The end result is every government program works perfect in theory,
and every government intervention fails miserably in practice.
Greetings and salutations, my fellow plebs.
My name is Walker and this is the Bitcoin Podcast.
The Bitcoin block height is 816330,
and the value of one Bitcoin is still one Bitcoin.
Today's episode is Bitcoin Out Loud,
where I read you a Bitcoin or Bitcoin-adjacent piece.
Today, I'm reading a piece by Dr. Peter St. Ange
that he just published today, titled,
What is Austrian Economics?
It is a succinct primer for anyone who wants to better understand the Austrian perspective,
which is extremely useful in order to better understand Bitcoin.
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Before I get into the read,
I just want to point out that Peter has a free email list.
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All these links are available in the show notes,
so without further ado,
let's get into this Bitcoin Out Loud read.
What is Austrian Economics?
The Economics of Liberty, by Peter St. Ange.
I've gotten some questions about Austrian economics,
which is the model I use to understand the world.
Since Austrian isn't very well known,
I thought I'd sketch out how it differs from mainstream economics.
In short, Austrian economics means economics without government bribes.
And it turns out once you take government bribes out,
economics gives a very different model of the economy,
one that puts liberty front and center.
The Capture of Mainstream Economics.
Economics as a field has been around for a long time,
at least since the 16th century,
when the classical model was worked out by the Spanish Scholastics.
But starting in the 1800s,
the field of economics was co-opted by governments,
starting with Prussia.
They saw economics as a useful propagandist,
who could help take over the economy
and turn out fantastic profits to bankers, industrialists,
and anyone else with a nice lobbying budget.
Economists became what Murray Rothbard called
the intellectual bodyguard of the regime.
Or, as James Buchanan put it,
economists become camp following whores.
This takeover culminated in the Keynesian Revolution in the 1930s,
after which mainstream economics, universities, and all,
became effectively a wing of the government.
Austrian economics simply returns to that pre-Keynesian classical understanding
of how an economy works.
What is Austrian economics?
Austrian economics gets its name because in the late 1800s,
the German-speaking world dominated the field of economics,
as it did much of science.
But economics operated very differently
in the two halves of the German-speaking world,
Prussia and Austria.
While Prussian economists were funded by government,
it was a different story for the poor Austrians,
who were not on the government payroll.
So they spent their days doing what economists had done for centuries,
try to understand how economies work,
why people buy, sell, trade, interact, work, produce, or destroy.
As such, I joined economist Peter Boetke
in considering the Austrians to be the true economics,
what he calls the mainline economics,
as opposed to the camp following whores in mainstream economics.
Praxeology.
So with that background, what makes Austrian different?
The classical or Austrian approach is to use logic to understand human behavior.
In Austrian, this is called praxeology, the study of human action.
Concretely, praxeology uses three key axioms.
An axiom is an obviously true thing,
from which you can logically deduce all of economics.
One, action has purpose.
This means people are not billiard balls.
They do things for a reason,
namely because they believe it will improve their life,
giving a personal profit.
Two, humans differ.
This means people have different skills and want different things.
This means it's profitable for people to trade and interact.
Three, leisure is a good.
This means people will only engage in work if it's profitable.
So for example, there's no such thing as an oppressed worker
unless violence was used.
Amazingly, these three axioms can literally explain the entirety of economics.
You don't need dozens of books written in calculus.
Further, the axioms imply that the way to maximize people's happiness is liberty
for the government to do absolutely nothing beyond protecting them.
After all, if action is based on what the actor thinks will most improve his life,
there is no role for government beyond protecting his ability to choose freely.
Meanwhile, if human differences motivate exchange and interaction,
again, there's no role for the government but to stay out of the way.
Compared to mainstream, which ignores theory in favor of data,
let the data speak is the mantra.
This turns economics into nothing more than statistics,
an endless stream of correlations.
In theory, letting the data speak looks neutral and scientific,
akin to the use of data in physics,
but that takes us back to the government bribes.
After all, who's collecting the data and who's running the statistical analyses?
Governments make up nearly the entire revenue of universities
between grants, appropriations, and subsidized student loans.
Indeed, they make up the overwhelming revenue of even non-university analysts
at these nonprofits that essentially operate as wings of the government.
This means the data isn't speaking because the data is bought.
The end result is that, in mainstream economics,
every government intervention, every central planner,
is just a question of data.
You run the simulation, see if the results are positive,
does the intervention improve the world?
Inevitably, every government intervention does improve the world,
on paper at least, given who's paying the analyst.
The end result is every government program works perfect in theory,
and every government intervention fails miserably in practice,
because from welfare programs, to industrial policy,
to bureaucratic regulation, to the Federal Reserve itself,
the data said what it was paid to say.
But note the important implication for government policy.
If everybody is profiting from every transaction,
action axiom, leisure axiom,
and if every individual is best at finding the best transactions,
subjective preferences, difference axiom,
it means there is absolutely no role for government,
beyond protecting our ability to choose.
Government is at best in the way.
We are paying government to destroy us.
Ideological Implications of Austrian
The key insight of Austrian that government intervention is harmful,
can be applied to pretty much every question in economics.
In fact, economist Murray Rothbard did just that in his 1995 book,
Making Economics Sense,
that walks through 117 common fallacies that, 30 years later,
still reads like it was written last week.
In terms of ideology, in contrast to Keynesian economics,
where government is always right,
or even Chicago economics, where big business is always right,
Austrian economics tends to imply a libertarian worldview,
one where the government gets out of the way altogether,
playing at most a helpful role so individuals can seek their own happiness.
It's not that libertarianism is required for Austrian economics,
it's that once you accept that individuals know what's best for them,
it implies that no central planner can run your life better than you,
no matter how many PhDs they have.
It implies the best way to help people,
the best way to build a society, is liberty.
So, just as studying physics makes you believe in gravity,
studying Austrian economics makes you believe in liberty.
Resources
Finally, some good resources.
My favorite to start the ball rolling is Rothbard.
The book I mentioned earlier, Making Economics Sense, is a great start,
or if you're interested in the demon spawn known as the Federal Reserve,
start with, What has government done to our money?
And if you'd like to go deeper on theory and history,
check out Rothbard's Man, Economy, and State,
or his magisterial, History of Economic Thought.
Rothbard is generally gold-centric, Bitcoin didn't exist yet,
but if you're interested in Bitcoin,
the best Austrian economist in Bitcoin is Seyfedin Ammus.
Check out his books, Bitcoin Standard, Fiat Standard, and Principles of Economics.
Conclusion
I'll end with a quote by John Stuart Mill.
The real advantage which truth has is that it may be extinguished once, twice, or many times,
but in the course of ages, there will generally be found persons to rediscover it,
until its reappearances falls on a time when from favorable circumstances,
it escapes persecution until it has made such head as to withstand all subsequent attempts to suppress it.
Austrian economics, like liberty itself, will always be at a disadvantage because governments dislike it,
yet the people always want liberty, sometimes very passionately,
and the people always want what prosperity delivers, so they and their children can pursue their dreams
and spread justice in the world.
Protecting liberty is a never-ending battle, but to me, it is the most sublime battle one could join.
Bitcoin Out Loud
And that's a wrap on this Bitcoin Out Loud episode of the Bitcoin Podcast.
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Until next time, stay free.