Criticisms of Austrian Economics

Economics Economics Questions
1

I am thinking about working on the Wikipedia article on Austrian Business Cycle Theory. I have “extensive” experience as a Wikipedia editor (fourteen featured articles, six of them featured on the main page, a bit of recognition, and knowledge of the necessary procedures to get an article featured); I have never done anything related to economics, let alone Austrian economics, however. Nevertheless, this would be a good project to do, I think (although, at first, it would mostly be in a sandbox, rather than the main article).

Like I discussed in another thread, including criticism of Austrian theory is pivotal to the extent that it is necessary for the article to go through the process of being featured or recognized. So, I want to make a list of all criticism of Austrian business cycle theory*.*

So, this is what I’m looking for,

  1. Criticism.
  2. Responses to that criticism.

This article will neither prove nor disprove Austrian theory in any sense. It will allow the reader to make up his or her own mind (although, obviously, most of the article will detail Austrian theory of the business cycle).

This article will take a long time to complete (it will require a lot of reading and re-reading).

In any case, I hope this thread can focus on letting me know what criticisms I can bring up and the responses to said criticism (if there are any), and maybe even what should be included in the article. I hope this article does not divolve into a debate on the validity of Austrian theory. Criticisms listed must be “scholarly” (to a degree similar to those already listed), and so no blog posts, et cetera.

Without further adue, here is the list compiled so far:

1. Bryan Caplan, Why I am not an Austrian Economist.

  1. ?

2. Paul Krugman, The Hangover Theory.

  1. Cochran, John P., The Hangover Theory?

  2. Epstein, Gene, In Defense of Austrian Theory.

  3. Finegold Catalán, Jonathan, Krugman contra Hayek.

  4. Garrison, Roger, Contra Krugman.

  5. Gordon, David, Hangover Theory: How Paul Krugman Has Misconceived Austrian Theory.

  6. Gordon Tullock, Why the Austrians Are Wrong About Depressions.

  7. ?

  8. John Maynard Keynes, The General Theory (throughout; if anybody knows exact pages please let me know)

  9. ? I’m sure to some degree Keynes’s criticisms in The General Theory have been responded to.

  10. Piero Sraffa, “Dr. Hayek on Money and Capital” and “A Rejoinder”

  11. Hayek, “Money and Capital: A Reply”

  12. Bruce Caldwell, introduction to Contra Keynes and Cambridge (commentary on the nature of Sraffa’s critique)

2

Here’s an internal criticism: Hulsmann’s [Toward a General Theory of Error Cycles](http:// http://mises.org/journals/qjae/pdf/qjae1_4_1.pdf)

3

Hazlitt wrote a whole book on debunking The General Theory called “The Failure of The ‘New Economics’”:

4

I am not trying to debunk Keynesian economics, just merely provide examples of rebuttals to Keynes’s specific criticisms of Austrian business cycle theory.

5

Whoops, when I read your post I understood something completely different. Sorry.

6

While commenting on Hülsmann’s disagreements over Mises’s theory of interests may be valuable, I wonder how relevant it would be to an article on Austrian business cycle theory (although, really, I could see it intagrated). The reason is that Hülsmann’s theory on interest is not the only one which runs contrary to Mises’s. Reisman also proposes his own theory of interest. But, mentioning Reisman’s may be irrelevant, because ultimately he (as does Hülsmann) agrees with the ultimate conclusion that a distortion of the price mechanism of interest will cause malinvestments to form.

So, the article is not really on interest theory, rather on the distortion fo the rate of interest. Nevertheless, perhaps both should be mentioned in passing, but it should be clear that they critisize not business cycle theory, only interest rate theory.

7

This is great stuff, Jonathan.

Would that there was someone who could summarize the whole thing succinctly as well.

Something like: There are 7 basic criticisms of ABCT. Criticism One argues that bla bla, and the 5 rebuttals in the literature are etc. Etc Etc and so forth.

8

  1. You might find something within “The Failure of the New Economics”

  2. This might be related… Murphy contra Sraffa: http://mises.org/daily/1486

9

Cowen’s Risk and Business Cycles contains a sustained critique of Austrian orthodoxy.

10

Giant Joe,

  1. This might be related… Murphy contra Sraffa: http://mises.org/daily/1486

Thanks, I forgot about that criticism of Sraffa (although, it has more to do with a criticism of Sraffa’s book, rather than a defense of Hayek).

Economistintraining,

Thanks, I totally forgot about Cowen. Now, if only that book was cheaper than $40.

11

Murphy also has an unpublished paper on the Hayek-Sraffa debate. In it, he concedes Sraffa’s general point on interest and takes a middle position in the debate.

12

Can you link to this?

13

I found this relating to Sraffa; its relatively ‘heavy’

http://www.auburn.edu/~garriro/garrison.pdf

its from the website http://www.auburn.edu/~garriro/articles.htm

14

It’s available somewhere in .pdf form, I’ll send you a message with the link if I find it.

15

Murphy’s paper is not online, so I won’t post it here. E-mail him for it.

Lachmann also has a commentary on that debate in Expectations and the meaning of institutions.

16

Nirgraham,

Thanks, I had forgotten about the capital reswitching debate (or the cambridge capital controversy). I will have to add that to the list later.

Ziragt,

Ah ok, if it’s not available online I won’t cite it.

17

Hi Jon,

Perhaps a distinction should be made between criticisms of ABCT in principle and of its application.

One may acknowledge that ABCT is coherent and descriptive of possible events. However, one may object to ABCT being used to describe a particular historical episode, such as the ongoing recession.

I bring this up because it is the position I find myself in. Sometimes my objection to a particular application of ABCT is mistaken as a criticism of ABCT in principle and much confusion results.

18

I remember you agreeing with Horwitz that the Fed should bail out banks.

19

I have never advocated bank bailouts, and I’m quite sure Stever Horwitz hasn’t either.

20

Funny…