Chapter 11: Back to the Future: Austrian Economics in the Twenty-first Century
Peter J. Boettke At the time of writing, the market economies of the world are suffering through a financial crisis of significant proportions. The capitalist system is under intellectual attack to an extent it has not been subjected to since the Great Depression. And the discipline of economics, and in particular, orthodox models of rationality and perfect competition, are often held up for ridicule. And modern macroeconomics is subjected to particular disdain for its inability to predict the current crisis, and modern financial theory is often pinpointed as the culprit behind the entire mess. This is not just evident in the rhetorical excesses of left-wing politicians and journalists. Even rather skilled economic commentators (both inside and outside of academia) make this assessment of the state of economics and public policy. The era of Reagan/Thatcher laissez-faire must come to an end, and a return of Keynesian style economics and public policy must be ushered in. The fate of the Austrian school of economics in all of this is – to put it bluntly – rather strange. The Austrian school is often held up for ridicule by those on the left for having provided the intellectual justification for the laissez-faire policies of Reagan/Thatcher, while the ideas in modern economics and finance that are held up for special scrutiny are in direct opposition to the methodology and methods of the Austrian school of economics. In addition, commentators who know that the Austrian school is at odds with modern mainstream economics, use that tension to dismiss...
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