What is the Austrian Economic School?
The Austrian Economic School (ATS) is the direction of economic theory, the main postulate of which is the idea of the primaryness of the self -organizing power of the market price mechanism.
What are the key provisions of the concept of?
- Value is subjective in nature and does not exist outside the consciousness of a person, and labor spent on the production of good (goods or services) is neither a source nor the measure of its value.
- Consumer behavior is difficult to predict, the nature of the markets is constantly changing, therefore, mathematical modeling in the economy, as well as a planned economy, is practically impossible.
- The only way to build a meaningful economic theory is to withdraw it from the basic principles of human activity.
- The main principles of economic policy should be non -interference (or minimal interference) in the economy by the state, economic liberalism and libertarianism.
How the Austrian Economic School arose and developed?
ASH was called from the origin of her founding father-the Austrian economist Karl Menger, whose fundamental work, the “foundations of political economy”, was published in 1871.
His main students and followers were Eugene (Oygen) Bem Baverk, the author of the work “Fundamentals of the theory of the value of economic goods” (1886), Friedrich von Viser, author of the book “Theory of Public Economy” (1914), and Ludwig von Mizes, whose main work , “Human actions: a treatise on the economy”, was published in 1949.
Other prominent representatives of AHS are economists Henry Hazlitt, Murray Rotbard and Nobel laureate Friedrich von Hayek.
The Austrian school is classified as one of the national schools (along with Lausanne, Anglo-American or Cambridge), who developed such a direction of economic science as marginalism. Its other names are “Psychological School” and “Vienna School”.
The Austrian school was an influential direction of economic thought in the first half of the 20th century, but the Keynard Keynes founded a much greater influence on the Keynard Keynes in the 20s of the last century.
The essence of the Keynes doctrine (state regulation of the economy by monitoring interest rates and money supply) perfectly corresponded to the existing state structure. Keynesianism has become the dominant economic doctrine in the West. In the line of this ideology in 1944, during the Brettonwood conference on foreign exchange financial issues, the International Monetary Fund (IMF) was created. This organization played a decisive role in the formation of a post -war global monetary system, confirming the gold and dollar of the US as a standard.
The other influential economic school in the 20th century was Marxism, believing that money as such, being instruments of capitalism, is non -viable, since the capitalist system itself is doomed.
The West fell under the influence of Keynes’s ideas, and the USSR and the countries of the socialist camp – under the influence of the ideas of Karl Marx, and the Austrian school became quite marginal, but in the second half of the last century she began to restore its positions. Nowadays, the Ludwig von Mizes Institute and the Society for the Development of Austrian Economic Theory are actively operating, which publish new works of economists working in the Austrian tradition, reprint the work of the classics of this direction, issue magazines and conduct scientific conferences.
In the XXI century, there was a surge in interest in AHS, not least – thanks to the development of blockchain technology and cryptocurrencies.
How ASH influenced the formation and development of cryptocurrencies?
Bitcoin roots go into the movement of cryptoanarchists, who are largely based on the works of economists of the Austrian school. Whitepaper Bitcoin was first published in e-mailing (Mayling List) of cryptographers and programmers seeking to ensure the confidentiality and financial independence of people through technological innovation.
Hesh genesis Bitcoin block contains the heading of the article “Chancellor On Brink of Second Bailout for Banks” The Times of the British edition. The article tells about the provision of state assistance to banks during the economic crisis of 2008. Although the title is quoted outside the context, the quote may indicate that the creator of Bitcoin, like AHS, considered state interference in the economy unacceptable.
Whitepaper Bitcoin also contains quotes from the works of the British cryptographer Adam Back and computer engineer Wei Dai Dai. According to Satoshi Nakamoto, Bitcoin “represents the implementation of the B-Money proposal Vai Dai … and the BitGold proposals Nika Sabo”. Sabo experienced a direct influence of the representative of. Hayek. In turn, the manifesto of Vai Daia, in which he puts forward the idea of B-Money, begins with the words: “I admire the cryptoanarchism of Tim May” “.
“Cryptoanarchy is a cybernetic embodiment of anarcho-capitalism that does not recognize state borders and allows citizens to perform any economic operations based on consensus”.
This ideal is close to the views of the American political philosopher Murray Rotbard, the follower of. In the book of Rotbard, “Ethics of Liberty”, Libertarian anarchy-capitalism is represented as a natural and only possible embodiment of the ideas of the autonomy of the subject endowed with free will.
Rotbard suggests that the anarchy-capitalist society is based on the rejection of violence as such. In his opinion, any aggression on the part of an individual or state, including coercion from the “rulers”, has no moral justification.
Bitcoin and other cryptocurrencies have a purely voluntary and peaceful nature. They suggest financial infrastructure based on voluntary cooperation. The purpose of cryptocurrencies is to endow people with financial instruments that allow you to protect themselves from inflation and state supervision. The success of cryptocurrencies is possible due to their own effectiveness as a technology for economic exchange, and not as a result of coercion from the state.
The ideological sympathies of Satoshi Nakamoto echo with the views of representatives of the ASH, and Vitalik Buterin, the creator of the second largest cryptocurrency Ethereum, belong to the words: “I believe that the Austrian economy was the whole world”.
The characteristics of the Bitcoin protocol forced to recall the book of Friedrich von Hayek “Private Money”, in which this representative of the Austrian school indicates the need to eliminate the government monopoly for the issue of payment funds and proposes to create a competitive system of settlements between legal and individuals.
Even analysts in the European Central Bank (ECB) in the report “Schemes with virtual currencies” conduct a direct connection between decentralized digital currency and the Austrian school. The document states that the roots of Bitcoin philosophy go into “direct criticism of existing fiat money and interventions by governments and other agencies”, which, according to Mizes, Hayek and Bem Baverk, “led to a deterioration in business cycles and significant inflation”.
How do cryptocurrencies relate to modern representatives?
Decentralized digital currencies are free from state control to a greater extent than fiat. The mechanism through which new bitcoin units are created and transmitted, ensures its deficiency and respect for the independence of an individual user. These characteristics cannot but cause sympathy of AERSH.
In his book “Brief History of Money”, Shedin Ammus, a modern representative of the Austrian school, justifies Bitcoin’s claims to the role of “firm money”, which is indicated. He explains that, according to the theoreticians, the value of the currency is due not to external support (in the form of gold or other assets), but by the ratio of demand and supply – the level of trust. In the case of cryptocurrencies, the psychology of the behavior of market participants affects the formation of their price. While people consider bitcoin and other cryptocurrencies deserving, demand for them is growing. A fall in the course is possible only in case of loss of public trust. Thus, the preservation of a stable favorable situation in the cryptocurrency industry already serves as a guarantor of the stability of the course.
Although some representatives of the modern ATS (Conrad Count, Daniel Kravitz, Robert Murphy, Sifedin Ammus) call themselves bitcoin maximalists, others doubt that Bitcoin and his analogues will be able to replace fiat currencies.
For example, economist Joseph Salerno (other representatives of the Austrian school agree with him) supports the idea of currency free of state control, but doubts the rapid development and implementation of new financial technologies.
The Austrian school considers the free market as the highest value and believes that the market itself determines the best form of money based on the efficiency factor. “Aggressive” promotion of bitcoin as money, these representatives of the ASH consider the concept of free market contradictory. Joseph Salerno says:
“In connection with Bitcoin, I am embarrassed by the fact that no one is conducting a campaign in favor of gold. Why impose bitcoin? Why not just let him go out the winner in the market struggle? I’m not sure of his vitality. Now he is viable, being an effective payment means. However, I do not think that he has already become a means of exchange. “.
In the fundamental works of Menger, Mizes, Rotbard and Hayek, money is defined as a “tangible object”. This characteristic is not applied to cryptocurrencies, which gives skeptics from among the followers of ACH an occasion to not consider them money.
Their opponents object to this, indicating that the representation, according to which the product should be physical and tangible, is outdated. According to them, before the appearance of Bitcoin, there was no concept of “scarce digital goods”. If earlier there was no appropriate technological base for the digital product, now it is available, and the value of the physical nature of the value should be refused.
Many economists of the Austrian school of the older generation consider gold to be the best form of money, while their younger colleagues are inclined to cryptocurrencies. Perhaps this is explained by the fact that young representatives of ASS are better familiar with the technological side of the issue and are able to understand how the principles set forth in the writings of the founding of the school are applicable in the world of developed technologies.
Nowadays, followers of AHS cannot but admit that their hope for gold as “hard money” remained theorization, while DCentral Сon: Miami cryptocurrencies have already become quite functional money with real scenarios of use.
Separate representatives of the ACSH believe that stablecoin, provided with gold, can be “firm money”, although they recognize: such a model risks becoming an object of state control, since the state can always confiscate the provision.
All representatives of the APS agree that the free market will sooner or later determine the best form of money, especially if there is no state intervention. Until this happened, it is necessary to continue to exert ideological pressure on the state, they believe.