If you have heard of Bitcoin, you must have heard of Austrian School of Economics. Satoshi Nakamoto's "Bitcoin-A Peer-to-Peer Electronic Cash System" and Hayek's "Denationalization of Currency" have become Bitcoin followers. Of the two great collectors.
But is Austrian economics really equivalent to supporting Bitcoin? What is Austrian economics talking about? Why did it successfully predict the global economic crisis in 2008? What misunderstanding do we have about Austrian economics?
On the evening of January 16th, EthFans Ethereum enthusiast editor, translator A Jian, and MakerDAO head of China Pan Chao, two researchers who have both experience in the currency circle and Austrian economics. The "Organization" event brought a small Austrian economics lecture. This sharing is very interesting. I have sorted it out. The article is very long. If you want to learn more about Austrian economics in detail, it is recommended to read more original Austrian economics masters.
▲ A Jian (right 2) and Pan Chao (1 right)
The following content comes from A Jian:
Origin of the Austrian School, a form of "discrimination" from the mainstream world
The Austrian school originated in 1871. In that year, a scholar named Karl Mengerd in Austria wrote a book-Principles of National Economics. Before him, it was an era that belonged to Adam Smith and David Ricardo (British Classical Economics). Karl Menger found that the theory was particularly good when he learned British Classical Economics, so he hoped to present his A German-speaking colleague recommended classical English economics theory, so he wrote the book.
But in the process, he was indifferent to the German academic and social science circles, because the mainstream of Germany at that time was the German historical school (such as Max Weber). The basic position of this school is that the economic laws themselves are different in different times and regions. That is, there is no such thing as an economic law, or it cannot be found or studied. Precisely, Karl Menger's starting point was to say that this law exists.
After the publication of "Principles of National Economics" was indifferent, Carl Menger spent a long time (about one or two decades) arguing with his colleagues in German academic circles. A German scholar mocked Karl Menger and the people who supported it as an Austrian school, meaning that you were all a group of Austrians who didn't understand anything . Karl Menger thinks this is also good, so call it the Austrian school.
Looking back at this history, we believe that the Austrian school should win, because economics and economic theory can be studied. This belief has become the mainstream of all economics research today. Of course, the German historical school also has academic descendants, such as Veblen, who advocates institutional economics (with a book entitled "The Theory of the Leisure Class").
Austrian economics: a new perspective on economics
What does the Austrian school mean today? We say that the Austrian school is an economic perspective. In a word : it is a unique method of constructing economic theory and a theory derived from this method. Three keywords, economic theory, the unique method of constructing it, and the theory derived from it.
First of all, we believe that there is a concept behind economic theory, that is, we believe that in human society, regardless of time and region, there is some universal law, which will be manifested in human exchange behavior. This law is stable and can be studied. A purely theoretical study of these laws is economic theory.
Secondly, the unique method is to say how the Austrian school constructs economic theory, which is the most important thing we have today to distinguish the Olli school from other schools. The unique methodology of the Austrian school is individualism, which refers to all social phenomena. If you want to explain it, you can only end up in individual actions. In other words, what kind of occupation will you be engaged in, whether the trade will increase or decrease, and whether the wage law will cause the unemployment rate to rise? These phenomena will ultimately be attributed to how individuals act in this environment.
Each of us is no different from other actors in society, and the regularity of this action can be confirmed by our own hearts. Suppose we study collectively, there will be a problem. Whether it is party or class, all its actions are made by individuals in the ultimate sense, and everyone has their own different preferences and directions. You cannot imagine how collective Act in exactly the same way. A stable model of collective action is not available.
Austrian individualism means that we need to explore the general law of individual action. What are the most obvious characteristics of this law? We divide it into four areas.
First, people will consciously distinguish their own purposes and means. This distinction makes us not study how people's purposes are formed. For example, why does he like to eat sweet instead of salty? The formation of preferences belongs to the category of psychology. What we want to study is whether there is some general law in the action of using means to meet the purpose.
Second, the description of this general law does not necessarily depend on a specific language. Whether it is a philosophical language or a mathematical language, all we have to do is to refine this law, and we will know how people do it. Choice and how to act. If, in this process, the mathematical expression makes us introduce some extra assumptions that are not originally in the theory, then we should also reject. This is a very big difference between mainstream economics and the Ollie school.
Third, in the whole process, people subjectively order their goals. As long as he has not reached his most satisfied, comfortable, and comfortable state, he will continue to act to achieve his goals. When people must sacrifice, they always sacrifice the least important purpose. When satisfied, he will certainly use his own means to meet one of the most important goals. This is the general pattern of human behavior as we know it.
Fourth, we know how individuals make choices and then use means to meet their goals, and we think of a chain of causality in between, and this process requires some knowledge. Knowledge transfer is never frictionless, and we must spend a lot of effort to learn new knowledge.
What I said above is the most obvious feature of Austrianism.
From this, we can infer economic theory. We believe that Austrian School has contributed a lot to economic theory in the history of economics, including but not limited to interest theory, business cycle theory, and capital theory. Here we only talk about one, that is, Hayek said in a 1945 paper that knowledge transfer is never frictionless. When knowledge is scattered in all corners of society, how does society complete the use of knowledge.
Hayek believes that everyone in a market is constantly moving, and this process will inject information about their preferences and ability to supply goods into the price. For example, suppose Fuyao Glass has invented a better production method, and the information that the price of car glass will drop is injected into the price. Assuming we need more private cars, we are willing to pay a higher price for the car, and this information will also Conducted into the price of glass. Then, as for the value of price, it will present the information gathered from all directions, and it is also continuously transmitting information to all directions to complete a complex social cooperation. Although everyone does not meet, the information is transmitted through the price.
This simple model constitutes a critique of the planned economy . Because all information must be collected at the planning center and then processed, it must be subject to the center's processing power and intelligence level. Then, the production efficiency of the planned economy can never be compared with the market economy. This has also been verified in reality.
The following content comes from Pan Chao:
Austrian economics is not equal to political claims such as liberalism and anarchism
People often associate Austrianism with liberalism or even anarchism, but today we are talking about Austrian economics . Austrian economics is just a way to describe the operation of the economy. It has its own unique method, but it has nothing to do with any political proposition, and it does not even say that liberalism is good. It just says that if you want to achieve an economic result, then you have to use a means. Free markets and liberalization can achieve the best kind of result among all means.
Austrianism is not equal to supporting Bitcoin. This is a misunderstanding of everyone . In Hayek's book "Denationalization of Currency", he does not envision a currency like Bitcoin, but a free bank competition. Every bank rationalizes its own assets and then issues trusted currency. It is always the correct theory that if you increase market competition, there will definitely be better constraints and more reliable products.
Of course, currency theory is a very important part of Austrian theory, but in fact, the gold standard is also very controversial in the Austrian school. Some people support the idea that gold should be used as the only reserve currency, 1: 1 anchor issuance, and paper money must be able to be converted into gold, thereby restricting the country's over-issue of currency.
But not everyone supports it, including Hayek. He believes that the existence of the central bank is also meaningful, and some behaviors of commercial banks will also lead to business cycles and economic problems.
The Austrian School: A Transcendent, Deductive Methodology
Mises has a very famous book-"Man's Action". It is also from this book that I have confirmed a methodology of the Austrian school called the methodology of human behavior. This point is very clear. I add that it is a set of a priori and deductive methodology. Through actions, people enter a state of satisfaction from dissatisfaction. Based on this basic principle, he derived many economic theories, for example, resources are scarce. From the perspective of Austrian economics, if resources are not scarce, then people will not act.
For example, the theory of diminishing marginal utility can be derived. Let ’s first clarify a very important concept. When discussing commodities, we have to divide the units. Suppose I have 5 bags of rice and the first bag survives. The second bag is reserved for next month. The third bag can be used to feed poultry, and the next bag is used for winemaking. You will find that people sort the value of units of goods, and this ranking is the law of decreasing marginal effects.
This is a bit abstract. Let me give you an example. The "diamond and water" paradox. People cannot live without water. Water should be more important than diamonds. But why are diamonds more valuable than water? Quite simply, we did not consider the unit. We compared the water and diamonds in the world. After adding the unit factor, one unit of diamond is more valuable than one unit of water.
The following content comes from A Jian:
Austrian school: economists should not be too conceited
How is the Austrian school different from other schools? I attribute it to two things, one is more profound and the other is more clear.
More profoundly, the Austrian school insists on a dynamic perspective to observe human actions and the operation of the economy from beginning to end, because it believes that all actions must consume time, and it is a dynamic process. This is not the case with neoclassical economics, which is the mainstream microeconomic theory. Microeconomics has a supply-demand curve, which asserts that the market will find the equilibrium point between demand and supply at a certain price, but this theory does not take into account the time factor. He actually experienced a dynamic process from production to final consumption. Microeconomics is a completely static description. It describes the state of the market at a certain moment. It does not fully consider whether the market will actually reach that state, or how the market will reach that state.
The Austrian school believes that this is the starting point for our understanding of the economy, but it is not the ultimate method.
More clearly, the Austrian school, especially Hayek, has always emphasized that economists should not be too conceited. When you make a lot of assumptions, you have inadvertently become too conceited. They think that these problems can be solved through mathematics or other methods. Solve it, but you forget that the collaboration of human society is a complex process, and it cannot be mastered in detail with a single mind. This is the biggest difference between our study of complex system theory and the study of simple systems. So in my opinion, the Austrian school is a school that is more clear-minded and more modest.
▲ Group photo of the participants (picture from Lien Tan Talk)
The following content comes from A Jian:
Austrian Economics: Strict Methodological Position and Love for Human Freedom
With regard to the core of Austrian economics, I would like to make two points.
First, a strict methodological position.
The Austrian school strictly insists on not using some assumptions that are often not in line with reality in order to obtain the most solid and reliable theory. For example, they resolutely refuse to aggregate capital because there is no objection to the amount of capital. How capital passes through the market and is arranged into a specific scene through a process, and it is put into production to produce something new. This process is the most important, that is, the structural significance of capital is far greater than the significance of the amount of capital. .
Many people will learn mathematics such as indifference curves and basic accounting of GDP in the course of studying economics. These things are not meaningless, but there is a vague assumption that people's satisfaction with different things can be quantified. But this part does not need to be introduced by the Austrian school, because you only need to know how people act. The price rises and the action decreases, because the higher the cost, this is the most accurate and core.
Second, the love of human freedom.
Economics itself is a science, it can only tell you whether it works according to economics when you want to do anything, it can never tell you what kind of value ranking is that everyone should go What it is pursuing is inherently value-neutral. It does not presuppose a position, and it is better to define one kind of rule than the other.
But Hayek also said that economics itself is neutral, but there is a certain value that guides the social scientist to do the corresponding research. He once said in the class, "I must tell you clearly, I don't want to take my class Into a political lecture, but I have to tell you what guides me in doing some of this research. "
In my opinion, including Hayek and Mises, they have done so much research because of their love for freedom and their love for the liberal system. So in my opinion this is also the core of the Austrian school.
The following content is from Pan Chao
Austrian economics: low interest rates are not sustainable, saving is good for the economy
On the core of Austrian economics, I would like to make three points.
First, the business cycle theory. Many people say that two schools predict the economic crisis in 2008, and one of them is the Austrian school.
Second, we are very sensitive about monetary policy today, but not a hundred or two hundred years ago. At that time, people thought that commodities or transaction volume were important, and currency was not. Only the Austrian school has always considered money itself to be worth studying, including interest rates. They also believe that money is decentralized. That is to say, if you put 100 yuan into the society, it will not be divided equally among 100 people. It will first enter the place closest to resources. For example, when the central bank implements loose monetary policy, capital will definitely run to the real estate side, and then it will flow to other industries, but inflation will be pulled up. Increased by 1%, some industries will increase a lot, not exactly equal.
Third, the Austrian school will emphasize that the central bank cannot artificially reduce interest rates to an unsustainable level, because one of their core ideas is that the expansion of credit will bring indulgence and savings are good for the economy.
In addition, everyone who is interested in Austrian school or blockchain is actually a passion for freedom.