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.

Comments

[bob mcmanus]

I occasionally read some Garrison and other Auburn material.

And as young bloggers go, this ain't too bad

http://post-austrianeconomics.blogspot.com/

[bdbd]

wasn't there an episode of x files based on all that?

[Ken Houghton]

The Institute for Human Studies is a solid, conservative institution. When discussing things with them, you're always aware that at least you're working from the same data set. Same with CATO on all issues not connected to Social Security. (We were, last year, able to agree that trial lawyers are good, because the cost of maintaining a legitimate, careful, profitable business without them around is too high.)

Mises people have such selective memories that, combined with their glib dismissals of data points, they're self-marginalizing, and one fairly quickly realises that life is too short.

[PSP]

As a reader, I have to say that Austrians and gold bugs are the bain of econoblog comments.

I'm not entirely sure that "and" is the right conjunction in that sentence. I am sure that the oft-repeated phrase "fiat currency" instantly directs me to the next comment.

[Ben Stein]

Good call, Mr. Houghton.

[Johnny B. Mediocre]

I often wonder if blog comments give a misleading sense of the influence of "the Austrians," making them seem (at least) far more numerous than they are in non-virtual reality. At many of the blogs that interest me (including Justin's and Brad's and Tyler's) I am not-infrequently struck by how many comments are from people who say, with emotion, "The Austrians understood that [X]' and sneer at "fiat currency." I don't feel like doing the graduate thesis required to fairly support this assertion that highly-charged "Austrians" (and Randian libertarians, for that matter) are overrepresented in comment sections in econo-blogs (and investing discussions). But it would be fun to try.
Amazon book reviews are another testable sample. BTW, I notice that in 2008, Ron Paul's "The Revolution" was Amazon's number-one selling political/policy book. The author bombed in the GOP primaries, and received 41,000 votes in the national election (and the Libertarian candidate, Bob Barr, won something like 400,000). But among online bookbuyers, he was the man.
Hypotheses: (1) true-believers in "the Austrians" tend to be geekier, more web-addicted AND more outspoken, than the average person. (Are they the Asperger's vote?... hmm, I'm serious; I wonder if there's a personality constellation of some sort) (2) As believers in The Truth they feel both more confident in their views and more compelled to enlighten the collectivists than econo-blog readers in general; (3) could it be that they are at all - contradictory as it would be - more organized in making sure that they are posting their views?

[Alon Levy]

Ken, Cato and the other libertarian groups also make things up when it comes to urban planning and public transit.

Johnny, there are places that have tried to understand why libertarians are so overrepresented on the net. I like the explanation on www.zompist.com, which is that there's a common Heinlein/Rand mentality that appeals to geeks by telling them they're geniuses who'd be destined for great things if only it weren't for the government. It's not just that these libertarians are more outspoken - the radical left is just as outspoken, but even on left-wing blogs you rarely see Naomi Klein and Noam Chomsky dittoheads comment.

[Steve Horwitz]

As one of the people mentioned in Justin Fox's blog entry, and favorably (and in the world of Austrian economists "more interesting than loopy" is about as much of a compliment as we often get), let me just note that there are real Austrian economists out there with PhDs from good graduate programs who publish in actual professional journals and who go to actual professional meetings of economists and teach at actual well-known universities with actual students.

We are not Randians. We are not gold-bugs. We do not say "fiat currency" as if it were the plague.

In other words, we do what people like Brad DeLong do, but just differently.

That people claiming to be "Austrian economists" are over-represented in the blogosphere would seem to be accurate. That, however, is not a reason to ignore the serious work that *actual practicing* Austrian economists do, especially work in peer-reviewed journals and books in the discipline.

I hope people like Justin (and Brad and others here) will start to take Austrian ideas seriously, but doing so requires that they start to distinguish between blog commenters and actual professional economists who do Austrian work. Those of us in the latter category are more than willing to be part of the conversation, and do to so civilly and without ideological shoe-pounding, if you're willing to engage in return.

A quick Google of my name will get you to my work, as well as "The Austrian Economists" blog of which I am a part.