Bob Murphy Again Shows There's Nothing More Pathetic Than Internet Austrianism

     Yesterday I wrote-belatedly-about the debate between Murphy and leading MMTer Warren Mosley. 

     http://diaryofarepublicanhater.blogspot.com/2013/11/the-bob-murphy-vs-warren-mosler-debate.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29

    I was late to this:

    http://mikenormaneconomics.blogspot.com/2013/06/warren-moslervsrobert-murphy-today.html

    I thought that it was a very good debate. I disagree wit Mike Norman that Murphy was rude and condescending-not that I don't love Mike Norman, who just linked to my post a few days ago-but I do think that Murphy was wrong on substance and that Mosler certainly won the debate. 

   Having said that, a recent post by Murphy again shows how pathetic an enterprise Internet Austrianism is:

    "A lot of times Austrian economists will say that the Austrians used to be really popular and influential, but that they were eclipsed by the Keynesians in the 1930s. Then they might explain this outcome along the lines of, “The Keynesian economists told government officials exactly what they wanted to hear: spend more money to fix this depression, whereas the Austrians told them they were the problem, not the solution. So naturally, the Keynesians ended up teaching at the top rank schools (funded with tax dollars) and staffed all the important posts.”

     "Now usually, mainstream economists reject this type of explanation as a self-serving conspiracy theory. They will say the Austrians failed the “market test” in the academic arena. “If you Austrians had better ideas, they would have risen to the top in the peer-reviewed journals. Stop whining.”

     "In that context, I was very surprised to read Paul Krugman’s account of the Keynesian triumph:

If you go back to the state of American economics in the 1930s and even into the 1940s, it was not at all the model-oriented, mathematical field it later became. Institutional economics was still a powerful force, and many senior economists disliked mathematical modeling. When Paul Samuelson published Foundations of Economic Analysis in 1947, the chairman of Harvard’s economics department tried to limit the print run to 500, grudgingly accepted a run of 750, and ordered the mathematical type broken up immediately.

So why did model-oriented, math-heavy economics triumph? It wasn’t because general-equilibrium models of perfect competition had overwhelming empirical success. What happened, I’d argue, was Keynesian macroeconomics.

Think about it: In the 1930s you had a catastrophe, and if you were a public official or even just a layman looking for guidance and understanding, what did you get from institutionalists? Caricaturing, but only slightly, you got long, elliptical explanations that it all had deep historical roots and clearly there was no quick fix. Meanwhile, along came the Keynesians, who were model-oriented, and who basically said “Push this button”– increase G, and all will be well. And the experience of the wartime boom seemed to demonstrate that demand-side expansion did indeed work the way the Keynesians said it did.

     "Except for that last sentence–the part about Keynesianism “work”ing–Krugman’s narrative fits almost exactly the (allegedly) self-serving Austrian version.

   http://consultingbyrpm.com/blog/2013/10/explaining-the-success-of-the-keynesian-revolution.html#comment-77308

   I think the reason that mainstream economists always say that Austrianism failed the market test in the academic arena is: because they failed the market test in the market arena. To believe this Austrian conspiracy theory you would have to believe Keynes was 100% wrong in his claim that ideas over time are much more powerful than any vested interests. 

   In truth the fall of Austrianism in the 30s has more to do with the total mincemeat Sraffa made out of Hayek than any mustachioed government officials thwarting Austrianism. 

   As usual the only aid and comfort Murphy can find is taking Krugman out of context.