Assuming economics was a neutral/apolitical science, you’d be right. However, modern academia is heavily influenced by politics - look at Hal Lewis’s letter of resignation in which he mentions the “money flood” and he’s a physicist! It’s pretty tough to politicize the spin on a quark… much easier to politicize aggregate demand.
Clayton -
No, it’s a quote from David Friedman regarding the distortions and half-truths Rothbard wrote about Adam Smith.
And my question is, who was doing that?
Thanks for the heads up. Who says 14 year old girls on the Internet are useless?
Yeah, I got that part. I’m confused as to why you posted it. And more importantly, why you directed it at me.
The mainstream, for quite some time now, has held the position that predictive power, rather than logical consistency, “is the hallmark of a good theory,” and now that the Austrians are famous for their correct predictions (and the mainstream econometric models are infamous for their incorrect ones) it’s no longer relevant. We have to hear the same one-liner, namely that “economists have predicted 11 of the last 10 recessions,” as if this constitutes some sort of argument and/or actually diminishes the explanatory and predictive power of the ABCT (which its always had, by the way).
Also, I always like it when Austrians are accused of attacking strawman. There is some truth to this, but at the same time, you have individuals like Lawrence Summers claiming that the tsunami in Japan will do wonders for its economy! I mean come on now.
lol, did he really say this? 
In my amateur opinion, if an economist commit broken window fallacy he isn’t worth his degree and he is bad economist. But hey, I doubt they teach this in mainstream econ courses… Though I may be wrong.
Check out the intro…
The mainstream, for quite some time now, has held the position that predictive power, rather than logical consistency, “is the hallmark of a good theory,” and now that the Austrians are famous for their correct predictions (and the mainstream econometric models are infamous for their incorrect ones) it’s no longer relevant. We have to hear the same one-liner, namely that “economists have predicted 11 of the last 10 recessions,” as if this constitutes some sort of argument and/or actually diminishes the explanatory and predictive power of the ABCT (which its always had, by the way).
Well, this just isn’t true! The mainstream has never said that logical consistency is not important in a model. In fact, for years now one of the main arguments in favour of mathematical modelling is that a) it forces one to be explicit about their assumptions b) its imposes logical rigour on the models in question.
And as I said, it takes a little gall to say that Austrian models have predictive power when they essentially consist of saying “there’s going to be a recession sometime in the future” or “there’s going to be a recession real soon” every time we’re in a period of economic prosperity.
Also, I always like it when Austrians are accused of attacking strawman. There is some truth to this, but at the same time, you have individuals like Lawrence Summers claiming that the tsunami in Japan will do wonders for its economy! I mean come on now.
This is too good! What you did there is said “well, the Austrians do strawmen their opponents because their opponents say REALLY, REALLY ridiculous things like (insert strawman argument here)”. Of course, what Summers actually said was a) if you take the standard result that natural disasters boost aggregate demand and b) Japan has been in its economic malaise because of insufficient aggregate demand it follows that c) there’s a possibility that the tsunami in Japan might bring some economic benefits, obviously offset by other factors.
Now, you might well disagree with this, but a is a pretty reasonable statement, at least not patently false. b is not worth going into here, but there’s a pretty sizeable literature on the subject, so I’d venture to say that it’s not obviously ridiculous either.
And the opposite is not true?
lol, didn’t anyone tell you that two wrongs don’t make a right? Seriously, you guys are the ones outside of the mainstream discussion here, if you want to be part of that discussion its probably not a bad idea to take their positions seriously. Shrill pieces showing the ridiculouslness of ridiculous strawmen won’t get you too far in that!
I have never in my life heard anyone cite passages from The General Theory in anything other than a critique of the text itself. And even then it’s been less than a handful.
For realz?
Got any examples?
Yep, they’re all contained in Pepall, Norman and Richard’s fantastic IO book! Or Varian’s Intermediate Micro book! Or Macroeconomics by Carlin and Soskice! Or, well, within any number of relatively basic economics textbook that you have never (and will never read). Of course, I suspect you wanted me to type out the model with you or spend the time looking on the internet for one, so you could ignore it.
So yeah, there’s some reading for you. Check it out, or don’t, attacking strawmen is pretty fun too.
Kind of like how the tales of big Paul Bunyan dragging his big axe on the ground and Pecos Bill ridding a tornado and then getting lost in the desert and being thirsty helped us make a great deal of sense of the Grand Canyon and the Rio Grande.
Yes, that is a perfectly reasonable and fair analogy to the point that I was making.
And astronomers and geometricians can kick up a fuss about how assuming the Earth is flat just because the horizon looks flat is a flawed analysis, but if it helps us explain why Austrialians don’t fall off the bottom (and informs travel restriction policy) that’s pretty good.
Right, except, no because that theory would lead to a whole bunch of bullshit predictions. A better example would be when physicists assume that there is no friction, of course, it isn’t literally true, doesn’t mean that the model is useless though.
And you think any of this is relevant because, what? ABCT didn’t predict and/or can’t explain a certain recession? Which one might you be talking about?
It turns out that if you want to make an empirical claim along the lines of “the drop in output between year y and year z can be explained the Feds action by mechanisms a, b and c” then you’re going to have to provide data in favour of that claim. Asking others to show how the data is inconsistent with your model before you’ve provided the data or the model, is a little bit lazy!
And as I said, it takes a little gall to say that Austrian models have predictive power when they essentially consist of saying “there’s going to be a recession sometime in the future” or “there’s going to be a recession real soon” every time we’re in a period of economic prosperity.
Say there is a man armed to the teeth on the roof of a building in a crowded city. He tosses 100 live grenades a day from the roof onto the street. The local police assure everyone that everything is just fine and that the grenades pose no danger. The Austrian prediction would essentially consist of saying “Someone is going to get killed sooner or later.” Would you say they are predicting 11 out of the next ten deaths?
AE explains WHY the govt meddling [=tossing grenades] we are constantly experiencing will produce recessions [=someone getting killed] after a boom period [=the fun of watching the grenade fly through the air].
It desn’t strike me as a valid criticism of AE to say “You keep saying the same thing, lighten up for once.” More convincing if you could show counterexamples to the prediction, and/or WHY the prediction doesn’t follow from the given information [=explaining why no one will die from the tossed grenades].
Now, you might well disagree with this, but a is a pretty reasonable statement [to say tsunamis are wonderful for Japan. Shame we don’t have a few more Katrinas ourself, one in every state, so we could finally see some green shoots].
You poor thang, brainwashed to believing the Emperor has New Clothes. Your only possible escape is a fat dose of humility, so you could ask us humbly why Summers is so wrong.
The distinction between “mathematical” and “verbal” methods is a false dichotomy, there is no meaningful distinction between the two… all math can be stated verbally and all (formal) verbal arguments can be stated mathematically. So, all the “you like Austrian economics because it doesn’t require math” bullshit is just a veiled appeal to authority to try to intimidate non-experts into silence. I’m more comfortable with math than I am with economics but I can clearly see with my own two eyes that the bullshit-per-word ratio among Austrian economics is much lower than in mainstream economics.
The trouble with the mainstream social sciences is that they really, truly do not understand what mathematics is. Let’s start with set theory, perhaps the most foundational of all modern mathematical disciplines. A set is constructed in the following manner: “All objects with property X are a member of this set.” So, if X is “divisible by 2” then the set is the set of even numbers. And so on. But this idea of properties is very intriguing… can we choose just any property and substitute it for X? The answer is no, you can’t. Some properties are self-contradictory, such as the defining property of Russell’s set (“a set which is not a member of itself”). The difference between analytical objects - the synthetic objects of mathematical study, such as line segments, fractals or pi - and empirical objects is that the properties of analytical objects are exhaustively known, whereas the properties of empirical objects are only partly known. So, when I say “the set of all red objects”, I’m not talking about a truly well-defined set since there is actually quite a bit of fuzziness around what red is, exactly, and what it means for an object to be a particular color. This is quite different than the situation with even numbers because the properties of natural numbers (what it means to be a natural number) are exhaustively known.
Saying “we use mathematical methods in modern economics” as some sort of boast is silly. The properties of the simplest physical objects - quarks, gluons, etc. - are not exhaustively known. The human brain - and even more, the sum of all human brains, human society - is the most complex physical object we know of. Physicists struggle to put meaningful error bounds on their models, even though they are dealing with phenomena that are quite simple by comparison to the phenomena of the social sciences. So, I really don’t understand the prancing and strutting over the use of mathematical methods in economics or other social sciences.
Finally, Austrian economics has something that obviates the need for statistical-wizard economists… it’s called the entrepreneur. UPS has a software program that maps out routes for its delivery trucks in such a way as to minimize the global number of left-hand turns taken by all trucks. This is an astoundingly complex computational problem, a lot harder than some multiple linear regressions run in Matlab. It is entrepreneurs who model the economy and respond to consumer demands. If they can profitably use statistical methods to do this, they will.
Clayton -
“UPS has a software program that maps out routes for its delivery trucks in such a way as to minimize the global number of left-hand turns taken by all trucks.”
Did not know that, very awesome.
Is this seriously coming from the person who claimed that Austrians defined utility as purely physical pleasure felt from performing an action or achieving a goal?
As someone who has managed to trudge through sections of the book, all one can do is criticize the theories that Keynes either creates himself or are Malthusian fallacies brought back from the dead. Anything from Keynesian capital theory to his view on savings is up for grabs.
You don’t think it’s a little demanding to have the person you’re debating with read three books before continuing the discussion with you? If I bluntly told you to go read Man, Economy, and State, Economics in One Lesson, and The Theory of Money and Credit you’d rightly call that ludicrous. But if you post the models I can assure you that someone on this forum will address them.
I don’t understand why you’re so beholding the statistical analysis in economics. Statistics do not operate under the condition of ceteris parabus, and even if they did every consumer has different preferences which would be expressed in the market despite what you’re professors might tell you about homo economicus. Even claiming that you can map such a complex and chaotic system as an economy with models which spit out precise data on how much output or real income will supposedly be effected by following a certain policy is narcissism of the highest order.
If this is truly the intellectual rigor and education you are receiving at your graduate institution than it seems like you would’ve been better off just burning the tens of thousands of dollars required in tuition fees for the warmth of the flames.
I wasn’t necessarily agreeing with your assertion. I was just pointing out how you refuse to even mention that Austrian theory is the most caricatureized of any. What is the point of accusing a wrong that you yourself are guilty of? Even if the other side is guilty as well, how in the world does that help your case? You seem to think that “two wrongs don’t make a right” is a valid trump of being a pot calling a kettle “black.”
Seriously, is the Internet getting so crowded that teenage girls are spilling over into economics forums?
You have no idea who I am or what I’ve read. You really don’t want to go there.
I wasn’t asking for examples of “a decent Intermediate Micro/ Macro II book”. I was asking for examples of this “lot of stuff that flies well under the radar of most Austrian discussion”. Please provide some specifics as to significant and important aspects of economics that are found in intermediate textbooks that are ignored in Austrian discussion.
I’ll say. They are perfect examples of things that, “while somewhat ‘unrealistic’, help us make a great deal of sense of the world out there.” Just like you said.
Austrians don’t have problems with thought experiments. They have problems with forming policy based on untrue assumptions.
What does any of that have to do with my question or the statement I was responding to? Which recession are you asserting Austrian theory did not predict or cannot explain?
While this is undoubtedly a fascinating conversation, would you guys mind taking it to another topic?
The “Austrian” model also predicts the calamitous effects of various government “counter-cyclical” interventionist policies. According to the Austrian framework, the attempt to re-inflate the economy and bail-out unsound business practices will “prolong the agony” and turn a sharp and quick depression phase into a “lingering and chronic disease” (as it facilitates the accumulation of malinvestment and prevents the structural realignment necessary for a sustainable and sound recovery).
I have read many books from Rothbard, Hayek, Mises, Woods, Murphy, Schiff, Menger, etc.
Every once in a while i will read journal entries made by institutionalists or keynesians or socialists. I have read William Stevenson, Krugman, Keynes (yes, General Theory, although i’ll admit i only read about 250 pages of it. I can see it on my shelf getting ignored while i read Schumpeter) Das Capital was brutal because it was in a political philosophy class (i read it alongside Carl Menger’s “Principles” and wrote my term paper comparing the two and calling Marx out for obfuscating economic language and forever confusing people who start their learning of the subject for his PoV. There really aren’t any books that aren’t very specific and over my head about econometrics, behavioral, public (welfare) economics.
Plus, being in a Big Ten school i am subjected to the other points of view constantly. My public policy class was not about government finance it was theoretical health economics. “Social Margin, cap and trade, etc.” It was miserable. I am going to do a full blog post to expose Jonothan Gruber’s “Public Finance and Public Policy” textbook is a propaganda tool. The author has a PhD in Economics from MIT and is the chairman of a public health research NGO.
I am a member at the “econgirl” blog, she and most members are very hostile towards Austrian economics and she admitted when the Keynes vs. Hayek rap video came out that she knew nothing of Hayek and had only auxiliary knowledge of the Austrian school of thought, despite her PhD in economics from Harvard… She was, however, somewhat familiar with Frederic Bastiat. I suspect that many don’t see the connection of the French Liberals and Austrians that Rothbard expounds constantly.
My current E305 Money and Banking class has so far avoided any kind of lay language regarding central and/or fractional banking. I have raised my hand a few times to bring issues up and when we got to the central banking chapters my professor prefaced the lecture with Ron Paul and dissent of the Fed. We went over McFadden and his regulations, but not his mysterious poisoning…(haha =/)
So, yes, i read the opposing views. Doing so is the only way to call yourself “right” anyway. You cannot wander around the world knowing nothing of others opinions, but subjecting your own ignorant opinion to them. I also find that at a school where more people are concerned about getting drunk, than about learning, that it is rather easy to talk sense into them one on one. They have no intellectual defense. They are puppets, zombies, dupes, marauders, for the mainstream news and other opinion molders (their professors and jon stewart).
It’s irrelevant, so who cares. Also, didn’t understand what you were getting at before. Look, you can’t criticize modern macro by finding flaws in Keynes. That’s just silly.
In a certain sense, no it’s not. What Keynes provided macroeconomics was a common framework, through the interpretation of Hicks and Samuelson. So, if you disprove Keynes you can disprove the basis of the common macroeconomic models. Some of the relevant concepts: marginal efficiency of capital and liquidity preference theory of interest.
Heh, I read nothing but the alternatives.
These days, I have taken an interest in Post-Keynesian and Modern Monetary Thinking ideas, although often feeling suspicious of them from particular perspectives, especially given their rather circular “Taxes = Demand for Money” argument.
I only read the Austrian School’s books in sudden bursts, in which I am on a long hiatus from Austrian School literature, and then suddenly read several small books of theirs during a short period. That way, Austrian books always seem fresh and fascinating.
In my life, I have not read one single full blown treatise on economics, and always stick to smaller, topical books, sorted by monetary theory or international trade or cosmopolitan finance and so on. There is so much effort involved in understanding every single treatise, as I have discovered from others, that it takes you a while before you have even decided whether you agree with the ideas.
This is spot on. It’s funny how Austrians characterize the current macroeconomic debate as themselves vs. the Keynesians (see Hayek/Keynes rap). Don’t they know that Keynesianism has been shot down long ago by the Lucas critique?