…proclaims a Keynesian economist in an obviously well-researched, articulate, and comprehensive argument.
Keynesian economist, Joe Weisenthal went on the attack today against Austrian economists calling them a “cult” because they “invented their own language”. In a series of Twitter posts (the forum for all constructive economic debate) Weisenthal tweeted
People who call Austrian economics a cult often miss the most compelling evidence: That Austrians have invented their own language.
— Joseph Weisenthal (@TheStalwart) February 20, 2013
(The definition as stated by the Mises Institute is “In popular nonscientific usage, a large increase in the quantity of money in the broader sense (q.v.) which results in a drop in the purchasing power of the monetary unit, falsifies economic calculation and impairs the value of accounting as a means of appraising profits and losses.”)
There are a few things to note here:
First, the claim that defining inflation as an increase in the supply of money is an Austrian-created view is flat out wrong. Until only several decades ago, in fact, Webster’s dictionary defined inflation as “An increase in the amount of currency in circulation…”. It is a fairly recent phenomena for mainstream economists to associate inflation solely with the increase of prices (a consequence of inflation in the traditional definition).
Secondly, even if a word was created it does not follow that this is ‘cultish’ behavior. Weisenthal would later criticize Mises for the use of terms such as ‘catallactics’ (a theory of exchange ratios and prices) and ‘praxeology’ (the science of human action). While it is true that Mises was the first to use these words, he did so only to describe existing phenomena that could be deducted by logic. Creating words to describe things we all experience is nothing new. The concept of gravity existed and was experienced from the beginning of time. There was nothing abnormal or cultish for Issac Newton to use the word ‘gravity’ to describe it. As we attempt to better understand the world around us, new words are needed to refer to different concepts.
Because of this, Austrians are not the only ones in economics who have “invented their own language”. Mainstream economists are now consistently referring to quantitative easing or liquidity traps or aggregate demand or liquidity preference.
Thirdly, whenever the terminology changed for the now mainstream use of the word ‘inflation’ is irrelevant. Austrian economics refers clearly to ‘inflation’ (an increase in the monetary supply) and ‘price inflation’ (an increase in prices). There is no attempt to mislead or deceive. The concept of an increase in the monetary supply is a critical component of the Austrian Business Cycle Theory. It doesn’t matter what this occurrence is called (Keynesians can refer to it as kerphlumkination or something if they really want to). The fact is, ABCT points to this increase in money supply as the central driver for the misallocation of resources across various sectors of the economy and across time.
The attack by Weisenthal is nonsensical and attempts only to de-legitimize the fastest growing school of economic thought.
(Robert Wenzel takes Weisenthal down in good fashion).