Peter,

forget history. Just give me an explanation about how the Austrian school can work in today's situation.

Believe me, I am open to any good ideas.

PH,
you're tone and "argument" are no less personally inflected than mine. I merely reciprocate.
And how have you "shown why capitalism does not necessarily involve growth"? All you've offered is a "theoretical" model that doesn't bear scrutiny.
The fact is we have experienced exponential growth since the industrial revolution and all empirical evidence (and numerous theorists) attests that capitalist economies grow or contract. Contractions are know as "depressions" and "crises", both "great" and garden varieties.
Can you point out one capitalist country predicated on or aiming for zero economic growth, let alone negative growth, despite the manifest limits to growth? Growth is the absolute prerequisite of profit and prosperity in the current paradigm (a fool's paradise).
Granted there are any number of theories of capitalism without growth, but there are no working models and no one is serious about trying it.
Indeed I have no doubt that you yourself see growth as an unalloyed good, despite the physical limits to growth. You pontificate for the sake of argument and in a desperate attempt to validate the world view your credibility is invested in.
This admittedly cuts both ways, but the weight of evidence is against you: AGW, GFC. BTW, you do concede that a free market means the transposition of power and wealth from West to East, or else a corporate no-man's land?
The reason another system, based on genuine "economy", would not realise "exactly the same problems of growth" (which you acknowledge after all?) is first that it would not have to realise a "profit" above and beyond subsistence, and second, hopefully, that it would be based on sufficiency, restraint and husbandry rather than profligacy.
Keep your Austrian School in the rumpus room with your train sets.

Okay, thank you.

Before I discuss the Austrian solution, we need to clear the ground as to the problem.

The Keynesians believe that
a) economic depressions arise spontaneously out of unregulated capitalism, and
b) by printing money, governments can make society as a whole wealthier.

The Austrians argue that
a) economic depressions arise from inflating the supply of money which sends false price signals setting off an artificial boom followed by an inevitable depression or recession, and
b) printing money make society as a whole poorer not richer. It is an act of wealth redistribution, not wealth creation.
c) There is nothing about the wealth redistribution that is fair. It takes money from the masses, especially the poor, the working class, the aged, people who save money and the young. It transfers it to billionaire bankers and whoever else government decides to favour, for example, major corporations, foreign dictatorships, and real estate developers.

The Austrian solution would work by abolishing government’s control of the money supply.

The result would be to end the cycle of speculative booms and depressing divisive busts. The economy would be more stable and fairer. Investment would be rewarded by productive activity rather than mere rising prices. No more bailouts for billionaires, no more handouts for big corporations, no more sneak tax on the poor and workers to pay for the financially sophisticated.

The result of the abolition would be money keeping its value, gradually compounding capital accumulation, therefore gradually compounding productivity, therefore gradually compounding living standards; and gradually falling prices. Everyone including the financially unsophisticated could provide for their retirement by *saving*. They can’t do that now because it gets inflated away. It would be easier for the young and poor to enter the housing market, because prices wouldn't be constantly rising.

How’s that for a start?

Squeers

You're just assuming what's in issue - again!

For example, define 'genuine economy', (other than by reference to 'hope'). What's that supposed to mean?

Capitalism means the private ownership of the means of production (Marx's definition). I live on a farm, and each year it produces product, and some of that we consume, and some of it we plough back in. Same with virtually all businesses, savings, investment. We consume less than we produce.

Now the point is, for many hundreds of thousands of years, people didn't do that. They consumed everything they produced, just like the Aborigines did, with very little surplus being saved for producing capital goods.

But we don't have to consume less than we produce. We can consume everything we produce. And many people do that.

But of course if we *all* did it, the rate of capital accumulation would go down. And therefore so would the benefit of capital accumulation, which is greater productivity.

So just as in history, the process of capital accumulation has gone: digging stick, shovel, bulldozer, the process of consuming all we produce would send the process into reverse. As you indicate, life would be lived at "subsistence". There would be no "profligacy" like blogging on the internet by electric light.

Your collectivist, aggregate thinking is clouding your understanding. The reason "capitalism" doesn't stop growing is because "people don't want to do it!*.

*You* don't want to live at subsistence level - why should anyone else?

Similarly, profit just requires that the price of the final product be more than the price of the factors of production. It does *not* necessarily require growth. People *can and do* still make a profit in a contracting economy.

Therefore you are wrong in saying that capitalism requires growth - rather, human nature desires economic growth.

Your economic understanding is just a garbled mishmash of Marxist slogans and Keynesian fables which you make no attempt to define or prove, and when you do, you go down in a screaming heap of embarassing ignorance.

You still haven't proved governement interventions make society fair or affluent.

PH:
<The Keynesians believe that
a) economic depressions arise spontaneously out of unregulated capitalism, and
b) by printing money, governments can make society as a whole wealthier>

This is nonsense.

I realise you are not addressing moi, PH, but as I've tried to point out above, Keynesianism was more a solution to "political" rather than economic instability, though there is no doubt it breathed life into the terminal liberalism that preceded 2 world wars and the great depression.
The political damage though was far more telling, driving Fascist nationalism, the logical extreme of protectionism, almost global after the Depression (but particularly in Germany thanks to impossible "reparation" debts imposed by the victors). Indeed, as Hobsbawm says,
"it may be worth reminding ourselves that in this period the threat to liberal institutions came "exclusively" from the political right, for between 1945 and 1989 it was assumed, almost as a matter of course, that it came essentially from communism" (my emphasis).
So as a rider to all the red necks out there drunk on moonshine, you were duped for half a century. The real threat to freedom came from the great democracies!
There's a real chance that history is about to repeat itself.

Peter,

You will find that my response, should it be published, is sympathetic to a lot the Austrian school says. After all, logical points are just that. I do believe that the reliance on such high levels of debt, especially by the US, is a mistake. I have sort of indicated this in previous articles.

However, as squeers suggests, political aspects are always just as important as economic. I suppose that is what I focus on more; i am more interested in policy possibilities and limitations to shape my writing.

For the second reason, focusing on political aspects, you will probably disagree with my reponse when it comes.

But I am making considerable effort to address the points made by fans of the Austrian school, notably Wolfgang Kasper.