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What have Austrians been wrong about?

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Austen posted on Tue, May 7 2013 9:36 PM

1. What have Austrians been wrong about in general?

2. What have Austrians wrongly predicted?

3. What have Austrians wrongly predicted that Keynesians have correctly predicted?

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1. In general? I don't think anything. There is a lot of disagreement among Austrians as to the specifics of certain advanced theories, but I don't think there is anything really wrong in the big picture.

2. Some have predicted hyper inflation to have hit already, but it hasn't yet (e.g. Bob Murphy).

3. No idea, as I don't follow Keyensian economists and their predictions. For the most part, whatever an Austrian claims the Keyensian will claim the opposite in terms of economic predictions (I'm not talking about micro).

4. I see that you didn't ask what Austrians have gotten right, so I'll just add this anyway: Peter Schiff correctly predicted the Dot-com bubble and the housing bubble, and Ron Paul predicted the housing bubble in 2000/2001 well before it even formed. And Ron Paul is an amateur economist at best, so how do you like them apples?

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Hmm... Honestly nothing springs to mind beyond this

As annoying as it sounds modern Austrianism is kind of like Marxism in their view that economic crashes are always in the making, so they'll always eventually be right when they do happen. As I recall Murphy and many Austrians have also been predicting hyperinflation, which of course hasn't happened... But we'll see about that one...

@Gotlucky

You kidding? Nothing compares to the fact that the Austrians predicted the great depression while everyone else while other economists were literally talking about how the economy had reached a new and everlasting state of prosperity.

At last those coming came and they never looked back With blinding stars in their eyes but all they saw was black...
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Blah blah blah history happened at some time in the past blah blah blah.

All the cool kids talk about the present.

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1. Don't know, but Austrian Economics is the one school of economics that is consistent with the theory of micro-economics and with any consistent theory of morality.  No other school of economics can say as much as all ignore theft from individuals and threats of force used to upkeep monopolies.

2. Lots, Austrian Economics can only be used to predict effects of policy not the exact timing of events associated with these effects.  Other economic schools that suggest that they can predict the timing of events are frauds.  Any success at predicting event timing is just a combination of good intuition and lucky guessing.

3. Nothing.  Keynesian Economics deals in the economics of short term (Months to Years) when the economy can take decades to adjust to policies.  (Although recently the economies of the Western World have been seeing full business cycles more often.)  In the longer term (Could be anywhere from hours to decades) the effects of policy come in line with Austrian style reasoning.

That is not to say that you can't get rich with Keynesian Economics and/or Chicago School Economics.  Policy Think Tanks and the like hire lots of economists to do their intellectual lifting as does the Fed and many large banks.  The true geniuses of stock picking and market timing are very rare as the timing part of prediction is extremely difficult.

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Blargg replied on Tue, May 7 2013 10:05 PM

I don't think you can predict what happens with the modern systems in place. For any problem, the constantly do crazy things to try to fix it. These often suppress the original problem, but create new problems later (which are then suppressed with more "fixes"). It's hard to predict the short-term outcome because the responses are inconsistent. The place where Austrian economics is properly tested is in the long-run, because you can't escape physics on that scale. How does it do on that scale?

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Murphy has admitted being wrong on hyperinflation, which Krugman and DeLong like to wield over his head.

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Krugman acknowledges Murphy's existence?

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Blah blah blah history happened at some time in the past blah blah blah.

All the cool kids talk about the present.

I like you, gotlucky.

 

“Since people are concerned that ‘X’ will not be provided, ‘X’ will naturally be provided by those who are concerned by its absence."
"The sweetest of minds can harbor the harshest of men.”

http://voluntaryistreader.wordpress.org

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+1 Kelvin

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I've never seen Austrians address how hyperinflation will happen, but from what I have studied in the field of International Political Economy it will happen only when the rest of the world ceases their participation in (1) the petro dollar system, (2) the international debt markets, and (3) the Eurodollar system.

Austrians need to participate in the mainstream.  What I just laid out above is THE only way that hyperinflation will occur.  And my guess is that the central banks of the world will not allow inflation to his the US all at once.  It will be a gradual undoing of the US dollar standard over a twenty or thirty year period of time.

"The Fed does not make predictions. It makes forecasts..." - Mustang19
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1) It's a small thing but indifference curves. Some Austrians reject the concept of indifference; you either like A or B. One non-Austrian economist replied that if Austrians didn't believe in indifference then they couldn't simultanously believe in their own subjective-marginal theory of value since it relied on indifference. Walter Block basically responded that Austrians could believe in indifference when they wanted to (theory of value), but could choose not to accept it when they didn't want to (indifference curves).

I love Block, but the whole debate made me shake my head. 

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indifference isnt a real concept, its an abstraction. in the real world people only make deal when they want to, so indifference is indistinguishable from preference.

mental models like this and the concepts they rely on are only as good insofar as they give you some logic chain. 

Keep the faith, Strannix. -Casey Ryback, Under Siege (Steven Seagal)
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Murphy has admitted being wrong on hyperinflation, which Krugman and DeLong like to wield over his head.

 
Mostly because Murphy couched it in terms of CPI, which was clumsy on his part. Schiff also gets predictions wrong sometimes. Which isn't surprising, he doesn't have a crystal ball. Few investors ever manage to systematically beat the market or predict it. People use this to discount his more long-term predictions on the health of the US economy, quite ridiculously.
 

1. In general? I don't think anything. There is a lot of disagreement among Austrians as to the specifics of certain advanced theories, but I don't think there is anything really wrong in the big picture.

Well, invariably one or the other side will be wrong, unless there is potential for synthesis, but I see this as healthy. Austrians don't stake a claim to infallibility. I do think that Austrianism is, however, one of the most theoretically sound schools of economics out there.

Austrians need to participate in the mainstream. 
 
They do try but their message isn't popular.

 

Freedom of markets is positively correlated with the degree of evolution in any society...

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I think I can both explain how hyperinflation will happen and also simulate hyperinflation on a computer.  Nobody needs to "allow" hyperinflation or vote for it or anything like that.  It is like an avalanche, once the conditions are right anything can trigger it.

http://howfiatdies.blogspot.com/2012/10/faq-for-hyperinflation-skeptics.html

http://howfiatdies.blogspot.com/2013/03/simulating-hyperinflation.html

I think Japan gets hyperinflation before the USA.

  -- Vince

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