Talk:Austrian school/Archive1

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I think this should be called Austrian School, which it is what it is usually known as. ħuman 06:43, 30 July 2010 (UTC)

Agree.--Bob^{Spring is sprung!} 06:50, 30 July 2010 (UTC)

yup, apologies, I started the page this way. -1=e^iπ 06:53, 30 July 2010 (UTC)

No big deal, just click "relocate". And don't capitalize "school" like I did above. Unless you think it should be. ħuman 06:58, 30 July 2010 (UTC)

What this article needs

This article needs more goat paragraphs. --Eira ^{OMTG! _{The Goat be Praised.}} 23:02, 27 May 2011 (UTC)

Yeah, this is kind of wall-of-text-y. The Austrians manage to pack so much wrong into so little space, though. Nebuchadnezzar (talk) 23:11, 27 May 2011 (UTC)

Cool anti logic proaganda bro.

Very nice strawmans keynesians. ^{— Unsigned, by: some nonconstructive idiot / talk / contribs}

It's easy to whine about how the other side is wrong. The hard part is actually proving that they're wrong. --User:Brxbrx/sig 03:07, 1 August 2011 (UTC)

Which must be why the creators of the article so completely failed to do so. This article isn't a refutation of Austrian Economics, this article is a refutation of a strawman of the misconception one gets from listening to people who read mises.org articles without much actual education in economics. You would think something called 'Rationalwiki' would have more people capable of, you know, using reason.

An actual engagement with Austrian economics could find some definite points to quibble with, and even some serious issues, but a proper engagement would require, you know, actually understanding the topic. Or even just having a background in economics wider than reading Paul Krugman. 173.49.17.29 (talk) 07:10, 24 November 2011 (UTC)

If you think this article is inadequate, how about making an account and giving us something to work with for improving it? There are those of us who do not exactly have the rosiest view of Prof. Krugman; but the one time this article mentions a view of his, Milton Friedman (not exactly one of those bullet-spitting pinkos) is in agreement with him. ListenerX^TalkerX 07:27, 24 November 2011 (UTC)

Austrians aren't exactly the biggest fans of Milton Friedman, fyi 69.127.171.56 (talk) 09:20, 3 December 2011 (UTC)

Seriously, there are tons of mistakes in this article. It's really biased. I'm not going to help anyone fix it, because I don't feel like it. But it's terrible.

Thsi article has a Keynesian bias.

I don't think you guys can get over the fact that it was Austrian economists who predicted the housing bubble. ^{— Unsigned, by: 24.189.254.24 / talk / contribs 2011-12-07T16:01:00}

If you didn't read... Stop adhering to a theory that has never been used successfully in any modern economy. Osaka Sun (talk) 00:30, 8 December 2011 (UTC)

Our physics articles also have a relativity bias, while your at it. Radioactive afikomen ^{Please ignore all my awful pre-2014 comments.} 01:49, 8 December 2011 (UTC)

Austrian irony

I've noticed that the Mises Institute has digitized books by Mises and other Austrian economists, and it gives them away as free ebooks over the Internet, like Jehovah's witnesses' literature or something, apparently because not enough people want to buy them.

If the Mises Institute doesn't have price signals to tell it how many of these ebooks to produce, how can it do this without running into Mises's socialist calculation problem and causing economic chaos? Advancedatheist (talk) 06:04, 9 March 2012 (UTC)

Most austrians are against IP. A digital book is a public non scarce resource. Its supply is infinte so the price is 0. If you download an ebook it doesn't mean there is one less ebook around to be sold to another person.

I think most economists would agree that once a piece of intelectual property is produced it will generate the most social good if it is allowed to be used for free. The rationale for IP is to artificially make a public good scarce for the sake of economically incentivicing creators to generate new material in the future. 87.219.175.245 (talk) 20:57, 16 April 2012 (UTC)

This post is particularly dumb in multiple ways. Longnameislonger (talk) 05:17, 16 April 2012 (UTC)

Which post are you referring to? If it's mine, could you explain why it's dumb in a bit more detail? 87.219.175.245 (talk) 20:59, 16 April 2012 (UTC)

No, Advancedatheist's post. MC=0 so there are no calculation problems and lower costs increases demand for normal goods, so it makes sense they give them away if readers is their goal instead of profit. Longnameislonger (talk) 21:48, 16 April 2012 (UTC)

r/skeptic discussion

A discussion of this article turned up in the RationalWiki google alerts this morning. I'll leave the link here for posterity. Peter ^{tanquam ex ungue leonem} 21:47, 19 April 2012 (UTC)

Are they trying to distance themselves from the fact that Austrianism ignores empirical testing? They can say whatever they want about Keynesianism and 70s stagnation (and vice-versa with Monetarism and the Great Recession), but the comments are setting up an unusual precedent. 174.118.208.93 (talk) 01:48, 26 May 2012 (UTC)

Interesting stuff... this is a difficult article to assess, inasmuch as we have a serious dearth of talent in economics here among our trusted users. It's a complicated and difficult field, and can often be counter-intuitive - the perfect breeding ground for pseudoscience!--^talk 07:41, 14 June 2012 (UTC)

Incorrect representation of ABCT

The writer of the ABCT section is misinformed about ABCT. ABCT states that the business cycle begins with an expansion of bank credit, not by an action of the central bank. It does not state that central banking causes the business cycle, but that it exacerbates it. Obviously, since the expansion of bank credit existed before the central banks, ABCT is consistent with the existence of the business cycle before the existence of central banks. See http://en.wikipedia.org/wiki/Austrian_business_cycle_theory

I recommend that if you criticise something, make sure you understand it first.

From the article you reference - central bank policies, including unsustainable expansion of bank credit through fractional reserve banking, are the predominant cause of most business cycles, (emphasis mine). That seems to this ignoramus to back up the assertion that the actions of the central bank (their policies) being the cause of business cycles. Bad Faith (talk) 12:31, 11 July 2012 (UTC)

The part you quote is under the section labeled "The role of central banks", so obviously it refers to the actions of central banks and their effect on the business cycle. Nowhere does the quote state, as is erroneously portrayed on this rational wiki page, that the central bank is a necessary component of the credit cycle. On the contrary, other parts of the wiki page on ABCT directly explain that the Austrians attribute the cause of the cycle to credit expansion as such:

The theory views business cycles as the inevitable consequence of excessive growth in bank credit, exacerbated by inherently damaging and ineffective central bank policies, which cause interest rates to remain too low for too long, resulting in excessive credit creation, speculative economic bubbles and lowered savings.

In contrast to most mainstream theories on business cycles, Austrians focus on the credit cycle as the primary cause of most business cycles.

According to the theory, the boom-bust cycle of malinvestment is generated by excessive and unsustainable credit expansion to businesses and individual borrowers by the banks.

In Rothbard's view, the cycle of generalized malinvestment is greatly exacerbated by centralized monetary intervention in the money markets by the central bank.

[emphasis added]

You can also look at the original article published by Polleit which the quote from the wiki page on ABCT you provided references. It never says that central banks are necessary to create the credit cycle, nor implies that this description represents "most business cycles". Rather, it refers to the current crisis and current fiat currencies (the article was written in 2007). Even someone who has no idea about economics should notice that the portrayal on this rational wiki page is inaccurate. There is a sharp distinction between a necessary condition of the business cycle (which central banks, according to the Austrians, are not), and a catalyst that exacerbates the cycle (which central banks, according to the Austrians, are). According to the Austrians, the necessary condition for the business cycle is credit expansion, not the existence of central banks. Credit expansion does not need central banks. Without credit expansion, according to the Austrians, there would be no business cycle, even if there were central banks. In such a case, even though there was a misallocation of resources, there would be no systematic cycles (I believe this is argued by De Soto in Money, Bank Credit and Economic Cycles, but I would need to check to make sure where exactly).

Also please note that here in my criticism I do not claim that ABCT is correct, only that it is incorrectly portrayed on the rational wiki. My criticism is valid irrespective of the validity of ABCT.

23 July 2012. ^{— Unsigned, by: 62.77.189.33 / talk / contribs}

Price gouging

Isn't price gouging, as defined by law, a pretty rare phenomenon? When people complain about only being able to buy from one supermarket, it's usually not because there's some emergency that makes it the only source of urgently-needed food or water. It's usually that they just don't feel like driving to the next town. But if the town were to be cut off from any other source of food or water, that would be an excellent time to raise the price in order to ensure that there is no shortage. This will encourage consumers to carefully ration their supplies, and thus will deter waste.

Actually, the seller probably doesn't care if he runs out, but he's trying to get as much money as possible, which just happens to also suit the needs of the customer. If, on the other hand, he gouges when it's not necessary, he's probably going to lose some consumer goodwill that in the long run won't be worth the profit he reaps from it. Tisane (talk) 17:59, 3 August 2012 (UTC)

Whoever wrote this wrote price-gouging, when they meant monopolistic profits. Hipocrite (talk) 18:52, 3 August 2012 (UTC)

Relevance

With reference to this revert, the relevance is that having to deal with these monopolists should merely be thought of as part of the cost of living in a particular place. It's no different than if a landowner said, "I'm the only one who owns land in this particular area, so you have to pay whatever I say to live on it." He's a monopolist too, if you want to consider a monopolist as whoever gets to dictate price for a particular product that you can't get anywhere else. There is no location that's exactly like any other given location, so every property owner is a monopolist.

For some reason, a lot of people seem to make a big deal out of the fact that there might be only one supermarket in a given town, and they disregard the fact that there's also probably only one source of other necessary products as well, e.g. courts, police, and defense. The government is a monopoly provider of those, and probably more likely to charge exorbitant rates because it has a monopoly over a larger land area than, say, the supermarket. The supermarket example is also probably only applicable to people who live in rural areas (a relatively small percentage of the population); if you live in an urban area, the market tends to be much more competitive for such products.

There are many disadvantages to even the rural provider being a dickhead and charging too much. E.g., he could encourage a competitor to open up, or he could encourage people to live in a different rural area, rather than that one. If that happens, his area might tend to not get built up as fast as other areas, causing his land value to not be what it would have been. Yeah, 7-Elevens and such charge a premium for being the only store within walking distance from your house, but it's not a huge deal compared to, say, the fact that you have a pay a lot of money to the monopolist defense provider to fund foreign wars you may not support. So, why make a big deal about the store. That premium is, in any case, what gives him an incentive to build there in the first place; he could have just let you drive all the way to the nearest Wal-Mart.

The fact that the local monopolist will absorb some of the ground rents means that landowners have a pretty good incentive to be wary of the existence of such monopolies in the area where they're planning to build, say, an apartment complex. If there's a private road going through that's not under their control, and it's the only source of transportation, they would be smart to make some kind of long-term deal with the road owner to ensure that they get a reasonable rate, before they start building apartments. It's in the interest of the road owner to make such deals, because they get more customers that way.

The same applies whether the monopoly in question is a supermarket or whatever. Although the supermarket is probably a bad example of a local monopoly because there are usually substitutes readily available, e.g. 7-Elevens and such. Yeah, maybe you can't get certain products at a 7-Eleven that you could get at a supermarket, but you can get enough to tide you over in between trips to a another town that has supermarkets with more reasonable rates. Tisane (talk) 03:50, 4 August 2012 (UTC)

Dubious statement

"As insightful as this assessment may have been when applied to a centrally-planned economy, both Von Mises and every Austrian schooler after him used the word "socialism" to refer to central-planning and completely ignored every (most) school(s) of socialist economics that reject it." That seems incorrect; Socialism deals not only with systems involving central planning but also with the pseudo-socialist systems such as syndicalism. See Chapter 16. Mises points out that socialist and pseudo-socialist run into problems both when they use central planning and when they don't. See what he has to say about guild socialism: "If the workers of a guild work less zealously or use the means of production wastefully, this is a matter which concerns not only them but the whole society. The State entrusted with the direction of production cannot therefore refrain from occupying itself with the internal affairs of the guild." Central planning in a socialist economy seems inevitable. The only viable alternative to central planning is some form of capitalism. Tisane (talk) 05:13, 4 August 2012 (UTC)

Another dubious statement, this time regarding "rational"

"However, they redefine 'rationality' in subjective terms to mean acting in a way that will fulfill whatever the individual desires. Thus, any action, whether common sense would define it as 'rational' or 'irrational,' is actually 'rational' as long as it has utility in meeting a person's needs. This bit of handwaving is often used to deny the importance of market failures or self-destructive behavior."

This definition of rationality isn't just limited to the Austrian school. Mainstream economists use it as well. The idea of rational self-interest is that people engage in purposeful behavior based on their weighing of costs and benefits. They could be totally mistaken in their calculations, but they are still considered by economists to be acting "rationally." It would be irrational, on the other hand, to choose an option that one knows will produce less satisfaction (after discounting for time-preference) than an alternative option. But people generally don't do that, so it's a moot point.

This is not really the argument that they use to deny the importance fo market failures or self-destructive behavior. After all, they still admit that miscalculation happens all the time. But they believe that the market will mitigate the long-term impact of such problems by removing resources from the control of those who mismanage them, and put them in the hands of those who are skilled at investing well. Since what is being debated is whether we should put resources under the control of government or of private sector entities, that makes it important to determine which is more of a problem: government failure or market failure?

The Austrians point out that market failure is in the eye of the beholder; one person might say "We need more roads; the market has failed to provide enough of them!" But another person could disagree; he might feel that there are already plenty of roads, and oppose being taxed to build more. Government failure too is subjective, because for instance, the recipient of pork barrel largesse might see that as being a good use of government. The supporters of the Austrian school probably either are concerned with their own benefit, and believe libertarianism will further it; or they see libertarianism as ethically mandatory; or they have more utilitarian views and believe that libertarianism will promote the greatest good of the greatest number.

Either way, they have a point that the government is a pretty crappy service provider compared to private sector entities operating in a competitive market. And they also have a point that there aren't too many particularly non-competitive markets out there, since so many substitute products tend to be available. Most of the monopolies are creatures of government. Tisane (talk) 05:32, 4 August 2012 (UTC)

No, Austrians define rationality as what humans do. Economists who are not crackpots define rationality as what humans would do if they were utility maximizing. That you don't understand what rationality is is evidenced by your point about roads. I know you are an Austrian who has no formal training in anything but threatening to kill the president, but the market failure of roads is not that I force you to build them, but rather that no rational actor would ever build a road, but every rational actor benefits from roads far more than the roads cost each rational actor. Hipocrite (talk) 13:18, 4 August 2012 (UTC)

With reference to formal training, I have a business degree, which required taking three economics classes, and I was also an economics teacher (albeit to an approximately nine-student adult continuing education class at FCC Petersburg Medium). Not that credentials necessarily matter all that much; there are a lot of perfectly good autodididactical lay scholars out there. Even in the case of those with formal training, most of their knowledge is likely acquired outside school, on their own initiative.

Anyhoo, where is the evidence that no rational actor would ever build a road? What about the 19th century turnpikes? See, e.g., w:19th century turnpikes in Rhode Island and w:19th century turnpikes in Massachusetts. More complete coverage is offered in this book. Unfortunately, it would seem that they didn't include in the preview the chapters on how private entrepreneurs built roads across the old west, apparently without any government charters.

Anyway, for good reason, the legitimacy of the concept of market failure is not universally agreed upon; see for example this essay, plus the commentary by the Independent Institute on lighthouses. Just as a road can be financed by tolls, a lighthouse can be financed by charges for ship passage by whoever owns that passage.

Citation needed, by the way, on your remark that non-Austrian economists define rational behavior as successfully utility-maximizing behavior. Every economics text I've seen (including those written by non-Austrians) says that rational behavior is that which is done with the intent to maximize utility, but it doesn't always succeed. See w:Rational choice theory. Milton Friedman (of the Chicago School) gives a definition of rational behavior that is basically the same as what I describe. So, it's not just Austrians who hold that view. Tisane (talk) 10:42, 7 August 2012 (UTC)

That sentence could use some clarification. I'd say it's used not so much to deny market failure as it is to deny the importance of self-destructive behavior (see, e.g., Enron) that would be considered "economically rational" but obviously quite irrational from the view of a non-economist. Re: market failure, you might as well say "The spherical nature of Earth is not universally agreed upon." Climate change: The biggest market failure ever. I do love the prattling on about "value-free" economics in the Mises link, though. Anyone who believes that fairy tale has been imbibing the econo-Kool-Aid for far too long. Nebuchadnezzar (talk) 11:14, 7 August 2012 (UTC)

Ultimately, though, the whole point of analyzing the issue of self-destructive behavior is to figure out what action to take to deal with the problem. Few people deny that self-destructive behavior is a major problem. For example, even the Austrians say that a lot of harm has come from voters self-destructively choosing statism. And a lot of their major books actually devote quite a lot of space to discussing the issue of self-destructive behavior in the private sector; e.g. the "persistent tendency to over-optimism on the part of speculators" and the consequences of malinvestments.

They acknowledge that it happens, but they argue that the situation is even worse when government intervenes, due to moral hazards, the cost of enforcing regulations, and other unintended consequences. They say that government intervention defeats the market's self-corrective mechanisms. Regardless of whether self-destructive behavior is such a small problem as to be unworthy of notice or a big problem that, nonetheless, would be only worsened by government regulation, the solution is still the same — don't try to solve it with government intervention.

In the wake of Enron, the government rewarded the failure of the major accounting firms to prevent that debacle by giving them a multi-billion-dollar regulatory compliance industry known as Sarbanes-Oxley. A lot of the safeguards required by that law would not have prevented the audit failure. For example, the new internal controls mandated by the law can usually be overridden by senior accounting staff of corporations. And the large-scale frauds are typically perpetrated by those upper-echelon financial officers. So government intervention did not accomplish a whole lot; if anything, it may have produced a false sense of security and taken the focus off of what really needs to be done to prevent another such collapse. Namely, people need to be wary about investing so much money in the company they work for, and they generally need to watch out for investments they don't understand. The financial arrangements of Enron were so convoluted as to be incomprehensible to almost everyone.

There may be other remedies as well that the private sector should offer; for example, perhaps auditors should not only certify that the financial statements appear to be free of material misstatement, but should also insure those statements' accuracy. That way, if they turn out to be fraudulent, insurance claims would come out of the auditor's (aka underwriter's) pocket. That would provide a greater incentive to exercise due diligence.

I think the main reason the Austrian School prefers not to use that language of rationality vs. irrationality is that it's unhelpful to debates when people make a bunch of ad hominem attacks, accusing their opponents of being lunatics and such. This was the main point of The Fight Against Error. It's better when people focus on refuting ideas rather than saying "that guy's a crank." Tisane (talk) 12:20, 7 August 2012 (UTC)

Definition of science

According to Wikipedia, "Science (from Latin scientia, meaning "knowledge") is a systematic enterprise that builds and organizes knowledge in the form of testable explanations and predictions about the universe. In an older and closely related meaning (found, for example, in Aristotle), "science" refers to the body of reliable knowledge itself, of the type that can be logically and rationally explained (see History and philosophy below). Since classical antiquity science as a type of knowledge was closely linked to philosophy. In the early modern era the words "science" and "philosophy" were sometimes used interchangeably in the English language. By the 17th century, natural philosophy (which is today called "natural science") was considered a separate branch of philosophy. However, "science" continued to be used in a broad sense denoting reliable knowledge about a topic, in the same way it is still used in modern terms such as library science or political science."

So it would seem that there are different accepted definitions of "science," and that the Austrian school (and economics in general) can fit within some of those definitions without being composed of testable explanations and predictions about the universe. In fact, the Austrian school's a priori techniques fit within what is described in that second sentence, of being "of the type that can be logically and rationally explained" through deduction.

If someone is going to criticize a statement reached through deduction, then that person should be able to find something at fault either in the original axioms or in the chain of logic used to reach the conclusion. But the theories of, say, John Maynard Keynes are at least as untestable as the Austrians'. Where is the experimental evidence behind, say, his theories of problems involving aggregate demand being behind the business cycle? That sort of a claim is at least as "theological" as any other; it's starting at the conclusion and trying to work backward, much as people said, "Hmm, the sun moves; what could cause that? Maybe there's a chariot that drives it! And that would require someone to drive the chariot, e.g. a god whom we'll call Helios."

At least Austrian economics makes the effort to start with axioms and build upward. They are so painstaking about that process that they end up writing "doorstops" such as Human Action and Man, Economy and State. Tisane (talk) 09:06, 8 August 2012 (UTC)

If you want to dig deeper into definitions of science, see demarcation problem. However, economics deals with observable phenomena about which empirical data can be collected. Why use a rationalist approach to economics? It seems that Mises had a naive conception of the scientific method -- he simply defined it as the experimental process. Thus, all historical or observational sciences (e.g., astronomy, paleontology, archaeology, etc.) are swept under the rug and a false dichotomy is created -- it's either "pure" experimental science a la physics or Mises' deductive quackery. Now do you seriously think that all the truths about the economy can be derived from the tautological action axiom? You can build up an entire logically valid framework around that, but that doesn't mean it has to match reality. What good are they if they don't match reality? (Besides propagandizing for the econo-cult.) You can generate infinite deductive systems that are internally consistent but have nothing to do with actual reality. And that's Austrian economics in a nutshell. Nebuchadnezzar (talk) 09:31, 8 August 2012 (UTC)

For an example, here's Austrian economics in action: Fuck empirical observation, I want to believe my own origin myth of capitalism! (The resemblance to Christian fundamentalism here is amusing -- just swap out a literal reading of Genesis for a literal reading of Adam Smith's thought experiments.) Nebuchadnezzar (talk) 09:36, 8 August 2012 (UTC)

Interesting. Although it's noteworthy the author doesn't provide an alternative theory of the origin of money. Of course, sometimes the first step to finding the truth is to debunk the theory that one had previously thought had already settled the matter.

It appears that the Austrians (and other economists) are coming around to accepting the gift economy as a legitimate and important phenomenon, after largely ignoring it. It received a lot of attention in the book Predictably Irrational, with examples such as the gift economy at the Burning Man festival being used therein. Mises himself used direct exchange as an "imaginary construction" to make certain points about economics. Rothbard viewed the use of money as so advantageous that it would emerge as soon as the social unit became larger than a few families. So, it appears that neither one necessarily saw barter as a system that actually saw widespread use at one time.

As far as empirical evidence is concerned, the Austrians sometimes point to correlations as a way of suggesting possible causation, or at least compatibility of their theories with observed facts. E.g., Rothbard points to trends in bills bought acceptances prior to the Great Depression that seem to fit into the Austrian theory of an inflationary boom causing a bust and economic depression. I would view this as similar to the paleontology example you gave above. No one is sure what wiped out the dinosaurs, but the iridium in the clay layer at the Cretaceous–Paleogene boundary is compatible with, or even supportive of, the Alvarez hypothesis about the impact of a massive extraterrestrial object. Explanatory frameworks arrived at by logical deduction are compared to known facts to try to estimate the likelihood of their validity. It's hard to be precise and accurate with these estimates, though, because of the lack of complete information (including "unknown unknowns").

Are Austrian theories less plausible than competing theories? At the end of the day, the politicians want answers, so they can solve economic problems and thereby keep the voters happy. They ask their economic advisers, "What caused this recession and how do we end it and keep it from happening again on my watch?" That requires some theory that there may not be enough evidence to be totally certain about. The Austrians would make the same accusation against adversaries, that they are ignoring relevant evidence that refutes those adversaries' theories. E.g., they say "You continue to support socialist and interventionist policies even though they haven't accomplished in the past (or were even counterproductive to) the types of goals you're trying to achieve now." It's telling that people don't even agree on such basic issues as whether the minimum wage causes unemployment, after all the experience we've had with minimum wage policies.

Whom do you see as the economist, or what do you see as the school of economics, whose theories seem best-supported by the evidence? Certainly each side tends to accuse the others of having some ulterior motives for wanting to get others to believe its pet theory. For example, anti-Austrians sometimes point to libertarians as being selfish money-grubbers who want to detract from theories that would justify using government to redistribute their funds. But the Austrians point to despots and democratic majorities as being so drunk with power that they view economics as a challenge to their conceit. I tend to believe in applying Hanlon's Razor to such situations. Tisane (talk) 13:49, 8 August 2012 (UTC)

Once you get past econ 101, you find out that there are actually competing views on the impact of the minimum wage on unemployment. The market for labor is likely a monopsonistic competition with substantial transaction costs for sellers of labor. You need to stop drinking the kool aid and branch out your reading past people you agree with. Hipocrite (talk) 14:02, 8 August 2012 (UTC)

I've read mainstream economics texts. It's interesting you mention "Once you get past econ 101" because, regardless of what school one attends, that is usually the class that teaches that minimum wages cause unemployment (at least of some workers, particularly relatively unskilled laborers). Do you have any particular suggested readings? Tisane (talk) 14:11, 8 August 2012 (UTC)

There's no need for a wonkish cite since this is also basic stuff. But minimum wage = unemployment is suspect for the following reasons. The first is that businesses don't necessarily operate at a borderline where they have to cut external demand or internal supply. Businesses also have expected profits and stored values of cash. The second is that wage hikes for whatever reason also increase demand. It makes the individual employer less profitable/competitive but since money is circular it also makes every other business more profitable/competitive. German autoworkers make almost twice as much money as American autoworkers do, but employment and productiveness in that industry is comparable--and since the 2008 financial crisis, superior in the case of Germany. Dr. Swordopolis (talk) 14:33, 8 August 2012 (UTC)

Going the reductio ad absurdum route: why not just raise the minimum wage to $100/hour in order to boost demand all the more? Are there some negative consequences of raising the minimum wage that high that we have some reason to expect wouldn't also occur, on a smaller scale, with more modest minimum wage hikes?

It seems reasonable to infer that if a person would have voluntarily gone to work for $5/hour, he must have concluded that doing so was preferable to the alternative (which may have been unemployment). But raising the minimum wage to, say, $7/hour closes off that option. And it's unclear what benefit that brings. Presumably, if he had the ability to earn $7/hour he would have done so without the need for a minimum wage hike, unless there was some other reason (e.g. work conditions or other non-monetary benefits) for preferring the lower-paying job. If that's the case, in his eyes he's actually getting paid less by having to take the higher-wage-paying job, because he valued those differences in benefits more than the $2/hour pay difference. Tisane (talk) 14:46, 8 August 2012 (UTC)

Imagine a supply of labor X, which is upward sloping - as the amount of money paid to labor is increased, more people would be willing to work. Imagine a demand for labor from a company, let's call it Unskilled Labor Co, which pays all of it's workers the same amount. Imagine that this firm sells into a market M, which is really really large (and thus the amount it produces has no effect on price). How many people will it employ?

Classical answer: It will employ people until the total cost of hiring an extra worker is equal to the total profit that an additional worker will bring.

The total cost of hiring an additional worker is not the workers salary, however - not only do you need to pay him his price, but you need to pay all of the other workers a slightly higher salary. Thus, to raise your salary from $6 to $7 to hire an additional worker means that worker costs not $7, but rather $7 + $1 times all of your other workers.

This means that the firm does not set marginal cost equal to marginal benefit, but rather, like monopolies, sets average cost equal to marginal benefit - thus under producing, and underemploying. Oops!

But wait, you say! Couldn't all those workers just quit Unskilled Labor Co and go work for Other Unskilled Labor Co, which would be willing to pay them $6.50 (still less than $7.00 that would be the efficient price for labor)? No, they would not! Unskilled Labor Co is closer to their house, they have job security at Unskilled Labor Co, they have built up seniority giving them good working conditions, they have no confidence that the job offer from Other Unskilled Labor Co is real, and all of the various transaction costs involved in getting a new job. So, people are underpaid because they have transaction costs preventing them from just up and quitting their job every day when some other firm raises its wages - as such, why would some other firm raise its wage? It wouldn't!

Thus, the market for unskilled labor fails due to the size of transaction costs relative to wages. The solution is for someone (say... the government?) to set a minimum price for unskilled labor that's equal not to the average cost for making stuff, but rather the marginal cost of making stuff. This is typically discussed in the second course you would take on microeconomics at the undergraduate level. I'll have to ask around to see who has a good undergraduate treatment on monopsony, but you are an economics teacher, right, so just take out the second year Micro book and look in the index for "monopsony," because all I did was reiterate that textbook treatment. Hipocrite (talk) 15:56, 8 August 2012 (UTC)

Hipocrite's explanation is more than sufficient, but if you want an even simpler version: Going the reductio ad absurdum route: why not just raise the minimum wage to $100/hour in order to boost demand all the more? Are there some negative consequences of raising the minimum wage that high that we have some reason to expect wouldn't also occur, on a smaller scale, with more modest minimum wage hikes? Assuming you don't have any maladaptive worker reactions to this behavior (which you will; few people will be a brain surgeon if flipping burgers creates the same amount of money and this will create market shocks) demand and thus employment will temporarily increase up until you have full employment. Then it'll just create inflation beyond that point. More importantly however is that businesses don't actually have that kind of cash on hand and the money will have to be made by booting out workers or having it come out of non-labor capital -- which reduces the firm's supply and demand, which hurts other businesses, etc..

The trick is to set the minimum wage below a level that will cause inflation AND will not force businesses to cannibalize their capital. And of course not to cause market failures like people deserting the military to work at Starbucks. Of course this level is different for different industries and a cynical federal or state rate will asymmetrically hurt and benefit different businesses. This is why what I actually support is a negative federal income tax (to create a base level of demand) and (especially) much stronger labor unions for unskilled labor. But in a country with weak labor unions like the U.S. and a nearly-flat tax structure (and bullshit like we are the 53 percent minimum wage is pretty much politically the easiest way to go. But if I had my druthers, I would gladly eliminate the minimum wage entirely in exchange for a strong negative income tax and/or universal labor union participation. Dr. Swordopolis (talk) 17:33, 8 August 2012 (UTC)

A: The Mises wiki only appears to now like the idea of a gift economy to "prove" psychological egoism, which is really just a tautology. So basically the Austrians are just now catching up the neoclassicals in explaining away altruism in gift economies.

B: That minimum wage creates unemployment is not necessarily true. I'm sure it is in some cases, but not all. There is evidence to contradict the Austrian/neoclassical view as well. See Leonard (2000) on the Card-Krueger controversy. There is also a theoretical problem here in addition to the ones Hipocrite and Swordopolis point out. The standard market supply and demand curves do not follow from aggregating individual supply and demand curves, as Steve Keen explains. Nebuchadnezzar (talk) 19:20, 8 August 2012 (UTC)

(I wanted to add some more points, but I put them here so it doesn't cause confusion as they replies to the above, not the most recent post.) C: As far as Graeber not offering an alternative, it's spelled out fully in Debt: The First 5,000 Years (see his Google Authors lecture for a quick explanation). Graeber also makes the point, which is familiar to anthropologists, that there is no one origin of money or debt. Take, agriculture, for example, which arose independently in 6 different places. There is no such thing as the origin of agriculture. Or the origin of the state, the origin of war, etc. This notion of the origin of something is usually just an origin myth, albeit in secular garb and outfitted for political purposes.

D: As far as empirical evidence goes, the Austrians have a tendency to use it when it supports their ideas but not when it falsifies them. Or they just outright fabricate it.

E: As far as my own theoretical biases, they tend toward Post-Keynesian and behavioral approaches, with a side-order of environmental and ecological economics (i.e., economics for people who are crazy enough to think that natural resources are not unlimited). I assume you're at least somewhat familiar with behavioral economics by your reference to Predictably Irrational. Behavioral economics is based on the cognitive biases and heuristics program initiated by Daniel Kahneman and Amos Tversky. I'd also check out Steve Keen's Debunking Economics (the site for the book has excerpts, but unfortunately, it seems to be down for now) and one of his big influences Hyman Minsky and his work on the financial instability hypothesis for starters. Nebuchadnezzar (talk) 20:45, 8 August 2012 (UTC)

I see that Leonard's piece tends to discredit Hipocrite's idea that the labor market is widely perceived as being monopsonistic: "labor economists traditionally regard monopsony as an empirical curiosum (Brown 1988, 134 n. 1).7 Individual low-wage firms typically employ a small percentage of the low-wage work force (Brown, Gilroy, and Kohen 1982, 489), so monopsony power is seen as limited in practice." Also, it states "What is missing from the minimum-wage arguments of this era is empirical evidence. The evidence for the successful application of economics to labor markets is entirely theoretical—that is, based on appeal to reason and logic" and, on pages 139-140, points out several methodological problems that arise in trying to gather empirical evidence on the issue. In light of the difficulty in testing economic hypotheses, it doesn't seem all that unreasonable to prefer the armchair techniques.

Hipocrite's explanation seems to rest on some dubious assumptions, such as employer's not being able to practice price discrimination. Companies practice price discrimination all the time in order to get extra workers without having the raise the pay of their existing workforce. When I worked at McDonald's, co-workers either asked me or looked over my shoulder at my paystub and found out that I was getting paid 50 cents an hour more than them, despite their longer tenure. They bitched about it, but didn't get anywhere. The boss was not going to raise their pay just to satisfy an envious desire for parity. He straight-up told me that he pulled a bullshit excuse out of his ass that the reason he paid me more was that my schedule allowed greater availability when he needed to staff certain shifts.

It happened at other workplaces too, both at other retailers and in the professional world; the new people tended to get paid more than the people who had been there. And sometimes, partly to justify pay differences, management would hire people to unnecessary "crew trainer" or "floor supervisor" posts involving duties that were virtually identical to those of the "associates." It seems pretty evident, at least based on the anecdotal evidence I've seen, that management is willing to pay what is necessary to attract new employees without jacking up the pay of the existing ones. The worker's leverage for seeking a pay increase depends largely on his ability to show that a competing employer would offer him that higher pay rate, and as you say, there are some switching costs involved, so if the difference is only a buck or two an hour, they might just sit tight.

Beyond those issues, there are a lot of public choice problems that arise when one gets a democratic government involved. Is the government really competent to set an optimal minimum wage? Even if the political influence of company management could be neutralized somehow, there are rival professions that might seek to screw each other over through the regulatory process. Skilled workers could try to price unskilled workers out of the market, if they compete to produce the same product. Those who seek to benefit from a minimum wage (e.g. automation technicians) will use some lofty cause, like improving labor efficiency, as an excuse for supporting policies that increase the demand for their services at the expense of other types of workers.

Yeah, automation is great, but people's time preferences are such that they only deem such investments worth the costs if the rate of return is high enough. To force them to make an investment that they don't feel like making diminishes satisfaction. Sometimes, like Britney Spears or Veruca Salt, they don't want to wait; they want it (i.e. that which will provide utility) now. Tisane (talk) 20:28, 8 August 2012 (UTC)

You rely a great deal on the 1980's and your personal experiences. Perhaps you are engaging in some confirmation bias? Just a thought! Hipocrite (talk) 21:17, 8 August 2012 (UTC)

PS: You've never been in "the professional world." Just a reminder. Hipocrite (talk) 21:18, 8 August 2012 (UTC)

Being a staff accountant for a CPA firm or an accounts payable accountant for a corporate finance department isn't "the professional world"? A CPA is a designation that has to be maintained through "continuing professional education." Granted, it's lapsed. Tisane (talk) 22:06, 8 August 2012 (UTC)

Armchair theorizing is okay if you lack empirical data and just say "Well, it could happen like this, let's see what happens..." But these so-called "laws" are presented as being as unassailable fact analogous to physical laws (just check out Buchanan's yowling quoted in Leonard) when they are in fact egregiously underdetermined. That's where you cross over from a bit of guesswork into ideology. As far as minimum wage goes, theory is definitely underdetermined there, yet the neoclassical interpretation is put forward as undeniable. Hogwash. In any case, it's a very "blunt instrument" as Leonard says. I prefer, along with your boy Hayek and Swordopolis, some form of universal basic income/negative income tax. Nebuchadnezzar (talk) 21:38, 8 August 2012 (UTC)

Even Henry Hazlitt admits (chapter 18, section 2) that it would be better just to implement straight-up doles and subsidies than regulations disguised as something other than those two things. Tisane (talk) 22:06, 8 August 2012 (UTC)

Improvements needed

This article is littered with insults and jokes. It's really distracting and it seems like the hallmark of emotional thinking, not rational thinking.

>Its usage can be found in no economy in the world...except Somalia.

Obviously this is another joke, but I think you are conflating Austrian economics proper - which is meant to be a wertfrei (non-judgemental) science - with political viewpoints like austrolibertarianism/anarchocapitalism. It might be easier to tackle these topics separately.

>As a side note, anyone familiar with the history of socialism will quickly recall that a Marxist Humanist current in Soviet Europe, the Praxis school

I have no idea why this is in the article, other than a slight resemblence between the words "Praxis" and "praxeology".

>According to The American Dream (film), somehow or another the Fed is really just the premier Jewish scheme

Again, nothing to do with Austrian economics.

> it's easy to be a Cassandra when all you predict is doom

Cassandra was noted for making entirely correct predictions. Maybe you meant "Chicken Little".

>"They are not subject to verification or falsification on the ground of experience and facts."

That's because AE itself actually can make no predictions. All of its theorems are ceteris paribus, i.e. they pertain to conditions that do not obtain in the real world or in experiments. AE is simply a starting point for understanding economies. To falsify it, you need to find flaws in the the chains of reasoning or in the axioms. BTW, the art of interpreting historical market data and making predictions is known as thymology. Source: "Austrian economists, qua Austrian economists, or praxeologists, do not predict. Period." - http://www.lewrockwell.com/block/block168.html

Perhaps this analogy can help you understand the situation? Consider the statement "The more CO2 in the Earth's atmosphere, the hotter the climate will be". It is impossible to verify or falsify unless you have multiple copies of the Earth to toy with. Fortunately, the statement is easy to accept. It follows from fairly basic physics. But the statement has little predictive power. Now, a prediction like "The world will be hotter 10 years from now if people don't cease CO2 emissions" is far more dubious and could easily prove to be false: there are a zillion factors affecting the climate.

>Rothbard flipped the word Libertarian on it's head, changing the definition from someone like Bakunin or Emma Goldman to rich white men like him.

He was rich? I didn't know that. Do you have any sources?

Abraxas (talk) 00:34, 18 September 2012 (UTC)

"This article is littered with insults and jokes." See SPOV. Also "But I thought this was supposed to be RATIONALWiki!" Drink! Nebuchadnezzar (talk) 01:30, 18 September 2012 (UTC)

All right, I'll take a nibble:

"...which is meant to be a wertfrei (non-judgemental) science..." The idea of a "value-free" science is patent bullshit, especially where economics is concerned.

"That's because AE itself actually can make no predictions." Hey, I already knew it was useless.

"To falsify it, you need to find flaws in the the chains of reasoning or in the axioms." You can have a completely internally consistent logical system that bears no resemblance to reality. Nebuchadnezzar (talk) 01:36, 18 September 2012 (UTC)

That link regarding value-free science is all over the place. It doesn't show what you pretend it does.

I agree that there are logical systems that bear no resemblance to reality. Euclidean geometry has proven to be one. However, the parallel postulate is of a different epistemological character than the action axiom of AE. It is easy to imagine the parallel postulate as true or false. But, as I explained above, it is logically impossible to deny the action axiom.

In any case, even if the axioms of AE are false, it is still worth of study as a logical system unto itself.Abraxas (talk) 06:21, 18 September 2012 (UTC)

Money supply

I don't understand this statement: "the proposal to revert to a gold standard... fails to explain how to deal with the effects of a fixed money supply when population and economic output have been increasing throughout American history".

What are these "effects" that must be dealt with? Note that pretty much any quantity of money, i.e. social tokens of exchange, will do. As long as people aren't carrying around boulders of gold in wheelbarrows, or manipulating atoms of gold, then practical quantities of gold can fulfill the function of money in enabling indirect exchange. And even in the extreme cases, there are still money substitutes (e.g. checks / debit cards) and token money (e.g. zinc wafers like the US penny).

Also, the gold standard is not a "fixed" supply since people do mine gold, which will occur in accordance with the demand for money. Although a gold standard is practically fixed compared to the Fed's destruction of 95+% of the dollar.

Really, I think this whole article should be rebooted. It is full of economic nonsense, silly jokes, irrelevant anecdotes, and scurrilous sideswipes. It's criticizing a strawman, not dealing with AE per se head on. It's much too easy for sub-100 IQ'ers to spew idiocy, and much too hard for them to understand the epistemological underpinnings (see http://www.google.com/url?sa=t&rct=j&q=ultimate%20foundation%20of%20economic%20science%20pdf&source=web&cd=2&ved=0CCYQFjAB&url=http%3A%2F%2Flibrary.mises.org%2Fbooks%2FLudwig%2520von%2520Mises%2FUltimate%2520Foundation%2520of%2520Economic%2520Science.pdf&ei=amlaULydMYKEygGn4YD4BA&usg=AFQjCNGdqD_UGYn6K0M_HSrBNK-UiSg8fQ) Abraxas (talk) 01:32, 20 September 2012 (UTC)

Self-contradiction

"they reject less mushy formal analysis in favor of more weasely verbal analysis'

That statement per se is mushy and weasely, as is this entire article and the verbal argumentation in this talk page - all of these things comprise words. The same is true with many scientific papers.

The entire article needs to be rewritten and not by irrational, literary weenies. Real men think in terms of math formulae, not mushy, word-based thoughts!!! Abraxas (talk) 15:49, 20 September 2012 (UTC)

An article on a self-consciously silly site doesn't need to be held to the same standards as a group of people attempting to dictate public policy.

Also: learn how to use per se properly pls.— Unsigned, by: ORavenhurst / talk^{Do You Believe That?} 16:20, 20 September 2012 (UTC)

My point still stands though - pooh-poohing verbal analysis is uncalled for. Logic boils down to verbal analysis. And mathematical formulae essentially amount to verbal statements. For example, "Euler's number raised to the power of this quantity, pi times the square root of negative one, yields negative one". When you attack words for being mushy or weasely, you are attacking the very tools by virtue of which you can be rational.

It's too often I see silliness invoked as an excuse whenever someone's BS is called out here. Why not just rename the site "sillywiki" instead of committing the crime of cybersquatting?

Per se just means "in/by itself" or "intrinsically". I'm not convinced I misused it.Abraxas (talk) 18:02, 20 September 2012 (UTC)

Why the Paul Samuelson quote?

The guy's a buffoon. Maybe he's fitting for this joke of an article.

"the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive." - Samuelson, Paul (1989). Economics, 13th Ed. McGraw Hill. pp. 837 Abraxas (talk) 18:24, 2 October 2012 (UTC)

nor rational nor neutral nor instructive

I have to say that I and a fellow have been spending the last 15 minutes laughing. Good job! But is this a "rational wiki" or just a "fun" wiki?

Yes, the Austrian school has gone through some kind of "popular" resurgence: bats*it libertarians and self-proclaimed anarcho-economists bi*ching around about praxeology all over the place. I get what you mean. Man I know that feeling. Yes, THAT is pseudoscience, fair enough.

But praxeology is not THE epistemology of the Austrian school. It was developed by Von Mises during the 1940s. And quite not his major contribution to the economic science indeed.

I should not need to school RATIONAL wiki on logical fallacies, but indentifying the more than 150 years of Austrian economic thought with "praxeology and wingnuts" (say, aged Von Mises + Rothbard and followers) is one. Just sayin'. It'd be like filling the page on the keynesian school with all the BS and wrong forecasts Krugman or Samuelson have written. It'd be a very long page and great fun to read as well, but it wouldn't be... instructive?

--Edosan (talk) 21:28, 19 September 2014 (UTC)

to the person who wrote this piece of biased shit article: you dont understand economics idiot. ^{— Unsigned, by: 78.23.161.99 / talk / contribs (signed by bot)} 16:01, 27 June 2015 (UTC)

Bizzarre vendetta

Why does the Austrian economics article go on and on with endless jokes, insults, canards, sideshows, and cheap shots at strawmen, while the following article is supportive to an absurd degree: http://rationalwiki.org/wiki/Keynesian_economics

Keynesian economics is one of the biggest pseudosciences of them all. The fallacies in the General Theory were torn to a million pieces by Hazlitt, the predictive successes are pathetic, and I have yet to see a single constant of economics or fixed mathematical relation, like "F=Gm1m2/r^2", backed up by empirical evidence. Where are the mainstream economists who come forward and admit when their BS is falsified by real-life data???

I'm wondering where in the world this vendetta against AE comes from. Is the Fed paying its economists to come here and discredit it or something? Are the people here motivated by some kind of politics? ^{— Unsigned, by: Abraxas / talk / contribs 2012-09-20T18:27:59}

Ironic that you'd argue for empiricism while defending Austrian econ. In fact, it's probably one of the most ironic things I've ever seen.72.181.110.248 (talk) 18:38, 28 March 2016 (UTC)

It's because "Rational" in this Wiki is defined as "anything that is popular in the big Universities", rather than the usual definition of "anything that is a product of reason based on well defined assumptions". It is similar to how some forms of Islam and Christianity define "Good" as "anything that agrees with us", rather than engaging with moral philosophy. --64.134.185.250 (talk) 23:02, 5 January 2013 (UTC)

^ This line basically sums up the entire wiki. Rational has become equivalent to what is most popular among the rational straw men. Do not forget that it was rational at one time to consider earth as flat.^{— Unsigned, by: 122 167 101 109 / talk / contribs}

Rationalwiki isn't perfect, but if you're complaining that it's making fun of one of the biggest crank magnets out there I think it's obvious the word "rational" isn't something you should be trying to defend.72.181.110.248 (talk) 18:38, 28 March 2016 (UTC)

Yeah since when did people in "universities" ever know anything, amirite? Ass. Sorry bro but praxeology is pseudoscience. Dsmelser (talk) 21:50, 12 April 2014 (UTC)

Because Austrianism is nothing more than the apotheosis of willful and proud economic illiteracy, while Keynesianism is a legitimate approach to understanding human economic behavior in the real world.^{— Unsigned, by: 99.120.42.26 / talk / contribs}

"Is the Fed paying its economists to come here and discredit it or something?" I think you answered exactly why this article should stay exactly like it is. Woowoo64.197.147.182 (talk) 09:45, 13 May 2014 (UTC)

Praxeology is a aprioristic science

Same field of mathematics and logic. Based on deductive reasoning. Try to read Human Action. ^{— Unsigned, by: 177.32.200.190 / talk / contribs 2013-01-07T05:39:20}

Tell us the brilliant advantages of your "science" not being falsifiable. Osaka Sun (talk) 06:08, 7 January 2013 (UTC)

Math not falsifiable too. Must to be a pseudocience. How to make a controlled social experiment? How to isolate variables? ^{— Unsigned, by: 177.32.200.190 / talk / contribs 2013-01-08T23:39:58‎}

Hello Hulk, how are you doing today? --Revolverman (talk) 23:42, 8 January 2013 (UTC)

Math is not science, it's just logic.--Just relax, and stay funny (talk) 01:00, 9 January 2013 (UTC)

And Praxeology also... ^{— Unsigned, by: 177.32.200.190 / talk / contribs 2013-01-09T02:27:31}

No, it's just semantics and ad hoc assertions. --Tasurinchi (talk) 19:25, 6 February 2013 (UTC)

Math is falsifiable with logic instead of evidence from the material universe. Of course, math doesn't make claims about the material universe. Economics does. That happens to matter. Dsmelser (talk) 21:54, 12 April 2014 (UTC)

Seriously?

This article is so fucking devoid of understanding, so thoroughly stripped of reflection, so utterly removed from reason, that it hurts me to even be aware of it's existence.

To the author; I hope you someday, like a newborn kitten, manage to open your eyes, see the world around you; and then apply just a modicum of analysis to your surroundings, so that you may die a sentient being like the rest of us.

That is all. ^{— Unsigned, by: 84.238.58.161 / talk / contribs}

Do you know what a wiki is? A wiki has multiple authors. Blue (is useful) 15:50, 19 February 2013 (UTC)

This page has a lot of potential, but some of the edits have made it laughable. Even a semi-serious critique of the Austrian school cannot have phrases like "massive buttload" contained therein. ^{— Unsigned, by: 108.202.76.111 / talk / contribs} 17:04, 12 February 2014 (UTC)

Seriously? (this page is awesome)

This might be one of the best wiki articles and descriptions I've ever read. Kudos to its authors! Bordacount (talk) 13:13, 6 April 2013 (UTC)

Biased much?

"As the claims of Austrian economists are difficult to verify through empirical testing (and the same economists openly admit to it), it is generally considered to be a heterodox approach" (citation points to Krugman). Of course a Keynesian would oppose Austrian economics. It's like writing an article about the government and quoting an anarchist. ^{— Unsigned, by: 130.80.28.26 / talk / contribs}

Feel free to edit the article. You know, instead of whining. If the thunder don't get you/Then the lightning will. 22:25, 17 April 2013 (UTC)

I'm going to remove it from the intro because we actually mention it again alongside Milton Friedman's criticism in the ABCT-devoted section. Osaka Sun (talk) 22:47, 17 April 2013 (UTC)

What is the objection to the action axiom (aside from the fact that it's put forth as an axiom rather than an observation)

The action axiom basically states that one takes actions with specific goals in mind, with the intent of alleviating one's felt uneasiness in the present by acting in ways one anticipates will bring about a more desirable state of affairs in the future. Thus, human action is distinguishable from the actions of an air conditioner, vacuum cleaner and TV, which do not understand the purpose for why they do what they do; they do not select means based on their ability to accomplish goals.

One can argue that it's unscientific to claim that statements such as this are true without proving them. But does anyone doubt the truth of the statement (as opposed to objecting to the epistemology behind one's belief in it)? There are a lot of unproven theorems that mathematicians find useful. If a mathematician errs in saying that Euclid's Parallel Postulate has been proven, it doesn't mean that the postulate is untrue.

I would interpret "choice" to mean that you were looking for a way to solve a problem and considered various possible means. It could be, then, that a chess program that looks for a solution to a "mate in x moves" problem, finds the optimal one, and executes it, is engaging in what could be considered "human action". The goal is to win; various means are available; and the program selects and carries out the one that will achieve the goal. Maybe even electricity engages in such action, in that its goal is to complete a circuit by the shortest route, and given two alternatives, it will pick the one that achieves that goal best.

When you look at it that way, maybe appliances do engage in "human action". A ball thrown straight up in the air, too, seems to behave as though its "goal" is to reach the earth by the shortest route; does it make much difference whether its behavior is not the result of physics that take place within the ball (as is the case with the vacuum cleaner, whose circuits that perform its functions are located within the "acting" object, rather than outside of it)?

Mises might be wrong in making an arbitrary distinction between human and non-human action, but it's not clear that it would be fatal to the rest of his theories. So what if animals and appliances also engage in purposeful behavior sometimes; it doesn't mean that humans don't engage in purposeful behavior. One can still proceed from the idea of purposeful behavior to theories of supply and demand that show that interventionist policies would cause certain problems (such as shortages and surpluses); whether one views the costs as outweighing the benefits (even the Austrians admit that taxes and regulations benefit some people at the expense of others) depends on what your goals are. The Austrians admit that there is no way of proving objectively that one goal is better than another.

Whether the ABCT or the Keynesian "aggregate demand" theory are correct probably partly depends on what humans believe will best accomplish their goals. For example, if people think that a recession won't get better unless the government intervenes, and that they therefore shouldn't increase their savings or spending unless they anticipate such intervention, then the Keynesian theories could be self-fulfilling. On the other hand, if they were to believe in the ABCT and act accordingly, that theory might become self-fulfilling.

By the way, it would be an interesting question to ask "What is felt uneasiness"? What are pleasure and pain exactly, and what distinguishes what living creatures experience from the processes that take place within nonliving things and cause them to do what they do? Some of these questions, our language may be too limited to be able to express precisely. Maybe our minds now are incapable of solving these mysteries, but a future superhuman creature will be able to.

"There is a history of logic as there is a history of technology. Nothing suggests that logic as we know it is the last and final stage of intellectual evolution. Human logic is a historical phase between prehuman nonlogic on the one hand and superhuman logic on the other hand." Let's hope Mises was at least right that a more powerful kind of logic than what we have now may be on the way.

The Austrians say that economic principles can't be proven by the scientific method, but they are always citing historical examples as evidence backing up their theories. Really, when they point out that it is hard or impossible to know that one has adequately isolated particular variables in the social sciences, they are just saying that the laboratory conditions are not perfect. They do not regard the economic "experiments" that have been conducted by states and other actors as totally useless, though. Austrians still try to support conclusions using evidence. They use both deduction and induction at various times to prove various points, even though they claim armchair economics to be superior. Glideslope (talk) 01:12, 6 December 2013 (UTC)

"Perhaps one reason they are so uncomfortable with empiricism is that Austrian economists are more interested in defending the political ideology of libertarianism than they are in advancing economic understanding,[6] and rigorous testing can sometimes undermine deeply held political beliefs." So in other words, perhaps they're being intellectually dishonest, which might include putting selfish personal gain ahead of truth. (Presumably worthy goals are almost always pursued by finding and sharing truth rather than lies. Lies are typically advanced to further selfish personal gain. Would anyone disagree with either of those two statements?)

We could accuse almost anyone of intellectual dishonesty, though. Suppose there is a person who believes capitalism is good for the world. He might become a factory owner because of this belief. It could also be that a person who wants to become a factory owner for personal gain uses the capitalist ideology as intellectual cover to diminish people's opposition to him or to put his own conscience at peace, if he is capable of such mental gymnastics. Do we have any way of knowing which it is?

People tend to end up in professions that are aligned with their ideology and to adopt ideologies that are aligned with their chosen professions. Unless there's a shred of evidence to support the speculation of intellectual dishonesty, maybe the sentence should be removed. Glideslope (talk) 03:13, 6 December 2013 (UTC)

One can argue that it's unscientific to claim that statements such as this are true without proving them. But does anyone doubt the truth of the statement (as opposed to objecting to the epistemology behind one's belief in it)?

You mean besides all of modern neuroscience and psychology? Not to mention the destruction of any useful conclusions that might be drawn from such an axiom as a result of the work done by Herbert Simon. Dsmelser (talk) 22:01, 12 April 2014 (UTC)

Terrible Article

Rational Wiki is supposed to be about debunking pseudo-science, not advancing political agendas. ^{— Unsigned, by: 91.229.33.254 / talk / contribs} 27 March 2014, 12:24 (UTC)

Political agendas that rely on rank pseudoscience are fair game. Radioactive afikomen ^{Please ignore all my awful pre-2014 comments.} 03:41, 28 March 2014 (UTC)

Austrian Economics is not a political agenda, nor is it accurate that it "eschews mathematical modeling and empirical testing in favor of a narrative approach termed 'praxeology.'[2][3]"

The fact, if whoever wrote that would BOTHER to read some actual economics history, is that early Austrians are responsible for creating many of the principles behind the mathematical economic models, and many of models themselves, that are in common use today.

The difference, i.e. "praxeology", is that Austrians have come to believe that the mathematical models are not "wrong" as a whole (though some of them demonstrably are), but rather the whole point is that they are insufficient to accurately model real-world economics.

And in the U.S. we have 80+ years of classical, neo-classical, and Keynesian economic policy which indisputably proves that in fact the mathematical models are not sufficient to predict. If they could, we wouldn't have recessions or market crashes.

While I have a great deal of appreciation for alternative viewpoints, this article is mostly just ignorant garbage.

Anne Ominous (talk) 23:29, 27 May 2016 (UTC)

That sounds like a nirvana fallacy: "economic models aren't perfect, so they're worthless". Also you've elided a rather important thing: even if a model predicts something, that doesn't automatically mean people will do anything about it. For instance, quite a few people (myself included!) were aware the U.S. housing bubble would eventually burst. It wasn't really hard to see coming. But by and large, society and government did nothing to prevent it, because that would have been hard. Wishful thinking is free! See also global warming. And while Austrian economics might technically not be in itself a political ideology, Austrians are pretty much to a man right-libertarians/minarchists/anarcho-capitalists. One might ask oneself why everyone who espouses Austrian economics clusters around one ideological alignment. Contrast with mainstream economics, where there are economists all over the political map. --Ymir (talk) 02:07, 28 May 2016 (UTC)

You're reading something into my words that doesn't exist. Try again.

From a scientific standpoint, if a model does not effectively model, it's worthless. That's not anti-science, it's science. Good example: according to Phillips Curve, which was a cornerstone of neo-classical and Keynesian economics, the "stagflation" of the 1970s was IMPOSSIBLE. It took years and Milton Friedman to come up with an explanation for it that could even remotely be shoe-horned into the theoretical model.

One can call a theory "objective science" all one wants, but if it doesn't match observation, it's neither objective or good science. "It doesn’t matter how beautiful your theory is, it doesn’t matter how smart you are. If it doesn’t agree with experiment, it’s wrong." -- Richard Feynman

The point was that Austrians don't claim more "conventional" economics is "unscientific", meaning that the models are not scientific attempts to model economic reality. When they say "unscientific", they mean it is unscientific to put too much faith in models that have consistently failed to predict the future. They don't hate the methodology of mathematical economics. (Why would they? They helped create it!) They simply concluded -- based on a plethora of good evidence -- that it is not sufficient YET to the task. And contrary to popular belief, they don't reject those mathematical models out of hand. They use them, too. They just don't put an excess of faith in them.

Re: "For instance, quite a few people (myself included!) were aware the U.S. housing bubble would eventually burst. It wasn't really hard to see coming. But by and large, society and government did nothing to prevent it, because that would have been hard." Utter nonsense. They did everything they could to prevent it, according to conventional (largely Keynesian) interventionist economic theory. In fact, there's a YouTube video in which Peter Schiff is talking about the coming bubble burst, which was called nonsense and even laughed at by economist Art Laffer (of Laffer Curve fame), a dyed-in-the-wool Keynesian, and others who followed interventionist economic theory. They were convinced that government interventionism (via, among other things, the Fed) had everything under fine control. Obviously they were wrong.

Re: "And while Austrian economics might technically not be in itself a political ideology, Austrians are pretty much to a man right-libertarians/minarchists/anarcho-capitalists. One might ask oneself why everyone who espouses Austrian economics clusters around one ideological alignment."

First, anarcho-capitalism is a branch of economics, not politics. As for the rest: one might legitimately ask why you haven't seen the blatantly obvious answer.

While it's true Austrians TEND to be Libertarians, if there is any causation in that correlation it is the opposite of what you imply: Austrian economics gives strength to the idea of Laissez-Faire capitalism, which is not possible under a central-planning, interventionist government. So it should be no surprise to anybody that Austrians tend to not be Democrats, who believe in central planning and interventionism.

Further, those who really support free markets today tend to not be Republicans, who give lip service to the idea of free markets but in recent decades have given little real-world support for same, instead opting to increase government spending and central control. And frankly, both parties have favored their friends and campaign donors over free markets.

I hope that is sufficient explanation for you. I think I've been very patient in politely explaining the obvious. Austrian economics *is* strictly economics. But it pairs quite well with Libertarianism.

76.178.135.153 (talk) 23:21, 29 May 2016 (UTC)

Is there anyone who calls economic theories "objective science"? The term "social sciences" exists for a reason, because it's very hard to do controlled experiments on whole human societies. Do you actually know what Austrian economics preaches? You seem to be saying Austrians are merely a wee bit skeptical of mathematical modeling, which is kind of understating things. Well okay, there's kind of a split between the "Misesean" and "Rothbardian" strains of Austrian thought. You're more describing Mises, who was somewhat critical of mainstream economics but didn't totally reject mathematical modeling. Rothbard on the other hand pretty much did. That's what "praxeology" is all about: "You can't describe people's actions with math!" I would say most current-day Austrians are Rothbardian; it's Rothbard's writings that pull most people into the Austrian school these days. Moving on, your claims about the run up to the financial crisis are the standard Austrian bullshit. Greenspan was a hardcore laissez-faire proponent, and was saying right up to his last day as Fed Chair that everything was hunky-dory and the free market fixes itself. The mortgage crisis was set up by the American right wing's decades-long push for "deregulation", which led to banks handing out designed-to-fail mortgages to anyone with a pulse and then palming off the mortgage bundles onto suckers. The suckers bought credit default swaps to insure their "investments", and, surprise surprise, CDS were unregulated, thanks to lobbying by the companies selling them, which meant of course the insurers just pocketed the premiums and had no way to make good on claims. Economists not living in Austrian la-la land are basically unanimous in crediting government and central bank action after the shit hit the fan with preventing Great Depression 2.0. This isn't to say that it couldn't have been done better, instead of throwing piles of money at the companies that created the crisis, but the point is that it worked at stopping the world financial system from collapsing. As for Schiff, see the whole section in this article with his name on it. Also, not on your main point, but "anarcho-capitalism is a branch of economics, not politics" is just plain false, under the accepted meanings of the words "economics" and "politics". Anarcho-capitalists advocate for a certain political system, in their case, abolition of government and markets for everything. --Ymir (talk) 05:17, 31 May 2016 (UTC)