Economics Questions

Re: Some Thinking w.r.t. Austrian Economics

Sage — Thu, 07 May 2009 18:32:09 GMT

GilesStratton:
Raising a price above the market clearing level will, ceteris paribus, lead to excess supply, in other words in will lead to unemployment, how is it not apodictically true?

Or to put it counterfactually, a MW above the market clearing level will cause more unemployment than if the MW was not implemented.

Thedesolateone:
They said that this was the problem; reduce Austrianism to its key premises (i.e. leaving the theory purely praxeological) gives us no useful knowledge, but expanding it requires the input of empirical observations (e.g. in this example the idea that many employers/consumers through competition, value their money over the extra satisfaction gained by effectively charitably donating to the workers whose marginal productivity is now below the wage they would have to be paid).

Praxeology is based on conditional (if—then) statements. The theory must be applied to reality, i.e. the apriori theory is combined with empirical observations to produce useful knowledge. For example, along with the action axiom, there are also the subsidiary empirical axioms that nature is diverse, and labor is a disutility. Empiricism is not the nemesis of praxeology.

Thedesolateone:

By the way, is it this one:

http://mises.org/journals/scholar/long.pdf

Or this one:

http://praxeology.net/antipsych.pdf

The antipysch article is basically a shorter version of the book, so read it first.

Re: Some Thinking w.r.t. Austrian Economics

Jon Irenicus — Thu, 07 May 2009 18:02:43 GMT

Yes, I printed it out too. It's a great read but not worth that much IMO.

Re: Some Thinking w.r.t. Austrian Economics

Thedesolateone — Thu, 07 May 2009 17:58:05 GMT

At a tasty £80, it has to be done!

http://www.routledge-philosophy.com/books/Wittgenstein-Austrian-Economics-and-the-Logic-of-Action-isbn9780415329484

What am I saying? It can be done for only £62. Bargains galore!

http://www.amazon.co.uk/Wittgenstein-Austrian-Economics-Logic-Action/dp/0415329485/ref=pd_nr_b_6?ie=UTF8&s=books

It seems like I'll have to read it online or get my father to print it for me at his work

Re: Some Thinking w.r.t. Austrian Economics

Jon Irenicus — Thu, 07 May 2009 17:48:14 GMT

Former.

Re: Some Thinking w.r.t. Austrian Economics

Thedesolateone — Thu, 07 May 2009 17:46:46 GMT

By the way, is it this one:

http://mises.org/journals/scholar/long.pdf

Or this one:

http://praxeology.net/antipsych.pdf

Re: Some Thinking w.r.t. Austrian Economics

Jon Irenicus — Thu, 07 May 2009 17:38:13 GMT

Maybe recommend the book to them too, if they're serious about learning, seeing as you'll be spending your next few academic years there.

Re: Some Thinking w.r.t. Austrian Economics

Thedesolateone — Thu, 07 May 2009 17:27:19 GMT

Jon Irenicus:
Have you read Long's book on Wittgenstein and Austrian econ?

No, but I will.

Jon Irenicus:
To sum it up, Austrian econ is empiricist in the classical sense of the word of taking highly certain truths known introspectively through action, as well as certain subsidiary postulates (e.g. disutility of labour), then proceeding to deduce its theorems thence.

I believe I had been moving towards that conclusion.

Jon Irenicus:
anyone but a well-versed Kantian is equipped to understand what truths that are synthetic a priori are.

I certainly wouldn't consider myself a well-versed Kantian - but I understand synthetic a priori to an extent. I think a misunderstanding for me comes with what you were explaining to me before (before in the long term sense - this was months ago). Something about not being able to know, but the type of knowledge being a priori. On this I am shaky.

Re: Some Thinking w.r.t. Austrian Economics

Jon Irenicus — Thu, 07 May 2009 17:14:19 GMT

The two Libertarian Society members I was having dinner with (prior to the lecture) were of the opinion that Austrian economists make unacceptable assumptions and while pretending not to believe in anything empirical, actually make judgements based on empirical fact.

Quite simply, they're ignorant. What more can I say? Have you read Long's book on Wittgenstein and Austrian econ? It's short and it deals with these questions. To sum it up, Austrian econ is empiricist in the classical sense of the word of taking highly certain truths known introspectively through action, as well as certain subsidiary postulates (e.g. disutility of labour), then proceeding to deduce its theorems thence. It is not if the word is construed narrowly to only include positivism/falsificationism, and usage of the hypothetico-deductive method. Mises couches praxeology in very Kantian terms, and unfortunately this means anyone but a well-versed Kantian is equipped to understand what truths that are synthetic a priori are. Nor do they make the effort to learn. Gets on my nerves.

Re: Some Thinking w.r.t. Austrian Economics

Thedesolateone — Thu, 07 May 2009 16:52:29 GMT

Yeah I think that's what I was trying to get at in my last post

Thanks for helping me clear that up

Re: Some Thinking w.r.t. Austrian Economics

hayekianxyz — Thu, 07 May 2009 15:34:55 GMT

Thedesolateone:
Surely we cannot predict whether or not the actors in question will decide that they actually favour paying above marginal productivity wages?

I suppose the most simple answer is to say that the money they're paying above the market clearing rate is money they're spending on a consumer good. Therefore once the minimum wage is raised (or imposed) the quantity of labour demanded for production purposes falls but the amount demanded for "consumption" purposes stays the same or at least offsets the drop in amount of labour demanded.

Re: Some Thinking w.r.t. Austrian Economics

Thedesolateone — Thu, 07 May 2009 15:27:51 GMT

GilesStratton:

Raising a price above the market clearing level will, ceteris paribus, lead to excess supply, in other words in will lead to unemployment, how is it not apodictically true?

Whether or not it happens in a particular instance is a different question, but that's not a praxeological concern, that's thymology.

Surely we cannot predict whether or not the actors in question will decide that they actually favour paying above marginal productivity wages?

Or am I misunderstanding you/the question - are you saying that: if those were the preferences of the actors, they would have already expressed them in action? And thus we can predict that unemployment will result as the actors have already (through inaction) declared their preferences not to charitably fund extra wages to workers?

Re: Some Thinking w.r.t. Austrian Economics

hayekianxyz — Thu, 07 May 2009 15:09:09 GMT

Thedesolateone:
To back this up they asked me the question (as someone who considers themselves an Austrian economist) "Would a minimum wage law lead to an increase in unemployment?". I said that it wasn't apodictically true/logically necessary (from Austrian axiomatic premises) that it would.

Raising a price above the market clearing level will, ceteris paribus, lead to excess supply, in other words in will lead to unemployment, how is it not apodictically true?

Whether or not it happens in a particular instance is a different question, but that's not a praxeological concern, that's thymology.

Thedesolateone:
They said that this was the problem; reduce Austrianism to its key premises (i.e. leaving the theory purely praxeological) gives us no useful knowledge, but expanding it requires the input of empirical observations (e.g. in this example the idea that many employers/consumers through competition, value their money over the extra satisfaction gained by effectively charitably donating to the workers whose marginal productivity is now below the wage they would have to be paid)

It seems they don't have an accurate grasp of what praxeology is. Praxeology is entirely hypothetical, as I said before it can tell us the ceteris paribus effects of a price floor above the market clearing price. Alone, it cannot tell us what happens in any particular case.

Thedesolateone:
They did try to employ the famous study in the US where empirical study led to "evidence" that minimum wages did not create unemployment, but of course I completely ignored this rubbish. I'm sure there are just as many studies proclaiming the other conclusion, and either way none of this "evidence" constitutes proof or even substantive backing for the conclusion that minimum wages are neutral to unemployment.

Block commented on this actually, he stated that when that study came out a number of mainstream economists said that the study must br wrong, they said that according to economic theory the minimum wage should always cause increases in unemployment. He also said what he found interesting was that if a mainstream economist is doing a study, they'll collect evidence and do what they will with it and if it fits the theory they're trying to "test" then that's all good. Otherwise, they'll think there's something wrong with the way they collected the data and go back and collect another sample, they'll do this until they have results that fit their theory. When in reality, according the empiricism it should be the other way round, they should see the results of the data they've collected and change their theory. In other words, they don't practise what they preach.

Some Thinking w.r.t. Austrian Economics

Thedesolateone — Thu, 07 May 2009 12:29:09 GMT

This stems from a dinner/lecture/pubchat I went to yesterday evening with the Oxford University libertarian society. The lecture was by Ralf Bader, who is an expert on the thought of Robert Nozick in general and on Anarchy, State and Utopia in particular (he wrote the most recent Cambridge guide to Nozick, and has just finished writing his own book on Nozick's thought). He teaches Kant at the University of St. Andrews, I believe. Anyway, we were chatting about historical instances of the market, the genesis of the state, the concept of self-ownership (is it coherent?), better words to express the idea etc. etc.

Anyway, we, inevitably as I was wearing my Rothbard "Enemy of the State" t-shirt, got onto the issue of Austrian Economics. The two Libertarian Society members I was having dinner with (prior to the lecture) were of the opinion that Austrian economists make unacceptable assumptions and while pretending not to believe in anything empirical, actually make judgements based on empirical fact. To back this up they asked me the question (as someone who considers themselves an Austrian economist) "Would a minimum wage law lead to an increase in unemployment?". I said that it wasn't apodictically true/logically necessary (from Austrian axiomatic premises) that it would. They said that this was the problem; reduce Austrianism to its key premises (i.e. leaving the theory purely praxeological) gives us no useful knowledge, but expanding it requires the input of empirical observations (e.g. in this example the idea that many employers/consumers through competition, value their money over the extra satisfaction gained by effectively charitably donating to the workers whose marginal productivity is now below the wage they would have to be paid). As far as I can see, pure praxeology cannot answer this question, and thus cannot say for sure that unemployment will result.

They did try to employ the famous study in the US where empirical study led to "evidence" that minimum wages did not create unemployment, but of course I completely ignored this rubbish. I'm sure there are just as many studies proclaiming the other conclusion, and either way none of this "evidence" constitutes proof or even substantive backing for the conclusion that minimum wages are neutral to unemployment.

My question is: does Austrian economics require empiricism, its nemesis, in order to conclude most of the judgements we often do conclude?

N.B. I have read Hülsmann's Toward a General Theory of Error Cycles and I believe this does a good job of "cleaning Austrianism up" with regards to ABCT.