At Cato Unbound this month, we’re talking about the Austrian school of economics. In his lead essay, Professor Steven Horwitz talks about how Austrians approach empirical questions, arguing that Austrians are indeed doing important real-world research, contrary to what their critics sometimes claim.
Jason Kuznicki
Jason Kuznicki is a research fellow at the Cato Institute and contributor of Cato Unbound. He's on twitter as JasonKuznicki. His interests include political theory and history.
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Good economics for Austrians means sound arguments, not just valid ones. Too much of modern economics consists of valid reasoning from false premises about human action. The accuracy of those premises matter greatly for Austrians.
Ah Jeebus. Nobody’s got a clue about true premises for human action but the Austrians.
SSDD.Report
I think it’s more like, “Few but the Austrians are questioning the premises about human action held by mainstream economic ideology.” Don’t you think it’s unfair for mainstream economists to dismiss Austrians as unscientific just because they say mathematics does more harm than good when it’s married to dubious ontologies? Isn’t an inflexible fealty to simple yet inaccurate numerical models a kind of scientism?
I guess at this point you get to gloat about how the Austrians really are just like Marxists. But given the sorry state of economic forecasting, I don’t think the economic establishment is in a position to dismiss its critics so facilely.Report
Anybody for some #OccupyEconomics?
Dear Professor Mankiw—
Today, we are walking out of your class, Economics 10, in order to express our discontent with the bias inherent in this introductory economics course. We are deeply concerned about the way that this bias affects students, the University, and our greater society.
As Harvard undergraduates, we enrolled in Economics 10 hoping to gain a broad and introductory foundation of economic theory that would assist us in our various intellectual pursuits and diverse disciplines, which range from Economics, to Government, to Environmental Sciences and Public Policy, and beyond. Instead, we found a course that espouses a specific—and limited—view of economics that we believe perpetuates problematic and inefficient systems of economic inequality in our society today.
http://www.nytimes.com/2011/12/04/business/know-what-youre-protesting-economic-view.htmlReport
You can probably guess what I’d say about that article, Tom.Report
Actually, I thought it was prime LoOG material, Robert. That one should understand what he rejects should be uncontroversial, but this is a brave new world.Report
You’re attacking a strawman, TVD. Nowhere did I say that critics of mainstream economics don’t need to understand what they reject. I bet you’d be surprised at my own background in the field.Report
I’ll have more to say about Austrian methodology soon. Suffice it to say that it’s not especially similar to the Occupy movement’s.Report
I’m shocked.Report
Let’s review Greenspan’s testimony before Congress. I do believe Greenspan was once called a Libertarian. He may have been disowned since then, as have so many others, a point I’ve made before elsewhere. (briskly) but let’s move along to the cite
Waxman: The question I have for you is, you had an ideology, you had a belief that free, competitive — and this is your statement — “I do have an ideology. My judgment is that free, competitive markets are by far the unrivalled way to organize economies. We have tried regulation, none meaningfully worked.” That was your quote. You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others. And now our whole economy is paying the price. Do you feel that your ideology pushed you to make decisions that you wish you had not made?
Greenspan: Well, remember, though, what an ideology is. It’s a conceptual framework with [sic] the way people deal with reality. Everyone has one. You have to. To exist, you need an ideology. The question is, whether it is accurate or not. What I am saying to you is, yes, I found the flaw, I don’t know how significant or permanent it is, but I have been very distressed by that fact.
Waxman: You found a flaw?
Greenspan: I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.
Waxman: In other words, you found that your view of the world, your ideology, was not right, it was not working.
Greenspan: Precisely. That is precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.
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I don’t think Greenspan is a good exemplar of Austrianism, given his predilection for technocratism in when it comes to macroecon and his close connection to mainstream academic and government economists. Hayek’s theory of the business cycle warned against precisely the kind of interest rate manipulation that made Greenspan famous (and it looks like Hayek got the better of Greenspan there). Greenspan was basically a run-of-the-mill right-wing economist who entertained Randian flights of fancy every once in a while. Lots of Austrians today consider him a traitor to the cause.Report
He was an Austrian where it mattered most: the regulatory front.Report
It’s not that simple, Blaise. Hayek thought that business downturns happened because financial innovation led to fluff in the economy that had to be tamped down with economic contraction. He probably would have been very skeptical of opening up the securitization spigot. Greenspan, if he was an Austrian, was of the Rothbardian, a priori bent, and so was a lot more susceptible to financiers whispering in his ear than someone with a more sophisticated Austrian outlook.Report
Well, so stipulated. Doesn’t mean Greenspan wasn’t a Libertarian, though. The Libertarians have a vexing taxonomy of eponymous doctrines. Worse than the schismatic Baptists, I swear.Report
The Libertarians have a vexing taxonomy of eponymous doctrines. Worse than the schismatic Baptists, I swear.
True enough, but I notice that every time someone around here trots out the “L” word, we get all kinds of “liberal, not left,” “left, not liberal,” “progressive, not left or liberal,” and various other taxonomical descriptions. I’m damn near afraid to use that word anymore!Report
Variance makes the world go ’round.Report
True, and you’re one of the folks I was thinking of. I still don’t have any idea of what to call you, other than friend.Report
I think it’s angular momentum that makes the world go ’round.Report
I’m find with friend.Report
Blaise, that’s what the government wants you to think.Report
There are two L Words tossed about with tiresome frequency, Liberal is the other one. If ever there was a Jerusalem, thou that killest the prophets, and stonest them which are sent unto thee, how often would I have gathered thy children together, even as a hen gathereth her chickens under her wings, and ye would not — it has to be the Libertarian Jerusalem. Nobody can tell a Libertarian a goddamn thing. If it didn’t come from their own camp, it’s simply not taken seriously — but give it two decades and they’ll be rejecting it, too.
It’s the same tiresome, long-discredited litany, reiterating their mantra: Nobody Understands Us. Perhaps if they saw themselves as they are seen, they’d be sufficiently embarrassed to at least give us one of the Secret Ovaltine Decoder Rings they issue to the faithful. My decryption of every transmission is always DRINK MORE AUSTRIAN OVALTINE.Report
Well, it was fun up to this point. But this kind of tired vitriol wore out its welcome long ago. If it refers to all libertarians, then it falsely conflates them all as one type–quite in contrast to what the same writer said just above. If it refers only to the staunch ideologues, then it’s fully as true of any other group, and the focus on just libertarians is misleading.
It’s sad, but not enlightening. Have a drink, chill, and my best wishes for a pleasant weekend.Report
You’re only expanding my point, James. What do the Libertarians believe? Austrian Empiricism ought to be able to make its point without resorting to Theological Disputations. Empiricism touts evidence, especially the evidence of the senses.
So where’s the evidence? You and I, James, we know Hayek’s not really an Austrian. Hayek “gets it”. Hayek knows regulation is not only necessary, it’s critical to the underpinnings of every other sort of human effort. And that, ol’ buddy, is why I can’t be a Libertarian. They don’t believe that’s true.Report
So, Blaise, you think that to qualify as a libertarian, one must but into Austrianism? Or what exactly are you trying to say? I guess if we grant you the authority to define libertarianism to your own convenience then it can be everything you say it is. But I won’t grant you that. Instead I’ll say that you engage in definitions of convenience, which make your claims invalid.Report
The title of this post is The Austrian School Gets to Work. First thing it needs to work on is definitions. Hanley’s not a stupid guy, he’s probably the only person around here with a working understanding of what Hayek was trying to say.
Among the many sects and schisms within the Libertarian camp are the Consequentialist Libertarians. Mises can be disposed of, nobody really takes him seriously anymore but Hayek’s not so easily tossed out with the trash. But both were foursquare consequentialists and both were Austrians.
I have said Greenspan was a Libertarian and a student of Mises. Greenspan may have trifled with Rothbardian cures for bad economies but his chief failure was born of Mises, that markets will self-regulate. They goddamn well don’t and Hayek knew it, too.
Now anyone can paste a label on anything he’d like, a-la Gilles Deleuze, crying out for something incomprehensible to enter the world. We’ve got it now, Gilles. It’s called Libertarianism, the cretinous little bald-headed child of Anarchism. They used to ask if you were an anarchist when you entered the country. Maybe they ought to reinstate that practice.Report
“They used to ask if you were an anarchist when you entered the country. Maybe they ought to reinstate that practice.”
Uck.Report
For one of my job interviews, they asked me “are you now or have you ever been a member of the Communist Party or any organization that advocated the violent overthrow of the United States Government?”
I said “The Southern Baptist Church.”
The guy across the table did not think that shit was funny at all.Report
I’m heartily sick of the anarchists in all their various incarnations. They all have this in common: they are not revolutionaries but reactionaries, all convinced of the goodness of man and the evils of those who would enforce the rule of law. A revolutionary at least has a vision of better government but the anarchist tells us lions will lie down with lambs and they shall all eat grass together.Report
I’m not saying they’ll eat grass together. I’m just saying that maybe we should stop giving the lions badges.Report
In some of their various incarnations anarchists firmly disbelieve in The inherent goodness of man. That’s why they don’t want to entrust any of the sunsabitches with the powers of government.
@Jaybird: That’s awesome. And now I’m imagining that the preferred answer to that question down South surely is a hearty, “Hel, yeah!”Report
@Robert,
Re: “Uck.”
Dude, at least there’s that for us to agree on.Report
@James H: this changes nothing. Such folks believe they’re the good guys, to the exclusion of anyone else. I believe it was the bandits, not the good guys, who said “We don’ need no steenking badges” in Treasure of the Sierra Madre.
Such Anarchists as you describe would do well to watch that movie, for the book is widely believed to have been written by an anarchist. Doesn’t end up with anyone happy.Report
. Such folks believe they’re the good guys, to the exclusion of anyone else.
Jaybird begs to differ.Report