All Commentary
Monday, April 9, 2012

Tyler Watts Wins Beth A. Hoffman Memorial Prize for Economic Writing

The second annual Beth A. Hoffman Memorial Prize for Economic Writing has been awarded to Tyler Watts, assistant professor of economics at Ball State University, the Foundation for Economic Education announced today. Through the generosity of a FEE donor, the prize was established to commemorate the late Beth A. Hoffman, long-time managing editor of The Freeman, by recognizing the best article on economics or economic history published in The Freeman the previous year.

Watts’s article, “The Canard of ‘Underutilized Resources,’” appeared in the March 2011 issue of The Freeman. It was selected from a list of five nominees by an outside panel of judges who knew and worked with Beth Hoffman for many years.

The prize consists of $2,000 and a handsome plaque. A perpetual plaque with the winners’ names is displayed at FEE headquarters.

Watts’s article critically analyzes the popular Keynesian view of recessions and the supposed solution of monetary stimulus, and applies Austrian economics to the Great Recession, which followed the housing-bubble collapse and related financial crisis.

What exactly went wrong in the economy such that so many resources are now not being utilized? By addressing this crucial question, only the Austrian perspective can adequately dissect the very concept of “underutilization” and offer a coherent critique of this mad-hatter monetary stimulus….

The value of capital—both capital equipment, or physical capital, and people’s knowledge, experience, and training, or human capital — is critically dependent on how well it can fit into the structure of actual consumer demands and the structure of existing complementary capital (both physical and human). It is precisely this kind of interconnectedness among different kinds of resources that mainstream economists tend to disregard. Yet the extent of economic losses revealed by the recent financial crisis and recession is making the malinvestment (waste) of resources hard to ignore. Even at the Fed, some people show signs of understanding the relevance of the structure of capital resources, as opposed to sheer quantities or supposed dollar values. As Naranya Kocherlakota, president of the Minneapolis Fed, recently stated: “the Fed does not have a means to transform construction workers into manufacturing workers.… Most of the existing unemployment represents mismatch that is not readily amenable to monetary policy.”

In other words, no amount of money-printing will change the real relationship of any particular object to its economic context. But the term “mismatch” implies mistakes have been made—entrepreneurial error—and raises the question: What went wrong to cause such massive mistakes in the first place? Again, Austrian capital theory provides the answer: The Fed itself, with its cheap money, along with a host of government “affordable housing” policies, severely overstimulated the housing construction market in the years of the boom.

Tyler received his doctorate from George Mason University in 2010.  His undergraduate degree is from Hillsdale College. Before joining Ball State, he taught at Grand Valley State University.  His research interests include Austrian economics, entrepreneurship, Public Choice, monetary theory and history, and economic history.

Beth Hoffman (1950-2008) joined the foundation staff in the 1970s. Besides working on The Freeman, she also edited books, pamphlets and other materials.  Over the years FEE supporters and seminar students came to know her as the friendly face or voice on the telephone ever ready to assist anyone seeking to learn the freedom philosophy.

Last year’s winner was Kevin A. Carson for “The Distorting Effects of Transportation Subsidies.”

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.