Economics Questions

Re: I'm curious how many here have read the alternatives?

archon — Thu, 23 Jun 2011 02:00:01 GMT

True... no one "school" of economics is perfect, but Austrian is much closer than Keynes. I, for one, think the greatest benefit to society from this current economic recession/ depression/ whatever is that Keynesians are almost completely discredited by their failure either to predict it or to fix it. I don't recall any Keynesians who saw it coming, and the Keynesians who tried to fix it all failed in their predictions that spending $3 trillion would make it better. Quite the opposite - the economy seems to be worse off after all that extra government spending.

Of course, I don't expect the Keynesians to admit failure... like Krugman, they'll all say it didn't work because the government didn't spend *enough* - "It would have worked if we spent $8 trillion instead of $3 T".

Re: I'm curious how many here have read the alternatives?

Caley McKibbin — Sat, 18 Jun 2011 02:54:14 GMT

I was talking about people like claudius (p.1).

Re: I'm curious how many here have read the alternatives?

EconomistInTraining — Sat, 18 Jun 2011 01:31:20 GMT

I'd like all of the elusive commentators that pop up here frequently with hit and run posts about math to start giving their background. Mine: I won an award for the highest math score in my county and generally pretty much aced math all through school (random calculation errors and all that) while skipping grades. "Wild" guess: they are all Joe Average. (Minus sarcasm: I guarantee they are internet posers.)

Well, here's my background. I'd say I'm an individual of above average intelligence who is pretty curious about all economics and all that stuff and enjoys the course he's taking. Of course, while I do enjoy quibbling over these things on the internet from time to time, I have other preferences that get in the way of really mastering the subject or getting good grades. These include, but are not limited to drinking beer, playing tennis & golf, eating good food, chasing tail and getting in some quality broments.

Posing over!

Re: I'm curious how many here have read the alternatives?

z1235 — Sat, 18 Jun 2011 01:29:17 GMT

EconomistInTraining:

But other than that I don't think there are too many other laws of human behaviour, there are empirical regularities and assumptions that we can make, but it seems to me (and correct me if I'm wrong) there are many more laws in physics than there are in economics.

So what? Must non-existent laws be invented just so papers can be published and academic careers maintained?

No doubt, you fail to explain something and then you use the existing body of economic theorizing to look at why. You change to model and put it to the test again, and so on and so forth. And this is how we can expect our body of economic knowledge to grow.

In real sciences that's called curve-fitting and it's useless most of the time. It's used by pseudo-scientists to make themselves look sophisticated and scientific in layman's eyes. And to publish papers, of course. Every new curve-fit, accomodating fresh data, is a justification for yet another paper that "improves" on the ones before.

Re: I'm curious how many here have read the alternatives?

EconomistInTraining — Sat, 18 Jun 2011 01:26:39 GMT

I wasn't necessarily agreeing with your assertion. I was just pointing out how you refuse to even mention that Austrian theory is the most caricatureized of any. What is the point of accusing a wrong that you yourself are guilty of? Even if the other side is guilty as well, how in the world does that help your case? You seem to think that "two wrongs don't make a right" is a valid trump of being a pot calling a kettle "black."

I agree Austrian economics is caricatured, and I don't think "two wrongs make a right" is a valid trump of being a pot who happens to be calling a kettle African American. Of course, I do think that if Austrians want to be taken seriously they should start taking their opponents seriously, you guys are only making yourselves easier to dismiss by attacking ridiculous strawmen of modern economics.

Seriously, is the Internet getting so crowded that teenage girls are spilling over into economics forums?

If only attractive (late) teenage girls well spilling over in economics forums! But seriously, I didn't really want to get into an inane bout of quibbling over who has mentioned Keynes and when. For what its worth, the data is that there's at least ten pages of Mises daily articles mentioning Keynes, so he's definitely somewhat talked about on t hese parts of the internet.

1) You have no idea who I am or what I've read. You really don't want to go there.

2) I wasn't asking for examples of "a decent Intermediate Micro/ Macro II book". I was asking for examples of this "lot of stuff that flies well under the radar of most Austrian discussion". Please provide some specifics as to significant and important aspects of economics that are found in intermediate textbooks that are ignored in Austrian discussion.

Actually, I kinda do want to go there. See, asbkebabs has credibility because he's taken courses in the stuff that he disagrees with. If you've not done the same then I think I'm going to assign a little less crediblity to your arguments when updating my priors! So please, list the classes in economics you've taken or at least the textbooks you've read. If the list is to extensive a represenative sample of your economics education will suffice.

Basically any model in macro besides IS-LM, every model in IO, a whole bunch of awesome micro stuff and a lot of the stuff in public economics (except the stuff that suits libertarians, like rational voting, log rolling and the rest of public choice). Like I said, the list is pretty big so you'd best go check the textbooks yourselves, who knows, you might learn something.

Austrians don't have problems with thought experiments. They have problems with forming policy based on untrue assumptions.

Austrians make assumptions true, such as "firm names don't count that much when you're trying to explain a recession" or "color of headquartes of firms doesn't explain differences of wealth all that much". They're pretty realistic and common sense, but they can't be deduced from any axiom. That's the thing though, you can't tell how important these assumptiond are unless you actually take a lot at the data, which I don't think Austrians do enough.

By the way, Austrian economics does make unrealistic assumptions. Like, the fact that people only have one discount rate is kinda not true according to most experimental/ behavioural research.

Which recession are you asserting Austrian theory did not predict or cannot explain?

I'm asking you to show which ones it did explain rather than blithely asserting it!

Re: I'm curious how many here have read the alternatives?

EconomistInTraining — Sat, 18 Jun 2011 01:08:02 GMT

Thanks for thee birthday wishes, indeed I do get the feeling we're arguing past each other. Or perhaps now I'm retreating with my tail between my legs in the face of two people agreeing with each other, both of whom are quite a bit more educated than one another (that's what I get for using a physics analogy out of ignorance I guess!)

But let me try to restate my postition a little more clearly, I think you can (and modern economic theory does) state a few laws about human behaviour, my first example would be diminishing marginal utility (something Austrians agree with) that are self evident and should be taken as axioms. But other than that I don't think there are too many other laws of human behaviour, there are empirical regularities and assumptions that we can make, but it seems to me (and correct me if I'm wrong) there are many more laws in physics than there are in economics. After this its necessary to applies this little economic theory combined with some empirical observations or assumptions to specific situations in the form of a model, using statistical methods to find the fit of the model. To take an earlier example I used, look at IO, if we come up with model in which one firm moves first by deciding the quantity it will produce and whether or not to merge and make a few reasonable assumptions about costs then you can come up with a model that does a pretty good job explaining merger waves. Of course, this model omits plenty of factors and its up to empirical methods to decide whether those missing factors would change the implications in any meaningful way, of course the name of firm for example wouldn't. Moreover, basic economic theory is important in all of this. If you change the basic facts of economic thinking such as diminishing marginal utility the demand curve would be very different etc.

But the fact remains that without some heavy empirical work about how firms set prices or how firms interact (sequential or not) you're basic facts of economic reasoning aren't going to get you much mileage. I guess the key point I'm making is that we need an interaction between theory and empirics that I think Austrian economics is a little short on. You start with some very basic facts and then use these to explain empirical phenomena, you develop a model and put it to the test against the data and then see how well it does. No doubt, you fail to explain something and then you use the existing body of economic theorizing to look at why. You change to model and put it to the test again, and so on and so forth. And this is how we can expect our body of economic knowledge to grow.

By the way, I read this recently and found it interesting, maybe you might too: http://economiclogic.blogspot.com/2011/03/modelling-without-theory.html

I don't think I've said this yet (and maybe even called you a little arrogant) but I actually enjoy your posts, they're informed and cause me to think pretty deeply over these issues more than most of the stuff on this forum (even if you're still wrong :p) so props to you for that.

Re: I'm curious how many here have read the alternatives?

Caley McKibbin — Sun, 12 Jun 2011 08:43:36 GMT

I came upon mises.org only as an accident of looking for something in a subject that was until then entirely mysterious to me. After that I began paying attention to commentary by economists in the media. After hearing a painful amount what the typical, representative economist has to say on various matters I lost all interest in the "alternatives". It's a good thing that I did not listen to economists before I studied AE. Otherwise, I would most likely have shut myself off to the subject before learning anything about it.

Re: I'm curious how many here have read the alternatives?

abskebabs — Sat, 11 Jun 2011 19:36:08 GMT

Happy belated birthday btw!(if it was yours)

It's strange in a sense, sometimes I feel like we're all arguing past each other. If what you've described as the goal of economic modelling were to be understood and confined to that description, then it would not constitute economic theory but an empirical branch/attempt to do economic history. For instance in accord with Menger's goods theory you'd use it to carry out statistical analysis to check the effects of changes in prices of fairly specific complementary factors on each other's prices in particular historical situations(Menger cites the stop of cotton imports following the American civl war as a good example, considering its effects on the prices of complementary factors in cotton goods industries and the wages of associated specific labour). In short you'd use it to do what praxeology alone cannot do, to give you a clue as to "how much" as well as the "what." But if you think you're going to use real R squared values to "test" the fact that the goods value of 2nd order goods specific to producing bread don'tl exist when you lack one of the complementary factors, e.g. flour, then you are nothing more than severely mistaken to the point of absurdity.

But just as the models of engineering don't "test" the laws of physics they apply, neither would economic models "test" economic laws(especially if they are built from assumptions already known to be categorically false, in which they would be little more than vain mental masturbation). You are probably right that what can be said by pure economic theory is limited without an understanding of history. I don't think anybody would dispute that. This doesn't make it not a worthwhile endeavour however, and neither would history supercede economic theory as so many seem to have misunderstood since Menger started the Methodenstreit.

Re: I'm curious how many here have read the alternatives?

EconomistInTraining — Sat, 11 Jun 2011 03:18:04 GMT

abskebabs, I knew if I was going to try to get that shit past you it wouldn't fly haha! I'm not going to argue about the natural sciencies with you, but I do think that when you say this:

his has NOTHING to do with modelling, which simply refers to the practical application of physical laws in certain scenarios, reasoning as to what factors we can ignore and to what approximation.

That sounds a lot like what goes on in economics, economists will try to find a simplified model of economic phenomena and put it against the data to find out what forces are the most important etc. But maybe I'm not getting what goes on in the natural sciences. Of course, I'm not sure there are too many (if any) laws in economics (diminishing marginal utility/ marginal returns?) at least not as I understand them in the natural sciences.

As to the rest of you, I dissapeared cause my professors wouldn't let me get a grade for posting here! That and I had birthday celebrating to do, I'll get back to all of you soon enough.

Re: I'm curious how many here have read the alternatives?

BlackNumero — Fri, 10 Jun 2011 20:54:29 GMT

Its good to read the alternatives, after a point you will become a better economist not by reading more Austrian works but by reading more Neoclassical works (since you will better understand Austrian critiques about them, become more knowledgeable about mainstream economics, and sharpen your critical thinking skills). You don't necessarily have to read JMK's GT to critique Keynesianism, a much better book to read would be a modern macroeconomics textbook (such as one by Mankiw etc).

Re: I'm curious how many here have read the alternatives?

Evilsceptic — Fri, 10 Jun 2011 14:55:56 GMT

I plan on finishing MES +HA and some other core works before moving on and read some more mainstream stuff. I don't see any difference between this and starting with the mainstream stuff and reading austrians later, and it is certaintly less dogmatic than ignoring the austrian school entirely.

Re: I'm curious how many here have read the alternatives?

Jack Roberts — Fri, 10 Jun 2011 00:01:14 GMT

I have not read the alternatives. I received basic mainstream economic education up to the end of high school. They taught me about the business cycle etc. I have no interest in reading up on mainstream intricate mathematical models of macroeconomics because i get my economic education from youtube videos (joke). But there are definitely more mainstream economists that have never heard of Austrian economics, than there are Austrian economists who have never had the privilege of being educated in mainstream economics. I would be willing to read some good books on what would be considered mainstream economics if you could suggest some, but as time is short and there are so many good books that i have still yet to study from the Austrian school. It is unlikely that I will spend too much time on them, if i did it would probably only give me a better way to convince mainstream economists to become Austrian economists.

Re: I'm curious how many here have read the alternatives?

Rcder — Thu, 09 Jun 2011 23:11:14 GMT

I'd like all of the elusive commentators that pop up here frequently with hit and run posts about math to start giving their background. Mine: I won an award for the highest math score in my county and generally pretty much aced math all through school (random calculation errors and all that) while skipping grades. "Wild" guess: they are all Joe Average. (Minus sarcasm: I guarantee they are internet posers.)

And so modest! (I kid, I kid).

But it seriously baffles me that these people expect to intimidate us with their ability to solve "complex" DSGE equations. They way they throw out these terms makes it sound like they're a concept they spent three minutes reading on Wikipedia, declared themselves masters of the subject, and then decided to throw it in our faces as some sort of blot against out intelligence. I'm by no means savvy in economics, seeing as its a subject that I've only had time to study off and on for the past year, but even I can see through this facade.

Re: I'm curious how many here have read the alternatives?

czelaya — Thu, 09 Jun 2011 19:15:50 GMT

I support that arguement askebabs.

Re: I'm curious how many here have read the alternatives?

abskebabs — Thu, 09 Jun 2011 17:47:24 GMT

Right, except, no because that theory would lead to a whole bunch of bullshit predictions. A better example would be when physicists assume that there is no friction, of course, it isn't literally true, doesn't mean that the model is useless though.

You know I was kind of going to respond in this thread in your favour, because as I've said before, I do think it would do much good if Austrians who are interested in serious intellectual debate read neoclassical economists and their textbooks more seriously. But this kind of bull you've just cited annoys me to no end.

Theories in the natural sciences are built from hypotheses, or more precisely hypothetical propositions used from whom consequences are traced, and when these predictions do not accord with observation they are falsified, but not proven true, since false premises can yield true conclusions. The entire point of this methodology is to refute hypothetical premises concluded to be false. This has NOTHING to do with modelling, which simply refers to the practical application of physical laws in certain scenarios, reasoning as to what factors we can ignore and to what approximation. "Modelling" NOTHING to do with the discovery of physical laws, if you want to emulate the natural sciences then you should perhaps learn the entire point of their methodology, and certainly not mistake empirical corroboration of conclusions of false premises as somehow corrobrating your "theory" built from a tissue of fallacies.