🏫 School's Out Part 2

Welcome back to school!

Last week you learned about the father of modern economic thought, John Maynard Keynes.

Today you are going to learn about the second economic school of thought in our series about economics thought.

Here was last week's hint. It was difficult.

This is Salma Hayek for those who don't know.

Which means this week we are going over famed Austrian economist Friedrich Hayek and his school of thought: Austrian economics.

Hayek is probably the most well known of the Austrian economists. The Austrian school of thought believes that the government should stay out of all facets of the economy.

No stimulus, no deficit spending, no stepping in. Hayek and the other Austrian's would argue that by stepping in, the government would be causing more damage to the economy than what would happen if the government did nothing

This theory was highly criticized by Keynes and other economists in the aftermath of the great depression. They saw the government doing nothing to help the problems and the condition of citizens continued to collapse.

The Austrian school also contributed some of the foundational aspects of modern finance and economics.

• Opportunity Cost - (The cost of doing one action means you aren't doing something else)

• Marginalism - That everything is determined by the next unit produced or consumed.

• Subjective Price Theory - Everyone has different preferences. So everyone will pay a different amount for the same good or service.

This non-interventionism into the economy spilled into how the government should be structured to best promote economic well-being.

If the government only creates more problems than it solves, then economic activity should be best left to the economic actors involved.

You conducting a transaction with other parties is done best when just the interested parties are involved. By getting the government involved, you are inviting a mess.

This thinking can be seen put into practice by former U.S. president Ronald Regan and former U.K. prime minister Margaret Thatcher. They took this thinking to it's political conclusion and instituted "trickle down economics"

Thank you for reading another issue of my newsletter.

I am still thinking of a name for this newsletter. Do you have any ideas for what I should call it? Also, what would you like me to write about next week?

Please message me on LinkedIn, Twitter or Instagram if you have any ideas about the newsletter name or what topic you would like see me write about next.

This issue and the week's prior were inspired by a reader's suggestion. So I am actively listening to what you what you want.

Thank you again for reading and I hope you have a great weekend.

Tristan