Economic predictions: Austrian hits vs. Mainstream misses...

Economics Economics Questions
1

As the years have gone by, I have – almost subconsciously – been developing a list in my mind of predictions made by Austrians and mainstreamers, and things that one predicted and the other didn’t, etc. You get the point.

Here is what I have off the top of my head:

  • The Austrians predicted the initial downturn that started the Great Depression. The mainstream guys did not.
  • The mainstream guys predicted that the Depression would return right after WWII because aggregate demand would fall after the government ended war spending. They were wrong.
  • The mainstream guys predicted that when gold was allowed to be owned again by US citizens that the price would plummet. The Austrians predicted the price would skyrocket. The mainstream guys were wrong.
  • The mainstream guys predicted that stagflation was impossible. It wasn’t.
  • The mainstream guys did not predict the current economic crisis. The Austrians did.

I don’t like that all of my examples are from American economic history, for one thing. Secondly, I know this list must be incomplete, but is it inaccurate?

Thanks.

2

Just to answer your question I believe there was a downturn in 1946 but it only lasted a year; not sure if this can be pinned on aggregate demand or something else but it didn’t last long and it was replaced by an era of prosperity.

What about this prediction: by 2005 soviet economic production would overtake american production. One year later the soviet union went bye-bye HAHAHAHA!

3

Just be aware there are anti-Keynesian mainstream economists, especially if you’re talking about “orthodox” Keynesianism (e.g. Krugman)

The stagflation and WWII examples in particular suggest you are talking about Keynesians

4

If Higgs is right–and I believe he is–there was no downturn in 1946.

Yeah, I guess I should have mentioned Mises prediction as early as 1920 that the Soviet Union experiment would not work because of economic calculation.

5

I want to get all of them in there, actually. among the guys that predicted gold prices would plummet in 1971 was none other than Milton Friedman.

Now, I like Friedman a lot. He was a tremendous inspiration to me before I discovered the Austrian school, and I still love to watch him debate (there are a few of them on you tube). But he was dead wrong on a number of issues, and that was definitely one of them.

6

Maybe so, but the prediction of the gold price is surely not a crucial issue (aside from what you may think about the gold standard). Obviously Friedman would not fall under the stagflation example, he’s the one who said the Keynesians were wrong.

7

Right. He was no friend of the keynesians, I know that.