Meet the Austrian School, one of the most important currents of economic thought in the world, and whose principles we can see in many of the economic facets of the world of cryptocurrencies.
En the world of economics, one of the best-known schools of economics is the Austrian School, whose beginnings took place in the city of Vienna in the year 1871.
Everything is born with the publication of Carl Menger's Principles of Economics, a Doctor of Law and Economist who would become the genesis of this current.
Since then, the Austrian School has gained great popularity in those individuals who have strong heterodox positions based mainly on methodological individualism and subjectivism, as well as being anti-interventionist and promoting economic liberalism. But it has also gained spaces in people with libertarian and anarcho-capitalist thoughts.
Origin of the Austrian School
As we have already commented, the Austrian School originated in Vienna at the end of the 1871th century, in XNUMX to be exact. At that time, Carl Menger presented his work Principles of Economics.
Quickly personalities such as Eugen Böhm von Bawerk, Friedrich von Wieser and others joined his current of thought and with it the Austrian School was born.
Among the original ideas of this school is that economic science is derived from philosophical logic. With this idea in mind, Austrian economists believe that developing sound economic theory requires starting from well-established and fundamental logical principles. This was a vision contrary to what the Prussian Historical School held, being a strong point of ideological confrontation in that sense for the time.
However, today most of today's economists practice many of the ideas that the Austrian School created and promoted in those early years, making clear the enormous impact it has had on today's economics.
However, in the 70th century, a new current arose among the orthodox economists, which led to the marginalization of the Austrian School. It was not until the crisis of the 1974s and the work of Friedrich Hayek, Nobel Prize winner in Economic Sciences in 2008, that "the School" again took on a great boom. A boom that was once again catapulted with the arrival of the XNUMX global financial crisis. At that time, the Austrian School and its heterodox thinking once again took on importance and relevance in the world economic world.
Principles of the Austrian School
The most important principle of the Austrian School is the methodological individualism. That is, the defenders of this current believe that all social phenomena are explicable by the actions of individuals. This current of thought departs from the idea that the mathematization of economics and empiricism is possible. Instead, Austrian economists choose to make deductions from self-evident axioms or irrefutable facts.
To this method, developed by Ludwig von Mises en "Human Action", it is called praxeology or the logic of action. Praxeology is a methodology that seeks to study the logical structure of conscious human action. Its most important statement in this sense is that the human being is a being of perfect rationality, and because of this, the ideas of limited rationality are its antithesis. Austrian economists, on the other hand, reject the division between macroeconomics and microeconomics, considering that the latter should explain the former.
The conclusions of the Austrian School usually lead to defend non-interventionist liberal economic policies. They conclude that the market produces and distributes resources better than the State.
Main exponents of the School
These are the key authors in the development of the Austrian School:
- Carl Menger (1840-1921). Founder of the School and theorist of marginalism.
- Friedrich hayek (1899-1992). The most recognized face of the Austrian School. Nobel Prize in 1974.
- Eugen von Böhm-Barwerk (1851-1914). Theoretical about capital and interest.
- Ludwig von Mises (1884-1973). Creator of praxeology and critic of socialism.
- Murray Rothbard (1926-1995). Defender of anarcho-capitalism and fruitful writer.
- Jesus Huerta de Soto (1956-). Theorist of the economic cycle, defender of the gold standard and the highest representative of anarcho-capitalism today.
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Main contributions
One of the main contributions of the Austrian School was developed by Carl Menger himself, and is the so-called "Marginalist Revolution". This idea argued that the value of a good depended on the utility assigned to it by each agent. But this utility is subjective, and will depend on the intensity of the needs that each individual wants to satisfy. With the development of the theory of subjective value, the different theories of objective value are put to an end, especially with the labor value, the basis of the Marxist system and coming from classical economists such as David Ricardo.
This "Marginalist Revolution" led to another critical contribution to the economic ideas of that time, this time we talk about "Theorem of the impossibility of socialism". This theorem was developed by Mises and Hayek, and it tells us that socialism is theoretically unfeasible. According to these authors, the reason is that socialism and its theories have serious information problems that make it unfeasible. They argued that this situation responds to the fact that in a socialist economic system the information on prices and profits does not exist. This break in the economic information chain inexorably leads to inefficient use of resources and subsequent economic decline.
About the business cycle
Another of the most important contributions of the Austrian School is its explanation of the business cycle. Austrian theory in this sense tells us that; cycles are initiated by an artificial expansion of credit not backed by prior savings. This is what happens when central banks lower interest rates or print money. Low interest rates lead to overinvestment in activities that, with interest rates at normal levels, would not have been viable.
However, this creates a false economic boom, a boom that ends in a bubble burst as cheap credit is cut off abruptly. At that point, the resources (capital and labor) destined for the bubble must be reallocated to really productive projects. However, this is not a simple task, since these resources are heterogeneous and cannot be reallocated from one sector to another easily. This situation in the end ends up leading to loss of value and, therefore, an economic depression.
The Austrian School and Cryptocurrencies
The libertarian and anarcho-capitalist ideas that the Austrian School upholds are closely related to the development of cryptocurrencies. In fact, the theories of money of the Austrian School given by Carl Menger, creator of this school, highlight the following characteristics that money should have:
- The money must have a prior non-monetary demand. This means that the money must be about goods that have a demand beyond its monetary use because its non-monetary value is prior to monetary use.
- It must have great accessibility. At this point, Menger emphasizes that it must be possible to obtain that particular good in a simple way. But in addition, its obtaining and exploitation should not be legally restricted.
- A means of easy transformation. This means that money can be used as a unit of account, but it should also be possible to de-treasure it in homogeneous portions.
- Treasurability. In this regard, Menger tells us that money must retain its value over time, but it must also have the ability to depreciate a portion without detracting from the value of the remaining money.
- Relative scarcity. This point tells us that money should be seen as a store of value, since a large increase in global production would significantly reduce personal wealth.
- Value stability. The value of money must be stable to geographical, temporal or quantity changes.
Its fundamental role in cryptocurrencies
Cryptocurrencies, for the most part, respect these concepts or conform to them, revealing the strong relationship that their economic systems have with the Austrian School. In fact, many consider that cryptocurrencies are an anarcho-capitalist expression, but this current owes its birth in part to the theories of the Austrian School, with which in many occasions it frames a way of thinking, vision of the economy and its impact on the world. .
Put in this way, we can think that people like Satoshi Nakamoto, and who helped him create this cryptocurrencies, , they were clearly up to date with this current of thought, perhaps even influenced, or perhaps just coincidence. The truth is that the results of those ideas seem to be seen in today's world of cryptocurrencies.
What do you think?
Let's not forget that we are talking about currents of thought that must be contextualized in their time. Society advances technologically and the context varies, so much so that (sometimes) it is not understood in the same way.
We mean that you should no longer understand the world in the same way as you were taught. Can you imagine a government / state that was a DAO that transparently regulates and distributes things? Is it possible that in such cases the mathematical "state" is more accurate than a private company? The "parties" would work for 4 years developing a DAO that society would transparently vote to govern them.
Thinking society with the schemes "Old world", where people are classified on the left and right sides, are they still valid? Bitcoin and technologies such as artificial intelligence with artificial neural networks, robots doing our work, constant relocation, increasingly non-existent borders, show that the traditional ideological model is also bankrupt.
Reset your mind unloading ballast from the past, study what is coming and think freely.
The Austrian School believed that socialist models were contrary to economic growth, but China (which is governed by the Communist Party) is currently practically the world's leading power, while the United States collapses. They call themselves communists, others say they are not. Does it matter? Do all the people in yellow shirts think the same? Is it really as simple as labeling something with a name for what it says, says it is, or the rest think it is? Or is it the excesses of intellectuality to categorize, as if we were robots, the pure and variable entropy of the human being?
What do you think? Let us know your opinion in the comments.
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