Is fiscal stimulus not working? Then do more of it, say the neo-chartalists. Are monopolies and price controls a problem? Then get rid of the central bank’s monopoly in setting the price of credit and the supply of government money, say the Austrians
The Economist, beloved and respected throughout the profession, ridiculed by outsiders and bloggers, finally made reference to what the economics blogosphere has been talking about for years. The entire economics community, despite what you may hear, is not on the same page. Decades old methodological and macroeconomic debates appear in tweets instead of dated books. The fiscal-monetary policy debate between monetarists and Neo(or maybe New?)-Keynesians has resurfaced. The methodological debate between the Austrians and the positivists…remains unmentioned.
In any event, the article seems to touch on the “modern macro malaise” in economics. Economists are still slightly baffled and confused by periodical swings in spending and investment. They still disagree (vehemently) about the Great Depression.
This treatment breaks from the crowd by adding the Austrian approach (more cogently than it is usually presented). The Austrian approach offers something the other two camps do not: a blank prescription pad. Rather than promoting a new fiscal regime or altering a monetary institution, Austrians equate manipulated interest rates to an economy distorted across time. Thus, the “problem” in the other camps is part of the solution for Austrians.
The article has much to offer interested students and economists. It considers three different approaches to macroeconomics. It gives Austrian Business Cycle Theory a long-deserved shout out. It’s got a caricature of Bob Murphy and Paul Krugman. It teases the mainstreams inability to predict and prescribe but still looks at the problem as spending-driven. While gently reassuring readers that Monetarists and Keynesians are still onto something, The Economist gives Austrians the pleasure of a third option, however crazy it may seem.