This afternoon I present my paper on “Classical Economic Theory and Supply Side Economics”. My focus, however, is about an issue that I think of as extremely important, have raised it often but never really received an answer that satisfies. And the issue is why do Austrian economists virtually never take on Keynesian economics. This was as much as admitted by Israel Kirzner in his brilliant biography of Ludwig von Mises (ISI Books, 2001: 160).
Ludwig von Mises adopted a vigorously dissenting stance towards this Keynesian economics. Although he rarely offered frontal rebuttal to Keynesian theory, his contributions to the topic dealt with in this chapter constituted a well-developed (if implicit) basis for his rejection of Keynesianism.
My argument is that it is only classical economists who had crafted their theories to deal with Keynes since it was they who had fought off Malthus and demand deficiency during the general glut debates of the 1820s. In contrast, Austrian theory had been designed to refute Marxists and socialists of all varieties but also was itself constructed on a demand-side focus based on marginal utility. And while Marxism and socialism have not gone away, the crucial battles in our own economies at this time deal with the Keynesian theory of deficient aggregate demand and the role of public spending to increase the level of employment and production. Keynesian theory has been a failure since the start, but in my view you have to go back to the classicals to understand why. The moderator will be the great Austrian economist, Steve Horwitz, so it should be a very interesting session. I am looking forward to.