Thursday, March 29, 2012

John Carney — Was 'Post-Keynesian' Hyman Minsky an Austrian in Disguise?

Good read. And a nice demonstration of how bring opposing sides together. Props.

Read it at CBNC NetNet
Was 'Post-Keynesian' Hyman Minsky an Austrian in Disguise?
by John Carney | Senior Editor


Letsgetitdone said...

Sorry Tom, I don't see your characterization at all.

"“In a world with capitalist finance it is simply not true that the pursuit by each unit of its own self-interest will lead an economy to equilibrium. The self-interest of banks, levered investors, and investment producers can lead the economy to inflationary expansion and unemployment creating contractions,”

Hayek wrote...or did he?
Except that last quote isn’t Hayek. It’s Minsky sounding very much like Hayek."

Didn't Soros write something very similar to that in a number of his books where he denies the notion that the free market must come to equilibrium? Perhaps Soros is an update to Hayek too? Perhaps we're all Austrian economists too, since most of us believe that the idea of free market stability is bunkum?

Or maybe, only Menger, Mises, and Rothbard are real Austrian economists and Hayek is just pretending to be one?

Or maybe Carney is just trying to entertain us with nonsense this fine afternoon?

Tom Hickey said...

Joe, I think it is significant because so many people think that Hayek a saint, even Saint Michael Archangel slaying the dragon of evil Keynesianism.

The fact of the matter is that Minsky studied under Schumpeter, who studied in Austria under the founders of the Austrian school, and Lerner studied under Hayek at the LSE. Wray studied under Minsky, and Lerner is one of the shoulders of giants on which MMNT stands.

Schumpeter eschewed the idea of identification with economic schools, saying in effect that there is correct economics and incorrect, and the task is to distinguish them. That's how knowledge develops. Identification with schools turns a subject into theology.

Jonf said...

Isn't really saying much though is it? I would suppose that thinkers in every field have similiar, even identical thoughts, at times. Now if you are saying Hayek and Minsky agree on a whole range of matters, well we should lay them out.

Tom Hickey said...

To people like Austrians it means a lot. John has been saying for some time that there is common ground between Austrian economics and MMT through their shared recognition of credit as a contributor to business cycles. These quotes show how close. John is speaking chiefly to them here. It also sends a message to PKer's about areas of potential agree with Austrian economics through Hayek.

Economic Maverick said...

Agreed. I think Ed Harrison has a post a while back that was something to the effect of "MMT and Austrians" should on the same side against "mainstream" Monetarists and Neo Keynesians, the latter two making the left/right bookends of the Neo-Classical Synthesis.

With that said, I also think there is a difference between "Austrians" like Schumpeter (whosse influence is clearly seen in Minsky) and Mises who was obsessed with Central banking. I guess Hayek is somewhere in between, but perhaps farther from Mises than I had realized. Furthermore, the Austrian emphasis on "boom / bust" cycles does bear some outside resemblance to Keynes "Animal Spirits", which Minsky expands on with financial instability and fragility expands upon. They all seem to against Neo-Classical EMH equilibriumists

Tom Hickey said...

Economic Maverick, I an not well-versed in AE, but I believe that Mises is not completely representative of AE. The Mises>Rothbard wing, e.g., mises. org, is different from other understandings of AE. Mises basically rejected New Classical economics, while Hayek integrated a significant part of it.

Schumpeter and Mises were contemporaries and fellow students in Vienna. Schumpeter studied under Eugen von Böhm-Bawerk while Mises is more closely associated with Carl Menger, although he also studied with EBöhm-Bawerk. Hayek was introduced to AE from Mises when working for him.

John Carney said...

Skeptics should go ahead and read the Hayek piece.

One thing Austrians and MMTers agree on is that the mainstream notion of "loanable funds" is nonsense. Hayek explains this very well in his essay.

Leverage said...

Later Hayek had not much to do with Mises in many core aspects of economic theory.

Off course being a conservative may mean not always being completely honest all the time about something, but that's something almost anyone

All that said, austrian economics being funded mainly on Say's law is simply wrong. Also the insight that markets are unstable is not only in the domain of 'austrian economics', classics, marxists or anarchists said it before any austrian (even of the 'fabian'-socialist flavour).

There can't be common ground (at least not in academic sense) of the main things because both theories come from totally opposite axioms, the most important being the nature of money (and interest rates too) and the knowledge problem and how to "solve" it (Austrian economics will always fall back to a hands off position).

The knowledge problem is something most people has not though much about but is paramount to 'understand' the different policy choices society has when it comes to the economy.