Austrian economics

Austrian scholars believe that the basis of economics is insight into the essence of human nature, and he is a science of deductive reasoning on this basis, which is similar to geometry.

This course contains a unique mental method and several important core theoretical tools.

The significance of this course for us lies in:

1, feel the beauty of geometric rigorous logic in economics.

2. Punch the economics of all kinds of specious lies.

3. In the current global economic downturn, master the core indicators and methods of the Austrian school to predict the economic cycle, and be a cold thinker.

4. Austria's contribution to ethics. Economic activity is actually the interaction between people. Ethics studies conflicts between people and helps you to establish a new perspective of economics.

Austrian Economics 10 Lecture-1

The influence of Austrian school: can the real world get rid of this kind of economics?

A dazzling star in the history of Austrian school economics;

1, Meng Le 1840- 192 1

2. Pombavik, the second generation head.

2, the third generation head, von Mises.

Mises believes that economics is not an empirical science, but a formal science of deductive reasoning, and the whole building of economics is derived from an axiom.

3. Hayek and Rothbard, Hayek's apprentices.

4. Hans Hermann Hoppe followed Rothbard's footsteps and studied ethics.

Austrian economics lecture 10-2

Deductive reasoning, why is economics a formal science?

The Austrian school believes that the principle of economics is not a hypothesis, but a self-evident axiom, just like geometry and mathematics. As long as there is no mistake in reasoning, the conclusion must be true.

Austrian Economics 10-3

Human action: how to build an economics building from a nonsense

First, the law of diminishing marginal utility

Desire is infinite, resources are limited, and the most important desire must be satisfied first. In order to keep important desires, I will give up some less important desires.

Second, the demand theorem

The higher the price, the smaller the demand and the lower the price, the greater the demand.

Third, interest theory.

Other things being equal, people always want to satisfy their desires as soon as possible. In life, our desires are satisfied by consumption, so for us, today's goods are more valuable than the same goods in the future. This is also called the time preference theorem.

This lecture 10 simply deduces several important theorems through deductive reasoning. If a detailed study is needed, please refer to Rothbard's Man, Economy and State.

Austrian Economics 10-4

Economic calculation tools: what is the fatal problem of planned economy?

In our view, the planned economy lacks incentive mechanism, but in Mises' view, this is only superficial criticism. The fundamental reason of planned economy lies in the lack of economic calculation tools, which will eventually lead to poverty and collapse.

Introduce two knowledge points:

1, people's inner world is immeasurable, which is the subjective axiology in economics, and the value can only be divided, but the specific size cannot be measured.

Only values can be sorted, which is called ordinal utility theory.

2. The external material world can be measured.

How can the unmeasurable inner world be related to the measurable outer world? Mises said that there is a bridge that can communicate inside and outside, money.

Planned economy has no private property rights,

There won't be any deal,

Without trading, there is no way to generate the currency price of trading.

Without the currency price of the transaction, it is impossible to calculate the cost and benefit.

If you can't calculate costs and benefits, you can't calculate profits and losses.

You don't know whether you have used resources effectively.

You can only knock about, sometimes overproduction, sometimes shortage.

Eventually, it will inevitably lead to widespread poverty and collapse.

Any intervention in price will distort economic calculation, hinder people from freely expressing their true desires and values, and eventually lead to some confusion in production.

Austrian Economics 10-5

Cantillon effect: Who is the most beneficial to inflation?

If the amount of money doubles, the result is only the price doubles, and the material wealth of the whole society remains unchanged. Only when people have more consumer goods and capital goods (means of production) can people really feel rich.

Neither inflation nor deflation will increase or decrease our material wealth.

Cantillon effect: Cantillon found that inflation does not raise the prices of all commodities at the same time and evenly, but always changes the prices of commodities in waves. Some commodities increase prices first, some increase prices later, some increase more, some decrease prices, and even some commodities decrease prices.

In this race against inflation, the most important thing is to get as close as possible to the new currency.

Those who get a fixed salary, retirement pension, life insurance and long-term bonds are unfortunate, and their asset prices are fixed.

Where does the new money in the real world come from?

Assuming that the reserve of a commercial bank is 10000 USD and the deposit reserve ratio set by the central bank is 10%, theoretically, a commercial bank can create a deposit currency of 10000 USD at most, and only need to write it in the borrower's account. There is no need to print money.

The distance between ordinary people and new wealth

Most ordinary people, the easiest credit to get in their life is mortgage, and the house is the first asset to buy when new funds flow out. So for so many years, house prices have been rising, mineral water has not been rising, and the prices of computers and mobile phones are falling.

Inflation has intensified the polarization between the rich and the poor. First, the rich can get new credit in many ways, that is, new money; Second, the rich have a lot of assets.

Austrian Economics 10-6

Business cycle theory: Who is the chief culprit of the economic crisis?

How do Austrian economists predict the US subprime mortgage crisis and the 1929 Great Depression?

What clues do Austrian economists see that other economists can't?

Money and interest rates. Inflation and interest rates are depressed.

According to the economic cycle theory developed by Mises, the murderer who leads to economic crisis and economic ups and downs is inflation, which is a man-made manipulation of the currency.

This kind of inflation is conditional. The new money injected into the economy through the credit market rather than other channels will inevitably lead to the economic cycle.

Enterprise and business cycle

Because of low interest rates and low leverage, enterprises expand their scale, recruit employees and buy raw materials, and replace assets with the most liquid assets.

Once the deleveraging cycle is reached and there is no new loan, the purchased assets cannot generate cash flow. If you don't want to break the cash flow, you can only sell assets at a low price and lay off employees.

Personal and business cycle

Low interest rates have the motivation to buy a house, and even down payment loans, 0 down payment, real estate prices, and stocks have also risen.

This is all caused by excessive money, which leads to asset bubbles and misleads people to make wrong investments and speculations. Depression and economic crisis are corrections to wrong behavior.

Money can't keep overspending, which will lead to hyperinflation. Before the 1929 US stock market crash, the Federal Reserve began to shrink the money supply. Before the subprime mortgage crisis broke out in 2007, the Federal Reserve raised interest rates.

Austrian Economics 10-7

Three ethical principles: Where does the legitimacy of your property come from?

Why do people have disputes?

Because of scarcity

Three principles of Rothbard s ethics;

1, individual ownership

No one can invade and enslave other people's bodies.

2. If things outside the body are ownerless, they will be available on a first-come-first-served basis. If it is land, the first person who works on this land legally occupies it.

3. For things other than the owner, the owner's consent must be obtained before the property can be obtained.

Austrian Economics 10-8

People who have no permanent property have no perseverance. In a world where property rights are expected to be unstable, economic efficiency and prosperity cannot be expected.

The author believes that the Austrian school's first come, first served does not mean that whoever comes into contact with the ownerless resources will get it, but that you must use the ownerless resources through actions, and what actions you take to use this land will give you the right to carry out such actions.

Columbus discovered America, but if he wants to own this land, he must first reclaim it.

Austrian Economics 10-9

Qualitative and quantitative: can you predict the future after learning Olympic sports?

Qualitative prediction:

In Mises' view, economics can only make qualitative predictions, but not quantitative predictions.

If you master Austrian economics, you can predict the general trend of house price, stock market and employment in your personal life by observing the US dollar policy and trend.

Quantitative forecast:

Economics can't predict quantitatively, because people's spiritual world can't be measured objectively, and people have unpredictable free will.

Keynesian economist: Coase Keynes Fisher Samuelson