I have a friend who doesn’t have the knowledge yet to answer this guy and I can’t really check it over for another few hours, although I’m sure it’s full of fallacies, false dichotomies and unsupported assertions - I find that non-Austrians are generally devoid of the ability to think logically or, as Herbert Dingle once said:
. . . I am not yet convinced that facility in performing mathematical operations must inevitably deprive its possessor of the power of elementary reasoning, though the evidence against me is strong. – Herbert Dingle
You’re sure it’s wrong, even though you haven’t read it? You’re sure it’s “full of fallacies, false dichotomies and unsupported assertions”?
So, you’ve just made a string of assertions without any support. Yet, you insult another person as presenting arguments “full of … unsupported assertions.” Very wacky.
I insult the guy based on the premise of the article. I did get a chance to skim it and one of the assertions he makes is that many of the assumptions of Austrian Economics is false. How can I take someone seriously who asserts garbage like that? First-rate thinker? I doubt it.
just to be clear though, do not dismiss economists because they aren’t Austrian Economists… you can learn a lot from non-austrian economists. David Friedman, an influence of mine, as well to some others on here, is an awesome economists and he is a neoclassical
The premise of the article is a critique of Austrian Economics. If you are going to dismiss critiques out of hand for no reason better than because they are critiques then you should just move on, IMO. Austrian Economics doesn’t need any more cheerleaders.
Bob Murphy wrote that Caplan’s first claim, that mainstream economics does NOT assign numeric values to utils [to those who understand math], is totally correct. He points out the ridiculous mathematical error of some of Caplan’s critics on this point.
I’m not sure if he talked about this, but while certain Neoclassicals may say that they don’t utilize cardinal utility (and all rankings in their utility functions are ordinal), they still utilize the tangency condition (MUa/Pa=MUb/Pb) in order to acheive the “optimal basket” on an indifference curve given a budget constraint, which consequently translates to the points on their demand curve. They may say that they don’t use cardinal utility, but in reality they still use cardinal utility in their price formation.
Bryan Caplan’s other claim that Rothbard extracted backwards bending supply curves from neoclassical metholdolgy without deriving them from his own value scale theorems is also unwarranted. A backwards bending supply curve, just like a Veblen good, is simply a connecting of the dots of a shifting supply/demand curve. The individual is not moving along a given value scale (a demand/supply curve) but rather changing in his ranking of goods (his ranking of leisure rises while ranking of money falls).
The error of saying a backwards bending supply curve of labor represents a single supply curve can also be revealed through a similiar so called “backwards bending supply curve” of cake. Rothbard mentions in his Chapter on Money that even though a supply curve may be “backwards”, at each price an individual will still earn more money at the lower quantity supplied than at a lower price with greater quantity supplied. The individual realizes that at a lower quantity supplied of labor, he can earn more money at the higher price and enjoy leisure. This would be analgous to a seller of cake that at a higher price, decides to sell less total cake because he can earn more revenue from the smaller amount of cake sold and enjoy some of his cake as a consumer good. But it is much clearer from this depiction of the backwards supply curve that this is a change in the cake owners value scale.
Austrian economics doesn’t need any more cheerleaders … because everyone is an Austrian Economist? Considering the current lack of Austrian economists in positions of influence and in academia, I’d say that Austrian Economics needs more cheerleaders - a lot more!
I’d say that no, assertions made against Austrian Economics are not necessarily incorrect. AE is certainly not the last word on Economics and there are many more praxeological discoveries to be made. However, given the success of our current understanding of AE, coupled with the fact that Mr. Caplan made the sweeping statement that several of the most important AE assumptions are incorrect [or overstated] would lead me to conclude that the guy must be from some dimention where the usual laws of logic do not apply.
Of course, it could be stated that AE is correct in the same way as Aristotle’s Crystal Spheres [almost] correctly predict the movements of the planets. However, we are comparing the predictive power of AE against that of an economic theory from which predictions are rarely correct. Until some genius comes along with another theory which is more correct than AE, this is what we are stuck with.
There is a difference between cheerleading and advocacy. Promoting people to study austrian economics is advocacy. Saying this like “non-Austrians are generally devoid of the ability to think logically” is cheerleading.
I have an issue with this attitude, especially in light of how you’re treating Caplan’s criticisms. If this is about predictive power (as you claim) how often are Brian Caplan or other GMU economists incorrect with predictions generally? Do you have any notion at all that can be substantiated? (I certainly don’t). More importantly, this is not about predicting anything. This is about methodology and epistemology. When you say things like “another theory which is more correct than AE” it means that you are either tentative about the fundamental axioms of praxeology, or doubt the process of logic which deduced economic laws from those axoims. If you have enough doubt in these foundations that you have to base your support of AE purely on its predictive power, then anything that you have to say about it really is just cheerleading.
“just to be clear though, do not dismiss economists because they aren’t Austrian Economists…”
I agree to this. I learned a lot more by reading Keynes and Marx about Austrian Economics than just reading the Austrians. Not that I agree with Keynes and Marx, but understanding their points (and logical flaws) helped me to understand AE to a fuller degree.
From another point of view, reading non-Austrians like Ostrom presented arguments in a different light that are very Austrian friendly.
To set up the background, this is Caplan speaking:
As if to emphasize the strength of his disagreement with the mainstream approach to utility, Rothbard goes on to dismiss the standard intermediate micro theorem “that in equilibrium the ratio of the marginal utilities of the various goods equals the ratio of their prices. Without entering in detail into the manner by which these writers arrive at this conclusion, we can see its absurdity clearly, since utilities are not quantities and therefore cannot be divided.”[6]
He continues:
What about the theorem - that Rothbard dismissed - which claims that utility-maximizing individuals equalize the marginal utilities of goods consumed divided by their prices? Doesn’t this show that neoclassicals believe in cardinal utility? No, it does not; statements made in technical jargon often sound absurd if you forget the underlying definitions. A utility function just uses numbers to summarize ordinal rankings; it doesn’t commit us to belief in cardinal utility. Deriving the marginal utility of individual goods from this function commits us to nothing extra.[10]
Now Murphy goes into nice detail everywhere but here, where he merely says:
The neoclassical equilibrium condition, which Hülsmann (following Rothbard) criticizes as fallacious, could be derived entirely from the ordinal preferences of the model’s agents. The introduction of utility functions is just a technical convenience which allows the use of differential calculus in order to render the analysis more tractable.