Volume 19, Issue 1 -

Economists of the Austrian School are supporters of the gold standard because it hinders and restricts arbitrary policies and rulers: it disciplines the behavior of all the agents involved in the democratic process and encourages people to act orderly and morally. It is, in fact, an obstacle to the lies and demagoguery because it spreads and facilitates transparency and truth in social relations. The creation of the euro in 1999 and its final implementation in 2002 assumed the disappearance of monetary nationalism and flexible exchange rates in most of continental Europe. We will discuss the errors committed by the European Central Bank. It is now seen how the different states of the European Monetary Union have given and completely lost their monetary autonomy, that is to say the ability to manipulate their local currency to serve political needs. In this sense, the euro has therefore acted, at least for the countries of the euro area, very similar to that which was, in its time, the gold standard manner. This is why the euro should be considered a real equivalent, albeit imperfect, of the gold standard.

Professor Huerta de Soto has proposed a defense of the Euro using the argumentation of the Austrian School of economics. Huerta de Soto main argument relies on the federal monopoly of money is a preferable situation than the monetary nationalism that prevailed before. Our article aims to open a debate on the question of the Euro. The main argument used in the discussion relies on the fiscal question. Public deficits and public debts in the Euro zone seem to dominate monetary institutions issues.

The paper addresses some similarities and differences in the institutional set-up of the classical gold standard and European Monetary Union (EMU). I argue that giving up monetary nationalism and committing to the rules of either the gold standard or EMU initially seemed to restrict the scope of state action. Therefore, the euro – like previously the gold standard – provided some (fiscal) policy credibility. Policy credibility was a main determinant of capital market integration and low government borrowing costs in Europe under both systems. However, I shall emphasize that the membership in the gold or euro club itself did not force reforms and spending cuts upon countries that faced crisis and debt problems. The article suggests that the institutional set-ups of the gold standard and EMU determined the degree of commitment to them and the way in which countries reacted to deal with debt problems.

The Adam Smith problem refers to a claimed inconsistency between the Theory of Moral Sentiments and the Wealth of Nations , regarding the portrayal of human nature in these two books. Previous research predominantly resolved the claimed inconsistency by uncovering virtuous, less selfish character traits in the Wealth of Nations . This article voices caution. I acknowledge – on methodological grounds – fundamental differences regarding the portrayal of human nature in Smith’s behavioral ethics, i.e. the Theory of Moral Sentiments , as compared with Smith’s economic research. The key argument is that Smith’s two books address different research problems and hence do not, need not and cannot adopt the same view of human nature – for methodological reasons, so my argument. Adam Smith scholarship overlooked that Smith himself in considerable degrees understood “economic man” as a heuristic abstraction. I connect to the philosophies of science of Imre Lakatos and Karl Popper.

This paper aims, first of all, at showing that there is a very close correspondence between the series of events of the subprime cycle and the typical process described by the Austrian business cycle theory. It then answers to some of the main criticisms directed against the Austrian explanation of this crisis. It shows, finally, how major aspects of this cycle – housing bubble, governmental policies of credit and housing, financial innovations – can be integrated to or deduced from the Austrian explanatory framework.