Saturday, January 02, 2010


Peter Boettke and his colleagues at "The Austrian Economists" have announced a change of their blog name to "Coordination Problem" because "austrian economics" represents more than he wants.

The parallels between
The Austrian Economists -> Coordination Problem
Scientific Creationism -> Intelligent Design
are just too delicious.

Austrian economics and creationism both suffer from the same big problem. When you dismiss criticism from fellow economists or scientists in favor of authority and bad philosophy, you lose the ability to prevent other fools from larding up your system with numerous contradictory and stupid ideas.

Boettke is aware of this. He writes:
As an experiment, over the past six months we have been tracking the use of the term Austrian economics in the news and in the blogosphere. Less systematically, we have also been listening carefully to the use of the term among fellow professional economists and what they think the label means. The results do not fit our intention. Google alert, for example, inevitably points to financial advice or libertarian politics, rarely to the research paradigm of F. A. Hayek, never to the scholarship of Israel Kirzner. Mises is often mentioned, but Mises the ideological symbol, not Mises the analytical economist. The "Austrian" theory of the business cycle is mentioned, but only in relationship to anti-fed politics and hard money advocacy, and never as an ongoing research program among professional economists.

So the real question now is where is the "Coordination Problem" version of the Wedge strategy?

No discussion is permitted at the new web site. Bob Murphy provides a forum at Boettke Et Al. Engage in Product Differentiation for the sniping, back-stabbing, and other activities typical of authority-based factionalisms. (But to be honest, typical of academia and many other fields as well.) More sniping at Marginal Revolution: Peter Boettke's announcement.

At times like this, I really miss Steve Kangas. We would bust a gut laughing at this.

See also my Austrian Economics index.

[Disclosure: My father was Austrian (Viennese) by birth. He never had anything to do with Austrian economics.]

UPDATE: Ask and ye shall receive. Bob Murphy provides the Austrian Wedge strategy.


Mark Plus said...

I notice that a lot self-professed "Austrian economists" keep showing up in the media, even on business forums like CNBC, with their predictions of the hyper-inflationary collapse of the American economy, a disaster which never seems to materialize.

These Austrianists sound like doomsday cultists, yet because they live just inside the boundary of ruling class respectability (unlike, say Lyndon LaRouche), nobody in the media holds them accountable for their nonsense. At the same time the Austrianists have probably laughed at the expense of the global warming apocalyptists for their empirical embarrassments. Austrianists, like the global warming cultists, believe in a capital-A Apocalypse; but they want it to support their world view, damn it!, not those other guys' beliefs.

Anonymous said...

Mark - interesting blog. I would enjoy reading criticisms of Austrian economics.

However, the problem with this critique of Austrian economics and also your Austrian Economics page ( that neither yourself nor any of the authors of the papers listed have demonstrated a knowledge of what Austrian economics is. Furthermore, it is far from a monolithic entity. It characterizes a school of thought that rejected Keynes mathematical gibberish in favor of classical economics. One can find many diverse opinions among the likes of Hayek, Mises, Rothbard, and modern day economists Walter Block, Hoppe, etc.

Your criticism of Austrian economics seems to be that "mainstream economists think its crazy." The entire post is written in a snarky, aloof, dismissive tone, which would be fine if you demonstrated knowledge and could offer real critiques of the scholarship instead of flippant dismissals. Until you have actually put in some legwork and sat down with Man, Economy, and State, or Human Action, or even perused some articles on, I think a lot or people are going to have trouble taking you seriously. After all, how can someone defend an ideology from a criticism that doesn't make one substantive point or attempt to debunk or deconstruct one idea?

Michael said...

Are you meaning to be taken seriously? You're defending the school by making claims that those who argue against it haven't "demonstrated" any knowledge. Sounds suspiciouly like something written by a religios proselytizer.
When you're talking about a school which almost defines itself as "not-mainstream", it's hard to NOT take that as the definition. If you read their writings, and I have, you DO find them very often doing nothing more than sniping at the mainstream, and simply making assertions about other's motives.
The basic ideas of AE are just silly. Methodological Individualism, taken far too often to mean that statistics are useless in ALL cases or that large entities don't "really" exist, is both a plank of the ideology AND runs rampant through it.
AE rejects outright the scientific method. And it's practitioners often use their ideology's in-fighting to their advantage by claiming that when ANY Austrian economist makes an prediction (no matter how vague) which comes true to any degree, that somehow its "rightness" applies to the entire school. I've been told Peter Schiff is the ONLY person to correctly call the 2008 financial crisis. It's silly.
And, yes, I've read some Mises and Rothbard, and essays from the others. Almost entirely nothing more than "though experiment" silliness where they just invent definitions about "man" and other words, and then draw inferences from these invented definitions. In case you're interested, it's made clear here:
AE is largely the work of political hacks who want to be able to legitimize their political ideas by having an economics school built to serve those ends. Even Bryan Caplan (as libertarian a writer as there is) doesn't buy into their ideas.

TequilaKid said...

Although I generally dump on the Austrians, I feel compelled here to rise in their defense. Ludwig von Mises wrote persuasive critiques of price controls, of Marxist conceptions of socialism, the feasibility of central planning, etc., that in my opinion have stood the test of time. I don't know of other economists who have dealt with these issues. Consequently some of Mises early writings will remain forever classics of economic thought.

Hayek too, despite his blunders and often transparently ideological discourse, has made fundamental contributions to political theory. I like Hayek because I agree with Ayn Rand that Hayek is a paper tiger. As Hans-Herrmann Hoppe argues, Hayek is perfectly compatible with social democracy. He never declared war on the state like Mises.

That said, on the other hand I must stress that much of Mises’ thinking is dogmatic, shallow and thoroughly ignorable.

Mises’ refutation of socialism is a torso. He never produced any argument, as far as I know, to warrant his view that government intervention must incessantly be pernicious. He tries to pretend that his argument against price controls (which argument I find logical and fairly persuasive) can be extrapolated to all sorts of government measures, but never tells us how he reached that conclusion.

Joanna Liberation said...

Steve Kangas link you provided proved quite informative:

Austrian methodologies so cranky!
Everybody with a government job says so!

Scientific Method:
Humans are not born knowing that "two plus two equals four."
School has tought them, and when first schools were being founded, they simply made a vote, how much two plus two should be.

The fact that we have thousands of different religions in the world is remarkable evidence of the fallibility of this [Austrian] method.
Logic unpopular? Logic fallible! What a logic!

A good analogy is the study of gases.
Because gases are analogous with people, so we can use statistics in economics all right.

Methodological Subjectivism:
Accidents and natural disasters make for objective causes that eliminate subjective interactions.
Because we all suddenly stop acting on our subjective beliefs when there is a national epidemic.

Methodological Individualism:
Entrepreneur loses control on a company because he does not do everything himself...
Entrepreneur is not the driving force of the market process because there is more than one cooperating...

Methodological individualists claim that individuals seek to maximize their personal rewards.
Now Steve Kangas tells how exactly they should all do that if they aren't stupid (eee, subjective).
They should all become conscientious objectors and stop voting!
Thank you Steve Kangas, you've saved us all from subjective hell!

Starting assumptions:
Mainstream slowly "discovering" assymetric information, irrational human beings, constant change.
Let's wait 100 years and they may even finally have to (unwillingly, no doubt) get to absence of force Mises. Then 200 years to get to absence of force Rothbard?
No hurry, take your time.
In the meantime, for government agression analysis on top of free market, read Rotbard's Power and Market.
Government economists may never get as far.

The Market Process:
Both companies and governments provide goods and services in exchange for money.
Yeah, and a small difference with governments is, just you try not buying the services!
Companies and politicians that do not perform well go bankrupt or are voted out of office.
Yeah, that's why everyone is as happy with their government as with their favorite soda brand.

"Between 1870 and 1885 the price of refined kerosene dropped from 26 cents to 8 cents per gallon."
“at the very pinnacle of Standard’s industry ‘control,’ the costs and the prices for refined oil reached their lowest levels in the history of the petroleum industry"

The Gold Standard and Business Cycle:
The theory that the Fed's monetary expansion and easing of credit restrictions results in "malinvestment" is an unsupported claim.
Exactly, because ninja loans just make perfect mainstream economic sense ;)

History of the Austrian School:
Socialism means that workers own the means of production, not private individuals or an elite group.
Because workers are no longer private individuals...
As you can see, socialism is hardly synonymous with a central planning committee.
Except maybe in countries where a ruling socialist government exist?
Apologies, I meant, totalitarian government whose all members just happen to be ardent socialists.

The politics of the Austrian School:
One presumes the "extraordinary losses" evoked in the above quote refer to corporate profits.
Indeed, they are merely the only objective measure of economic efficiency, so why bother.