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Congratulations to Prof Boettke for this recognition.

Wow Pete--they don't even publish my Letters to the Editor.

I must admit I got mad at the writer when she wrote this at the end:

"But as much as the Austrian diagnosis may resonate now, it doesn't provide a playbook for what to do next, which could limit its current resurgence."

Was she accurately portraying your follow-up quote about Hayek? ("Mr. Hayek rightly warned of the dangers of central planning, Mr. Boettke says, but "he didn't give a prescription for how to move from 'serfdom' back."")

In other words, she ends the article as if to say, "Sure had we listened to the Austrians, the housing bubble never would have happened, but now we need Krugman to guide us through this."

I know you obviously didn't say that to her, but did she honestly misunderstand what your position was, or was she just trying to end with something ironic and dramatic?

Congratulations, Pete!

@ Bob,

I don't think the WSJ is pushing Krugrman! We can take the bit at the end in one of two ways. 1) We could pout and complain. 2) We could take it as a challenge. Which is more productive?

How, indeed, do you unwind the interventionist state? We now have, for example, Dodd-Frank with its discretionary financial regulation. That's gonna do a number on our system of financial intermediation. We should be thinking not only about what (mostly bad) things it will do, but also about how to turn it around. The same goes for all forms of regulations. We should not have had entry restrictions in medicine, but we did. How do you unwind that? It won't do IMHO to just say "end them!" So how to deregulate? That's a problem worth thinking about IMHO.

Congratulations, Pete!

Nice! Congratulations Pete.

@Bob: I spoke to the reporter for almost an hour Bob and she had done some homework and was very sympathetic to the Austrian story. (She even sent me a follow up email late last night thanking me for the time I spent with her.) She and I talked about the "what to do now" question as it was clearly one she thought was important. One of the things I said to her was that there was a difference between "what to do NOW" and "what should we have (or have not) done in Sept. 2008."

AE provides some pretty clear answers to the latter, but now that we've dug ourselves this huge *policy-driven* hole two years later, it's not automatically clear what we should do based on AE alone. We're not quite where we were in the GD and we're also not quite where we've ever been before. Undoing the damage of the last two years of policy errors on top of the bust resulting from the boom of the years before 2008 is not something I think we can just take out of the AE playbook.

In the end, I think that's all she was getting at. What I wish she would have added was "and neither does any other school of thought right now." We're all in the same boat. I just think we've got a better set of oars and more talented rowers. :)

Congratulations to Pete for this fantastic story. It is well-deserved recognition for him, the program at GMU and the Austrian revival.

We know what not to do: fiscal stimulus and one-time tax credits to stimulate housing and consumption (cash-for-clunkers). No tax increases, new mandates and added burdemsome regulation (as Roger has commented). And the current low-interest policy is counter-productive.

In other words, we know Omabanomics is the wrong medicine. Boehner was substantively correct to call for the Obama economics team to resign. They have ruined the country.

Cato has a section on its website recommending large, realistic spending cuts on a department-by-department basis. I'd personally go further and start a dialog on abolishing what the federal government is either incompetent to perform, or for which there is no constitutional mandate. I believe the original cabinet departments were Treasury, War, State and Interior. We have a target-rich environment.

The correct Austrian/Public Choice approach is to focus on institutional and rule-based reform. For example, to repeat a question I asked recently: do we want free banking, narrow banking or no banking (Kotlikoff's reform)?

I see no comparative advantage for Austrian/Public Choice/classical liberal economists to be arguing about the interest-rate level the Fed should be paying on reserves. Let Krugman worry about that.

Roger wrote:

1) We could pout and complain.

I'm not pouting. I'm guffawing, or snorting perhaps.

How, indeed, do you unwind the interventionist state? We now have, for example, Dodd-Frank with its discretionary financial regulation....We should not have had entry restrictions in medicine, but we did. How do you unwind that? It won't do IMHO to just say "end them!"

Why not? Those new measures haven't even fully kicked in yet, right? They were signed in what, the last six months?

So why can't we just say, "Abolish them before this nonsense continues"?

I understand if you're talking about Social Security or something, but the new bills that just got passed?

Oops, I forgot my highlighting never works on this blog. There ought to be a law.

Congratulations to Pete!

O'Driscoll's comment is well taken. There is a natural tendency to focus too narrowly on the interesting theoretical questions (e.g., how to run the Fed in the world of the second best) and forget that most other policy decisions and institutional configurations, the ones that have made the inevitable correction into a lingering stagnation, turn on elementary economic truths.

@ Bob,

Legal restrictions in healthcare are old, not new. Dodd-Frank is new, but too-big-to-fail and financial regulation in general are old. Which measures do we kill first? How do you go from the current healthcare system to the free market in healthcare that we have never had? How precisely? No hand waving. Ah, well, those are not easy questions. IMHO, however, they are questions Austrian economists should think about.

I think that this short debate between Koppl and Murphy reveals a problem with classical liberalism / libertarianism: there are very good reasons not to be gradualist, and very good reasons not to be radical, i.e., there's no strategy to foster liberty.

If the strategy is gradualist, it must rely on politicians. Because politicians are never or almost never pro-liberty, and because those who are are most likely to face strong opposition from their colleagues, the gradualist approach is doomed because of the principal/agent problem of democracies: representatives do what's in their interest, not the so called "common good". They rule, and are only marginally influenced by voters: besides, pushing liberty is in no one's interest because it is a public good, not like power, which is an oversupplied public evil.

The symbol of the failure of gradualism is probably Reagan: despite all his free-market rhetoric, it didn't do anything to unwind the welfare state, and did little to stop the growth of public expenditures, let alone reducing them. That's why "free-market economic policy" sometimes is supposed to mean "fiscal irresponsibility and huge public deficits". Creating a huge fiscal imbalance and upholding Greenspan at the Fed, it just started a 20-year inflationary boom which was disguised for a free-market revolution.

However, without an exit plan, if we are just to convince people to resist government intervention and say "stop the feds" without any further instruction, there will be a short-run of chaos.

Government is the greatest destroyer of social capital that exists in human society: it turns individuals involved in their communities (like Tocqueville's Americans) into automata who delegate thinking and choosing to their representatives and are content with signing the electoral form with a cross, as if they were illiterate. It substitutes cooperation with command, individual efforts with social rights, economic autonomy with economic dependence on the ruling class (this process is more advanced in Europe than in the US).

In the short run there will be starving old men who relied on robbing some young worker for their pensions, there will be social trust to build up, mutual friendly societies to create, and new laws, customs, mores and habits to develop.

So who's right, the radical or the reformer? I'd guess that both are wrong. Liberty is a public good, and a reliable strategy to supply it is yet to be found. Constitutional reform, or even smaller reforms, are made in the interest of those who can write them down, not in the interest of the public at large.

There is a creative tension between the radical and the gradualist approach, out of which may (but not necessarily) come effective action. The founding fathers were driven to radical actions by the failure of reform.

There was no follow up on Reagan. Instead, we got GHW Bush, compared to whom Clinton looked good. After Clinton, we got GW Bush, who made Clinton look still better. Now we have Obama, who reminds me of Carter.

The Bush legacy is a Republican Party run by the country-club set. The Tea Party phenomenon gives one some hope.

It's a shame that nobody explained to this poor journalist that professor Boettke is not an Austrian economist, that there is no such a thing as the "Austrian economics", that there are only good and bad economics, and that professor in question even renamed his blog (previously called "Austrian Economists") into "Coordination problem", to avoid this identification with the Austrian School.

I would expect professor Boettke to correct the misinformation contained in this article. For example he could forward to them his blog post from this January 1, in which he, among other things, said:

"As of January 1, 2010, we are changing our name to "Coordination Problem". This name change is symbolic as well as substantive. The term "Austrian economics" has become as much a hindrance to the advancement of thought as a convenient shorthand to signal certain methodological and analytical presumptions...The name Austrian economics has been lost as a focal point for a tradition of economic scholarship, and is now a focal point for something else. We have to let it go."

Look again, Nikolaj. The blog's name change *is* mentioned, along with the perils of the label "Austrian."

Did I miss the Tonight Show interview where Peter Boettke was discussing Austrian economics?

I would think Ron Paul, Lew Rockwell, and a few others are a little higher on the list.

Sam,

The article was on advancing Austrian ideas in the academy, not on the Tonight Show, the Internet, chat forums, blogs, etc. I think the article is pretty clear on this:

"Mr. Boettke, whose latest research explores people's ability to self-regulate, also is minting a new generation of disciples who are spreading the Austrian approach throughout academia, where it had long been left for dead"

...

"In the last decade at George Mason, he has helped recruit the Austrian school's leading scholars and drawn students from around the world. Roughly 75% of his students have gone on to teach economics at the college or graduate level."

I have seen this same comment on other websites and I am not sure why people are missing this point.

So to answer your question, no you didn't miss the Tonight Show interview where Pete Boettke was discussing Austrian economics. But you did miss the point of the article.

Austrian economics in academia would be in a sorry state without the quarter century efforts of Lew Rockwell and the scholars associated with the Mises Institute.

So, no I did not miss the point of the article.

Nikolaj:

the problem is the pooling equilibrium.

The Austrian School nowadays is made of a few serious people working to enhance it, and many pseudo-economists with little or no understanding of the Austrian literature, let alone the economics literature at large, with little ability to distinguish an economic from a conspiracy theory, and with more attachment to the Austrian label than to Austrian ideas.

In a pooling equilibrium, orthodox economists who can't distinguish real and fake Austrian economists may end up thinking that they are all crackpots, because they assume there is little or no benefits in trying to screen good from bad apples. This damages the success prospects of the Austrian school, and also the reputation of Menger, Mises, Hayek & Co.

The blog's name change*, the attempts to foster academic reputation, and openness to other journals and ideas are all attempts at signaling to orthodox economists that there is a distinction between the messy and noisy crackpottism of the web and the Austrian School of Menger, Mises, Hayek and Co.

Given the very low signal-to-noise ratio, it is difficult to be taken seriously by professional economists, and in these cases no separating (non-pooling) equilibria may form without some strong signaling.

PS Let's now push the mainstream to do some screening, too!

* I must admit that Coordination Problem makes me think about a Benny Hill sketch with all sorts of people running around and crumbling down, and some strange background music theme. :-D

"Austrian economics" like the term "capitalism" isn't going anywhere -- we have to learn to live with it, and define it well. People mistakenly think cronyism, welfare statism, and fascism are all examples of "capitalism" in the sense of free market economics. They are not.

We shall defend ourselves to the last breath of man and beast. (William II, King of England)

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