Saturday, April 9, 2016

Böhm-Bawerk on Keynesian Stimulus.


Now that Eugen von Böhm-Bawerk (1851-1914) joined Friedrich von Hayek in the online PoKe pantheon, it seems fair to bring to the readers' attention Richard M. Ebeling's 2015 essay "Eugen von Böhm-Bawerk: Leading Austrian Economist and Finance Minister of Fiscal Restraint".

Apart from being a critic of Marxism -- aspect of Böhm-Bawerk's work endearing him to internet PoKes, but which Rudolf Hilferding ("Böhm-Bawerk's Criticism of Marx", 1920) and Nikolai Bukharin ("Economic Theory of the Leisure Class", 1927) replied to -- Ebeling describes other, apparently less well-known, aspects of Böhm-Bawerk's economic thought.



Always involved in academic life, Böhm-Bawerk, nevertheless, repeatedly worked for the Austrian Federal Ministry of Finance: an Austrian economist working for the Government! Ebeling:
"[I]n 1892 he [Böhm-Bawerk] was vice president of the national commission that proposed putting Austria-Hungary on a gold standard as a means of establishing a sound monetary system free from direct government manipulation of the monetary printing press."
From that position, Böhm-Bawerk went to hold the office of Minister of Finance, on and off, from 1895 to 1904. Ebeling writes of Böhm-Bawerk's first stint in office:
"However, Ernest von Koerber, the Austrian prime minister in whose government Böhm-Bawerk served, devised a grandiose and vastly expensive public works scheme in the name of economic development. An extensive network of railway lines and canals were to be constructed to connect various parts of the Austro-Hungarian Empire – subsidizing in the process a wide variety of special-interest groups in what today would be described as a [Keynesian] 'stimulus' program for supposed 'jobs-creation'.
"Böhm-Bawerk tirelessly fought against what he considered fiscal extravagance that would require higher taxes and greater debt when there was no persuasive evidence that the industrial benefits would justify the expense".
Just like Böhm-Bawerk's opposition to Marxism anticipated modern internet PoKes (endearing him to them), his opposition to Keynesian policies -- before Keynes' polymathic intellect invented them -- anticipated modern Austrian economists' opposition to Keynesianism: opposition must be in the Austro-PoKe family's DNA.

Ebeling puts these remarkably modern-sounding words in Böhm-Bawerk's mouth: "A very large number of our public authorities have been living beyond their means." Apparently, Böhm-Bawerk said that in early 1914!

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If one could say that as a conservative economic theoretician Böhm-Bawerk was ahead of his time, as an educator his legacy was maintained by his students, among them Ludwig von Mises. Ebeling quotes Mises' views on his teacher:
"[N]o citizen of this country [Austria] should ever forget the last Austrian minister of finance who, in spite of all obstacles, was seriously trying to maintain order of the public finances and to prevent the approaching financial catastrophe. Even when all those who have been personally close to Böhm-Bawerk will have left this life, his scientific work will continue to live and bear fruit."
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Having died two decades before the so-called Keynesian "Revolution", Böhm-Bawerk never left his opinion on said "Revolution" or on Keynes. His disciples, however, did.

Mises:
"It was different with the 'new economics' of Lord Keynes. The policies he advocated were precisely those which almost all governments, including the British, had already adopted many years before his 'General Theory' was published. Keynes was not an innovator and champion of new methods of managing economic affairs. His contribution consisted rather in providing an apparent justification for the policies which were popular with those in power in spite of the fact that all economists viewed them as disastrous. His achievement was a rationalization of the policies already practiced. He was not a 'revolutionary,' as some of his adepts called him. The 'Keynesian revolution' took place long before Keynes approved of it and fabricated a pseudo-scientific justification for it. What he really did was to write an apology for the prevailing policies of governments."
One imagines Böhm-Bawerk would have endorsed that wholeheartedly. His scientific work, it seems, continues to live and bear fruit in online post Keynesian soil.

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