The best argument agains Austrian economics

Economics Economics Questions
1

This is an honest thread and not a joke or an attempt to start a flame war.

There’s a term in economics that I saw printed somewhere once, a term for when the cost of transition to an ideal system exceeds the benefits.

Like in physics or chemistry, a plot of the energy of a system as you change a parameter may go up and gradually shoot off into infinity, and then come down from infinity and reach a universal minima on the other side of the wall. But if you are on the wrong side of the wall, you can’t get to the universal minimum without first destroying the system.

2

im confused… is this supposed to be a claim against austrian econ? if so, explain it more please

3

Just because a problem exists in one situation does not prove it exists in every other. Please provide some reasoning why you think it applies to economics at all (let alone AE).

And if you want to throw physical analogies around - what about tunnel effect?

4

If the transition costs exceed the benefits, then it’s not an ideal system!

This analogy doesn’t hold. You can’t deal with utility in numerical terms.

5

I’m afraid that statement demonstrates that you don’t know how to define an ideal system. I think my attempt at this discussion is lost upon the audience here. We are talking past each other.

6

Okay, let me see if I’m reading your attempted analogy right…

Assume there is some ideal economic system, and we aren’t there. Assume that the changes to reach the ideal are known, and the costs of those changes are calculable. Is it possible that the costs of reaching the ideal system outweigh the gains of the transition?

Is that what you’re saying?

Or, paraphrased: We’re too far down the road to total statism to go back. We need to just accept that we will always be ruled by corrupt governments, and we need to get used to the idea, and make the best of things in this state.

Doesn’t sound as good paraphrased, does it?

But your analogy doesn’t really work very well, because there aren’t any such “shoot off into infinity” points. As stated by Azure, utility is not a numerical quantity in the Austrian view.

Ignoring your post and focusing on your thread title, I’ll try to contribute a possible argument against Austrian economic theory, just for the hell of it.

So, one of the main points of the Austrian school seems to be that preferences can’t be aggregated or calculated, and so they may gloss over the possibility that, via empirical methods, they can come up with some aggregations or calculations based on measureable data which have functional utility for determining the directions of economic activity.

Basically, I’m saying that the Austrians’ reluctance to equate different individuals’ value scales in certain places, coupled with their reluctance to (as a temporary measure) numerically measure utilities makes it impossible for them to create certain types of economic models which, despite the (possibly bad) assumptions going into them, may have some usefulness.

Now, I haven’t thought this counterargument through completely, so I’m sure somebody will tear it to shreds, but hopefully that’s good enough for a first try.

7

Basically, I’m saying that the Austrians’ reluctance to equate different individuals’ value scales in certain places, coupled with their reluctance to (as a temporary measure) numerically measure utilities makes it impossible for them to create certain types of economic models which, despite the (possibly bad) assumptions going into them, may have some usefulness.

Now, I haven’t thought this counterargument through completely, so I’m sure somebody will tear it to shreds, but hopefully that’s good enough for a first try.

(Nothing to really “tear apart” here. It’s more a matter of the individual Austrian’s reluctance to embrace models. A successful entrepreneur would not use such a model willy-nilly. They would have to make educated guesses as to when and where is the best time to apply such a model. The Austrian school per se doesn’t have anything against such a decision. The reasoning, of course, is that those who use models unwisely will ultimately become insolvent. It is merely the subjective decision of a given Austrian to refuse to use such models. Well played, I say.)

8

@dinewhouse

I simply asked you to explain your analogy further

9

Nah, we’re done with that. To claim to have the best argument against something and then offer nothing but a loosely-termed, unfinished analogy, only to wax disillusionment when people talk past each other, is bush-league.

10

[quote user=Valject]

The Austrian school per se doesn’t have anything against such a decision. The reasoning, of course, is that those who use models unwisely will ultimately become insolvent. It is merely the subjective decision of a given Austrian to refuse to use such models.[/quote user=Valject]

Okay, I see where you’re going with this, but let me try this argument.

  1. We assume empirical useful models in which the numerical utility values/interpersonal utility equalization are used as approximations exist.

  2. We also assume that some of these useful models have not been found.

  3. Further, we assume that the Austrian school of economics has become the dominant school of thought, and that all those learning about economic thought are taught the tenets of subjective value theory and internalize them.

  4. The internalization of these rules prevents individuals from thinking in a way which allows them to devise the heretofore unknown useful models.

  5. Therefore, the dominance of the Austrian school results in ignorance of these models, and only when individuals break free of the tenets of the school can they make the approximations needed in order to devise the models.

Now, I admit my third point is somewhat strong, but it needs to be in order to show that the deficiency is due to the Austrian school. Of course, even if the Austrian school someday dominates popular economic thought, that will in no way prevent people from thinking outside the box, but internalized logic is powerful because it suppresses this.

11

Completely correct in such thinking. But we have to make the assumption of all of this first. This is the stalemate point of the argument, as you can not prove that clever entrepreneurs will not devise these models on their own, disregarding the tenets of the Austrian school, and I cannot, equally, prove that they will. Empirically, I can claim that the fact that people break the law or reject the idea of government demonstrates that people are likely to think outside the box (ironically employing a model of sorts). However, you could equally put forth empirical evidence that people don’t leap from buildings to see if everyone is wrong about people being able to fly by flapping their arms. It can be said, though, that if anything this is a very minor problem, not with the school itself, but with the assumptions of its members.

12

Even worse, I could, as a proponent of the Austrian school, claim that, while its tenets discourage the use of such approximations and models, the school, by its ruthlessly deductive nature, also promotes deep out-of-the-box thinking, thus making the Austrian school a contributor and a detractor.

In the end, it comes down to–wait for it–a subjective value judgment!

13

The ability to connect the dots is something I respect in my fellow beings. Satisfactory. Highly satisfactory.