You may think that it is out of hubris that I brazenly chide most of what is peddled in public schools and universities as fallacious. Well, economists qua economists are well aware that their services can command greater remuneration behind the aegis of the State or University tenure than on the market. Roughly 80% of economists work for the State during their career, so why would they espouse an economic doctrine which logically detonates all State involvement in the economy (Unless, of course, they happen to be one of the small handful of Austrian Economists associated with the Mises Institute)?
One of the most damaging fallacies is that rugged individualism, greed and unbridled laissez-faire caused the Great Depression and that government controls and expansion were the only recourse to put the global economy back on track. One of the prevailing reasons offered regarding the crash is not the unprecedented credit expansion and social programs leading up to it, but instead a precipitous decline in aggregate demand. John Maynard Keynes, the most influential exponent of the Statist/inflationist doctrine played a key role in the propagation of these ideas.
A harsh recession took place in 1937 which is often dishonestly ignored by mainstream economists, occurring nearly a decade after the implementation of Keynesianism. If it weren’t for Keynes’ glib arrogance yet captivating charm, a better theory depicting the causes of the Great Depression may have surfaced. Ludwig von Mises set forth an irrefutable disquisition in his “Theory of Money and Credit”. Keynes – who had a limited proficiency in reading German, but could only understand concepts he was already familiar with – read Mises’ work, but dastardly told the economics world that no new concepts had been put forward! By dismissing Mises, Keynes could catapult himself to the economics stratosphere, with governments falling over themselves to introduce a plethora of social programs and run up monolithic deficits in his name.
Most would be mad to refuse a position of power in the government. Salaries are higher than on the market, there is a raft of perquisites, more vacation time, earlier retirement age, less effort is required, less working hours, etc,. All this begs the question: why would an economist be a thorn in the side of the powers that be? Wouldn’t it be easier just to join the gangsters in charge, when doing so would make life far more easy?
For the government, why would they support an economic school of thought which demonstrates that every government action leads to market distortions, chaos and malinvestment? Why would the government hold their hands up and admit that progressive taxation, in order to fund their sclerotic welfare states, lessens economic potential, prevents the middle classes from surging and keeps greater proportions of society dependent on government? It is easier and more expeditious for a social democrat to make their case to a layman than it is for a libertarian. One need only pander to the emotions of the electorate, pointing out the avarice of the speculating businessman and the dire need of the poor. By making such a case, the long run becomes irrelevant. Joe Average doesn’t know or care about the long-term effects, especially when rewards can be reaped in the present. Trying to explain the importance of time preference to the majority of people will leave them bored and less sympathetic towards laissez-faire come election time.
The brown-nosed sycophants in the media also contribute to this inescapable web of misinformation. Statist fanatics such as New York Times columnist and resident Keynesian Paul Krugman garner considerable followings on social media by their fuzzy pro-big government writing. Extreme egalitarians such as John Rawls and Thomas Piketty decry inequality, eliciting unlimited State expansion to right these natural wrongs. Vast swathes of the electorate believe in this rhetoric and demand for more equality, without ever defining it. A greater evil of this widespread belief in egalitarianism is that many believe that one day, they too can eventually be elected into office, thus contributing to public opinion of the indispensable nature of State interference in the economy. Many economics students are ignorant of the books of the Austrian school*. Many economics teachers and professors are also ignorant of the Austrian school* and have been lulled into thinking that without government, economic disorder would reign supreme.
For Austrian Economics to make headway, public opinion has to be molded. David Hume recognized that it was public opinion which kept government in power and therefore, it will have to be public opinion that must be swayed to unlearn over a century’s worth of economic refuse.
*By Austrian School, I include the classical economists and champions of laissez-faire. I only chose “Austrian School” for brevity’s sake.