Steve Horwitz has a more digestable version of his Adam Smith Institute talk here. Here's my quick take on the different arguments.
1. Steve says that the problem is that policy is giving bad signals that distort the arrangement of different kinds of production. The problem is the distortion. The solution is to stop the policies that are going the distortions.
2. I am much less worried about the distortions because I think the market does a good job at ensuring the survival of good arrangements of production. The problem, as I see it, is that while the market process picks winners and losers well, it does not guarantee a Panglossian outcome where resources are used to their full potential. We cannot pick winners and losers well with government. We can nudge the resource utilization issue without disturbing the market process that picks winners and losers so well.
Often the debate proceeds as if my side is somehow missing the fact that the market process is good at picking winners and losers and generating a good arrangement of different kinds of production.
I do not think that's the disagreement.
That's exactly what my side likes about the market. That is not where the problem is. Now if you want to tell me that my solution to the other problem will make things worse, then argue that point. Don't tell me that we've missed something about the fundamental issue being the arrangement of production and don't tell me that we only think maximizing aggregate GDP is what matters.
UPDATE: Here's another way of putting it:
A couple things can threaten the stability of a house. You could have a flash flood pick it up off its foundation and wash it away, or you could have a fire from faulty wiring in the ceiling burn it down.
Let's say faulty wiring starts a fire. My reaction is going to be to point to the problem of a fire and try to put that fire out, perhaps by spraying it with a lot of water.
If you were to tell me that throwing lots of water at a house risks lifting it off its foundation and washing it away, I would say that that's not really a risk right now: I'm just trying to put the fire out with a fire hose.
It would make even less sense for you to tell me that clearly by continuing to work with the fire hose I don't appreciate the fact that houses need to stay on their foundation and not wash away in order to maintain their integrity.
This is how I feel like some conversations with Austrians go.
I understand that it is bad for the house to get washed off it's foundation. I understand that staying on the foundation is good for the stability of the house.
I am concerned that my roof is burning down right now. It's not that I don't understand how foundations work - I just don't see that as a big problem right now.
We rise and fall
3 hours ago