I’ve entered into a discussion on science-related forums arguing over Austrian methodology. Naturally, the biggest challenges come from epistemology; the fact that the methodology is axiomatic and adverse to empirical testing and the hypothetico-deductive model.
I’m reading Rothbards “The Mantle of Science” to get a handle over this, but I’d appreciate some advice/resources.
Here’s an example of one of their responses:
Can’t understand why you would do that but anyway. Force him to be concrete, he can argue b.s. because he has not made one concrete point. Only general b.s.
For example ask him how he “emperically” test the relation between unemployment and minimum wage. Then tear apart anything he says. Show him that it is much much much worse than a “much thornier issue in the social sciences than in, say, physics.”
Then present your deductive argument. Ask him what is wrong with that argument. etc etc, point is be concrete only then errors will come out.
I can’t say I disagree too much… I think the issue is better framed as the schools talking past one another.
Austrian economics is correct in that it is non-contradictory. Its insights are definitionally true. A good example is “human action”, which is by definition purposeful. What about involuntary foot tapping? It’s not technically human action. Except it has real world implications, so, you know, it’s relevant to the real world and mainstream economists may want to study at it in detail.
So the basic issue is that mainstream economists want to include a bunch of non-praxeological concepts in on top of what they see as trivial/useless observations that “human action is purposeful”.
Mainstream economists definitely differ in how outrageous/stupid they want to be, but I don’t see any problem with using epidemiological metrics as long as you treat them like epidemiological metrics. Similarly, you can do a ton of fancy math but that doesn’t mean it isn’t complete garbage.
Additionally, I think you can test economic hypotheses in controlled studies. The Prisoner’s dilemma has been repeatedly tested in controlled environments. Right? Or is it technically not a controlled experiment because you can’t prove that test/control groups are “equal enough”? It’s just a question of how reasonable you want to be. AE is technically correct that there are no objective guidelines for induction and the scientific method. But AE also remains agnostic on whether turning a doorknob will open the door. So…
I’d also say that Austrian Economists typically depart from strict AE whenever they say interesting things like “interest rates are too low”. How the hell do they know? What part of AE tells you what the interest rate is? Just because there’s a price control doesn’t mean that the price is too low, too high, or could be just right. Strictly all it means is that there’s a breakdown in economic communication. Except that’s not flashy or interesting. It’s a lot cooler if you pretend like it explains everyone’s economic problems. I mean, maybe it does, but that’s not Austrian Economics. That’s inductive logic.
I’d also say that Austrian Economists typically depart from strict AE whenever they say interesting things like “interest rates are too low”. How the hell do they know? What part of AE tells you what the interest rate is?
Say someone is kicked out of school for poor academic performance. He goes home and his folks mention that his grades were too low. To which he replies, “How do you know? You did not even see my grades. You also do not know what a passing grade is my school. What tells you what my grades are?”
And the answer is, of course, that while they do not know what his grades are, nor what they should be, they do know that his grades are too low, because he got kicked out of school for low grades.
Similarly, there are well known results of too low interest rates. When they happen, you know that rates are too low, without having to know what they should be.
Just because there’s a price control doesn’t mean that the price is too low, too high, or could be just right.
Price controls are usually imposed at less than the market price at rate of imposition. So they are too low. One may argue that over time, given the constantly fluctuating state of the universe, that they change to being too high or just right. As with the persn kicked out of school for low grades, there is a reliable sure fire test. If a black market begins, if shortages happen, if clever ways are found to raise the price without officially raising the price, they are too low.
Inductive logic. There’s nothing praxeological about the conclusion that he was kicked out because grades were too low. Particularly, there is no praxeological branch that gives us particular information on “public schooling”.
But yeah you should make your example more clear. Are the parents told “Bobby was kicked out of school for having low grades”? Or were they told “Bobby was kicked out of school and wasn’t turning in his assignments”? The latter is most analogous to the Federal Reserve, and only through inductive logic can you conclude that no assignments → bad grades → explusion, or interest rate controls → seem kind of low → bad economy.
First, yeah, Austrians do typically have an estimate as to what interest rates should be. They bracket it between the status quo (too low) and infinity (too high). That may seem “reasonable”, and I agree. But there’s no praxeologic reason for the bracket because its based on finite numbers. It is as praxeologically incoherent as saying the interest rate should be between 14 and 15% (which you would agree is non-Austrian).
Second, you can’t conclude the cause just by looking at the real world consequences. I’m sure all Austrians will agree that a particular outcome can, in theory, have multiple (or infinitely many) causes. If you’re going to say that ABCT is what’s really happening, the link is necessarily inductive because you’re talking about the real world and hypothesizing about people’s preferences/actions/etc. Can praxeology alone rule out a 0.000000001% market interest rate? Nope.
I don’t disagree. But then again, I dont’ disagree with strong inductive logic. It’s just non-austrian.
If you get a black market, it means there’s a disagreement about the legal system. It doesn’t mean anything about the direction of prices. You get black markets when prices are too high AND too low.
So, to resummarize, Austrian Economists depart from praxeology all the time in order to sound interesting. I think that’s just fine and dandy, but they pretend like they’re standing up there doing strict a priori economics, and they’re not. Even if their inductive arguments are 99.999% likely, it’s still non-Austrian.
Praxeology is AE’s big shiney claim to fame, so its natural they should overemphasize it. Kind of like how Christians pretend like they get everything from God and the Bible but turn around and shape their rules around modern lifestyles and opinions. It might be totally justified, but they’re supplementing objectivity with empiricism, and they don’t parade it because then they lose their edge.
Sieben,
You have to distiguish between what we may call pure and applied AE. Pure AE is praxeological, and reaches its conclusions by deductive logic alone. All the statements are of if-then form. If such and such is the case, and all other things stay the same but for an introduction of a minimum wage, then there will be greater unemployment. The proof offered is deductive. That’s pure AE.
Then there’s the messy complicated everchanging world, where all other things are never held equal. In analyzing an historical phenomenon, and ever so much more so in trying to predict the future, we are leaving the realm of purely deductive AE. I doubt anyone pretends otherwise. And it is in this realm, which we may call applied AE, various economists attempt to use the principles they learned in pure AE to figure out what is actually going on.
Applied AE is admitedly an art, not a science, and like all art, all’s fair in trying to get the right result. Inductive reasoning, educated guesswork, native intelligence, suspicion of govt, generations of economic wisdom soaked in with mother’s milk if you were lucky enough to get some, and who knows what else, all are part of what goes into deciding what are the essential features to focus on, and how to apply pure AE to them.
Some are much better at it than others. And when they somehow reach their conclusions, Ramanujan style, they have to find someone, usually themselves, who will play the role of G.H. Hardy and give convincing, though of necessity not praxeological, reasons for what they predict.
This is no way detracts from the shininess of AE. Consider two men, both lost in a dangerous jungle, who have to find their safely way out of there by a mixture of thinking and guesswork. One has a compass whose North needle points North [the Austrian], and another has a compass whose North needle points East. They both know a true fact , that their destination is north of the woods. Who is the shiny one?
Well I’m glad we agree that there is zero praxeological (read: Austrian) content or guidance to the sort of inductive flashy statements our famous Austrians make. It’s just whatever we can all agree is a “reasonable” treatment of the evidence.
The point is that this is the point on which Austrians and the Mainstream are supposed to diverge. In actual fact, the Austrians engage in the same sort of mainstream positivism, except they might make fewer egregious overstatements.
Conversely, the “unique” Austrian arguments can all be run from a mainstream perspective if you change the vocabulary a little. If you talk like a neoclassical, you can analyze the fed in terms of “price controls on future money”, or something. I’m sure we both agree that mainstream eco is equipped to (at least consequentially) talk about price controls.
So to me, the uniqueness of Austrianism is mostly in its culture, values, and attitude. I happen to think these attributes are the most important factors in any endeavor, so this is not pejorative. I just wish Austrians openly recognized these as the source of their strengths rather than appealing to some magic praxeological mojo that gives them better answers.
Read Hoppe’s book on Austrian Economics and Method.
Read theory and history by Mises.
Because of the variability of human action we cannot make human law without praxeology. We also cannot interpret human action without an understanding of praxeology.
The reason why the hard sciences work with empirical evidence is because of the fact that they have the same properties and so when put in the same conditions will act in the same ways. The same is not true for men because men are inherently different due to past experience and physiological construction (inherent intelligence, height of senses ETC.), and furthermore the same situation will never occur twice.
With this being said I think that when praxeologically and logically interpreted history and empirical evidence can give us general tendencies, but these are tendencies when in certain situations and nothing more, they are in no way laws.
Conversely, the “unique” Austrian arguments can all be run from a mainstream perspective if you change the vocabulary a little. If you talk like a neoclassical, you can analyze the fed in terms of “price controls on future money”, or something. I’m sure we both agree that mainstream eco is equipped to (at least consequentially) talk about price controls.
Some parts of mainstream economics are indeed not mistaken. But their big picture assumptions are very mistaken, as mistaken as saying night is day.
And it leads them to predict night will be day.
Well I’m glad we agree that there is zero praxeological (read: Austrian) content or guidance to the sort of inductive flashy statements our famous Austrians make. It’s just whatever we can all agree is a “reasonable” treatment of the evidence.
I found some Walter Block about this. He agrees, too. [emphasis mine]
…allow me a few methodological, philosophical words. Austrian economists, qua Austrian economists, or praxeologists, do not predict. Period. In what sense, then, am I putting together this list of Austrians who have predicted the housing bubble? It is in the sense that they predicted this phenomenon not as formal economists, or praxeologists, but, rather, in their role as thymologists, or economic historians; see on this here. A metaphor that may clarify this distinction is that between a musician playing scales, and then rendering the music of Mozart. In a basic sense, the two are very different. Yet, surely, facility with the former renders the latter ability more sophisticated and knowledgeable. So is it with praxeology and thymology. Knowledge of the former offers no guarantee of the latter; but, it surely helps. Praxeology is the science of (Austrian) economics. It gives us apodictically certain laws, or basic axioms, or synthetic a priori truths that need not be, indeed, cannot be, tested; they can only be (empirically) illustrated. For example, here are a few axioms provided by perhaps the world’s presently active leading praxeologist, Hans Hoppe:
etc etc
What parts are mistaken? They don’t know that human action is defined as purposeful? How do you explain the mainstream economists who do not predict night as day?
_ I mean… its a prediction about the future, not the past. I’m glad Block says it has nothing to do with economics, but then what is it? What governs it? Nothing? Just our intuitions and feelings about what sorts of inductive arguments are “good enough”?
If there’s nothing wrong with “historical prediction”, then why not go balls to the walls with it like many mainstream economists do? Is the Austrian gripe really just “Well, they’re not doing praxeology so they really shouldn’t call themselves economists according to our definition of economics (which they don’t do because they have their own definition).”
Praxeology might even be irrelevant. Someone who failed to apply praxeological glasses to the federal reserve and viewed it as a mechanical natural disaster could concievably make some pretty accurate predictions.
Given the title of the OP, could we not say that praxeology is the methodology of Austrian-School economics? That is to say, Austrian-School economics uses a different methodology (i.e. praxeology) from that of “mainstream economics”, and the latter uses the same methodology as that of the “hard” sciences.
Yes… That’s kind of the point really…
What parts are mistaken?
Keynes: Denial of Say’s Law, and all that follows from it. In particular this corrolary of Say’s Law:
The same principle leads to the conclusion, that the encouragement of mere consumption is no benefit to commerce; for the difficulty lies in supplying the means, not in stimulating the desire of consumption; and we have seen that production alone, furnishes those means. Thus, it is the aim of good government to stimulate production, of bad government to encourage consumption.
Keynsians turn night into day by saying it is the aim of good govt to increase consumption etc. We see the wreckage from this before our eyes, high unemployment etc.
Chicago: Monetary cranks. Assume that changes in the money supply can bring prosperity. We see the disastrous effects of this in high inflation we are having and will have.
Marx: Labor Theory of Value. Leads to class warfare, and many deaths, when all so called classes in reality help each other.
Socialists: Assume non existence of calculation problem. Has led to mass starvation in many countries.
Praxeology teaches the error of all of the above from first principles.
I’m glad Block says it has nothing to do with economics, but then what is it? What governs it? Nothing? Just our intuitions and feelings about what sorts of inductive arguments are “good enough”?
I agree that Block’s definition of it being “economic history” is a little awkward. I imagine he is stretching the word history to mean future history as well, so that thymology is the attempt to apply AE to the real world, whether in understanding past events or predicting the future.
And yes, I think you nailed it. It’s an art form. The difference is that an Austrian is trying to create music [=correct predictions] from a working Stradivarius violin [=solid theoretical principles to guide him somewhat] ,
and the mainstream from this:
There was either an article or a video clip that was featured on this site not long ago (within the last six weeks) that was Hoppe on this exact topic. I only vaguely remember it, maybe someone remembers it better and can link it for the OP.
I agree with you, but I don’t think that Sieben does. He seems to be arguing that, when Austrian-School economists e.g. claimed that there was a “housing bubble”, they were necessarily and implicitly using the exact same methodology as “mainstream economists”.
I can’t figure out what Sieben is saying, it’s incredibly hard to just come in on debates. But anyway, no one here should just start understanding that praxeology is the Austrian method and that it’s incredibly different from mainstream empiricism
Not all mainstream economists deny Say’s law. And Say was not an Austrian.
Again, not all mainstream economists buy into all of these.
Can you give an example of a conclusion that ONLY an Austrian employing praxeology can reach?
But again, there’s an objectively correct way to play a certain song. There is no objectively correct way to predict the future. So from a theoretical standpoint, it might not matter if your underlying theory is “good”.
Close. I’m saying that Austrian economists supplement with the same methodology as mainstream economists, and that without this supplementation, they cannot make predictions.
Which methodology is that?