The times they are a-changing
Over at what was the Austrian economists blog, Peter Boettke announces a change of name, saying
As an experiment, over the past six months we have been tracking the use of the term Austrian economics in the news and in the blogosphere. Less systematically, we have also been listening carefully to the use of the term among fellow professional economists and what they think the label means. The results do not fit our intention. Google alert, for example, inevitably points to financial advice or libertarian politics, rarely to the research paradigm of F. A. Hayek, never to the scholarship of Israel Kirzner. Mises is often mentioned, but Mises the ideological symbol, not Mises the analytical economist. The “Austrian” theory of the business cycle is mentioned, but only in relationship to anti-fed politics and hard money advocacy, and never as an ongoing research program among professional economists.
These trends are not recent, but have been constant throughout our respective careers. We have always been among those who attempted to offer resistance to this use of the term. It has become evident to us that our efforts have been futile. Rather than resist the pure ideological identification, we are choosing to devote our efforts elsewhere. The name Austrian economics has been lost as a focal point for a tradition of economic scholarship, and is now a focal point for something else. We have to let it go.
This is pretty much the view I expressed here
although the Austrian School was at the forefront of business cycle theory in the 1920s, it hasn’t developed in any positive way since then. The central idea of the credit cycle is an important one, particularly as it applies to the business cycle in the presence of a largely unregulated financial system. But the Austrians balked at the interventionist implications of their own position, and failed to engage seriously with Keynesian ideas.
The result (like orthodox Marxism) is a research program that was active and progressive a century or so ago but has now become an ossified dogma. Like all such dogmatic orthodoxies, it provides believers with the illusion of a complete explanation but cease to respond in a progressive way to empirical violations of its predictions or to theoretical objections.
It seems pretty clear that these developments are related to the global financial crisis. The adoption as a badge of pride by Forbes magazine and others of the previously pejorative term “capitalism” was one of the most extreme manifestations of market liberal triumphalism in the 1990s. But, in the wake of the crisis, “capitalism” is a much more problematic term. It works well enough as a generic term covering all advanced economies in which private capital plays a leading role, but one that is, as we have seen, ultimately dependent on government action for sustainability. We can then say that the relatively unregulated, finance-dominated form of capitalism that has held sway for the last 30 years is being supplanted by a different form in which the role of government as ultimate risk manager is more direct and obvious. But this has little rhetorical value for market liberals.
The story with Austrian economics is more complex. On the one hand, the crisis has increased the appeal of Austrian views of the business cycle, relative to other rightwing views like New Classical macro and Real Business Cycle theory. On the other hand, the label has been increasingly associated with gold bugs, critics of fractional reserve banking, neo-Confederates and general fringeness.