Austrian School of Economics

Senior Leeds Lathan asks Per Bylund, a Swedish entrepreneurship professor, about economic standards in Sweden during a Mises Circle meeting Monday night.

Photo Credit: Charlie Pearce | Daily Texan Staff

Students got a realistic view into the supposed prosperity of Sweden’s economy at a talk hosted Monday night by the UT Mises Circle in Waggener Hall. Computer science junior Michael Goldstein, who co-founded the Mises Circle last spring along with former UT students George McHugh and Jose Nino, hosted the talk. 

“Our goal was to create a forum for economics in the tradition of the Austrian school, which focuses on the logic of human action as the basis of economic theory,” Goldstein said. 

The Austrian School of Economics, on which the Mises Circle bases its philosophy, was developed in part by Ludwig von Mises, a 20th century Austrian economist. Mises also developed the theory of praxeology, which seeks to explain the effects of actions by individuals. 

The Mises Circle talk, titled The Myth of Sweden, sought to explain the current economic state of Sweden based on its perceived success as a capitalist country with an expansive welfare system. 

Per Bylund, a Swedish professor of entrepreneurship at the University of Missouri, participated in the talk via live webcast. Bylund said that while there is a myth of Sweden’s economy being among the finest in the world, high income taxes and an unsustainable degree of socialization are the realities. 

“Things are not what they look like,” Bylund said. “Sweden is really a subsidized market with exploited workers.”

Bylund said even though Sweden may have extensive welfare programs, such as free health care, public schooling — students are actually paid to go to school, but also have a legal obligation to do so — and social security, the government uses these programs as an incentive for workers to pay high taxes into the system.

Despite the large amounts of benefits, Bylund said Sweden’s welfare system has caused a devaluation of its currency, known as the krona, and restricted access to healthcare in order to keep treatment costs low. This resulted in patients being placed on waiting lists for as long as 18 months just to be treated.  

“Government presents us with a view of economics that is very different from what most economic professors would say and the opposite of what Austrian Economics would say,” said Daniel Krawisz, software engineering graduate student and a member of the Mises Circle. “Economics is important to make informed choices about politics.”

Krawisz said that the Mises Circle is open to students willing to learn about economics. The Mises Circle meets every Monday at 7 p.m. to discuss economic theory.

“We would like to see people who are informed, but who are ready to disagree,” Krawisz said. “It helps us to refine our ideas.”

The UT Mises Circle, a new organization founded by students Michael Goldstein, George McHugh and Jose Nino, focuses on economics in terms of “praxeology,” the logic of human action. Rather than using models or data from past events to interpret economic activity, as is often the case with conventional economics, praxeology is centered around a simple concept: “humans act purposefully.”

“Praxeology does not investigate why people do things, what people should do or what people have done — those investigations belong to psychology, ethics and history,” McHugh, a management information systems senior, said. “Rather, praxeology asks, ‘What are the implications of people’s actions?’ Basically, the study of common sense and, thus, economics.”

The namesake of the group, Ludwig von Mises, was an Austrian-born economist and one of the founders of the Austrian School of Economics, which according to Nino, a history senior and president of Libertarian Longhorns, “is free-market oriented discipline that sought to explain recessions and other related economic crashes through the expansion of credit that is characteristic of practically all central banking systems.”

Plans to form the Mises Circle have been in circulation since spring 2011, but did not become a reality until last semester when the group officially registered as a student organization. While the founders and many members also participate in Libertarian Longhorns, which explores similar economical theory, the group does not officially endorse any political position and focuses exclusively on the economics.

“Economics may be known as ‘the dismal science,’ but you wouldn’t know it based on the enthusiasm of the students [in our organization],” Goldstein, a computer science sophomore, said. “Even more, very few of the members are economics students at the University.”

The diverse student make-up of the organization is largely due in part to the unconventional economic principals from which the Mises Circle finds its basis. According to Goldstein, the economic thought the organization uses is often overshadowed by more “mainstream” economic teachings, such as those of John Maynard Keynes.

However, the works of Mises have recently gained prominence in the headlines through Congressman Ron Paul’s frequent references to Austrian economics during Republican debates.

“In what little time is given to Paul in the debates, he will sometimes make some Austrian economic references with regards to various economic policy prescriptions,” Nino said.

One such prescription would be the recent economic recession, which has rekindled interest in these often overshadowed economic teachings. As explained in the 2009 Wall Street Journal article, “The Man Who Predicted the Depression,” Mises is said to have predicted the economic turmoil of the 1920s, even going as far to turn down a job offer with the Viennese bank Kreditanstalt, claiming that “a great crash is coming, and I don’t want my name in any way connected with it.”

“Only the Austrian economists understood and continue to understand what truly causes the booms and busts of the business cycles and how they can be fixed and avoided,” Goldstein said.

As UT does not offer a course specifically over Mises’ principles, the Mises Circle presents students with the opportunity to discuss the Austrian school of economics through means of group discussion, presentations and relevant readings.

“Our ultimate objective for our group is to have a class that covers Austrian economics at UT,” McHugh said.

While the plan is still in its early stages, the Mises Circle hopes to eventually gather enough interest for a course or seminar on Austrian economics through student involvement in their organization.

“Many people are starting to question the Keynesian economic establishment, its economic models and policy prescriptions,” Nino said. “Our goal at UT is to provide UT students [with] a legitimate forum that discusses Austrian economic principles.”

Printed on Wednesday, February 15, 2012 as: UT Mises Circle founded on humanist economic approach