On January 7-8, I attended the American Economic Association (AEA) meetings in Denver, Colorado. Usually around 10,000 economists attend this annual conference.
I substituted for Tyler Cowen, who was supposed to be one of the panelists for a session entitled, “What’s Wrong (and Right) with Economics? Implications of the Financial Crisis.” Cowen’s assigned topic was “Lessons for Libertarians.” (Tyler had a conflict and couldn’t make it.)
The other panelists were James Galbraith (son of John Kenneth Galbraith), Brad DeLong (Berkeley), and Scott Somner (Bentley University).
It was a packed audience, with maybe 300 economists and journalists in the room.
I focused on the need to replace the current macro model to incorporate Austrian economics. I said that libertarian economists consider the Keynesian and monetary models defective — Keynesian models being anti-saving and pro-deficit, and monetarists believing that the economy is “depression proof” as long as the money supply goes up (I noted that M2 rose 10% in 2008 but we still came close to a financial collapse).
I made two major points:
1. “There’s no free lunch in fiscal or monetary policy — deficit spending and inflation have unintended consequences.”
2. “Bad government drives out good business.” The feds encouraged irresponsible banking practice (bad real estate lending policies) that led to the financial crisis and real estate bust in 2008.
Finally, I encouraged students, economists and textbook writers to study the Austrian school of Mises & Hayek, the Austrian theory of the business cycle, etc.
I also stressed that we could learn a great deal by studying the policies of foreign countries, such as Canada and Australia, which didn’t suffer from a financial collapse like we did. The host, John Quiggin, an economist from Australia, appreciated this, and he spoke about the better-run Australian banking system.
I noticed that Cato and the Liberty Fund were exhibitors at the AEA meeting, and they said they got a lot of good response. Also, at the end of my talk, I mentioned my book “The Making of Modern Economics,” and after the session a bunch of people went to the ME Sharpe Publishers booth and the book sold out quickly.
This enthusiasm for libertarian economics suggests to me that the Austrians are missing a great opportunity to introduce Austrian economics to faculty, students and journalists from around the world hungry for an alternative to establishment economics and textbooks. Marxists are always at the AEA meetings in large numbers and URPE (the Marxist organization) hosts a lot of sessions. But virtually no Austrian economists were there giving a paper, or attending. Pity.
The next morning was a session on “Popular Economics” with Robert Shiller (Yale professor and author of “Irrational Exuberance”), Robert H. Frank (NYTimes columnist), Steve Levitt (Chicago economist and author of “Freakonomics”), and Diane Coyle (UK economist). During the Q&A, I asked whether the panel and the econ profession were willing to take some responsibility for the irresponsible debt crises facing the US and other countries (because for decades they’ve been teaching students the Keynesian theory that deficits don’t matter or are beneficial)….and none would!
In fact, Steve Levitt said, “Economists have little or no influence on public policy.” That was pretty astonishing considering the influence the Chicago school has had on public policy. I felt like yelling out, “What about the Chicago boys in Chile?” I wrote an entire book, “EconoPower” about the positive influence economists have had on public policy (auctions, retirement, investments, etc.).
In liberty, AEIOU,