Robert Wenzel is Not an Economist…

…so it’s best not to take him seriously on these matters.

Responding to a part of a Steven Horwitz post that talks about aggregate demand shortages, Wenzel writes,

This is as far from Austrian theory as you can get.  Austrian school economists see central bank monetary expansion as distorting the economy.

This shows the extent of Wenzel’s understanding. He can’t separate the concept of an aggregate demand shortage from that of an oversupply of money by the Federal Reserve. This means he can’t realize that aggregate demand shortages are relevant even in a world where there is no central bank. And aggregate demand shortages need to be resolved through an equilibration of the supply and demand for money, whether through a falling price level or an increase in the supply of money. Any disequilibrium means there’s room for entrepreneurship, and that’s just what private banks (or clearing houses) with foresight do: increase the supply of money.

This type of behavior is just what I try to explain in an older post, “Epistemology of Rejection.” I use the exact same topic to illustrate what I mean. (Of course, some “Austrians” took it personally — I was much more polite there than I am here. I’m taking a cue from Krugman: snark is necessary in an environment where credentials don’t matter.)

7 thoughts on “Robert Wenzel is Not an Economist…

    1. JCatalan

      Yea, that might be reason not to take him serious in general. Although it’s best not to judge since I don’t know the full story. But on economics and what is and isn’t Austrian I’d read him with more skepticism than, say, me (who should be read with more skepticism than, for instance, Horwitz or Krugman).

      1. Seth MacLeod

        I tend to be very skeptical of anyone writing about Austrian theory who isn’t a professional* economist or philosopher. That doesn’t mean that they don’t have something to offer, but I see a lot of people write about Austrian theory and either focus too much on the basics or they don’t seem to get that there is a fair amount of disagreement even among Austrians about the more complex topics.

        At least with the professional* Austrian economists, they are intimately aware of the disagreements and critiques of Austrian theory by Austrians, so I know that they aren’t just talking out of their asses.

        *Or people who studied it and are trying to pursue it professionally (don’t worry I’m not taking jabs at you).

        1. Alexi

          The thing with people like Wenzel is they make quite a lot of noise about the fact that they are allegedly Austrian and give the rest of us a bad rep, particularly since they don’t tend to understand the subtleties of the theory in question. Wenzel is a decent blogger but that’s about it.

          1. JCatalan

            And ultimately the standard should be good economics, not Austrian economics — especially if Austrian Econ is defined as the beliefs of one or two men who, like any human being, are prone to error.

  1. RobertRoddis

    I don’t think this debate between “free banking” and the 100% reservists has much to do with “economics”. It is a contract language and drafting issue.

    What exactly is the written agreement that will appear on the face of the “free banking” notes which are intended to be accepted by payee strangers?

    1. JCatalan

      That might be one aspect of it (although, yes, banks and their clients do have contracts with each other; and customers can choose between different banks and different services). Another is whether any issue of money creates malinvestment.


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