Colloquium on Sound Money

aje on April 21, 2011

20th-21st November 2009, London

1.    What is Money?

  • Menger, Carl, 1976, “The Theory of Money” (Chapter 8, in Principles of Economics, p.257-286)
  • Salerno, Joseph T., 1987, “The “True” Money Supply: A Measure of the Supply of the Medium of Exchange in the U.S. economy” Austrian Economics Newsletter, Ludwig von Mises Institute
  • Shostak, Frank, 2000, “The Mystery of the Money Supply Definition” The Quarterly Journal of Austrian Economics, Vol. 3, No. 4, pp.69-76

2.    The Interest Rate and Intertemporal Coordination

  • Mises, Ludwig von, 1953 [1912], The Theory of Money and Credit Yale University Press (Excerpts: Chapter 19, pp.339-367)
  • Hayek, Friedrich A., 2008 [1931], Prices and Production Mises Institute (Excerpts: Lecture 2, pp. 223-252; Lecture 3, pp.253-276)
  • Sweeny, Joan and Richard James Sweeny.  1977, Monetary Theory and the Great Capitol Hill Baby Sitting Co-op Crisis: Comment, Journal of Money, Credit and Banking, Volume 9, Feb., pp. 886-89

3.    The Gold Standard and the Great Depression

  • Rothbard, Murray, 2005 [1963], What has government done to our money? Mises Institute (Excerpts: pp.159-170)
  • Reed, Lawrence, 2005, “Great Myths of the Great Depression” Mackinac Center for Public Policy
  • White, Lawrence H.  2008, “Is the Gold Standard Still the Gold Standard among Monetary Systems?” Cato Institute Briefing Papers, No. 100

4.    Deflation and Prosperity

  • Rothbard, Murray, 2005 [1962], The Case for a 100% Reserve Dollar Mises Institute (Excerpts: Chapter 10, pp.180-186)
  • Selgin, George, 1997, Less than Zero: The Case for a Falling Price Level in a Growing Economy Institute of Economic Affairs, Hobart Paper No. 132 (Excerpts: pp.9-41; 70-72)

5.    Free Banking vs 100% reserves

  • Mises, Ludwig von, 1953 [1912], “Peel’s Act” in The Theory of Money and Credit Yale University Press (Excerpts: Chapter 20, pp. 368-373)
  • White, Lawrence H. 2009 [1984], Free Banking in Britain: Theory, Experience, and Debate, 1800-1845, Institute of Economic Affairs (Excerpts: Chapter 5, pp.89-135)
  • Selgin, George, 1997, Less than Zero: The Case for a Falling Price Level in a Growing Economy” Institute of Economic Affairs, Hobart Paper No. 132 (Excerpts: pp. 67-69)
  • De Soto, Jesus Heurta, 2006, Money, Bank Credit and Economic Cycles Mises Institute (Excerpts: Chapter 8, pp.675-714)

6. Central banking

  • Smith, Vera, 1990 [1936], The Rationale of Central Banking, Liberty Fund (Excerpts Chapter XII, pp.167-196)
  • Hayek, Friedrich A., 1990, Denationalisation of Money – The Argument Refined, Institute of Economic Affairs, Hobart Paper Special, No. 70 (Excerpts: pp.23-28, 46-55, 130-131)
  • Congdon, Tim, 2009, Central Banking in a Free Society, Institute of Economic Affairs, Hobart Paper No. 166 (Excerpts Chapter 1, pp.34-43; Chapter 8, pp.178-189)

7.    Proposals for Reform

  • Salsman, Richard, 1990, Breaking the Banks, American Institute for Economic Research (Excerpts: Chapter IX, pp. 125-141)
  • De Soto, Jesus Heurta, 2006, Money, Bank Credit and Economic Cycles Mises Institute (Excerpts: Chapter 9, pp.736-787)
  • De Soto, Jesus Heurta, 2006, Money, Bank Credit and Economic Cycles Mises Institute (Excerpts: Chapter 9, pp.788-805)

Macro bootcamp

aje on August 7, 2010

Updated: March 2018

The Macro Bootcamp is a short and intensive reading group that serves as a refresher for a graduate level class in contemporary macroeconomics. It aims to cover the seminal texts of the most prominent schools of thought, and act as a foundation for applications to current policy debates.

1. Advanced reading

Participants are advised to read the following book, which provides an excellent introduction to modern macroeconomics from a school-of-thought approach. The interviews at the end of the book in particular are worth attention:

2. Reading list: key articles

Note: this reading list is heavily influenced by Tyler Cowen’s Macro I Reading List, Fall 2006 (.pdf). For a previous version of that, see here.

History of thought/background

Real Business Cycles

New Keynesian economics

Monetary policy

3. The podcast

Here is an audio version of my own lecture notes:

4. Further reading

The classic graduate text for macro is David Romer. It is the best treatment of the alternative growth models, and then has a chapter on each variable of national income accounting. Participants are advised to grapple with it after the bootcamp has taken place.

It is also a good idea to see how various Austrian, Keynesian and Monetarist ideas can be integrated into a heterodox narrative. See Arnold Kling’s “Lectures on Macroeconomics“.

Note: the lectures above feed into the Monetary Theory and Policy Workshop

The one week paper

aje on August 6, 2010

The “one week paper” sounds ludicrous, so it’s important I make some important caveats:

  1. The paper must not require any primary empirical research (i.e. there is no data collection or analysis involved).
  2. The paper is an article, therefore you’re predominantly citing/drawing upon journal articles and not books.
  3. The paper fits into an area that you have already published on, and the topic is something you have been thinking about for a long time and have already collected material
  4. You have a publication lined up, so that you know the journal/edited volume it will appear in, you know the editor’s requirements, and you know the audience.

If the above apply, the one week paper is feasible. Here’s the schedule:

Monday Gather the large pile of existing material that you have been keeping over the last few months/years. Print out references and articles that you’ve been keeping (e.g. draft emails, filed emails, blog posts, RSS feeds – however you “keep” articles to follow up on later). Conduct primary desk research to assemble your literature review. Take the key references, and go through their citations. Bust Google scholar, JStor, and whatever other databases you use. Print, print, print.

Tuesday Get the cafetiere on the go, find a comfortable chair, and READ. Go through the printouts and read everything. Annotate as much as possible – both in terms of comments and general thoughts.

Wednesday The aim now is to settle on the structure of the paper. Do *not* switch on your computer. Collate the printed material, lay it out on the floor, and formulate the key sections. Use a blank piece of A4 to write out the structure of the paper. Label the INTRO, Sections 1, 2…, CONC. on the printouts, and pile them up (loosely) into sections. The paper should now be laid out in front of you.

Thursday Have a lie in. Think about the paper as you drift in and out of sleep. Then, start writing. Consider the writing process to be similar to an oil painting. Create a base layer in terms of the structure: i.e. create the sections within the word document. Then begin populating each section by taking the pile of papers and working through them methodically.

Friday Keep writing. I find I’m at my peak from 10pm – 2am, so I try not to feel as though I’m slipping behind if I’ve not made much progress before lunch.

Saturday Write.

Sunday I don’t have a printer at home, but at this point you should print out the draft. Go to the pub, get a decent pint of lager and make corrections. Come home and revise the draft (crossing through each annotation with a thick black marker once it’s been adopted). Ensure spelling/grammar/formatting is sensible. Save a PDF version. Upload onto SSRN if you want broder feedback. Submit. Relax.

An undergraduate Austrian-school reading list

aje on August 6, 2010

The best introduction to all aspects of the Austrian school, and how it differs from other approaches to economics is:

Handbook

Videos

Textbooks

  • Shand, Alexander H., 1984, The Capitalist Alternative: An Introduction to Neo-Austrian Economics. New York: New York University Press
  • O’Driscoll, G.P., and Rizzo, M.J., 1985, The Economics of Time and Ignorance Routledge
  • Evans, Anthony J., 2020, Economics, A Complete Guide for Business, London Publishing Partnership

Primers

  • Littlechild, Stephen C., 1978, The Fallacy of the Mixed Economy. Hobart Paper 80. London: Institute of Economic Affairs
  • Kirzner, Israel M., 2001, Ludwig von Mises. Wilmington, DL: ISI Books
  • Butler, Eamonn, 2010, Austrian Economics – A Primer, London: Adam Smith Institute

Intellectual histories

Conference proceedings

  • Dolan, Edwin G., (ed) 1976, The Foundations of Modern Austrian Economics. Kansas City: Sheed & Ward Inc.
  • Spadaro, Louis M., (ed) 1978, New Directions in Austrian Economics. Kansas City: Sheed Andres & McMeel

If you like audio, here’s Ludwig Lachmann’s “History of the Austrian School” (1977). Here’s the short intro I wrote in 2005, and here’s “What Should an Austrian Economist Do?“

The Austrian-school classics

aje on August 6, 2010

  • Hayek, Friedrich A., 1948. Individualism and Economic Order. Chicago: University of Chicago Press
  • Mises, Ludwig von, 1949. Human Action: A Treatise on Economics. New Haven: Yale University Press
  • Rothbard, Murray N., 1962. Man, Economy & State. Princeton, N.J.: D. Van Nostrand Company
  • Kirzner, Israel M., 1978. Competition and Entrepreneurship. Chicago: University of Chicago Press

Also see this video series by Richard Ebeling and “What Austrian Economics IS and What Austrian Economics Is NOT” by Steve Horwitz.

Contemporary pathways in Austrian macroeconomics

aje on July 23, 2010

One of the most common criticisms of the Austrian-school of economics is that it is stuck in the past. For me this inexcusably ignores some excellent work that has been done “post revival” (i.e. since 1974). Indeed my own research on monetary theory is grounded in the following books, which – read together – demonstrate the relevance of Austrian ideas for a progressive research programme:

  • O’Driscoll, Gerald and Rizzo, Mario, 1985. The Economics of Time and Ignorance, Routledge
  • Cowen, Tyler, 1997. Risk and Business Cycles: New and Old Austrian Perspectives, Routledge
  • Lewin, Peter, 1999. Capital in Disequilibrium: The Role of Capital in a Changing World, Routledge
  • Horwitz, Steve, 2000. Microfoundations and Macroeconomics, Routledge
  • Garrison, Roger, 2001. Time and Money: The Macroeconomics of Capital Structure, Routledge

Note that they have all been published as part of the “Foundations of the Market Economy” series edited by Mario Rizzo and Larry White through Routledge. This is testimony to the influence of the NYU programme and the power of the SDAE as a professional organisation. A thorough reading of these books provides an excellent understanding of the unique contributions of the Austrian school, but one that is embedded within the state of the professional debate. More importantly, they are bursting with ideas to take this research forward, and beg to be applied to the current economic climate. They provide fertile pathways for the future of the Austrian-school.

Austrian theory of the trade cycle

aje on July 20, 2010

The classics:

Some recommended overviews:

Collecting and Presenting Data

aje on June 18, 2010

This article intends to walk through a process for collecting and presenting data. It will include some basic commands in Excel and Powerpoint. The slide deck below provides a step-by-step guide. You should follow it in order to complete the set tasks.

You will need the following to get started:

Tasks

1. Replicate the following PDF file (but without the patterned fill): “aje_data_chart.pdf”

2. Replicate the following PNG image (but without the patterned fill):

  • Download “aje_data_2.xlsx“
  • Email me for the solution: “aje_data_3.xlsx”

Resources on data visualisation:

Some examples of good data visualisation:

tumblr_n1ghpzCox61qhm4zto1_500

The Economist is renowned for good data visualisations. Here is their advert for data journalists, demonstrating their expertise.

This is part of my online course on Analytics.

Resources on the financial crisis

aje on June 18, 2010

A lot has been written on the financial crisis, but here are my recommendations for those seeking to understand the causes of what went wrong.

The 2010 documentary, Inside Job is well made, and features interviews with very important figures in the crisis. The trailer is here:

My criticism of it is that it focuses too much on the immediate manifestation of the problem (conflicts of interest between Wall Street and Federal agencies) and not enough attention to the underlying causes that generated the easy money, relaxed lending standards, and regime uncertainty. As an anti-capitalist rant it’s effective and fun, but as an economic explanation it is overly simplistic and incomplete.*

This is a tangent, but I was utterly engrossed by this 6 hour interview with Matthew Cox, who took advantage of lax lending requirements in the build up to the global financial crisis and created a fascinating career as a mortgage broker conman:

Here is my explanation of the causes of the crisis: (and the lecture notes for this talk are here)

This is how South Park explain the problem:

And here is there insight into the discretionary judgements of policymakers during the crisis:

https://youtu.be/wz-PtEJEaqY

There has been a lot of discussion about who did or didn’t predict the financial crisis. You can read my survey of these claims, as well as my own public statements prior to the crash, here:

Martin Wolf provides a sensible explanation here:

“The proximate cause of the crisis was an explosion of indebtedness, much of it associated with sharp rises in the real prices of property. A significant part of the explanation for this debt explosion was reliance on household debt for sustaining consumption, especially in the US, since the real incomes of so many were stagnating.39 Behind this were even more profound changes, including the entry of China into the world economy, the liberalization of the financial system, and undue reliance on a monetary policy that targeted only inflation. Ultimately, the financial crisis was the consequence of huge (and insufficiently understood) shifts in the world economy transmitted via a grossly undercapitalized and underregulated financial system.” (Wolf, M., 2023, The crisis of democratic capitalism, Allen Lane, p. 99)

 

Engaging, populist books:

Policy-focused pamphlets:

Engaging popular accounts:

Thorough, academic accounts:

Entertaining and informative videos:

My own account of the UK experience is:

  • 2015 “The financial crisis in the United Kingdom. Uncertainty, calculation and error” in Boettke, Peter J., and Coyne, Christopher J., (Eds) The Oxford Handbook of Austrian Economics, Oxford University Press

* Note that around the 11 minute mark, Matt Damon says: “In September 2008 the bankruptcy of US investment bank Lehman Brothers and the collapse of the world’s largest insurance company, AIG, triggered a global financial crisis”. But the graphic used to accompany the subsequent stock market crash has “bailout defeated” as first main bullet point!

Advice on surviving grad school

aje on March 15, 2010

I’m still not sure how I managed to complete my PhD within 4 years and also get married in that time, but it must come down to:

  • Pick the right school – I was immensely fortunate to go to the dynamite George Mason (that dares to be different), and it meant that knowledgeable people, who shared my passions, surrounded me. If you study in an environment like that, you can’t go wrong
  • Preparing well – find out the textbooks for the core subjects and read them before you start
  • Find/create a good study group and stick with it – I find that learning is a social process and therefore a stable group of close colleagues is gold dust
  • Have realistic expectations – for me the first year was about survival. I’m consistently told that ambition and aspiration should exceed merely “survival”, but for me lower expectations seems to work
  • Drink productively^ – if you’re going to get drunk a lot, make sure it’s productive
  • Love what you do – my PhD mattered to me. I was willing to sacrifice a great deal. If it’s a chore then it’s a struggle, but I never grew tired of my subject and still want to discuss and develop the ideas I pursued.
  • Change the title at the last minute – without trying to contradict the previous advice, in the final few months of intense writing/rewriting of my dissertation I changed the title. As the formatting requirements began to take priority over the content, you begin to question everything. At about 4am I had a revelation and rewrote the abstract and changed the title. It was a good decision – not only was it a more accurate title, but it reinvigorated me and breathed new life into the project
  • Endure: it is a test of stamina. Pete Boettke likes to recite James Buchanan’s advice of keeping your butt in the chair. I believe that most academics are lazy, and if you work hard you will succeed. All writing is work and all work is work in progress. Just get it down and keep moving forward. If you go straight to grad school from undergrad you’ll realise that you’re open all hours. You can have a healthy work/life balance by realising that:
    • Your life is your work and your work is your life
    • You’re not working 9-5. Whenever you’re awake, you’re working.

Bottom line is that ideas matter.

More grad school advice:

As a warning, don’t ignore 6 bullet points on why people go into grad school in the Humanities (via Tyler Cowen). Mike Moffat has a guide here. Some funny cultural insights in grad school are here and here. Michael Munger has an excellent series of videos providing a Guide to Academic Publishing.