Thomas E Woods – whom I mentioned the other day – hits back most satisfyingly at Matthew Yglesias. The latter had some sniffy thoughts about Mr Woods’ recent book on the financial crisis. For the sin of looking at the crisis through the perspective of Austrian economics, with its specific way of looking at the economic cycle and the role of banking, Mr Woods incurs a certain amount of sneering from Mr Yglesias.
Mr Woods gets the distinct impression that Yglesias has not read his book. I have no idea whether he has or not; but there does seem to be a recent pattern of leftists trashing the likes of FA Hayek, or whomever, in a way that suggests that they haven’t the faintest idea of what or who they are talking about. You can just picture the thought process that goes through Mr Yglesias’s mind: “Ah, these central Europeans with their funny names and their think tanks – who are they to question the great Keynes and his sensible ideas on demand management”.
But I detect a sign that perhaps, just perhaps, the Yglesiases of this world are losing some of their Olympian self-confidence. At a City event the other night, listening to people talking about the economy, I did not get the impression from all the associated financial types that the idea of using the printing press to cure problems caused by underpriced credit was regarded as very brilliant. In fact quite a few folk are mentioning inflation as the issue that could hit Real Soon Now.
Thomas E. Woods is great value. Check out his website.
Let’s not loose sight of the fact that Austrian Economics
is not subject to falsification; that is:- it’s twaddle.
Let’s not loose sight of the fact that Austrian Economics is not subject to falsification; that is:- it’s twaddle.
And there was me thinking that logical positivism had gone out of fashion! Here’s a question – is “2+2=4” ‘twaddle?’ Is it subject to falsification?
No it’s not.
How can you connect your statement in a axiom system with the observable universe?
FFS! Accusing me of positivism!
That is (for the hard of thinking) your statement about symbols may be well formed or perhaps even “true” within some axiom system. But in what sense are you making a useful or meaningful statement about reality?
More specifically, in what sense is Von Mises making statements about reality? Can these statements be subject to any form of test? Can they be shown to be false by observable facts?
I’ve been somewhat amused by the return of Keynes in recent years. I’m not an economist, but I thought he had very much fallen from favor for decades, almost to the point of being considered discredited.
Isn’t the return of Keynes mostly due to the cover he gives politicians who want to spend their way into office with borrowed money?
Keynes is indeed discredited. He was rebutted almost line by line by Hazzlit almost at once. As a man he was ripped a new one by Rothbard. In practice his “theories” lead to disaster.
But, as you say – and say well – it’s a message politicians love to here.
“it is not subject to falsification, therefore it is twaddle” (or words to that effect).
Sorry but that is Positivism – and it is not what Karl Popper (a nonpositivist) held.
“something is either science or nonsense” (twaddle) is the Positivist point of view.
Popper denounced that – instead holding that something is either “science or nonscience”.
Of course many people would argue with Popper’s definition of science (which assumed that the methods of the physical sciences were the only scientific ones) but Popper never held that “nonscientific” logical truth was either “nonsense” or unimportant.
On the contrary Popper accepted that (nonempirical nonfalsifable) principles of reasoning were basic to both understanding and living in the physical universe.
For example, “A is A” (the law of idenity) may seem like “just a tautology”, but human beings who ignore such principles have a nasty time.
There is the empirical bit – not in “proving” Austrian economics, but in observing the consequences of ignoring the principles of reasoning on which it is based.
So if economics is a science (which depends on one’s definition of “science” for it is NOT a science in the sense that physics is) it is not a matter of “science is measuement” or “science is predicition” – but it CAN be predicted that ignoring the truths of Austrian School economics will have bad effects.
For example, the boom-bust cycle.
One can not really predict the day of the bust – but Austrian School people do (and did) predict that a credit money expansion boom must end in a bust – see the articles written on this at the Ludwig Von Mises Institute over the last few years (both on the general credit-money expansion and the specific perversions of the present credit money bubble by government influenced Fannie Mae and so on).
Whereas to the “science is prediction” people, such busts always come as a surprise.
The failure of the “empirical” people to predict things correctly should lead to them not being considered “empirical” (at least when they refuse to change their theories and, in fact, demand yet MORE credit money expansion on hair-of-the-dog grounds), but for some reason they get away with still calling themselves empirical.
This is an odd thing – Austrians (who do predict what will happen) are denounced as sellers of “twaddle”, but the “mainstream” economists (who do not predict things correctly and refuse to accept that physical reality refutes their doctrines) are still called empirical “scientists” and are given Nobel Prices.
Still if one can ignore logical reasoning in economics (as not part of the “scientific method” of experiment and measuement), why not ignore the principles of reason in everything?
That would explain why creatures like Stickinsect and Krugman (whose “conflicts” divert attention from the fact than neither man understands even the first principles of economics) are given Nobel Prices.
Turning to political matters.
It is not just the “mainstream” economists who tell politicians what they want to hear, it is also many “journalists”.
For example, the ironincally named “Lexington” writer of the “Economist” magazine, shows this.
Led by President Bush the Republicans rejected principle and went for wild Welfare State spending and Corporate Welfare (such as the obscene bailouts of the banks and other corporations) so their support has collapsed.
But “Lexington” still does not get it (or rather he pretends not to). Yet again he calls upon Republicans to reject principle (which he calls “ideology”) and to concentrate on “competance”.
Just like the first “M.B.A. President” George Walker Bush with his “compassionate conservativism” rejecting “anti big government ideology”.
After eight years of this wild statism for “Lexington” to call for more of the same would be bad enough – but for him to pretend that Bush and co were somehow “ideological” and the Republicans need to move even further to the left (rejecting any connection with principle whatever) is a despicable lie from a despicable magazine.
People like “Lexington” are not honest opponents – they are lying filth, and should be treated accordingly.
And, of course, any call for the vast bloated unconstitutional mess that is the Federal government to be “competant” ignores reality.
Neither the principles of reasoning nor empirical evidence suggest that such a government can be “competant” and “solve peoples problems” – so the calls for such a government are (at the very best) fundemental errors of judement. And claiming that Republicans have rejected big government under Bush and now should “change” to accept such “competant” “problem solveing” government now, is blatent dishonesty.
DavidNcl, if the word “twaddle” applies, then, as Paul Marks has explained in this thread, it applies to your claim that Austrian economics is unfalsifiable. Rubbish. Its notion of the role of the business cycle, for instance, could be tested. Just because an idea cannot be tested by say, mathematics, does not mean it cannot be evaluated for whether it gives an accurate or useful read of how the world actually works. Take such ideas as the law of comparative advantage, the division of labour, marginal utility, economies of scale, transaction costs and the theory of the firm, etc, etc. Some of these ideas can be explained by reference to mathematical models, some by simple logic. That does not mean they are unfalsifiable.
The statement “All which cannot be falsified is twaddle” cannot be falsified.
Therefore, the statement “All which cannot be falsified is twaddle” is, by it’s own definition, twaddle.
The point is, if you can’t prove it, while it may or may not be twaddle (I don’t agree with DavidNcl on that), it is useless. I raised this point a while back here- that there must be a means to demonstrate that various systems (e.g. social, economic) belong to particular classes of systems, and thus prove that they have certain properties which exclude certain analyses as wrong. I.e. you get closer to a proof.
Nobody agreed with me, NickM unleashed Lyapunov exponents, and I was left somewhat disheartened. As an example, we cannot long term predict any chaotic system. We can however show that certain systems are in the class of chaotic systems i.e. that their trajectories diverge in a phase space. This tells us useful things about the system. It tells us, for instance, that it cannot be modelled with linear equations. That excludes certain analyses of the system- e.g. those based on modelling it with linear equations. Math has told us something useful about the extent of our knowledge, even if it can’t furnish us with precise answers.
Libertarians and socialists make certain assertions about economic and social systems. Fundamentally, libertarians assert that in these systems the feedbacks are negative; the systems tend to stablise if unperturbed. Socialists are effectively arguing that the feedbacks are positive- the system, left alone, will go into runaway or oscillation, and thus outside control is necessary. A further libertarian argument is that the socialists are inside the system, so there is no outside control to be had; and thus themselves induce positive feedbacks.
And so on.
I find myself as an uneducated grockle amazed that nobody on either side seems to want to actually get to the root of the debate by some kind of systems analysis (and this is only one approach). Everyone seems far far happier firing off wordy, and, effectively, useless rhetoric at one another. Maybe if you’re a professor of economics, that is more lucrative than actually solving the problem. But everyone here basically said, “no no Ian, you can’t prove anything, you have to win the argument by your superior rhetoric”. And that’s bollocks, because you can’t win the argument. We already know that the other side have the better sounding, more appealing, argument.
If it really does come down to who sounds best, economics is worthless. If there is no means to actually prove, or to actually disprove one analysis (e.g. Keynesian) then, indeed, it is all twaddle. It comes down to rival belief systems, not math or economics. It’s a waste of time.
Math should be able, at least, to exclude some economic assumptions. So far as I can tell, nobody is actually interested in trying.
Ian B, I have several initial reactions to your comment. First, could you provide a link back to the previous thread to which you referenced? I might have read it but don’t remember, and would like to have another go at it. Second, I like your analogy to “negative feedback’ versus “positive feedback” systems; it does seem to be a useful shorthand description for the two different approaches to the issue. I shall have to ponder it some more. Finally, have you a suggestion as to how to approach the “systems analysis” or some other approach to get at “the root of the problem”?
(Oh, and what is a “grockle”?)
Laird, I’ve no idea what thread that was in, nor how to find it. Sorry. But if anyone knows how to find any Samizdata thread with “lyapunov” in it, please feel free. There can’t be many…
As I said, it seems to me there has to be some fundamental way to get to the bottom of the debate. Otherwise we’re all, Austrians or Chigaoans(?) or Keynesians, just arguing belief positions. That’s useless. Economics, if not social dynamics, ought to be a tractable problem.
I have no training in this, and very little brain. I would hope somebody with more knowledge and expertise ought to be able to have a go. But it seems to me that for all the billions of words typed regarding, and complex predictions and extrapolations made by, the various economic “schools” must reduce to a very few axioms which each school presumes to be true. It is these axioms that need to be addressed.
I’m not claiming to have much in the way of answers here. When I brought it up before, I was hoping for a discussion as to how analysts might proceed in such an endeavour, and was instead honestly surprised by the reaction that basically you can’t use such an approach.
But standard economic methodology, reasoning and argument, has got us nowhere. After more than a century of this fierce debate, it is still open for, basically, anyone to believe what they wish. If this were physics, we’d still be arguing about whether a body with no forces acting upon it will move at a constant velocity or coast to a stop. If this were biology, we’d still be arguing about whether stew spoils due to spontaneous generation or microbes. There must be a way to get “underneath” the problem. Surely?
Ian, maybe it’s just me, but to me it is obvious that there is no way to do that. The reason is simple: a body with no forces acting upon it is just that. There is no such thing as a live and awake human with no forces acting upon it. So yes, it is all down to faith. That’s why I am telling my teenager to not waste his time on studying economics, (and that’s why he’ll probably end up studying it). Am I missing something?
“If you can not prove it, it is useless”.
I seem to be spending a lot of my time hitting Ian B. these days – which is bad of me as he is a fellow libertarian who I agree with 99% of the time.
However, this will not do.
A is A – the prove is there at once (law of idenity).
The idea that all things must be like physics (testing by experiment) is just flat wrong – many very important things indeed are true by logical reasoning (not by experiment).
Nor are they “useless” – try and operate in the physical univese on the basis that logical truths (call them axioms call them “useless tautologies” call them what you like) are not important.
You will die rather quickly.
Surely that is empirical enough?
It may not be a test in the tradition of the methods of physics – but it is empirical (as well as logical a priori).
Austrian economics can not tell you on what day a bust will happen (Mises was asked this in the 1920’s and stated that he could not) – but that is only “useless” if you are a day trader concerned with only short term fluctuations of the market.
Knowing that there is a credit money bubble and that it will bust is rather “useful”.
Glenn Beck (an entertainer) had lots of people on his show predicting (before it happened hence “prediction”) the rise in the stock market of the last few moths – and they explained the phony basis of it, and that it would not mean a long term recovery in the economy.
How empirical do we have to be?
Do we have to give exact days or percentages?
Things that it is not possible to reliably predict?
“If you can not then you are not scientists”.
Fine, then “science” is “twaddle” – for such things can not be done in human affairs.
Human beings are just that (beings – agents) – they are rather more than water, carbon and some trace stuff.
Each bust is different due to the interactions of human beings.
But general principles (based on logical reasoning) are valid.
My own comment is being held up – but “anyone can believe what they wish” is nonsense.
Logical proof is not less certain than experimental proof – it is more certain.
As for human beings – the fact of our existance is self evident (litterally) and from the existance of the “I” (for thoughts DO mean a thinker – contrary to clever-clever acacemic philosphers) various other things follow.
And, unless we assume the physical universe is an illusion, (and why should we assume that, surely the burden of proof should be on the person who claims the evidence of our senses is an illusion not the person who does not so claim) then each person must take account of it.
“Acting man” (to use Mises’ term) is both a reasoning mind and a reasoning mind operating in a real world of which he must take account if his plans are to have any chance of success.
For example, acting on the basis of “that is a wall, but it is also not a wall” is a contradiction (just as with Plato’s double-think “we will assume, for the purposes of navigation, some bodies in the sky move – but we also hold and teach that they do not move” is a contradition).
The (unofficial) doctrine that “there is no God and his name is Obama” (most recently seen in the introductory speech by Rev Jenkins at Southbend) is also a contradiction – as if there “is no God” Obama can not be God.
Therefore the standard “modern” theological position of holding that there is no being called God (“God” is just a word we use to mean being nice to each other in society – or whatever) whilst, at the same time, worshipping an individual being (in this case Barack Obama) as God, is clearly a mistaken position.
Turning away from philosophical questions and from the weird sight of people worshipping a rather evil man (Barack Obama) as if were a divine being – whilst, at the same time, holding that no divine being (as a reasoning being – an indiviudal) exists (and the even odder fact that manyof these people are theologians). I will go back to “Economist” bashing.
This may be something I do a lot – but at least it is a morrally correct.
I feel uncomfortable attacking Ian B. – a decent and intelligent man. But I have no moral problem in sticking the boot into the Economist writers – as they are bunch of scumbags.
Talking about Austrian economics without talking about the opposition to credit-money expansion (as they people J.P. points at do) is very much “Hamlet without the ghost” stuff.
Leaving important things out is as bad as telling direct lies.
This is why one swears to tell the truth and the “whole truth” in court – not to state every nonrelevant detail of one’s knowledge, but not to cover up vital information either.
A recent Economist article shows what I am talking about – it was on the budget mess in California.
The two basic facts of the Californian buget mess are that California has one of the highest (if not the highest) levels of government spending in the United States. And that California has one of the highest levels of taxation in the United States.
The article mentioned neither one of these facts – therefore, its implied position that things could be solved by yet more tax increases (put into effect by removing the veto of both a one third minority in the State Legislature and removing the say of the people via direct vote) was utterly worthless.
The basic fact of the case (the explosion of government spending in California over many years) was left out.
It would be like conducting a murder trial with the “victim” in fact alive and laughing at the accused (the taxpayers) from behind a curtain.
This is the nature of Economist talk about the threat of evil “excruciating cuts in public services” in California. The pro tax increase, anti government spending cut bias is obvious.
I think that Ian B. would agree that the threat of what Dr Gabb calls the “Quisling right” (i.e. people who pretend to be free market, but who always side with the statists when things get serious) is a major one.
Of course the vote by the people of California (by more than two to one) to refust to accept higher taxes (with a lot of bells and whistles to hide the fact that the propositions were about keeping higher taxes) will be noted by the Economist “newspaper” people.
Mentally noted as evidence for how the budget system of California had to be changed – to remove the power of the people to reject such higher taxes.
In truth the Economist folk are no more supporters of democracy than they are supporters of the free market.
They use word like “democracy” and the “free market” to cover their support for an ever bigger government (both in the Welfare State and in the crushing of civil liberties via such things as “gun control”) – a government controlled by an “educated” elite.
It is the dishonesty of the Economist magazing people (as well as their statism) that leads me to hate them.
Bugger Democracy, unrestrained Democracy always ends up getting us into the sorts of mess the World is presently in. Once the citizens find out (speedily find out) that they can vote themselves all sorts of expensive treats, and politicians discover they can get very wealthy with permanent political careers, by promising citizens the benefits of other people’s property and money, then look out! It’s just Socialism (a mislabel for it), doomed to fail when it runs out of other people’s money to spend, and in the process, it will strip the citizens bare in its attempt to give the citizens what it promises.
Nothing with an ISM in it is Government or even relevant – it’s just ‘Vested Interest’ and Government needs to be above all that sort of nonsense.
That said, Democracy has its place. It’s place is as an enhancement and a counter to the OTHER two forms of Government, that are also a disaster if unrestrained, which are Aristocracy, and Dictatorship (Monarchy).
Which is why we will have to go back to Constitutional Republics (including Britain – we are a Republic, a Constitutional Monarchy Republic).
Science has its place, and I’m a fan of science. I am not a fan of ‘junk’ or ‘pseudo’ science though, and that sad brand of science that will say exactly what its political masters pay it to say, has far too much sway in the World right now.
Remember this though, Science cannot prove the existence of love, or measure it. Often, Science confuses love with sex, or with hormones or somesuch.
Yet strangely, Science without love, usually ends up with junk science, pseudo science, and the inhuman science of people like Dr Mengele.
I doubt such false scientists have ever been in love, so they lack the spark of say an Einstein.
Now there’s a man that knew love! What Science!
Now, tell me, what Economists treat their subject with love, and with respect and understanding for The Market, rather than Economists that do not know love, and who only have abuse and manipulation in mind for The Market? ‘Pseudo’ or ‘junk’ Economists, in other words.
Wheels turn, pendulums swing, tides ebb and flow, causes have effects, cycles do their ‘cycling’.
As long as the Rights to Life, the Rights to Liberty, and the Rights to Property, don’t get interfered with, then neither politicians, NOR ECONOMISTS, can do much damage. Can they.
If they do mess around with those things, then The Market will turn on them and kick them heartily in the gonads.
Usually sooner rather than later.
That’s my ‘Economic Theory’ anyway.
Bugger Democracy, unrestrained Democracy always ends up getting us into the sorts of mess the World is presently in. Once the citizens find out (speedily find out) that they can vote themselves all sorts of expensive treats, and politicians discover they can get very wealthy with permanent political careers, by promising citizens the benefits of other people’s property and money, then look out! It’s just Socialism (a mislabel for it), doomed to fail when it runs out of other people’s money to spend, and in the process, it will strip the citizens bare in its attempt to give the citizens what it promises.
Nothing with an ISM in it is Government or even relevant – it’s just ‘Vested Interest’ and Government needs to be above all that sort of nonsense.
That said, Democracy has its place. It’s place is as an enhancement and a counter to the OTHER two forms of Government, that are also a disaster if unrestrained, which are Aristocracy, and Dictatorship (Monarchy).
Which is why we will have to go back to Constitutional Republics (including Britain – we are a Republic, a Constitutional Monarchy Republic).
Science has its place, and I’m a fan of science. I am not a fan of ‘junk’ or ‘pseudo’ science though, and that sad brand of science that will say exactly what its political masters pay it to say, has far too much sway in the World right now.
Remember this though, Science cannot prove the existence of love, or measure it. Often, Science confuses love with sex, or with hormones or somesuch.
Yet strangely, Science without love, usually ends up with junk science, pseudo science, and the inhuman science of people like Dr Mengele.
I doubt such false scientists have ever been in love, so they lack the spark of say an Einstein.
Now there’s a man that knew love! What Science!
Now, tell me, what Economists treat their subject with love, and with respect and understanding for The Market, rather than Economists that do not know love, and who only have abuse and manipulation in mind for The Market? ‘Pseudo’ or ‘junk’ Economists, in other words.
Wheels turn, pendulums swing, tides ebb and flow, causes have effects, cycles do their ‘cycling’.
As long as the Rights to Life, the Rights to Liberty, and the Rights to Property, don’t get interfered with, then neither politicians, NOR ECONOMISTS, can do much damage. Can they.
If they do mess around with those things, then The Market will turn on them and kick them heartily in the gonads.
Usually sooner rather than later.
That’s my ‘Economic Theory’ anyway.
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