# Austrian School of Economics



## JM (Feb 26, 2009)

> This criticism of the Austrian school is related to its rejection of the use of the scientific method and empirical testing in social sciences in favor of self-evident axioms and logical reasoning.



[ame=http://en.wikipedia.org/wiki/Austrian_School]Austrian School - Wikipedia, the free encyclopedia[/ame]

It sounds interesting...any suggested reads or net articles?


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## Prufrock (Feb 26, 2009)

You might start here: Mises Institute.


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## TimV (Feb 26, 2009)

LewRockwell.com

A conservative/libertarian site with a short articles every day, often about Austrian economics. Mostly Catholic but also Reformed writers.


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## Craig (Feb 26, 2009)

For a different take on the Austrian school, check this out:Putting Mises in his place


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## Kevin (Feb 27, 2009)

Prufrock said:


> You might start here: Mises Institute.





That is a great site.


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## Brother John (Feb 27, 2009)

Check out this thread.

http://www.puritanboard.com/f111/you-austrian-42840/

-----Added 2/27/2009 at 08:44:00 EST-----



Craig said:


> For a different take on the Austrian school, check this out:Putting Mises in his place



Intresting article. If Austrian is not right then there is no way that the Keynesian can be right???? So where do we look for Reformed Biblical economics. I would love to know who is expounding these ideas? Please help me out.


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## Craig (Feb 27, 2009)

Blev3rd said:


> Check out this thread.
> 
> http://www.puritanboard.com/f111/you-austrian-42840/
> 
> ...



I'm not sure where to look for a Reformed Biblical economics. It seems that the Austrian school relies on atheistic assumptions, so I no longer hold to a nearly "anarcho" capitalism. It seems that consistency on "conservatism" would dictate businesses be should be owned and operated at a local level...we see big government as a problem, why don't some of these people acknowledge huge conglomerates suck up the wealth and destroy the little guy? 

There is an economic system called "Distributism" (which is the school John Medaille holds to) that attempts to solve the problem. At this point, I think it introduces other problems...so I'm calling myself a modified capitalist who emphasizes small, local organized businesses are best. Capital for the sake of aquiring and dominating the national market is ungodly.

If I get into grad school, I hope to learn and contribute to this sort of a Christian Social Theory.


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## Contra_Mundum (Feb 27, 2009)

Why would a Protestant want to align himself with a socio-economic order (Distributivism) that seems to be tied to a particular strain of RomanCatholicism?

The disagreements on that posted link seem mostly RC's arguing over whether a GoodCatholic can ever be an Austrian.

But if you are a person who believes there are two Kingdoms, then "good economics" belongs to the kingdom of nature. Inevitably the best economics will be _best _compatible with Christianity, since Christ is Lord of all.

If some Austrian (Mises) was critical of how RomanCatholicism (especially in its social theory) in his day seemed incompatible with free-market economics, what is that to the Protestant? Adam Smith was a Scotsman; doesn't make him right or wrong, but it does show free-market ideas arising in a Protestant context.

If Mises was right about economics, and wrong about Jesus Christ (and it seems he was very confused about the whole composition of Christ's kingdom), *only those religious persons who think that there is one divinely authorized Kingdom* are ultimately going to reject him or the whole Austrian school because there were Atheist thinkers among them.

Just try reading the Austrians for yourself. And read their critics. And Ivanhoe (PB member) probably has some ideas for books. He's a "modified southern Agrarian" or something. He's read quite widely.


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## he beholds (Feb 27, 2009)

Craig said:


> Blev3rd said:
> 
> 
> > Check out this thread.
> ...



I think in true capitalism, the big guy would not be rewarded by the gov't, so the little guy could compete better. 
I do think it would be fair for the big guy to make more, for he would put up a bigger risk, but not when tax breaks are in his favor and his risks may not actually now be more than the little guy. 
Individual citizens can still choose to go to the little guy, if that's what matters to them. We don't need the gov't telling us who we should support and who we shouldn't (as is the case in any model other than true capitalism).


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## discipulo (Feb 27, 2009)

Beware of Austrians, they convinced the world that Beethoven was Austrian and Hitler was German


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## Craig (Feb 27, 2009)

Contra_Mundum said:


> Why would a Protestant want to align himself with a socio-economic order (Distributivism) that seems to be tied to a particular strain of RomanCatholicism?
> 
> The disagreements on that posted link seem mostly RC's arguing over whether a GoodCatholic can ever be an Austrian.
> 
> ...



I'm not aligning myself with Romanism...I think distributism makes good critiques of capitalism. While I'm ready to look at economics with an eye toward who/where ideas come from, I'm not so ready to dismiss one system because it's a product of Catholic Social Theory...likewise, I'm not dismissing the Austrian school b/c it's founders were God-haters...I do not think the Austrian school can be reconciled with Christianity because in it's outworkings it is a survival of the fittest motiff, and not based on actual quality. We've commoditized *everything*, including people.

Companies have found cheap ways of outsourcing production and offer us commodities at a lower quality and cost that also cost us jobs (we don't produce much as an economy any longer), and an ability for mom and pop shops to compete. Bob may have sold tools and was knowledgable in tools offering his customers expertise...he made a decent profit until Home Depot came into town. His prices were under cut, Home Depot's service isn't necessarily better, and Pop may now work at Home Depot making far less than he did as a shop owner.

How is that not destroying small business? How is that not taking producers and making them into servants? I could talk about my family's business as well...we're involved with manufacturing/engineering and distribution. People buy their products online and call us with questions their cheaper quality and cheaper priced suppliers can't answer. They like our knowledge, but they won't pay the extra few dollars it costs to do business with us. We cannot compete with products that are of a lower quality, nor do we want to. Our business has dropped off because our market *relies* on the productivity of other nations. We are killing ourselves as an economy. Those are just a few reasons why a "2 Kingdom" approach will not be my cup of tea any time soon.


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## TimV (Feb 27, 2009)

Many of the leading Austrian thinkers like Mises, Rothbard etc.. were from that Westernized German Jewish population which felt a healthy non-Statist Protestantism was the best way they as Jews could live in a safe environment. That self interest as well as academic integrity, seeking the peace of the city, for in it you shall have peace etc... was and is why so many of those Jews have tended to join themselves to conservative Protestant causes over the years.


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## brandonadams (Feb 27, 2009)

> This criticism of the Austrian school is related to its rejection of the use of the scientific method and empirical testing in social sciences in favor of self-evident axioms and logical reasoning.



As to the OP, if you are interested in exploring this particular issue, the absolute best article you will find on the topic is from John W. Robbins

The Failure of Secular Economics - Here he does a great job of showing the varying epistemologies of different schools of economics, such as the Chicago school (Milton Friedman) which relies on the scientific method, and Austrianism, which rejects the scientific method in favor of a priori rationalism. There is also an MP3 version if you like that better
http://www.trinitylectures.org/MP3/The_Failure_of_Secular_Economic_Theory,_John_Robbins.mp3

I would also recommend The Promise of Christian Economics

Again with an MP3 version http://www.trinitylectures.org/MP3/The_Promise_Of_Christian_Economics,_John_Robbins.mp3

There are several series of MP3s on economics here Trinity Foundation

Hope that helps


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## Contra_Mundum (Feb 27, 2009)

Craig,
I don't think your problem is with Capitalism or Austrians, but it is with the fact that presently the State is benefiting your competition at your expense. And the solution the Distributivists seem to be proposing is to reverse the parties upon whom the State bestows its favors.

Great.

See, this is where the arguments over economics frequently break down. The corporate-Statists call themselves Capitalists, when they are merely inverse-fascists, and their Socialist opponents join in to bash Capitalism, while pushing for reversal in State-sponsored favoritism.

The truth is that everyone--without exception--has aprioristic motives. The Austrians simply wave those motives like a banner, while their opponents on the left and right disguise their _a prioris_. To the left and right (economically) both sides reveal a common motive--harness the coercive power of the State to provide benefits to either "small-operators" or "big-operators."

Austrians, and theoretical free-marketers in general, believe the State should do one thing: enforce contractual terms freely entered into by all parties, without favoring the great or the small. Now where have we heard that principle before? (Ex.30:15; Job.34:19; Acts 10:34; Prov.22:2).

If large company tried to undercut local business, without providing comparable service, accompanied by lying, etc., _in the absence of govt. assistance to maintain viability in face of customer sovereignty_ *why do we think people will behave irrationally and continue to support scum?* They wouldn't, because people do not typically behave irrationally, and they want good products, good service, and don't want to be lied to or coerced. That, at least, is a basic free-market belief.

You can apply the pejorative "survival of the fittest" to the free-market if you want, if you value some other notion than "consumer-sovereignty." But please don't make the mistake of attributing to modern day masters of the pseduo-market-system--who simply game the regulations to their advantage at the expense of the little guy--with a true meritocracy.

The problems (in general) that small-business faces today is a *direct result* of anti-free-market policies that are 1) widely pursued, and 2) presented as "free-market" ideas. Thus, the massive government-intervention already in existence on Wall-Street is called "market-failure", the solution for which is ...(wait for it)... new regulation! Finally (!) the State is going to come to the rescue! Where have they been for the last century! While we've been suffering!


The real battle is between true free-market economics and competing systems of State-sponsorship. The closest thing to free-market existed in this country over a century ago, when various State-favoritism was already well-entrenched, but the variety in the individual states was a check on Federal controls.

With the institution of the Federal Reserve, the demise of market-capitalism was only a matter of time. With the nationalization of the bank-and-credit system now taking place, the "American-experiment" is coming to an end. We had Mercantilism in the Colonial period; the first century or so, of emerging free-market Capitalism in the post-Independence age (all the while the was a battle between those who wanted Federal neo-Mercantilism and a national bank, vs. libertarians); followed by the period of Imperialism culminating in the creation of a "private-national-bank", the Federal Reserve; and the aftermath--the last century witnessing the destruction of vestiges of Capitalism.


It's just really too bad that liberty and freedom of association are the principles that get blamed for troubles, when we've seldom even seen their relatives, much less the things themselves.

If there are "economic laws," (and I do believe in them) then they are *natural laws* (like physics) and their only "moral" quality may be found in their application or misapplication. Just like shooting someone is an application of physics, so using economics to rip someone off is criminal. But no one says that having guns is immoral because it can be seen as an application of the principle: "survival of the fittest."

But that's how the free-market was described above--attacked as if it were an immoral instantiation of evolutionary ideas. No way. The 18th century was an amazingly fruitful era to be a Western scientist discovering laws and principles. Just because in the 19th century Darwin or certain business moguls made immoral applications of those laws doesn't make the laws themselves the culprit.

But that's exactly what we are being asked to swallow today. Indeed, Distributivism is quite consistent with RC social theory--certain ideas are BAD, because NATURE itself contains flaws, so that even if you discover something TRUE, it might be EVIL. So the CHURCH is necessary to tell you if you should grow your business beyond a certain size.

Modern postivistic economists (who say they are uncommitted to any pet "theory") opine relentlessly about how they are just trying to manage an unpredictable beast--our economy. Of course they are lying (perhaps even to themselves). They deny that there are LAWS they have been flouting, or manipulating, thinking they are so clever.

But over and over the Austrians, who believe in economic law, somehow predict the failures of these boobs and their policies. They are not popular, at least they haven't been, but they have been correct. They are like Cassandra.


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## Craig (Feb 27, 2009)

You raise interesting points...and I'm not going to pretend to know how to respond.

I like reading Lew Rockwell and other Libertarians because they do understand how socialism and communism fails. I am against government interventionism...I think I believe in a truly free market. 

Capitalism, where economic growth is determined by one's economic might, does seem to be economic darwinism. Some businesses will fail, not because they weren't viable, but because someone bigger (i.e. more capital) was able to squash them.

I agree as well that the government is there to enforce agreements, but also to prevent monopolies...something that seems to be selectively tolerated.


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## brandonadams (Feb 27, 2009)

Monopolies can only exist by the power of the state. A state sponsored monopoly is the only kind that exists.


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## crhoades (Feb 27, 2009)

Just when one says "Reformed" we all know that there are large tenets of agreement and some points of disagreement, the same has to be said of "Austrian Economics". Couple of things that will help sort things out, Mises was a utilitarian, Rothbard more natural rights, Hayek used a bit of evolutionary methodology. They all wrote on the epistemology of economics and I personally think you can trace any differences to this.


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## brandonadams (Feb 27, 2009)

Craig, I would recommend that you read Robbins' "Freedom and Captitalism" as well as "Ecclessiastical Megalomania" (which is an analysis of Roman Catholic political and economic teaching). You can get a taste of it here The Economic Thought of the Roman Catholic Church (MP3)


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## satz (Feb 28, 2009)

Craig,

I would like to share some thoughts. I do understand that I am mainly speaking as an armchair theorist, so do forgive me if I have misunderstood you. 

I guess I don’t understand why you seem to be proceeding on the basis that small businesses are the ideal we should strive for, or which should be protected. If small businesses are unable to compete with big businesses, how is that any fault of either the system or the large businesses? 



Craig said:


> Capitalism, where economic growth is determined by one's economic might, does seem to be economic darwinism. Some businesses will fail, not because they weren't viable, but because someone bigger (i.e. more capital) was able to squash them.



But (and I am thinking out loud rather than pushing a point I am fully settled in) if another business can do things cheaper and better than a small business, than perhaps the small business was not truly viable? All because a business model was viable once does not mean it has the right to remain so forever, or that others should be barred from trying to compete by doing things better.

Proverbs 27:23-24 says “Be thou diligent to know the state of thy flocks, and look well to thy herds. For riches are not for ever: and doth the crown endure to every generation?” Even the bible admits that riches or income cannot be assumed to last forever. New market trends or new competitors will enter and threaten or affect businesses, and men need to adapt and change if need be.



> Companies have found cheap ways of outsourcing production and offer us commodities at a lower quality and cost that also cost us jobs (we don't produce much as an economy any longer), and an ability for mom and pop shops to compete. Bob may have sold tools and was knowledgeable in tools offering his customers expertise...he made a decent profit until Home Depot came into town. His prices were under cut, Home Depot's service isn't necessarily better, and Pop may now work at Home Depot making far less than he did as a shop owner.
> 
> How is that not destroying small business? How is that not taking producers and making them into servants? How is that not destroying small business? How is that not taking producers and making them into servants?



Again, if Bob really offered an advantage in either quality or knowledge, why wouldn’t he have been able to compete, despite charging higher prices? I believe there are many small restaurants/eateries/coffee shops that are able to compete against the mcdonalds and starbucks of the world, despite charging higher prices.

You mentioned economic Darwinism in the earlier quote. I am not sure biblical fairness would extend to protect _businesses_ themselves. Everyman deserves to be able to earn and living and provide for his family. But that does not mean he has the right to earn a living in the exact same business throughout his life. Circumstances change, and a prudent man may have to change what he is doing to adapt to those circumstances. I do not see anything unbiblical about that. 

I would express one last thought about your comment on “taking producers and making them into servants”. Again, I do not see how it is a man’s right to be self-employed. Bob can be equally productive for home-depot. That may not be the ideal situation from his point of view, but as long as he is still able to earn a living, I do not see how it is a biblical evil. Also, while in your example Bob made less working for HD, I think biblically there is no reason to assume that one cannot prosper greatly as an employee – and I think employees today have so many rights that it is generally wrong to term them “servants” in the negative sense of the word. Proverbs is full of examples of Solomon telling us that even a servant or slave can get ahead and prosper by serving a master. There is no need to assume that one will always be financially less well of as an employee as opposed to running your own business.

I guess I do not see how the system you describe is inherently wrong. There is always room for abuse by sinners and large businesses can behave in an unethical way – selling at below cost just to drive competitors out of business. However, possible abuses do not make the system inherently wrong.


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