Posted on 08/04/2009 1:45:12 PM PDT by parsifal
Mainstream economists dismiss the Austrians as cranks. Nobel economist Paul Samuelson wrote that "I tremble for the reputation of my subject" after reading the "exaggerated claims that used to be made in economics for the power of deduction and a priori reasoning [the Austrian methods]." (1) Noted economist Mark Blaug has called Austrian methodologies "so cranky and idiosyncratic that we can only wonder that they have been taken seriously by anyone Perhaps the defining difference between mainstream and Austrian economists lies in their opposing philosophies towards learning truth.
Mainstream scientists use a well-developed process called the scientific method. This method employs both data and theory. "Data" includes facts, evidence and statistics. "Theory" is the attempt to describe general laws, principles and causes and effects found in the data. Both form a cycle, as data goes into the formulation of theory, whose conclusions then engender more data collection in an attempt to confirm, refute or develop yet more theories. The accuracy of this process is verified by experimentation or prediction. Scientists believe they are on the right path when both theory and data agree; when they disagree, they know something is wrong. It could be the theory is wrong, or the data is badly collected or interpreted.
(Excerpt) Read more at huppi.com ...
Certainly not by the Keynsians.
I tend to think of the Austrians as economic philosophers more than direct economists. If you want Austrians with data, I think you're talking about the so-called Chicago school. Guys like Friedman and even Sowell strike me as being in harmony with what the Austrians say, but with the data. OK, actually, Sowell is more the philosopher type.
For me, I would be interested in anyone who understood that the Fannie Mae bundling was headed for a train wreck, and anyone who wrote clearly on the effects of the stimulus. That may or may not be an austrian from chicago, though I'm pretty sure a Chicagoist or an Austrian ought to have seen it whether or not they did.
if you are going to be a professional economist
No chance of that, and the world is probably a better place for it. I've seen my checkbook even if you haven't. I rather liked the easy credit that led to the Fannie Mae debacle, although I saw some of the early warning signs when things started to go awry. Government policies aren't able to change very nimbly so while I think even some of the people administering the policy saw trouble, they weren't able to adjust the policy for a lot of reasons, some political, some venal.
When I look back over the sequence of events that led to the fall, it all looks pretty clear cut and understandable to me. But hindsight is relatively easy and not too useful. The harder part is seeing it coming in time to change it. I'm not sure which economists saw the overbuilding which led to the decline in real estate prices about five years ago and said, in time to change things, we have to get control of Fannie Mae. Or which ones said, our deficit is not sustainable. We can wage war or expand government but not both. Or we can not sustain an economy indefinitely that is dependent upon Chinese investors buying our bad paper. If they stop buying our goose is cooked. I would read the economists who saw that, whether they were Keynsians or Austrians or whatever they were.
Which economists have explained how you can print a couple trillion and not devalue the dollar? You might make the case that we are just clearing the books and admitting reality, that the devaluation was coming regardless. But I haven't heard anyone who has had the nerve to say that out loud. Maybe politically you can't say it out loud.
Check out Peter Schiff’s writings for predictions on the housing bubble.
I'm not convinced that that is not an example of an effect of inflation - the over production of dollars.
Circular reasoning?
Self stimulation?
They think they can just keep printing forever as long as the dupes:
Don't stop believin'
and just
Hold on to the feelin'
Sorry, Parsy, no sale.
“Check out Peter Schiff’s writings”
Thanks, I will. In surfing the net before I answered you I realize I had read this from him; I think it was also posted or referenced from FR.
I’ll do some more reading. Someone new to add to my reading list. Thanks again.
Honestly, I don’t understand how anyone can take macroeconomic theory, and in particular, Keynesianism, seriously.
The housing bubble was so obvious, but was denied and denied, until it finally made its presence known in a way that was undeniable. I recall reading thread after thread here of people with their heads in the sand, attacking as lunatics those who dared to point out the truth.
Government, through misguided regulation and subsidies, largely created the housing bubble, and kept inflating it in a futile effort to keep it from popping.
Fiat money can be a handy thing for the politician, who can use it to his advantage by manipulating it to cause a temporary expansion. But, eventually, there will be a correction. And the bigger the bubble, the bigger the pop.
The real debate here is what economics really is: is it a science of measuring inputs and outputs, and developing equations? Or is it really the observation of human action and its consequences?
Ah, the ASE’s are part of the bull frog school of economics. You know, if a bull frog had wings, he wouldn’t whomp his *ss every time he jumped.
OK, seriously, when we end up in a world without gov’t and a national bank, and the lakes are filled with strawberry wine, then we can revisit the ASE’s.
parsy.
Good point. They need to change their name to the Austrian School of Philosophy. There was one article above where Friedman was dissing the ASE’s.
FWIW, I don’t think Schiff was he only one who saw the crash coming. (I did too, but for different reasons.) I remember watching people on TV say thing.
parsy.
Well, heck, at least I got your attention. Did you read any of the links?
parsy.
Circular reasoning? No, its called the scientific method.
parsy.
Its both.
parsy.
I have a Mises library of most of his books and have actually read three or four (Human Action is a toughie that I have attempted many times). This is how I know that you are talking through your hat.
You want I should go to the mises.org place and ping you what I read? One of them had something to do with forcing people to do things if they wouldn’t work, but I only read that a few weeks ago.
The other ones were several years ago. I read a lot. I think I can still pick it out.
parsy, who has no reason to lie.
I’d be more convinced if you were able to go to your bookcase.
(Lots of people have a reason to lie. They just forget what it is.)
I never bought the von Mises book. I did buy the Hayek one, but my books are in 4 different places at present.
I can type in something from the facsimile Waste Land, if you want.
He do the police in different voices.
parsy.
Ping!
parsy.
I would definitely not consider myself a Keynesian. The arguments for Keynesianism seem as specious to me as the arguments for Austrian economic theory. It seems that a number of folks at FR believe that non-Austrian means Keynesian, which is just silly.
My main concern about what is going on right now is that I would like to see a truly free market, rather than a market which is owned by the highest bidder.
Most so-called conservatives and liberals believe that a "free market" is one in which the current participants should be able to pretty much do whatever they can get away with, so long as it is legal. The hope is that the sum total of all of these actions will result in hard-working entrepeneurs triumphing over rent-seeking oligarchs.
The current situation suggests that rent-seeking oligarchs will triumph a lot of the time.
I really don't know why so many on FR are proud to be shills and useful idiots for the oligarchs on Wall Street. The quote in the article detailing that corporations have two sets of economists, one to do the math and the other to do the shilling, was a classic.
Simple things that the useful idiots are either unable or unwilling to comprehend are:
1. It is impossible in most cases to extract government activity from private activity. Even if we were living under the type of limited government that most of us wish for this would be the case. The amount of money spent to maintain the military, prisons, the court system, etc. would make this the case even then.
2. Corporations lobbying to remove regulations or lower taxes is no different than corporations lobbying to add regulations and raise taxes. It is just lobbying. If a corporation wanted to behave in the most "Austrian" way possible then they would cease and desist from all lobbying efforts. They would merely keep themselves apprised of changes in the laws, and change their behavior accordingly. Shills who try and justify lobbying when it helps corporations and oppose lobbying when it hurts them are just being logically inconsistent. Something which Mises or Hayek would presumably have found appauling.
3. Most people agree that some amount of environmental protection enforced by the government is a must. Why can't we expect the government to also perform market protection as well? I support anti-monopoly laws. I support laws which would require all trades to be made public, and I support laws to keep margins low. These, in my mind, would tend to increase the amount of information available to the general investor, and encourage investment rather than speculation. What is wrong with that?
4. Gold bugs are very inconsistent in their thinking. They talk about the Treasury "printing money" as if this was somehow the activity most likely to increase inflation. Fiat money is just that: it is the sum total of all of the real and perceived wealth. The total sum of real and perceived wealth just took a major hit. Trillions of dollars of deficit spending is no match for the tens of trillions of dollars lost on MBSs and CDSs. We have a way to go before we have to worry about inflation ... even if the gold bugs are right!
5. Shills start out sounding like great supporters of the "individual". But what they really support is some stripped down "producer/consumer"-bot that is always trying to maximize his profit potential. Most real individuals are intricately interwoven into their communities, unlike the loner crackpots that seem attracted to fringe economic theories. I, as an individual, spend most of my time NOT maximizing my net worth. Perhaps I am stupid, or naive, but I am more like my fellow humans than those who are ever surfing the stock indexes. Individualists who want to rob me of my individuality by denying me my associations to my fellow countrymen, my family, my friends, and my coworkers are not true individualists. I do not wish to be lost in a sea of cheap labor. I do not want to limit myself to only those jobs where I can "be my own boss", e.g. insurance salesman, general contractor, etc. I like the fact that I get to work with millions of dollars of high tech equipment that I couldn't afford to purchase myself.
I hope all the shills out there are getting some kind of monetary remuneration for fighting the good fight for GE-IBM-MicroSoft-GM-AIG. If not they are even less rational than me.
Which von Mises book, please?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.