Very recomendable and entertaining reading…
Winnie-the-Bear: Austrian economics sounds like 19th century laissez-faire to me.
George Jones: It is. However, the Austrians have some arguments speaking for them. One is that they hold that the complexity of human behavior makes mathematical modeling of the evolving market impossible. Second, they argue it is credit that matters, not money, when explaining business cycles. In other words, they can better explain bubbles and bursts. This is something the rational-man and efficient market theory disciples struggle with to this day, including our central banker friend. Thirdly, Austrians believe that the ever-evolving economic world is too complex, dynamic, and multi-faceted to be hampered with by political animals and bureaucrats. They also stress that economic failure is quite natural and healthy.
http://allaboutalpha.com/blog/2009/11/27/the-ineichen-dialogues-act-ii-larasmussteinmontians-in-yellowstone-park/
Thanks for the link. Of course nobody’s perfect, so he also gave us this little paragraph for our amusement:
“George Jones: Ben is referring to the Austrian school of economics that argues for greater economic freedom, small government and the abolition of central banks. It was tried in the 1930s and failed miserably, wiping out nearly one third of the Western world’s GDP with a quarter of the labor force thrown onto the streets. Authorities and central banks are currently doing everything to prevent a repeat. They have succeeded; so far.”
And:
"What’s your view on central bank intervention in the 2008 financial crisis?
"George Jones: Given the hand dealt to the central bankers I think they did well. They met head-on with the worst economic crisis since the Great Depression and did what central banks are supposed to do in that situation: they flooded the market with liquidity. Yes, there may be unknown long-term implications from these interventions, and yes in a perfectly free market and libertarian world it might have been better for the market to clear in the short-term. However, you need to survive the short-term to experience the long-term. The central banks made certain that the short term needs of the banking system were met, putting short-term necessities ahead of long-term niceties."
Yes, one has to wonder what country in the 1930s abolished its central bank and made government smaller.