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What Makes Austrian Economics Unique?mises.org/mises-wire/what-makes-austrian-economics-unique
304 sats \ 16 comments \ @Rothbardian_fanatic 28 Dec 2024 econ
The Austrian school offers a unique perspective on human action, the role of the entrepreneur, the market, capital, and the importance of individual freedom. Austrian economics is one of the most distinguished and intellectually rigorous schools of economic thought. It has a long history, even with ideas dating back to at least the 16th century and the 17th century, experiencing an impressive renaissance. The Austrian school, in the true sense of the word, originated in the late 19th century and got its name from the fact that the founding fathers of the school—Carl Menger, Eugen von Böhm-Bawerk, Ludwig von Mises, and Friedrich von Hayek—all came from the Austrian Empire.
One of the outstanding characteristics of the Austrian school of Economics is the importance that theory accords to capital and entrepreneurship. The emphasis on these factors also distinguishes the economics of the Austrian school most clearly from what is usually taught at universities today as “economics.” Especially in the discipline called “macroeconomics,” the textbooks draw the picture of an economy that gets by without capital and entrepreneurs. It’s a bit like trying to explain the function of an automobile, but ignoring the role of engine and driver. Even in the theory of growth, entrepreneurship is absent and the role of capital is mystified as something that expands and shrinks without structure automatically according to the amount of net investment, which, in turn, is modeled as a function dependent on national income.
Unfortunately, the valuable insights of the Austrian school remain closed to most people because they are contrary to the political interests of power. Many disasters could have been avoided in the past if more people had stood up to the falsehoods incessantly proclaimed by state-believing politicians and their entourage. It is not different in our time.
Yes, Austrian Economics is different for many reasons. The fundamental beginning is Humans act. From that beginning everything is logically reasoned, deductively. This article is a good introduction to the methods and ideas that come from this a priori science. It is also a good basis for analyzing other human behaviors.
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20 sats \ 3 replies \ @Undisciplined 28 Dec 2024
The focus on entrepreneurial decision making is one of the huge distinctions. It's not that other economists are unaware of that, but the emphasis of the models is always equilibrium (or balanced growth paths). The process of converging to equilibrium is generally taken for granted.
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24 sats \ 2 replies \ @Rothbardian_fanatic OP 28 Dec 2024
Yes, but the mainstream economists don't usually view entrepreneurial effects as changing the economy in any really large manner. They are thinking in terms of integrated aggregates doing the actions, while is is really one entrepreneur at a time making the production decisions with respect to time and available resources for profit. They think government, which takes with one sticky-fingered hand and gives with the other while producing nothing, nothing at all.
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370 sats \ 1 reply \ @SimpleStacker 29 Dec 2024
Yes, the macro models that I learned in grad school had a way-too-simplified view of the firm.
Here are some of the assumptions that modern macro models often make about the firm:
  • It frictionlessly converts labor and capital inputs into outputs, usually via a Cobb-Douglas or CES production function.
  • It has no fixed costs of production and exists independently of any decision made by anyone in the economy.
  • It is commonly owned by all the consumers in the economy and simply returns its profits to the consumers.
You are right that in such models there is no channel through which entrepreneurial decision making is reflected.
Interestingly, macroeconomists recognize the weaknesses of these assumptions, but they make them in the name of mathematical convenience, so that their models are more solvable.
This tradeoff, simplifying models for the sake of mathematical tractability, is probably one of the biggest problems in modern economics. It's become impossible to publish anything without a solvable model (whether by hand or by computer), and so rather than dealing with the underlying complexity through reasoning, economists just assume away the complexity.
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22 sats \ 0 replies \ @Rothbardian_fanatic OP 29 Dec 2024
It seems to me that the simplifications needed to make the mathematical models work make the models less than useless for making economic decisions and policy. They reflect an unreality that the economists may recognize but are trapped by the model they are employing to understand the firm or the economy in general. I think this is the main reason Austrian Economic school is superior in predictions and actually making policy decisions.
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10 sats \ 5 replies \ @Bell_curve 28 Dec 2024
Economics taught in college today is free markets lead to market failure. Therefore we need regulators to prevent or fix market failure.
Students are taught that regulations prevent or fix market 'failures' but they never discuss the deleterious effects of regulations. Regulators have good intentions ergo we can ignore outcomes.
from John Cochrane: Econ 101 seems awfully stuck in a rut. A week of market perfection, with eyes rolled. Nine weeks of theoretical “market failures” remediable by the all seeing benevolent regulator. No time on the experience of actual government policies, evaluating how well the parable explains them, or alternative parables of government failures.
https://www.grumpy-economist.com/p/conceptualizing-regulation
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11 sats \ 4 replies \ @Rothbardian_fanatic OP 28 Dec 2024
The whole reason for this phenomenon is that Keynesianism has taken over most of academic economics. Keynesianism just bolsters the state and statism where interference and regulation is the only thing holding the economy together. Also, for them there is no individual actions, only aggregates. What unadulterated BS!!
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10 sats \ 3 replies \ @Bell_curve 28 Dec 2024
1970s stagflation debunked Keynes and his disciples. One of many instances of Keynes being wrong empirically
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11 sats \ 2 replies \ @Rothbardian_fanatic OP 28 Dec 2024
A lot of different instances have shown Keynes to be incorrect in his reasoning. However, his theories are still being taught because the current authors studied Keynes when they were in school, and did their Ph.D.s based upon his theories. Hayek admits he made a big mistake when he did not take up the offer to debate Keynes. He may have changed Keynes' way of thinking. But then again, Keynes was a Fabian.
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10 sats \ 1 reply \ @Bell_curve 28 Dec 2024
Keynes died in 1946
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11 sats \ 0 replies \ @Rothbardian_fanatic OP 28 Dec 2024
Hayek was invited to debate Keynes in the '30s. Many of the currently popular economic textbook authors took their training from direct Keynes followers and wrote their books from that point of view. They are the current textbooks.
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0 sats \ 5 replies \ @Bell_curve 28 Dec 2024
from Grok:
Milton Friedman had several critiques of the Austrian School of economics, although he also shared some common ground with them. Here are some key points of his critique:
Empirical vs. Theoretical Focus: Critique: Friedman was a proponent of empirical economics, arguing that theories should be tested against real-world data. He believed that the Austrian School, particularly its more dogmatic adherents, placed too much emphasis on theoretical deduction without sufficient empirical validation. Friedman's methodology involved testing theories with data, contrasting with the Austrian preference for praxeology, which emphasizes logical deduction from self-evident axioms. Monetary Policy and Central Banking: Critique: While Friedman favored a rules-based approach to monetary policy (like a fixed monetary growth rule), he supported the existence of a central bank, which many Austrians oppose. Austrians like Ludwig von Mises and Friedrich Hayek argued against central banking due to its potential for causing economic cycles through manipulation of money supply. Friedman's advocacy for a monetary rule was seen by some Austrians as too interventionist. Economic Predictions and Policy Advice: Critique: Friedman was critical of the Austrian School's reluctance to engage with economic policy in a way that could lead to specific, actionable advice. He believed in using economic knowledge to inform policy, even if his approach was towards reducing government intervention in different ways than Austrians might advocate.
Methodology of Positive Economics: Critique: Friedman’s essay "The Methodology of Positive Economics" argues that theories should be judged by their predictive power, not by the realism of their assumptions. This was in stark contrast to the Austrian methodological approach, which often judges theories based on the logical coherence of their assumptions. View on Inflation: Common Ground and Critique: Friedman and Austrians share a disdain for inflation, but Friedman’s solution was to advocate for a steady, predictable increase in the money supply, whereas Austrians typically advocate for a free banking system or commodity-based money to naturally control inflation.
Despite these critiques, Friedman respected some Austrian economists, particularly Hayek, with whom he had significant agreement on the importance of individual liberty and free markets, though their methods and specific policy prescriptions often diverged.
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11 sats \ 4 replies \ @Rothbardian_fanatic OP 28 Dec 2024
Can you give me one good reason I should reply to Grok?
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0 sats \ 3 replies \ @Bell_curve 28 Dec 2024
Point out the errors made by Grok
edit: I have been testing Grok and ChatGPT
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0 sats \ 2 replies \ @Rothbardian_fanatic OP 28 Dec 2024
Has the training been completed and on which materials?
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0 sats \ 1 reply \ @Bell_curve 28 Dec 2024
Grok is still rough
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11 sats \ 0 replies \ @Rothbardian_fanatic OP 28 Dec 2024
Still very biased by the lefty/Marxist/socialist/communist/murderers publishing magazines and newspapers nowadays that is used for training.
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