According to the Austrians, economic theories cannot be proved or disproved based on empirical evidence but rather through deduction based on irrefutable axioms. So my question to you, as humans utilizing the little time we have on this world to strive for truth, is what sort of empirical evidence would it take for you to question the truth of some of most defining theories of the Austrians? What would it take to be convinced that, even if you don't have the cognitive capacity to identify where the deductive error in the Austrians' logic occurs, they've gotten it wrong in some fundamentally refuting manner throughout the years? What would it take to convince you, even if it is unlikely/impossible for the existence of a state not to grow and grow into the behemoths we see today, that a little bit of state is better than none at all?
It seems to me that the only field of study in my life that operates independent of any sort of proving or disproving empirical evidence is that of Austrian economics. I understand the arguments for why this might be the case, but when we take into account that somewhere along the way our logic could simply be wrong (even if we don't know where the error is occurring), I don't think it is illegitimate to take into consideration the empirical evidence in favor of or contrary to our economic theories to decide whether or not we've aligned ourselves with a consistent and correct economic school of thought.
I can't possibly be the only frequenter of these forums that struggles with this sort of thing, so my question stands: what would have to happen in the physical world to shake your faith in the correctness of established Austrian economic theory?
The OP was wrong in the first sentence before the question was asked and that false statement was insinuated into the question.
What can be proven/disproven is as follows. What is true can be proven and what is false can be disproven.
- EinarFridgeirs: "f AE predicts that X should happen, based on a priori reasoning, and then Y consistently happens in the place of X, that is a serious sign that your a priori reasoning went wrong somewhere, and you should go back and re-examine your premises."
Never hurts to re-examine premises. If you find no flaw, it might mean you are not smart enough or it might mean you are mistaken in your interpretation of what is happening or failing to account for some factors. You may be thinking the economy is growing while it is declining or you might miss the massive wealth transfer from elsewhere that keeps the system going. If you measure the sum of angles in a triangle and get more than 180 degrees, do you go and falsify the whole geometry? Not at all. It would either mean that you measured incorrectly or that the space is bent in your particular location. Maybe your protractor was made in China or there is a planet nearby.
- Alex M: "you really have no way of knowing if it was purposeful or whether the nerve under his knee cap randomly fired. In scineram's example, there's no way of knowing to what extent the self-bankrupting woman's shopping spree consisted of purposeful action or merely biological reflex."
You can't know in the past, but you can test it in the present. Offer someone a billion dollars to abstain from something for ten minutes.
A common example of government providing a benefit to ALL citizens equally and improving living standards is the traffic light. In this case, the government "restriction" would not be a zero sum game. Moreover, national defense benefits all Americans, particularily those they pay the most taxes since they have the most property/wealth to lose inthe event of predation at the hands of a foreign power.
For example, while a citizen's right is supposedly infringed by the red signal, in practice this commuter will get to his destination faster and safer with this "restriction" in place since it streamlines transport. Nonetheless, the Austrian could argue that a private firm responsible for programming the traffic light would be far more responsive and effective than government civil engineers.
""Although those Austrians that adhere to the more traditional classical liberal position would say very little. Certainly not 20%! That's huge!
Your "standards" are nothing but arbitrary and meaningless numbers""--DD5
My standard is based on the Rahn Graph. IN addition, there have been numerous studies designed to identify the optimum tax rate to achieve growth, equality, tax revenue, et al. My standard is the tax rate at which to achieve the maximum societal growth.
for example, the Rahn Graph shows that a tax rate of zero equates to very little societal growth (presumably due to the absence of established and accepted standards and protections of private property, contracts, civil adjudication, et al that a central authority historically has insured, albeit inconsistently at best). IN contrast, a 100% tax would obviously lead to zero growth since nobody would work for nothing.
In summary, do you advocate zero government DD5? and if so, how would you provide for the national defense, legal disputes, private property, contracts, controlling the adverse effects of external costs of production, et al. ?
I think the answer is something along the lines of pray daily in the Church of Rothbard and make a few sacrifices of poor people before the Hoppe Monument and hope that it all works out. Should it not go according to plan, round up the heretics and read the Holy Scripture of Mises to them as they burn on a fire.
"You don't need a weatherman to know which way the wind blows"
Bob Dylan
Great argument.
One must actually understand ABCT in order to even attempt to validate it by some emprical data. Now, it has already been established here that you don't know diddly-squat about Austrian Capital Theory or ABCT. So why should anyone even bother to check the validity of your sources?
One must actually understand ABCT in order to even attempt to validate it by some emprical data.
Now, it has already been established here that you don't know diddly-squat about Austrian Capital Theory or ABCT. So why should anyone even bother to check the validity of your sources?
Capital theory is an absolutely useless exercise, and a detailed exposition of it isn't necessary to Austrian business cycle theory either. Neither Hayek nor Lachmann could resolve its problems, so there's slim chance that anybody on these forums will be the one to do so. Garrison clearly chose to elaborate upon "Prices and Production" for a reason, it's not bogged down with irrelevant issues of capital structure. Of course, if you want to concern yourself with a non-issue that nobody within the economics profession concerns themselves with, go ahead. I've got more interesting things to read and more interesting subjects to think about.
Of course, the idea that nobody intelligent and well read could ever disagree with you is a nice fiction, but it's exactly that. A fiction that vocal minorities like to conjure up to rationalize their own failures.
Oh, and once you want to address the actual content of my first post, feel free. My point still stands, there's been scarce little empirical work done on the ABCT. And I'm not willing to accept that empirical work would support the Austrian story as a matter of faith.
And sure enough, from the comments here:
I agree with Barkley. Capital theory has been abandoned by current economics. The absence of capital theory tells you something about current economics. It is a dead-end as even Hayek came to see. So what happens to ABCT? Beyond rudimentary observations about capital structure, I am not sure we can say much. This is why I am very sympathetic to Tyler Cowen's revision (expasnsion?) of the ABCT.
hayekianxyz: Should it not go according to plan, round up the heretics and read the Holy Scripture of Mises to them as they burn on a fire.
Should it not go according to plan, round up the heretics and read the Holy Scripture of Mises to them as they burn on a fire.
Why are you dragging Mises into this?
If I wrote it more than a few weeks ago, I probably hate it by now.
I don't feel qualified to engage in actual discussion here, but I have a question:
hayekianxyz:Capital theory is an absolutely useless exercise, and a detailed exposition of it isn't necessary to Austrian business cycle theory either. Neither Hayek nor Lachmann could resolve its problems, so there's slim chance that anybody on these forums will be the one to do so. Garrison clearly chose to elaborate upon "Prices and Production" for a reason, it's not bogged down with irrelevant issues of capital structure.
Are you implying that a proper analysis of the capital structure is no important prerequisite for understanding economic cycles? Isn't precisely this disinterest in the heterogeneity of capital a foundational error of all those schools of economics that seldom see any recessions coming?
Rettoper: "A common example of government providing a benefit to ALL citizens equally and improving living standards is the traffic light."
Oh really? How does some traffic light I never come across while driving benefit me? Because I am paying for it! And there are also people who don't drive at all. Do they also benefit from the traffic light?
By this logic, just replace "traffic light" with "bread" and you'll even have a stronger case for government benefiting all. Bread is probably more important then traffic lights. Government then should provide bread.
" for example, the Rahn Graph shows that a tax rate of zero equates to very little societal growth (presumably due to the absence of established and accepted standards and protections of private property, contracts, civil adjudication, et al that a central authority historically has insured, albeit inconsistently at best)."
Well, obviously, if you just presume that absence of government equates to absent of protection, judicial services, contracts, etc... then it's easy for you to start off with a positive number for government size. According to the Obama standard, the optimal size may be closer to 70% since he [conveniently ] presumes absent of government equates to absent of healthcare, education, etc..... The presumption is baseless. Remove it and the standard becomes 0% government.
" how would you provide for the national defense, legal disputes, private property, contracts, etc......"
Market, market, market, and market. Those things are already provided by the market except that they have been monopolized by one institution that we all call the government. All of those things you mentioned are economic goods and services. Why is it logical to exclude the above from all the other services that you think are important?
Or perhaps to ask the question differently, why can the services currently provided by the government not be provided by voluntary means just like bread, shoes, cars, insurance coverage, internet service, etc.... If those services are in demand, why must they be provided by coercion?
I swear, one of these days I'm just gunna quit worrying about all this stuff and just concentrate all of my efforts on aquiring as much money as possible.
Ignore the troll that calls himself hayekxyz. He must hold the record for "Most posts as a troll", nevertheless, he is a troll.
DD5:Ignore the troll that calls himself hayekxyz. He must hold the record for "Most posts as a troll", nevertheless, he is a troll.
I appreciate your advice, but I've had a few inspiring exchanges with him already and I do value his opinion. His views may differ from what is generally upheld here, but that doesn't make them less valid by default.
DD5, I agree that private roads with privately managed traffic lights is preferable to public roads with predictably less efficiently maintained and timed traffic lights.
however,man is a social animal, if not a rational one, and I suspect that even within a society of Mises' that a limited government structure would establish itself in short order.
Of course, I agree with you completely that most government services would be better served by the free market. However, I believe that a government framework that restricts government power (ie our constitution) is preferable to no government at all. For example, government can be employed to work against itself to maximize the benefits of freedom.
For example, the nature of man is to create government to gain power and exploit the wealth and freedoms of their fellow citizens. it is a fact of nature whether you like it or not. Then what better method have you of usurping this tendency than limited government with checks and balances as favored by our founding fathers.
Moroever, since you claim that government is not needed. Then you must reject the bill of rights, declaration of independence, and the constitution which are all constructs of government.
Also, a nation dependent on the free market for its defense would fall victim to the very mercenaries that it paid. I presume you have read machiavelli.
In summary, your theoretical arguments do not account for the tendency of men to use government to coerce and plunder their fellow man. Note that many Leftist in government understand and probably agree with the tenets of the Austrian school, yet personal gain has been shown to trump truth and justice.
Although it may be sometimes overemphasized, capital theory is not useless. In fact, it's even become a minor fad in strategic management and entrepreneurship studies to mention austrian capital theory as supporting theories of organization. I urge everyone to study Peter Lewin's work, which shows that capital theory can have real-world implications. He has a recent workig paper which summarizes his capital-based theory. One does not have to be an Austrian true-believer to find capital theory useful.
I should also note that even if the theory itself were not useful, it is excellent training in a certain way of thinking. Being able to recognize complementarity, interconnections, and heterogeneitiy is not a trivial ability.
"DD5, Your characterization of the traffic light as overly expensive or leading to a shortage of bread is not valid."
You seem to have misunderstood the example. I didn't talk about "overly expensive" or any "shortage".
The traffic light that I do not drive through no more benefits me then the bread I don't eat, or the restaurant I don't dine in, or the art show I didn't attend, yet if I was forced to pay for them for the benefit of a few others, it would be obvious that some are benefiting at my expense. A zero-sum game.
All non-voluntary exchanges result in zero-sum games. The traffic light is part of road that is financed by coercion. The monetary contribution of the true "customers", the true beneficiaries of any particular road (and its traffic lights) is negligible, since the cost is widely dispersed among everybody.
"Your rigid theoretical assertion that zero government is optimum has been disproven by reality."
Not so. Just a baseless and unfortunate assertion that everybody just assumes to be true. However, it is certainly the case that up until now, "limited government" has been disproven. See the US.
"However, I believe that a government framework that restricts government power (ie our constitution) is preferable to no government at all. "
There is no such framework. You are granting one agency monopoly power over violence in a given territory with the unlimited power to finance its activities by compulsion, i.e., taxes. Just economic law alone predicts that such a monopoly will only tend to grow, while the quality of its services will decline.
"Moroever, since you claim that government is not needed. Then you must reject the bill of rights, declaration of independence, and the constitution which are all constructs of government."
You really should read this: http://mises.org/daily/2874
or listen to it at: http://media.mises.org/mp3/audioarticles/2874_Hoppe.mp3
"Then you must reject the bill of rights, declaration of independence, and the constitution which are all constructs of government."
What freedom have they provided to you exactly?
The mistake is in not realizing that these documents and constructs are themselves coercive in nature. They inherently violate your property rights from the beginning, so any notion of government as a property rights protector is self contradictory.