The Slow Vindication

Followers of the Austrian economists (if you are at all sincere about understanding political economy you should at least get familiar with their arguments) frequently lament that the Keynesian social-democrat mainstream not only disagrees with them, but never even bothers to argue against them, treating them instead as if they were invisible or worse, attacking idiotic strawmen instead. But every once in a while I notice a truth, revealed long ago through reason by the Austrians, peeking through when a modern Keynesian happens to write about real world effects that seemed to him counter-intuitive. Several times in the past year or two I’ve seen Austrian conclusions pop through the cracks of post-2008 Keynesianism, but justified on different grounds and expressed in different language. The truth is making itself known, for truth can never be suppressed forever, but the mainstream of economics is still having a hard time shedding their faux empiricism and obsession with complicated-but-meaningless mathematical models. So when they notice it they have to notice it in terms of economic history throwing them a curveball that warrants more study.

Just today in the New York Times, Neil Irwin notices with some consternation that low interest rates have a strange way of favoring the biggest players in a market. The revelation comes from a chance encounter with on-the-ground experiences of actual entrepreneurs.

Atif Mian, an economist at Princeton, was recently having dinner with a colleague whose parents owned a small hotel in Spain. The parents had complained vociferously, Mr. Mian recalled the friend saying, about the European Central Bank’s low interest rate policies.

That didn’t make sense, Mr. Mian thought. After all, low interest rates should make it easier for small business owners…

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