On "The Philosophical Origins of Austrian Economics" . . .
First of all, thank you for the link Bigun. I've just spent the last hour reading through it and many of its points were known to me regarding the origins of Austrian Economic Thought, though the specific information contained in the later section on the assault on Austrian Economics by the Logical Positivists in the early 20th century, which I knew had occurred, was more or less new to me. You might note that the author of the article is really explaining the philosophical foundations and justification for the methodological approach of Austrian Economics, and especially "methodological individualism," which may help to highlight his reasons for writing the article, which I thought was excellent.
Since Austrian Economics is new to a lot of people, I wanted to put up another link that may help to put the author's subject in perspective:
Overview of the Austrian School
I would particularly call your attention to the "bulleted list" of major characteristics of Austrian School thought, located very near the top of the article; especially their emphasis upon Subjectivism and Deductive Method as helping to explain some of the major tenets of Austrian Economics the author of the article is trying to make clear.
I got my first exposure to Austrian Economics in grad school in the late 1980's when I took a seminar on "The History of Economic Thought" at Texas A & M with
Morgan Reynolds, of the Economics Department at the university. Reynolds later went on to become
Chief Economist at the Department of Labor in the early years of the Bush Administration. He was then the Editor -- I think -- of the
Quarterly Journal of Austrian Economics and his self-admitted bias in favor of Austrian Economic Thought was a highlight of the seminar, which I enjoyed tremendously.
There are several things about Austrian Economic Thought which appeal to me. The first and foremost is that they were the first economic theoreticians to update traditional
Laissez-Faire approaches to economic policy, which I always saw as an underpinning of human freedom, within a framework that placed the consumer at the center of economic life in a coherent and cohesive manner. Adam Smith, David Ricardo, et al. had all focused primarily upon producers and, when we trace the development of modern economic thought's emphasis upon consumer-centric economics it is the Austrians who come first.
But there was more in Austrian Economic Thought that appealed to me. I did my grad school work in History, and one of my specializations was in "Quantitative Methods in Historical Research," in which I crunched numbers on everything from voting behavior to demographic trends. One of the things which I had to learn very early on was that the
strength of the relationships one developed in Quantitative Analysis of historical data was oftentimes somewhat weak, though strict Demographic Analysis was generally stronger, and the lesson pounded into my head was that a good quantitative analyst examining historical trends needed to complement his number crunching with good documentary research in order to explain "subjective factors" that might explain deviations from the norm when trend analysis was presented. And my Quantitative Methods professor also told me that economic analysts faced the same difficulty since economic trends were often no stronger -- we're dealing with R
2 values in regression analysis here -- than the ones I was developing.
I carried this "hands on" knowledge of Quantitative Analysis with me into Dr. Reynolds' seminar and, when he arrived at a discussion of the Austrian School and presented its emphasis on Subjectivism I was immediately struck by its "real world" application to human behavior, whether in Economics or any other discipline. And I also noted that this particular bias of Austrian Economics, which does not trust the use of discrete mathematics in economic trends analysis for its attempt to "objectify" human economic activity, made most of the grad students in Economics very nervous, since many of them went from seminar to seminar learning economic formulas used to express trends and then moved on to demonstrate them in analysis. I remember when a discussion of trend analysis in price theory developed that Reynolds told them something like "you guys can never incorporate the varied influences of all economic actors involved in determining prices so you're lost before you even begin." Everyone chuckled as he said it, but I couldn't help but detect some real nervousness on the part of several of those students, some of whom I was sure would be writing theses on price theory which would be presented as support for or opposition to theories some economist had expounded previously.
I wanted to mention all of this because what eventually brought me around to supporting the consumption tax was what I learned in Austrian Economics about prices, which is that they are
not a reflection of the
objective or intrinsic value of a good or service, but rather a "system for communicating information" to economic actors (see the bulleted list I referred to above). While I do see some weaknesses in Austrian Economic Thought with reference to monetary policy -- I'll skip that -- I pretty much think they've got it right just about everywhere else, but
especially on prices, which was one of the key underpinnings of their argument that Socialism could not work as an economic system. I used to be a proponent of the Flat Tax, primarily for reasons of judging that it was more politically expedient an option than the consumption tax, but the more I reflected upon what a pricing system was really about the more I began to turn to the Fair Tax, because the greatest of its many efficiencies is that it
reduces economic uncertainty with regard to prices and a modest reduction of economic uncertainty is about all that I believe government can hope to achieve in economic policy.
Well; now you know what I really think. Thanks for the link again Bigun. I enjoyed the article.