It isn’t what people think it is. It was established by some with an agenda to get rid of the Federal Reserve and is a means to an end, not an end in itself. It is why they have no concrete plans to get from point A to point B and their theories are incomplete, no comprehension of supply/demand issues affecting prices, particularly that of money itself, for example. I can’t say how many times I’ve asked Austrian economists how we get from what we have now to what they want without a lot of chaos and people getting caught with their assets hanging out and heard nothing but crickets. They can talk for hours about how evil the Federal Reserve is, but have little to say in specifics about what things would be like without it, how to get there, or what the process of getting there would be like for the economy as a whole. To me, these things are important to know to be able to put some thought toward them before being able to judge it on its merits.
In the absence of a mapped vision, I’m left filling in the intellectual blanks; and from what I can tell, there is quite a bit of rhetoric and anti-Fed propaganda wrapped in libertarian principles to make it palatable. Perhaps the desire to get rid of the Fed is consistent with the purported political principles behind it, but the rhetoric produces some ideological paradoxes that leave me wondering whether there is a Trojan horse of ultra-conservative statism hiding in it.
Their tendency to oversimplify things to where every price change has something to do with the Federal Reserve, which simply is not true, cast some doubt in my mind about how serious they are about economic stability. This is intellectual dishonesty that is detrimental in form, getting the public angry about the wrong things and we can’t fix price issues in the broader economy that are caused by public policy/regulatory issues if the real causes of them are obscured by misdirection. But even more than that, in a broader ideological sense, it’s the things they don’t say that are implied by what they do that need to be sorted through and scrutinized before buying the whole thing as gospel. They say things without saying them and get away with it pretty much scot free because people don’t seem to notice the ideological paradox created by the actual meanings.
One of the best examples of this I can think of is the Austrian assessment of the housing and mortgage crises. That was almost entirely a regulatory debacle. The government was incentivizing behavior that it couldn’t get out of the markets otherwise, yet they hound on interest rates and easy money as being the cause, as if people cannot be trusted to do with their own money and credit what they will.
Thinking about that deeper than the surface, who is to say that low interest rates and easy money don’t produce productive investments absent regulatory incentives into ‘irrational exuberance’? These are never things we hear about in the midst of a crisis and so it is impossible to weigh the bad versus the good, and they take advantage of that bias of information with the fallacy of composition. There is not one shred of evidence that easy money causes bad behavior when people are left to weigh all investments on equal footing, without government interference.
Even if people cannot be trusted to do the right things with their money, there is no way to do anything about that in a free society. Really, do the Austrians propose that we should replace the Fed with an investment Gestapo that is equipped to make value judgments for each individual investment? I think that would be worse than the Fed. Or maybe scarcity of money is best approach. If we don’t have it to throw around, we can’t do bad things with it. Either way, it is a violation of principle that suggests paternalism of a different stripe is better. The scarcity idea is even more of a loaded proposition if there is a desire to foster a society of self-sufficiency as a main goal because putting a cap on how much money there can be not only puts a cap on government, but it also puts a cap on the economy at large and there is an opportunity cost to doing that as opposed to allowing expansion at a steady rate through possibly NGDP level targeting; that leads to a market driven approach to expansion. There would have to be reform in the financial regulatory structure so that government can’t distort investment markets, and that would have to be done first, even if we took everything the Austrians say at face value.
For another example, some of them have said that the economy of the 80’s was an illusion of prosperity, an inflation-filled, artificial boom. Oh really? In order to accept that premise, one has to agree to toss Milton Friedman, supply-side economics, and Reaganism under the bus for the frauds they are. Really, isn’t that what these Austrians are saying without actually saying it? Either Friedman and/or Reagan were full of crap or these Austrians are because both situations cannot be true simultaneously. Can’t tell you which is true beyond the shadow of a doubt, but there are plenty of inconsistencies in rhetoric on the part of the Austrians and not much in the way of empirical evidence to prove their points, while there is reams of evidence MV=PY and the AS/AD model are true.
From my perspective, it really is just much easier to tell the truth, not only about what is really being said, but what the intentions behind them really are. Because these ideas have been packaged the way they have been, couched in contradiction and bits of truth stretched like taffy, I really don’t put that much weight toward it. I would rather be content as I was in the 80s than throw that possibility away for things that I can already tell are probably not in our best interests.