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Austrian Economist Blog and Schechter….

by Amity Shlaes
December 1, 2008

For some reason I have the Schechters on the brain. They are the family of chicken butchers who stood up to the New Deal.  I’m also teaching them this week in my NYU class. My Schechterism is shared by  least one reader, an Austrian, apparently.  Thank you, Austrians. I’m gaining more respect for you every day. I can feel myself turning into an Austrian.


  • Posted by Brian


    You are in rare company when it comes to Schechter if you are teaching at NYU. Your colleague on the law school faculty, David Schoenbrod, wrote the definitive treatment of the constitutional problem that the Schechters were making clear in their storied, if oft forgotten (sorry), legal challenge.

    Try his Power Without Responsibility. It is a little more focused on political theory but has occasional flashes of the rubber hits the road feel of The Forgotten Man.

    I think you can ultimately look for a challenge to the bailout based on the same premises, see, e.g.,George Will this week in Newsweek . In the meantime Bill Frey is making things interesting in the legal realm.


  • Posted by Rien Huizer

    Of course, who can argue against the Austrians. They ridiculed both the application of theoretical economics and Marxism. But what can Austrian ideas offer to the government of a democratic country where voters expect benefits. I have a lot of sympathy (still) for these quixotic intellectuals who did not believe that socialism or worse totalitarian approaches to government were desirable or even feasible. But they were as romantic as the socialists the argued with and as weldfremd (as an Austrian you should be fluent in German) as the neoclasical economists. Good government is difficult, and having 150 million monday morning quarterbacks looking over your shoulder and demanding goodies makes (net, information benefits versus policy space losses) it even harder. Laissez fairyland..

  • Posted by Jerry L Jordan, former Cleveland Fed

    From Copernicus to Newton to Einstein to Friedman, once it is explained it is obvious. Like many who even tried calculus and failed (as I did), it took a long time to understand this stuff about first and second differences. Once it sunk in that there could be no permanently positive second derivative, it was obvious what followed. Once there is an inflection and the second difference turns negative, present values must fall. Apparently, the MBAs who manage investment portfolios slept through that class.

    But, how to get the simplest ideas clearly explained? The early editions of Alchian and Allen carried a preface: Alan A. Enthoven: “… the tools of analysis that we [in Defense] use are the simplest, most fundamental concepts of economic theory, combined with the simplest quantitative methods. The requirements for success in this line of work are a thorough understanding of and, if you like, belief in the relevance of such concepts as marginal products and marginal costs, and an ability to discover the marginal products and costs in complex situations, combined with a good quantitative sense. The economic theory we are using is the theory most of us learned as sophomores. The reason Ph.D.’s are required is that many economists do not believe what they have learned until they have gone through graduate school and acquired a vested interest in margnal analysis.” (Economic Analysis in the Department of Defense, AER, LIII [May 1963], 422).

    So, Obama is going for “public works.” Some of us know that if the value of the marginal product of labor is less that the wages paid to that labor, an economy shrinks. That is, if the taxes which are collected to pay the wages of the government-employed workers would otherwise have bought more than the value of what is produced by those government-employed workers, the result is negative for the aggregate economy. But, like the challenge faced by Copernicus,how does one explain that to those not trained in marginal analysis?

  • Posted by Jehu

    Mr Jordan: “if the taxes which are collected to pay the wages of the government-employed workers would otherwise have bought more than the value of what is produced by those government-employed workers, the result is negative for the aggregate economy.”

    I think it is funny you never see an Austrian running a business. My favorite definition of the species is a group of individuals who haven’t looked at their 401(k) in several months.

  • Posted by brian

    I tried to post some clever repartee on the Austrian direction this thread is taking, ironic since Menger was a Pole as were the Schecters, but I digress.

    I must have found the marginal resource invested in clicking submit didn’t return in gratification what keeping my smart remarks to myself did.

    Anyway, my main reason for return is to admonish myself for getting Schoenbrod’s academic allegiance wrong. He is working on a project centered at NYU Law but his actual posting is NYLS. Nonetheless, he remains a subway ride or local phone call away for the best reflection on Austrian rubber hitting the road in the political economy.

    BTW – some have offered Predictably Irrational as counterpoint to the Austrian super-rationalist exaggeration. Of course the margins move on self-perceptions of benefit that can be objectively assailed. So somebody buying a Prius when they wouldn’t save the added purchase price in gas costs over the life of the vehicle could nonetheless be having an Austrian moment. [IMHO]

    I tend to think that more Austrian’s are running businesses than let on.

    Merry Christmas, Happy Hannukah to the Schechters and seemly solstices to anybody else who doesn’t fit in those categories.


  • Posted by Catherine A. Lound

    Dear Amity, I have been devouring your book The
    Forgotten Man. My only complaint is that it ends too soon. Are you writing a book that goes from 1940’s on through the war?
    I have been recommending it to others and will purchase my own copy soon-this is a library loan. I want it in my permanent collection. Thank you.