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Economics: What are the primary philosophical differences between Ludwig Von Mises and Milton Friedman?

  • I am seeking to start a private equity fund with the intent of "betting" against the commercial real estate and retail sectors in the United States. As the basis of our business plan will be rooted in economic theory to justify why betting against these sectors through short-selling etc will be feasible, I must fully understand why these sectors are doomed to collapse. Though I am a student of current events, trends, international relations, political science, and history, economics is my weakness. I have intuitive beliefs regarding economics that I have justified to myself through many readings; however, I need some answers fast. Ludwig Von Mises is of the Austrian School of Economics. Milton Friedman is a libertarian and a believer in laissez-faire economics. What are the differences between the two men and their respective schools of thought? I believe that economics, as with most mathematical problems, has one correct answer and many false answers. I do not view economics as matter of different opinions, but rather as a science in which there is one correct school of economics with all others being incorrect. I am a firm believer in the power of the free, deregulated market to sustain a high standard of living and elevate societies from poverty to wealth. I blame the actions of government for the current economic crisis (manipulation of interest rates, high taxes, federal reserve system, abolition of gold standard, inflationary spending etc.). What I am getting at here is this: I intuitively know that the answers to our current economic crisis can be found in the literature and philosophies that support free market economics. However, within free-market economics and/or libertarian economics are many different variants. In seeking to predict future trends one must adhere to the correct school of economics. Are there are free market economists or thinkers out there that can explain to me some of the different schools of economic thought within 'free-market economics' and give me the differences between them? Can anybody provide me with a compelling argument for a single school of economic thought within laissez-faire economics that is the most accurate school thus conceived of? Any help would be greatly appreciated. Feel free to respond to this post of just email me.

  • Answer:

    About the only thing they had in common is a distrust of government and especially government intervention in the economy. This meant they often agreed on public policy issues but their approach to economic problems had little in common. Miese rejected the utility theory that is the standard model economists use to describe human behavior and instead believed that individual ranks various ends or goals that he wants to attain. Friedman accepted the standard formulation of microeconomics and was an early and effective advocate of monetarism and provided the empirical foundation for it in his study of the monetary history of the US. If you see the economy as a mathematical problem that has a solution you disagree the Austrian School, because they do not, but think the economy is driven by individuals who's actions can not be modeled That is the basic disagreement they have with conventional economists who assume that when an opportunity exist, someone will exploit it so little or no attention to the roll individuals play in the economy.. Friedman however accepted the conventional view and believed than even unrealistic mathematical models could produce valid results.

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You might try Brian Doherty's book Radical for Capitalism: http://www.nolanchart.com/article6225.html

clore333

You're trying to predict trends. One school of thought will not provide the end all and be all of economics. There is a reason we devote an entire university faculty to the study. However, Mises are very un-mathematical and a long time ago decided free markets were the right thing to decide distribution.They haven't progressed much further than that revelation and the rest of the field has kind of moved on without them. Friedman is similar but a bit more mathematical. Understand this, economics is the predictor not these "schools" of thought. They are only deviations on the base theory that amount to political ideologies. Study basic economics from the ground up. Get some text books and learn the basics. Educate yourself on some of these theories. You will find they don't serve as systemic predictors but stuff built around the basic theory. Also remember that every economy in the world has government intervention in their economy. Studying the way the world would work if everything was free market won't work since government is involved with everything. Basic economic theory acknowledges this and builds around it.

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