Economics Questions

Re: What sort of empirical evidence would it take to contradict Austrian economics?

chloe732 — Tue, 11 May 2010 03:51:21 GMT

Hayekianxyz: "Empirically different cycles throughout history have presented themselves in different ways with regards to labour markets, financial markets, goods markets and the like, these different phenomena require different explanations. "

Umm, did you forget to include central bank intervention in your list? An oversite?

Re: What sort of empirical evidence would it take to contradict Austrian economics?

hayekianxyz — Mon, 10 May 2010 02:34:46 GMT

Please refer me to material that explains business cycles and general macro-economics better than the capital theory. Thanks.

*tumbleweed rolls by*

Because to ask that question is to miss the point entirely. There's no such thing as a general theory of business cycles, even if the Austrian story is logically valid and theoretically unproblematic (which it isn't), that doesn't mean to say that it has any explanatory power for any recent business cycles. Empirically different cycles throughout history have presented themselves in different ways with regards to labour markets, financial markets, goods markets and the like, these different phenomena require different explanations. And if I recall correctly, Mises original statement of the business cycle was limited to the contemporaneous housing bubble in Vienna.

Re: What sort of empirical evidence would it take to contradict Austrian economics?

Caley McKibbin — Mon, 10 May 2010 02:07:23 GMT

Please refer me to material that explains business cycles and general macro-economics better than the capital theory. Thanks.

*tumbleweed rolls by*

Re: What sort of empirical evidence would it take to contradict Austrian economics?

Giant_Joe — Mon, 10 May 2010 00:35:03 GMT

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?

Any theory or variation of a theory that better explains economics. That is a value judgment, of course. What turned me on to AE was the video "Peter Schiff Was Right"

Now if Austrians are wrong about something, where someone else is right, and has been at least as correct as the Austrians, then I'd take a look.

I'm quite happy with the empirical approach when it's applicable and works well. But I've found in the case of economics that the Austrians have got it more correct than anyone else with the deductive approach.

Re: What sort of empirical evidence would it take to contradict Austrian economics?

chloe732 — Sun, 09 May 2010 19:21:10 GMT

DD5- "Listen, a dose of reality. The US is not going to scale itself back to any constitution. It may eventually scale back, but not because the US Constitution will have anything to do with it. It will do so in the same way that other governments have scaled back in the past - By economic turmoil and collapse!"

Rettoper: "I haven't been following Austrian theory for long, but I found a reasonable rebut to your opinion in short order on this site:

http://mises.org/media/4824"

This doesn't refute anything DD5 said. Riggenbach takes a big tube of lipstick and smears it on the face of a pig.

His first example of how things are getting better is to point out that slavery was abolished. But, it was government that enabled slavery to exist, it was government that caused the war that killed 600,000 people, it was government that enforced Jim Crow laws for 100 years. Gee, it sure was nice of government to finally relent on these things. Point: All of these ills were the creatures of government. He goes on to mention women receiving the right to vote. But, then he goes on to talk about the entitlement mentality. But "voting" enables this mentality. Therefore, what difference does it make if women have the right to vote. What do they, or anyone, ever vote for? Fewer benefits? Who do they vote for? Republicans or Democrats. Case closed.

I see Riggenbach's list on Media, I'm sure he has tremendous credibility while I have none. But, his comments about "the long run" don't hold water. Our liberties are vanishing before our eyes, the government has steered the economy into a black hole, the debt load and future entitlements are not sustainable, the central bank possesses the power to destroy the monetary system.

DD5 is right. Liberties will increase, but this will due to the conditions he describes, not the Pollyanna notions described by Riggenbach.

(this thread has wondered from the original post, but it was difficult to remain silent on the Riggenbach issue)

Re: What sort of empirical evidence would it take to contradict Austrian economics?

Anonymous — Sun, 09 May 2010 17:24:55 GMT

Listen, a dose of reality. The US is not going to scale itself back to any constitution. It may eventually scale back, but not because the US Constitution will have anything to do with it. It will do so in the same way that other governments have scaled back in the past - By economic turmoil and collapse!--DD5

Wrong, throughout US history are examples of steady and inexerable increases in freedoms. Moreover, over the last 30 years our dynamic political system has demonstrated the ability to make 180 degree shifts in direction without violence

I havent been following Austrian theory for long, but I found a reasonable rebut to your opinion in short order on this site:

http://mises.org/media/4824

The Constitution within our Federal framework can be attenuated to increase freedoms and reduce government over time. 200 years of increased freedoms, security, prosperity, and incredible innovation and improved living standards should not be discarded so readily for a fanatical adherence to a doctrine whose outlook is "turmoil and collapse"

Moreover, I challeged the Austrian system to provide for national defense in a world of expansionist despotic regimes and the link you offered was lacking at best.

according to Murphy, the free anacharist society would depend on private insurance companies to hire private armies to defend "paying customers". Like many Austrian tenets, in theory acceptable, in practice dangerous at best.

the efficacy of mercenary armies is best debunked by Machiavelli. History is full of their betrayal, incompetence, and cowardice relative the the experience of the US and UK military. Moreover, their allegiance is based on the highest bidder. To overthrow a free anarchist society no matter how wealthy only requires an predatory alliance with a bigger bankroll.

Lastly, Murphy's free anarchist's answer to nuclear weaponry was to place its trust in despotic warlike societies because "they wont attack a prosperous neighbor that they can trade with" --- this is absurd. It is preferable to put our trust in the USMC versus Hitler, Stalin, Tojo, Mao, et al. Note that the US military to date has not even remotely interfered with the civilian government. IN summary, the system is not perfect, but it has worked splendidly over the last 250 years to improve living standards, security, freedoms, and peace.

It is far preferable to your "turmoil and collapse"

Nonetheless, thanks for the links -- they are informative and thought provoking. Note that I agree with 99% of the arguments offered by Austrian theory. However, it is beneficial to challenge the more extreme and rigid these tenets (private defense in this case) whenever possible.

I will respond to private law when I review more material on this matter.

Re: What sort of empirical evidence would it take to contradict Austrian economics?

Jesse Forgione — Sat, 08 May 2010 18:09:34 GMT

The argument that Austrian economic theory is not falsifiable is not appropriate since the theory, as such, doesn't make factual claims about data.

The empirical data of human action is necessarily complex and cannot be isolated and measured like other phenomena. It can only be interpreted in the context of some theory.

So-called "empirical economics" is still interpretive, but without a coherent deductive theory derived from the axiom of action, the fact that humans act to realize their preferred ends.

An economist who says he's observing data without interpreting it according to a certain theory of economics is either lying to smuggle in a fallacious theory, or only doing the job of a recording device.

Re: What sort of empirical evidence would it take to contradict Austrian economics?

DD5 — Sat, 08 May 2010 03:58:02 GMT

Rettoper: "- the US Constitution may be the best vehicle to achieve this beneficial change."

You cannot establish a social system based on voluntary and peaceful cooperation by institionalizing a system of legalized theft and murder at its heart. Government is an anti-social system. It's wide public support is based on myths and fallacies. It's no different then the myths surrounding regulations, welfare helping the poor, and government must supply our money. You should learn about this topic more in depth before you reject it. You cannot achieve freedom by just repeating all of the same classical liberal mistakes.

Re: What sort of empirical evidence would it take to contradict Austrian economics?

Esuric — Sat, 08 May 2010 03:19:54 GMT

I'd like to add one more thing: No one is saying that to be an Austrian economist one must ignore the works of all other schools of thought. All we're saying (at least, all I'm saying) is that the Austrian framework, in its entirety, is the most logically consistent and well developed framework (again, relatively speaking). An Austrian would do well to read Shackle, Winter, Coase, Williamson, Stigler, Keynes and others.

Re: What sort of empirical evidence would it take to contradict Austrian economics?

ziragt — Sat, 08 May 2010 03:13:23 GMT

Esuric is right. Lachmann's work on expectations is some of the best work on the subject. To get the whole picture on expectations, combine Kirzner and Lachmann, then compare that to what's used in today's DSGE work. The problem is that this picture of expectations is not easily formalizable.

What Austrians need is someone capable of mathematically formalizing Austrian views on expectations and uncertainty. After all, if Shackle was able to formalize his own form of radical uncertainty, why can't we do so as well?

Re: What sort of empirical evidence would it take to contradict Austrian economics?

AarontheCurious — Sat, 08 May 2010 03:00:35 GMT

It is entirely possible that there are some deductive errors somewhere along the way.

To me Austrian Economics is not independent of empirical evidence, if I saw that these theories were not congruent with reality I would not subscribe to them anymore

it is just that we don't use the data to come up with theory, it is qualitative

Re: What sort of empirical evidence would it take to contradict Austrian economics?

Esuric — Sat, 08 May 2010 02:55:35 GMT

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.

Hayek and Lachmann's work on capital was a major step forward for economics as a science. The fact that this monumental breakthrough has not been fully appreciated/grasped is entirely immaterial; the mainstream still doesn't understand subjective value theory. Either way, you don't know enough about capital theory to actually critique it.

Various schools of thought (Behavioral, New Institutional, ect) have only recently discovered insights which were introduced by the Austrian's over a century ago.

but the fact remains that whatever your opinion on capital theory, it's only one part of the story and there are others that Austrians haven't paid much attention to that are also important, like money (to which monetarists have paid attention) and expectations (to which most economics have paid attention, but more relevantly Tyler Cowen I suppose).

Have you ever read any of Lachmann's work? You simply don't know what you're talking about.

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.

Argumentum ad populum for the 10,458th time. I understand that you're not a stickler for logic, but your belligerent rants are not intellectually stimulating nor can they ever refute the Austrian framework.

Re: What sort of empirical evidence would it take to contradict Austrian economics?

yessir — Sat, 08 May 2010 02:42:01 GMT

like money

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Have you read "The Theory of Money and Credit"? enoug talk about money...

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as if it's the sole cause of every business cycle, as opposed to other macro-economic phenomena like money, labour markets and the like.

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explain to me how money causes business cycles, withouth using the capital structure?

Re: What sort of empirical evidence would it take to contradict Austrian economics?

hayekianxyz — Sat, 08 May 2010 02:14:14 GMT

As Leland Yeager points out in his article in "Austrian Economics in Debate", Austrians have chosen to focus on capital. Whether or not this focus has been productive is up for debate, certainly there is insight to be gained from disaggregating capital to some extent and clearly the excessive focus on things like "orders of goods" have been counter-productive. But the fact remains that whatever your opinion on capital theory, it's only one part of the story and there are others that Austrians haven't paid much attention to that are also important, like money (to which monetarists have paid attention) and expectations (to which most economics have paid attention, but more relevantly Tyler Cowen I suppose).

And this is the general problem with a lot of the talk about the ABC theory, people seem to focus exclusively on the capital structure, as if it's the sole cause of every business cycle, as opposed to other macro-economic phenomena like money, labour markets and the like.

Re: What sort of empirical evidence would it take to contradict Austrian economics?

yessir — Sat, 08 May 2010 02:06:57 GMT

Capital theory is an absolutely useless exercise

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Please refer me to material that explains business cycles and general macro-economics better than the capital theory. Thanks.