Politics & Media
Apr 03, 2017, 08:59AM

Bannon Is Right About Austrian Economics

The White House Chief Strategist criticizes Democrats and Republicans alike. 

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White House Chief Strategist Steve Bannon claimed recently that too many Republicans in Congress are myopic, suffering from a uniquely American conservative disorder called, in a word, libertarianism.

“I think the Democrats are fundamentally afflicted with the inability to discuss and have an adult conversation about economics and jobs, because they’re too consumed by identity politics,” Bannon told a reporter for The New York Times Magazine. “And then the Republicans, it’s all this theoretical Cato Institute, Austrian economics, limited government—which just doesn’t have any depth to it; they’re not living in the real world.”

This was met with predictable pushback, as Jeff Deist of the Mises Institute—the flagship store, if you will, for the Austrian economics brand—writing in Business Insider exemplifies. “We know Bannon has read Sun-Tzu and Aristotle, but has he read the Austrian literature he dismisses so casually?” Deist inquires. “Finally, there’s the old ‘not living in the real world’ chestnut; how many times have libertarians heard this one?”

Not enough times, in my opinion. But I digress.

Bannon is familiar with not only Sun-Tzu and Aristotle, but marginal figures like Julius Evola as well. So there’s actually a non-insignificant chance that he’s read up on Austrian economics. But even if he hasn’t, I have, and can tell you that the branch of economics known for producing “anarcho-capitalist” diehards like former UNLV economist Murray Rothbard (who adorns Republican congressman Justin Amash’s office wall and is the number one protégé of Austrian econ mainstay Ludwig Von Mises) is in low repute for a reason.

A core problem with Austrian economics—the economic “soul” of libertarianism to a far greater degree than e.g. the more mathematical and Milton Friedman-friendly Chicago School—is that it’s too often unable to disentangle its normative libertarianism (the ought) from its purportedly socially scientific economizing (the is). This is known as the “libertarian straddle.” When pure economics fails to convince (both others and perhaps even ourselves), we libertarians can always fall back on the moral superiority of the non-aggression—or voluntaryaxiom. This subtle shifting of the goalposts in Austrian School rhetoric gives reasonable people pause to consider what’s really motivating things.

“Austrian economics, or any brand of economics, has very little to say about blood, culture, soil, language, and nationhood,” Deist writes. “Social science, at least honest social science, is not prescriptive; economics can’t provide a normative system, political science can’t Make America Great Again.” But Austrian economics does provide a normative system. No less than Murray Rothbard himself said so.

“It so happens that the free-market economy is by far the most productive form of economy known to man, and has been responsible for industrialization and for the modern economy on which civilization has been built,” Rothbard told readers in his 1973 book, For a New Liberty. “This is a fortunate utilitarian result of the free market, but it is not, to the libertarian, the prime reason for his support of this system; that prime reason is moral and is rooted in the natural-rights defense of private property; even if a society of despotism and systematic invasion of rights could be shown to be more productive, the libertarian would support this system.

Of course, the flipside to this is the notion that even if a system of natural rights-derived private property promoted despotism, the Austrian economist and libertarian would nevertheless support it. That kinda sucks.

Luckily, the Austrian School per se is too marginal to be of much influence. Deist is correct to point out that congressional Republicans are “hardly under the spell of Austrian economics.” But Bannon has a point about the Austrians’ myopia and broader conservative tunnel vision around notions of individual liberty. The superficial identity politics engulfing the left may be worse—and probably is—but let’s have no illusions about what’s animating the ideological right.

  • It seems that the Austrian school can't accept the reality that the U.S.is off the gold standard and has a fiat currency. All of their postulating involves a system long ago abandoned that's not returning, so what use are they?

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  • Dain. Let me give you a little argumentative weaponry to use to further this idea: 1) I teach people this set of categories: a) Austrian School: (Institutions: Political Economy) the application of the calculus to economics, and the use of that innovation to understand Social Science. The study of human relations so that we may improve institutions and reduce those frictions that impede cooperation. Assumption: we are ignorant. (MONARCHY/ARISTOCRACY/CONSERVATISM) b) Chicago (freshwater) School:(Rule of Law, with Monetary Economics) The search for formulae under which we can make use of fiat currency to prevent currency shortages that artificially raise interest rates, but do so within the limits of natural law (non-discretion) so that we interfere as little as possible in planning and organizing production distribution and trade while doing so. Assumption: we are ignorant but can insure against shocks. (MIDDLE CLASS/CLASSICAL LIBERALISM) c) NewYork (Saltwater) School: (Discretionary Rule for the purpose of maximizing consumption). The search for the means of maximizing consumption by discretionary (non-rule-of-law) means. Assumptions: our ignorance is irrelevant since any interference in planning and damage in the medium and long term are offset by the good of increased consumption in the short term. (UNDERCLASS/GOSSIP-CLASS/LEFTISM) 2) Myth and Tradition, moral and norm, historical analogy, reason, rationalism, empirical science, and 'complete' science (a term which won't make sense to you at present), describe a sequence of decidability of increasing precision that requires increasing information. When we possess less information than needed to say, make a scientific proposition, we can rely upon those less precise tools that precede it. Not doing so is called pseudoscience - a pretense. Conversely, relying upon rationalism when sufficient information to use science is available, doing so is called pseudo-rationalism. We must match the tool to the information available - or we are engaged in either fallacy, fraud, or deceit. An austrian (practitioner of social science) will suggest that if we lack the empirical means of decidability, then we must retreat to the rational means of decidability. And this is the honest, and truthful, and scientific thing to do. Attempting to make science fit insufficient information is just fraud. Nothing more. AND ONE ARGUMENT YOU WON"T LIKE 3) You won't like this, but so called austrian economics consists of two branches. Polish Austrian (christian), and Austrian-Occupied Ukrainian(jewish). Rothbard and Mises appropriated the term "Austrian" due to anti-semitic biases. Mises was from Ukraine (L'viv), and a jewish city. Perhaps the most jewish city. But Marginalism (Austrianism), is from Poland (Menger) and vienna, and "Constructive Economics" (Jewish Economics), has nothing to do with Austrianism other than incorporating marginalism. Even so, Misesian and Rothbardian marginalism consists of ordered series, not networks (weighted sets). This error eradicates most of the importance of marginalism. Third, Jewish economics ignores the commons as well whereas the very purpose of austrian economics is the improvement of the commons. So austrian economics proper and jewish economics proper, are fundamentally different systems of thought - and mises Human Action, through at least chapter 5, is some of the most absurd pseudoscience ever penned by man. Fourth, austrianism, except for the question of the business cycle, has been fully integrated into mainstream economics. So the Mises institute continues this 'terminological appropriation' by rothbard and mises. What does all that mean: it means almost no one who works in the field of economic philosophy (the search for methods of decidability in political economy) has any idea what he or she is doing - or talking about. Hopefully this serves you. Curt Doolittle The Propertarian Institute Kiev Ukraine.

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