So a lot of times, I hear people say the following: "The Austrians made key insights 100 years ago, but now they've gone far off the track and are regarded by serious economists as crazy." Unfortunately I hear this statement all too often.
One of the things I wonder is: who are these serious economists? The kind working for the government? Paul Krugman?
In fact, when people learn that I consider myself an "Austrian" (technically an Austrian-in-training), or at least hint at it, they say "Oh no, you're not an Austrian are you?"
Unfortunately the "oh no" isn't said out of fear of another Austrian intellectual stalwart showing up, but rather out of a "great, another crazy person" feeling.
How does one handle such irritating claims? (This is a largely rhetorical question, but a discussion would be great.)
Nothing major has changed since 100 years ago.
"The Austrians made key insights 100 years ago, but now they've gone far off the track and are regarded by serious economists as crazy."
Sounds like Giles. :P
To paraphrase Marc Faber: We're all doomed, but that doesn't mean that we can't make money in the process. Rabbi Lapin: "Let's make bricks!" Stephan Kinsella: "Say you and I both want to make a German chocolate cake."
Is Giles a social-democrat? Because those are the types that keep stating that claim.
Ask him yourself. He's hayekianxyz.
Yes I know of his name-change. Maybe he'll wander into this thread? :P
Perhaps.
I don't think that's quite fair. I don't know about Giles political views (a Hayekian social democrat seems rather unlikely, but I suppose there's stranger..), but he doesn't seem opposed to Austrian economics. Rather, he is a supporter of the Boettke wing of the Austrian school, rather than the Rothbardian wing.
I don't think there should be any wings of the Austrian school. An idea is either correct or its not. Don't be dogmatic. Take the best of all worlds. Its counter productive to divide AE into camps. I don't think Boettke or Kirzner or Lachmann (well, Lachmann before he went Keynesian) is a different wing. They just study entrepreneurship exclusively, thats all.
I like early Rothbard and late Rothbard, but middle Rothbard went off from writing technical stuff like Man, Economy, and State (which is top notch for several proofs that I like) to writing about ethics and politics. Think of what he could have added, given his technical skill, if only he just concentrated on expanding the economic component of AE after he finished MES! He could have written another two or three such works at least...
I like Hayek , but if this or that essay strikes me as useless or erroneous, I just ignore it. He has quite a few, because he tried several times to use different terminologies to attract understanding in American mainstream. For instance, rate of profit is such a pointless and misleading term to borrow as Rothbard pointed out. That ruined totally Hayek's 1939 collection of essays. However, Hayek has a great many contributions to AE; even more than Rothbard simply because Hayek has such large technical body of work.
I like anything by Mises.
I think that Boetkke (and the like) and the traditional Austrians (Mises, Hayek, Bohm-Bawerk) ask different questions and investigate different phenomena, but employ the same general premises. The former studies observable phenomena dealing with organizations and institutions. They are essentially institutional economists. The latter studied markets, that is, broad/objective and relatively unobservable phenomena. They were interested in capital, value, monetary theory (ect) and how human actions (praxeology) effects market forces. I think Boettke takes praxeology and focuses on other social institutions, which are intrinsically different in nature. I would say that Boetkke is not a theoretician; he's into applied political economy (which resembles sociology more than anything else really).
The mainstream basically considers the controversies of the 20s and 30s to be settled, and some Austrians (though I wouldn't really call them Austrians) believe that the mainstream has absorbed a significant amount of Austrian insights. So the theoretical framework is essentially established and now economists want to actually use what they've learned.
"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion."
Blueline976 wrote: How does one handle such irritating claims?
How does one handle such irritating claims?
What you've described is merely someone describing how they fall for the fallacy of appeal to authority.
Your job is to ask that person which claims he believes are crazy and why. In all likelihood, you will be presented with a straw man, which is then your que to create a learning moment.
This is a fallacy because the truth or falsity of the claim is not necessarily related to the personal qualities of the claimant, and because the premises can be true, and the conclusion false (an authoritative claim can turn out to be false). It is also known as argumentum ad verecundiam (Latin: argument to respect) or ipse dixit (Latin: he himself said it). [1] On the other hand, arguments from authority are an important part of informal logic. Since we cannot have expert knowledge of many subjects, we often rely on the judgments of those who do. There is no fallacy involved in simply arguing that the assertion made by an authority is true. The fallacy only arises when it is claimed or implied that the authority is infallible in principle and can hence be exempted from criticism.
http://en.wikipedia.org/wiki/Appeal_to_authority
Blueline976: Yes I know of his name-change. Maybe he'll wander into this thread? :P
He's a troll.
He might do.
Oh OK; well that settles it then. For all third parties please take note of this and discount any weight you might otherwise put on my posts accordingly.
There's a lot of heterogeneity in the "Austrian school", so much so that labels can be really deceptive. I didn't fully realise the differences until my own views drifted quite a bit from the Rothbard/ LvMI approach and Austrian economics in general. Regarding my (trollish) views, let me try and make myself clear. To be somewhat original, there is good economics and bad economics, the former helps us understand the real world and social phenomena, the latter doesn't and often obfuscates the truth. Let me also say I don't think that there is any single way to do economic research, different tools are suited to different phenomena and we can't tell a priori which tools will be best suited for the task. Austrian economics is just one approach that has its own comparative advantages, but I don't think it's the only valid approach, nor do I think that it's as opposed to other approaches as a lot of people here seem to think it is.
Let me give a brief example, experimental economics and others have shown that under certain conditions (repeated interactions, situations where mistakes are costly) the standard supply and demand model fits fairly well. Within a few iterations the actors within a "market" will converge on the equilibrium solution.
So, perhaps for these cases the standard mathematical models will do a fairly job good of explaining what goes on "out there". For others, they need to be modified, even if this involves developing more complicated mathematical tools (or relying on verbal reasoning). The fact is, we can't tell a priori what tools we should use, and humans can be very inventive with math. Various insights of behavioural economics have been formally modelled and the result is a more complete depiction of real actors in the real world. Moreover, as Nicolai Foss points out in his paper, evolutionary game theory and other game theoretic tools have allowed for the representation of of various Austrian (Hayekian) features of the economy such as emergent order. And these tools have been used in applied work by self described Austrian such as Leeson.
Most mainstream economists say that math is just the language of economics, I think this is true to an extent and it captures an important insight. I'll grant that sometimes the methodology drives the research, and this is unfortunate, but if Austrians can develop the mathematical tools (as some have done) to model their insights, all the better for them, and it'll pay off in the long term.
As for my political views, well, who knows? I certainly don't. Kind of keen on the whole democracy business though.
Wait, what? Hayek didn't study observable phenomena dealing with organizations and institutions? Hayek didn't work in the economics department at Chicago, he was in the Committee on Social Thought, furthermore, what about "The Fatal Conceit", "Constitution of Liberty" and "Law, Legislation of Liberty"? Even Mises wrote "Socialism" and other works on political economy.
I'm not really sure it what sense it's sociology, I'd grant that it's interdisciplinary, but it borders on legal and political theory, not sociology (not that there aren't Austrian scholars who do work on the border of sociology and economics, see Storr and the blog "The Sociological Imagination). And why shouldn't Austrians do political economy? In terms of comparative advantage, I'd say that's exactly where their advantages lie.
As for Boettke and all not being theoreticians, I'm sure they would agree. In fact, I've heard many commentaters on the Coordination Problem blog explicitly stating that to be the case. But using the usual definition of theoreticians very few Austrians are (even the LvMI folk) and to the extent that there are, there are still too many and I've not seen all too many breakthroughs from them.
If you really deny that a lot of Austrian economics has been incorporated into the mainstream, I'm not sure what to say. Hayek has had huge influences on experimental economics, NIE, economics of information, public choice and ACE. Game theory, which makes up most of modern day micro, was initially developed by Oskar Morgenstern, an Austrian economist.
"You don't need a weatherman to know which way the wind blows"
Bob Dylan
There's a lot of heterogeneity in the "Austrian school", so much so that labels can be really deceptive. I didn't fully realise the differences until my own views drifted quite a bit from the Rothbard/ LvMI approach and Austrian economics in general. Regarding my (trollish) views, let me try and make myself clear. To be somewhat original, there is good economics and bad economics, the former helps us understand the real world and social phenomena, the latter doesn't and often obfuscates the truth. Let me also say I don't think that there is any single way to do economic research, different tools are suited to different phenomena and we can't tell a priori which tools will be best suited for the task. Austrian economics is just one approach that has its own comparative advantages, but I don't think it's the only valid approach, nor do I think that it's as opposed to other approaches as a lot of people here seem to think it is. Let me give a brief example, experimental economics and others have shown that under certain conditions (repeated interactions, situations where mistakes are costly) the standard supply and demand model fits fairly well. Within a few iterations the actors within a "market" will converge on the equilibrium solution. So, perhaps for these cases the standard mathematical models will do a fairly job good of explaining what goes on "out there". For others, they need to be modified, even if this involves developing more complicated mathematical tools (or relying on verbal reasoning). The fact is, we can't tell a priori what tools we should use, and humans can be very inventive with math. Various insights of behavioural economics have been formally modelled and the result is a more complete depiction of real actors in the real world. Moreover, as Nicolai Foss points out in his paper, evolutionary game theory and other game theoretic tools have allowed for the representation of of various Austrian (Hayekian) features of the economy such as emergent order. And these tools have been used in applied work by self described Austrian such as Leeson. Most mainstream economists say that math is just the language of economics, I think this is true to an extent and it captures an important insight. I'll grant that sometimes the methodology drives the research, and this is unfortunate, but if Austrians can develop the mathematical tools (as some have done) to model their insights, all the better for them, and it'll pay off in the long term.
So I'm just gonna ignore all that and say you're wrong.
Hey, at least you're honest!
But in all seriousness, doesn't that create a massive public good problem, namely people researching and being informed about who they are voting for, their past records, and the actual correct policies which should be in place? Note I'm not using the moral argument, but one of Powell's arguments.
hayekianxyz: Hey, at least you're honest!
What about you?
You make nonsensical comments, such as:
hayekianxyz:Even if one accepts the Rothbardian approach to praxeology, there's still room for econometrics
and when you're challenged on it:
DD5: How does the [alleged] Rothbardian approach to praxeology differ from the Misesian approach to praxeology, and how does it pertain to econometrics?
How does the [alleged] Rothbardian approach to praxeology differ from the Misesian approach to praxeology, and how does it pertain to econometrics?
I'm still wondering if he knows what 'axiom' or 'aprior' means. Last I heard he actually told me I'll be waiting for the answer, which is his MO.
I've come across this attitude. My response is to point to the predictive power of Austrian economics historically. Science is useless without the ability to predict, and the Austrian School predicted the Great Depression, the failings of the Phillips curve (tradeoff between unemployment and inflation) and the possibility of inflationary recession, S&L meltdown, tech-stock bubble burst, and the current crisis. Then I ask what kind of track record neoclassical or Keynesian economists have, and which ones predicted the current crisis along with Austrians such as Peter Schiff, Mark Thornton, etc...
Kind of keen on the whole democracy business though.
Of all stupid things you choose the stupidest.
Hayek didn't study observable phenomena dealing with organizations and institutions?
Yes, I should have distinguished between early and later Hayek.
As for Boettke and all not being theoreticians, I'm sure they would agree.
I know they would agree. That's why I said it.
Game theory, which makes up most of modern day micro, was initially developed by Oskar Morgenstern, an Austrian economist.
Morgenstern was not an Austrian, and Mises disapproved of game theory.
If you really deny that a lot of Austrian economics has been incorporated into the mainstream, I'm not sure what to say.
I don't think you know very much about Austrian economics. Every time we have a conversation you seem quite perplexed. Much of AE has been absorbed by the mainstream, and much hasn't.
The most annoying criticism I ever heard was of Mises' economic calculation argument, where this guy says to me: "Of course socialism can calculate, it takes so many bricks to make a factory..."
“Socialism is a fraud, a comedy, a phantom, a blackmail.” - Benito Mussolini"Toute nation a le gouvernemente qu'il mérite." - Joseph de Maistre
Well, there you go. Hayek was a social democrat and his philosophy makes no sense. And his economics are basically inferior to Mises in all ways.
The easiest way to reply to this is ask if the heliocentrists have added anything to the study of astronomy lately. If they say "no" then say that, using their logic, heliocentrists MUST be wrong.
"It has been well said that, while we used to suffer from social evils, we now suffer from the remedies for them."
F.A. Hayek, The Constitution of Liberty
I don't think you know very much about Austrian economics. Every time we have a conversation you seem quite perplexed.
That seems like a fairly frequent observation.
Morgenstern was not an Austrian, and Mises disapproved of game theory
Ok, well, I'm sorry to challenge to gospel of Mises, I wasn't aware that archbishop Esuric of the Holy Chuch or Austrianism had excommunicated Morgenstern for his indiscretions. Well, down the memory hole he goes. Seriously now though, this Mises guy must be pretty awesome, he died like 50 years ago and yet he's still somehow relevant for the state of game theory today.
I don't think you know very much about Austrian economics.
People keep saying that, and I mean, it's true that in the grand scheme of things I've only been studying economics for a year and a half now. But, what I find really funny is that you used to say "there's no way you've read Mises and Hayek, or any other Austrian, because if you had there's no way you could fail to opposed FRB", well, a few months later and guess what? You're sort of keen on the whole fractional reserves business too. It's funny, when I toed the Rothbardian line alongside the rest of you I didn't really get any challenges about my knowledge of Austrian economics.
But hey, I guess it's easy to be comfortable with your views when anybody who disagrees is a priori stupid, evil or just clueless.
I probably shouldn't be getting into all of this, but apparently it's got to the stage where I get one serious response and three other "yeah well you're stupid" type responses and also I'm sort of hungover.
DD5, I'd say that the different conceptions of praxeology can roughly be capture in the differences between praxeology as a method and as an area of study. Wilderness, perhaps I'm wrong but an axiom can mean many different things and I always understand a priori to mean knowledge that's independent of experience, but perhaps I'm wrong.
Well, the standard public choice account of democracy actually can't explain why people vote. The expected return from voting (the probability of your vote being decisive multiplied by the difference you'd gain from one party winning) is so small that even the drive to the poll wouldn't be worth it. So of course, any explanation, such as those put forth by L&B and Caplan, that purports to explain why people do turn up (which they do) has to invoke the fact that people enjoy voting. Many people take a lot of pleasure from voting, from discussing politics and from researching the candidates. Granted, for democracy to work a strong democratic ethic would be necessary, as well as other institutional changes (more decentralized governance) but there would be other tricky prerequisites for anarchism too.
To show that I am not always out to get a jab at hayekianxyz, I say the following:
Bob Murphy pointed that the Mises "disapproved" of game theory, that is, game theory as it was at the time he "disapproved" of game theory.
Liberte:Well, there you go. Hayek was a social democrat and his philosophy makes no sense. And his economics are basically inferior to Mises in all ways.
I don't understand your use of sarcasm.
hayekxyz:Wilderness, perhaps I'm wrong but an axiom can mean many different things and I always understand a priori to mean knowledge that's independent of experience, but perhaps I'm wrong.
I'm not sure if the term axiom is fully out of the philosophical debate which isn't necessarily unfrutiful. The debate appears to have begun to take place since Hume tried to absolve it, Kant rebutted him resolving some of the issues, and then Karl Popper drew the line to maintain the natural sciences and keep Humean skepticism out of those sciences so it didn't ravage those sciences as it had the philosophy department. Source here.
The path down axiom lane gets into what has been termed common sense, empiricial, sensory, assumptions, self-evident, intuition, primitive sense; and phenomenology, as far as my limited knowledge on this complicated subject goes, appears to actually dare to define where propositions, axioms, and terms come from. Hume analytically just put up a stop sign and arbitrarily said can't go any further and even questioned axioms themselves which other consequences of Hume's philosophy, as I've named one already, ie. Popper drawing the line, is it obviously questions logic itself, secondarily therefore truth-values in knowledge, and also, implied relations in the world. Not that Hume denied facts just that he put too much of an analytical inclination that has it's philosophical consequences (analytical is only of the mind as opposed to synthetic aprior which incorporates not only the mind but what the mind can know external to itself too). There is posterior knowledge and it is not cut-off from a prior knowledge. These are two parts of a whole. I can't make a full critique on Humean consequences, but this is what I gather so far.
Austrian philosopher-economists such as Barry Smith, Uskali Maki, and Francios Facchini currently work in this field, amongst some other people too (just don't feel like writing out all their names). Other none Austrian's (though philosophically in name only because their work has influenced the field) include the phenomenologists of Edmund Husserl, Adolf Reinach, and an extant fellow by the name Josef Seifert who I don't think is an Austrian economist-philosopher wrote a great paper on the subject of phenomenology that is explanatory as well as historical in nature. Husserl and Reinach have their explicit foundations in Franz Brentano. Franz is linked to the founder of the Austrian School Carl Menger (though the link/influence is debated as to how much and some other non-important for this post details. I've read papers on both sides of the debate one by David Gordon the other by Barry Smith.). These are all within the tradition of Aristotle, including Carl Menger, and this is what had lifted their knowledge pursuits to a science.
All of this is important for numerous reasons, but one vital understanding that can be taken away from this is it depends on what you mean by "a prior... (being) independent of experience". On the one hand if a prior is cut-off from experience by interpreting scientists or whomever then what good is it? In some absolute sense of the term of being 'independent of experience' in which experience has nothing or never had anything to do with the development of any a prior knowledge then how could a prior knowledge have any connection to experience (or the rest of the world outside of a prior knowledge)? It would leave a prior knowledge as possessing no knowledge of experience and completely cut-off from the rest of world in all ways including being able to interpret the world. But that is clearly not the case of the intention of a prior knowledge. It is an assumption like any other assumption in all of the sciences. Astronomy is one of the most physical sciences there possibly can be. Physics itself becomes a subfield within the massive undertakings of Astronomy. Yet Astronomy, like all sciences, involves assumptions. There has to be a starting point for any intellectual or science to even take place. And those assumptions necessarily imply connections with experience in which experience informs theory and theory informs what that experience is. It's a feedback system. But those assumptions necessarily have to relate to the field of inquiry. That in and of itself is an axiom that any field involves itself and not some other field exclusive of the field in question. If the field of inquiry is X, then for the field to be about Y and not X is not to inquiry about field X, but rather field Y.
Axioms are very empirical. To believe otherwise cuts them off from the rest of reality and reduces the axiom and all theories involved with the axiom as merely analytical having nothing to do with the rest of world. To cut-off axioms from experience all together endangers all of the sciences as they are all founded upon assumptions.
Game theory is the basis of any type of social biological evolution. It is imperative to understand game theory in order to understand the most common felt uneasinesses that people try to alleviate, why people generally aren't sociopaths, the importance of reputation, and why it is generally not profitable as an individual to do things like murder someone, become a thief, or enslave people.
Sam Armstrong,
Rothbard said game theory was a field of praxeology.
The link didn't go to the post I wanted. Scroll down in that link to JosephBright's post. Rothbard also apparently said 'Theory of War' or Hostile Action is a field of praxeology too (I mention that as that was a recent thread).
I like reading Morgenstern, but I have to agree that in terms of praxeology, catallactics and political economy Mises' work is both more realistic and more theoretically consistent than 'game theory'. Game theory lacks a number of the insights of praxeology and also develops a number of erroneous conclusions based on fallacious premises.
Mises isn't holy gospel (speaking for myself, not for the tweakers that frequent this chat), but it does seem to me that Mises was almost never wrong. And as good as Morgenstern can be at times, he was wrong a lot more often than Mises was. What's more, Morgenstern's work wasn't even supposed to be directly applicable to economics. It patently assumes many false conditions to make its points, game theory is much more a theoretic model with situational applicability whereas praxeology is universally applicable to all purposeful action ('human' or otherwise).