An Interview with the President of the Ludwig von Mises Institute Poland

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From Austrian economists’ point of view, responsibility for the current breakdown lies entirely with the state and central banking. In an interview with Bankier.pl, Witold Falkowski, the president of the Ludwig von Mises Institute Poland, explains where the economic crisis comes from and how to avoid the return of recessions.

[Bankier.pl] Who was Ludwig von Mises?

[WF] Mises was a distinguished economist and praxeologist. As he mentioned himself, a real economist he became after reading ‘Principles of Economics’ by Carl Menger, the founder of the Austrian school of economics. Mises was highly esteemed and respected as a researcher in the twenties and thirties. The Austrian school and Mises were forgotten though, ever since Keynes’ ideas became popular. Jörg Guido Hülsmann, author of a recent monumental biography of Mises, titled it: “Mises: The Last Knight of Liberalism”. Indeed, Mises was a consistent and staunch defender of the truth which he regarded as economic liberalism, not very popular in academic circles in the U.S., where he spent over 30 years, and still unpopular in state capitalist Europe. Thanks to his consistency and intellectual activity the Austrian school has survived, and recently even been booming.

Mises was also a knight in a more literal sense. In winter 1918-1919, when the Marxists gained influence in the government of Austria, he personally persuaded Otto Bauer, the leader of the Marxists, and his wife Helena Gumplowicz to give up plans for an alliance with Moscow and the introduction of the Bolshevik regime in Vienna. Therefore we can say that Mises won an important battle in defense of civilization.

What determines the uniqueness of Austrian economics?

Its normality – we are living in abnormal times when evil is often referred to the good, theft to justice, savings to suppression of demand, good of certain interest groups to the public good. The Austrian School stubbornly asserts that there is no reason to take away people’s money in the name of some public benefit, as there is no investment without savings and capital accumulation, and the market is able to provide almost all goods and services the consumers need.

In the scientific sense, what determines the peculiarity of the school is: its methodological individualism (we study various phenomena, and not their aggregates, the average statistics, etc.); subjectivism (no objective economic values, price depending on supply, demand, preferences of the seller and buyer); realism (these are units who work, rather than collectives, aiming to improve the situation of acting). Austrian economics is firmly rooted in praxeology, a philosophical study on the effectiveness of action. It indicates certain rules, which control human action, and warns against the consequences of violations of these rules. Such violations include, for example: dictating to people what is good for them; forcing entire populations to follow certain regulations and economic compulsions (maximum prices, minimum wages, tariffs, state insurance, subsidizing certain spheres of the economy, fiat money, and many others).

Austrian economics, unlike the British tradition and all of today’s mainstream, is actually not divided into macroeconomics and microeconomics. Economic laws are universal and the activity of all market participants ultimately boils down to the actions of individuals. Reflections on the aggregates, models and the shape of the national and the world economy are the areas of speculation which the Austrians do not enter.

There is one more distinctive feature of Austrian economics. Austrians believe that economics is the science which everyone can and should learn, because it concerns everyone. Practicing economics, as something between social engineering and creative accounting, is in our opinion a blind alley or rather a way that leads to increasingly serious crises and large scale manipulations. Economics should be taught from kindergarten.

Are achievements of Austrians still valid?

As valid as the law of gravity. Austrians do not announce anything sensational, they rather call not to be against human nature, which is analogous to the force of gravity, which affects all animate and inanimate objects. They remind us that man is not an electron brain but a being with the specific evolutionary constraints. Accumulated in the human mind is both discursive knowledge, that can be used to create clear plans, and practical knowledge (Hayek called it ”Metis” from Greek, after James Scott), which is rather encoded in the mind and body, passed in culture and customs, distributed within society. If all human knowledge is brought to the discursive layer, we will not only deprive it of substantial resources but also allow dangerous abuse, which Hayek called the ‘fatal conceit of reason’.

The Austrian theory of money and business cycles is especially current during the smoldering crisis. Austrians consistently preach that fiat money, created “ex nihilo” paper money as the credit, has to destabilize the economy because it gives a man the power that no one should have, a temptation which no power can oppose…

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