• Tag Archives Friedrich Hayek
  • Mises-Influenced MP Becomes Brexit Minister

    Steve Baker, a Conservative Member of Parliament, was announced today as junior Brexit minister under fellow libertarian David Davis. Baker, who has referenced Austrian scholars such as Ludwig von Mises, Jess Huerta de Soto and F. A. Hayek in the House of Commons, has long been a Eurosceptic and seen as a ‘hardliner’ in future negotiations with the EU. Along with his opposition to the EU, Baker has been a vocal opponent of the Bank of England’s policy of quantitive easing, and the IMF.
    In his own words:
    I am afraid that the contemporary mainstream of economics is missing some vital information…
    As I explained, as Mises set out, as Hayek followed in his steps and as others have predicted, we risk a final and total catastrophe for our currency system.
    To conclude, we are in danger of simply kicking a can down. … We are looking at further credit expansion, further monetisation of debts and further socialisation of risk. Throughout the western world, we are in danger of appearing as King Canute, trying to use politics to hold back the realities of social co-operation, which we usually describe as economics. The IMF is an institutional legacy from a monetary system that failed 40 years ago, and the successor to which is even now failing as well.

    This post was published at Ludwig von Mises Institute on June 14, 2017.


  • Why bad economic theories remain popular

    Ludwig von Mises and Friedrich Hayek, the most prominent ‘Austrian’ economists of the time, anticipated the 1929 stock market crash and correctly predicted the dire consequences of government attempts to artificially stimulate economic growth in the aftermath of the crash. John Maynard Keynes, on the other hand, was totally blindsided by the stock market crash and the economic disaster of the early 1930s. And yet, Keynes’s theories gained enormous popularity during the 1930s whereas the work of Mises and Hayek was largely ignored. Why was it so?
    Keynes became popular because he told the politically powerful what they wanted to hear. In particular, he provided power-hungry politicians with intellectual support for the schemes they not only already had in mind, but in many cases were already putting into practice. Despite being riddled with errors, Keynes’ theories also appealed to many economists because the implementation of these theories would confer a lot more influence upon the economics fraternity. The fact is that in a free economy there wouldn’t be much for an economist to do other than teach economics. He/she would certainly never have the opportunity to be involved in the ‘management’ of the economy.
    The points outlined in the above paragraph, along with Keynes’ charisma and salesmanship, explain why ‘Keynesian’ economic theories became dominant, but it doesn’t explain how they managed to stay dominant in the face of an ever-growing mountain of evidence indicating that they result in long-term economic decline.

    This post was published at GoldSeek on 26 May 2017.


  • Bob Murphy: Where Monetarism Goes Wrong

    The following video was published by misesmedia on May 12, 2017
    The great Austrian economist Friedrich Hayek celebrated a birthday earlier this week, while the prominent monetarist (and Fed historian) Allan Meltzer passed away the same day. Joining us to discuss monetarism is our friend Bob Murphy, who lays out the central tenets of the Chicago school and its godfather Milton Friedman. At its heart, Bob explains, monetarism is a cousin of Keynesianism – one advocates fiscal stimulus, the other monetary stimulus. Both go astray when it comes to money, and both fail to see the trees in the macro forest. Bob explains why in this great discussion of the differences between the Austrian and Chicago schools.


  • Danielle DiMartino Booth: Inside the Fed

    The following video was published by misesmedia on Apr 13, 2017
    Danielle DiMartino Booth is a former Dallas Fed staffer and author of the new book ‘Fed Up: An Insider’s Take on Why the Federal Reserve is Bad for America’. She joins Jeff Deist to talk about her years watching Ivy League PhDs make gross and fundamental errors in an almost comically cloistered environment.
    Have Fed economists even read Mises and Hayek? Do they recognize malinvestment as a byproduct of interest-rate setting? Do they know anything about their own institutional history, or at least enough to recognize how mission creep has turned the Fed into a central planning Politburo? And how will Janet Yellen deal with the inherent tension between raising interest rates and keeping the cost of US debt service in check?


  • “The End Of Truth” – Hayek Saw It All Coming Over 70 Years Ago

    The Road To Serfdom (authored by F. A. Hayek, first publ;ished in 1944)
    Excerpts from Chapter 11 – The End of Truth
    Annotated via Crossroad.to/heaven,
    “The most effective way of making everybody serve the single system of ends toward which the social plan is directed is to make everybody believe in those ends. To make a totalitarian system function efficiently, it is not enough that everybody should be forced to work for the same ends. It is essential that the people should come to regard them as their own ends.”[p.171]
    Berit’s comment: Ponder that statement. It helps explain the significance of universal service-learning. Like socialist youth in Nazi (National Socialism) and Communist countries, all must embrace the new ideology. Those who don’t — the intolerable dissenters — must be silenced.

    This post was published at Zero Hedge on Mar 29, 2017.


  • How We Talk About Economics and Why It Matters | Paul Rubin

    The following video was published by misesmedia on Mar 14, 2017
    The F. A. Hayek Memorial Lecture, sponsored by the Stephen Haag Estate. Paul H. Rubin is Samuel Candler Dobbs Professor of Economics at Emory University, Past President of the Southern Economic Association, and former Editor of ‘Managerial and Decision Economics’. Presented at the Austrian Economics Research Conference at the Mises Institute in Auburn, Alabama, on 11 March 2017. Includes introductory remarks by Joseph Salerno.


  • Five Reasons for Central Banks: Are They Any Good?

    In a time when Federal Reserve reforms are discussed more openly than ever before, it seems appropriate to also think about the more fundamental question of whether central banks are needed in the first place. In 1936, Vera C. Smith (later Lutz) published her doctoral dissertation The Rationale of Central Banking written under Friedrich A. von Hayek at the London School of Economics. Smith reviewed the economic controversies around central banking from the nineteenth to the early twentieth century in France, Belgium, Germany, England, Scotland, and the United States.
    Smith made very clear that central banks are not the result of natural developments in the banking sector, but come into existence through government favors.
    So what are the justifications for central banks? Smith identified five main arguments for central banks from an economic point of view. Although Smith has written with a gold standard as the underlying monetary system in mind, it is interesting to look at these arguments with the benefit of hindsight more than 80 years later. Has any one of the arguments actually made a strong or even conclusive case for central banking?

    This post was published at Ludwig von Mises Institute on February 22, 2017.


  • Regime Uncertainty

    In a blog post last Friday I provided evidence that the extent to which a US president is ‘pro-business’ has very little to do with the stock market’s performance during that president’s term in office. Regardless of whether the associated policies are good or bad for the economy, the key to the stock market’s performance over the course of a presidency is the market’s position in its long-term valuation cycle. On this basis there’s a high probability that the stock market’s return over the course of Trump’s first – and likely only – 4-year term will be dismal, no matter what Trump does. However, the policies of a president can have a big effect on the performance of the economy.
    It’s obviously early days for the Trump Administration, but the initial signs are not positive. The main reason is that ‘regime uncertainty’ is on the rise.
    ‘Regime uncertainty’ is the name given to the tendency of private investors to pull back from making long-term financial commitments due to uncertainty about what the government will do next. According to an essay by Robert Higgs, it was one of the factors that prolonged the Great Depression of the 1930s. Government intervention is generally bad for the economy, but it tends to be even worse when it happens in an ad hoc way.
    As discussed in a Bloomberg article last month, the economically-depressing effect of government by ad-hoc command was also addressed by Friedrich Hayek in ‘The Road to Serfdom’. The problem, in a nutshell, is that if the government’s actions are predictable then people are able to plan, but if officials are regularly issuing commands it will become much harder for people to have the kind of security that is a precondition for economic development and growth.

    This post was published at GoldSeek on 6 February 2017.


  • The serfs have rebelled – Europe next?

    Hayek’s The Road to Serfdom described how personal freedoms are progressively eroded by the state in the name of the common good. His warning is more associated with totalitarianism and dictatorships, than modern democracies, but the statist attitudes he warned about still apply today and lead to the same loss of personal freedom and increase of state control. In the main, the serfs are patient and tolerant of their masters, but in a democracy, the establishment behind the state risks being challenged. And that has happened twice this year, first with Brexit and now with Trump in America.
    We can be certain that the establishment in Britain and America will reinvent itself. Theresa May is not out to change the world, but is adapting to the new realities. Donald Trump is still mostly an unknown quantity, but the initial impression is one of appalling economic ignorance, dressed up as the new Reaganomics. He proposes substantial tax cuts and state-directed infrastructure spending ‘to make America great again’. But unless tax cuts and infrastructure commitments are made in lock-step with reductions in government spending, which seems extremely unlikely, the outcome will be to stimulate latent price inflation to a surprising degree.

    This post was published at GoldMoney on NOVEMBER 17, 2016.


  • The impoverishment of the masses

    Feudal and mercantilist economic systems were characterised by the lower orders of ordinary people being enslaved by, or subjected to, the commands of an elite.
    Beyond basic subsistence, serfs and slaves were not enabled to consume other goods, nor were they given the means to do so. Communism was hawked as handing power to the serfs, or workers, united in and by the state. But again, it meant that workers remained serfs, employed and commanded by a state set up in their name. Freedom from the bourgeoisie became subjugation by the state. Only capitalism, founded on free markets and freedom of choice for all, held the promise of freeing the masses from a life of drudgery and servitude.
    This was what the industrial revolution in Britain was about, particularly after the Corn Laws were repealed, and also the basis for the opportunities offered in America for refugees from European feudalism and mercantilism. And as the benefits of this freedom became enjoyed by those that were freed, so the abolition of slavery followed. A minimalist enlightened government based on democracy guaranteed property ownership and ensured that individuals’ rights were enforceable. These were the simple conditions of free markets, the conditions where the lowest consumer is the master of the mightiest producer, who endeavours to serve him. These are the conditions that led to a dramatic improvement in living standards for everyone in only a few decades, an improvement that had proved impossible in all the history of feudalism, mercantilism, and communism. It was the unique achievement of Anglo-Saxon laissez-faire.
    But empires strike back. Just as communism enslaved the workers in their own name, so democratic states in the name of capitalism find ways to bind their own electors. Freedoms taken for granted by the British and Americans were never fully adopted by more socialistic states, and even the Anglo-Saxons have been slowly compromised to the point where their democratic systems are now breaking down.
    Central to the loss of freedom, the road to serfdom as Hayek put it, is the creation of myths. The myth that the state acts on behalf its people, when it always acts to protect itself. The myth that the state knows better what its electors want than the electors themselves. The myth that only the state has the impartiality to right all wrongs. The reality is the exact opposite. The state intervenes to prevent people from deciding the matters that directly concern them. The middle classes have been taxed in the name of redistribution to the poor, and the poor themselves in turn have been relieved of the value of their earnings and savings by monetary debasement, always in the interest of the common good.

    This post was published at GoldMoney on SEPTEMBER 08, 2016.


  • The Real Reason Brazil Can Still Be “the Country of the Future”

    Writing this week for Bloomberg, Tyler Cowan made the case that Brazil is ‘still the country of the future.’ While I share Cowan’s optimism for the nation’s future, his focus on the country’s diversity, size, and vaguely federalized political structure overlooks the real story – that Austrian economics and libertarianism is winning the battle of ideas within the country.
    As Reason recently highlighted in an excellent short documentary, Brazil is home to one of the fastest-growing and accomplished liberty movements in the world. Not only did organizations like the Mises Brasil, Students for Liberty Brazil and the Free Brasil Movement play a pivotal role in the suspension of president Dilma Rousseff but, as I love to point out, Ludwig von Mises is now the most searched economist in the country. More impressive still, as of last month, F. A. Hayek was searched more than John Maynard Keynes and Murray Rothbard was searched more than Milton Friedman. This is an incredible testament to the work of Mises Brasil, Instituto Rothbard and the other organizations within the country dedicated to spreading Austro-libertarian ideas.

    This post was published at Ludwig von Mises Institute on Aug. 12, 2016.


  • Our Disastrous Monetary System: A New Must-Read Book Explains

    There is a long tradition in Austrian economics and libertarian thought of presenting ideas not only to academic peers and fellow intellectuals, but directly to the broader public. Hayek’s Road to Serfdom, and Rothbard’s What Has Government Done to Our Money?are prime examples. In the German speaking world it was Roland Baader, a student of Hayek’s at the University of Freiburg in the 1960s, who has from 1988 until his death in 2012, more than anyone else, popularized the ideas of the Austrian school of economics. Blind Robbery! How the Fed, Banks and Government Steal Our Money by Philipp Bagus and Andreas Marquart stands in that tradition. The German-language original has already been translated into Taiwanese, Korean, and Spanish, and it is now made accessible to a much wider audience in English.
    The aim of the book is to shed light on a subject that far too many people spend too little time, if any at all, thinking about: the monetary system. Everybody knows about the importance of money, but what do we really know about the functioning of the monetary system? The authors invite the reader to think carefully and critically about central questions: What is money? How is it produced? And what effects does an excessive production of money have on the distribution of incomes and wealth, our ways of life, our culture, and the economic system as a whole?

    This post was published at Ludwig von Mises Institute on July 20, 2016.


  • The Anti-Globalization Brexplosion: “If You Ain’t Got Nuttin’, You Got Nuttin’ To Lose”

    Populism, nationalism, and xenophobia all contributed to the victory of the ‘Leave’ campaign in the United Kingdom’s recent referendum on membership in the European Union. But these forces float on the surface of a larger sea change: a fundamental shift worldwide in the relationship between the state and the market.
    Since the birth of modern capitalism, these two frameworks of human activity have generally been at odds. While the market tends to expand geographically as its participants pursue economic benefits, the state seeks to keep orderly everybody and everything within the territory it controls. A merchant may recognize market opportunities in a foreign country, but he will run into the state – most immediately, that country’s immigration authorities – if he pursues them.
    How to reconcile the tension between the market and the state is the central concern of political economy today, just as it was for Adam Smith in the eighteenth century, Friedrich List and Karl Marx in the nineteenth century, and John Maynard Keynes and Friedrich von Hayek in their long debate on the topic through the middle decades of the twentieth century.
    Let’s consider two hypothetical extremes in the state-market relationship.

    This post was published at Zero Hedge By Yoon Young-Kwan, originally posted Project Syndicate, Jul 1, 2016.


  • The Week in Review: June 11, 2016

    This week graduate students from around the world gathered at the Mises Institute for our annual Rothbard Graduate Seminar. The subject this year focused on Ludwig von Mises’s seminal treatiseHuman Action, with the students receiving instruction from Professors Guido Hlsmann, Jeffrey Herbener, David Gordon, Peter Klein, Joseph Salerno, and Mark Thornton. The discussion and debate among both students and faculty has been intense and instructive, with Dr. Salerno noting that he still discovers something new every time he reads Mises’s masterpiece.
    As Jeff Deist noted this week, programs such as RGS are a vital part of libertarian strategy. By grooming new generations of Austrian scholars, we continue to keep alive the intellectual torch in the tradition of greats like Mises, Rothbard, and Hayek. And in times like today, where Nobel Prize winning economists are ignorant of basic economic concepts, central bankers work tirelessly to delude themselves of the strength of the economy, and capitalism is being blamed for obesity, civilization desperately needs such scholars to preserve hope for the future.

    This post was published at Ludwig von Mises Institute on June 11, 2016.


  • Trump and Hillary Don’t Know How to Fix the Economy

    Recently, Hillary Clinton was taped ridiculing Donald Trump for lacking a detailed plan for the American economy. The message, so it goes, is that Trump is not suited for the presidency because he doesn’t have a plan on how to turn the American economy around.
    But is it really more dangerous to elect a president who makes up economic policy on the fly than one who proclaims to have a detailed plan for us?
    The answer to this is no, it is not more dangerous to elect someone who makes up economic policy by the seat of his pants – as Donald Trump is prone to do – than it is to elect someone who thinks she can have the future of the economy neatly mapped out. However, this does not imply that seat-of-the-pants method is lessdangerous either. The underlying problem is we have two competing people who think they can manage the American economy.
    The core of why both philosophies are equally dangerous is best summarized by F. A. Hayek and the pretense of knowledge. Hayek notes in his speech in 1974:
    Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones … in the study of such complex phenomena as the market, which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process … will hardly ever be fully known or measurable.

    This post was published at Ludwig von Mises Institute on May 30, 2016.


  • The Fatal Conceit

    Don’t Plan on Living in St. Petersburg…
    GENEVA, Switzerland – When we left you last week, we were describing why neither democracy nor planning works on a large scale. Austrian School economist Friedrich Hayek described the problem with great thoroughness in his book The Fatal Conceit.
    The Fatal Conceit: central economic planning is literally impossible – there can be no centrally planned rational economy. Individual planning is distinct from central planning, in that the many individual plans pursued by self-interested individuals mesh and create a spontaneous order. This order is far superior to anything that a central planning agency can ever hope to achieve – in fact, as Mises has shown, central planning is even doomed to failure ifthe planners hypothetically had perfect knowledge of all facets of the economy at a given time. However, this hypothetical situation can can never be realized anyway, as knowledge is widely distributed and as Hayek argues, is often tacit and therefore not directly communicable. It only expresses itself in human action.
    Planning is a necessary feature of life. We have to plan our day… our year… our business, our vacations, our budgets – we plan for everything in our lives. And generally speaking, the better we are at planning and at following through on our plans, the better things go.
    Naturally, we assume that this sort of planning will be helpful at all levels – from our personal schedules to an agenda for the entire nation. But there’s a problem: Planning requires detailed knowledge of our goals and resources.
    If you’re going to build a factory, for example, you need a lot of information. You need to know where, when, how, and why, covering a vast range of issues. How much will it cost? How long will it take? What will it make? How will the goods be delivered? Where will employees come from? How much will they earn? Etc., etc.
    You do that planning as best you can – sometimes right, sometimes wrong – and always knowing that you’ll have to live with the results. But then, along come the feds. And they’ve got their own plans.
    ‘You can’t build a factory there,’ they say.
    ‘We’re raising the minimum wage,’ they add.
    ‘You’ll have to get a license… a permit… clearance from the FDA, EPA, FBI, TSA, NSA, DOJ, SEC, NLRB…
    ‘And, oh yes, your product must be sold at the price we set…’

    This post was published at Acting-Man on May 17, 2016.


  • Getting It All Straight – Trumpism, Nationalism, Patriotism, & Libertarianism

    I was struck by a tweet from libertarian Republican congressman Justin Amash, who has become the ‘new Ron Paul’ now that the three-time presidential candidate and libertarian icon has taken a well-deserved rest from politics. The other day he tweeted:
    ‘Patriotism & nationalism are profoundly different. Patriotism is love of country. FA Hayek called nationalism ‘a twin brother of socialism.”
    Amash, who has vowed to never support GOP frontrunner and likely presidential nominee Donald Trump, undoubtedly had the New York real estate mogul in mind, but no matter what one thinks of The Donald, Amash is quite wrong about the nature of American nationalism and the meaning of ‘patriotism.’
    To begin with, Hayek was clearly talking about European nationalism, not the American variety. I’ll get to the difference between them, but I want first to point out the irony of Amash’s citation of this particular Hayek quote, because the great libertarian theorist was here talking about the problem of centralization: that is, the growing tendency of smaller political units to be subordinated to and swallowed up by bigger entities.
    If we place Hayek’s discussion in the present context, then it becomes clear that nationalism is not the enemy but a (potential) friend of liberty. For the modern trend is toward supra-national entities, like the European Union, the UN, and the North American ‘Free Trade’ Agreement, which are engaged in erecting precisely that ‘society which is consciously organized from the top’ so abhorred by Hayek. When nationalism is arrayed against globalism, i.e. against the concept of a regional super-state, or even a World State, libertarians must clearly take sides with the former.

    This post was published at Zero Hedge on 05/11/2016.


  • The Neural Network We Call the Market

    The market is a neural network – a massive computation on society. Though many scientists around the world spend their efforts attempting to create brain-like neural networks in their laboratory, they are completely unaware of the fact that the most advanced re-creation of the brain has been long underway outwardly through the collective, self-organizing behavior of human beings.
    Upon reception of the Nobel Prize in 1974, the famous social theorist, economist, and philosopher Frederick Hayek said,
    ‘We are only beginning to understand on how subtle a communication system the functioning of an advanced industrial society is based – a communications system which we call the market and which turns out to be a more efficient mechanism for digesting dispersed information than any that man has deliberately designed.’
    Hayek was not only correct but way ahead of his time.
    Today, we recognize the commonality of the brain, global economy, and market as complex adaptive systems. If human intelligence is the result of both the staggering complexity and astounding adaptiveness of our own neural networks, which continually rewire themselves at the molecular and biological level as they learn and respond to the world, should we expect to achieve the same results from anything less?
    In recent years, there has been a move in the right direction by attempting to mimic the human brain with the use artificial neural networks. However, this still represents a decrease in the scale of complexity and is unlikely to produce general human intelligence.

    This post was published at FinancialSense on 04/08/2016.


  • Will Donald Trump End Up Like JFK?

    Bumpy, Lumpy and Slumpy The inability of democratic assemblies to carry out what seems to be a clear mandate of the people will inevitably cause dissatisfaction with democratic institutions. Parliaments come to be regarded as ineffective ‘talking shops,’ unable or incompetent to carry out the tasks for which they have been chosen. The conviction grows that if efficient planning is to be done, the direction must be ‘taken out of politics’ and placed in the hands of experts – permanent officials or independent autonomous bodies.
    – Friedrich Hayek
    AIKEN, South Carolina – Last night, we sat on the porch of the old Willcox Hotel. The sky was clear. The temperature was perfect. The sun sank in the West… just as it should. But today, we’re leaving town. Saying goodbye to Aiken. Probably not a moment too soon. We’ve heard the local sheriff has collected a posse of architects and is looking for us…

    This post was published at Acting-Man on March 14, 2016.


  • Allister Heath: This crisis has been caused by arrogant central banks

    It was Friedrich von Hayek, the great Austrian economist, who explained just how central the price system is to capitalism and our civilisation’s astonishing prosperity. The fact that goods, services, assets, money, time, ideas, and risk all come with a price attached allows resources to be allocated remarkably effectively. …
    The free market makes mistakes, of course, but it fails far less frequently than any alternative way of allocating resources. The only other way is to direct activity centrally — an extreme version of central planning — but that is a recipe for catastrophe.
    Tragically, while policymakers supposedly understand this, they have spent years undermining the price system, making it less useful and efficient, planting the seeds for one crisis after another. The current market turmoil — which has pushed the FTSE 100 down 22 percent from its recent peak, sent yields into a spin, and turbocharged gold — is one consequence of all of this. Far from being a manifestation of what the left describes as “neo-liberalism,” it is primarily a failure of statism.

    This post was published at The Telegraph