Confused by macroecon

Economics Economics Questions
1

My first exposure to economics (other than a high school class where we just made a fake stock portfolio) was Frederic Bastiat, and thereafter Mises and Rothbard. So I came into my understanding of economics from an Austrian perspective. This was no problem when I had my micro class in college. The professor enjoyed discussion, and since we never got very far into macro theory there was never any dispute (actually she started asking me questions by the end of the course).

Skip ahead two semesters to macro. The professor didn’t mind discussing differing theories, and he was rather critical of Keynes as a monetarist. But the text was something by Schiller (who, if I remember correctly, does not even believe in such a thing as “economic law”), and it was full of Keynesian nonsense - which nonsense was on the tests.

Now, I tried to look at it as studying the particulars of the theory. But so much of it was such convoluted dreck that when I was expected to solve an actual problem I had to suppress my Austrian view entirely and write down answers which I understood to be completely false. Sometimes I just didn’t understand the material because it was so blatanty in contradiction with not only Austrian theory, but even what I had learned the previous year in microecon. The result was that I got a C in the course, and was pretty well discouraged in my dreams of eventually majoring in economics.

So, has anyone else had this problem? And if so, how did you remedy it? In particular, are there any guides to learning macro theory from an Austrian perspective, just so it can be digested and understood despite its falsehood? I’m going crazy trying to learn it on my own. And God knows the professors and text aren’t any help. They’re just as boring and sanity-testing in their convoluted trains of “logic” as the General Theory itself.

2

This website is an excellent source for information on Austrian economics, but it can be overwhelming to newcomers.

I recommend you read Viception. Out of every libertarian book I know, I recommend that one the most. It covers much economic material, does not reach into the thousands of pages, and does not require using a web search engine to understand words. Here is my review of it.

3

Off the top of my head, I would recommend going through Henry Hazlitt’s “The Faliure of the ‘New Economics,’” which, I know, is a highly critical book - it demolishes Keynes’ General Theory beautifully! - but Hazlitt is acually able to make (some) sense of Keynes’ arguments before he refutes them. I would recommend committing those explanatory snippets to memory. Also, if you haven’t already, LEARN MATHEMATICS! - especially statistics. One book that I know does this well (meaning that the math itself, and not the math as it applies to economics, that you’ll need to survive through couse is well presented) is Henri Theil’s Introduction to Econometrics. That book is a little hard to come by, though I did manage to get a used copy of it off of Amazon for $8. Hazlitt’s book, of course, can be found as a pdf. on this website. You may also want to look at some of Hayek’s stuff on Keynes, not for a rebuttal to the Keynesian position, but because he restates Keynes’ argument better than Keynes himself. Check out Hayek’s Prices and Production and Other Works for the essay on Keynes’ theory of money, as well as the book A Tiger By the Tail. Lastly, if you must resort to something by a Keynesian, get A Guide to Keynes by Alvin Hansen, in which he explains Keynesianism better and more cleary than Keynes does himself.

As for learning the “logic” of macroeconomics, well, sorry! It seems you’ll have to rely purely on memory and not on an ability to follow a chain of deductive reasoning.

About your experience in college, all I can give you is really the old cliche of “don’t give up.” I’ll be starting college myself after the summer’s over, and I’ll be sure to bring my copies of Man, Economy and State and Human Action with me. They’ll be my cross and holy water against the Keynesian demons! I’ve heard that the Golden Rule for College when dealing with any subject is: “Get a good book and cover your ass!”

Good luck!

4

Now I know I might not be the best answer for this, as I start college in the fall, but I know for my AP Macro exam I used an AP study guide, which presented all the Keynes/Monetarist/Non-Austrian economics in a “clear” concise package, and although I knew the Austrian, I memorized enough of it to get a 4 out of 5 on the test.

5

The problem how I see macroeconomics (and microeconomics) as taught these days, is that the concepts are often expounded in isolation from any particular context. For example, in mathematics, nobody talks about the philosophy or history of mathematics, or if they do, it’s usually done throught a sidenote. This is because mathematics is a purely deductive system, from premises to conclusion, so its philosophy or history is completely irrelevant to its proofs.

From a student’s point of view, the principles of economics seem to come out of nowhere ex nihilo, so the student is not aware, for example, how Keynesian Cross came about, or why markets should suddenly fail.

These concepts are based on hidden assumptions that are left unsaid in the textbooks.

To confound the situation, there seems to be no coherent linkage between Macroeconomics and Microeconomics, made worse when one topic contradicts the other, and students are not aware why that is.

From a historical perspective, the student should understand that economics is an ongoing debate, between various schools of thought. Every concept or model is a response to another school’s arguments throughout history, from the Physiocrats, to the Classicals, and then on to the Marginalist revolution, the Keynesian revolution, the rise of Monetarism, and so on.

My recommendation is to read about the History of Economic Thought, which in my opinion, every student in an economics curriculum should take as his or her first class. Here is a link for some recommendations:

[url]Economic History - #5 by Catalan]

6

Macroeconomics, in its most extreme simplification, can be reduced to a fundamental disagreement on a principle: Say’s Law.

7

I had this problem, namely an enormous ego and a closed mind, but my grades never suffered because of it. You must understand that you know next to nothing about economics, Austrian or otherwise. Give the material a chance, and keep your mind open.

8

Problem with that is, it’s not the case. I don’t know “next to nothing about economics”. An honest evaluation of an area in which one is well-studied is not “an enormous ego and a closed mind”. Furthermore, it doesn’t take a doctor of philosophy to recognize glaring logical contradictions within the material.

9

  1. Time and Money by Roger Garrison

  2. The Structure of Production by Mark Skousen