The Austrian school of economics is unique in the field largely due to its reliance on deductive reasoning over empiricism. This doesn’t mean that empirical evidence has no value, only that it is used to confirm rather than develop hypotheses. The use of deductive reasoning led the early leaders of the Austrian school to develop theories in marginal utility, time preference, and the business cycle.
The advantage to such an approach is consistent, logic based argumentation; it is difficult to counter a contention when it is built on soundly applied logic. With sound reasoning, policy decisions can be prescribed with confidence not in their predictive nature but in the certainty that they are pointed in the correct direction.
Since Ludwig von Mises, Austrian economic theory has been grounded in what he termed “praxeology,” the science of human action. With the individual as the starting point, the tendencies of individual action lead the Austrian economist to develop broader economic theory. The fact that an item possessed today is of greater value than the same item possessed tomorrow, for example, enabled Austrian economists to develop theories of interest as it relates to time. These theories could then further be extrapolated, logically, to show how interference with interest rates creates false signals regarding individual time preferences and ultimately leads to mistakes in investment. These mistakes cause the business cycle. The most complex theories put forth by economists of the Austrian school can all be traced back, logically, to the actions of individuals.
The Donald made international headlines when he announced U.S. withdrawal from the Paris Climate Agreement, a toothless document whereupon states around the globe promise to curtail carbon emissions. To show how inconsequential the agreement is, one need only look at some of the “reductions” promised. For example, China, supposedly the source of nearly one quarter of the earth’s greenhouse gas, promises to increase emissions until no later than 2030. Similarly, Pakistan’s agreement includes the following:
“…there is no plan at present for carbon sequestration in the country due to uncertainty surrounding implementation potential and associated high costs…”
While there is nothing in the agreement binding signatories to their promised reductions, Mr. Trump’s opposition to the agreement is largely focused on the “international support” required by nearly half of the nations pledging to participate. Since it is the United States which contributes the most in foreign aid, the burden of this support would further tax the nation now under Mr. Trump’s control. While foreign aid as a percentage of the total U.S. budget is negligible, Mr. Trump seeks any opportunity to seem fiscally responsible. In this case, his appearance of fiscal conservancy has no bearing on global temperature nor the runaway U.S. debt, but we can give him the thumbs up regardless.
The typical household labors under a number of constraints. This is true regardless of the household’s location, size, cost, value, occupancy, income, and condition. The inhabitants of the household contribute to its persistence by securing an income. The money and assets amassed are then applied to the upkeep and/or expansion of the household. When the occupants of a household exceed their ability to pay for upkeep or expansion, they can borrow money to maintain the level of existence to which they are accustomed or curtail spending, doing without the desired amenities. When the inhabitants of a household can no longer borrow money, they are finally forced to curtail spending.
In a federal republic like the United States, similar restraints exist on the individual states comprising the union. The inhabitants of the state contribute to persistence of the state through taxation. The money and assets amassed are then applied to the upkeep of the state and the services deemed necessary or desirable. When a state exceeds its ability to pay for upkeep or services, it can borrow funds, raise taxes, or curtail spending, doing without the desired services. When a state can no longer borrow money, it is finally forced to curtail spending, as is currently the case with Illinois.
In the second scenario, funds were amassed at the point of a gun via taxation and spent by progressive politicians on programs that will purchase more votes for those same politicians. Now that Illinois is unable to pay for the votes purchased by their politicians, will fiscal common sense emerge and who will pay for future votes?