Students of the Hungarian Mathias Corvinus Collegium visited the Hayekhall, home of the Austrian Economics Center and the Hayek Institute, on October 19th for a lecture on Austrian Economics. Senior researcher Martin Gundinger welcomed the group and explained the institutes´ mission: Bringing back Austrian Economics – both in discourse and action to Europe and the place of its origin, to Austria.
Martin then gave an introduction to the school´s thoughts and what distinguishes the Austrian School from neoclassical thinking in economics. In a nutshell, the Austrian School deals with humans in economics, not with idealized models (e.g. the „homo oeconomicus“). This means that the Austrian School considers people´s errors in acting and their incomplete knowledge before action. It also means that economic models often lead to false conclusions. The concept of price was also introduced as being purely subjective in contrast to that in neoclassical economics. On top of that, some methodological issues were raised.
Martin then presented his latest study on inflation which clearly shows that the current inflation is not a consequence of Russia’s invasion of Ukraine but much more of wrong political decisions in the past. These decisions led to decreasing productivity and other problems such as a variety of mechanisms, all of which led to cover-up policies of governments and an interventionist spiral. These policies were debt-funded and contributed to a further decrease in productivity. Consequently, debts could not be paid and governments put massive pressure on central banks for quantitative easing. However, this also led to distorted market signals and a further decrease in productivity in the mid- to long-term. Now after the Covid-lockdowns inflation is skyrocketing while at the same time the economy lacks productivity and the money supply is excessive. The logical consequence is high inflation. As governments are not (yet) willing to reverse their course the pressure of inflation might stay on a high level for quite a while.
The students challenged Martin in the discussion, which was not only focused on economic, but also philosophical and moral questions. A thought-provoking, entertaining, and lively academic dispute.