I’m currently majoring in economics, and this year I’m taking the first two econ classes that everyone with this major takes, which are principles of macro and principles of macro. As an open question to the people here who are well read in AE, how much of what I learn during the course of the year would an Austrian disagree with? How substantial is the difference between the two? And if it’s substantial, is that due primarily to a difference in methodology?
For instance: I have a test on Friday on supply and demand curves, market equilibrium, and price elasticity. Pretty basic stuff. How much of that does the Austrian reject?
Also, would people who have been through mainstream economics classes recommend supplementing the material from class with study of AE in my free time, or should I wait and work through all of it later when I have a firmer grasp of the class material?
Almost everything in your macro class will be at odds with what you’ll find here. Much of micro is pretty well-settled - I don’t think you’ll find too many discrepancies there.
This is pretty fundamental stuff that even us crazy Austrians use. If you don’t understand the basic interplay of supply and demand, or equilibrium/disequilibrium, etc., you’ll find yourself up sh*t creek without a paddle, and quick.
My biggest complaint is that nobody bothers to teach from primary works anymore: you’ll get some dumbed down textbook written by a bunch of nobodies (or Paul Samuelson). They teach you Keynesianism without teaching you Keyenes, and Monetarism without teaching you Friedman/Chicago, etc. The bulk of what I remember in these courses was rote memorization. It sucked. Long. And. Hard.
If you’re interested in supplement your Intro to Micro, you absolutely can not go wrong with Carl Menger’s Principles of Economics.
If you’re interested in supplementing your Intro to Macro, you can’t go wrong with W.H. Hutt’s The Keynesian Episode. This may be a step above “intro” though.
AE was my first study in economics. I learned some things about mainstream later. Mainstream is supplemental to AE rather than vice versa. I found it supplemental only in the sense that a few implications of base AE theory are not included in AE study material, such as price elasticity, though nothing that couldn’t be inferred if you were faced with a problem without an immediate answer.
The problem with macro is that there is no such thing as a dichotomy between a micro and macro principle. A principle is a principle. You don’t see classes called macro-physics or macro-psychology.
Right on. The beauty of AE is synthesis of macro/micro. All other schools of macro, there’s really not much of a connection between macro and micro. If macro isn’t rooted in micro, and micro is the foundation of it all, then all you’ve got is a big steaming pile of good-for-nothing-doesn’t-work-in-the-real-world.
Again, it depends on what classes we’re talking about. Your principles and intermediate microeconomics class will probably be very close to Austrian micro-economics minus Marshallian scissors, but your macro classes will directly contradict Austrian macroeconomics, almost entirely. The problem with macroeconomics is that it simply isn’t real; there are not separate economic worlds, one at the micro level and the other at the macro level. Mainstream economists don’t understand this, and will contradict themselves repeatedly (for example, you’ll learn that in the macro world markets wont clear). Then you have other types of classes, most of which will be extremely left-leaning, taught by socialist sympathizers (depending on where you’re going to school). A class like “History of economic thought” won’t include Say, Bastiat, Bohm-Bawerk, Wieser, Mises, and Hayek (all extremely important), while “Industrial organization” will teach you that government must step in and save the markets from themselves. Econometric type courses are just math, nothing controversial there.
Here’s some advice, and it’s extremely good advice. If you’re serious about economics you should major in mathematical economics, in order to get a real gist of the neo-classical approach. You have to first understand neo-classical economics in order to see why they’re wrong, and how they came to these incorrect conclusions. Don’t be worried about the math, it’s really not that hard. Another reason to take math economics is that it gives you an advantage for your GRE’s and graduate school, or, if you’re not interested in grad school, it helps you in the labor market.
I read AE during college, and it’s been very helpful, but most of all it allowed me not to be deceived by false conclusions made from incorrect premises. And I enjoy arguing a lot.
Problem is, I have no idea what I’m doing with my degree. I’m working with the assumption that I will not be going to graduate school at the moment simply because I have no set reason to go to graduate school.
Ermm, that’s just not true. Maybe at a principles level when you’re learning bastardized Keynesian thought it is, but since (I think) the 1970s there has been a big push to provide microfoundations to macroeconomics. Of course, this isn’t unproblematic, but it’s just not true to say that there aren’t any microfoundations to mainstream macro. As I mentioned, the problem is that the microfoundations are Walrasian general equilibrium theorizing.
Would you agree with the above consensus that mainstream micro (both principles and intermediate) is relatively uncontroversial, but mainstream macro will be almost entirely at odds with current Austrian thought?
Not really, in fact, I’d almost say the opposite. Mainstream macro at a principles level will be neoclassical Keynesian synthesis stuff. Whilst I don’t think ISLM and ASAD models are particularly helpful to Austrian economics, I do think there are some part of Keynesian economics that are compatible with Austrianism. For example, price rigidities and sticky wages are compatible with an Austrian style of economics, as opposed the Walrasian world of instantly adjusting prices and omniscience.
Principles level micro won’t be too bad either. Generally speaking there won’t be much math involved and that math you do require won’t be very complicated. The problem is that it focuses on equilibrium as opposed to the market process. But at a principles level your teacher will usually explain what happens why the price of too high or whatever, past principles you’ll generally assume equilibrium always.
So as far things go what you learn in your principles level class will be more in line with what you think you already know. The key is to go in there with an open mind and realize that both approaches are valid and complimentary. Whereas the perfectly competitive model is perfectly OK to look at equilibrium statics, presumably some approach is needed to elaborate on how the economy might even reach equilibrium, I believe Austrian economics does just that.
As far as textbooks go, use Mankiw’s Principles of Economics for your main textbook, complement it with David Moss’ A Concise Guide to Macroeconomics for macro and possibly another book for micro. Whilst you’re doing mainstream economics you should read Garrison’s Time and Money and Israel Kirzner’s Competition and Entrepreneurship.
It is still analogous to the micro-macro divide in mainstream economics in that there are a subset of principles that apply to the macro sphere that do not carry over to the micro.
Of course I find the distinction in Economics to be largely bogus.
I believe his intent was to recommend literature that would explain mainstream economics, even if Austrians disagree with a significant portion of it. It’s the whole ‘know thy enemy’ thing.