I read this comment on Krugman's blog that I found relevant to a question I've been thinking:
"As a recovering Austrian economist, I think that the key flaw in Austrian economics is its insistence that economics is an a priori rather than an empirical science. As a result, when empirical evidence supports their positions, they use it. When empirical evidence falsifies their positions, they declare that it's irrelevant because economics is a priori."
This got me thinking back to an inconsistency that I first noticed in Jim Cox's "The Concise Guide to Economics". One such example is his discussion on the Phillips Curve: http://www.conciseguidetoeconomics.com/book/phillipsCurve/
His claim: "Once workers realize that inflation is not undermining the value of money as rapidly as they had anticipated, they lower their wage expectations thereby shortening the duration of the job search and reducing the unemployment rate."
...is then supported by brief statistics showing a relationship between year, inflation, and unemployment. Is this not empirical support? As a newcomer to Austrian Economics, everywhere I have read informs me that there are too many variables for empiricism to be a valid way to understand the economy.
what Michael said.
Also, something becomes an empirical issue when theory says that there are factors that counteract each other. Then you have to measure which effect dominates and try to see why(sometimes this is also influenced by outside factors). Even in some(probably many) of these cases where it's an empricial issue, there is likely no way to calculate the overall effect coming from a specific factor.
I agree with Krugman's point on this, which is a horrifying manifestation of precisely what I've been warning about for some time:
The Rothbardians (not real Austrians) ignore the facts, history, and metrics whenever they feel like it, and then suddenly get interested in using them in those isolated cases where they seem to support the point desired...and this leaves socialists like Krugman and Bernanke with a powerful weapon to discredit REAL Austrian thought.
I just replied to another post, in fact, where this comes up...
Tom Woods tries to claim that everyone living in the Long Depression was wrong about how bad it was, based on his use of METRICS that claim prices fell, yet somehow the economy was just wonderful.
Meanwhile, Rothbard refused to accept the clear metric evidence that the 1920s were not an inflationary boom, but in fact a period of price stability, while he was wrongfully claiming that the Great Depression was caused by that boom, and somehow NOT by the Fed contracting the money supply by 30% in 1929.
Likewise, Rothbardians claiming that the current economic depression was caused by INFLATION of the money supply in the 2004-2008 period, when any examination of the facts shows that the growth of the domestic money supply was at a 60 year low during that period, could be refuted by anyone with a simple chart...leaving me to dread someone like Woods or Murphy actually being confronted by such a chart in a debate with someone like Krugman or Bernanke.
We'd end up with Rothbardianism being debunked...but with Austrianism being seen as discredited, in its aftermath. The former is deserved, the latter would be a disastrous fallacy.
There is no such thing as conflicting data. Only interpretation of data can conflict.
Just thought I'd quote that, because it is very true. Assuming reality is unable to contradict itself, this is exactly true. If you've got conflicts, then either the data was obtained using faulty methodology, or you're interpreting it wrong.
Kaz makes a great point. It's important not to fall into that trap. Something only becomes an empirical issue when theory (which should be logically deduced, though these deductions themselvse are based on empirical observations such as people acting and such) shows there to be forces in play that counteract each other. Then it becomes an empirical issue to measure the magnitude of each effect or simply see which one wins out. Then there is of course trying to explain why the winning outcome won out.
Its a myth to say that Austrians don't use empirical evidence... We criticize the mainstream economists for using empirical evidence for TESTING theories and economic law. But to Austrian Economists, we do not need to test basic economic law because economic law is just fact. For example, we do not need to test that a circle has 360 degrees, it is just fact that a circle is 360 degrees. Same thing applies to economics, we do not need to test the law of demand because we already know it as fact... Austrian Economists use empirical evidence to ILLUSTRATE economic theory, we do not use empirical evidence to TEST theory. We do not need empirical evidence to prove our theories and laws, we only use such evidence to illustrate our theories or laws, but the mainstream need empirical evidence for their theories and laws because they are too concerned about testing the law and applying the scientific method to economics.
I would suggest to you to watch this Walter Block lecture that talks about empirical evidence.
http://www.youtube.com/watch?v=Xn6TXqgyj_M start at 13:45...
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