Austrian school

The thoughts of the Austrian school, while worthy of extremely serious consideration, cannot be applied directly as they are.  The “anarchic capitalism” is a kind of utopia, that could work quite well in colonial Virginia before the American revolution, but cannot be applied in the complex geopolitical situation like we have now, where a quite strong state is needed for both external and internal security.

However, we must accept that there is a natural order in the society, as well as in the market mechanism and in wealth distribution, that should be kept as much as possible free to self-adjust according to the variation of other conditions: self-adjustment will be more effective and less disruptive than any adjustment imposed by the government.

External adjustments in the market are needed only in case the state has to put some constraints, that are not due to the market itself, but to the need of keeping the public order. As an example, we can consider the mandatory insurance for car owners, that it’s not a demand from market driven forces, but it’s an instrument to guarantee that un-guilty people be deprived from compensation in case of an accident. Since by this way the market is not anymore free, due to the fact that car owners cannot leave it and keep the risk on themselves, the state must create a protective mechanism against oligopolies.

The same  consideration should be applied to wealth distribution, the emphasis on inequalities and on the income distribution, creates a distortion. By this way, we fight the wealth instead of fighting poverty. It would be better to concentrate on the production of the wealth, limiting the state action in order to   assure   a decent standard of living for the poorest, and leaving then the wealth to be distributed according to the natural order, whatever it is. The real problem, in this case, will be to define what exactly means “a decent standard of living”, according to Amartya Sen (who does not belong to the Austrian school) it means “not to be ashamed in contact with other people”.

As a matter of fact, in a developed country, it cannot be accepted that the poorest have no shelter or must die because cannot afford medical care, while in less developed countries a decent minimum standard is a condition to keep an acceptable level of internal security.

Another important point is the temporal preference: this concept is quite old, being described, albeit with a Medieval terminology, by the scholars of the Franciscan school in XIII century after Christ. In modern times, we should refer to the theories exposed by Eugene von Böhm-Bawerk as well as other economists belonging to the Austrian school.

 

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