But the correctness of Austrian theory is beside the point. Because if it was ever applied in practice by actual politicians, the voting public would become more than just annoyed. If the response of the Bush and Obama administrations to the financial crisis of 2007-08 had been to allow every beleaguered financial institution to go bankrupt while simultaneously endeavoring to balance the budget while government revenues tanked and social welfare obligations spiked, the economic devastation would have been well nigh unthinkable. There simply would be no political future for politicians who simply abandoned the general public to the viciousness of the free market.
Economic crises and bank panics predated the creation of the central bank in the United States; indeed, to many observers, they seem to be endemic to capitalism and unregulated markets. And when markets run completely amok, the public expects its leaders to do something.
This touches on something I've never really understood. Economics is really just one of many factors that affect the overall well being of our society. What really matters to most of the people of this world is having the best, most efficient and fair society, not the best, most efficient and fair economy. It doesn't matter if Austrian, Keynesian, or Monetary policies make the an economy function more efficiently, if a slightly less efficient economy gives more benefits to more people, then those are the policies we should use.
tnb
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