Wanted: Critics of Austrian Economics \ stacker news ~econ

Wanted: Critics of Austrian Economics mises.org/mises-wire/wanted-critics-austrian-economics

1733 sats \ 55 comments \ @Undisciplined 20h econ

By Per Bylund

Austrian economics today needs critics who actually understand the concepts upon which Austrian thinking is built.

403 sats \ 27 replies \ @SimpleStacker 20h

Interesting. I certainly wouldn't qualify, as I'm not someone with a deep understanding of the Austrian school of thought.

But, speaking as a mainstream economist who's pretty sympathetic to Austrian ideas, and pretty critical of mainstream economics, I'd say this:

I always got the sense that Austrians are unwilling to engage with mainstream economics using the tools of models and econometrics. They seem way too critical of the mathematical and statistical approach to economics. Most mainstream economists understand that models are just tools--not to be taken too seriously--but still useful in helping us think more rigorously about a particular problem. I think Austrians would probably be taken more seriously by mainstream economists if they were willing to use modern tools to illustrate and argue for their ideas, rather than sticking to a primarily dialectic approach.

But this is just an outsiders' perspective. It's possible that I'm not characterizing the Austrians fairly.

244 sats \ 25 replies \ @Undisciplined OP 19h

I always got the sense that Austrians are unwilling to engage with mainstream economics using the tools of models and econometrics. They seem way too critical of the mathematical and statistical approach to economics.

I'm in full agreement on this point.

Their view is probably something like "We're the ones who keep sticking our necks out and being right about stuff, while the rest of the profession calls us weirdos. Maybe, it's time for some of the professionally wrong people to actually contend with our ideas."

While I might have more familiarity with Austrian theory than you, I'm also not really an Austrian economist. I do think they are generally right about theory, as far as they go, so I'm not the right person to try to pick them apart. However, I share your position that there are other valuable econ tools that Austrians somewhat carelessly reject.

33 sats \ 8 replies \ @Rothbardian_fanatic 19h

The reason why Austrians do not engage in terms of mathematics is because they base their economics on a different concept: logic. Austrian economics is a chain of reasoning that starts from: humans act. They draw all conclusions from this basic premise and use no mathematics to prove anything although they sometimes use mathematics on problems involving margins and actions on the margins. Mainstream economists do not want to engage Austrians on the basis of logic is why they don’t do it. The conclusions of the Austrian school, including Murray Rothbard, even make sense, common sense when explained step-by-logical-step. They don’t often come to conclusions that are nonsensical on the face of them.

31 sats \ 7 replies \ @Undisciplined OP 19h

Mathematics is just logic, though, and it provides many useful analytical tools.

I believe Austrians were right to reject the use of certain mathematics that are inappropriate for the study of human action, but they are overly broad in their condemnation of mathematics.

Some Austrians, like Bob Murphy, are more discerning and recognize that many of the tools in set theory and discrete mathematics are applicable to economics.

128 sats \ 4 replies \ @SpaceHodler 16h

Austrian econ is more like discrete math. It's interested in what happens at the margin of whatever it is that is being analyzed. In particular it's interested in:

Border cases
Qualities rather than quantities
Relative comparisons rather than absolute values
Partial orders (e.g. those formed by "if x then y" relations)
Directionality (↑/↓) or sign (+/-) rather then rate of change
Finite domains rather than functions over continuous sets
Asymptoticity of recursive functions (which game theory is a study of)

The human element introduces non-determinism.

30 sats \ 3 replies \ @Undisciplined OP 16h

Exactly.

My view is that embracing the branches of mathematics that map onto their methods of analysis would benefit them, by immediately integrating a bunch of known results from those fields, and would make it easier for mainstream academics to embrace their work.

196 sats \ 1 reply \ @SpaceHodler 16h

The empirical methods of mainstream econ work with data, once data has been collected. The a priori methods of Austrians have the benefit that they're suitable for analyzing new phenomena, such as Bitcoin, before there is data on it. Satoshi had to use Austrian, a priori thinking, to create it.

But now we have 16 years of data too, and I think it's easier to spike most people's interest by showing them the data in the form of an NGU chart, than it is by getting them to read the white paper and understand the game theory :) Which is an example of how empiricism can be useful.

20 sats \ 0 replies \ @Undisciplined OP 16h

Yes, Austrians acknowledge the usefulness of empiricism for doing economic history and demonstrating how economic principles played out in the past.

I think they do themselves a disservice in seeming to oppose the use of empirics at all, when what they oppose is the use of empirics for proving theory.

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10 sats \ 0 replies \ @Rothbardian_fanatic 16h

It may benefit them, however, that is not the way Austrians have pursued their theories from Menger to the present. It is outside of their methods of theoretical exploration.

14 sats \ 1 reply \ @Rothbardian_fanatic 19h

Ok I can agree with you on that point! The other point not mentioned is that mainstream economists are using mathematical tools inappropriately to arrive at inappropriate conclusions. Their conclusions depend upon the mythical homo economicus, which last I looked did not really exist.

0 sats \ 0 replies \ @Undisciplined OP 19h

Now we're fully aligned.

134 sats \ 15 replies \ @SimpleStacker 19h

I think Austrians are right about a lot of things too. In fact, I show clips of Joseph Salerno's Mises Institute lecture on Calculation and Socialism in my Micro Principles class.

And I agree that mainstream economists need to keep Austrian ideas in mind more often as they write about their policy ideas. Mainstream economists need to:

Remind themselves that the "benevolent social planner" doesn't actually exist
There's a big difference between external validity and internal validity
The incentives of our profession bias us towards interventionism ( as well as saying kooky, counterintuitive things)
There are many values people care about besides consumption, including ideas like liberty and freedom. (We're not just consumption machines just as happy to consume the same amount as a slave than as a free person.)

But, yeah, that being said, I don't see the two sides engaging each other academically unless they bridge the methodological gap, which seems too wide at this point.

39 sats \ 10 replies \ @Rothbardian_fanatic 19h

I think some of the Austrians, for instance, Robert Murphy, do use some of the same methodological tools as mainstream economists. If you read his articles and theses on time preference and the natural rate of interest, you can see the mathematical tools of mainstream economists being used. Hayek also uses mathematics to demonstrate some of his various ideas. I think the problem may be that Austrian economics comes to vastly different conclusions on the ordering of society for the optimum results for everybody. They deny that the state has a role to play in the economy that is benevolent, decent or even useful. Mainstream economists find that anathema because they are court jesters.

43 sats \ 9 replies \ @SimpleStacker 19h

I wonder if it really just boils down to what you think of the state's role in correcting so-called market failures.

15 sats \ 8 replies \ @Rothbardian_fanatic 19h

It could if you were willing to let the state interfere in the market. Austrians generally say that there are no market failures, only state-interference-in-the-market failures.

228 sats \ 6 replies \ @SimpleStacker 19h

What would Austrians call an externality if not a market failure? And how would Austrians respond to the idea that markets presuppose enforceable property rights, and that a state is needed to enforce property rights?

20 sats \ 5 replies \ @Rothbardian_fanatic 19h

They deny the state is needed to enforce property rights. They presuppose enforceable property rights but who does the enforcing may be where they differ. Externalities are not market failures according to the theory. Externalities are enforced on the market by the state’s interference. After all, a tort is a tort unless protected by the state.

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0 sats \ 0 replies \ @Undisciplined OP 18h

One point here is that Austrians don't view deviations from a hypothetical equilibrium as a market failure. They would say something like "You're definition of market equilibrium was based on faulty assumptions."

21 sats \ 3 replies \ @Undisciplined OP 19h

I don't know if I've shared my econ hierarchy with you before, but I'd be curious what you think about it.

If we order methodologies as follows:

Austrian: deductive reasoning from first principles
Mathematical modelling: a few simplifying assumptions plus mathematical logic
Experimental econ: well designed experiments testing points of ambiguity in theory
Econometrics: statistical analysis of real world data

I basically have more confidence in the results from higher on the list than the results from lower and really I only believe results from lower if they can be made consistent with results from higher.

Ironically, all of my professional work is from the lowest rung of the ladder.

142 sats \ 2 replies \ @SimpleStacker 19h

I'd basically agree with your ordering, except that I'd say that #1 and #2 usually end up with "it depends" (e.g. on some key elasticity), which then necessitates #3 and #4.

#3's problem is that this is pretty much impossible for most questions of economic significance. Small scale experiments aren't sufficient because they don't reflect real world decision-making conditions.

And #4 of course is full of problems, so the credibility really just depends on the research design and the circumstances of the study. IMO one paper is insufficient to conclude anything, but if you have lots of papers with different methodologies, across different settings, all showing the same thing, you can have more confidence. Still have to be careful, due to various biases in the publication process.

21 sats \ 1 reply \ @Undisciplined OP 19h

I should have had the caveat "when appropriate" for the ones below being consistent with the ones above.

Where I think this hierarchy helps is that it limits the range of interpretations of results from the weaker methodologies. Instead of thinking a regression overturned some foundational economic principle, the researcher would instead try to figure out what other mechanism might be at play.

214 sats \ 0 replies \ @SimpleStacker 19h

I mean, the types of questions that people are answering these days with their econometric tools are so small-scale compared to what Austrians like to talk about, that it's not even necessarily a methodological gap it's also simply a difference in the scope of analysis.

I suppose I'm coming at it from a microeconomist's perspective. I think I'd agree with the Austrians more in their critique of math/stats when it comes to macro. (As you can tell, I'm not really a fan of modern macro.)

20 sats \ 0 replies \ @denlillaapan 17h

Yes

20 sats \ 1 reply \ @Baleberg 4h

The Bitcoin podcast walker should be here as advocate for mises and other from mainstream as its critics.

0 sats \ 0 replies \ @Undisciplined OP 4h

I like Walker and would be glad to have him here, but I think we have a good number of Misesians already.

What's badly missing are the intelligent critics. The most prominent vocal critic of Austrian theory, who actually has a deep knowledge of it, is Bryan Caplan. The problem there, is that he's overwhelmingly sympathetic with Austrian Economics, but has a few points of departure.

33 sats \ 9 replies \ @kepford 20h

Actual good ones I assume? The problem is few educated on economics seem to take it seriously. Would you agree @Undisciplined

75 sats \ 7 replies \ @SimpleStacker 20h

See my post above. I always got the sense that it's not that mainstream economists disagree with Austrian ideas, it's that Austrians refuse to engage using the tools of modern, mainstream economists.

To put it another way, it seems more like a methodological gap than an ideological one.

I could be wrong

47 sats \ 6 replies \ @kepford 20h

I can see that. I'm not any kind of economist but I've heard Austrian's talk about how trad econ uses math and charts as if econ is like the hard sciences. That's a pretty hard difference they have with trad econ and one that I can see being a huge leap.

119 sats \ 1 reply \ @SimpleStacker 19h

The criticism is fair. Some economists give too much credence to our models and our data. But I'd say that most mainstream economists would agree that we're not a hard science, and even our best models and best data analyses are suggestive at best. But they're still useful tools, and better to have them than to not have them. You just have to interpret them holistically along with other methods, which would include experience, intuition, and dialectic and historical reasoning.

0 sats \ 0 replies \ @Undisciplined OP 19h

You're touching on a big important difference between Austrians and the mainstream that is also a point of commonality.

Mainstream economists give the impression of extreme confidence in their tools, while Austrians are openly critical of those tools.

The truth, as you say, is that most economists are at least intellectually aware of the deficiencies in our tool kit.

I think this helps Austrians to not get seduced by the fancy methodologies, but it also makes it very difficult to communicate across the divide.

18 sats \ 3 replies \ @Rothbardian_fanatic 19h

Austrians object to using mathematical tools on several points. One being that mathematics aggregates things that should not really be aggregated. Another being that mathematics and charts do not represent what actual humans use for making decisions. A third is that mathematical results do not always reflect reality very closely. What the Austrians call praxeology and callitics differ on many of those points from the mainstream, which, by-and-large is still based somewhat on Kenysianism.

0 sats \ 2 replies \ @Undisciplined OP 19h

Mathematics does not aggregate. Some mathematical methods aggregate.

The other points are all about omitting key elements from their analysis, which can just as easily be done with verbal logic.

16 sats \ 1 reply \ @Rothbardian_fanatic 18h

That was the point, the methods aggregate where aggregation erases the differences that are important. Yes, verbal logic makes some of the same mistakes but are more readily found.

0 sats \ 0 replies \ @Undisciplined OP 17h

The important point, though, is that there are appropriate mathematical approaches that don't make any more errors than verbal logic. Sometimes it's easier to catch a mathematical error, because there are such well-defined rules about what can be done with the notation.

16 sats \ 0 replies \ @Undisciplined OP 20h

Exactly. This is a plea for intelligent criticism.

Iron sharpens iron.

14 sats \ 1 reply \ @Rothbardian_fanatic 19h

You beat me by 40 minutes!!

0 sats \ 0 replies \ @Undisciplined OP 19h

I chose Quick Draw McGraw as my icon for a reason.

0 sats \ 12 replies \ @Solomonsatoshi 17h

Austrians hugely under estimate the importance of the state in projecting its power and thereby assisting in the wealth of the nation. Economic functionality is not solely about free markets, it is about resource hegemony, market levers and manipulation.

21 sats \ 11 replies \ @Solomonsatoshi 10h

After 6 hours none of the Libertarians - Mises Disciples who frequent this platform dare rise to my challenge above - they are given an opportunity to debate but fail to rise to the occasion- perhaps they prefer circle jerking their ideas rather than facing a robust contest of ideas.

0 sats \ 10 replies \ @Undisciplined OP 4h

I'm sick of rehashing the same points with you. That's not what the author is requesting. We're aware that most people are statists and I've told you before why I don't think your arguments are any good.

Here's the assignment: read Human Action, read Man, Economy, and State, read A Theory of Socialism and Capitalism, and then come back with arguments about where specifically Austrian theory makes mistakes.

0 sats \ 9 replies \ @Solomonsatoshi 2h

You cannot refute my assertion...admittedly it is a broad one but deliberately so as it gives you ample scope to respond in a reasoned manner if you chose to...it covers almost the entire scope of Libertarian - Austrian dogma.

You claim you have previously responded - where? I suggest you cannot point to any sequence of reasoned arguments where you have engaged in the issues raised rather than attacking the messenger or completely avoiding any direct, meaningful and actual contest of ideas/critique.

No, you like other Austrians are so sure you are right that you do not believe it necessary to provide a reasoned retort to a direct challenge - instead you seek to shoot the messenger...and then you wonder why there are no critics prepared to engage...it is because you are not capable.

0 sats \ 8 replies \ @Undisciplined OP 2h

We've had this conversation over and over again. The fact that you don't remember makes it even more pointless to engage with you now.

0 sats \ 2 replies \ @Solomonsatoshi 2h

BTW your (mis)use of the word statist as an implied term of disrespect proves how broadly appropriate my initial challenge is.

You could help readers by defining how and why you see the term statist as a term of disrespect.

A contest of ideas being a logical sequenced dialogue which observers can follow using logic and reason to weigh the merits of the arguments.

0 sats \ 1 reply \ @Undisciplined OP 2h

Here's the definition:

In political science, statism or etatism (from French état, "state") is the doctrine that the political authority of the state is legitimate to some degree.

Feel free to explain in what way I misused the term.

0 sats \ 0 replies \ @Solomonsatoshi 1h

You have called me a statist in a context strongly suggesting such name calling constitutes an argument credibility and substance.

You cannot see that the definition you provide is in no way justifies such name calling? It is not a definition that even fits the context you have used it it. It is pure nonsense.

Yes I argue that the state is an important mechanism in economic functioning and therefore (conditionally) legitimate but unless you have demonstrated that you can refute my position on that you have provided no argument at all.

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0 sats \ 4 replies \ @Solomonsatoshi 2h

This conversation is not a contest of ideas-this is you avoiding any fact based reasoned contest of ideas.

You cannot point to any example of where you have engaged in such a manner as would constitute a critical debate and contest of ideas.

I ask you again to point to an example. Silence.

0 sats \ 3 replies \ @Undisciplined OP 2h

Go reread our past exchanges if you're interested. I'm not doing this with you again, because you don't make any attempt to understand my position.

Or, go argue with someone else.

Or, like I said above, actually read some Austrian writing, so that you aren't coming from a place of complete ignorance, and come back with specific criticisms and we can dive into them.

0 sats \ 2 replies \ @Solomonsatoshi 2h

You cannot and will not when requested provide any evidence of the assertions you have made.

Instead they are now exposed as baseless claims, claims you cannot justify or demonstrate.

Critical debate and contest of ideas is actual proof of work - work you cannot perform. Asking someone to go and read your dogma is not a contest of ideas.

You may be convinced of the dogma but you are unable to elucidate it convincingly when challenged.

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