A Critique of the Austrian School of Economics?

[theyounghistorian77]

Vs



Discuss

 

[lrkun]

First principles vs. The real world.

The latter belongs to other schools, the former is used by the austrian school.

Whether A school is scientific.

What is Economics?

Economics is the study of how people choose to use resources.

Resources include the time and talent people have available, the land, buildings, equipment, and other tools on hand, and the knowledge of how to combine them to create useful products and services.

Important choices involve how much time to devote to work, to school, and to leisure, how many dollars to spend and how many to save, how to combine resources to produce goods and services, and how to vote and shape the level of taxes and the role of government.

Often, people appear to use their resources to improve their well-being. Well-being includes the satisfaction people gain from the products and services they choose to consume, from their time spent in leisure and with family and community as well as in jobs, and the security and services provided by effective governments. Sometimes, however, people appear to use their resources in ways that don't improve their well-being.
Asni Souk

In short, economics includes the study of labor, land, and investments, of money, income, and production, and of taxes and government expenditures. Economists seek to measure well-being, to learn how well-being may increase overtime, and to evaluate the well-being of the rich and the poor. The most famous book in economics is the Inquiry into the Nature and Causes of The Wealth of Nations written by Adam Smith, and published in 1776 in Scotland.

Although the behavior of individuals is important, economics also addresses the collective behavior of businesses and industries, governments and countries, and the globe as a whole. Microeconomics starts by thinking about how individuals make decisions. Macroeconomics considers aggregate outcomes. The two points of view are essential in understanding most economic phenomena.

The list of fields in economics illustrates the scope of economic thought.

Is economics scientific?

Economics is the social science that analyzes the production, distribution, and consumption of goods and services.

It is science in the sense that it is outside the realm of natural sciences.

Economics is a social science?

Yes, because it studies human environment, there is no specific(physical) laboratory. if we want to test anything concerning with economics, then we survey and taking primary and secondary data and analyze the things and it is carried out on the society. thus, society is the laboratory for any test of the subjects concerning with economics.

Accordingly, factors such as human nature differs and is heavily prejudiced by one's own preferences.

How does economics gather and present data?

Trend analysis. The only analysis I'm familiar with is granger causality analysis. However, I'm sure there are others being used.

Granger causality is a statistical concept of causality that is based on prediction. According to Granger causality, if a signal X1 "Granger-causes" (or "G-causes") a signal X2, then past values of X1 should contain information that helps predict X2 above and beyond the information contained in past values of X2 alone. Its mathematical formulation is based on linear regression modeling of stochastic processes (Granger 1969). More complex extensions to nonlinear cases exist, however these extensions are often more difficult to apply in practice.

What is the purpose of economics?

To predict future trends by analysing existing trends.

What problems may arise with the use of economics?

Data is very difficult to gather. Once I went to the national statistics office here in the Philippines, I had trouble getting data prior to 1940+, because granger analysis requires 20+ years of data in order to be effect and unbiased. Sometimes, I even wonder if the books about economics manufacture their own data.

Statistical analysis is very easy to tweak. Just add this and that, I won't show how it is done, because it might be used for an evil purpose hehe, or subtract this and that from your factors and the result will be in accord with you or against you as you deem it so.

Most of the time you'll be using secondary data. Sometimes, you'll be tempted to coach your sample or the person in which you seek to interview for data.

On the issue of whether School A is scientific?

No, it isn't. First principles are true only in a sense if it can't be proved. Such as the first cause, however that which the topic deals with a lot of variance between reality and your equation. Especially since man's preference differs, your analysis will never be more than 75 percent in accuracy. Now if you apply first principles, you will have a uniform result wherein it does not allow variance in your analysis. You will have a hard time making the data and reality fit.

-oOo-

Please correct me if I am wrong or if you have an alternative position. I haven't practiced economics for some time now, so my memory of the subject is not that accurate.

Also, my knowledge is limited to the use of granger causality analysis. I've never really used linear equations when I was an economist, because it failed to predict in reality.

 

[ArthurWilborn]

The first video compares Austrian economics to religion or Freudian psychology; that it is a series of post-hoc rationalizations that are not concerned with finding support via evidence.

The second video rejoinds that science is weak in chaotic systems, and that economics is highly chaotic. It contends that Austrian economics uses logic and reason to select which variables to track. It also claims that the Austrian method has a high rate of predictive success.

I'm sympathetic towards the second video, but the author was smug and provided no evidence of his claims. Since this is what is predicted in the first video, I'm more inclined to side with him. Based on these, economics requires a more scientific approach then the Austrian method provides.

 

[Arcus]

The first video compares Austrian economics to religion or Freudian psychology; that it is a series of post-hoc rationalizations that are not concerned with finding support via evidence.

The second video rejoinds that science is weak in chaotic systems, and that economics is highly chaotic. It contends that Austrian economics uses logic and reason to select which variables to track. It also claims that the Austrian method has a high rate of predictive success.

I'm sympathetic towards the second video, but the author was smug and provided no evidence of his claims. Since this is what is predicted in the first video, I'm more inclined to side with him. Based on these, economics requires a more scientific approach then the Austrian method provides.

I agree pretty much with this. There was precious little Austrian school where I studied, though some of its more mainstream ideas were presented. It certainly has it's value and right to life, if anyone is going to find a flaw in the theory of rational and selfish homo economicus, it'll probably be the guys who specialize in marginal utility theory.

 

[ImprobableJoe]

That's the one that's wrong, dumb, and embraced by sociopaths all over the world as a rationalization for their subhuman ethical development, right?

 

[impiku]

Most critique of the Austrian school centres around its methodology. Austrians use a unique epistemic method in search for economic truths; a priori deductive methodological individualism. It is basically breaking down economic activities to the individual level and deriving economic laws based on axioms. I always disliked social sciences employing the scientific method, because there were too many variables at play and any particular factor can be spinned to look relavant which I find to be misleading. I don't put empiricism on a pedestal like I used to. All that matters is predictive success and Austrians are strong in that department. I find calling out Austrians for their "odd methodology" juvenile and uncompelling.

 

[ohcac]

That's the one that's wrong, dumb, and embraced by sociopaths all over the world as a rationalization for their subhuman ethical development, right?

Yeah, you tell em! They're just a bunch of ... poopheads! Yeah! Thats it! Poopheads! You really got them there!

 

[Master_Ghost_Knight]

To call economics a science is insulting. Who are we kiding, economist have fuck all knowledge about any field of science, they are not trained to think scientificaly (an you need to be trained that) and their knowledge of math is laughable at best.
To sugest that they can draw the correct conclusions from real world data or that they can form good conceptual models about reality is not knowing that critical skills are not part of any economic school of any sort. This is a field we usualy call "humanities", which for someone with my experience means people who re to dumb to learn math and get a real degree, and from my experience it is not uncomon to find clegues of mine who have already finished their engineering training to venture out in economics and management whitout even before having brushed uppon the subject and consistently outperform any so called "specialist" in those fields. The expereience can only be sumarized as taking candy from a baby, companies only employ economists if they run out of engineers. And believe me it is that bad.
And why is it that bad? you might ask. It is because nobody bothered to tell an economist that because an idea sounds good it doesn't make it a good idea, and you need training and a large set of reasoning tools to come up with good ideas and not just ideas that sound good.

 

[ImprobableJoe]

Yeah, you tell em! They're just a bunch of ... poopheads! Yeah! Thats it! Poopheads! You really got them there!

Wow, you really got me with all that sarcasm, especially with all hypocrisy that has come to define you...

 

[ImprobableJoe]

Oh, and mainstream economists don't take the Austrian School seriously. It is, as I described, mostly an excuse for dirtbag right-wingers to pretend that their bullshit economics have an academic standing. Sort of like Intelligent Design, and the believers in both are equally deluded.

 

[Arcus]

Oh, and mainstream economists don't take the Austrian School seriously. It is, as I described, mostly an excuse for dirtbag right-wingers to pretend that their bullshit economics have an academic standing. Sort of like Intelligent Design, and the believers in both are equally deluded.

It's a bit harsh... I think you would be negligent in completely dismissing it, and Schumpeter is generally regarded as a worthwhile economic philosopher. Most decent Economics programs will include lessons on business cycle theory, clustering, entrepreneurship, and creative destruction. Just because astrology is bunk doesn't mean we have to reinvent the constellation names.

Of course, there's a difference between masturbating to some of the theories and ripping off your dick .

 

[ohcac]

Oh, and mainstream economists don't take the Austrian School seriously. It is, as I described, mostly an excuse for dirtbag right-wingers to pretend that their bullshit economics have an academic standing. Sort of like Intelligent Design, and the believers in both are equally deluded.

Okay, I apologize for antagonizing you so much as of late and for the use of sarcasm. However, all I've noticed is that when you post against libertarianism/Austrian economics/Ron Paul is that you simply state outright that the ideologies are the outbursts of right wingers and that these people are dirtbags who hate society. Could you elaborate more on exactly *what* leads you to believe this? Even if you have posted it elsewhere, it wouldn't hurt to give a *small* argument in favor of your propositions.

To call economics a science is insulting. Who are we kiding, economist have fuck all knowledge about any field of science, they are not trained to think scientificaly (an you need to be trained that) and their knowledge of math is laughable at best.
To sugest that they can draw the correct conclusions from real world data or that they can form good conceptual models about reality is not knowing that critical skills are not part of any economic school of any sort. This is a field we usualy call "humanities", which for someone with my experience means people who re to dumb to learn math and get a real degree, and from my experience it is not uncomon to find clegues of mine who have already finished their engineering training to venture out in economics and management whitout even before having brushed uppon the subject and consistently outperform any so called "specialist" in those fields. The expereience can only be sumarized as taking candy from a baby, companies only employ economists if they run out of engineers. And believe me it is that bad.
And why is it that bad? you might ask. It is because nobody bothered to tell an economist that because an idea sounds good it doesn't make it a good idea, and you need training and a large set of reasoning tools to come up with good ideas and not just ideas that sound good.

My intuition tells me that you are probably dead wrong about the status of job descriptions for the occupation of economist. However, you pull the "I have friends who blah blah blah and they tell me blah blah" anecdotal canard so I'm not sure if any research I produced would sway your opinion.

 

[ImprobableJoe]

Okay, I apologize for antagonizing you so much as of late and for the use of sarcasm. However, all I've noticed is that when you post against libertarianism/Austrian economics/Ron Paul is that you simply state outright that the ideologies are the outbursts of right wingers and that these people are dirtbags who hate society. Could you elaborate more on exactly *what* leads you to believe this? Even if you have posted it elsewhere, it wouldn't hurt to give a *small* argument in favor of your propositions.

Since you're so small, I guess a small argument would help. If you're a Ron Paul supporter who thinks that people without insurance should just die, rather than people pay taxes into universal healthcare, you're a fucking shitty human being and you can fuck off. If you're part of a economic cult that rejects reality in favor of nonsense, the way all "free market, supply-side" cultists are both unethical and frankly stupid, then you deserve the scorn heaped on you.

Look at the current American supply-side, right-wing, "free market" idiocy. The "answer" to every problem is lower taxes, when the reality is that economies thrive on higher-than-current taxes. That's a fact that you can look up; America's golden age of the 1940s-1970s saw much higher tax rates than we see currently. Economies don't thrive by giving rich people tax cuts, they thrive on having a vibrant middle class making high wages and rich people paying high taxes. The more money consumers have, the more demand there is, the more reason business have to provide more on the supply side.

Your Austrian School morons have it exactly backwards, and anyone with an IQ above 80 can show how stupid most of their ideas are.

 

[Master_Ghost_Knight]

My intuition tells me that you are probably dead wrong about the status of job descriptions for the occupation of economist. However, you pull the "I have friends who blah blah blah and they tell me blah blah" anecdotal canard so I'm not sure if any research I produced would sway your opinion.

Would it convince you instead when I do the exact same thing next year and I show you may pay role and my degree?

You may find it to be anecdotal at best and you have all the right to be skeptic about it, but for someone living in my position this is what reality looks like, take it for what you will.

 

[Dean]

Ugh. If "mainstream economics" is a science, then it is at best a very bad science, and many modern economists don't seem to realize the limits of their own epistemology, at least within the social-sciences sphere, that economics is supposedly a part. They claim to know things that they cannot possibly know, they assume to know all variables when there are almost certainly unknown variables, they seem to believe that economic data retrieved from limited sources is representative of the entire economy, they don't take into account how their own measurements can effect what they're measuring, etc. As well as having trouble attempting to implement empiricism to an entire society that they cannot possibly observe all at the same time.

If you look at 'mainstream' Keynesian theories for example, they're just comical frankly, from a logical perspective. Example: the "Keynesian Multiplier Effect"...? They actually seem to think that ... increasing the money supply; causes trade to take place that would have always happened anyway, given some transaction or another. As if money is the root-driver behind trade, and if there was no money... nobody would use any other form or method of trade, i.e. barter. etc. It seems almost like supernatural-style economics to me. They seem to think that paper has some extraneous properties that cause economic prosperity, which we know to be false. In sum, while I am not in the Austrian School (I consider myself to lean more towards the likes of Chomsky in the Libertarian Socialist camp).. I think mainstream economists seem to forget that it is more about the facilitation, and more importantly production - of goods and services - rather than simply playing around with the medium.

One of my criticisms of the Austrian School of Economics is likewise, the way in which they seem to reject empiricism and empirical evidence as a means of proving their economic theories, which seems rather weak to me. And equally, I think it is strange the way the other theories seem to focus in on some almost religious-belief of collective-consciousness, like... everyone will stop by or stop producing at the same time, or whatever?

Does anyone dispute this? :|

 

[Dean]

@ImprobableJoe

[. . .] Look at the current American supply-side, right-wing, "free market" idiocy. The "answer" to every problem is lower taxes, when the reality is that economies thrive on higher-than-current taxes. That's a fact that you can look up; America's golden age of the 1940s-1970s saw much higher tax rates than we see currently. Economies don't thrive by giving rich people tax cuts, they thrive on having a vibrant middle class making high wages and rich people paying high taxes. The more money consumers have, the more demand there is, the more reason business have to provide more on the supply side.

[. . .]

It strikes me that a system of the kind advocated by Ron Paul supporters (Right Wing Economists, Anarcho-Capitalism, et al) is not sustainable, and my attitude to all the caterwauling about so-called "free markets" is a rather cynical one also.

There are many ways where it can become quite nasty even without the intention of anyone. Corporations could end up controlling key technology or infrastructure and then end up using this as a leverage, even indirectly. See the dynamics described in the Propaganda Model, where there is certainly some kind of intention but not as straightforward as conspiracy theorist would like to believe.

• "We live in a badly developed anarchist situation in which the biggest gang has taken over and have declared that it is not an anarchist situation" - Alan Moore.

You want that people get together and define certain rules and make sure they are enforced, maybe Governments are too large and such organizations should sit on a more regional or even local level, but then they are too weak to counter multi-national corporations as Chomsky pointed out. As it seems, once there is one "world government" that only takes care of the basic rules (human rights, environmental laws?), you wouldn't need all the levels in between and local organization and free-form collaboration when required could do the trick, then you could arrive at Anarcho-Syndicalism. Alas, this scenario seems unlikely to occur.

 

[Dean]

[. . .]Your Austrian School morons have it exactly backwards, and anyone with an IQ above 80 can show how stupid most of their ideas are.[. . .]

Actually, it is rather apt indeed that you should mention that. The Austrian School rejects mathematical models, etc. Most of the ones I have spoken to from the Austrian Camp don't even think that IQ is a legitimate measure of intellect. Perhaps this is to be expected if you are correct (ironically). :geek: As I have already said, most of them don't even accept what they call "empirical" data, rather absurdly, eh? As it stands, it would appear that members of the Austrian school have things rather disfigured out of shape (relating to the economy) in their overbearing conceptualization of "free-markets". They for get that truly free, free markets cannot exist. Most of them don't even acknowledge the fact that ALL business entities as they are today have government-restrictions on them, either directly or implicately ...

 

[ImprobableJoe]

Actually, it is rather apt indeed that you should mention that. The Austrian School rejects mathematical models, etc. Most of the ones I have spoken to from the Austrian Camp don't even think that IQ is a legitimate measure of intellect. Perhaps this is to be expected if you are correct (ironically). :geek: As I have already said, most of them don't even accept what they call "empirical" data, rather absurdly, eh? As it stands, it would appear that members of the Austrian school have things rather disfigured out of shape (relating to the economy) in their overbearing conceptualization of "free-markets". They for get that truly free, free markets cannot exist. Most of them don't even acknowledge the fact that ALL business entities as they are today have government-restrictions on them, either directly or implicately ...

Well, the trick is that because "free markets" don't exist in any real or rational sense, and never can on a scale useful for discussion, they can always claim to be 100% correct. That is, they can claim that we would get the results the claim if only we could create the fantasy world that their claims are based on. So when they fail after getting 20% of what they want, they claim that it is because they need 100%. You give them 50% of what they want, and things get worse and worse, and they say they need 100%. At 99% your country turns into Somalia, and they claim that it is YOUR FAULT that their ideas failed, because you didn't give them 100%.

 

[sonia2010]

Hi,
This is my first day in this forum and I hope that all of you will welcome me here. The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments (see praxeology), the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have multispecific uses which must be aligned (see Austrian business cycle theory), and emphasizes the organizing power of the price mechanism (see economic calculation debate). Austrian economists are generally advocates of laissez faire policies.
Thanks