Economics is not a science in the same way chemistry and physics are sciences. Or, if it is, it’s a pseudo-science having more in common with psychology than geology. In his classic book Human Action economist Ludwig Von Mises demonstrates how economics is the study of human action. Human action is sometimes rational, sometimes irrational, sometimes predictable, and sometimes unpredictable. In short economics is the subject of scarcity and decision making.
While Microeconomics pertains to individual and business decisions, the field of Macroeconomics relates to how the economy behaves in general. Topics such as employment, prices, interest rates, government budgets, productivity, value of currency, trade, savings and investments are all connected to one another. Macroeconomics studies how, within time, these factors change the business cycle. The three most known schools of economics that have impacted the Western world in the last century are the Keynesian, Monetarist, and Austrian. Keynesian theory follows the principles of John Maynard Keynes and is characterized by a belief in active government intervention in economic matters. Milton Friedman was the pioneer of the Monetarist theory, a belief that monetary policy, or control of the money supply, is the primary if not the sole determinant of a nation’s economy. Austrian School is an outgrowth of classical economics and is known for its belief that equilibrium and efficiency of markets are best achieved without an active state interference. Carl Menger, Ludwig Von Mises, Nobel laureate Friedrich Hayek, and Murray Rothbard have all made vast contributions to the Austrian School of Thought.
While I cannot completely discredit certain Keynes’ ideas I am inclined to not accept its modern version that has been accepted and applied by the Western world. The history of economic bubbles we’ve witnessed during the last decades should be solid proof that governments cannot control human action despite the efforts they employ, unless one is to relinquish his personal God given right to be a free man and accept the idea that the state should have the power to control him. And that is where I found Austrian economics to be in tune with the freedom of individuals expressed through freedom of economics. While the Austrian economics have not been accepted by world governments as a viable economic system it should be noted that politics have had a great deal of impact on such decisions. But with the more recent Ron Paul phenomenon people and certain politicians are now starting to embrace the Austrian ideology.
Philosophy is key to one’s ability to think on his own. Logic is an element of philosophy. One will find Austrian thought very logical. History is also a main component in understanding and evaluating economics. Historic facts have been used to prove Austrian theory. The conclusion to all this is that free markets, unaltered by government intervention, are best for human progress, human innovation and ingenuity, and most of all for individual liberty. The current economic crises have helped proponents of Austrian economics get recent traction in the world. While it is starting to be embraced by many people it’s still primarily due to solving the economic problem. But what we all must know is that Austrian principles, when applied properly will be the main driver of maintaining individual liberty.
I invite you to listen to Jay Taylor‘s “Turning Hard Times into Good Times” radio show this Tuesday, July 12th, 3:00 PM Eastern/12:00 noon Pacific to learn more about Austrian Economics. Click on the link below and you’ll be connected.
Jay will have a special guest, James Turk, founder of GoldMoney and the pioneer of digital gold. James, who applies Austrian macro knowledge to his investments, will discuss current events and how to survive and prosper when the dollar collapses.
Jay will also have me in his show and I will elaborate on the correlation between economics and individual freedom.
This is going to be very enlightening, and I can guarantee you that you won’t get this kind of knowledge from mainstream media. If you can’t make it to the live recording, don’t worry! Just click on the link below and find the archive for Tuesday, July 12th.
Tuesday, July 12th, 3:00 PM Eastern/12:00 noon Pacific