Don’t Call It a Comeback

In a recent working paper by Roger Koppl and Sound Money fellow Nicholas Cachanosky, the authors argue that in the soul searching that has taken place over the past decade, many macroeconomists have, in fact, begun taking small steps toward Austrian (or at least Austrian-adjacent) ideas. The transformation is by no means revolutionary, and it is far from complete. But from the perspective of Austrian-influenced scholars, this renewed skepticism toward dynamic stochastic general-equilibrium modeling has been a step in the right direction.

I share the authors’ desire to see an Austrian turn in the profession. However, I remain skeptical that Austrian ideas really have made much headway into the mainstream. It’s true that in the immediate aftermath of the financial crisis, many mainstream macroeconomists expressed skepticism of the status quo. But similar kudos have been given to Mises and Hayek in the past (think Robert Lucas in the 1970s) without bearing much fruit over time.

It’s easy to pay lip service to Mises and Hayek when the failure of the status quo is plainly evident, as it was in the late 2000s. It’s a lot harder to keep those ideas in the mainstream discussion by taking steps toward providing a viable alternative framework.

Anyone familiar with Roger Garrison’s work knows the emphasis Austrian-minded scholars place on “sustainable” versus “unsustainable” growth. The same terminology is appropriate for describing the future of the Austrian macroeconomics research program.

Austrian ideas have experienced short-lived “booms” dating all the way back to Hayek’s Nobel in 1974. Although these times yielded much fruit within the Austrian camp (the 1970s, for instance, yielded scholars such as Lawrence White, Roger Garrison, George Selgin, and Roger Koppl, just to name a few), their impact has been harder to detect outside the Austrian camp, in the mainstream of the economics profession.

The question the next generation of Austrian scholars needs to ask is what we can do to build on the work of the giants who came before us to make these small steps toward embracing some Austrian ideas turn into a giant leap for Austrian macroeconomics.

Thankfully, a new generation of Austrian-friendly scholars (many are students of the aforementioned Austrian scholars, and many are frequent contributors to this blog) is emerging. Taking the best ideas from both the Austrian school and the monetary-disequilibrium tradition, this new generation has begun to flesh out what I believe has the making of a viable Austrian alternative.

But as is always the case, no revolution is accomplished overnight. Our work is far from over. Much groundwork still needs to be laid.

So has Austrian economics been making a comeback following the Great Recession? Not yet. Overturning the status quo in the profession remains a moonshot. But by building on the great work of our predecessors, we’ve taken steps in recent years that will hopefully help lay the foundation for a future giant leap.

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