Austrian Economics vs. Austrian Economists

In a lengthy post Gabriel Mihalache provides an anticipated critique of Austrian Economics, and he deserves some responses from a self-defined "Austrian" so here goes...

Austrian Economics is not science, in any sense in which I can understand the word.

The way I understand the word is either Science: "measurement"; or science: "the systematic study of a given subject"... and Austrians lost relevance throughout the c20th as the discipline of Political Economy (science) became the Science of Economics. As the systematic study of exchange and the institutions through which exchange takes place, if Austrian Economics isn't a science i'm not sure what is.

Radical subjectivism leads to complete quietism

Aside from the fact that radical subjectivism has it's own critics within the "inner-circles" of the Austrian community (scroll down to comment 6); the purpose of a priori theorising is to retain an anchor for dealing with subjectivism (radical or otherwise). Ok, it undermines forecasts. But this feeds back into the above distinction between Science: predictions and science: understanding.

stop it with the normative cop-outs

Pete Boettke's mantra of From Approximate Value Neutrality to Real Value Relevance (.pdf) puts this positive/normative debate in context: the positive science of economics enables a normative debate on political economy. There is nothing normative about Austrian Economics, it's just that the force of the conclusions tempts Austrian economists to stray into political science. To me this distinction is clear, but in practice I accept that it can appear fuzzy. That's either the fault of the writer or the reader though, and not the discipline itself.

the insistence that there’s only one true theory of the business cycle and that all real-life cycles happen for the same reason

I don't believe this, and don't think there's anything within the ABC literature that rests on it being the sole course of every business cycle, always and everywhere. There's two things at play: the Austrian view of capital markets and the Austrian view of the effects of monetary expansion. The two are intertwined, but can (and usually are) kept seperate.

The rejection, as if out of moral superiority, of formal, mathematical models

My own position is that in an effective division of labour we should recognise the strengths and weaknesses of various methodologies. It's a mistake to argue about mathematical technique as a universal requirement, the question is whether Mathematics is sufficiently more useful than any other discipline for the use of economists.

stop thinking in terms of “schools”

"Schools" aren't just an interpretive construct to classify economic thought. There are real networks of communities that utilise common techniques and do generate identifiable similarities. But regardless, it seems odd to critise Austrian Economics for being too narrow-minded. After all we're ultimately studying Praxeology (i.e. sociology) and flicking through Austrian journals provides an eclectic cacophony of cross-pollination. Methodological purity is a double-edged sword, and my own opinion is that I'd rather be a successful economist (who's an Austrian), then a successful Austrian economist.

we’re dealing with too much politics and too little science.

Perhaps, but that depends on which Austrian Economist you're reading, surely. A more expansive definition of what Austrian economics really is (and thereby who "Austrian economists" really are) incorporates numerous scientists who refrain from ever mentioning politics (Doug North is a classic example).

Reading through Gabriel's critique confused me because he seemed to be focusing more on Austrian Economists than Austrian Economics. Indeed when I asked him which of these two seperate things he was really talking about he replied:

Huh… probably both. It’s more of a social/political phenomenon for me, rather than a positive, factual science. I know this view might be offensive, but that’s how I see things.

Personally I'm not offended at all, and am glad that Gabriel's taken the time to write down his thoughts, I just feel it's a better criticism of how Austrian's practice Austrian Economics, as opposed to the underlying theoretical framework. It raises an important question: "What should Austrian Economists Do?" Gabriel and Bryan Caplan answer by saying "stop wasting your time". For me the answer is:

• criticise by creating
• study the great Catallaxy

(see here)

Comments

[Gabriel M.]

Thank you for your interesting reply! The selection of links also looks promising.

It will take me some time to read all of them, so it's going to be a little while before I can answer. I think this discussion is worth keeping alive.

For now I will just object to the first distinction you introduce, "Science: "measurement"; or science: "the systematic study of a given subject"".

I would instead say "Science: the formulation, testing and refinement of hypotheses" but that's not an argument, merely a difference of perspective.

My dissatisfaction here is with the way to decide or know when your study is successful. And I think that there's no better way than to repeatedly slam your ideas against the data in a structured way (statistics; quant. methods).

A priori methods have, far too often, been self-serving in regards with this aspect. The lack of formal logic isn't helping either.

So, yeah, that's basically my point... it's fine that you say "understanding" but as far as confirming those ideas... there's a problem.