AcademicI’m Steve Horwitz, Professor of Economics at St. Lawrence University. My article, “There is No Such Thing as Trickle-Down Economics” recently made the front page of Reddit. AMA!
Oct 13th 2016 by sghorwitz • 25 Questions • 390 Points
Hello everyone, I’m Steve Horwitz, Professor of Economics at St. Lawrence University in Canton, NY. I did my PhD work at George Mason University, the home of the Mercatus Center where I am a Senior Affiliated Scholar today. I am also a Distinguished Fellow at the Foundation for Economic Education, a Senior Fellow at the Fraser Institute in Canada, and I’m currently serving as a Visiting Scholar at the John H. Schnatter Institute for Entrepreneurship and Free Enterprise at Ball State University.
I’ve written three books, Monetary Evolution, Free Banking, and Economic Order (1992), Microfoundations and Macroeconomics: An Austrian Perspective (2000), and Hayek’s Modern Family: Classical Liberalism and the Evolution of Social Institutions (2015). I also write regularly for Bleeding Heart Libertarians and FEE.org.
My work has focused on monetary theory, macroeconomics from an Austrian perspective, the economics of gender, and the family as a social institution.
My recent article for FEE.org, “There is No Such Thing as Trickle-Down Economics” made the front page at /r/Economics, /r/Politics, and ultimately the front page of Reddit.
Several years ago, my video with Learn Liberty exploring the gender earnings gap, “Do Women Earn Less than Men?” made the front page of /r/Libertarian, leading the video to go viral. I wrote about the ensuing controversy here.
Ask me anything about economics, the gender earnings gap, the role of the family as a social institution, “bleeding heart libertarianism,” or any other aspects of my work you find interesting. I look forward to your questions!
EDIT: Thank you for your questions everybody! I was asked to devote 90 minutes to this conversation, so I am now concluding the AMA. If anyone has a question that I was not able to get to, feel free to follow me over to /r/LearnLiberty where I’ll continue taking questions for a half-hour of “overtime.”
What do you make of many in the economics profession and academia, such as many on /r/badeconomics disparagement of Austrian economics as being "dogmatic" or "fundamentalist"? What would you say the most popular misconception of Austrian economics as a discipline is?
I think the most common misconception is that it's just "ideology" - that it is no different from libertarianism. It isn't helped when people use the term "austro-libertarianism." Austrian economics is as old as modern economics, dating to the marginal revolution in 1871, and is a form of value-free social analysis. Unfortunately, too many economists think math and related models are the only kind of "science" or rigorous thinking. They're wrong as the history of economics and other disciplines demonstrate.
Folks might also want to see this https://www.cato-unbound.org/2012/09/05/steven-horwitz/empirics-austrian-economics
Prof. Horwitz, what do you think of Scott Sumner's claim that monetary policy is the right's Achilles heel? Given his response, what is the Austrian answer? I am not saying you or Austrians are part of the "right". I am assuming he meant people who favour tight money in general.
I think it is to the extent, as Cory asked below, free market types are seen as not having an answer to the Great Depression. Monetary theory is also REALLY complex and hard and explaining policy to a lay audience is challenging. Explaning why depressions happen and how to "cure" them, with their focus on money, is indeed one of our biggest challenges.
I tried to break down monetary policy for non-specialists here:
Dr. Horwitz, thank you for doing this.
What would you say are the top 3 must read books for people interested in Libertarianism?
What do you think are the most common misconceptions people have about Libertarianism?
Oh this is a nearly impossible question. :)
I'm going to go with the more academic books: Hayek's Constitution of Liberty; Nozick's Anarchy, State, and Utopia; and more obscure one: Chris Sciabarra's Marx, Hayek, and Utopia.
But really, there are so many, including Mark Pennington's recent Robust Political Economy that are worth reading.
We are pro-business or in favor of anything that benefits corporations
We think people are only greedy or selfish
We think everything is solved by the market in the narrow sense.
Those are three good ones anyway.
I'm not the best person to ask as I don't have grad students. My sense is that it's pretty good as the undergraduate major is in high demand.
Thanks for doing this Dr. Horwitz. What do you think of Piketty's book? I know you probably don't like the wealth tax but what do you think of analysis?
Here's me on Piketty: http://www.coordinationproblem.org/2015/01/horwitz-on-piketty.html
it's video lecture.
Your better bets for Piketty criticisms are McCloskey's long review and any thing by Bob Murphy and/or Phil Magness on the book. I endorse them all.
Why do you think monetary disequilibrium theory hasn't caught on more with both Austrian economists and mainstream economists? What can be done to change the common perception that the true Austrian approach to recessions is merely "doing nothing," letting any and all deflation "run its course"?
I think it's doing better than it used to as the Market Monetarists are also working from that broad approach. I think part of it is that it's, like so much else, tough to model in the ways the mainstream values (wrongly). I do think it's more common among Austrians too - the younger Larry White students are working from that tradition.
As for the second, we need to keep reinforcing the argument that monetary equilibrium is the goal and that letting deflation run its course is a disaster, as we saw in the 30s.
Broad question: What, if any, implications do behavioral economics have for the Austrian school? What has the relationship been, and what should it be from your perspective?
Great question. I have an article coming out in Economic Affairs from the IEA on exactly this topic later this month.
Here's some earlier thoughts: http://www.coordinationproblem.org/2010/09/agent-failure-and-market-failure.html
The short version is this: behavioral econ shows us that, empirically, we are not homo economicus. Austrians have always known that. Humans are bumbling, stumbling, masses of imperfection with limited knowledge and all kinds of cognitive biases. So BE is helpful in providing the empirical evidence of that.
The question is: so what? For some BE folks, those imperfections are an ipso facto case for government intervention just like "market failure." Not for Austrians. Following Vernon Smith we are interested in understanding how human social institutions enable us to learn from each other and overcome those "failures" and general mutually beneficial interactions that better us all.
BE helps us understand the "problem situation" of human action, but Virginia Political Economy provides the answer for how we overcome it.
IOW: you don't destroy the case for markets by destroying the fiction of homo economicus.
I've always argued for a free and open economy. When I've talked about Austrian economics, on Reddit, replies will say that Austrian economics is a "debunked" theory that "no economist actually believes any more."
How should I respond to people who argue that no respectable person believes this stuff?
sources, sources, sources.
There is an organization of professional economists the Society for the Development of Austrian Economics with over 100 members and that has sessions at professional meetings. There are dozens of tenure Austrian econ profs at all kinds of schools. They have written hundreds of professional articles that have passed the peer review process. Peter Boettke is the president of the Southern Economic Association. I could go on. AE is alive an well in professional economics.
I'm reading Marx's Capital, and trying to wrap my head around what Marx meant when he talked about the labour theory of value, (as opposed to cartoon versions of the LTOV that people tend to talk about when they know they disagree with Marx).
It seems like to Marx, value is something that's social - useful things still need to be produced, but it's important that they're useful to society as a whole rather than because they're useful to individuals in society. No matter how long someone spends making stuff no one needs, it won't be productive labour. The way that we figure out what counts as productive labour is based on the relative exchange value of useful things.
First: is that right? If not, what am I missing?
And if it is right, what happens to diminishing marginal utility? Surely Marx doesn't think we need two coats as much as we need one, but if labour hours are strict ratios then that seems like a problem.
I think the first part of this is largely right. It's the social value of labor and there lots of cartoon versions of the LTV around.
As for the second, if we're talking about Marx's end-world, where things really are produced according to the socially necessary labor involved, unmediated by prices and markets, we're in a world of post-scarcity where DMU isn't going to be a big issue. If I'm understanding the question right...
I think a lot of libertarians I meet lose arguments because of the facets of "libertarianism" they focus on while debating. I often find myself reaching a logic argument about coercion, comparing relative wealth in the US with the poorest around the globe, reaching "privatize everything!", or something else along those lines that comes across as very 'purist'. I'm not saying these are all wrong, but they come across as silly or irrelevant to most of my peers. I much prefer chatting with "Bleeding Heart Libertarians" who can at least share sympathy in acknowledging some validity to progressive arguments.
So, two questions: (1) how has your personal version of "BHL" evolved in the past few years, as Black Lives Matter, equality for trans people, 'white privilege' acknowledgement, and other "left-wing" movements have grown to reach the mainstream?
..and (2) how can the BHL movement save us from the eternal bickering of 'libertarians' and 'progressives'? Thanks.
Love this question.
I think that BHL types (and libertarians in general) should be qualified supporters of all of those things in your first question. Equality for trans folks being the most obvious and without qualification. BLM is trickier as libertarians have long noted the racism and brutality of the cops, but we would have big problems with some of their proposed solutions, esp. to the extent it's been captured by socialists.
And I think we can carefully acknowledge the language of privilege. But I also think we can expand it to talk about state-granted privilege. After all, things like occupational licensure do way more damage to non-whites (and poor whites, who often get forgotten in this discussion) than white privilege talk.
I don't know if BHL can "save us," but it can enable us to talk mroe productively with the left if we recognize the legitimacy of many of their concerns and the ways in which we share goals, but also talk civilly with them about how best to achieve them.
To make good, clear arguments with high-quality evidence, presented in calm, well-constructed, written and spoken form that unambiguously demonstrate our commitment to creating a better world for all, and especially the least well off among us.