Austrian school of economics and Scarlet FM: Difference between pages
(Difference between pages)
Content deleted Content added
No edit summary |
|||
| Line 1: | Line 1: | ||
{{Infobox Radio Station |
|||
{{Articleissues |refimprove=August 2007 |technical=December 2007}} |
|||
| name = 97.5 Scarlet FM |
|||
{{Austrian School sidebar |expanded=all}} |
|||
| image = [[Image:Scarlet_FM.png|200px]] |
|||
{{Capitalism}} |
|||
| city = [[Narbeth]], [[Pembrokeshire]] |
|||
{{Libertarianism sidebar}} |
|||
| area = [[Llanelli]] and South Camarthenshire |
|||
| branding = |
|||
| slogan = |
|||
| airdate = [[July 14]] [[2002]] |
|||
| frequency = 97.5 MHz |
|||
| share = |
|||
| share as of = |
|||
| share source = |
|||
| format = [[Mixed Hits]] | |
|||
| class = |
|||
| owner = [[Town and Country Broadcasting]] |
|||
| website = [http://www.scarletfm.com 97.5 Scarlet FM] |
|||
}} |
|||
'''Scarlet FM''' is a local radio station covering the [[Llanelli]], [[Burry Port]] and [[Pembrey]] areas of south [[Carmarthenshire]] in west [[Wales]]. It plays mainly Adult Contemporary music, featuring both current and classic hits. Scarlet FM is the official radio station of the [[Llanelli Scarlets]] rugby team. The station used to be based at The Foothold Centre in the Stebonheath area of Llanelli, but has since moved to the main Town and Country Broadcasting studios in [[Narberth, Pembrokeshire]]. |
|||
The '''Austrian School''', also known as the “'''[[Vienna]] School'''” or the “'''Psychological School'''”, is a [[Heterodox economics|heterodox]]<ref>[http://books.google.com/books?id=IESEfQVI1vgC&pg=PA35&dq=austrian+school+heterodox+economics&sig=ACfU3U32u37y5TkaI6T0IyF_UpuecKQJQQ#PPA36,M1 David C. Colander], Complexity and History of Economic Thought, p. 35.</ref> school of economics that advocates adherence to strict [[methodological individualism]]. Proponents of the Austrian School hold that the only valid economic theory is logically derived from basic principles of human action. Alongside the formal approach to theory, often called [[praxeology]], the school has traditionally advocated an interpretive approach to history. Proponents of praxeological method hold that it allows for the discovery of economic laws valid for all human action, while the interpretive approach addresses specific historical events. On the other hand, critics of the Austrian school contend that its methods consists of [[post-hoc analysis]] and do not generate testable implications, and so fails [[falsifiability]].<ref name = "mgtqpu">{{cite web |url=http://anti-state.com/article.php?article_id=381 |title=Why We Can't Associate Too Closely with the Austrians |accessdate=2008-05-12 |author=Joe D. |date=2003-01-31 |work= |publisher=anti-state.com}}</ref><ref name = "ovjxyg">{{cite web |url=http://www.huppi.com/kangaroo/L-aussm.htm |title=A Critique of the Austrian School of Economics |accessdate=2008-05-10 |author=Steven R. Kangas |date= |work= |publisher=}}</ref> |
|||
The station can also be heard in [[Ilfracombe]], [[Devon]], some 50 miles away on the other side of the Bristol channel, as well as in nearby [[Swansea]], although the stations on-air branding and presentation does not acknowledge either area. |
|||
==History== |
|||
[[Classical economics]] focused on the [[labour theory of value]]. In the late 19th century, however, attention was focused on the concepts of “marginal” cost and value. The Austrian School was one of three founding currents of the [[Marginal revolution#The Marginal Revolution|marginalist revolution]] of the 1870s, with its major contribution being the introduction of the [[subjectivism|subjectivist]] approach in economics.<ref name=keizer/> Carl Menger's 1871 book, ''[[Principles of Economics]]'' was the catalyst for this development; while [[marginalism]] was generally [[Media:[[Image:Example.ogg]][[Image:Example.jpg]]]]influential, there was also a more specific school that grew up around Menger, which came to be known as the “Psychological School,” “Vienna School,” or “Austrian School.”<ref>Israel M. Kirzner (1987). "Austrian School of Economics," ''[[The New Palgrave: A Dictionary of Economics]]'', v. 1, pp. 145-51.</ref> The Austrian School played a major role in the development of economic theory in the 20th century.<ref name=keizer>{{cite book |last=Keizer |first=Willem |title=Austrian Economics in Debate |publisher=Routledge |location=New York |year=1997 |isbn=9780415140546 }}</ref> |
|||
Programmes on Scarlet FM are mainly hosted by presenters who also work on its sister stations [[Swansea Bay Radio]], [[Radio Carmarthenshire]] and [[Radio Pembrokeshire]]. |
|||
Austrian economics is currently closely associated with the advocacy of ''[[laissez-faire]]'' views. Earlier Austrian economists were more skeptical compared to later economists such as [[Ludwig von Mises]] and [[Karel Engliš]], with [[Eugen von Böhm-Bawerk]] saying that he feared unbridled competition would lead to “[[anarchism]] in production and consumption”.{{citequote|date=August 2008}} However, the Austrian School, especially through the works of [[Friedrich Hayek]], was influential in the revival of ''laissez-faire'' thought in the 1980s.{{Fact|date=November 2007}} |
|||
The school originated in [[Vienna]]. However, later adherents of the school like [[Murray Rothbard]] and others have derived the roots of the thought of the Austrian School from the Spanish [[Scholastics]] teaching at the [[University of Salamanca]] of the 15th century and the [[France|French]] [[Physiocrats]] of the 18th century.<ref>[http://www.mises.org/etexts/austrian.asp What is Austrian economics?]</ref> It owes its name to members of the [[Germany|German]] [[Historical School]] of [[economics]], who argued against the Austrians during the ''[[Methodenstreit]]'', in which the Austrians defended the reliance that [[classical economics|classical economists]] placed upon deductive logic. Their Prussian opponents derisively named them the “Austrian School” to emphasize a departure from mainstream German thought and to suggest a provincial, [[Aristotelian]] approach. (The name “Psychological School” derived from the effort to found marginalism upon prior considerations, largely psychological.) The school was no longer centered in Austria after [[Hitler]] came to power, and is now based almost entirely in the United States. |
|||
Menger was closely followed by [[Eugen von Böhm-Bawerk]] and [[Friedrich von Wieser]]. [[Austria]]n economists developed a sense of themselves as a school distinct from [[neoclassical economics]] during the [[economic calculation debate]], with [[Ludwig von Mises]] and [[Friedrich von Hayek]] representing the Austrian position, where they contended that without monetary prices and private property, meaningful economic calculation is impossible. |
|||
The Austrian economists were amongst the first to clash directly with Marxism{{Fact|date=November 2007}}, since both dealt with such subjects as money, [[capital (economics)|capital]], [[business cycle]]s, and economic processes. This was part of the Austrian economists' participation in the late 19th Century ''[[Methodenstreit]],'' during which they attacked the [[Georg Wilhelm Friedrich Hegel|Hegelian]] doctrines of the [[Historical School]]. The Austrian economist Böhm-Bawerk wrote extensive critiques of Marx in the 1880s and 1890s. |
|||
Austrian economics after 1920 can be broken into two general trends. One, exemplified by [[Friedrich A. Hayek]], while distrusting most neoclassical concepts (like the entire corpus of macroeconomics), generally accepts a large part of the neoclassical methodology; the other, exemplified by [[Ludwig von Mises]], seeks a different formalism for [[economics]]. The main area of contention between the mainstream and the Austrian school is on their view of the market system as a process, not only to be studied using equilibrium models, but to be viewed as an incessant process that only tends toward a constantly changing equilibrium, this difference is the root of the [[Austrian Business Cycle Theory|Austrian business cycle theory]], the economic calculation debate, and their different views of monopoly and competition. The second primary area of contention between neoclassical theory and the Austrian school is over the possibility of consumer indifference{{ndash}} neoclassical theory says it is possible, whereas Mises rejected it as being “impossible to observe in practice.” This is a more philosophical problem, than one directly relevant to the understanding of the operation of the market. The third major dispute arose when Mises and his students argued, building on Czech economist [[Franz Cuhel]],<ref>[http://pcpe.libinst.cz/nppe/3_1/nppe3_1_4.pdf Cuhel, Franz: "On the Theory of Needs"]</ref> that utility functions are [[ordinal scale|ordinal]], and not [[cardinal number|cardinal]]; that is, the Austrians contend that one can only rank preferences and cannot measure their intensity, in direct opposition to the neoclassical view at the time. Finally there are a host of questions about uncertainty raised by Mises and other Austrians, who argue for a different means of [[risk assessment]]. These questions are directly linked to the market process approach to economic theory, since the world of probabilistic uncertainty is the equilibrium world. Only immersed in a world of genuine uncertainty the market process theory is relevant. |
|||
Austrian economics was ill-thought of by most economists after [[World War II]] because it rejected observational methods{{Fact|date=November 2007}}. Its reputation rose somewhat in the late 20th century with the work of [[Israel Kirzner]] and [[Ludwig Lachmann]], as well as a renewed interest in Hayek after he won the [[Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel]].<ref>{{cite book |last=Meijer |first=G. |title=New Perspectives on Austrian Economics |publisher=Routledge |location=New York |year=1995 |isbn=9780415122832 }}</ref> However, it remains a distinctly minority position, even in such areas as capital value. Currently, the only major US university with a significant Austrian presence is [[George Mason University]]. Austrian economic ideas are promoted mainly by non-academic bodies such as the [[Mises Institute]]. |
|||
===Influence=== |
|||
According to the Austrian economist [[Peter J. Boettke]], during its history the position of the Austrian school within economics profession has changed several times from the center to the fringe, and currently its position lies between [[Mainstream economics|mainstream]] and [[heterodox economics]].<ref name="Boettke and Leeson">{{cite book|last=Peter J. Boettke|first=Peter J. Boettke|coauthors=Peter T. Leeson|title=A Companion to the History of Economic Thought|editor=Warren Samuels, Jeff E. Biddle, and John B. Davis|pages=446–452|chapter=28A: The Austrian School of Economics 1950-200|url=http://books.google.com/books?id=3H8gBQv5MysC&pg=PA445&dq=austrian+school+heterodox+economics&lr=&sig=ACfU3U2uO3tvskiSCG_we5gL0VSCevKdDw#PPA445,M1 |publisher=Blackwell Publishing |date=2003 |isbn=978-0631225737}} </ref> While often controversial, the Austrian School has been historically influential due to its emphasis on the creative phase (i.e. the time element) of economic productivity and its questioning of the basis of the behavioral theory underlying [[neoclassical economics]].{{Fact|date=May 2008}} |
|||
The influence that Austrian school ideas have had on [[Keynesian]] [[macroeconomics]] is often overlooked{{Fact|date=November 2007}}. Keynes himself acknowledged being exposed to the Misesian notion that “nominal” values could have “real” effects. A further source of this influence is the period of time when the [[London School of Economics]] brought in Hayek and other “continental” economists. {{Fact|date=November 2007}}While their students, though initially receptive, ultimately were drawn to the new Keynesian doctrines, many of the Hayekian concepts, particularly those relating time to the value of capital and its importance, would find their way into the work of Keynesians, especially by way of [[John Hicks]] (who, while distancing himself from Keynesianism, nonetheless made the most influential attempt to formalize it).{{Fact|date=November 2007}} |
|||
The former [[U.S. Federal Reserve]] Chairman, [[Alan Greenspan]], speaking of the originators of the School, said in 2000, “the Austrian school have reached far into the future from when most of them practiced and have had a profound and, in my judgment, probably an irreversible effect on how most mainstream economists think in this country.”<ref>Greenspan, Alan. "Hearings before the U.S. House of Representatives' Committee on Financial Services." U.S. House of Representatives' Committee on Financial Services. Washington D.C.. 7/25/2000.</ref> Greenspan also said that he had attended a seminar hosted by Ludwig von Mises.<ref>[http://www.usagold.com/gildedopinion/greenspan-gold.html The Greenspan-Paul Congressional Exchanges]</ref> |
|||
In more recent politics, [[Ron Paul]], a Republican U.S. Representative who was running for the 2008 American Presidency, is a strong believer in Austrian school economics. He has authored six books on the subject, and displays pictures of [[classical liberal]] economists [[Friedrich Hayek]], [[Murray Rothbard]], and [[Ludwig von Mises]] (as well as of [[Grover Cleveland]]) on his office wall.<ref>[http://mises.org/story/2891 The Economics of a Free Society - Ron Paul - Mises Institute<!--Bot-generated title-->]</ref><!--better citation needed--> |
|||
==Analytical framework== |
|||
Austrian economists reject statistical methods and artificially constructed experiments as tools applicable to economics, saying that while it is appropriate in the natural sciences where factors can be isolated in laboratory conditions, the actions of human beings are too complex for this treatment. Instead one should isolate the logical processes of human action - a discipline named "[[praxeology]]" by [[Alfred Espinas]].{{Fact|date=November 2007}} |
|||
Austrian School theorists, like [[Ludwig von Mises]], insist that ''praxeology'' must be [[positive economics|value-free]]. That the method does not answer the question "should this policy be implemented?", but rather "if this policy is implemented, will it have [[Law of unintended consequences|the effects you intend]]?" However, Austrian economists often make policy recommendations that call for the elimination of government institutions - [[Anarcho-capitalism|anarcho-capitalist]] solutions. These recommendations are similar to, but further reaching than the [[minarchism|minarchist]] ideas of [[Chicago School (economics)|Chicago School]] economists. Both schools advocate strict protection of private property, and support for [[individualism]] in general, and are often cited by [[conservatives]], [[laissez-faire liberal]], [[libertarian]], and [[Objectivism (Ayn Rand)|Objectivist]] groups for support. |
|||
The Austrian method is based on the heavy use of logical [[deduction]] from self-evident [[axioms]], undeniable facts about human existence. ''The primary axiom from which Austrians deduce further certain conclusions is the action axiom which holds that humans take conscious action toward chosen goals''. The axiom actually affirms many other axioms such as [[existence]], [[identity]], [[consciousness]], and [[free-will]]. Austrians recognize this but focus on action and say that it is undeniable because in order to deny action, one would have to employ action in the act of denial. |
|||
This is the one area where Austrians differs most significantly from other schools of economic thought. Mainstream schools such as the [[Neoclassical economics|neoclassical]] economists, the [[Chicago school (economics)|Chicago school]], the [[Keynesian]]s and [[New Keynesian economics|New Keynesians]], adopt mathematical and statistical methods, and focus on [[induction]] and empirical observation to construct and test theories; while Austrians reject this approach in favor of [[deduction]] and logically deduced inferences. Austrians stress deduction because deduction, if performed correctly, leads to certain conclusions and inferences that must be true. Though Austrians do not discount induction, they hold that it does not assure certainty like deduction. Mainstream economists do not argue with this assertion, but believe the conclusions that can be reached by pure logical deduction are limited and weak.<ref name = "Samuelson"/> |
|||
Austrians view [[entrepreneurship]] as the driving force in [[economic development]], see [[private property]] as essential to the efficient use of resources, and usually (if not always) see [[government]] interference in market processes as counterproductive. In this, their views do not far differ from those of the [[Chicago school (economics)|Chicago school]]. |
|||
As with neoclassical economists, Austrians reject [[classical economics|classical]] cost of production theories, most famously the [[labor theory of value]]. Instead they explain value by reference to the [[Subjective theory of value|subjective preferences of individuals]]. This psychological aspect to Menger's economics has been attributed to the school's birth in turn of the century [[Vienna]]. [[Supply and demand]] are explained by aggregating over the decisions of individuals, following the precepts of [[methodological individualism]], which asserts that only individuals and not collectives make decisions, and [[marginalist]] arguments, which compare the costs and benefits for incremental changes. |
|||
Contemporary neo-Austrian economists claim to adopt [[economic subjectivism]] more consistently than any other school of economics and reject many neoclassical formalisms. For example, while neoclassical economics formalizes the economy as an [[economic equilibrium|equilibrium]] system with supply and demand in balance, Austrian economists emphasize its dynamic, perpetually dis-equilibrated nature. |
|||
The core of the Austrian framework can be summarized as taking a subjectivist approach to marginal economics, and a focus on the idea that logical consistency of a theory is more important than any interpretation of empirical observations. Austrians focus completely on the [[opportunity cost]] of goods, as opposed to balancing downside or disutility costs. It is an Austrian assertion that everyone is ''better off'' in a mutually voluntary exchange, or they would not have carried it out.<ref>[http://cepa.newschool.edu/het/essays/margrev/oppcost.htm The Opportunity Cost Doctrine]</ref>. Mainstream economists point out that this is not necessarily true if there are [[external costs]]. |
|||
This focus on opportunity cost alone means that their interpretation of the [[time value]] of a good has a strict relationship: since goods will be as restricted by scarcity at a later point in time as they are now, the strict relationship between investment and time must also hold. A factory making goods next year is worth as much less as the goods it is making next year are worth. This means that the business cycle is driven by miscoordination between sectors of the same economy, caused by money not carrying incentive information correct about present choices, rather than within a single economy where money causes people to make bad decisions about how to spend their time. |
|||
==Contributions== |
|||
Some general contributions of Austrian economists: |
|||
* A theory of distribution in which factor [[price]]s result from the [[imputation (economics)|imputation]] of prices of consumer goods to goods of "higher order", that is goods used in the production of consumer goods (goods of the first order). |
|||
* An emphasis on the forward-looking nature of choice, seeing time as the root of uncertainty within economics (see also [[time preference]]). |
|||
* A fundamental rejection of mathematical methods in economics seeing the function of economics as investigating the essences rather than the specific quantities of economic phenomena. This was seen as an evolutionary, or "genetic-causal", approach against the stresses of [[economic equilibrium|equilibrium]] and [[perfect competition]] found in mainstream Neoclassical economics (see also [[praxeology]]). |
|||
* [[Eugen von Böhm-Bawerk]]'s critique of [[Karl Marx|Marx]] centered around the untenability of the [[labor theory of value]] in the light of the [[transformation problem]]. There was also the connected argument that capitalists do not exploit workers; they accommodate workers by providing them with income well in advance of the revenue from the output they helped to produce. |
|||
* Eugen von Böhm-Bawerk's capital theory, which equates [[capital intensity]] with the degree of [[roundaboutness]] of production processes. |
|||
* Eugen von Böhm-Bawerk's demonstration that the law of marginal utility, as formulated by [[Carl Menger|Menger]] necessarily implies the classical law of costs and hence the vast majority of the conclusions of the British [[classical economists]]. This discovery was later fully developed and its implications traced by a student of [[Ludwig von Mises|von Mises]], [[George Reisman]], in his book, ''Capitalism''. |
|||
* An emphasis on [[opportunity cost]] and reservation demand in defining [[marginal theory of value|value]], and a refusal to consider supply as an otherwise independent cause of value. (The British economist [[Philip Wicksteed]] adopted this perspective.) |
|||
* The Mises-Hayek [[business cycle]] theory, which explains depression as a reaction to an intertemporal production structure fostered by [[monetary policy]] setting [[interest rate]]s inconsistent with individual time preferences. |
|||
* Hayek's concept of [[intertemporal equilibrium]]. ([[John Hicks]] took over this theory in his discussion of temporary equilibrium in ''Value and Capital,'' a book very influential on the development of neoclassical economics after World War II.) |
|||
* Mises and Hayek's view of prices as permitting agents to make use of [[dispersed knowledge|dispersed tacit knowledge]]. |
|||
* The [[time preference theory of interest]], which explains interest rates through [[intertemporal choice]] - the different time preferences of the borrower or lender - rather than as a price paid for a [[factor of production]]. |
|||
* Stressing uncertainty in the making of economic decisions, rather than relying on "[[Homo economicus]]" or the rational man who was fully informed of all circumstances impinging on his decisions. The fact that perfect knowledge never exists, means that all economic activity implies risk. |
|||
* Seeing the entrepreneurs' role as collecting and evaluating information and acting on risks. |
|||
* The [[economic calculation debate]] between Austrian and [[Marxist]] economists, with the Austrians claiming that Marxism is flawed because prices could not be set to recognize opportunity costs of factors of production, and so [[socialism]] could not make rational decisions. |
|||
== Specific contributions == |
|||
===The Austrian view of inflation=== |
|||
The Austrian School has consistently argued that a "traditionalist" approach to inflation yields the most accurate understanding of the causes (and the cure) for [[inflation]]. Austrian economists maintain that inflation is always and everywhere simply an increase of the [[money supply]] (i.e. units of currency or [[means of exchange]]), which in turn leads to a higher nominal price level, as the real value of each monetary unit is eroded, loses purchasing power and thus buys fewer assets and goods and services. |
|||
Given that all major economies currently have a [[central bank]] supporting the private [[bank]]ing system, almost all new money is supplied into the [[economy]] by way of bank-created [[credit (finance)|credit]] (or [[debt]]). [[Austrian economists]] believe that this bank-created [[credit (finance)|credit]] growth (which forms the bulk of the [[money supply]]) sets off and creates volatile business cycles (''see'' [[Austrian Business Cycle Theory]]) and maintain that this "wave-like" or "[[boomerang]]" effect on economic activity is one of the most damaging effects of monetary inflation. |
|||
According to the [[Austrian Business Cycle Theory]], it is the [[central bank]]'s policy of ineffectually attempting to control the complex multi-faceted ever-evolving [[market economy]] that creates volatile [[credit cycle]]s or [[business cycle]]s. By the [[central bank]] artificially "stimulating" the economy with artificially low interest rates (thereby creating excessive increases in the [[money supply]]), the bank itself induces [[inflation]] (often focused in asset or commodity markets) and speculative investment, resulting in "false signals" going out to the market place, in turn resulting in clusters of malinvestments, and the artificial lowering of the returns on savings, which eventually causes the malinvestments to be liquidated as they inevitably show their underlying unprofitability and unsustainability.<ref>Thorsten Polleit, ''Inflation Is a Policy that Cannot Last'' [http://mises.org/story/2901]</ref> |
|||
Austrian economists therefore regard the state-sponsored [[central bank]] as the main cause of inflation, because it is the institution charged with the creation of new currency units, referred to as [[credit (finance)|bank credit]]. When newly created [[credit (finance)|bank credit]] is injected into the [[fractional-reserve banking]] system, the credit expands, thus enhancing the inflationary effect.<ref>Charles T. Hatch, ’’Inflationary Deception’’ http://mises.org/journals/scholar/hatch.pdf</ref> |
|||
The Austrian School asserts that inflation is an increase in the money supply, rising prices are merely consequences and this semantic difference is important in defining inflation<ref> {{cite web|url=http://mises.org/story/908 |title=Defining Inflation |accessdate=2008-09-20 |last=Shostak, Ph.D |first=Frank |date=2002-3-2 |publisher=Mises Institute }}</ref>. [[Ludwig von Mises]], the seminal scholar of the Austrian School, asserts that: |
|||
<blockquote> |
|||
Inflation, as this term was always used everywhere and especially in this country, means '''increasing the quantity of money and bank notes in circulation''' and the '''quantity of bank deposits subject to check'''. But people today use the term `inflation' to refer to the phenomenon that is an inevitable '''consequence of inflation''', that is the tendency of all '''prices''' and wage rates '''to rise'''. The result of this '''deplorable confusion''' is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. . . . As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil. They try to keep prices low while firmly committed to a policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, there cannot be any question of stopping inflation (Emphasis added).<ref> {{citation|first=Ludwig |last=von Mises|coauthors= | contribution=Economic Freedom and Interventionism|title=Economics of Mobilization| editor-first=| editor-last=| coeditors=|publisher=The Commercial and Financial Chronicle| place=Sulphur Springs, West Virginia|pages= |date=1951-4-6|year= |id= | contribution-url=http://mises.org/efandi/ch20.asp|format= |accessdate=2008-09-20 }}</ref> |
|||
</blockquote> |
|||
Following their definition, Austrian economists measure the inflation by calculating the growth of what they call 'the true money supply', i.e. how many new units of money that are available for immediate use in exchange, that have been created over time.<ref>Ludwig von Mises Institute, "[http://mises.org/content/nofed/chart.aspx?series=TMS True Money Supply]"</ref><ref>Joseph T. Salerno, (1987), Austrian Economic Newsletter, "[http://www.mises.org/journals/aen/aen6_4_1.pdf The "True" Money Supply: A Measure of the Medium of Exchange in the U.S. Economy]"</ref><ref>Frank Shostak, (2000), "[http://www.mises.org/journals/qjae/pdf/qjae3_4_3.pdf The Mystery of the Money Supply Definition]"</ref> |
|||
This interpretation of inflation implies that inflation is always a distinct action taken by the [[central government]] or its [[central bank]], which permits or allows an increase in the [[money supply]].<ref>Ludwig von Mises, [http://mises.org/books/Theory_Money_Credit/Contents.aspx The Theory of Money and Credit]", ISBN 0-913966-70-3 See also: Jesus Huerta de Soto, "[http://mises.org/books/desoto.pdf Money, Bank Credit, and Economic Cycles]", ISBN 0-945466-39-4</ref> In addition to state-induced monetary expansion, the [[Austrian School]] also maintains that the effects of increasing the money supply are magnified by credit expansion, as a result of the [[fractional-reserve banking]] system employed in most economic and financial systems in the world.<ref>Murray Rothbard, "[http://mises.org/rothbard/rothmoney.pdf What Has Government Done to Our Money?]", ISBN 978-0945466444 [</ref> |
|||
Austrians claim that the state uses inflation as one of the three means by which it can fund its activities, the other two being taxing and borrowing.<ref>Lew Rockwell, interview on "[http://mises.org:88/Now NOW with Bill Moyers]"</ref> Therefore, they often seek to identify the reasons for why the state needs to create new money and what the new money is used for. Various forms of military spending is often cited as a reason for resorting to inflation and borrowing, as this can be a short term way of acquiring marketable resources and is often favored by desperate, indebted governments.<ref>Lew Rockwell, "[http://mises.org/story/3010 War and Inflation]", Ludwig von Mises Institute</ref> In other cases, the [[central bank]] may try avoid or defer the widespread bankruptcies and insolvencies which cause economic [[recession]]s or [[depression]]s by artificially trying to "stimulate" the economy through "encouraging" [[money supply]] growth and further borrowing via artificially low interest rates.<ref>Thorsten Polleit, "[http://mises.org/story/2810 Manipulating the Interest Rate: a Recipe for Disaster]", 13 December 2007</ref> |
|||
Accordingly, many [[Austrian economists]] support the abolition of the [[central bank]]s and the [[fractional-reserve banking]] system, and advocate instead a return to sound money such as a 100 percent [[gold standard]], or, less frequently, [[free banking]].<ref>Ludwig von Mises Institute, "[http://mises.org/books/goldstandard.pdf The Gold Standard]"</ref><ref>Ron Paul, "[http://mises.org/books/caseforgold.pdf The Case for Gold]"</ref> Money could only be created by finding and putting into circulation more gold under a [[gold standard]]. This would constrain unsustainable and volatile [[fractional-reserve banking]] practices, ensuring that [[money supply]] growth (and inflation) would never spiral out of control.<ref>Murray Rothbard, "[http://mises.org/rothbard/100percent.pdf The Case for a 100 Percent Gold Dollar]"</ref><ref>Ludwig von Mises Institute, "[http://mises.org/story/2870 Money, Banking and the Federal Reserve]"</ref>. Dr. [[Alan Greenspan]] asserts that economic liberty and [[Ludwig von Mises]] asserts that civil liberties would be protected. |
|||
<blockquote> |
|||
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. |
|||
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard. |
|||
<ref> {{cite web|url=http://www.321gold.com/fed/greenspan/1966.html |title=Gold and Economic Freedom |accessdate=2008-09-20 |last=Greenspan |first=Alan |date=1966 |work=The Objectivist }}</ref> |
|||
</blockquote> |
|||
<blockquote> |
|||
It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights. The demand for constitutional guarantees and for bills of rights was a reaction against arbitrary rule and the nonobservance of old customs by kings.<ref>{{cite book |last=von Mises |first=Ludwig |authorlink=Ludwig von Mises |coauthors= |title=The Theory of Money and Credit |publisher=Liberty Fund, Inc. |date=1981-7-1 |location= |pages=Chapter 21 |url=http://mises.org/story/2276 |doi= |id= |isbn=0913966711 }}</ref> |
|||
</blockquote> |
|||
===The Austrian view of business cycles=== |
|||
{{main|Austrian Business Cycle Theory}} |
|||
According to Austrian economist [[Joseph Salerno]], what most distinctly sets the Austrian school apart from neoclassical economics is the [[Austrian Business Cycle Theory]]:[http://mises.org/journals/aen/aen16_3_1.asp] |
|||
{{cquote|The Austrian theory embodies all the distinctive Austrian traits: the theory of heterogeneous capital, the structure of production, the passage of time, sequential analysis of monetary interventionism, the market origins and function of the interest rate, and more. And it tells a compelling story about an area of history neoclassicals think of as their turf. The model of applying this theory remains [[Murray Rothbard|Rothbard]]'s ''[[America's Great Depression]]''.}} |
|||
Austrian economists focus on the amplifying, "wave-like" effects of the [[credit cycle]] as the primary cause of most business cycles. Austrian economists assert that inherently damaging and ineffective [[central bank]] policies are the predominant cause of most business cycles, as they tend to set "artificial" [[interest rate]]s too low for too long, resulting in excessive [[credit (finance)|credit]] creation, speculative "[[economic bubble|bubbles]]" and "artificially" low savings.<ref>Thorsten Polleit, [http://mises.org/story/2810 Manipulating the Interest Rate: a Recipe for Disaster], 13 December 2007</ref> |
|||
According to the Austrian business cycle theory, the business cycle unfolds in the following way. Low interest rates tend to stimulate borrowing from the banking system. This expansion of credit causes an expansion of the [[money supply|supply of money]], through the [[money creation]] process in a [[fractional reserve banking]] system. This in turn leads to an unsustainable "monetary boom" during which the "artificially stimulated" borrowing seeks out diminishing investment opportunities. This boom results in widespread malinvestments, causing [[capital (economics)|capital]] resources to be misallocated into areas which would not attract investment if the money supply remained stable. |
|||
Austrian economists argue that a correction or "[[credit crunch]]" – commonly called a "[[recession]]" or "bust" – occurs when credit creation cannot be sustained. They claim that the [[money supply]] suddenly and sharply contracts when markets finally "clear", causing resources to be reallocated back towards more efficient uses. |
|||
===Economic calculation problem=== |
|||
The [[economic calculation problem]] is a criticism of [[socialist economics]]. It was first proposed by Ludwig von Mises in 1920 and later expounded by Friedrich Hayek.<ref name="Mises">{{cite book |title=Economic calculation in the Socialist Commonwealth |accessdate=2008-09-08 |last=Von Mises |first=Ludwig |authorlink=Ludwig von Mises |year=1990|format=pdf |publisher=[[Ludwig von Mises Institute]] |url=http://mises.org/pdf/econcalc.pdf |language=English}}</ref><ref>F. A. Hayek, (1935), "The Nature and History of the Problem" and "The Present State of the Debate," om in F. A. Hayek, ed. ''Collectivist Economic Planning'', pp. 1-40, 201-43.</ref> The problem referred to is that of how to distribute resources rationally in an economy. The capitalist solution is the [[price mechanism]]; Mises and Hayek argued that this is the only possible solution, and without the information provided by market prices socialism lacks a method to rationally allocate resources. Those who agree with this criticism argue it is a refutation of [[socialism]] and that it shows that a [[socialist]] [[planned economy]] could never work. The debate raged in the 1920s and 1930s, and that specific period of the debate has come to be known by economic historians as the ''The Socialist Calculation Debate.''<ref name="School">[http://cepa.newschool.edu/het/essays/paretian/social.htm The socialist calculation debate]</ref> |
|||
[[Ludwig von Mises]] argued in a famous 1920 article "Economic Calculation in the Socialist Commonwealth" that the pricing systems in socialist economies were necessarily deficient because if government owned the [[means of production]], then no prices could be obtained for [[capital goods]] as they were merely internal transfers of goods in a socialist system and not "objects of exchange," unlike final goods. Therefore, they were unpriced and hence the system would be necessarily inefficient since the central planners would not know how to allocate the available resources efficiently.<ref name="School" /> This led him to declare "...that rational economic activity is impossible in a socialist commonwealth."<ref name="Mises" />. |
|||
==Criticism== |
|||
The main criticism of modern Austrian economics is its lack of scientific precision. Austrian theories are not formulated in formal mathematical form, but using verbal logic. Mainstream economists believe that this makes Austrian theories too imprecisely defined to be clearly used to explain or predict real world events. Economist [[Bryan Caplan]] noted that, "what prevents Austrian economists from getting more publications in mainstream journals is that their papers rarely use mathematics or econometrics."<ref name="Caplan">{{cite web|url=http://www.gmu.edu/departments/economics/bcaplan/whyaust.htm|title=Why I Am Not an Austrian Economist|last=Caplan|first=Bryan|publisher=George Mason University|accessdate=2008-07-04}}</ref> This criticism of the Austrian school is related to its rejection of the use of the [[scientific method]] and [[empirical]] testing in social sciences in favor of self-evident [[axiom]]s and logical reasoning.<ref name = "mgtqpu"/><ref name = "ovjxyg"/> The Nobel prize winning economist [[Paul Samuelson]] wrote that, "I tremble for the reputation of my subject" after reading the "exaggerated claims that used to be made in economics for the power of deduction and a priori reasoning [the Austrian methods]."<ref name="Samuelson">{{cite book|last=Samuelson |first=Paul |title=Economics |publisher=New York: McGraw-Hill |date=1964 |edition=6th |pages=736}}</ref> |
|||
Another general criticism of the School is that although it claims to highlight shortcomings in traditional methodology, it fails to provide viable alternatives for making positive contributions to economic theory.<ref>Klein, B. 1975. "Book review: Competition and entrepreneurship". ''[[Journal of Political Economy]]''. 83: 1305- 1306. </ref> This criticism is generally accepted, in the sense that the theories of Austrian economics are qualitative in nature and do not yield testable predictions. As an example, some{{Who|date=August 2008}} Austrians propose that the net possibility of gain is a more accurate measure of the cost of an action than [[opportunity cost]] (subjectivism). However, it is ultimately difficult to measure the possibilities and [[risk]] involved. |
|||
In his critique of Austrian economics, the libertarian economist [[Bryan Caplan]] stated that Austrian economists have often misunderstood modern economics, causing them to overstate their differences with it. He argued that several of the most important Austrian claims are false or overstated. For example, Austrian economists object to the use of [[cardinal utility]] in [[microeconomic]] theory; however, microeconomic theorists go to great pains to show that their results hold for all [[monotonic]] transformations of utility, and so are true for purely [[ordinal utility|ordinal preferences]].<ref name="Caplan"/> He has also criticized the school for rejecting on principle the use of [[mathematics]] or [[econometrics]]. In response, Austrians argue that neoclassical economists are innumerate and do not understand the mathematics they rely on.<ref> [[William Barnett II|Barnett, William]], [http://mises.org/journals/qjae/pdf/qjae7_1_10.pdf Dimensions and Economics: Some Problems]</ref> Austrians also claim that econometrics is fundamentally based on mathematically and logically invalid summation and averaging of demonstrably non-additive personal utility functions, and therefore is subjective. |
|||
There are also criticisms of specific Austrian theories.<ref>List of criticisms of specific Austrian theories available at [http://world.std.com/~mhuben/austrian.html Austrian Economics]</ref> For example, [[Neo-Keynesian Economics|neo-Keynesian]] economist [[Paul Krugman]] argued that Austrian business cycle theory implies that consumption would increase during downturns, and cannot explain the empirical observation that spending in ''all sectors'' of the economy fall during a recession.<ref name="Krugman">{{cite web|url=http://www.slate.com/id/9593 |title=The Hangover Theory |last=Krugman |first=Paul |date=1998-12-04 |publisher=Slate |accessdate=2008-06-20}}</ref> Nobel Laureate [[Milton Friedman]], after examining the history of business cycles in the US, concluded that "The Hayek-Mises explanation of the business cycle is contradicted by the evidence. It is, I believe, false."<ref name="Friedman1969">{{cite book|last=Friedman |first=Milton |title=The Optimal Quantity of Money and Other Essays |publisher=Aldine |location=Chicago |pages=261–284 |chapter=The Monetary Studies of the National Bureau, 44th Annual Report}}</ref><ref name="Friedman93">{{cite journal|last=Friedman|first=Milton|title=The 'Plucking Model' of Business Fluctuations Revisited|journal=Economic Inquiry|pages=171–177}}</ref> |
|||
Economist [[Jeffrey Sachs]] pointed out that when comparing developed free-market economies, those that have high rates of taxation and high social welfare spending perform better on most measures of economic performance compared to countries with low rates of taxation and low social outlays. Poverty rates are lower, median income is higher, the budget has larger surpluses, and the trade balance is stronger. (Unemployment however, tends to be higher in those countries.) He concludes that Austrian economist Friedrich von Hayek was wrong when he said that high taxation would be a threat to freedom; but rather, a generous social-welfare state leads to fairness, economic equality, international competitiveness, and strong vibrant democracies.<ref>{{cite journal|title=The Social Welfare State, Beyond Ideology |last=Sachs|first=Jeffrey |date=October, 2006 |journal=Scientific American |url=http://www.sciam.com/article.cfm?id=the-social-welfare-state |accessdate=2008-06-20 }}</ref> In response to Sachs' article, [[William Easterly]] noted that Hayek, writing in 1944, correctly recognized the dangers of large-scale state economic planning. He also questions the validity of comparing poverty levels in the Nordic countries and the United States, when the former have been moving away from social planning towards a more market-based economy, and the latter has historically taken in impoverished immigrants. Easterly also argues that laissez-faire countries were the leaders of "the ongoing global industrial revolution" which is responsible for abolishing much of the world's poverty.<ref>{{cite web |url=http://online.wsj.com/article/SB116355956112023480.html?mod=opinion_main_commentaries|title=Dismal Science|accessdate=2008-09-07|author=[[William Easterly]] |
|||
|date=2006-11-15||publisher=[[The Wall Street Journal]]}}</ref> |
|||
==Seminal works== |
|||
* ''[[Principles of Economics]]'' (1871) by [[Carl Menger]] |
|||
* ''[[Capital and Interest]]'' (1884-1921) by [[Eugen von Böhm-Bawerk]] |
|||
* ''[[Human Action]]'' (1940-1949) by [[Ludwig von Mises]] |
|||
* ''[[Individualism and Economic Order]]'' (1948) by [[Friedrich Hayek]] |
|||
* ''[[Man, Economy, and State]]'' (1962) by [[Murray Rothbard|Murray N. Rothbard]] |
|||
* ''[[Competition and Entrepreneurship]]'' (1973) by [[Israel Kirzner|Israel M. Kirzner]] |
|||
==References== |
|||
{{reflist|3}} |
|||
==See also== |
|||
{{integrate-section}} |
|||
* [[Anarcho-capitalism]] |
|||
* ''[[An Austrian Perspective on the History of Economic Thought]]'' by [[Murray Rothbard]] |
|||
* [[Austrian Business Cycle Theory]] |
|||
* [[Consumarchy]] |
|||
* [[Consumer sovereignty]] |
|||
* [[Chicago school (economics)]] |
|||
* [[Free market]] |
|||
* [[Keynesian|Keynesian school]] |
|||
* [[Neoclassical economics|Neoclassical school]] |
|||
* [[Newtonian time]] |
|||
* [[Quarterly Journal of Austrian Economics]] |
|||
* [[Socialist economics|Socialist school]] |
|||
* [[Supply-side economics]] |
|||
* [[School of Salamanca#Economics|School of Salamanca (Renaissance pre-Austrians)]] |
|||
==External links== |
==External links== |
||
*[http://www.scarletfm.com/ Scarlet FM website] |
|||
{{commonscat}} |
|||
*[http://www.radiopembrokeshire.com/ Radio Pembrokeshire] |
|||
* [http://www.mises.org/etexts/austrian.asp What is Austrian Economics?] Austrian School as defined by the [[Ludwig von Mises Institute]]. |
|||
*[http://www.radiocarmarthenshire.com/index.html Radio Carmarthenshire] |
|||
* [http://cepa.newschool.edu/~het/schools/austrian.htm History of The Austrian School] from the History of Economic Thought website. |
|||
*[http://www.swanseabayradio.com/ Swansea Bay Radio] |
|||
* [http://www.mises.org The Mises Institute - A large selection of online books, video/audio, journal archives, and research on Austrian economics] |
|||
*[http://www.scarlets.co.uk/ Llanelli Scarlets] |
|||
* [http://it.stlawu.edu/sdae Society for the Development of Austrian Economics] Largest professional organization of Austrian economists |
|||
* [http://www.econlib.org/library/Enc/AustrianEconomics.html Austrian Economics] ''[[Concise encyclopedia of economics]]'' on [[Econlib]] |
|||
* [http://homepage.newschool.edu/het/schools/austrian.htm Austrian School on newschool.edu]{{ndash}} compare Austrian versus other Schools |
|||
* [http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/bawerk/austrian The Austrian Economists by Eugen von Böhm-Bawerk 1891] |
|||
* [http://library.wur.nl/way/catalogue/documents/A%20Great%20Revolution%20in%20Economics.htm A Great Revolution in Economics - Vienna 1871 and after] by Houmanidis and Leen |
|||
* [http://www.montpelerin.org/ The Mont Pelerin Society] |
|||
* [http://www.liberty-page.com/issues/austrian/main.html/ Austrian School Economists] from Mark Valenti's Liberty Page |
|||
* [http://www.gmu.edu/departments/ihs/hsr/s97hsr.html#austrian The Origins of the Austrian School of Economics by John Moser] |
|||
* [http://pcpe.libinst.cz/nppe/3_1/nppe3_1_6.pdf Austrian Economics and the Political Economy of Freedom] by Richard M. Ebeling] |
|||
* {{dmoz|Science/Social_Sciences/Economics/Schools_of_Thought/Austrian_School/}} |
|||
* [http://austrianecon.com Austrian Economics Forum] Discussion message board concerning Austrian economic theory |
|||
* [http://www.FreeMarketeers.com The Free Marketeers Network] The networking site for Free Marketeers around the world |
|||
* [http://austrianeconomists.typepad.com/ The Austrian Economists] |
|||
* [http://austrianaddiction.rationalmind.net Austrian Addiction] |
|||
* [http://www.lewrockwell.com Lew Rockwell] |
|||
* [http://www.purelogic.us The Pure Logic of Choice] |
|||
* [http://worksaveown.wordpress.com WorkSaveOwn] Blog on Personal Finance from an Austrian Economics perspective |
|||
* [http://www.econtalk.org/archives/2007/12/boettke_on_aust.html Link] Discussion on [[Econtalk]] regarding Austrian School |
|||
* [http://www.mygoldmymoney.com myGoldmyMoney] Austrian economics and sound money community |
|||
{{Town and Country Broadcasting}} |
|||
===Critical=== |
|||
* [http://world.std.com/~mhuben/austrian.html Critiques of Libertarianism: Austrian Economics] |
|||
* [http://www.huppi.com/kangaroo/L-ausmain.htm A Critique of the Austrian School of Economics] |
|||
* [http://www.gmu.edu/departments/economics/bcaplan/whyaust.htm Why I Am Not An Austrian Economist] |
|||
{{UK-radio-station-stub}} |
|||
{{Template group |
|||
|list = |
|||
{{Austrian economists}} |
|||
{{macroeconomics-footer}} |
|||
{{History of economic thought}} |
|||
}} |
|||
[[Category: |
[[Category:Llanelli]] |
||
[[Category: |
[[Category:Radio stations in Wales]] |
||
[[Category:Heterodox economics]] |
|||
[[cy:Scarlet FM]] |
|||
[[be-x-old:Аўстрыйская школа]] |
|||
[[ca:Escola Austríaca]] |
|||
[[cs:Rakouská škola]] |
|||
[[da:Den østrigske skole]] |
|||
[[de:Österreichische Schule]] |
|||
[[et:Austria koolkond]] |
|||
[[es:Escuela austríaca]] |
|||
[[eo:Aŭstria skolo de ekonomiko]] |
|||
[[fr:École autrichienne d'économie]] |
|||
[[is:Austurrísku hagfræðingarnir]] |
|||
[[it:Scuola austriaca]] |
|||
[[he:האסכולה האוסטרית]] |
|||
[[nl:Oostenrijkse School]] |
|||
[[ja:オーストリア学派]] |
|||
[[no:Den østerrikske skole]] |
|||
[[pl:Szkoła austriacka]] |
|||
[[pt:Escola austríaca]] |
|||
[[ru:Австрийская школа]] |
|||
[[sk:Rakúska ekonomická škola]] |
|||
[[sr:Аустријска школа]] |
|||
[[fi:Itävaltalainen taloustiede]] |
|||
[[sv:Österrikiska skolan]] |
|||
[[tr:Avusturya Okulu]] |
|||
[[uk:Австрійська школа]] |
|||
[[zh:奧地利經濟學派]] |
|||
Revision as of 18:43, 12 October 2008
 | |
| Broadcast area | Llanelli and South Camarthenshire |
|---|---|
| Frequency | 97.5 MHz |
| Programming | |
| Format | Mixed Hits |
| Ownership | |
| Owner | Town and Country Broadcasting |
| History | |
First air date | July 14 2002 |
| Links | |
| Website | 97.5 Scarlet FM |
Scarlet FM is a local radio station covering the Llanelli, Burry Port and Pembrey areas of south Carmarthenshire in west Wales. It plays mainly Adult Contemporary music, featuring both current and classic hits. Scarlet FM is the official radio station of the Llanelli Scarlets rugby team. The station used to be based at The Foothold Centre in the Stebonheath area of Llanelli, but has since moved to the main Town and Country Broadcasting studios in Narberth, Pembrokeshire.
The station can also be heard in Ilfracombe, Devon, some 50 miles away on the other side of the Bristol channel, as well as in nearby Swansea, although the stations on-air branding and presentation does not acknowledge either area.
Programmes on Scarlet FM are mainly hosted by presenters who also work on its sister stations Swansea Bay Radio, Radio Carmarthenshire and Radio Pembrokeshire.
External links
  | This article about a radio station in the United Kingdom is a stub. You can help Wikipedia by expanding it. |