I’m sure this is going to piss everyone here off but here goes: I think you guys are way too wrapped up in theory without translating that theory into practical ideas. I mean it’s great that you can use praxeology in a sentence but you need to show how that can predict what happens in the real world otherwise what’s the point? Sound underlying theory is very important in hard sciences like physics but much less important in soft sciences like economics.
The fundamental flaw of modern economics is treating the science like the natural sciences. Men act and atoms don’t. We can verify physical experiments, but don’t understand the underlying laws. Praxeology, on the other hand starts with general statements, the axioms and their deductions which we have apodeictic certainty of. The best “practical idea” is to drop the futile scientism from the study of economics.
The theory of economics used here is applicable to the economy just as the Pythagorean theorem is to actual existing triangles.
There are no perfect triangles in existence, yet we use the theorem to approximate an unknown side of things that we approximate to be triangles.
Austrian economics is deductively derived just like the Pythagorean theorem. It doesn’t require experimentation to be proven. There is no experiment to test the statement 1+1 = 2, yet it is true.
Natural sciences don’t use this kind of deduction. It relies on experimentation and philosophical induction.
This actually makes science “less sound” than mathematical or logical theorems. (at least in my mind)
Personally, I don’t think there exists such a thing as “social science” outside of philosophy. Most social science today tries to apply scientific testing to aggregates of people, which I don’t find convincing at all, because there are too many variables to account for. I think methodical individualism is the way to go in figuring out all sorts of social behaviour. It’s worked for economics, why not other kinds of “social science”?
If you want to predict future phenomena, you want to be some kind of market analyst and use whatever tools you can find that are effective. There are people like Peter Schiff and Marc Faber who believe in the Austrian school of economics and trade on the market and do well.
I honestly don’t understand the problem here.
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When aren’t Austrian ideas translated into practical ideas?
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The point is that there is no direct way to exactly predict what happens, it is really impossible only generalities can be made and as for these generalities who predicted the great depression? Who predicted the fall of the soviet union? Who predicted the internet bubble? Who predicted the housing market crash?
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If it were molecular physics we’d be much more in tune to things like graphs and numerical theories, in other words much more neo-classical and “mainstream” than we are. Indeed how can theory be less important in a system in which we already know what motivates individuals and can move up from there while much of the time in physics we have no idea WTF is going on until it is observed.
Ok let’s try this. What separates Austrian ideas from other economics in a practical sense? Not that they use praxeology but in terms of practical issues.
they don’t advocate the impoverishment of the masses?
I was looking for something a little more specific. And not what separates Austrians from Keynesians but from other free market philosophies.
They support the ultimate laissez-faire economic policy, the majority of the individuals on this forum (and many Austrians in general) are indeed anarchists. It is felt that any taxation/government intervention of any kind causes market distortion which will almost certainly be negative because of the fact that the state isn’t driven by consumer demand and has the calculation problem.
While almost all other types of economics believes in “market failures” Austrian economics either states that there are, and can never be, one or that there are very few requiring the state to be brought down to night-watchmen levels. Another major difference is the belief in the effects of interest rates controlled by a central bank instead of controlled at the free market rate, which is more or less what ABCT revolves around.
Finally Austrian economics claims that the market is self correcting and the best/fastest way to bounce back from a recession is to allow the market to sort out its malinvestments.
Those are some of the major differences on “practical issues” all of which are derived from theory beginning at praxeology
All of those things you mentioned are all supported by free market economists like Milton Friedman for example. What is it that separates Austrian school from the other free market schools? The first time I heard of the phrase Austrian School was from Peter Schiff. 2 things that struck me as drastically different were his belief that trade deficits and total debt are a bad thing. But the Austrians here seem to disagree. So I’m wondering exactly what does distinguish Austrians from other free marketers.
We could start with Friedman being a MoneySocialist.
Ok then why did Milton Friedman support the state and a fiat currency not driven by consumer demand? You could say that David Friedman more or less agrees, because he mostly does, but the main thing is the belief in the effect of interest rates on the market. Friedman was, of course, a monetarist who believed similarly that the money supply and interest rates could be tampered with as needed, it relies much less on the market just fixing its malinvestments.
The calculation problem isn’t talked about nearly as much with other free market economics. Finally Friedman and friends didn’t believe that government interference would have nearly the market distorting power that Austrians tend to. The fact is that, if you exclude theory you aren’t going to get radically different answers from one free market advocate from another.
What you are asking us to do here is to explain why free market advocates disagree with free market advocates without talking about theory. This is similar to saying why it is that (just for the sake of argument because its the best example I can think of at the moment) someone who is a Communist isn’t also (necessarily) a Marxist without talking about the method behind their madness.
I liked Friedman though, his defenses of the free market were often superb. Think of it as a Twilight Zone fan praising an episode of the Outer Limits
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Value theory - similar with non-Austrians but not quite the same. In the view of most Austrians, mainstream economists lack the proper understating of subjectivism and they fail to follow it to its natural conclusion in many areas.
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A theory of money and credit - Austrians have a coherent theory integrated with marginal utility and the rest of economics.
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Capital theory (and structure of production)- non-Austrians lack a Capital theory
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Entrepreneurship - non-Austrians lack a theory on entrepreneurship or at least they are very weak at it.
I think you’re too wrapped up in criticising without having first understood…
OK, now we’re getting somewhere. I didn’t know Milton Friedman was in favor of fiat currency. I always assumed all free market economists were in favor of a gold standard.
Peace.
Read “why i am not an austrian economist” by Bryan Caplan.
although critical of Austrian Economics it basically explains every difference between Austrian economics and the mainstream approach.
Read “why i am not an austrian economist” by Bryan Caplan.
although critical of Austrian Economics it basically explains every difference between Austrian economics and the mainstream approach.
You haven’t read the Bailout Reader? http://mises.org/daily/3128 (offered here merely as an example of observations made from the Austrian perspective)
So, the mainstream economists did predict the housing bubble and bust? Their theories do explain how it happened? They know what to do now to fix the problems? Their methodology leads them to conclude that the problem lies in the bust, and that government must figure out a way to induce consumption. They didn’t read the Bailout Reader either.