Do you consider Austrian economics to be heterodox/outside of mainstream neoclassical thought?
For example, let’s consider an average introductory college econ textbook (e.g. Samuelson). What in this book do you disagree with a little bit? What do you disagree with vehemently? And what do you disagree with that people might be surprised to find out you disagree with it (for instance, obviously you disagree with any nods he gives to Keynes, so I am asking about more subtle/basic disagreements–disagreements on points of theory, etc)?
I don’t they are a heterodox school. Not fully anyways. Especially when it comes to microeconomics.
99% of the microeconomic principles you might learn from an Austrian economist you would also learn from a mainstream economist. The only real difference from the mainstream at this level is that some Austrians have an eccentric interest in methodology. Of course, for all the ink that is spilt on how much better Austrian methodology is, its funny that there are so little differences between Austrian and mainstream micro.
The only substantive claim to distinction that Austrians might have is in macroeconomics. But is that really saying much? I would say you could probably count a dozen “mainstream” schools of macroeconomic thought (Keynesian, neo-Keynesian, New Keynesian, Monetarist, New Classical, Real Business Cycle, etc). Whats one more? Already mainstream economists like John Taylor are saying things that sound very Austrian to me.
I personally see “Austrian Economics” (as it is expressed at a place like LvMI) as more political movement than economic intellectual movement.
Economist Robert Higgs criticized the “claptrap that has passed for economic wisdom in this country for more than fifty years and seems to have originated in the first edition of Paul Samuelson’s Economics (1948), the best-selling economics textbook of all time and the one from which a plurality of several generations of college students acquired whatever they knew about economic analysis.”
This is absolutely incorrect. The differences between the mainstream and the Austrians are torrential, both when it comes to micro and macroeconomics. They differ on method (mentioned), price, value, capital, competition (what constitutes competition), entrepreneurship and business cycles. Austrians basically reject most of the stuff you will learn in intermediate microeconomics, such as consumer choice theory, Cournot and Stackelberg models, Cobb-Douglas production functions, ect.
This is what someone sounds like when they know absolutely nothing about Austrian economics.
Well, I agree that the difference between mainstream schools and autrian method is relatively small when it comes to micro, since micro talks about more tangible/everyday situations that it’s hard to put much bullshit on them.
The thing is, in my view, that austrians develop the same logic they use in micro into macro. While mainstream schools treat micro and macro as each belonging to a whole different universe, it’s like current physics where researchers can’t correlate properly quantum mechanics (micro) with gravity(macro).
I can give one example- in my AP MicroEcon class (very “mainstream”) “perfect competion” was a market where everyone made the exact same product, entry/exit was free, there were too many producers so that anyone trying to deviate above/below market price would not affect it, and everything was displayed through a nice omniscience way. As far as I know, “perfect competion” in Austrian is nothing like this.
One does not have to reject things like rational choice theory to be Austrian (as Esuric seems to think). For example, Peter Leeson has written many articles based on models that utilize utility maximizing agents.
Similarly, being mainstream doesn’t mean you swallow the perfect choice model as an accurate description of reality (asmwalsh seems to think). It is merely one of many tool for understanding interactions in market institutions (oddly enough, for all the bad mouthing of the perfect competition model, Austrians draw the same continuos supply and demand curves you find in “mainstream” textbooks. I guess Austrians also see the value of these as tools for learning, even if they are simplifications from reality).
This is probably why one should avoid reading anything by Murray Rothbard. It only leads to great confusion about what both mainstream and Austrian economics are about. I would recommend reading Austrian economists that didn’t make into Rothbard’s approved cannon. Economists like Schumpeter and Hayek. Both of whom are revered by “mainstream” economists.
That’s about all I have to say on this topic for anyone interested.
Neoclassical consumer choice theory (indifference curves and budget constraints) and production theory (isoquants) are inherently circular; neoclassicals implicitly and explicitly (inter-temporal choice) employ cardinal utility; production functions aggregate and homogenize inherently heterogeneous inputs, knowledge is given (production sets) rather than discovered, and it is perfectly reproducible; prices, in the Austrian subjectivist framework, are determined by the marginal pairs, upper and lower limit; et al.
Mises, Kirzner, Bohm-Bawek and Hayek would all agree, and you would know this if you actually bothered to read any of their work (rather than reading lazy online “critiques” of AE). Furthermore, the macro world and the micro world are not separate; Austrian subjectivist capital-based macroeconomics is radically different from mainstream macroeconomics because Austrian action-oriented microeconomics is radically different from mainstream choice-oriented microeconomics.
They revere Hayek because of his work on law and informational economics. They never bothered to read his stuff on capital and/or the business cycle.
being mainstream doesn’t mean you swallow the perfect choice model as an accurate description of reality
The only reason I said that is since what, as far as I know, most high schoolers will experiance is AP or AP-derived course work, and if that is all they ever get, thats all they will ever think.
Student, I don’t know where you got that idea about Murray rothbard (or the idea about Austrians using continous S/D curves for methodological purposes), but they are frankly wrong. Austrians draw continous supply/demand curves for convience, not for any purpose that involves calculus. Rothbard even says this in MES, saying one can draw S/D curves continously solely for convience, but nothing more.
I don’t understand where that conclusion came from. I don’t see anything in your post even resembling a justification for such an extreme prescription.
Austrian economics is most certainly heterodox economics, but that doesn’t necessarily mean it is wrong.
Of course, I do believe it is. For all the Austrian hooplah over cardinal utility, for instance, I’ve never seen a successful refutation of the the von Neumann–Morgenstern utility theorem (although Rothbard does attempt to do so).
Yes, Austrian economics is heterodox economics, it’s probably also the most successful and interesting branch of heterodox economics (and probably that branch with most similarities to mainstream economics).
I think heterodox approaches are really important, and that sometimes mainstream economists can be somewhat closed minded towards these approaches (that isn’t to say they’re totally ignorant, often times they aren’t). Nonetheless, I think the mainstream is not just correct more often than the Austrians but I also think it’s better science. I think that any science has particular norms and ways of doing things, in economics it’s standard to use math as the language for expressing economic insights (I also think this is a good thing). So whatever validity Austrian critiques and insights may have I don’t think they’re particularly relevant to economics until they can be expressed in math and modelled. Of course, when these insights can be modelled and expressed in mathematical terms it’s a different story, and they have to be evaluated like any other theory. And that’s the way science proceeds, quite often, by absorbing heterodox insights into the mainstream and answering their critiques.
Nonetheless, I think the mainstream is not just correct more often than the Austrians but I also think it’s better science.
Because…? What is it more “correct” on?
I think that any science has particular norms and ways of doing things, in economics it’s standard to use math as the language for expressing economic insights (I also think this is a good thing).
Which is exactly what Austrian econ challenges.
So whatever validity Austrian critiques and insights may have I don’t think they’re particularly relevant to economics until they can be expressed in math and modelled.