I am a PHD student in Economics. The only time anyone mentioned Austrian economics to me was briefly in an economic history class when I was an undergrad. I recently noticed that it’s still around since common sense has compelled me to associate with libertarians and it seems to be making a resurgence in those circles. For the last couple weeks I have been doing some reading and talking to some people about it and trying to figure out how these theories (mainly of the business cycle) which are so simple and so obviously, in my assessment, correct, receive no attention from mainstream academics while theories like IS/LM and “aggregate demand” (whatever that means) which are so obviously nonsense maintain a level of credibility. There are some specific questions on which I could use some clarification.
I have been told that Austrians entirely reject empiricism (a view I am somewhat sympathetic toward). Is this true?
I have been told that Austrians reject “marginalism” but I can’t seem to discern exactly what people mean by this. It seems in the theories I have read that there is a clear application of the equalization of marginal costs and marginal benefits. Usually, upon further scrutiny of this claim people have ended up talking about empirical issues which in my mind just makes it a restatement of the previous claim.
There dosn’t seem to be a central macro model (at least an explicit one) upon which Austrian economics is based. Is this true? If not where can I find such a model? If so why? Is it just because nobody has come up with one or are Austrians against such a thing on principal (another claim I have heard)?
I suspect it is some combination of these issues which accounts for the ostracism imposed on the school by the so-called mainstream. If I have missed the mark though, I would appreciate hearing any further theories which may be out there. (I am aware of the political incentives to favor a policy of interventionism but I do not see why this problem should affect the academic community…)
Yes, or at least, they reject it in the sense you mean it. Some of the Aristotelians (sp?) around here are empiricist, who nonetheless eschew the positivism that characterizes today’s social sciences.
No, and Austrians would turn around and say that the mainstream rejects subjectivism. I hardly see how Austrians can reject marginalism was a certain Carl Menger was at the center of the marginal revolution.
Well, Austrian’s don’t strictly divide their views into “micro” and “macro” and then pretend there exists no link between them as the mainstream does. Nonetheless, most Austrians would say that their macroeconomics is capital based (see Garrison’s Time and Money on this), capital being the link between the individual actors and the economy as a large. Also the capital structure is able to take time into account in a manner than the aggregates of Keynesianism don’t.
If you’re coming from a mainstream position, read Hoppe’s Economic Science and the Austrian Method on methodology and Garrison’s Time and Money on macroeconomics.
Yes and no. They (and by “they” I mean the hardline Misesian branch of the school, which most here including myself adhere to; the Hayekians and Lachmannians differ) reject the hypothetico-deductive model of theorising common in the natural sciences as applicable to the sphere of economics. They don’t reject empiricism in the classical sense of using induction as a means of forming conceptual truths which are then operated upon deductively to form the school’s various theories. And of course deciding whether a theory applies to a particular set of circumstances or not will be an empirical task. But yes, the school is unabashedly opposed to positivist empiricism.
This is nonsense. The modern school’s founder, Carl Menger, was a pioneer of marginalism and if anything the school is more consistently marginalist than any other school of economics, by not making marginalism some arbitrarily constructed theory and by applying it to every domain of economic theory, including monetary.
It doesn’t have one commonly conceived. It does however deal with macroeconomic issues, such as business cycles, but via microeconomic theory (e.g. price control theory, capital theory) and as such offers a more holistic, integrated account of the facts that other schools cannot by excessive focus on misleading aggregates. Roger Garrison in his Time and Money gives as close an account of what Austrian “macroeconomic” theory would like than anyone has to date.
I would add Praxeology and Understanding from Selgin on methodology, dl from this site, and Microfoundations and Macroeconomics: An Austrian Perspective from Horwitz.
Thanks everyon, this has been helpful. I think I am an Austrian and nobody ever told me, haha. I will be around probably with further questions as they come up.
Regarding (1), I like Roderick Long’s argument that Mises’ attempt to derive economics apriori should be seen as different from “the claims of Descartes and Kant to have derived the laws of physical motion a priori,” (p.3) and as similar to what Frege did "for logic and mathematics – namely, to de-empiricize and de-psychologize the subject. … Seeing Mises’ project as one with stronger affinities to Fregean anti-psychologism than to Cartesian rationalism might help to make his apriorism more palatable in contemporary philosophical circles. (p.14, n.24)
Source: Wittgenstein, Austrian Economics, and the Logic of Action.
I will read that soon, but I can’t help but ask. Is it your oppinion that “government is immoral, unnecessary and dosn’t work?” (your picture seems to contradict this for one thing.)
So it seems to me from reading Long that the statements about “marginalism” may be related to the idea that every decision comes down to a binary choice, or exchanging one situation for another. But I don’t get the impression that Mises or anyone else considers it inappropriate to then conceive of the choice of, let’s say a quantity that can take any positive real value, as an infinite number of binary choices which (at least in my mind) is perfectly compatible with concepts like marginal value and marginal cost as they are defined by classical economics. Am I on the right track here?