I think much of what I like about capitalism stems from the idea of certainty; the idea that we can be sure, perhaps naively or misleadingly, that individuals will always act in accordance with self-interested values.
Amongst the many schools of economic thought, the Austrian school lies outside the economic mainstream. However, it has perhaps surprisingly punched above its weight in terms of its influence over the political and economic thought of the 20th century. Some of the most prominent and influential economists were from this particular school, such Friedrich Hayek. Hayek in particular had a large influence on the thinking of some of the great leaders of recent history such as Ronald Reagan and Margaret Thatcher.
Known for their “laissez-faire-ness” and strong individualist and libertarian undertones, the Austrian’s ultimately advocate a much broader philosophy that reaches beyond just economics. It is perhaps this point that has given them an even wider reach and audience.
In his 1936 book ‘The General Theory of Employment Interest and Money’ John Maynard Keynes outlined how rather than being independently rational, investors were often prone to erratic herd-like behaviour. He argued that macroeconomic stability is inherently vulnerable to the ‘animal spirits’ of speculators. The recent deflation of the post Global Financial Crisis (GFC) gold price bubble is a prime example of this phenomenon.