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| Disputed term/author/ism | Author |
Entry |
Reference |
|---|---|---|---|
| Welfare Economics | Austrian School | Coyne I 31 Welfare economics/Austrian School/Coyne/Boettke: (…) consider the thought process of an entrepreneur who is deciding whether or not to pursue a venture that might only yield profits in a decade. If the entrepreneur believes that there is a good chance that the government will change the rules and confiscate her wealth over the next decade, she will have a weaker incentive to invest. If, in contrast, the entrepreneur has confidence that the existing rules, which allow entrepreneurs to keep the profits from their investments, will remain constant over the next decade, she will be more likely to invest in the long-term project. The broader point is that interventionism, to the extent that it results in unpredictable or overly burdensome interference in economic activity, poses a threat to the entrepreneurial dynamism of the market process. An appreciation of the problems posed by interventionism - the knowledge problem and unintended consequences - is at the core of the Austrian critique of standard welfare economics. Welfare economics studies how resource allocations affect social well-being. Standard welfare economics, which serves as the economic rationale for government intervention, concerns itself with finding the best use of available resources under the assumption that all the relevant information concerning preferences and production techniques is known and given. AustrianVsWelfare economics: The economic problem, under such circumstances, is a simple computational problem of employing the right means to obtain the appropriate ends. Adoption of policy is based on how well the market can handle the static economic problem confronting society. To the extent that the market does not approximate the ideal, it is said to fail and government is called upon to push the economy closer to the solution of the economic problem through interventionism. >Interventions/Austrian School, >Interventionism/Mises. Austrians argue that this is not the economic problem society confronts. The problem is rather one of discovering and using the dispersed and tacit knowledge that emerges from interactions. Thus, while mainstream economics models the competitive market as a type of supercomputer, Austrians view the market as a means of mobilizing and using the context-specific knowledge dispersed throughout society. Free Market: The bias that Austrians share towards the free market, therefore, is grounded in the effectiveness of this system at using and conveying the various bits and pieces of knowledge necessary to allocate resources in a value-added manner. >Free Market/Rothbard. Knowledge: The emphasis on the division of knowledge and the market process as a means of discovering and using this knowledge is the crux of the Austrian criticism of both comprehensive and piecemeal government intervention into a freely operating market. Government's inability to obtain the knowledge necessary to plan or regulate the price system is the fundamental economic criticism of intervention into the market order. >Knowledge/Hayek, >Markets. We emphasize the term "economics" to highlight that this is not an ideological argument in favour of markets, but rather a subtle argument in technical economics about the type of knowledge, and the source of that knowledge, necessary to use scarce resources in a way that improves human welfare. Cf. >Price control, >Sales ban, >Sales tax. |
Coyne I Christopher J. Coyne Peter J. Boettke The Essential Austrian Economics Vancouver 2020 |
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