[Editor's Note: This is an old interview from the Harvard Political Review, reprinted here for the use of our readers and students.]
Mark Thornton is an Austrian economist and senior fellow of the Ludwig von Mises Institute, a libertarian academic organization dedicated to scholarship of the Austrian School as inspired by Ludwig von Mises. In the past, he has taught in the Economics Department of Auburn University and served as an economic adviser to former Alabama Governor Fob James. The Harvard Political Review sat down with Mr. Thornton to discuss this often-overlooked school of economic thinking.
Harvard Political Review: What is the Austrian School of economics in a nutshell?
Mark Thornton: The Austrian School is the oldest, smallest, and fastest growing school of economic thought. It is traditional in its methods, adhering to logical deduction of economic laws. It is radical in its policy espousal, generally libertarian and even anarcho-capitalist.
HPR: John Maynard Keynes’ economic theories today serve as the foundation of innumerable public policy decisions enacted by federal government, not to mention that Keynesian macroeconomics is taught almost universally across college campuses. Why is this the case and why do Austrian economists find it flawed?
MT: Big government likes to be told that borrowing, spending, and bailing out your friends is the right thing to do. Its not surprising that Keynes’ book the General Theory was a big hit among leaders like Mussolini, FDR, and Hitler. He was singing their tune. Keynes was a wealthy bureaucrat and polymath. He was not an economist and had little understanding of how an economy actually works. To see the basics, view the “Hayek vs. Keynes” YouTube video. It has had millions of hits and has been translated into more than a dozen languages.
HPR: Today, the economic meltdown of 2008 is widely attributed to the irresponsible, shortsighted practices of Wall Street. What do you feel were the main causes of the 2008 meltdown?
MT: I wrote in 2004, 2005 and 2006 that the Federal Reserve and the easy credit conditions it had created in the economy beginning in 2001 by lowing the Federal Funds rate to 1%, and basically telling everyone that they would support the housing market if necessary, caused the housing bubble. Greenspan and Bernanke continually denied there was a housing bubble or that it would cause any trouble. Paul Krugman devoted several of his columns during 2001 and 2003 asking the Fed to start a housing bubble to get us out of the recession of 2001.
HPR: Our current budget deficit hovers around $1.6 trillion annually. The Republican Congress proposes to cut at most $100 billion from the current budget, and fears cutting anything else for fear of alienating the electorate. What are the ramifications of this reluctance for the country? Paint us a scenario whereby ten years down the road, entitlements and interest on the national debt consume the entire budget.
MT: The deficit is out of control, the national debt is out of control and entitlement spending is out of control. We are in an unsustainable fiscal mess. Don’t trust me. Larry Kottlikoff says it. The Congressional Budget Office says it too. Cuts of $100 billion are a joke. They need to cut spending $1.6 trillion this year and more than that the following year. Their reluctance to make the necessary cuts means that the dollar is doomed to die from hyperinflation. This means that everything that you and your parents have will probably be wiped out. My recommendation is to learn Chinese or Hindi and spend your money on things that will last, like gold jewelry or a rare book.
HPR: Finally, I would be remiss if I did not mention drug prohibition since you have written so extensively on the topic. What are your main arguments in favor of decriminalization?
MT: I don’t favor decriminalization. I recommend full legalization of all drugs. I have shown that prohibition actually creates all the social problems that we now believe prohibition is supposed to have addressed. Crime, corruption, overdoses, etc. are all the results of prohibition. Making them legal and above board will eliminate prohibition-related crime and corruption and result in much safer products. Every time the government cracks down on drugs, new and more powerful, more potent and dangerous drugs come to the black market. I have just completed an essay based on an episode of The Simpsons entitled “Homer vs. the 18th Amendment.” The show does an excellent job of rehashing the predictable effects of alcohol prohibition. It will be published this fall in a book titledHomereconomicus.
HPR: Thank you for your time, Mr. Thornton.
Originally published March 2, 2011.