Austrian School On The Rise
The Austrian School of economics is gaining followers. Fueling this shift is a belief that mainstream loose-money policies led our current crisis. While die-hard mainstream economists like Paul Krugman aren’t budging, millions of people are rethinking the role government should play in the economy. Many of them are looking to the Austrian School for answers.
Public outrage over bailouts and rising debt is widespread. The outcry has Wall Street and mainstream economists on the defensive. Banks are so concerned that their leading industry group, SIFMA, just launched a major PR offensive against this “populist overreaction” (yes, that’s their wording. Read the Bloomberg piece for more.) One commenter quipped that the campaign slogan should be Stop Complaining About Getting Fleeced.
The Austrian Answer
Many people are attracted to this school of economic thought because of the fiscal discipline inherent to it. Responsible spending, low taxes, and small government are major themes. Austrian advocates like Ron Paul and Lew Rockwell have been fighting inflationary and easy-money policies for decades. It looks like the crisis they have been warning about has finally arrived. And reflating the bubble may not work this time.
That’s not the only reason their popularity is on the rise, though. Their anti-war stance is popular with the Left, while their small-government policies appeal to fiscally conservative Republicans, who are disillusioned in the wake of Bush’s reckless deficit spending.
Mises.org Traffic: Evidence of Increasing Interest
The Ludwig Von Mises Institute is Mecca for Austrian and Libertarian Economists (in the US, at least). The organization, chaired by Lew Rockwell, has a huge collection of material catering to liberty-minded economists. I contacted their webmaster to see how traffic has been since the crisis started. Their traffic is up rougly 80% YoY. Note the traffic spike in September of last year when Lehman was dying:
A Shift or a Fad?
It’s unclear if what we’re seeing is a major shift in economic thinking, or a temporary blip. If government can successfully reflate the bubble, interest in Austrian economics will probably fade, as Americans once again get comfortably numb. Like a drug addict, hitting rock bottom may be necessary before significant change happens. Whether we have reached that point remains to be seen.
Judging by the shift in consumer spending, Americans are well on their way to a permanent change in lifestyle. We’ve never seen a dramatic shift like the one that happened over the past year or so. Austrian economics may play a major role in policy reform.
Any rational person can see how unsustainable our current path is. But our political and financial leaders remain convinced that the answer lies in more debt/credit. This may delay pain for a few more years, but only makes the long-term picture uglier. A sea-change is inevitable. Exactly how everything will play out is unknown, but it’s going to be interesting to watch.
h/t Jesse’s Cafe for the Greenspan toon
Disclosures: No positions in any stocks mentioned