(I posted this in the old forum, sorry if cross posting is frowned upon but i wasnt sure which forum is current)
Hello, I have an incredibly naive question for you economics pros so go easy on me
There are many reasons people decide to take up study of economics. Some want to become leaders, advisers to leaders, academics just for the intellectual joy of it or curiosity. However, the less noble of us just want enough understanding to improve our lot in life.
My question is, if your goal was the worldly pursuit of wealth, in your opinion, would an in depth study of austrian economics shed any insight or give you any sort of business edge with regards to this goal? What i have noticed with foums such as these is that there are a large amount of “armchair economists” who enjoy a debate or two and think they have the answers to all the worlds problems. There seems to be a barrier to people just seeking practical knowledge rather than thinking big in some kind of megalomaniac global thinking.
So my questions are, has austrian economics helped you with your own personal wealth, and if so, what are the crucial bits of understanding that helped you with regards to entrepreneurship and investing. And also, the trouble with austrian economics as far as i can tell is that it is utopian and of limited use in the present world whos economies clearly are not lassie-faire sp? capatalist. It seems to me that if you want to make money in the real world you should study the world as it is, not how you would like it to be.
I remember this question came up in one of the video’s of the seminars, and the answer was basically a flat no. My advice? Find out what consumers want, that is the #1 road to profit. Also, while I feel guilty saying this, doing business with the state is usually quite profitable, but it also turns you into a traitor to mankind, so you need to balance that.
So is austrian economics purely about advocating an ideal economy or does it have any anylytical methods for deciphering present economies? I mean, in neoclassical economics there isnt so much an agenda of creating thrid way economies or any other enonomy for that matter but it does provide some tools to analyse markets and is useful in the business world.
Might have to give austrian ecomics a miss then. It is interesting trying to change the world and all but might have to stick with more practical real world stuff and leave philosophising for retirement
“Buy low, sell high” is an old Austrian adage. [;)]
In economics, inidividual wealth making is discussed under the guise of entrepreneurial activity. Most traditional economic theory is based on “models” which don’t even have entrepreneurial activity in them. They don’t even get to first base for what you want. The Austrians are different in that they have always included the entrepreneur as a key component of any economic system. That being said, the Austrians look to the entrepreneur to guide the economic system, not the other way around!
I see. However, if it is the entrepreneurs “job” to find price disparities in the market and exploit them, wouldnt a more effective tool to use for this be studying the actual market with the use of statistics and real data? Austrian economics may focus on the entrepreneurs place in the economy but the entrepreneur himself needs to focus on the market and from my limited experience neoclassical modeling of the market seems to be more useful.
Perhaps marketing would be a more useful major than economics for people interested in creating new products and services or at least supplying them where they are wanted.
Economics seems a bit overkill for the individuas needs however i could be wrong as there is no doubt rich economists out there
As for investing, when analysing the stockmarket or property market or whatever, is modern finance with all its statistical and mathematical models a more useful tool than the bottom up austrian approach?
I mean, it seems to me austrian economics is for the big picture but once people educate themselves to the level of “austrian economist”, other than teaching and writing, what real world skill do they have? Do they have techniques to predict what is likely to happen in markets? And i constantly hear them say they dont use math but how could they possibly analyse the huge amount of data to spot trends ect in the real world economy?
There is something of a mis-understanding here. Whatever tools the entrepreneurs want to use is OK by Austrians. It’s OK by Austrians if they use super-computers, or weegie boards. The “anti-calculation” edict isn’t aimed at them, but at would-be central planners who think they can usurp the likes of the entrepreneur using “computers” [said in Dr Evil style, with air-quotes].
For Austrians, the point of the entrepreneur is the discovery process and the freedom of individuals to use whatever methods (including weegie boards and super-computers) they can to make good predictions etc. Of course modern finance does make good use of calculations and mathematics (eg, the Merlon-Black formula), but this does not invalidate or obsolete the Austrian model. In fact the Merlon-Black story is a good example of the dangers of assuming that it’s all just a matter of formulae and computers. (They took a bath when they themselves did so).
The essential parts of economics can be learnt very quickly (and should be taught in school). Typically the first two chapters of a textbook are good value. But then they start making all sorts of aggregating assumptions so that they can bring mathematics into the theory. That’s when the Austrians part company. But none of this is directed at guiding the entrepreneur. Neither Austrian theory, nor other “conventional” theories of economics. As I said, in most conventional theories the entrepreneur doesn’t even appear as an actor.
We’re probably talking past each other, but I do find it interesting to think about the basic processes behind the market system, and I think the Austrians have the upper hand in that respect.
I think Austrian Business Cycle Theory may be useful for investing. In fact, I know a wealth management which uses that theory, besides others theories.
Apart from this, Mises says that you cannot teach a person to be an entrepeneur.
Another thing Austrian School tells us, against Keynesianism, is that saving is good for the economy. So, we shouldn’t feel guilty for saving anymore.
Thanks guys. I will have to get a copy of that book.
Just a quick comment about this statement:
strikes me as rather like asking those educated in the history and philosophy of art whether they themselves can paint…
or a marine bioligist if they can out angle a typical fisherman
I find those analogys rather odd. You seem to be under the impression that economics is seperate from the real world. For a school that claims to have a superior view of how the world works but cant find any practical application seems to be kind of useless. Obviously there are practical applications as the others have pointed out and you are simply mistaken.
you seem to think history, philosophy, and biology are seperate from the real world. i know a marine biologist that would be very upset to learn this.
further on your point :a school that claims to have a superior view of how the world works but cant find any practical application seems to be kind of useless.
the same could be said for keynsian and neo-classical economists could it not?
Given that Austrian economics studies the effects of institutions on the market, it does deal with mixed economies as well. At any rate, I am not sure why you expect economics to help you get rich. It is a science studying the actions of humans, not a get-rich scheme. Austrian writings on financial markets might help though.
And I’ll expand:
Austrian economists have no problem, as Brett said, with entrepreneurs using statistical studies etc. Nor does it have a problem with empirical studies - in fact, many Austrians make heavy use of them. It simply holds, though, that to analyze any statistics a logically coherent theory is necessary, and this is undoubtedly true. Experience cannot and never will refute the law of demand. An Austrian will not, usually, use mathematics to devise core theory. There seems to be a trend in Austrianism towards expressing theories mathematically though, and this is not problematic since there is nothing antithetical in Austrianism to such an endeavour. If you want wealth, it’ll take more than a degree in Economics (which is a pure science of sorts), or even Marketting or Finance.
. At any rate, I am not sure why you expect economics to help you get rich.
I dont understand this attitude. Its like saying i am not sure why you would look into biology to find the cure for cancer or expect physics will help you get to the moon.
Surely all business people or any people in general need an understanding of the economy they function within if they hope to get their slice of the pie. I know tons of investment banks that recruit economics grads and i am sure that the bulk of rich kids choosing to major in economics at Ivy league schools have making money as their number 1 motivation. Its ludicrous to think economics is some ivory tower science that people avoid if they want to get rich.
Anywho, thanks for your input with the other stuff.
Brucester, like I said monetary economics might be able to help you get wealthy via a better understanding of financial markets and how the economy moves. Most economics operates on a larger level, and has more to do with what will enable a society as a whole to maximize wealth, i.e. which policies are most conducive (or not) to doing so, and which institutions may impede or aid the process.
I thought about the same exact things you are thinking about right now. How do I take this body of knowledge and turn it into a business model? I have had a tremendous amount of success, although I am still young (21), employing the austrian thought process to investing and business theory. I have yielded 87% return a year the last three years in the united states stock market by employing the thought processes of anti-control organizations and the deep understanding of the powers of decentralized markets (macro or micro). Further, I am currently involved in a few start ups and about 3 of them are built on the sturdy foundation of Austrian economics.
So yes, you can turn this information into profits! But it takes a hell of a lot of work and most people will tell you to go fly a kite when you try and get money together. Also, your friends usually don’t appreciate how you don’t give them favors. And in my case they really don’t appreciate it when I say “Im not a damn goverment. If you want the service/product then pay for it like everyone else. I am not levying a tax on anyone else so that I can pull you a favor”.
“My question is, if your goal was the worldly pursuit of wealth, in your opinion, would an in depth study of austrian economics shed any insight or give you any sort of business edge with regards to this goal?”
Austrian economics promotes understanding of real economic gain in the face of false economic gain. I have a rediculous little saying that helps me distiguish between the two.
Profit or Greed?
It is no large matter to see through the veil, the immoral motives of those whose who avail, to judge for themselves our interest and need.
Through every concoction they hope to succeed, to blot out from reason “Profit or Greed?”
PROFIT = economic gain from what you own, produce or control (capital) by free exchange. This is the prime directive of capitalism and the nature of a (true) market economy.
GREED = economic gain from what others own, produce or control by coercion. This is the prime directive of socialism and the nature of a (false) political economy.
What does that have to do with your question? Just this: it helps me to identify real personal economic gain as opposed to the false political gains in the “world as it is” - as you have put it. Here are two short examples
Social Security The false political economy (or “world as it is”) would encourage you to believe that there is some benefit to you in preserving the existence of the social security system. You will benefit in the future for allowing the state to take from you today. That is political greed - benefit by what someone else owns or produces. Thinking and reasoning in the Austrian sense helps to identify the wasteful greed of such a proposition. It has helped me to identify more profitable retirement alternatives that allow me economic gain from what I own or produce. Though politically created, IRA’s and ROTH IRA’s permit me to accumulate my own sustinance for retirement. The Austrian motivation is that I am responsible for my own retirement.
Health Care The same premis concerning government-provided security applies to one’s present and future health requirments. A free-market alternative to socialized medicine is the HSA, or Health Savings Account. Austrian economics helped me to decern the advantages to controlling my health costs and saving my own money for the future.
Thanks all. It has been a very interesting thread.
Just a few comments about the above.
false political economy (or “world as it is”) would encourage you to believe that there is some benefit to you in preserving the existence of the social security system. You will benefit in the future for allowing the state to take from you today. That is political greed - benefit by what someone else owns or produces. Thinking and reasoning in the Austrian sense helps to identify the wasteful greed of such a proposition. It has helped me to identify more profitable retirement alternatives that allow me economic gain from what I own or produce.
hmmm.. So you can sleep better at night knowing that you provided for yourself? Regardless if you agree with the social security system or not, it still exists and you are still taxed for it. Unless you have found a way to evade taxes there is no point in ignoring the system and cashing into it when neccassary.
Austrian economics helped me to decern the advantages to controlling my health costs and saving my own money for the future.
Again, the public health system is funded by you so providing for yourself is really providing for everyone else on top of that. If anything, having utopian views and playing the game as though it was reality will lead only to being frustrated at the system and give you no real gains than if you were to “imorrally” benefit from others by playing the game that exists right now.
“having utopian views and playing the game as though it was reality will lead only to being frustrated at the system and give you no real gains than if you were to “imorrally” benefit from others by playing the game that exists right now”
That depends upon one’s perception. I have no frustration or remorse having to ‘render unto Cesar’. Why? I understand there is little I can do to change what exist. Frustration or remorse is counterproductive.
I also have no frustration or remorse gaining understanding of the ideal. Why? Understanding the ideal of the free market is the approach of a realist because only a free market provides real gains. A false political economy is the ‘utopian’ view because it is something that is presented as reality but is not self-sustaining - a reality that cannot persist. Preserving and advancing the knowledge of how and why a free market is better than interventionism is the hope for future economic gain. It is also a roadmap for our own prosperity.
You asked and I answered how knowledge of Austrian economics - the free market - has benefitted me. In short, it has given me a positive attitude and real wealth. I may be forced to contribute to a false (utopian) system, but I have profited without participating in it by seeking political gain (profit from what I do not own or produce). That is a direct answer to the way you asked your question.
Perhaps, then, your question is not “how can I profit from Austrian Economics” but should instead be “how can I seek political gain”?
Says who? When since did economics become a standard of morality? I have read numerous times in austrian books that austrian economics does not seek to answer questions of morality and leaves such topics to religion and philosophy. It seems you have much reading to do before becoming any sort of teacher on the topic.
