Tag Archives: Austrian School / Libertarian Theory

Joseph Conrad’s Praxeology

open quoteLike Willa Cather, Joseph Conrad was a great economic novelist who maintained a contemptuous distance from the “economic” novel.

. . . .

The fullest, indeed the virtually inexhaustible, expression of Conrad’s praxeology is his novel The Secret Agent (1907). Cather thought that her era was characterized by “the revolt against individualism.”[3] Conrad saw something larger: a revolt against human action as it really is. The Secret Agent attempts to explain both the revolt and what it revolts against.

I.

The praxeology of The Secret Agent emerges from Conrad’s interest in a certain group of characters — political radicals — who are engaged in plotting, or at least in ardently desiring, the downfall of the capitalist system. These people have their own theories about human action, theories that Conrad finds enticing targets for ridicule. From the ruins of their ideologies, he retrieves much that is useful by an opposing system of thought.close quote (Read more from )

I had no idea. How interesting!

Three Great Criticisms of Marx

From the Mises Institute.

The Conflict of Ideologies: Marxism vs. the Majority
– Marxism denies consciousness by attributing all thought to class affiliation.
– Marx considered all dissent treason, and developed anti-democratic ideas where majorities failed to endorse his views.

***

The Critics of Marxism
– Materialism denies consciousness and contradicts itself by attempting to attribute all human decisions and civilization to material conditions.
– Marx hated Prussia’s Hohenzollern’s socialism, because it wasn’t *his* socialism.
– Marxism became decidedly anti-Christian.
– Dialectic materialism falls apart in trying to explain simplest historical events.
– Marxians never ascribe positive trends to class machinations, only negative ones.
– Marxism sharply contrasts Freud. The former denies consciousness, the latter relies on it. Even Marx critics ignore this.
– Christian Marxists ignore Marx’s decidedly anti-Christian views. Marxism, for example, teaches religious ideas are the “super structure” of material production.

***

The Ideological Impregnation of Thought
– Thoughts are always & inevitably attributed to one’s class, and they serve the interest of that class.
(Marx never reconciles this w/ his undeniably bourgeois background. Nor does he define “class.” Nor does he address the possibility that a correct theory might be more useful to a person than a false one.)
– Marx’s motive was the adoption of socialism. Instead of addressing the devastating criticism of economists, he dismissed their whole work as the machinations of a rival “class,” and ridiculed them. They are wrong, because they are bourgeois, and there is no reason for careful analysis.
– They made exception to their own thoughts and theories, which they assumed were true and pure.

Commentary on the election of Rand Paul

I guess we’ll wait and see. I like his support for auditing the Federal Reserve and limiting spending. I like this skepticism about our wars too, though greatly prefer this father’s outright opposition.

I’m also very much influenced by Hans Herman Hoppe’s earth-shattering book, Democracy the God that Failed. I’ve begun to doubt that Democracy works, so I’m largely just an amused bystander when a politician is elected who seems to support my belief in individual liberty.

The Constitution was good, so good that it took 300 years for power to become centralized, concentrated, and predatory, but nevertheless, here we are. Realize that we used to be a nation in which half the population didn’t have to work.

Perhaps the best thing that can happen is a falling apart of the United States, preferably into 310 million independent nations. (peacefully!)

The case against coersive taxation

From a correspondence with friends:

I hold the very radical belief that taking someone’s property by force or threat of force is stealing, regardless of whether it’s done by an individual or institution or government, regardless of whether you call it taxation, and regardless of what virtues are invoked to justify the violence.

***

My apologies for the long-winded reply, but this stuff is my passion. I’m happy to make my case, even if we agree to disagree afterward:

> “Is it wrong to keep a standing army?”

Yes. The United States did not keep a large standing army during peacetime until 1948. Since then, we’ve had a foreign, undeclared war every decade, and never mind the fact that our Constitution requires congress to declare war. The psychopaths in government are having too much fun sending suckers like me off to war and their friends are making too much money.

How you like them apples? You’re a citizen of a country that can’t go a single decade without invading another.

How about the fact that we spend more than the rest of world COMBINED on “defense” which to me looks more like “offense”?

> “With all that you own and all that was given to you just by virtue of being born in the US, don’t you think that is worth protecting?”

I feel tremendous admiration and gratitude to all the entrepreneurs who risk their personal wealth to produce goods and services they hope I will VOLUNTARILY buy.

These are the people we should revere. These are the people to whom we should build monuments, not the power hungry politicians and bureaucrats who are too stupid, lazy, and cowardly to provide us with things we want. They cannot serve society, so they seek to rule it. Entrepreneurs build civilization. They are the ones who need protection, primarily from their government.

> “You use the services of the country, therefore, you have to pay your share.”

1- There are many that don’t use, which I’m also required to pay for.

2- I’d hardly categorize the wars in Iraq and Afghanistan, the bank bailouts, the nationalization of General Motors, the TSA’s pornographic body scanners, the NSA’s eavesdropping on my telephone calls, the Guatemalan Syphilis Experiment, and the BULLSHIT speeding ticket I got as “services.”

3- I’d absolutely *love* to stop using ALL public “services” in exchange for keeping all the money which people VOLUNTARILY give me for my work.

But regardless, I’m glad you at least used the words “have to.” You acknowledge then that government-provided services are coercive.

Violence will be used against me if I attempt to do without the benefit of infecting unsuspecting Guatemalans with Syphilis, for example. Initially, my refusal to pay for this public “service” will only inspire increasingly menacing letters from the tax collector, but ongoing refusal to pay will be met with physical violence, including lethal force should I attempt to defend my property. (btw, I pay all my taxes — out of fear.)

Please acknowledge the violence.

It can be justified only if you believe that a peaceful system of voluntary exchanges cannot provide education, security, food for the hungry, housing the poor, transportation, culture, etc.

Then you are faced with a dilemma: Should we leave the poor to their fate or should we violently separate people from their wealth? Should remain ignorant about the advanced stages of Syphilis or should we use the threat of violence to force people to pay for government experiments?

Of course, I believe there is overwhelming evidence that all these things are better provided in a free market (all the ones which are worth doing that is, and none of the ones which aren’t) . Therefore, the dilemma you might feel between violent taxation and some societal need doesn’t even exist.

Because your statist approach is the violent approach, I think the burden of proof lies with you; you must to demonstrate the government’s superiority to the free market. Nevertheless, I’ll make the case that the free market is the better provider, just because it’s so easy to do:

> 1) Security.

If you search for “mall cop tasers” on youtube, you don’t find anything (I didn’t), because privately hired security, unlike security hired by the greedy, lazy, cowardly, power-hungry sociopaths in government is accountable.

You might also be interested in the not-so-wild west where private security flourished, and the murder rate was lower than that of most modern-day U.S. cities:
www.independent.org/publications/tir/article.asp?a=552

Also, gun town USA — where crime nearly vanished, and not a single person has been murdered in the 25 years since a renegade mayor required every household to purchase a gun:
www.wnd.com/?pageId=41196
(I’m philosophically against the requirement, because it’s coercive, but I think this demonstrates the ability of people to protect themselves peacefully.)

> 2) Transportation

The railroad was build on private initiative in pursuit of private profits. It worked great until government strangled it with regulation, then killed it by FORCING everyone to subsidize an interstate highway system.

The obvious failure of the free market then precipitated the nationalization of Amtrak, a government monopoly, which, if I remember correctly, has lost 32 billion dollars to date.

Despite the best efforts of the statist ideologues, Indiana, Chicago and California are considering selling roads to entrepreneurs who are willing to risk their private wealth in the providing of transportation services.

> 3) need a structured state government to implement changes

Like a hole in the head.

Local governments have either outlawed or required people to kiss the ring of governance, beg permission and pay a hefty licensing fee for the following privileges:
-arranging flowers in Louisiana
-selling coffins in Louisiana, even for monks
-interior designing in DC or Florida
-showing tourists around in Boston
-labeling GMO-free foods “GMO-free”
-selling raw milk
-running lemonade stands in Portland ($120 health department fee)
-selling pumpkins and Christmas trees into Lake Elmo MN
-delivering your neighbors garbage to the dump in San Francisco
-putting signs in your store windows in Dallas
-eyebrow threading in Texas
-training Yoga instructors in Virginia

You risk the violence of government for committing these “crimes.”

4) civil services

How about the fact that poverty in the US fell by 1% a year from 1950 until 1968 when the government’s “war on poverty” began? Since the government’s “war on poverty,” the poverty rate stagnated and remained so despite a quadrupling of the government’s anti-poverty budget.

Source:
www.youtube.com/watch?v=064YTtSxVSo#t=46m10s

Consider this next time you hear someone say the free market punishes the poor.

5) (I’ll cover education, though you didn’t list it.)

As I said, I believe the burden of proof lies with the advocates of violence. I challenge you to find any evidence that public education has been anything but a pathetic, disastrous failure despite a tripling of the federal education budget, and a doubling of the number bureaucrats per student:
www.lostrepublic.com/archives/4630

There’s also the fact that before America’s first public schools appeared in Massachusetts, there was near 100% literacy.

I think all the evidence of the superiority of the free market in providing services generally provided by government is irrefutable. You may find ways spin, question and undermine it, but instead of doing that, can you find evidence that the government approach is superior? Can you find any evidence whatsoever to justify the coercive funding of public “services”?

A parable reflecting the common, unimaginative objections to privatizing education

People in the Soviet Union were standing in line for butter. After several hours, one of them said:

“This sucks. Why does government control food distribution?”

There were some nods of agreement, but the young man behind him, a Phd student, said “the free market is great for the rich, but what about the poor? Who would feed the poor?”

“Can you imagine a system in which food is only grown and sold for profit??? A system in which everything was about MONEY!” said another man. “How barbaric!”

“I can speak to this personally,” said a fourth man, a drunk who wobbled on his legs. “Every day of my life I eat from my government quota of food. If it wasn’t for the government, I would starve!”

“Yes, you’re right, the original dissenter agreed. Perhaps food is too important to be left to the free market.”

What Kind of Person Runs For Political Office?

A wonderful and shocking show from Radio Free Market:

“If you want government to intervene domestically, you’re a liberal. If you want government to intervene overseas, you’re a conservative. If you want government to intervene everywhere, you’re a moderate. If you don’t want gov’t to intervene anywhere, you’re an extremist.” ~Joe Sobran

The Killing and Reviving of the American Dream

Excerpted from a great Mises Daily article by Lew Rockwell:

open quoteThe trends are gleaned from US Census data, which provide a look at how economic downturns can devastate a society, and offer a glimpse into a theme that the Austrian tradition has long emphasized. Economics isn’t just about trade statistics, retail sales, or GDP. It is the very pith of life.

What the Census data indicate is that our mobility has been drastically curtailed from what it was a few years ago. The number of people who have not moved from one home to another, from one community to another, has risen substantially. . . .

Another trend is the delay in marriage. For the first time since the data have been tracked, the share of women 18 and older who are married fell below 50 percent. The share of the population age 25 to 34 that is unmarried jumped from 34.5 percent in 2000 to 46.3 percent nine years later. This is a massive social trend, dictated by economic realities. . . .

We’ve also seen a jump in the number of people working from home, which also makes sense given the tighter labor markets and growing resistance to hiring. Another option besides working at home is one that Europeans know very well: going back to school. This trend has taken hold in the United States in the last two years. . . .

The tendency to plunge back into school is also dictated by economic realities. We are now in the third straight year of college graduating classes whose earnings potential is far less than they had expected during their years in school. During these years, students accumulated six-figure debts that they figured they could pay off in a reasonable time with their high incomes. Those incomes have not appeared. So rather than accepting pay at the prevailing rate, they have reenrolled in school to defer having to service the loan.

We might as well bring up the striking trend of young people moving back in with their parents after a period of living by themselves. This phenomenon has given rise to the phrase Boomerang Generation. In 2000, some 17 percent of Americans age 20 to 29 lived at home. Today, some estimates put that figure at 34 percent. And this compares to 1960, when only 9 percent of people in this age group lived with their parents. . . .

Tragically, labor-force participation among American youth age 16 to 24 continues to fall. Most recently, it fell to 60.5 percent in July 2010, which is the lowest July ever recorded. Before 20 years ago, the typical labor force participation rate ranged between 81 and 86 percent. In other words, four out of five kids in this age group gained hugely valuable experience for a lifetime of work. Now only three out of five kids do. The most dramatic drops we’ve seen in these figures have been in the past three years. . . .

This is a striking fact of our times, one made even more devastating as we look at the economic fundamentals such as the unpayable public debt and the out-of-control spending in Washington and the states that continues to consume vast amounts of private capital.

However, if we take a longer-term look, we can see that these trends date back decades, with the turning point being the severing of the dollar’s last link to gold in 1971. This is the event that set up the explosion of government growth, of credit addiction across the population, of massive malinvestment in housing and many other sectors, of the gutting of American savings, and, most seriously, of the loss of freedom to the national-security state. . . .

Having established the trend lines, let us now speak of cause and effect. In every case, we can easily trace these trends to economic realities, which in turn are profoundly affected by government policy trends and monetary policy in particular. Monetary policy is truly the hidden hand behind the strangulation of the American dream. It is the secret force at work that erodes our living standards, funds the growth of the leviathan state, and makes every sector of economic life dependent on rising debt.

But there are other factors at work here, too. Antitrust law hobbles business as never before. Taxes drain productivity from corporations, small businesses, and households. Protectionism keeps the best products at the best prices out of the hands of consumers. Edicts issued by a thousand bureaucracies keep American enterprise constantly guessing about the legal climate. Patent mania has created a minefield for innovation in every sector from medicine to software. Imperial wars have drained away capital and labor resources from the private sector.

The leviathan state is the great enemy of American prosperity, the monster that devours wealth. Every bit of economic growth that we experience is due not to the presence of this leviathan, but to the ingenuity of American enterprise in getting around the barriers. . . .

you can count me among the skeptics that the Tea Party is going to achieve anything like a restoration of liberty. It isn’t clear that many of these activists really understand that ending despotism will require a gutting not only of the current crop of state managers, but the entire apparatus of state management itself. That means ending all forms of government intervention, domestic and international.

It is not enough to cut back or even end the welfare state; the imperial warfare state must also be dismantled. That means taking apart the national-security apparatus as surely as we end the economic intervention in domestic life. To oppose one while supporting the other — and this is the very essence of the Republican Pledge to America — is self-defeating if not deliberately deceitful. We know the results of this kind of intellectual incoherence because we’ve seen it so many times before.

Tea Partyers proclaim themselves to be against socialism, but reflect on the often-overlooked forms that socialism takes in our time. The first type is corporate socialism that puts large banks and corporations in the driver’s seat of public policy, leading to bailouts for the most well-heeled firms out there. In an effort to keep home values from falling and to keep American automotive companies from going belly up, the whole of the American mortgage market is socialized and American car manufacturing put on the public dole.

A second type of American socialism comes in the form of a gargantuan military-industrial complex that plows through more than a trillion taxpayer dollars each year to sustain the American empire around the world — and be enriched, of course.

Yet a third type is that which provides social security and medical benefits for older Americans, people who believe that because they have paid into these systems their entire lives, they are entitled to receive back as much as possible.

These three systems of socialism are a main cause of the American bankruptcy. They are absolutely unsustainable. A consistent application of the principle of liberty must take aim at these programs, across the board, with no exceptions. . . .

the current revolutionary atmosphere in political life will be subverted by the political machinery of Washington. The radical sentiments you heard during the primaries are already being changed to please the establishment. . . .

If this next round follows suit, the Republican elite will benefit from the energy and enthusiasm of naive activists but will trim and curb the antigovernment agenda in the interest of “responsible governing.” The most we can hope for is a wonderful gridlock.

But the next question becomes, What exactly are we waiting for, and how do we bring it about?

. . . . In this fight, I believe we are working with the most powerful tool of all, one that is stronger and more effective than all the armies, guns, and drones in the world. In the end, no government can rule without at least the passive consent of the people. This is why government works so hard at the manufacturing of ideologies to justify what it is doing to us. Our job is to counter this with education of a different sort, one that debunks the rationales behind despotism and then explains the meaning of liberty.close quote

Conversing with Critics

Well, the Mises Institute has done it to me again. I was so taken by Jeffrey Tucker’s recent lecture, “How Government is Unraveling Civilization by Force,” that I posted it on a social news site, calling attention to what I considered the lecture’s most provocative moment: Tucker’s quoting of Lew Rockwell: “It’s as if the socialists discovered that their plan creates poverty, so they decided to change their name to environmentalists to make poverty the goal.” Aside of its provocative tone, the quote summarized the lecture rather well.

Sometime I think I engage in online economic and political debates because they sharpen my rhetorical skills and to force myself to re-examine and re-explore my libertarianism. Other times, I think I’m driven by a masochistic determination similar to the impulse which led me to sport of distance running as a teenager.

I immediately found myself in another long, long, frustrating debate about the Austrian school with a anonymous user who at least seemed earnest in his belief.

I’ve always admired the willingness of the Austrian School, and that of its great ambassador, Ron Paul, to address the best of the opposition. The willingness stands in stark contrast to the usual public debate, in which each side acknowledges only the most ridiculous, desperate, disreputable members of its opposition as if they represented the whole. The public debate consists of little more than building and burning straw-men.

I want to share the debate which ensued not to burn my own straw-man, though I admit, it occasionally lapsed into absurdity, but to demonstrate how statist ideology fails to live up even to the standards by which it judges and condemns the Austrian School.

One of the most challenging steps in my eventual acceptance of the Austrian School, was realizing the supremacy of theory over empiricism. I do not blame anyone for initially recoiling at the suggestion that economics defies empiricism, or, at least, defies an empiricism comparable to that of the hard sciences. I did.

When asked to live up to their own empirical standards, it becomes evident that statism begins with axiomatic acceptance of state power and free-market fallibility, and relegates the empiricism and math they so readily demand of the Austrian School to a role no more important than that of parsley on a steak. It is a garnish; little more than counting. They count taxes, budgets, unemployment checks, paper dollars, volumes of concrete, cheese, meat, corn, cosmonauts, tanks. They attempt to understand human society in all its complexity but their only tool is a tape measure.

Here’s the debate:

HIM:

That statement is so far removed from reality it’s disturbing to know that people consciously make this their world view in order to support an equally delusional ideology that actually creates poverty in the real world.

> Austrian economics was ill-thought of by most economists after World War II because it rejected mathematical and statistical methods in the area of economics.[27] Its reputation rose somewhat in the late 20th century with the work of Israel Kirzner and Ludwig Lachmann, as well as a renewed interest in Hayek after he won the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel (a.k.a. the Nobel Prize in Economics).[28] Following Hayek, one of Ludwig von Mises’s students, Murray Rothbard, became prominent in both Austrian applied theory and Libertarian philosophical thought.[29] However, it remains a distinctly minority position, even in such areas as capital value.

It’s interesting to know that the Austrian School of Economics has basically been unable to show that any of their principals actually hold up in the real world. The whole sub field of economics basically only works as a thought experiment.

ME:

For the sake of argument:

> It’s interesting to know that the Austrian School of Economics has basically been unable to show that any of their principals actually hold up in the real world.

Keynesian Economics vs. Austrian Economics

Applying Economics to American History

HIM:

Applying theory after the fact is something any idiot can do. There is no mathematical or scientific basis to anything Austrian School economists claim. It’s like Voodoo Economics, it’s all faith based.

ME:

Well, the first of the two videos I posted show Peter Schiff, a follower of the Austrian School predicting the crash of the housing market at a time when Bernanke, the Fed, and all the Media’s talking heads were saying it was impossible. Watch the video and you’ll see him ridiculed for making his prediction.

Other examples:

– In his book Socialism (1920), Ludwig Von Mises not only predicted the collapse of the Soviet Union, but said the country would be full of factories which produced almost no ready consumer good.

– Congressman Ron Paul, Austrian School follower, July 16, 2002:

> by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges of Fannie, Freddie, and HLBB have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions.

– When the world entered the all-paper money regime, most economists said than the price of gold would fall from $35. The Austrians predicted the opposite.

– The Austrians were right about the 1970s stagflation and the explosion in the price of gold after the gold window was closed.

Your move. :)

HIM:

There is nothing more than theory to any of that. That’s the entire point and you’re actively trying to ignore and obfuscate that point.

Show me where there are any mathematical or scientific examples that support those things happening in real world situations.

There are none, the Austrian School of Economics has never worked as anything other than a theory.

ME:

A valid concern. This point deserves more attention that we can give it here. Nevertheless:

I believe economics, the study of human action, defies mathematical or “scientific” modeling because of its complexity. In fact, mathematical modeling seems to always cherry pick whichever data provides the best propaganda — like the Soviet Union claiming a high GDP as evidenced by the fact that it produced vast quantities of concrete. Never mind the fact that citizens (subjects?) didn’t want more concrete. They wanted food, jeans, cosmetics, condoms, etc.

From F.A. Hayek’s Nobel acceptance speech:

> It seems to me that this failure of the economists to guide policy more successfully is closely connected with their propensity to imitate as closely as possible the procedures of the brilliantly successful physical sciences an attempt which in our field may lead to outright error. It is an approach which has come to be described as the ?cientisticattitude an attitude which, as I defined it some thirty years ago, ?s decidedly unscientific in the true sense of the word, since it involves a mechanical and uncritical application of habits of thought to fields different from those in which they have been formed.. . . . Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones.

edit: PS — how can you read Ron Paul’s 2002 statement about a housing bubble, or watch that Peter Schiff video where he gets ridiculed for predicting the housing crash, and not respect the forecasting power of Austrian Economics?

HIM:

That’s not a valid excuse for explaining why their models don’t work when in real world situations. If human behavior was too difficult to predict then how is it that they have developed an economic model that predicts how a free market would operate?

It’s not too difficult, they just got it wrong, that’s why the Austrian School of Economics is a relic from over a century ago.

ME:

Human behavior is not too difficult to predict and model with theory — artificially low interest rates create business cycles, minimum wages cause unemployment, government subsidies of loans cause irresponsible lending.

Human behavior too difficult to predict and model with math.

HIM:

BS, absolute bs. The whole field of statistics exists to predict human behavior. Google is so good at predicting human behavior using their alogrithmns that they know what you’re thinking.

Austrian Economists deny this because their philosophy of economics does not stand up to any real scrutiny.

http://www.huppi.com/kangaroo/L-ausmain.htm

> Summary
>
> The Austrian School of Economics is a tiny group of libertarians at war with mainstream economics. They reject even the scientific method that mainstream economists use, preferring to use instead a pre-scientific approach that shuns real-world data and is based purely on logical assumptions. But this is the very method that thousands of religions use when they argue their opposing beliefs, and the fact that the world has thousands of religions proves the fallibility of this approach. Academia has generally ignored the Austrian School, and the only reason it continues to exist is because it is financed by wealthy business donors on the far right. The movement does not exist on its own scholarly merits.

A pre-scientific approach? Please. Austrian Economics was destroyed a long time ago.

ME:

I’ve offered many examples of Austrians accurately forecasting economic events.

Can you offer examples of where the number crunchers have done similar things?

Can you offer examples of economic theories arrived at by your “scientific” approach from whichever school of economic thought you believe has the best approach?

Also, if you’re in the mood, why didn’t all those number crunchers see the housing bubble collapse coming?

> http://www.huppi.com/kangaroo/L-ausmain.htm

They quote Paul Samuelson, the mathematician/economist, who, as late as 1989, claimed the Soviet economy was poised to overtake ours, and that it served as proof that command economies can thrive.

> Mainstream economists believe in fiat money; Austrians believe in the gold standard.

> Mainstream economists assert that the mystery of the business cycle is deep and poorly understood; Austrians claim the government causes it.

I would say these two points are accurate.

Perhaps I’d be better off agreeing to disagree, but I think the case for business cycles caused by artificially low interest rates is closed. I think it’s supported both deductive and empirically.

Likewise, the case for commodity money (money that can’t be printed) is huge. I’m surprised anyone out there is even attempting to defend fiat money.

HIM:

But, you just said that people actions are impossible to predict, are they or aren’t they?

Why won’t proponents of Austrian economics test their theories like everyone else?

Why does Austrian economics fail to stand up when tested like other ideas about economics are able to?

Why? Because it’s a failed theory that real economists gave up on over 100 years ago. It’s a rich mans philosophy that’s sold to plebes to keep their hopes alive.

It’s voodoo economics, it’s faith based optimism, it’s religion disguised as economics, nothing more than worshiping the false god of the market.

ME:

> But, you just said that people actions are impossible to predict, are they or aren’t they?

No I didn’t. I said human behavior is too complex for physics-like mathematical models. Reread my comments.

I offered you many examples of accurate forecasts of important events made by Austrian School economists when all “mainstream” economists were predicting the opposite.

Do you have any examples of the triumphs of mathematical modeling in economics?

HIM:

Yes you did, you said human behavior is impossible to predict and then you claimed Austrian Economists had predicted human behavior plenty of times. Take your hocus pocus fruity economic theories and find someone dumb enough to buy them because no one with half a brain has given a fuck about Austrian economics in over 100 years. Except suckers.

ME:

Just re-read this whole thread. Nope, I didn’t. I said it’s impossible to model with math.

Perhaps we should agree to disagree about Austrian Economics.

Can you make the case for mathematical modeling in economics? Perhaps cite some instances where mathematical economics predicted significant events?

HIM:

That’s why Austrian economics is a myth, it’s been placed on the scrap heap of failed economic thought.

Peoples behavior can be quite reliably predicted using mathematical models, all modern theories are tested that way to insure that they work. The only people who claim that mathematical and scientific models don’t work are Austrian economists because those models show that Austrian economics don’t work.

Do you know what they call theories that don’t work? Failures, that’s when you pick yourself up and make new observations and come up with new theories that actually represent what happens in the real world.

That’s what most people do anyway. If you’re an Austrian School Economist you hold onto a dead theory for 100 years after it was tossed on the scrap heap of failed economic theories.

The Austrian School of Economics is worthless.

ME:

Can you name some non-Austrian economic theories that work?

Can you name some successes of your approach to economics, or successes of economists who believe in your approach?

HIM:

There are currently only two basic schools of economics, supply side and demand side. Economics alternates between serving the needs of one before switching back to serving the needs of the other. These two elements are constantly in and out of balance. Take away all of the names and different schools of thought and that is all economics ever tries to achieve.

The Austrian School is really just old school supply side economics.

All currently used economic models have been tested in the real world economy and all share similar elements. Regardless of that, it always comes down to an argument over who to favor in order to create a successful economy.

The wealthy claim that they make the economy run and rewarding them with more money means that they can create an even greater economy.

Everyone else, when they’ve really examined how money flows, tends to see that demand creates a healthy economy. So they favor a system that doesn’t punish effort but ensures that there is enough consideration for the demand side of the equation to keep things working.

ME:

Okay, you still haven’t cited any successful predictions, or articulated any theories, but thanks for the explanation. Serious questions here:

> The wealthy claim that they make the economy run and rewarding them with more money means that they can create an even greater economy.

Who does the rewarding?

> they [everyone else] favor a system that doesn’t punish effort but ensures that there is enough consideration for the demand side of the equation to keep things working.

What sort of system gives “consideration for the demand side”?

Also, if you think of any successful predictions of significant economic events made by non-Austrians please let me know. Or let me know of any theories.

HIM:

Those who continue to work and support their empires while accepting less and less for more productivity every year. Ultimately this leads to demoralized workers who rightly demand their contribution to the success of the overall system be recognized.

You have a very limited idea of who should be rewarded for a successful nation.

I’m apparently not answering your questions in a way that you can understand I’m answering them.

ME:

1) Nothing you’ve said rests upon a foundation of mathematical proof similar to what you’ve demanded of Austrian Economics.

2) I cited examples of when Austrian economists accurately forecasted major economic events (despite mass denial and ridicule). Can you cite examples of non-Austrian economists accurately forecasting major economic events?

3) All your theories (none of which seem to involve any math or empirical study), presuppose a very powerful, very benevolent force which presides over an economy, selecting winners, and upholding “justice”. For example:

> it always comes down to an argument over who to favor in order to create a successful economy.

> The wealthy claim that they make the economy run and rewarding them with more money means that they can create an even greater economy.

> favor a system that doesn’t punish effort but ensures that there is enough consideration for the demand side of the equation to keep things working.

> workers who rightly demand their contribution to the success of the overall system be recognized.

> You have a very limited idea of who should be rewarded for a successful nation.

I’m interested to hear you elaborate on who does the “rewarding,” “favoring” and “ensuring,” how they do it, and what would happen if they didn’t.

HIM:

Dude, you just don’t get it. That’s life.

ME:

Obviously not. Thanks for the dialogue.

Positivism and Behaviorism

A Mises daily article excerpted from Ludwig Von Mises’ Theory and History:

open quoteThe marvelous achievements of the experimental natural sciences prompted the emergence of a materialistic metaphysical doctrine, positivism. Positivism flatly denies that any field of inquiry is open for teleological research. The experimental methods of the natural sciences are the only appropriate methods for any kind of investigation. They alone are scientific, while the traditional methods of the sciences of human action are metaphysical, that is, in the terminology of positivism, superstitious and spurious. Positivism teaches that the task of science is exclusively the description and interpretation of sensory experience. It rejects the introspection of psychology as well as all historical disciplines. It is especially fanatical in its condemnation of economics.

Auguste Comte, by no means the founder of positivism but merely the inventor of its name, suggested as a substitute for the traditional methods of dealing with human action a new branch of science, sociology. Sociology should be social physics, shaped according to the epistemological pattern of Newtonian mechanics.

. . . .

The two main varieties of the neopositivistic assault on economics are panphysicalism and behaviorism. Both claim to substitute a purely causal treatment of human action for the — as they declare unscientific — teleological treatment.

Panphysicalism teaches that the procedures of physics are the only scientific method of all branches of science. It denies that any essential differences exist between the natural sciences and the sciences of human action. This denial lies behind the panphysicalists’ slogan “unified science.” Sense experience, which conveys to man his information about physical events, provides him also with all information about the behavior of his fellow men.

Study of the way his fellows react to various stimuli does not differ essentially from study of the way other objects react. The language of physics is the universal language of all branches of knowledge, without exception. What cannot be rendered in the language of physics is metaphysical nonsense. It is arrogant pretension in man to believe that his role in the universe is different from that of other objects. In the eyes of the scientist all things are equal. All talk about consciousness, volition, and aiming at ends is empty. Man is just one of the elements in the universe. The applied science of social physics, social engineering, can deal with man in the same way technology deals with copper and hydrogen.

. . . .

It is difficult to conceive how one could deal with the activities of an engineer without realizing that he chooses between various possible lines of conduct and is intent upon attaining definite ends. Why does he build a bridge rather than a ferry? Why does he build one bridge with a capacity of ten tons and another with a capacity of twenty tons? Why is he intent upon constructing bridges that do not collapse? Or is it only an accident that most bridges do not collapse?

If one eliminates from the treatment of human action the notion of conscious aiming at definite ends, one must replace it by the — really metaphysical — idea that some superhuman agency leads men, independently of their will, toward a predestined goal: that what put the bridge-builder into motion was the preordained plan of Geist or the material productive forces which mortal men are forced to execute.

To say that man reacts to stimuli and adjusts himself to the conditions of his environment does not provide a satisfactory answer. To the stimulus offered by the English Channel some people have reacted by staying at home; others have crossed it in rowboats, sailing ships, steamers, or, in modern times simply by swimming. Some fly over it in planes; others design schemes for tunneling under it. It is vain to ascribe the differences in reaction to differences in attendant circumstances such as the state of technological knowledge and the supply of labor and capital goods. These other conditions too are of human origin and can only be explained by resorting to teleological methods.

The approach of behaviorism is in some respects different from that of panphysicalism, but it resembles the latter in its hopeless attempt to deal with human action without reference to consciousness and aiming at ends. It bases its reasoning on the slogan “adjustment.” Like any other being, man adjusts himself to the conditions of his environment. But behaviorism fails to explain why different people adjust themselves to the same conditions in different ways. Why do some people flee violent aggression while others resist it? Why did the peoples of Western Europe adjust themselves to the scarcity of all things on which human well-being depends in a way entirely different from that of the Orientals?

Behaviorism proposes to study human behavior according to the methods developed by animal and infant psychology. It seeks to investigate reflexes and instincts, automatisms and unconscious reactions. But it has told us nothing about the reflexes that have built cathedrals, railroads, and fortresses, the instincts that have produced philosophies, poems, and legal systems, the automatisms that have resulted in the growth and decline of empires, the unconscious reactions that are splitting atoms. Behaviorism wants to observe human behavior from without and to deal with it merely as reaction to a definite situation. It punctiliously avoids any reference to meaning and purpose.
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