The memoirs of the indefatigable economist Ludwig von Mises, written from his exile in Geneva in 1940, contain this moving, even tragic, passage:

“Occasionally I entertained the hope that my writings would bear practical fruit and show the way for policy. Constantly I have been looking for evidence of a change in ideology. But…I have come to realize that my theories explain the degeneration of a great civilization; they do not prevent it. I set out to be a reformer, but only became the historian of decline.”

Reading the whole of Mises’s works, it is clear what he means by decline: the deliberate wrecking of civilization itself, through the rise of the total state. (Read more from mises.org)

And for a philosophical criticism of publicly produced security and justice, I present, Hans Hermann Hoppe:

A very well-written, straight forward explanation here, by Hans Hermann Hoppe. He covers many important libertarian ideas.

This year’s Nobel Memorial Prize in Economics goes to two Americans, Thomas Sargent (NYU) and Christopher Sims (Princeton). Officially the award is for “their empirical research on cause and effect in the macroeconomy.”

. . . . it’s a bit odd for the economics profession right now to be celebrating two scientists for their work in helping policymakers steer the macroeconomy. It would be a bit like awarding Jonas Salk a Nobel Prize in the midst of history’s second-worst polio epidemic.

. . . .

Given that you wanted to approach macroeconomics in the way the mainstream has done it over the past few decades, then yes Sargent and Sims made seminal contributions and should be congratulated for their important work. For example, there is a poll for visitors at the official site, asking, “Did you know that Sargent and Sims’s work is used by policymakers worldwide?”

Yet hold on a second. We ironically seem to be in the midst of one of the causation-correlation traps that I just explained above. Just about everyone is celebrating the work of Sargent and Sims, in effect saying, “Thank goodness you gave policymakers such guidance, especially when they need it now in the midst of the worst financial crisis since the 1930s! We can only imagine how awful the world economy would be today, were it not for your seminal papers.”
Aspects of the Pathology of Money

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Yet things might well be just the opposite. The “data” is just as consistent with the opposite conclusion, namely that Sargent and Sims steered the macroeconomics profession along a trajectory that led policymakers to do things that blew up the global financial system, such that we are currently worried about the collapse of an entire continent and its currency. (Read more)

See also:

How to silence a Nobel Prize winning economist: Ask him about the economy.

This essay was the first thing of Hoppe’s I ever read. It blew my mind. It discusses the common ground between Marxism and Austrians and how the Marxists depart down the road to serfdom by misidentifying the exploiters.

Interesting to note that Hoppe began as a Marxist. I think the essay demonstrates his philosophical rigor.

The most remarkable fact in the history of our age is the revolt against rationalism, economics, and utilitarian social philosophy; it is at the same time a revolt against freedom, democracy, and representative government. It is usual to distinguish within this movement a left wing and a right wing. The distinction is spurious. The proof is that it is impossible to classify in either of these groups the great leaders of the movement.

Was Hegel a man of the Left or of the Right? Both the left-wing and the right-wing Hegelians were undoubtedly correct in referring to Hegel as their master. Was George Sorel a Leftist or a Rightist? Both Lenin and Mussolini were his intellectual disciples. Bismarck is commonly regarded as a reactionary. But his social-security scheme is the acme of present-day progressivism. If Ferdinand Lassalle had not been the son of Jewish parents, the Nazis would call him the first German labor leader and the founder of the German socialist party, one of their greatest men. From the point of view of true liberalism, all the supporters of the conflict doctrine form one homogeneous party.

The main weapon applied by both the right- and the left-wing antiliberals is calling their adversaries names. Rationalism is called superficial and unhistoric. Utilitarianism is branded as a mean system of stockjobber ethics. In the non–Anglo-Saxon countries it is, besides, qualified as a product of British “peddler mentality” and of American “dollar philosophy.” Economics is scorned as “orthodox,” “reactionary,” “economic royalism,” and “Wall Street ideology.”

It is a sad fact that most of our contemporaries are not familiar with economics. All the great issues of present-day political controversies are economic. Even if we were to leave out of account the fundamental problem of capitalism and socialism, we must realize that the topics daily discussed on the political scene can be understood only by means of economic reasoning. But people, even the civic leaders, politicians, and editors, shun any serious occupation with economic studies. They are proud of their ignorance. They are afraid that a familiarity with economics might interfere with the naïve self-confidence and complacency with which they repeat slogans picked up by the way. Read more from mises.org

These two lectures speak to a very subtle, but very important topic underlying economics.

There’s a struggle between empiricists who insist there is no knowledge without experiment, and rationalists who believe in the triumph of reason. When the former, the empiricists reign, economics gets treated like just an opinion true only until it can be refuted, with all theories (including socialism) being valid until experiments are conducted.

The second of these two lectures by Hans Hermann Hoppe is more accessible than the first.

Triple H – The man, the myth, the legend:

I loved this Mises daily article.

Very comprehensive.

Liquidity Trap is a euphemism for institution carrying irresponsible loans who don’t want to go bankrupt. They seek to be rescued (with your savings) from the dreaded liquidity trap. It is at the heart of Keynesianism.

They say there isn’t enough money. People will stop spending. When people stop spending, businesses will go under. When businesses go under, more people will be out of work. And so on in a vicious, self-reinforcing spiral.

This Mises daily article helped me understand the nonsense of this idea, which Keynesians discuss with much subtelty: http://mises.org/daily/3697

Here’s my short version.

The only time people will stop spending altogether is when they no long want goods and services provided by others. In other words, never.

Price fluctuation can absorb any amount of hording of cash. If people are filling their mattresses with dollars, prices will simply drop. Opportunities will be created for those who choose to buy things.

Most people will save their money in banks. If we lived in a free society, and the interested rate was settled on the free market, the increased savings would create more opportunities for people who want to borrow money. This would be manifest in low interest rates.

High savings create lots of opportunities to borrow and thus low interest rates. Low savings make it hard to borrow and thus high interest rate.

One very important, uniquely Austrian point, is that this harmonizes savings with interest rates. It harmonizes future planning of people (who are saving) with opportunities for entrepreneurs to begin long-term projects.

Keynesianism treats all production equally — long term, short term, building computers, digging ditches — as if humans produced and traded blobs of meaningless GDP. The Austrians identify short and long production processes and their need to be harmonized with savings (which reflect whether people are planning for the short or long term). This distinction gets messed up with the Fed sets the interest rate or rescues institutions from the so-called “Liquidity Trap.”