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Why Economics Matters

Why Economics Matters by Jeff Deist, Mises Institute

This article is a selection from a June 19 presentation at a lunchtime meeting of the Grassroot Institute in Honolulu at the Pacific Club. The talk was part of the Mises Institute’s Private Seminar series for lay audiences. To schedule your own Private Seminar with a Mises Institute speaker, please contact Kristy Holmes at the Mises Institute.

First let me say that what we today call “Austrian economics” flows from the great legacy of classical economics, with the very important modification economists now call the “marginal revolution.” Austrian economics is also a term that describes a healthy and vibrant (though often oppositional) modern school of economic thought. It originated with intellectual giants like Carl Menger and Ludwig von Mises, names I’m sure many of you are familiar with. These economists were from Austria, hence the term.

There was a landmark conference at South Royalton, Vermont in 1974, attended by the likes of Murray Rothbard and Milton Friedman, that revitalized the Austrian movement and helped it regain prominence in the latter part of the twentieth century. Milton Friedman was in attendance, and that’s when he famously remarked that “There is only good economics and bad economics.”

And of course that’s true. Schools of thought should not be rigid, or dogmatic, or too narrowly defined. But classifying various economists and theories into groups or family trees does indeed help us make sense of economics. It helps us understand how we arrived at a time and place where Ben Bernanke, Paul Krugman, Thomas Piketty, and Christine Lagarde are viewed as modern mainstream thinkers rather than the radicals they are when compared to the whole history of the field.

We supplied some photocopies that roughly trace the history of economic thought. Notice the split in the 1930s, not coincidentally during the Great Depression, between Mises and John Maynard Keynes. Up until then, from about 1850 forward, Austrian economics was mainstream economics. But as you can see, most of today’s mainstream economists fall somewhere under the umbrella of Keynes, and they tend to focus on variants of Keynes’s ideas about aggregate demand.

But at least they focus on something!

Ignorance of Economics Is not Bliss

Which leads me to my topic today: “Why Any Economics Matters.” I say “any” because at this point the entire subject appears to be...