Other Perspectives

I will admit that I am not as well-versed on Austrian economics as I ought to be, but I'm trying to learn more about both that school and Neoclassical economics so that I can be a more effective participant in the discourse. One of the things I came across was a paper by Bryan Caplan, Professor of Economics at George Fox. He's a former Austrian but has since moved to arguing for libertarianism from a Neoclassical perspective.

It's very, very long, but I would hope that those interested in alternative points of view would at least wade their way through it:

LINK

I have read multiple books of Mises and Rothbard and I found the writing to be a very poor description of their views, at least from what I have read. I disagreed with the writer on some points, but I will leave them alone for now. Each point could be its own thread. Thanks for the reference.

I will give this to Caplan: the fact that Austrian principles are neither testable or provable has always rubbed me the wrong way.

Okay, so that's pretty explosive, so I better explain myself.

Austrians contend that there's no way to derive generally true principles from discrete economic statistics, because those statistics only show what was happening at a particular place, in a particular time, and with particular individuals. That's why they use praxis rather than empirical data.

The problem that creates for Austrians is that there is no way to determine whether or not a particular policy is having an effect on anything, since statistics give you no useful information about how economics work. Therefore, even as they say that interventionism has this or that effect on the economy, by their own admission, they cannot use empirical data to support their assertion. If they could use empirical data, then they would have no need for praxeology, since empirical data lends itself only to inductive reasoning and praxeology is only good for deductive reasoning. Furthermore, if they accepted that you could gain useful information about economic laws from statistics, then that means so could the government.

How would we ever know if Austrian principles were contributing to the general prosperity without using statistical analysis?

B-Ran wrote:I will give this to Caplan: the fact that Austrian principles are neither testable or provable has always rubbed me the wrong way.

I would like to see how Austrian principles are less testable than Neoclassical or Keynesian.

Neoclassical/Keynesian economists accept empirical data into their hermeneutic. Therefore, they can look to available data to confirm or deny their theses.

Austrianism is praxeological. It cannot appeal to available data because its hermeneutic necessarily delegitimizes empiricism as an acceptable means of confirming or denying praxis.

The basic reasoning of the Austrian School is praxeology. This does not make it untestable. In fact when put to the test, Austrian Economics has been the most accurate in the predictions of major economic events. That is one way to test which school of thought is best. Now, I understand that these tests won't be perfect, but they help.

But how can Austrian economists define what constitutes an economic event if not through statistical (empirical) information in order to know whether they predicted what they predicted or not? And furthermore, how could the Austrian economist determine what caused the event in question? Austrians, as a rule, do not believe in macroeconomics.

What tool does the Austrian economist use to determine that he was right about a prediction? You could point to notable economic indicators, but unless you radically redefine what those indicators are, you are using the same economic indicators the Keynesians point to as evidence of the success of their policies. You can postulate about what -might- have happened, but Austrians shy away from such scenario-making, again because praxeology makes such untenable.

B-Ran wrote:But how can Austrian economists define what constitutes an economic event if not through statistical (empirical) information in order to know whether they predicted what they predicted or not? And furthermore, how could the Austrian economist determine what caused the event in question? Austrians, as a rule, do not believe in macroeconomics.

What tool does the Austrian economist use to determine that he was right about a prediction? You could point to notable economic indicators, but unless you radically redefine what those indicators are, you are using the same economic indicators the Keynesians point to as evidence of the success of their policies. You can postulate about what -might- have happened, but Austrians shy away from such scenario-making, again because praxeology makes such untenable.

Mises predicted the Great Depression. Keynes predicted that there would not be a severe recession ever again (before the Great Depression).
Peter Schiff predicted the bursting of the housing bubble and the current recession. The only other people that I have seen predicted this mess are also Austrian Economists.

This is the type of evidence that I am talking about. There are many more, but those two are my favorite.

Austrians do not shy away from scenario-making. Reading any of the many works of Mises, Rothbard, Hazlitt, etc. would prove that they often participate in the "what ifs".

http://news.google.com/archivesearch?q=housing+bubble+burst+&hl=en&um=1&sa=N&sugg=d&as_user_ldate=2004&as_user_hdate=2004&lnav=d3&ldrange=2002,2002&hdrange=2005,2008

This is a partial list of news stories from 2004 predicting what is going on right now, and from a cursory examination I don't see Peter Schiff's name on any of it.

But anyway, how do you determine what's going on in an economy from an Austrian perspective, especially causality?

For one, you understand the Austrian Business Cycle. You understand where money comes from. You understand that socialism does not work.

I do not care to defend Austrian Economics anymore on here. I will just stand for what I believe in a particular situation. If there really is a better way or a better understanding, someone can present that better way of thinking.

Look at the link that you sent that had a google search of "housing bubble" from 2004. Find out if other people predicted this and how they came to the conclusion that they did. I can tell you how we got into the mess we are in. I can tell you some basics about what is going to happen in our economy and I can tell you why. If someone has an alternate view, let's hear it.

You know, you don't have to be an Austrian to believe in economic liberty. There are plenty of neoclassicist and monetarist libertarians out there (the author of the article at the top of the page is one).

It depends on what you call economic liberty. If a person believes in a central authority messing with the money supply and the government protecting fractional banking (which our government does through the legal tender laws), then they disagree on a very fundamental issue with an Austrian. I do not have much concern with which school of economics someone says they are from. If they consistently support more freedom in the market, we agree.

Monetarists, as far as I understand, believe that the money supply should be manipulated because they believe it will help stabalize the economy. At least this is what Friedman thought should have been done during the Great Depression. Now, Friedman said a lot of good things, but what he advocated regarding the Great Depression was wrong. If you would like to start a thread about a particular subject, this would be a good one to discuss.

I am not going to attempt to define what school thinks what. Instead, we can talk about the actual issues. If someone thinks that the money supply should be messed with... lets talk about it. If someone thinks we should replace the unemployment tax with tariffs, lets talk about it (which we have). If someone thinks that there is a better way than the free market, lets talk about it. I am not going to worry about which school of thought I fall into, instead, I will try to reason through the issues without regard to an allegiance or opposition to a particular school of thought. I will do my best to keep my mind open and have honest discussion.

"If we allow ourselves to use the term 'society' to depict the pattern of all individual exchanges, then we may say that the free market 'maximizes' social utility, since everyone gains in utility."

I found this quote of Murray Rothbard in the paper that you linked to. It has summed up my thoughts that I have attempted to sum up in many different ways. I am glad I found this one.

I think the fundamental proposition that I have an issue with, as far as that statement goes, is the subtext that surrounds it. Namely, that there are really no such things as neighborhood effects or public goods.

I really do encourage you to sit down and read the whole thing, mostly because its author is very sympathetic to the Austrian viewpoint while at the same time being primarily interested in being a good economist. He gives Austrianism its due credit, especially as it pertains to the Austrian business cycle and other important and influential ideas to come out of Austrianism. But he also points out flaws in the Austrian model.

Which makes sense, unless the Austrian model is flawless.

B-Ran wrote:I think the fundamental proposition that I have an issue with, as far as that statement goes, is the subtext that surrounds it. Namely, that there are really no such things as neighborhood effects or public goods.

I really do encourage you to sit down and read the whole thing, mostly because its author is very sympathetic to the Austrian viewpoint while at the same time being primarily interested in being a good economist. He gives Austrianism its due credit, especially as it pertains to the Austrian business cycle and other important and influential ideas to come out of Austrianism. But he also points out flaws in the Austrian model.

Which makes sense, unless the Austrian model is flawless.

I ended up reading the whole thing. I found it interesting, but I do not agree with his criticisms. I would also encourage you to read writings of Mises to understand his thoughts. Through the writer of this articles eyes does not actually do the writing justice. It is not that there is some literary beauty to it... but the actual thought being expressed by Mises or Rothbard is different than he summarized on many subjects. To be fair, just reading a critique of a person's thoughts does not usually do justice to the person and their thoughts.

Here is the thing... I do not think that Austrian Economics is perfect by any means... however, I do not think that any amount of government intervention in the marketplace, besides defining and enforcing property rights, is beneficial. Just because the Austrian School has not answered every question relating to econ, does not mean that its answers regarding government intervention are not the best answer possible. The Austrian School of Econ has so far been for non-interventionist policy.

What sort of government intervention would make the market better than a free market? None. Now, does this mean that there are no more questions to answer? Of course not. Defining property rights most effectively/justly/naturally is one key issue that hasn't been totally answered. However, the Austrian School can be absolutely correct about the effects of government intervention in the market without being the perfect school of thought. I am suggesting that this is the truth. The only way to show that I am incorrect is to show an example of an interventionist policy that is better than the free market.

How would you define 'better?' That after all is an important question.

B-Ran wrote:How would you define 'better?' That after all is an important question.

Better meaning that the most people found the exchange (between gov't and them) beneficial.

I should clarify... what government intervention that was coercive.