"Why is the Austrian school of Economics considered a pseudo-science?" question in /r/askscience brings out the Austrian apologists.
np.reddit.com/r/askscience/comments/1nqxxe/wh...
np.reddit.comPosted Oct 5, 2013, 9:32 PM UTC
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np.reddit.com19
That's brigading, right the fuck there. It's all well and good to say "Hey guys, come laugh at these idiots BUT DON'T GET INVOLVED wink wink", but saying "Can someone help answer this question from a school of thought that I oppose?" and "Damage control crew on the way" is pretty fucking damning evidence.
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The best part about it is that although he says "I'm not proficient enough to answer" he has still bought into the Austrian school hook, line, and sinker.
Whatever happened to the noble tradition of leaving things to the experts... oh ya, the internet.
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The best part about it is that although he says "I'm not proficient enough to answer" he has still bought into the Austrian school hook, line, and sinker.
It seems to me from what I've read, Austrian Schoolkids believe that in any area of Economics that NOBODY is proficient enough to answer.
That kinda seems like the entire premise of Austrian School Economics.
"Economic is complicated, so let's just just throw out the whole notion. Let's stop trying to figure out how it works - lest we upset it and make it angry and it smites us."
They take the same approach to Economics as some people take to religion.
"It would be wrong to try to analyze or judge the actions of God or to try to control it or usurp it's power. Divert your eyes from charts and graphs and cases where empirically Keynsianism has clearly worked - such things are an abomination to the irrational and fickle whims of the Money God free market economy."
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I mean, "experts" on Austrian economics claim that it literally cannot be tested.
Let that sink in.
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Damage control crew on the way.
They're not even trying to hide it any more.
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Because it was debunked in the '70s in a series of debates between Sraffa and Hayek? This debate occurred as the predominant economic paradigm shifted from Keynesianism to neoliberalism. As Austrian economics was proven inferior to the theory of Keynes there were (and are) still ongoing attempts to claim neoliberal economists, most notably Freidman, as being Austrians. These cultists will never concede.
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Yeah, the whole, "You can't use math because human activity is complex" thing really undercut them.
Fun fact: von Mises' brother (uh, also von Mises) was a pretty great scientist and statistician - good at math. Friedman also was a pretty hot shot - he has a rather useful non-parametric statistical test named after him.
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As an Australian, our financial success during the global recession was attributed to stimulus measures put in place by our government. So you can't really say Keynesian economics is that outdated....
Source: My arse, please correct me nicely :)
EDIT: Holy fucking shit, I have flair! My dreams have come true, thank you ELS mods!
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Anyway, serious digression: really, really guys, what is it with the libertarian obsession with Mises and Austrian economics? I ask because mainstream economics is very libertarian-friendly, but very Austrian-antagonistic (if they are even aware of them at all - they're so fringe I know academic economists of very good pedigrees who don't even know what Austrian economics is). So why not go for normal economic theory? Seriously, normal economists are very friendly to a lot of ideas libertarians like. Without having to deal with the fact that Austrian economics is a joke, particularly because they don't math.
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Austrian economics is a debunked theory which ignorant people tend to cling to because it provides an excuse for their awful beliefs and behavior. Under Austrian Business Cycle Theory the government is 100% responsible for the cycle of booms and busts because of the imposition of interest rates on the economy. This notion is laughable to anyone with the basics of formal economic study. Austrians fixate on total wealth of an economy but totally ignore the effects from the distribution of income. Another part of their belief system is that governments are not bound by the price signals of the "free marketplace" and so tend to produce inefficient results, while totally choosing to ignore the cases of externalities and public goods. All of this would be great if economic research and theory hadn't advanced far beyond the 1930s.
TL;DR: Austrians believe that government is the cause of literally every economic ill and desperately need to read some post-War economic literature.
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So, in other words, normal economics isn't edgy enough or rabidly anti-government enough for them?
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Yep. Some start with their anti-government bias and sought a fringe ideology to convince themselves that they are actually in the right. Others just feel the need to be contrary or adopt the trappings of intellectual superiority. Austrian economics is akin to phrenology or aether.
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imposition of interest rates on the economy
How does that ruin the economy in their theory?
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How does that ruin the economy in their theory?
Under the current monetary system an independent central bank aims to keep inflation within certain bounds (a very common value is 2 - 3%) by raising interest rates when inflation gets too high and lowering interest rates when inflation gets too low. Price stability is extremely important and helps the economy function because there is virtually no risk of short-term large fluctuations in the value of the dollar thus assisting both borrowers and lenders.
The Austrian Business Cycle Theory says that the singular correct interest rate is the one determined where all savers and borrowers come together and the prevailing interest rate equalizes the supply and demand for loanable funds. Their theory says that interest rates imposed on the economy by government intervention/central bank action will always differ from the "natural" rate which should be prevailing. At the layman level, if the central bank rate is less than the natural Austrian rate, this leads to a shift in the quantity and type of goods produced leading to an artificial boom in those sectors and eventually the economy busts to self-correct since the production of those sectors don't match actual consumer demand.
The biggest problem with ABCT is that there is no one ideal "natural rate" for the economy. Each type of good has it's own "natural" interest rate. Their spin on the theory is, unsurprisingly, untestable, and can be rejected right off the bat. Another problem is that it is quite easy to hedge against changes in interest rates, and proposing that massive multinational corporations with massive economic power and very, very smart financial types behind them are totally at the mercy of heartless central bankers arbitrarily adjusting rates is a bit of a stretch.
Suffice to say that the current system has been tinkered with for many decades and this is the best we have come up with in order to maximize economic welfare across an economy.
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Pretty good for a short summary.
The biggest problem with ABCT is that there is no one ideal "natural rate" for the economy. Each type of good has it's own "natural" interest rate.
That was Saffras criticism of Hayek, Hayek used a Wicksellian interest theory in Prices and Prod since he was writing to neo-classicals and Mises did in his formulation to save time. They both pointed out there is no homogeneous natural rate, unashamedly, but that doesn't do much to the theory. There are aggregate savings, and when they are increased by monetary expansion i.e. not by consumer saving it is going to look like more capital is available for long term production, when it's not.
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Oh, this is an easy one. I'd say that it is simply because modern economic theory claims that there are a series of trade-offs, and concedes that there may actually be a point where social programs and taxes are a net benefit.
This isn't good enough for the AnCap'ers on reddit. They will not concede anything.
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Yeah they don't like coherent logic very much
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Austrian economics believes that the FREE MARKET™ is too complicated for humans to understand. Therefore, any attempt at outside intervention (I.e., government action of any kind) leads to Malinvestment™ which is the root cause of recessions. The best part is that because Austrians eschew statistical analysis, they don't make real, testable econometric predictions. Austrians are always predicting that the economy will eventually enter a downturn, and of course they're always right because eventually it happens. Hence Austrians get to claim they 'predicted' the 2008 crisis, but they are always predicting a crisis, just never with enough specificity to actually have that prediction be testable.
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Yes, they predicted the 2008 crisis. They also predicted the 2007 crisis, the 2006 crisis, the 2005 crisis... I suppose, as a part of the "business cycle", once there is in fact a crisis, the predict the upswing if they're not too busy glad-handing each other about finally being "correct" about something.
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Actually after the crisis they've been predicting... more crisis.
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what is it with the libertarian obsession with Mises and Austrian economics?
Ron Paul said so.
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Oh my fucking god, u/PlayerDeus posted this link to a debate between David Friedman and Bob Murphy:
http://www.youtube.com/watch?v=l2RByG_vutE
Needless to say Murphy quotes Mises and Rothbard and gets his behind gift wrapped and delivered to him.
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Wow, this was not up to askscience standards. I reported a few top level posts (otherwise did not participate).
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Given that everyone posting in that thread is brigading from lolbertarian subs I'm going to step out on a (Pretty firm) limb and say that entire thread was astroturfed.
What? The OP, a user for two days who had no other posts, was actually an An-Cap sockpuppet? Unheard of!
I'd like to go point that out, but I try to respect the philosophy of not touching the poop.