User:DerFluchtPlan/sandbox

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Working space for improving Austrian School:

... stuff


As the claims of Austrian economists are difficult to verify through empirical testing (and the same economists openly admit to it), it is generally regarded as a heterodox approach[1] or as outright pseudoscience. Austrian rejection of statistical methods point to the sensitivity of statistical methods to assumptions and the inability of these methods to fully model human behavior.[2]

cannot adequately describe human behavior can seem intuitively compelling, but they fail to provide the mathematical proof demonstrating why normally unbiased estimates suddenly become biased simply because they are dealing with people who make decisions. In this sense, the Austrian school is to economics as a certain other Austrian school was to psychology. Perhaps one reason that "Austrian" advocates 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,[3] and rigorous testing can sometimes undermine deeply held political beliefs.

Can we take anything positive from it? Well, to start, its use can be found in no economy in the world... except Somalia.[4]

Praxeology[edit]

I tremble for the reputation of my subject...
—Paul Samuelson on the Austrians[5]

Murray Rothbard's Praxeology: The Methodology of Austrian Economics (read here!) describes praxeology as an application of deductive reasoning, applied to a set of "unquestionable" axioms. Of course, any implications derived from these axioms are only as good as the analysis that derived them, and the axiom that they were derived from. This is where praxeology gets into trouble, as they reject less mushy formal analysis in favor of more weasely verbal analysis. Let's look at the axiom that Rothbard refers to as the foundation of praxeological deduction as an example, the "fundamental axiom of action." Almost immediately, the axiom wades into trouble. It states that:

individual human beings act.

The first part of that assertion is simple enough to grasp, but what does it mean to act? One possible definition of act says it is to "perform an action." This seems to be as far as most Austrian school thinkers take this. However, as an air conditioner, vacuum cleaner and TV all perform actions, it would seem this axiom places human beings in the rather large set of things that act. It would be pretty embarrassing then, to derive any economic conclusions from the fact that people are part of the set of things that act, as the conclusions deriving from being a member of the set of things that act would apply to other members of that set as well. Fortunately, Rothbard is kind enough to clarify his definition:

... that is human beings take conscious action towards chosen goals.

Note that one under-defined concept has now been replaced with two; conscious action and chosen goals. Let us ignore the validity of this assertion, and try to figure out just what chosen goals are. The word choice would seem to imply some form of conscious action was taken in forming these goals, so is the real statement of this axiom "human beings take conscious action towards a consciously acted upon set of goals"? Perhaps Rothbard meant to differentiate between "choosing" and "acting," but that is never clearly expressed. In either case, it would seem that the definition of goal needs some work to be truly useful. Sound logic relies on the clarity of definition, as many arguments are sensitive to subtle changes in meaning, and vague statements hide contradictions.

This approach of verbal deduction also leads to a rather noticeable (ab)use of false analogies and intuition pumps. The Austrians advocate logic and reason the same way that Scientologists advocate the pursuit of Science: It's a buzzword, totally divorced from what buzz phrase actually means, which is why Austrians tend to be treated as jokes by the very academic circles they claim to represent. ("Prax it out, brah!")

This statement is actually totally meaningless. It doesn't even come close to proving that "laissez-faire" capitalism is best. Human beings can take "conscious action" towards socialism just as easily.


Notes[edit]

  1. Caplan, Bryan. "Why I Am Not an Austrian Economist", George Mason University
  2. "Statistical Malfeasance and Interpreting Economic Phenomena", Mises Institute
  3. "Austrian Economics and Classical Liberalism", Mises Institute
  4. Which is probably why the Mises Institute seems so supportive. See "Stateless in Somalia and Loving It." (Spoiler alert: This sunny depiction of Somalia's economy depends on quote mining the 2005 edition of the CIA World Factbook, whose immediately preceding passage pointed out that "Somalia's small industrial sector, based on the processing of agricultural products, has largely been looted and sold as scrap metal." And that "Livestock, hides, fish, charcoal, and bananas are Somalia's principal exports, while sugar, sorghum, corn, qat, and machined goods are the principal imports." Not to mention that "The ongoing civil disturbances and clan rivalries, however, have interfered with any broad-based economic development and international aid arrangements." This makes the hoopla about mobile communications the proverbial silver lining. Interestingly, the current edition of The World Factbook provides less scope for quote mining, as the positive stuff has been parsed out in the economics section, rather than presented as a single upbeat section.)
  5. Paul Samuelson. Theory and Realism: A Reply. The American Economic Review Vol. 54, No. 5, Sep., 1964