Three Schools of Economics

Trying to understanding macro- economics, the fluctuations of the market, unemployment and trying make predictions for the future? You may think that economics is all about doing calculations,  analyzing charts and being objective and rational, well it is not. Even Joseph Schumpeter way back in the 1940's recognized that he was not a mathematician and that he had to rely on sociology to build his ideas on business cycles, economic development and "creative destruction." Schumpeter's concepts where not in tune with Keynesian economics and if you want to have a better idea about how economics is indeed voodoo economics just follow this:

"Warren Mosler, an innovative carmaker, a successful bond-investor and an idiosyncratic economist, moved to St Croix in 2003 to take advantage of a hospitable tax code and clement weather. From his perch on America’s periphery, Mr Mosler champions a doctrine on the edge of economics: neo-chartalism, sometimes called “Modern Monetary Theory”. The neo-chartalists believe that because paper currency is a creature of the state, governments enjoy more financial freedom than they recognise. The fiscal authorities are free to spend whatever is required to revive their economies and restore employment. They can spend without first collecting taxes; they can borrow without fear of default. Budget-makers need not cower before the bond-market vigilantes. In fact, they need not bother with bond markets at all.

The neo-chartalists are not the only people telling governments mired in the aftermath of the global financial crisis that they could make things better if they would shed old inhibitions. “Market monetarists” favour more audacity in the monetary realm. Tight money caused America’s Great Recession, they argue, and easy money can end it. They do not think the federal government can or should rescue the economy, because they believe the Federal Reserve can.

The “Austrian” school of economics, which traces its roots to 19th-century Vienna, is more sternly pre-Freudian: more inhibition, not less, is its prescription. Its adherents believe that part of the economy’s suffering is necessary, an inevitable consequence of past excesses. They do not think the Federal Reserve can rescue the economy. They seek instead to rescue the economy from the Fed."
To continue reading: (Marginal Revolutionaries. The Economist. Dec. 31, 2011)