I don't like the term Austrian economic thinking as a name for a school of thought. It is more an attachment to the prestigiousness of the individuals involved in creating the school of thought rather than the understanding or the application of the thought its self. I would propose the name Philosophical Economics or possibly even Logical Economics. This is because they use a lot of logic and not a lot of actual observation and data analysis.
Mises is cool and all. I like the philosophical approach to economics, where you lay down foundations for what should happen by easy to follow assumptions based on proven laws of economics and basic logic to prove an expected outcome or theory. It allows you to move much faster through ideas rather than waiting to find statistically relevant data on massive macroeconomic or even large microeconomic issues and theories. Its dope! it really is. you can race through large trains of thought without the footwork of gathering lots of data. Because by using logic, you can essentially prove something without the brass tax data. You can still have empirical evidence, and examples, and charts n such, but it does not have to be nearly as exact as something based on loads of data collection. You are essentially free of large scale data collection and tons of annoying math!
But this post is to much of a repeat from lsat week.
The biggest problem with this is that you get people who take philosophy as law. Without a basis in math and data, you can run into monumental problems especially if people start to take this to heart and apply it to economic policy. Essentially it could work logically on paper but then again the earth being flat used to work out philosophically on paper as well. The point being that no matter how good of a philosopher you are your never going to have even close to perfect information thus your theories will always be imperfect and the flaws in them can cause untold damage in horrible negative externalities. When people take ideas like totally free markets will achieve the optimal social outcome you get problems like the great depression on the 1930s, housing market crashing due to uncontrolled housing markets and predatory loans, ect.
Also, many austrians feel like negative externalities do not exist. which is just to convenient, because they absolutely do exist and can cut big holes in the hulls of the Austrian super tanker.
So in the end, please start calling it Philosophical economics instead. It gives the listener a much better idea that what they are listening to is unproven theory and not substantial and proven fact.
Deal bro.
Here is a picture of Karl Marx to piss people off.
The biggest problem with mathematical economics is that you get people who take mathematics as law.
ReplyDeleteMathematics is just a tool; you can use a continuous model to describe fluids -- let's take water -- disregarding the fact that the thing you're describing consists of discrete particles. It depends on what you're trying to achieve or the phenomen-on/-a you're trying to model. The difference between those sciences, though, and economics, is that you can at least do experiments to justify your "utils" and whatnot. Mainstream economics is not an empirical discipline; it's prediction-postdiction run amok ("An economist is a person who can tell you what is going to happen next month and then later explain why it didn't happen").
Mathematical economists are just defining things out of the air with no motivation, and then manipulating and solving the equations to approach some answer. This won't do for increasing our understanding of markets.
Mathematical econ as pure math, like mathematical physics, is okay but, just like physics, once you need to start describing reality, you cannot take the shut-up-and-calculate path as you start describing abstract universes; at least alternate ones have a chance of existence.
Maybe what I've written thus far is not convincing but check out this gem from a neo-classical (this is real - Washington Post):
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When you miss so regularly on your forecasts, Altig says, “it’s easy
to think we have to rethink everything we think we know.” But, he
adds, “You can be wrong for a very long period of time and still have
the underlying structure and story about the economy correct. That’s
not crazy. I guess that’s where I would be right now. It’s not like
you have to throw out how you think about these things. You just have
to have the same humility you always have.”
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Is that economic "science"? I see why some institutions are hesitant to label it as such and why Peter Schiff lumped it in with -philosophy of sports- and -physics without math- (which I would have thought was harsh before respected economists said things like that).