-school adherents like Mr. Boettke are resurgent as their views resonate with more people."  On bailouts and "stimulus," the article quotes Boettke as saying:

What I'm really worried about is an endless cycle of deficits, debt, and debasement of currency.  What we've done is engage in a set of policies that's turned a market correction into an economy-wide crisis.

For Daily Bail regulars, he's preaching to the choir, but the profile of Boettke, which includes quotes like this one, is an encouraging sign that our side of the argument on bailouts, Keynesian "stimulus," deficits and debt, is finally getting a hearing.

Still, that didn't stop some free-market, Austrian-leaning folks from using the occasion to stir up a good old-fashioned cat fight.  David Kramer, writing on the Lew Rockwell blog about the Boettke piece, sputtered:

Yet, “somehow,” one of the biggest One World Government propaganda rags—the War Street Journal—wrote a puff piece on Prof. Boettke of George Mason University who (according to this rag) “is emerging as the intellectual standard-bearer for the Austrian school of economic.” Perhaps in the minds of Peter Boettke and the folks at the War Street Journal. Now why in the world would the WSJ print such a baldfaced lie when Boettke could not even shine the shoes of the greatest living Austrian economists in the world today—Hans Hoppe, Walter Block, David Gordon, Joseph Salerno, Guido Hülsmann (I could go on)? Hmmm…could it be…could it be…could it be because Prof. Boettke is still a believer in one of the biggest scams ever perpetrated on human civilization [i.e. the Fed]?

If you didn't know already, the world of Austrian economics is bitterly divided into two, more or less distinct camps.  The Austrians associated with George Mason see themeselves as the right-thinking, cosmopolitan standard-bearers of the tradition of Mises, Hayek, Kirzner and Rothbard.  They view the Austrians associated with the Mises Institute and Lew Rockwell.com (generally speaking) as cultish, gold-bug conspiracy theorists whose understanding of Austrian economics is obsolete, and whose politics give aid and comfort to neo-confederates and racists.  By the same token, the Mises Institute/Lew Rockwell crowd (generally speaking) regards the GMU Austrians as sellouts who would rather be cosmopolitan than libertarian, and respectable rather than radical.  Besides, the GMU Austrians aren't "real" libertarians at all, they're "Beltway" libertarians.

The recriminations from either side have more than a grain of truth in them, but for Pete's sake!  Does it really make sense to rehash petty squabbles (that almost no one gives a crap about) when people like Ben Bernanke and Tim Geithner are still on the loose, and wreaking all manner of havoc with the economy our children will inherit?  Even worse than being a waste of time and energy, some of the things Kramer claims about Boettke aren't even true.  He claims that Boettke is "a believer" in the Fed (aka "one of the biggest scams ever perpetrated on human civilization").  He also suggests that Boettke (like all those other "Beltway" libertarians), would rather praise the moderately pro-state Hayek than the more radical Mises, who many people regard as a crackpot.  Kramer writes:

And guess who is the only Austrian (albeit barely) economist that the rag [i.e. the Wall St. Journal] mentions in conjunction with Boettke and the Austrian school of economics? Friedrich Hayek. You know, the “Austrian” economist who once stated that the welfare state works.... I guess that’s why the Socialist members of the Nobel Price committee gave Hayek the Nobel Prize in “Economics” rather than the exponentially superior Ludwig von Mises (the number one Austrian economist—and, for that matter, economist—in history)

To which, I can only say:  You Cannot Be Serious!

Responding to a David Frum attack on Ron Paul's views on monetary policy, Boettke once wrote:

Mises was not a crackpot, but perhaps the most insightful economic thinker in the world at a time when the world itself was upside down.  He was an anti-socialist when the world looked upon socialism with hope, and he was an anti-Keynesian when the discipline of economics all moved in the Keynesian direction.  Subsequently we learned that socialism led not to hope but to political tyranny and economic deprivation, and Keynesianism was logically flawed in lacking microfoundations, and practically flawed in leading to world-wide inflation and economic stagnation.  In other words, Mises was right!  In fact, I think one could make a reasonable argument that Mises was right on every single controversial position he held --- from methodology to public policy.

That's right, this is the same Peter Boettke who Kramer accuses of treating Mises as some kind of crazy uncle you try not to mention by name.

And what does Boettke think of central banking (i.e. the Fed)?  Like any good Austrian, he rejects the notion that a central banker has the requisite knowledge to set interest rates or manage the money supply.  And like Peter Schiff, he has grown fond of pointing out how the Fed continually throws the economy out of whack with artificially low interest rates -- or, what Boettke calls "the crazy juice."  So, let's get this straight.  Peter Boettke says the Fed cannot possibly do the job it is tasked with doing, refers to Ben Bernanke as a purveyor of "crazy juice," and David Kramer wants to believe that Boettke is just another Fed apologist?  Good grief.   It seems Kramer must be the one drinking the crazy juice.

Personally, I read Lew Rockwell.com every day.  I think people like Tom Woods, Robert Murphy and Walter Block -- to say nothing of Rockwell himself -- have done great work over the years advancing the causes of liberty and sound economics.  And within the field of economic science, so have academics like Boettke and GMU alum, Steve Horwitz, who runs Coordination Problem/The Austrian Economists blog.  But the cat-fighting that goes on on these occasions is just stupid.  In a saner moment, even David Kramer would have to agree that it's a waste of time and energy and it needs to stop.  Especially when you consider that these central-planning geniuses are still in power:

 

 

 

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Reader Comments (26)

Congratulations to Pete Boettke. It's nice to see him get the kind of recognition he deserves. And check out this jaw-dropping list of publications: http://econfaculty.gmu.edu/pboettke/pubs.html
Aug 31, 2010 at 1:54 AM | Registered CommenterDr. Pitchfork
Fun piece to read...i'll check out the links in the morning...you should post it at the austrian school sites you visit and make sure it gets read by both sides in the cat fight...
Aug 31, 2010 at 2:23 AM | Registered CommenterDailyBail
Dr. Boettke is now deleting all somewhat worrisome and innocuous comments from his blog. FYI.
Aug 31, 2010 at 11:10 AM | Unregistered CommenterRachel
You are not going to get both or all sides of the story as Dr. Boettke seems to like to delete any critique on his blog.
Aug 31, 2010 at 11:17 AM | Unregistered CommenterRachel
I must have hit a lil too close to home when I mentioned he was cashing a paycheck stolen from the taxpayer's of Virginia while funding the broadening waistline of econ professors that will not result in any real Austrian revival.
Aug 31, 2010 at 11:21 AM | Unregistered CommenterRachel
Rachel...I don't know the story so I can't comment...these comments sections are free and open to debate..
Aug 31, 2010 at 11:24 AM | Registered CommenterDailyBail
Rachel,

I saw your comment. I thought it was pretty rude. What's your beef with Boettke? I've never understood why some LRC-ers get all worked up over what Boettke or Horwitz or doing -- and I suspect it isn't even about them, but some of the, um, personalities who inhabit their part of the Austrian universe.
Aug 31, 2010 at 11:40 AM | Unregistered CommenterJames H
Good post. You pretty much nail it on the head. If you have to invent stuff to complain about, then that's a tacit admission that you in fact have nothing to complain about. I have written for Mises.org, and I know Boettke and Horwitz. The former mostly rehashes what the great Founders have said; the latter want to be good economists with the Austrians as foundation. Much is to be said about both approaches, but only the latter approach will actually mainstream Austrian ideas and move economics forward.
Aug 31, 2010 at 12:29 PM | Unregistered CommenterTroy Camplin
"Rachel,"

I deleted your comment at CP. Remarks about the waistlines of your hosts or other commenters are out of bounds. Have a substantive disagreement? Post it. Have an insult? Nuked. There's plenty of disagreement on CP, as even reading for 5 minutes would indicate. What we don't tolerate is insulting behavior.

Add that to that the fact that there's only about 10 different names posting under your IP, and you might understand why you were sent to the penalty box. Come back to CP when you can interact like an adult.
Aug 31, 2010 at 2:04 PM | Unregistered CommenterSteven Horwitz
Ha, if this is a catfight, I'm all clawed up.

Check out the comments section:

http://www.economicpolicyjournal.com/2010/08/kelly-evans-again.html

From Boettke: "I have also repeatedly claimed that I do not want to get involved in internet wars..." Maybe this is why they jumped on me - am I the only person from GMU (a lowly grad student just starting his second year) to even respond to the attacks on Boettke? Ignoring crackpots who think you're part of a conspiracy of the power elite when you is probably the best policy, but calling the GMU Austrians "the Uptights" is just so childish and ridiculous that my annoyance got the better of me.

To paraphrase DiLorenzo - how boorish can you get! Labeling a great economist from your own school of thought an "Uptight" because of extraordinarily childish jealousy over a WSJ article!

Look, I understand giving the government or the Fed or the war both barrels, but fellow Austrian School economists? Is the LRC crowd completely incapable of moderating their tone? It makes me think of Stalinists screeching about Trotskyite wreckers whenever they bring up the whole Koch thing. I've been reading LRC since my undergrad days but I feel like I've been purged.
Aug 31, 2010 at 5:51 PM | Unregistered CommenterBrian Bedient
Brian, I saw your comments. It's just crazy what comes out of DiLorenzo sometimes. Clawed up, indeed. It really is too bad, but what's encouraging is that most people on the periphery are on the same page as you.

What area(s) do you plan to study, by the way? You're pretty lucky to be at GMU -- this is an exciting time to be an economics student and an especially exciting time to be an Austrian.
Aug 31, 2010 at 7:21 PM | Registered CommenterDr. Pitchfork
Dr. Pitchfork - GMU is absolutely an exciting place to be right now; I came all the way from California to attend. It feels like important ideas are going to come out of this place...maybe Vienna felt like this around a century ago?

I think I'd want to study history of thought if I thought there to be more call for it in the profession. I studied under a professor named James Ahiakpor back at Cal State Hayward who turned me on to a lot of classical economic thought, and studied Austrian ideas more or less independently through Mises.org (which is why it really irks me that I've been singled out by them as a "Beltway libertarian" along with one of my most radical professors...I'm an anarchist, for the love of the Flying Spaghetti Monster, and guess whose arguments converted me? Hans-Hermann Hoppe). I feel like having a classical AND Austrian background helps me fit a few extra pieces into the puzzle.

I took the Austrian economics sequence at GMU in my first year (instead of taking stuff like econometrics I was supposed to take in my first year) and I'd really like to take all that knowledge and put it toward the development field...critiquing foreign aid practices and state-led development planning schemes through an Austrian lens sounds like the work of a couple of lifetimes to me. The lack of progress of various developing countries worldwide is of much concern to me - imagine the untold human suffering that comes from economic blunders in places like Zimbabwe and you can't help but feel sick to your stomach.

I know I don't want to make a career of vicious arguments with people who essentially believe the same things I believe over why Professor Boettke changed the name of his blog, that's for certain.
Aug 31, 2010 at 10:37 PM | Unregistered CommenterBrian Bedient
Brian, thanks for sharing and best of luck. Sounds like Vienna to me. (btw, did you ever write Tom DiL and ask him WTF?)
Aug 31, 2010 at 10:51 PM | Registered CommenterDr. Pitchfork
Sent to me by email...asking me to post the comment...not sure if this will ruffle some feathers...

---

As one who has been banished himself by Horwitz, I am certainly inclined to be sympathetic to anyone else who has suffered that fate. But Rachel got what she deserved. She was way out of line.

But that doesn't change the fact that you can still be banished by Steve Horwitz just for winning the argument with him.

In fairness, he's certainly not the only one like that. Many years ago, Lew Rockwell threw me out of Mises University for challenging Rothbard, and I have since been banished from his Mises Economics blog and Mario Rizzo's ThinkMarkets, for the same transgression, winning the argument.

I am happy to report that I have the run of the house at Cafe Hayek, whose operators, Roberts and Boudreaux, apparently have the confidence in themselves and dedication to economics lacking elsewhere, and, are, for my money, the real leaders of the Austrian School today.

By the way, that discussion over at Coordination Problem now about the disagreement between Kirzner and Lachmann is really over equilibrium, with Kirzner saying the market tended toward it and Lachmann saying that we couldn't be sure of that.

You wouldn't know that from all the learned mumbo jumbo over there, but that's what it's really all about


DG Lesvic

the bad boy of economics and terror of the Austrian School
Aug 31, 2010 at 10:51 PM | Registered CommenterDailyBail
DG Lesvic

the bad boy of economics and terror of the Austrian School
---
LOL Rest assured, the ban (which I was unaware of) was NOT for "winning the argument."
Aug 31, 2010 at 10:53 PM | Registered CommenterDr. Pitchfork
Dr. Pitchfork, with regard to Dr. DiLorenzo - my original post was incredibly vague to the point of being non-falsifiable and he came back within a couple of hours shouting "liar!" because a couple of his buddies hadn't remembered any disruptions. He didn't contact me to ask me to clarify (as a rational person trying to solve a mystery might have done), nor did he, to my knowledge, talk to Dr. Boettke about it. He wanted to make political hay out of it in his one-sided battle against Dr. Boettke, who, to his credit, is studiously ignoring his LRC critics. DiLorenzo obviously doesn't care about what I heard from Boettke or what actually happened to spur the program's name change (which did happen shortly after Coase's birthday). I see no point to further engaging someone who's just trying to score points without regard for the truth - DiLorenzo can go to hell.
Aug 31, 2010 at 11:24 PM | Unregistered CommenterBrian Bedient
DailyBail, the thing is, this isn't really even academic politics - the main offenders over at LRC seem to mostly make their money as writers for the popular market, wannabe Fox News talking heads, speakers at Ron Paul events, and the like. As DiLorenzo pointed out on the LRC blog, his books are like totally more popular than Boettke's so HE should be the Homecoming Queen instead (because if you sell a lot of books to laymen it means you're a good academic economist right? So when is Glenn Beck getting his Nobel?). Whereas, for example, Dr. Pitchfork cited Dr. Boettke's jaw-dropping list of academic publications earlier in the thread. The collision between GMU and LRC seems like it's partly the result of two differing business models having the same brand name. As Boettke pointed out to my class, it's very difficult to be a professional ideological crusader and an academic economist at the same time. It shows how detached from the normal academic world DiLorenzo, famous for writing pro-Confederate popular history rather than economics, is that he thinks book sales should determine one's standing as a scholar. This isn't the kind of bloody little turf war over a department chair or a point of semantics that characterizes normal academic politics. This is a mass political and cultural movement's leadership attacking a group of scholars they consider apostates.
Sep 1, 2010 at 12:28 AM | Unregistered CommenterBrian Bedient
Well delineated brian, thanks...and i had already removed my comment about academic politics as in retrospect it seemed inappropriate on my part...

I float far on the outside of the Austrian School and enter briefly when I need a smackdown for some Krugman Keynesian witch-doctoring madness...if you search the site, you'll find several Austrian takedowns of Krug...

Any time you might wish to contribute anything to the site, send it my way by email....
Sep 1, 2010 at 12:38 AM | Registered CommenterDailyBail
Since he invoked my name, let's be clear: Mr. Lesvic has indeed been banned at our blog, but not because of the content of his arguments. Rather he is insufferably rude to both his hosts and other commenters and refused to alter his behavior after several warnings from us. Now that he has infested your nest here, good luck to you. One quick google search of his name and the name of our blog will give you all the warning you need to have.

Mr. Lesvic, in fact, is a warped kind of cyber-stalker.
Sep 1, 2010 at 8:00 AM | Unregistered CommenterSteven Horwitz
I removed the 2nd post from Mr. Lesvic...
Sep 1, 2010 at 8:53 AM | Registered CommenterDailyBail
Of course I would like to respond to Prof. Horwitz’ attack upon me, but rather than subject the good people here to another Austrian School “cat fight,” while America burns, I would simply submit this commentary on the discussion taking place at his blog now, and which I was not allowed to post there.

Congratulations to the best teacher of economics in the world today, Prof. Ebeling, for that wonderful exposition of the scientific method in economics.

But, if this discussion and economics itself is to have any impact beyond academic, esoteric circles, we need to take it back down to earth.

It all begins with the housewives shopping for the evening dinner and finding more meat but not as many potatoes as they wanted. They would bid up the price of the potatoes and downward that of the meat, thereby sending a signal to the farmers, less meat and more potatoes. And to maximize their sales and profit, the farmers and all of the other producers must respond to the signals and wishes of the consumers, and until there were no more relative oversupplies and undersupplies, but equilibrium between the supply of and demand for meat and potatoes, and everything else.

It was this spontaneous tendency toward equilibrium, driven by the profit motive, and guided by the signals of price, that Adam Smith called the Invisible Hand.

Since it, briefly, explains how the market coordinates its separate efforts, without a central, socialist dictator telling everyone what to do, and is the only thing that does so, it is essential to the case for a free market, and, conversely, discrediting it is equally essential to the case for socialism.

Prof Lachmann’s role in the debate was this. An otherwise stalwart defender of the free market, he questioned the conception on which it most depended, the Invisible Hand, or tendency toward equilibrium. Since the market actors were prone to error, there was disequilibrating as well as equilibrating action in the market; and, as Lachmann saw it, no way of knowing whether the equilibrating would outweigh the disequilibrating, and the market actually tend toward equilibrium or disequilibrium

But, we know this much. The market tends toward a final state of rest, and could never rest at disequilibrium.

The housewives could not rest with more meat but not as many potatoes as they wanted, nor the farmers with more meat but not as many potatoes as they could sell

To maximize their satisfaction, both consumers and suppliers must take the actions which, in the absence of any further action, would bring about equilibrium, which, if they didn’t actually attain it, tended toward it.

Entrepreneurial error doesn’t change the fact that the market tends to correct it, and interference with the market is interference with the correction.

The possibility of market failure is immaterial. Economics is not a science of possibilities, for anything is possible, nor of certainties, for nothing is certain. It is a science of practical and reasonable assumptions, and the futility of human action is not one of them. The possibility of getting hit by a truck if we get out of bed in the morning doesn’t mean we shouldn’t get out of bed. To live, we must act, to act, presume success, and, to analyze our action, a universe conducive to it, tending not toward disequilibrium and chaos, but equilibrium and order.

DG Lesvic
Sep 2, 2010 at 2:10 PM | Registered CommenterDailyBail
Well said, DG. Of course, the "tendency toward equilibrium" is a red herring. Assuming that the world changes, markets are always in a dynamic state of dis-equilibrium. Equilibrium, general or otherwise, is just a textbook fantasy, whatever heuristic value it might have in the classroom or anywhere else. It's almost better not to talk about it at all.
Sep 5, 2010 at 1:57 PM | Registered CommenterDr. Pitchfork
If you can't stand the heat get out of the kitchen.

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter.
George Washington

Ah, the bully pulpit, be careful with all that power.
Sep 5, 2010 at 3:12 PM | Unregistered CommenterZ
Dr. Pitchfork,

You wrote,

"the "tendency toward equilibrium is a red herring."

To Mises, it was an essential tool of analysis, “which economic thought cannot do without.”

Notes and Recollections, P 36

You wrote,

"markets are always in a dynamic state of dis-equilibrium."

That's right.

You wrote,

"Equilibrium, general or otherwise, is just a textbook fantasy."

That's right.

Finally, you said that whatever heuristic value it might have, "it's almost better not to talk about it at all."

Why wouldn't you want to talk about something that had "heuristic" or explanatory value?

Rothbard explained its value:

The final equilibrium position is “like the mechanical rabbit being chased by the dog. It is never reached in practice and is always changing, but it explains the direction in which the dog is moving.”

Man, Economy, and State, P 276

That's what economics is all about, explaining the direction in which action upon the market moves it.

Did you really mean to say that it was better not to talk about economics at all?

But, keep pitchin’ that manure.

Prof. Horwitz complained that I was a “warped kind of cyber-stalker.” What he was really complaining about was that, in this new age of the Internet, the profession can still run from the science but no longer hide from it.

Was I “insufferably rude,” as he charged? I hope so, for while the elite would limit economics to a mutual admiration society, exposing learned pretension is an economist’s job.

Why not a Scientific as well as Public Choice Economics, exposing the motives of economists as well as officials? It is not economics but the profession that could not stand the scrutiny, and, as should be apparent by now, economics can not stand the lack of it.


DG Lesvic
Sep 6, 2010 at 10:59 PM | Unregistered CommenterDG Lesvic
LOL (btw ["by the way"], that means I'm laughing, as in, laughing at you)

Here's why:

You wrote:

'You wrote,

"the "tendency toward equilibrium is a red herring."

To Mises, it was an essential tool of analysis, “which economic thought cannot do without.”

Notes and Recollections, P 36'

Mises goes on to say in the very next sentence: "But [Austrian economics] is always aware of the purely instrumental nature of such an idea, and similar aids." Instrumental, heuristic...Yes, I do believe Mises and I are on the same page on this one.
---

You wrote:

'Finally, you said that whatever heuristic value it might have, "it's almost better not to talk about it at all."

Why wouldn't you want to talk about something that had "heuristic" or explanatory value?'

This was a nice turn of phrase on my part. It's a shame it was lost on you. But even in interpreting my statement literally, you've simply misread what's actually there. The key word here is "almost." It is "almost" better not to talk about states of equilibrium. Surely the world of economics would be better off if SOME people altogether stopped talking about equilibrium, no?
---

Then you wrote:

'Rothbard explained its value:

The final equilibrium position is “like the mechanical rabbit being chased by the dog. It is never reached in practice and is always changing, but it explains the direction in which the dog is moving.”

Man, Economy, and State, P 276'

Red herring, mechanical rabbit... If markets can chase mechanical rabbits, then I say economists can get distracted by red herrings. Mises agrees with me in any case (see above).
---

Finally, you wrote:

'That's what economics is all about, explaining the direction in which action upon the market moves it.

Did you really mean to say that it was better not to talk about economics at all?'

"[E]xplaining the direction in which action upon the market moves it" is just one of many aspects of the problem of scarcity and how human organization deals with that problem. But your question is a complete non sequitur. Are you really suggesting that economics should treat equilibrium as something OTHER THAN a "purely instrumental" concept, as Mises would have it (or a "heuristic" one, as I have termed it)? I ask because I am entirely in agreement with Mises and Rothbard and have presented the issue in much the same terms. You have simply mis-read what I wrote, presumably to show what a "bad boy" you are. (Are you joking?)

Anyhow, thanks for playing.
Sep 7, 2010 at 12:46 AM | Registered CommenterDr. Pitchfork
Dr. Pitchfork,

Congratulations. You won the argument.
Sep 7, 2010 at 2:09 AM | Unregistered CommenterDG Lesvic

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