As central banks have continued to employ stimulative measures, proponents of Austrian economics are sounding the alarm. To the latter group, policies such as quantitative easing distort market prices, resulting in malinvestments that will have consequences (e.g. a housing bubble fueled by low rates that shifted too much capital from productive uses into housing, the effects of which we have been feeling for a few years now). To understand this philosophy better, I recently read Human Action by Austrian economist Ludwig Von Mises.
Though the book first came out in 1949, many of the issues discussed are still relevant today. At the same time, however, the book does offer some perspective on some of the challenges economists faced six decades ago that they no longer face today, at least in this part of the world. For example, Mises spends a good portion of the book dispelling many of the myths set forth by those who would rather we be under communist or religious rule.
For all of the differences between mainstream economics and those of the Austrian School of thought, the book can serve as a reminder of just how similar these schools are in many respects. On issues such as free trade, the impact of price distortions, incentives and other topics, there is no disagreement.
Unfortunately, in 1949 as now, the challenges faced by economists in implementing good policy remain the same: a government interested in the short-term that panders to the uneducated (when it comes to economics) masses.
In general, Von Mises makes a good case for the benefits of moving to a laissez-faire capitalist society, and of the slippery slope that faces societies who wish their government to intervene in only “special” areas; this latter list tends to grow exponentially, eventually crippling the free market.
I recommend the bookto anyone looking to get a comprehensive understanding of the theories underlying the Austrian School of economics. Set aside some time, however; the book is 900 pages long, involving a lot of jargon and extensive use of the passive voice!
