When in Vienna, do as the Viennese do.

The term “Austrian economics” had always been a spectre floating on the outer boundaries of my political knowledge.  I had always heard advocates of this school of thought, such as former Senator Ron Paul, speak of it, but never taking the initiative to investigate it, I just assumed the term was synonymous with “free markets”.  Upon delving further into economic theory, I have found that this could not be further from the Truth.  Free markets could merely be considered the environment necessary to facilitate the Austrian School of Economics.  The purpose of this post is to define Austrian economics and examine some of the claims and beliefs held by this school of thought. This is essentially just a brief introduction to the subject, barely scratching the surface of a very historically rich economic philosophy.

First and foremost, we need to establish the quiddity of the term “Austrian economics”. Austrian economics can be defined as a set of claims and/or principles regarding markets and the economy and how they naturally operate and function.  This particular school of economic thought originated in Vienna within the Austrian Empire in the late 19th/early 20th century.  Some of the key people credited with its founding and developing its core principles are Carl Menger and Eugen von Böhm-Bawerk, among others. With a brief framework laid out for the term, let’s examine each of the main claims of the Austrian economists.

Claim #1: Choices made within markets stem from individuals.

When speaking about the economy, it is very easy to pick up and paint with a very large brush. We tend to say that the government raised our taxes, or that the banks have lowered the interest rates.  Austrians see the use of these words for what they really are: metaphors. Austrians contend that all choices made in the economy are ultimately made by individuals. We use terms like “government”, “bank”, or “corporation” to more easily vocalize the choices of a group of individuals. To Austrians, the economy is fueled by individual choice.

Claim #2: Price and utility are subjective to each individual.

People can argue all they want regarding the proper prices to charge for goods and services, but when it comes down to it, only each individual involved in the act of voluntary exchange can know what the service they are receiving is worth to them in comparison to the price they are paying to receive said service.  In an economy based on voluntary exchange, each person involved in a trade believes they are leaving the transaction better off than they were beforehand.   No government regulation can alter the inherent sense of worth and cost each person attributes to various products and services.

Claim #3: Prices are indicative of the availability of resources.

Austrian economists claim that in an economy free of government regulation on the prices of natural resources, the natural prices serve as indicators of the scarcity of our resources.  For example, if reserves of silver were beginning to run low, the owners of the mines where the silver is salvaged from would begin to raise the prices on the silver due to its imminent depletion.  This rise in the price of silver would cause a ripple effect, producers of all sorts that use silver in their products necessarily raising the prices of those products to make up for the margin lost from increased silver prices. Eventually, these raised prices would reach the consumers on the lowest level of the consumption chain, therefore triggering a “warning flag”, if you will, transferring knowledge of the depleting resources to people at all levels of the economy.  Again though, this would only be an accurate reading of resource levels if the economy were void of government regulation and interference in resource pricing.

Claim #4: Protection of private property is integral for voluntary exchange to thrive.

One of the most important principles of the Austrian school of economics is this particular claim.  All voluntary exchange presupposes that private property is held in an almost sacred status.  If it is not, more than likely, it is not voluntary exchange, but rather coercion by a government for exchange to take place.  It is a logical to assume that in a society where private property is not protected, very few people would exchange goods.  What would be the point in exchange, in accumulating more wealth, if a higher hierarchical body, such as government, could step in at any point and confiscate one’s property?  At that point, exchange would merely be a facade, trading goods between two parties so that a government can take those goods from the one party instead of the other.  If one cannot harvest and utilize the fruits of their own labor, real exchange can never take place.

Claim #5: Markets are spontaneous phenomena.

Austrians hold markets as involuntary, spontaneous phenomena.  They are not man-made, but rather, causes of exchange and production.  No amount of regulation, limitations, or planning can guarantee any certain output of markets in a society.  There are going to be natural upswings in economies, as well as natural downswings.  Tampering with the money supply or raising/lowering interest rates will hold no sway over the markets in the long run, only serving to potentially make them worse off through forced actions.  Spontaneity is not something that can be predicted or controlled.  

As I said at the beginning of this post, this is only an introduction to the subject. I am still learning about Austrian economics, as well as classical and Keynsian economics.  I am at the beginning of this particular road, just as some of you may very well be also.  If this post caught your interest, I urge you to not just take my word for it on the principles of Austrian economics. Do you own research, take charge of your education. Go read von Mises, Hayek, Menger, just as I am in the process of doing. Decide if you agree or disagree with the Austrian principles. Expand your worldview. You owe it to yourself to do so.

The basis of this essay stemmed from this extremely informative YouTube video. It’s what led me to ultimately do more research for myself. I hope it sparks your interest as it did for me. Here is the link:Austrian Economics with Steve Horowitz

Until next time, take care.

-Brad

I Think, Therefore I Write.

I am an ardent proponent of the belief that educating yourself means empowering yourself.  I have basically spent the past year of my life living by this concept and plan to until the day I leave this world.  I’ve pored over endless tomes and works, many of which are overlooked today due to the misconceptions that they are “outdated” or “irrelevant”.  I’ve read the likes of Adam Smith, John Locke, Sir Thomas More, Karl Marx, Ayn Rand, Thomas Hobbes, and John Stuart Mill to name a few, not to mention multiple books on the history of America and its governmental institutions, such as the Federal Reserve.  I’ve begun to explore every possible corner of economics, political philosophy, general philosophy, and history.

Some may ask why I’ve spent so much time and effort on these particular subjects, or at least on nearly ancient writings regarding these subjects.  My answer to those people: I contend that one cannot truly know where they are going or where they are currently if they do not fully understand where we, as the human race, have been.  It is the foundation upon which we build our future.  Just as a captain would not set sail without a detailed sea chart, we would not, should not, leap into the waters of Tomorrow without a map of our own, one our ancestors had a direct hand in creating.

I also believe that the only way to truly know where you stand on a particular issue is to know every argument, every side.  How else will you defend your position?  How will you suppose to even know your position to be True if you have not examined all facets of contemplation?

These are the reasons I have embarked upon this philosophical journey; to broaden my mind, to better understand our world and how it works, to empower myself.  I know that for the path I seek to travel down as I embark on establishing a career, I will achieve no feat, large or small, if I do not ground myself in Truth, Reason, & Knowledge.  I hesitate to deem myself a “philosopher” lest I sound pretentious or lofty in my musings, but I do indeed seek the Truth via study of various philosophies and histories.  I don’t presume to know everything, and I do not intend to pick up an “all-knowing” facade.  I’m merely living and learning, utilizing this blog to chronicle my journey.  I’ll review books I read, discuss various philosophies and viewpoints (including my own at times), and document my travels that correlate to these topics (I’ll soon be moving to D.C. this September for a few months).  

I don’t expect many people to read this, and that is perfectly okay.  I am mainly doing this as a reflective tool, but if people start reading along the way, that is all the better.  

Knowledge is one of the best tools we can possess.  It is subtly carried and easy to conceal, none too much of a burden, but most deadly in the slaying of outright lies and mockeries of human existence when wielded in tandem with Truth & Courage. The best part about Knowledge is that it is gained at no cost to us if we choose to seek it out for ourselves. It is absolutely free.  Time spent harvesting knowledge is not a cost, for each second utilized in gathering information is compounding the amount of information in one’s brain.  One is constantly bettering themselves and their futures.  

That being said, what I have essentially been trying to communicate through this introductory post is: welcome to this blog.

More personally, welcome to my journey.


-Brad