Salsman on the Austrians

[Capitalism Forever]

The inflationary policy of the Fed (est. 1913) created an artificial economic boom, which was finally unable to sustain itself after the Smoot-Hawley tarrif was passed. Contrary to most economists, the post-1930 contraction of the money supply was not the problem – it was the artificial expansion caused by the move to fiat currency. (Extending the inflationary policy would only have delayed the contraction and made the depression worse. See Austrian Trade Cycle Theory)

I still recommend Richard Salsman's articles.

The Austrian idea of an "artificial boom" or "false prosperity" is (perhaps unwittingly) predicated upon a Keynesian view of the relationship between production and consumption. It is production that drives prosperity, so if the production is real, the prosperity is real.

[DavidV]

The Austrian idea of an "artificial boom" or "false prosperity" is (perhaps unwittingly) predicated upon a Keynesian view of the relationship between production and consumption.

Austrians in turn accuse Salsman of being a supply-sider, and based on his response to me, I think he's blissfully ignorant of Austrian economic theory.

By the way, my response to Salsman's speech on the Greate Depression is here: http://forum.ObjectivismOnline.com/index.php?showtopic=103

[A.West]

Austrians in turn accuse Salsman of being a supply-sider, and based on his response to me, I think he's blissfully ignorant of Austrian economic theory.

By the way, my response to Salsman's speech on the Greate Depression is here: http://forum.ObjectivismOnline.com/index.php?showtopic=103

What is the basis of your smear that Salsman is "blissfully ignorant" of Austrian economic theory? The fact that he read and analyzed most or all of the major works in the school? His description of its flaws are dead-on, based on my observations of them over the past 15 years. Considering the significance Objectivists place on proper epistemology as the basis of genuine knowledge, and the continuing descent into Kantian subjectivism/skepticism/rationalism of most Miseans, I thought it should be obvious that in terms of methodology, they are a dead-end. Objectivists no longer need Austrians for polemics, and I've long concluded that it's time to move on to a more Objective, positive theory of economics.

As for Salsman being a "supply sider," he certainly is no follower of Kudlow, or Wanniski, but the point is that most economics incorrectly focuses on demand, while the essence of economics relates to profitable production, so a focus on producers and production ("supply") is very objective.

As for that link from the Miseans, I just laughed when Richard brought it to my attention. That particular pack of rats seem to consider the term "ARI-affiliated" as a negative one, (though I would consider the site more "ARI-freindly" than "ARI-affiliated"). The Miseans seemed to have missed the point of my article, extrapolated my views to represent some that were the opposite of what I had expressed and written in that and my other articles of the time. Funniest was their idea that I was boosting the stock market in 2000, when I had written a number of cautionary articles in that and previous years, articles which didn't make the company I worked for particularly happy. But yes, the Austrians can brag that they've predicted nearly every market crash and financial crisis - they've predicted at least 100 out of the last 5, after all. I've actually tracked some of these "Austrians'" financial newsletters over the past 15 years - their track records are generally pathetic. Which is why they market their investment newsletters with overblown promises and hype, and have massive customer churn rates.

As for Rothbards' book and take on the depression, I wasn't able to force myself to read more than a little bit of it long ago in undergraduate school. But his followers' subjectivist Libertarianism and their desire to criminalize banking and convert banks into a network of warehouses is enough to convince me to stay far away from Rothbardianism.

[DavidV]

I use the term “blissfully ignorant” because Salsman intentionally ignores post-Misesian Austrian work. This is evident in his criticism of the Austrian school, in which he admits and demonstrates his ignorance of anyone who shows “animosity (and/or indifference) towards Ayn Rand and Objectivism.”

OK, so maybe Rothbard is not a nice guy, and the post I linked is not the most brilliant criticism of Salsman, but there are some brilliant economists in the Austrian school, and you can’t ignore them just because of bad terminology and wacky political theories.

[A.West]

I use the term “blissfully ignorant” because Salsman intentionally ignores post-Misesian Austrian work. This is evident in his criticism of the Austrian school, in which he admits and demonstrates his ignorance of anyone who shows “animosity (and/or indifference) towards Ayn Rand and Objectivism.”

OK, so maybe Rothbard is not a nice guy, and the post I linked is not the most brilliant criticism of Salsman, but there are some brilliant economists in the Austrian school, and you can’t ignore them just because of bad terminology and wacky political theories.

Salsman doesn't ignore post-Misesian Austrians. I have seen a number of references in his published works to certain people or ideas that might be "Austrian," e.g. Lawrence H. White.

The Austrian school, as it has developed under the Von Mises Institute and Mises.org, is guilty of much worse than "bad terminology." As a school of thought, they ARE subjectivists, they aren't just misapplying the term. I have seen a few exceptions, trying desperately to reconcile Austrianism back to Menger/Aristotle/Ayn Rand, but these are just that, exceptions. Apriorism/rationalism/subjectivism is now deeply embedded in the Austrian "school". They are anti-inductive, and celebrate their particular take on epistemology. And that, ultimately, is why so many of them despise Ayn Rand and Objectivism. And that is why they care very little about Menger, the founder of "Austrian" economics. I think it is time for Objectivists to use Objectivist epistemology in buiding economics theory, and move beyond Austrianism. One should always look for good ideas, and sometimes they come from Austrians, sometimes from "supply-siders", sometimes from neo-classical economists. But one must always attempt to keep the foundations of one's knowledge rooted to reality, and systematically sound.

I would like to see your list of brilliant work and/or people that falls under the Austrian School. Working in financial markets, I'm always looking for sources that extend my practical knowledge of economic reality.

[DavidV]

OK, so Salsman ignores any Austrian who (in his words) is “indifferent” to Ayn Rand. Ayn Rand was not an economist of course, so he is arbitrarily excluding the vast majority of Austrian economists from his worldview, no matter how intensively he studies the few who happen to be ARI-affiliated Objectivists. (I’m alluding here to his label of Reisman as a “Rationalist-Kantian”) I don’t want to get into an in-depth analysis of Salsman’s misunderstanding of modern Austrian theory, but I think the criticism I linked to shows that he has a very cursory and outdated take on it.

“Apriorism/rationalism/subjectivism is now deeply embedded in the Austrian "school"

I am familiar with most of the Mises.org affiliated intellectuals, and while I can’t disagree that this is true for many of them, Austrian economics is an economic view–not a philosophical theory, so they are a diverse group of people. However the two dominant Austrian philosophers – David Gordon and Roderick T. Long are explicitly Aristotelian and (based on my personal experience with them) praise Ayn Rand (and egoism, I think), even if their understanding of Objectivism is very confused. They also understand (to various degrees) Mises’ epistemological flaws and can reconcile value-free economics with objective morality.

But the important point to me is that I have found Austrian theory to be correct in all its essentials, and it makes much more sense than anything I learned as an economics undergrad. Salsman on the other hand comes across to me as a confused monetarist, and the “theory of objective prices” (I do think prices are objective –I am referring to the particular theory he was advocating) is just silly to me.

I would like to see your list of brilliant work and/or people that falls under the Austrian School.

I’m not an economist, but for an example of brilliant new insights, I would offer Walter Block on Coase and property rights and Hans-Hermann Hoppe on the economics of risk and insurance.

Objectivists no longer need Austrians for polemics, and I've long concluded that it's time to move on to a more Objective, positive theory of economics.

I’d love to see this theory, but I think Menger, Hayek, Mises & co did for economics what Ayn Rand did for philosophy. They have outlined the universal essentials, and the notion that some new theory will sweep all that away has the same credibility as a similar claim about philosophy.

But yes, the Austrians can brag that they've predicted nearly every market crash and financial crisis - they've predicted at least 100 out of the last 5, after all.

I don’t know what Austrians you follow, but the ones I’m familiar with would never claim that such predictions are possible.

[A.West]

You continue to repeat something regarding Salsman "ignoring" various Austrians. I believe he has observed and explicitly rejected a number of them. I think he's already presented the fundamental problems with Austrianism, so I'm not surprised that he's focusing on more productive efforts.

It only took a few minutes folowing your links to find some of these leading Austrians of yours advocating a-priorism in epistemology, failing to reconcile subjective to objective value (despite claiming to do so), and promoting anarchism in politics. So I'd say they're evaluated pretty acurately. Some of them may in certain respects offer some useful technical insights on certain limited matters, but I'd say their "school" is in an advancing state of disrepair, and certainly is not incorporating essential philosophical truths provided by Objectivism. I don't understand how you can see their philosophical failures as non-essential, given the evidence they continue to provide.

[ex_banana-eater]

However the two dominant Austrian philosophers – David Gordon and Roderick T. Long are explicitly Aristotelian and (based on my personal experience with them) praise Ayn Rand (and egoism, I think), even if their understanding of Objectivism is very confused.

I haven't actually read his book, Reason and Value: Aristotle Vs Rand, but I get the impression much of his motive is to combat Objectivism. Whether that is true or not I'm not sure, but I can tell from the reviews that it certainly misrepresents Ayn Rand's philosophy.