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Austrian Economics ExplainedUnderstand Economics, Understand the WorldInformationLiberation Jun. 08, 2010 |
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  Austrian economics should not be studied merely to understand the basics of supply and demand, understanding Austrian economics, or economics in itself, imparts one with a deeply logical and philosophical view of the world itself. When you understand real economics, you understand everything, no amount of government propaganda can confuse you or hide you from the truth. With the world becoming ever more socialistic and the government printing record amounts of money, there could be no more important time to understand what economics is, how wealth is actually created, and how the world was transformed in only 200 years from a world of incredible scarcity to a world of unimaginable abundance. Rather than live in a futuristic world like that of Star-trek, learn how the government's systematic looting of the public has lead, and will continue to lead us even further into poverty. - Chris, InformationLiberation Part One: The Keynes vs Hayak Raps This video explains in an entertaining form the two prevailing economic theories, one is government propaganda which advocates government control of the economy as described by Keynes, the other is free market capitalism which advocates human freedom as described by Hayek. LYRICS We’ve been going back and forth for a century [Keynes] I want to steer markets, [Hayek] I want them set free There’s a boom and bust cycle and good reason to fear it [Hayek] Blame low interest rates. [Keynes] No… it’s the animal spirits [Keynes Sings:] John Maynard Keynes, wrote the book on modern macro The man you need when the economy’s off track, [whoa] Depression, recession now your question’s in session Have a seat and I’ll school you in one simple lesson BOOM, 1929 the big crash We didn’t bounce back—economy’s in the trash Persistent unemployment, the result of sticky wages Waiting for recovery? Seriously? That’s outrageous! I had a real plan any fool can understand The advice, real simple—boost aggregate demand! C, I, G, all together gets to Y Make sure the total’s growing, watch the economy fly We’ve been going back and forth for a century [Keynes] I want to steer markets, [Hayek] I want them set free There’s a boom and bust cycle and good reason to fear it [Hayek] Blame low interest rates. [Keynes] No… it’s the animal spirits You see it’s all about spending, hear the register cha-ching Circular flow, the dough is everything So if that flow is getting low, doesn’t matter the reason We need more government spending, now it’s stimulus season So forget about saving, get it straight out of your head Like I said, in the long run—we’re all dead Savings is destruction, that’s the paradox of thrift Don’t keep money in your pocket, or that growth will never lift… because… Business is driven by the animal spirits The bull and the bear, and there’s reason to fear its Effects on capital investment, income and growth That’s why the state should fill the gap with stimulus both… The monetary and the fiscal, they’re equally correct Public works, digging ditches, war has the same effect Even a broken window helps the glass man have some wealth The multiplier driving higher the economy’s health And if the Central Bank’s interest rate policy tanks A liquidity trap, that new money’s stuck in the banks! Deficits could be the cure, you been looking for Let the spending soar, now that you know the score My General Theory’s made quite an impression [a revolution] I transformed the econ profession You know me, modesty, still I’m taking a bow Say it loud, say it proud, we’re all Keynesians now We’ve been goin’ back n forth for a century [Keynes] I want to steer markets, [Hayek] I want them set free There’s a boom and bust cycle and good reason to fear it [Keynes] I made my case, Freddie H Listen up , Can you hear it? Hayek sings: I’ll begin in broad strokes, just like my friend Keynes His theory conceals the mechanics of change, That simple equation, too much aggregation Ignores human action and motivation And yet it continues as a justification For bailouts and payoffs by pols with machinations You provide them with cover to sell us a free lunch Then all that we’re left with is debt, and a bunch If you’re living high on that cheap credit hog Don’t look for cure from the hair of the dog Real savings come first if you want to invest The market coordinates time with interest Your focus on spending is pushing on thread In the long run, my friend, it’s your theory that’s dead So sorry there, buddy, if that sounds like invective Prepare to get schooled in my Austrian perspective We’ve been going back and forth for a century [Keynes] I want to steer markets, [Hayek] I want them set free There’s a boom and bust cycle and good reason to fear it [Hayek] Blame low interest rates. [Keynes] No… it’s the animal spirits The place you should study isn’t the bust It’s the boom that should make you feel leery, that’s the thrust Of my theory, the capital structure is key. Malinvestments wreck the economy The boom gets started with an expansion of credit The Fed sets rates low, are you starting to get it? That new money is confused for real loanable funds But it’s just inflation that’s driving the ones Who invest in new projects like housing construction The boom plants the seeds for its future destruction The savings aren’t real, consumption’s up too And the grasping for resources reveals there’s too few So the boom turns to bust as the interest rates rise With the costs of production, price signals were lies The boom was a binge that’s a matter of fact Now its devalued capital that makes up the slack. Whether it’s the late twenties or two thousand and five Booming bad investments, seems like they’d thrive You must save to invest, don’t use the printing press Or a bust will surely follow, an economy depressed Your so-called “stimulus” will make things even worse It’s just more of the same, more incentives perversed And that credit crunch ain’t a liquidity trap Just a broke banking system, I’m done, that’s a wrap. We’ve been goin’ back n forth for a century [Keynes] I want to steer markets, [Hayek] I want them set free There’s a boom and bust cycle and good reason to fear it [Hayek] Blame low interest rates. [Keynes] No it’s the animal spirits
KEYNES Here we are… peace out! great recession thanks to me, as you see, we’re not in a depression Recovery, destiny if you follow my lesson Lord Keynes, here I come, line up for the procession HAYEK We brought out the shovels but we’re still in a ditch… And still digging. don’t you think that it’s time for a switch… From that hair of the dog. Friend, the party is over. The long run is here. It’s time to get sober! KEYNES Are you kidding? my cure works perfectly fine… have a look, the great recession ended back in ’09. Surely, I deserve credit. Things would have been worse All the estimates prove it—I’ll quote chapter and verse HAYEK Econometricians, they’re ever so pious Are they doing real science or confirming their bias? Their “Keynesian” models are tidy and neat But that top down approach is a fatal conceit REFRAIN Which way should we choose? more bottom up or more top down …the fight continues… Keynes and Hayek’s second round it’s time to weigh in… more from the top or from the ground …lets listen to the greats Keynes and Hayek throwing down KEYNES we could have done better, had we only spent more Too bad that only happens when there’s a World War You can carp all you want about stats and regression Do you deny World War II cut short the Depression? HAYEK Wow. One data point and you’re jumping for joy the Last time I checked, wars only destroy There was no multiplier, consumption just shrank As we used scarce resources for every new tank Pretty perverse to call that prosperity Rationed meat, Rationed butter… a life of austerity When that war spending ended your friends cried disaster yet the economy thrived and grew ever faster KEYNES You too only see what you want to see The spending on war clearly goosed GDP Unemployment was over, almost down to zero That’s why I’m the master, that’s why I’m the hero HAYEK Creating employment’s a straigtforward craft When the nation’s at war, and there’s a draft If every worker was staffed in the army and fleet We’d be at full employment with nothing to eat REFRAIN HAYEK jobs are the means, not the ends in themselves people work to live better, to put food on the shelves real growth means production of what people demand That’s entrepreneurship not your central plan KEYNES My solution is simple and easy to handle.. its spending that matters, why’s that such a scandal? The money sloshes through the pipes and the sluices revitalizing the economy’s juices it’s just like an engine that’s stalled and gone dark To bring it to life, we need a quick spark Spending’s the life blood that gets the flow going Where it goes doesn’t matter, just get spending flowing HAYEK You see slack in some sectors as a “general glut” But some sectors are healthy, and some in a rut So spending’s not free – that’s the heart of the matter too much is wasted as cronies get fatter. The economy’s not a car, there’s no engine to stall no expert can fix it, there’s no “it” at all. The economy’s us, we don’t need a mechanic Put away the wrenches, the economy’s organic REFRAIN KEYNES so what would you do to help those unemployed? this is the question you seem to avoid when we’re in a mess, would you just have us wait? Doing nothing until markets equil-i-brate? HAYEK I don’t want to do nothing, there’s plenty to do The question I ponder is who plans for who? Do I plan for myself or leave it to you? I want plans by the many and not by the few. We shouldn’t repeat what created our troubles I want real growth not just a series of bubbles Let’s stop bailing out losers and let prices work If we don’t try to steer them they won’t go berserk KEYNES Come on, Are you kidding? Don’t Wall Street’s gyrations Challenge your world view of self-regulation? Even you must admit that the lesson we’ve learned Is more oversight’s needed or else we’ll get burned HAYEK Oversight? The government’s long been in bed With the Wall Street execs and the firms that they’ve led Prosperity’s all about profit and loss When you bail out the losers there’s no end to the cost the lesson I’ve learned? It’s how little we know, the world is complex, not some circular flow the economy’s not a class you can master in college to think otherwise is the pretense of knowledge REFRAIN KEYNES You get on your high horse and you’re off to the races I look at the world on a case by case basis When people are suffering I roll up my sleeves And do what I can to cure our disease The future’s uncertain, our outlooks are frail Thats why free markets are so prone to fail In a volatile world we need more discretion So state intervention can counter depression HAYEK People aren’t chessmen you can move on a board at your whim–their dreams and desires ignored With political incentives, discretion’s a joke The dials you’re twisting… are just mirrors and smoke the market’s a process where we can discover the most valuable ways to serve one another we need stable rules and real market prices so prosperity emerges and cuts short the crisis REFRAIN Which way should we choose? more bottom up or more top down the fight continues… Keynes and Hayek’s second round it’s time to weigh in… more from the top or from ground …lets listen to the greats Keynes and Hayek throwing down
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