# Think Tank > Austrian Economics / Economic Theory >  Austrian economists vs. Axiomatic economists - make peace?

## Shaka

I have crossed swords with the Austrians in the past but, as a practical matter, their opposition to Axiomatic Economics is usually confined to snarky comments - they rarely ban me.

However, Post-Autistic economists (aka Real-World economists) systematically and unashamedly ban anybody who mentions the axiomatic method in a forum post.

Usually, this is done abruptly and without explanation but Robert Oak, the owner of the Economic Populist forum, was foolish enough to recently state this policy in print.

Thus, since the Post-Autistics are really more dangerous to me than the Austrians, perhaps we could make peace and unite against our common enemy?




> Mises claimed in _Human Action_ that the only pure economic science is radical apriorism  using solely deductive reason without the help of experience. He built his entire system on logic and self-evident assumptions, similar to geometry. Mises rejected all forms of inductive aposteriorism, or the use of empirical studies or history to prove a theory. Mises solemnly declared, Its particular theorems are not open to any verification or falsification on the grounds of experience.

----------


## nate895

What is an axioamtic economist? Quick summary please.

----------


## ClayTrainor

> What is an axioamtic economist? Quick summary please.


I'm not claiming to know the answer, i'm just rationalizing.

Axiom:
"A statement that is accepted without proof."

I don't understand how a form of economics can be based on this principle, since economics is based on experimentation and expansion on those ideas.

What are the basic principles of Axiom economics?  How does it differ from the Austrian theory?

----------


## mczerone

Praexeology seems to be the same thing, which is the basis for the Austrian theory of the credit cycle - it gives as axioms "time preference" and the law of diminishing returns.

Are you just following a line of analysis with a shifted set of definitions, but the same underlying results?

----------


## Shaka

*Cutting the Gordian Knot of GE Theory*

Steve Reglar (2005) writes:

_As a tool of capitalist hegemony the doctrine of general equilibrium is very useful. It assumes that the normal condition of society is for the state to play as little a role in economic life as possible, because the market is part of human nature and the most efficient form of economic organization. The theory, therefore, has a role in legitimizing capitalist hegemony._

A tool of capitalist hegemony?  My, what harsh language!  One can almost visualize GE theorists visiting smoke-filled rooms to accept bribes from their cigar-puffing benefactors.  Indeed, Post-Autistic economists, after observing the word axiomatic in the title of my book (Aguilar, 1999), dismissed it out-of-hand, denouncing me as a bought-and-paid-for stooge of Big Business.  Apparently, just that one word was enough to convince them of this about me.

But before we dismiss this talk of an epistemological approach being a tool of Big Business to legitimize their obviously anti-social behavior, let us at least see if the socialists are consistent.  James Yunker (2007) writes:

_This article evaluates the performance of contemporary capitalism relative to that of a hypothetical alternative designated profit-oriented market socialism. In most respects, profit-oriented market socialism would closely mimic contemporary market capitalism. The major difference would be that most profits and interest generated by the operations of publicly-owned business enterprises would be distributed to the general public as a social dividend proportional to household wage and salary income rather than in proportion to household financial assets. The basis of the comparison is a small-scale but comprehensive computable general equilibrium model._

Here we read that GE Theory is not a tool of capitalist hegemony, but a tool of profit-oriented market socialism, that is, publicly-owned business enterprises (e.g. Fannie, Freddie, AIG, etc.) that mimic contemporary market capitalism.  And it is not a tool in the sense of legitimizing the socialists (presumably, their legitimacy is derived from emotional appeals of the Gosh, there sure are a lot of poor people  darn capitalists! variety), but a tool in the literal sense of defining a software model.

Well, which is it?  Reglar thinks that GE Theory "assumes that the normal condition of society is for the state to play as little a role in economic life as possible." Yunker sees GE Theory as the basis for a central planner to "mimic contemporary market capitalism" while retaining for himself the authority to distribute the social dividend  hardly a "little role in economic life."

The primary (actually, the only) criticism that socialists have of my writing is that it lacks substantial references.  Apparently, he whose writing is filled with the most quotations from the most august of academic journals wins.  Thus, having observed that Reglar and Yunker have opposite views of GE Theory, we clearly need a tie-breaker.  Cristobal Young (2005) writes:

_General equilibrium theory  the mathematical analysis of a market economy as a whole  has its roots in the late 19th century works of Leon Walras and Vilfredo Pareto  However, the project failed to attract much following and soon faded into dormancy.

It was the end of the Great Depression, ironically, that saw a tremendous revival of the General Equilibrium (GE)/Welfare economics project.  In the US, a loose grouping of devout socialists were busy detailing the elegance of the market equilibrium.  The leaders of the GE revival  Oskar Lange, Abba Lerner and Abram Bergson  were cutting-edge mathematical economists and true believers in Soviet-style central planning

The GE framework, given sufficient mathematical complexity, is actually a grand narrative on the fragility and implausibility of perfect market equilibrium.  Successive mathematical torturing has outlined an extensive list of unlikely conditions required to demonstrate general market efficiency.  Mark Blaug has nicely summarized a partial inventory: perfectly rational, omniscient, identical consumers; zero transaction costs; complete markets for all time-stated claims for all conceivable contingent events, no trading at disequilibrium prices; no radical, incalculable uncertainty; only linearly homogenous production functions; no technical progress requiring capital investment, etc (1997, p. 5)

For an economic system that failed to satisfy such assumptions, there seemed a need for government intervention.  General equilibrium theory provided a sort of checklist for market critics._

Young supports Yunkers position though, while they agree that central planning is the inevitable result of economists' acceptance of GE Theory, Young see this as a bad thing and Yunker sees it as a good thing.  Nevertheless, the _Review of Political Economy_ and the SSRN trumps an obscure conference of socialists idling on the taxpayers dime, drinking tea and refining their plans for world conquest.  Two out of three quotations wins!

Steve Keen (2007, p. 173) has also observed that satisfying the ever-growing list of assumptions made by Debreu and his followers is unrealistic:

_It is almost superfluous to describe the core assumptions of Debreus model as unrealistic: a single point in time at which all production and exchange for all time is determined; a set of commodities  including those which will be produced in the distant future  which is known to all consumers; producers who know all the inputs that will ever be needed to produce their commodities; even a vision of uncertainty in which the possible states of the future are already known, so that certainty and uncertainty are formally identical. Yet even with these breathtaking dismissals of essential elements of the real world, Debreus model was rapidly shown to need additional restrictive assumptions._

In the context of GE Theory, the conditions required for capitalism to be efficient are implausible in practice, though conceivable in theory. The former implies that the free market is always inefficient. The latter implies that a central planner can mimic how capitalism would work if it were efficient while the "profits and interest generated by the operations of publicly-owned business enterprises would be distributed to the general public as a social dividend."

In the context of GE Theory, there is no way for libertarians to get around this dilemma without being impaled on one or the other horn. Either we live with a system that can never be efficient in practice or we have an efficient system but renounce private property rights and put distribution of the "social dividend" in the hands of a central planner.

Far from being a tool of capitalist hegemony," acceptance of GE Theory is the death of capitalism.  Our only compensation is that, like a condemned prisoner who gets to choose the firing squad or the hangman, we get to choose inefficiency or tyranny.  How did free-market economists respond to this dreadful choice?  Milton Friedman invoked his famous assumptions dont matter dictum (1953) to avoid having to admit that he could not untie the Gordian knot of GE Theory  but that is cowardice.  Surely there must be a better way!

Instead of attempting to untie it, I cut the Gordian knot of GE Theory by throwing all of Walras and Paretos assumptions overboard and starting from scratch with my own set of axioms.  When faced with a dilemma "in the context of GE Theory," I invented Axiomatic Economics. As Hannibal Barca said, "we will either find a way, or make one." The same goes for libertarians; we will _never_ accept socialism.

My assumptions are three:

*1)* One's value scale is totally (linearly) ordered:

i)	Transitive;	p ≤ q and q ≤ r imply p ≤ r

ii)	Reflexive;	p ≤ p

iii)	Anti-Symmetric;	p ≤ q and q ≤ p imply p = q

iv)	Total;	p ≤ q or q ≤ p

*2)* Marginal (diminishing) utility, u(s), is such that:

i)	It is independent of first-unit demand.

ii)	It is negative monotonic; that is, u'(s) < 0.

iii)	The integral of u(s) from zero to infinity is finite.

*3)* First-unit demand conforms to proportionate effect:

i)	Value changes each day by a proportion (called 1+εj, with j denoting
the day), of the previous day's value.

ii)	In the long run, the εj's may be considered random as they are not
directly related to each other nor are they uniquely a function of
value.

iii)	The εj's are taken from an unspecified distribution with a finite
mean and a non-zero, finite variance.

Read my Simplified Exposition of Axiomatic Economics for a more detailed, but still undergraduate-level discussion of my economic theory.  This paper requires knowledge of multi-variable calculus but omits the real analysis that plagues readers of my 1999 book.


*REFERENCES*

Aguilar, Victor.  1999.  _Axiomatic Theory of Economics_.  Hauppauge, NY:  Nova Science Publishers, Inc.

Blaug, Mark.  1997.  Ugly Currents in Modern Economics.  _Policy Options_.  18: 3-8

Friedman, Milton.  1953.  The Methodology of Positive Economics. in _Essays in Positive Economics_.  Chicago, IL:  University of Chicago Press.

Keen, Steve.  2001.  _Debunking Economics_.  Annandale, NSW Australia:  Pluto Press

Reglar, Steve.  2005.  "The Descent of Political Economic Theory: Keynes, Keynesian economics, from bastardised Keynesianism to Neo Liberal Hegemony.  http://www.elequity.com/contego/pdfb...ricanMinds.pdf

Young, Cristobal.  2005.  The Politics, Mathematics and Morality of Economics:  A Review Essay on Robert Nelsons Economics as Religion.  http://papers.ssrn.com/sol3/papers.c...ract_id=898914

Yunker, James.  2007.  A Comprehensive Incentives Analysis of the Potential Performance of Market Socialism.  _Review of Political Economy_.  19 ( 1): 81-113  http://econpapers.repec.org/article/...p_3A81-113.htm

----------


## mczerone

wow, I went down the rabbit hole there....

I guess I still don't see why you are driving a wedge between yourself and the Misesians, when the ultimate lessons, and much of the reasoning, is identical.

Your theory very well might have something to it, but what problem does it solve?  Where does it significantly differ from other schools in post-diction of events (what can it explain that others can't)?


One major flaw that isn't addressed: while you CAN integrate discrete functions, you seem to also want to apply derivatives to them - a well-ordered set of value definitions that give rise to a "utility function" do not admit differentials.

The steps you took to axiomatically define the simple set properties are disproportionately rigorous to the latter parts of your theory where such truisms are stated as (paraphrased, I lost the page with the quote): "at any time the amount of money in anyone's possession is constant".  1st - of course when there is a single measurement, there is only one valuation.  2nd - do you mean to then imply that the instantaneous rate of change is thus zero - because you didn't go on to prove this.

You seem to be in over your head with the rigorous necessity of the axiomatic method, though I can't readily see any definite, real world, conclusion of your theory to refute - - just a bunch of systematic (but not rigorous or formally defined on any measurable fields) mathematical definitions and then some not-entirely-related political commentary.

----------


## Conza88



----------


## Shaka

*A Non-Mathematical Explanation of the Axioms*

First, what are axioms?  One thing that took me by surprise when I published my book in 1999 was that almost nobody in the general public knows what the word axiomatic means.  Mention of my books title was met with blank stares and open derision.  The blank stares I could understand, but derision?  How mean!  Eventually I came to realize that people think axiomatic is an empty, feel-good adjective, like super-duper.  They were derisive because they thought that I was calling my ideas, effectively, the super-duper theory of economics.  

The Random House College Dictionary offers three definitions:  axiom, _n_, 1. a self-evident truth.  2. A universally accepted principle or rule.  3. _Logic, Math_, a proposition that is assumed without proof for the sake of studying the consequences that follow from it.  I employ definition #3.  The problem with #1 is that, lacking a burning bush experience, nothing ever appears sufficiently self-evident.  The problem with #2 is the same one encountered when ordering pizza:  Everybody will go hungry if they must wait for universal agreement on which toppings they want.

Ones axioms are introduced at the beginning of ones book and then all of the subsequent theorems are derived from the axioms.  For example, Euclid claimed that, given a line and a point not on the line, there exists a unique line that passes through the point and is parallel to the given line.  Lobachevski asserted that there is more than one parallel and Reimann that there are none.  Thus, there are three geometries and, similarly, there may be more than one economics.  I am, however, the only economist to ever precisely state my axioms and to base an entire theory on exactly those axioms and on nothing else. 

*Axiom #1:  Ones value scale is totally (linearly) ordered. * 

An ordering is a way of comparing any two items in a set.  For instance, if you were a grade-school teacher, you could order all of the children in your class by height.  Asking them to form a line from the tallest to the shortest is unambiguous.  There may be some squabbles as to which of two boys is taller, but the issue can easily be settled with a tape measure.  If it cannot, then they are of equal height and (conceptually, if not literally) they occupy the same point on the line.

Intelligence is a different matter.  What if one child is good at math, another at chess and a third excels in music?  Which one is more intelligent?  There is no tape measure that can resolve this dispute.  Thus, intelligence is not an ordering, while height is.  I claim that value is an ordering, like height.  Specifically, it is transitive, reflexive and anti-symmetric.

But what does total mean?  It means that any two items can be compared.  An example of an ordering that is not necessarily total is subset.  It can be total:  If ones sets are defined as everybody less than or equal to 50, everybody less than or equal to 51, etc, then all of those sets can be ordered by the concept of subset just as the children were by height.  But what if one set is girls and one set is blondes?  Not all girls are blonde, but neither are all blondes, girls  boys can have yellow hair too.  So subset can be, but is not necessarily, total.  Height is a total ordering and, I claim, so is value.

*Axiom #2:  Marginal (diminishing) utility has three characteristics.*

Marginal and diminishing utility are the same thing.  Also, utility and value are synonymous; early economists came from many different lands and never settled on a common lexicon.  

Diminishing utility refers to how the value of an item depends on how many of them one already owns.  For instance, if my only means of transportation around town is a bicycle, then obtaining a car is very important to me.  But, if I already own a car, getting another one is not particularly important.  It may be nice to have both a sedan and a pickup but, realistically, most people get by with just one vehicle; it is possible to strap cargo to the roof of a car and it is possible to squeeze ones entire family into the front seat of a pickup.  Rich people may have a whole stable of cars but, for most people, three is about the limit.

So we see that, for cars, utility diminishes very rapidly down to almost nothing for the third unit.  For guys, the value of shoes diminishes about as fast as it does for cars.  For women, the value of shoes diminishes less quickly, dropping to zero only after a dozen or more pairs are obtained.  Imelda Marcos found value in her thousandth pair of shoes.  How rapidly utility diminishes is described mathematically by diminishing utility.

I claim that diminishing utility is independent of first-unit demand.  For instance, the same mathematical function can describe how rapidly utility diminishes for a mans vehicles and for his shoes; both drop to a negligible amount relative to the first units value after about three are obtained.  The former has the same diminishing utility as the latter, only with more zeroes on the numbers.

I claim that diminishing utility is negative monotonic, which means that it always diminishes.  The only thing that could conceivably go back up in value as one obtained more of it is an addictive drug, like crack.  However, my theory describes only one moment at a time and addiction takes months and years to develop.  The addict is really not the same person that he was before he took up the pipe, both literally and figuratively.  So, at no point in time, was my theory ever inapplicable to his valuation of narcotics.  For most phenomena, this claim is uncontroversial.

I claim that there is a limit to how slowly utility can diminish.  Non-mathematical readers do not need to know what an integral from zero to infinity is, only that its being finite implies that utility must diminish at a good clip.  There is no phenomenon that is still valued even after millions and billions of units have been obtained.

*Axiom #3:  First-unit demand conforms to proportionate effect.*

First-unit demand is demand for the first unit (the first car or the first pair of shoes) so, by axiom #2, it is independent of diminishing utility.  Proportionate effect describes things that gradually increase over time, but as a proportion (percentage) of their current value.  After many individuals have independently experienced such growth for a period of time, they are log-normally distributed.  

When describing the current state of society, many individuals means everybody in society, each of whom grew to their current state independently, but in the way described by proportionate effect.  When predicting ones future, many individuals means the many paths that one may follow as one is buffeted about by each days epsilon, εj.  (Note: epsilon, ε, is a mathematical symbol denoting a small impulse, negligible by itself but influential in quantity.)

My theory describes society, so my demand distribution, c(_m_), can be thought of as an aerial view of the people who value a phenomenon assembled along a line marked money, where they are asked to stand by the number of monetary units that are equal to a unit of that phenomenon.  There are many examples in prediction literature, especially of investments, where the log-normal distribution is used to describe the possible future outcomes of an action one is considering.  But my theory is descriptive, not predictive.

As Wikipedia puts it, A variable might be modeled as log-normal if it can be thought of as the multiplicative product of many independent factors which are positive and close to 1.  For example the long-term return rate on a stock investment can be considered to be the product of the daily return rates.

Height conforms to proportionate effect.  Throughout ones childhood, there are good days when one gets plenty to eat and there are bad days when one does not.  But the effect on ones height is proportionate to what one has already obtained.  Big kids eat more on the good days than little kids because they have bigger stomachs.  Height is not distributed normally, that is, it does not have a bell-shaped curve.  The graph of the distribution of height or intelligence rises quickly to a peak and then tapers off gradually to a long tail.  This long-tailed distribution is called log-normal, though non-mathematical readers do not have to know what this word means, only that I claim that first-unit demand is described by it.

There is an easy plausibility argument for axiom #3:  Interest is calculated as a percentage of the amount owed.  Fixing this percentage (using the same percentage throughout the calculation) is a special case of the percentage varying slightly every day.  Thus, the fact that people have calculated interest in this way throughout history, and done so unquestioningly, implies that they should accept my axiom as self-evident.  There are other conceivable ways of calculating interest (which I consider in the appendix of my book) but, as far as I know, nobody has ever thought to even ask this question.  Thus, axiom #3 actually meets the dictionarys more restrictive second definition of axiom, a universally accepted principle or rule.

At the end of this paper I list five branches one may take through my website, depending on one's background and motivation.

----------


## mczerone

You post a wall of pre-written text that doesn't address the issues I addressed.  I no longer feel the need to try to decipher your poor attempt at communicating.

As I said before - there may be something there, but you need to learn how to present it cogently and coherently as it applies to something relevant.

I can deal with the Mathematical formulation of axioms very well - I don't need a FAQ about what axioms are, I need a coherent analysis of a real world situation using your economic tools, without any hand-waving or assumptions.

To encourage people to adopt to your system, you must provide the effort to make the presentation of the ideas accessible, stop yelling at people because they "don't get it" and start asking yourself why they aren't getting it.

Whatever differences you have with the Misesians (I gathered this all stems from an argument with Rothbard about how to read the spot price of gold relative to the interest rate), they have a cogent presentation of ideas surrounded by sound and rigorous formulation and inviting presentations.  Until you can convince someone of your theory who can in turn explain it better than you are doing, you will be relegated to the sidelines of academic discussion.  It's a free market of ideas, when your idea fails, you should blame inadequacies in some part of it - not in the judgment of everyone else.  This includes presentation, even if the underlying theory is correct.

----------


## Shaka

The question that divides the axiomatists and the post-autistics is whether or not economists should clearly state their assumptions before proving any theorems from them.  The axiomatists believe that economists should make their assumptions clear.  The post-autistics prefer to flit about the internet making glib pronouncements on this, that and the other topic.  This procedure is only made possible by the absence of foundations, which relieves them of the necessity of internal consistency.  Instead of foundations, post-autistics support their glib opinions with vague references to statistical fact, though the actual statistics are never cited or are merely anecdotal.




> Your theory very well might have something to it, but what problem does it solve? Where does it significantly differ from other schools in post-diction of events (what can it explain that others can't)?


Business cycles are an example of a problem that my theory addresses.  See my previous thread on this forum:  http://www.ronpaulforums.com/showthread.php?t=188887

----------


## mczerone

> The question that divides the axiomatists and the post-autistics is whether or not economists should clearly state their assumptions before proving any theorems from them.  The axiomatists believe that economists should make their assumptions clear.  The post-autistics prefer to flit about the internet making glib pronouncements on this, that and the other topic.  This procedure is only made possible by the absence of foundations, which relieves them of the necessity of internal consistency.  Instead of foundations, post-autistics support their glib opinions with vague references to statistical fact, though the actual statistics are never cited or are merely anecdotal.
> 
> 
> 
> Business cycles are an example of a problem that my theory addresses.  See my previous thread on this forum:  http://www.ronpaulforums.com/showthread.php?t=188887


You seem to miss the point: We agree that the vast majority of economists use improper methods.

Unfortunately, this debate breaks down when you claim any conflict with the Austrians because (1) they are rigorous, (2) they have a theory that adequately explains the historical record of business cycles, and (3) your own higher calculations lack rigor.

I come from a Mathematics background, and I know that you think that you've got something that is important.  You need to flesh it out, and submit some polished articles to peer-reviewed journals: there are plenty that would publish an Austrian-like entry if it meets the quality standards.  

You claim a theory of systematical building of axioms and logic, and thus you need to build your own structural base.  Make a logical divide between "intro," "development," and "results." Don't assume your reader knows any mainstream economics, define every term, from what you mean by "supply," to the meaning of a "theorem" in your structural system.  

I don't have any specific problem with anything I've read - but it's impossible to really follow any of your reasoning.  I've found your mathematical "proofs" following your theorems to be lacking, but only because you go through showing simple steps, but then make broad logical leaps without explaining why what you've shown is relevant to what you wanted to prove.

Please, if you respond, do not link another page, or copy another conversation.  If anything, I'd like to know how you've responded to my direct, constructive, criticism: Am I being too harsh?  Do you think you don't have any holes in your mathematics like those I mentioned? Can you tell me a coherent example of where the current Austrian explanation of a specific historical event is flawed, and how your theory reasonably explains that event?

----------


## tmosley

I haven't had time to read through your posts yet, Shaka, but I think that one could say that, when comparing these different schools of economics, one would come up with the following analogy:

Keynesianism/Mainstream economics is like alchemy.  They start with what they want, and twist the numbers until they get there, much as the Alchemists started with a lust for gold and immortality, and they denied reality and continued on their foolish quest until they had killed themselves with the poisonous elixirs they came up with.

Austrian economics is like chemistry, in that it is based off of empirical observation.  With enough observation and analysis, it becomes possible to make predictions, and the extent to which those predictions match reality is the extent to which the theory is correct.

Axiomatic economics is like mathematics.  One can derive a great deal of insight from mathematics, but only to the extent that your axioms are correct.  Mathematics makes few predictions on it's own, but when combined with empirical science, it can make predictions far in advance of what is possible with either set alone.

Of course, I don't know anything about axiomatic economics, nor do I know what your axioms are.  As I was scanning down the page, I see that they are awfully long to be irreducible truths.  I'll give them a read over when I get home today, and chime in with something.

----------


## ARealConservative

I recognize the writing style

http://www.debatepolitics.com/econom...nevitable.html

----------


## Shaka

> I don't have any specific problem with anything I've read - but it's impossible to really follow any of your reasoning.  I've found your mathematical "proofs" following your theorems to be lacking, but only because you go through showing simple steps, but then make broad logical leaps without explaining why what you've shown is relevant to what you wanted to prove.


If you can disprove any of my theorems, then post your proof here and I will respond.




> I recognize the writing style
> 
> http://www.debatepolitics.com/econom...nevitable.html


That was last August.  You would have read it here except - ahem - it was deleted.  I'll try, try again and see if my paper stays online this time.

http://www.ronpaulforums.com/showthread.php?t=190369

----------


## ARealConservative

> That was last August.  You would have read it here except - ahem - it was deleted.  I'll try, try again and see if my paper stays online this time.
> 
> http://www.ronpaulforums.com/showthread.php?t=190369


~  gasp  ~  your precious thread was deleted from a forum designed to forward individual liberty *and*  property rights.  The horror!

----------


## krazy kaju

How exactly do you differ from the Austrian school?

----------


## ARealConservative

> How exactly do you differ from the Austrian school?


he advocates the virtues of fiat currency

----------


## krazy kaju

^ That's cute.




> Austrian economics is like chemistry, in that it is based off of empirical observation. With enough observation and analysis, it becomes possible to make predictions, and the extent to which those predictions match reality is the extent to which the theory is correct


Funny that you say that, considering that the Austrian school is based on deductive logic.

----------


## mczerone

> If you can disprove any of my theorems, then post your proof here and I will respond.


Okay, deal.  

I'll put you on my "disprove" list, right after I "disprove" bigfoot, UFOs, the existence of God, and the Time Cube Guy (google him).

When you have a scientific claim, you have the burden of proof.  Right now, as I said earlier, your ramblings aren't coherent enough to follow so I can't even tell what some of your theorems are attempting to prove.

Why don't you use one of your "theorems" to actually show me something I can refute?

And further, AFAIK, the Austrians specifically acknowledge that they can't predict if hyperinflation will occur, precisely because the assets of the Fed are sheltered, and also that it's impossible to predict the future behavior of either individuals or government actors.  

*Saying that "the future lies somewhere in between" the free market solution and "a socialist utopia" with a central planner of a bank kind of tips your hand about what you are doing - usurping praexeology for the Marxists.*

Best of luck refining your ideas so that a peer-reviewed journal will publish them; I'm going to try to avoid responding, as this is a real time-waster for me right now.

----------


## StilesBC

Economics as "science" is wrong.  Attempts to make it so will constantly fail because science must deal with subjects that do not alter their motivations.  

Austrian economics is compatible with changing social preferences, which is why its economists avoid using models to explain behavior.  Models require assumptions.  Assumptions are often false.

----------


## krazy kaju

Science means any systemized body of knowledge. Thus, economics is science.

----------


## ARealConservative

> Science means any systemized body of knowledge. Thus, economics is science.


http://en.wikipedia.org/wiki/Hard_science

----------


## Shaka

> How exactly do you differ from the Austrian school?


Here are twenty differences:

*Are You an Austrian, Axiomatic or Mainstream Economist?*

*Short Six-Question Version of Questionnaire.*




> he advocates the virtues of fiat currency


No, I do not.

----------


## tmosley

> Here are twenty differences:
> 
> *Are You an Austrian, Axiomatic or Mainstream Economist?*
> 
> *Short Six-Question Version of Questionnaire.*
> 
> 
> 
> No, I do not.


That is not a list of differences, that is an online quiz.

Austrian economics is based off of observation.  Many adherents use that knowledge to predict future events, but to my knowledge, there is no real systematic method that is espoused.  It's basically a "this all happened before, and it will happen again" sort of thing, at least to my knowledge.  If someone else has information to the contrary, I would be happy to see it.

As for Shaka, I have to say that your theories really don't seem to pass muster.  They neither take empirical observations from the past into account, nor do they make any discernible predictions that can be falsified.  If you are interested in finding a strong, logical underpinning for Austrian economics, I might suggest that you read John Galt's speech from Atlas Shrugged, as she uses a similar method to rigorously define her position, and indeed, makes predictions (elsewhere in the book), most of which are coming true now before our eyes.

----------


## Knighted

> Economics as "science" is wrong.  Attempts to make it so will constantly fail because science must deal with subjects that do not alter their motivations.  
> 
> Austrian economics is compatible with changing social preferences, which is why its economists avoid using models to explain behavior.  Models require assumptions.  Assumptions are often false.


This says it all.  One of the key problems with Keynesian economics (and i'm guessing Axiomatic economics too by the sound of it) is that its practitioners cling to their models and mathematical equations as if they are proven fact.  The equations and models are so absurdly simplified and make so many assumptions in most cases that, if anything, all they are good for is theoretical pondering.  Yet the economists that favor these believe they can use them in practice to achieve desirable results.  

A perfect example of the failure caused by following the models blindly is the Phillips Curve.  It had a cheery mathematical derivation and was taken as fact by all the Keynesian economists that inflation and unemployment MUST be inversely related - that is, up until the 1970's when the economy proved that the Phillips Curve was one giant flop.  There is a decent amount of evidence suggesting that it was the Fed's tinkering with the money supply over this period that was truly responsible for the high inflation rates.  And if they did, i'll bet it was belief in the Phillips Curve that prompted it.  While inflation was already high and unemployment continued to climb, they continued to pump up the money supply to get rid of the unemployment, since that's what the almighty Phillips Curve said to do.  It wasn't until Volcker became chief and actually did the opposite, clamping down on the money supply like a vice, that the inflation and unemployment both began to subside.

----------


## Conza88

> I haven't had time to read through your posts yet, Shaka, but I think that one could say that, when comparing these different schools of economics, one would come up with the following analogy:
> 
> Keynesianism/Mainstream economics is like alchemy.  They start with what they want, and twist the numbers until they get there, much as the Alchemists started with a lust for gold and immortality, and they denied reality and continued on their foolish quest until they had killed themselves with the poisonous elixirs they came up with.
> 
> Austrian economics is like chemistry, in that it is based off of empirical observation.  With enough observation and analysis, it becomes possible to make predictions, and the extent to which those predictions match reality is the extent to which the theory is correct.
> 
> Axiomatic economics is like mathematics.  One can derive a great deal of insight from mathematics, but only to the extent that your axioms are correct.  Mathematics makes few predictions on it's own, but when combined with empirical science, it can make predictions far in advance of what is possible with either set alone.
> 
> Of course, I don't know anything about axiomatic economics, nor do I know what your axioms are.  As I was scanning down the page, I see that they are awfully long to be irreducible truths.  I'll give them a read over when I get home today, and chime in with something.





> That is not a list of differences, that is an online quiz.
> 
> Austrian economics is based off of observation.  Many adherents use that knowledge to predict future events, but to my knowledge, there is no real systematic method that is espoused.  It's basically a "this all happened before, and it will happen again" sort of thing, at least to my knowledge.  If someone else has information to the contrary, I would be happy to see it.
> 
> As for Shaka, I have to say that your theories really don't seem to pass muster.  They neither take empirical observations from the past into account, nor do they make any discernible predictions that can be falsified.  If you are interested in finding a strong, logical underpinning for Austrian economics, I might suggest that you read John Galt's speech from Atlas Shrugged, as she uses a similar method to rigorously define her position, and indeed, makes predictions (elsewhere in the book), most of which are coming true now before our eyes.


Ok, the OP is full of $#@!... but so is this. You've mis-characterized / explained the Austrian School of thought, in basically every sentence.

And I'll bother to come back and elaborate this when I have time.

----------


## krazy kaju

> Austrian economics is based off of observation.  Many adherents use that knowledge to predict future events, but to my knowledge, there is no real systematic method that is espoused.  It's basically a "this all happened before, and it will happen again" sort of thing, at least to my knowledge.  If someone else has information to the contrary, I would be happy to see it.


The Austrian school is based on deduction/theory/synthetic a priori. For evidence, see: Menger's _Principles_, Mises's _Human Action_, Rothbard's _Man, Economy, and the State_, and Hoppe's _Economic Science and the Austrian Method_.

----------


## Shaka

> The Austrian school is based on deduction/theory/synthetic a priori. For evidence, see: Menger's _Principles_, Mises's _Human Action_, Rothbard's _Man, Economy, and the State_, and Hoppe's _Economic Science and the Austrian Method_.


Austrian economists (by nationality  they were not a school until Hayeks famous lectures) were already weak by 1930.  Menger was good.  His 1871 _Principles of Economics_ (1981) is one of the most important economics book ever written.  But, with the publication of Böhm-Bawerks 1889 _Positive Theory of Capital_ (1959), Austrian economists split into two branches.  Menger did not find a worthy successor until Mises and together they laid the groundwork for the Axiomatic School founded by this author (1999).  Meanwhile, Böhm-Bawerk was laying the groundwork for what would become the Hayekian School.  This branch has grown progressively weaker all the way up to 1990.  We found only problems with it while the legacy of Mises contains _some_ good ideas...

Keen observes The one barrier which stands in the way of todays neoclassical economist transmuting into tomorrows Austrian is the Austrian insistence that there is little, if any, role for mathematics in economic analysis (2001, pp. 304-305).  He is right.  This issue _must_ be addressed if the Austrians are to survive.

The introduction of the DWCS has greatly strengthened the Hayekian position.  If they follow through with these ideas they can have a viable theory.  In return, I ask that they stop describing their theory as deductive and based on the platitudinous action axiom.  The use of words like deduction and axiom is inappropriate for people who have not provided a clear and concise statement of their postulate set.  Kolmogorov had it easy  mathematicians were already familiar with axiomatic systems like geometry, so the only question put to him was whether his particular postulate set was an adequate foundation for the theory of probability.  But with Debreus breathtaking dismissal of the real world on one hand and Hoppes catch-22 on the other, most of my time is spent banishing misconceptions about what axiomatic means. The first step is a clean split between the Misesians and the Hayekians.

To adopt this division, the economists known as Austrians (e.g. Garrison and Skousen) must take the less ethnic name of Hayekians.  Keynesians do not call themselves English and Sraffians do not call themselves Italian, so why do Hayekians call themselves Austrian?  Skousen has recorded (2001, p. 434) that Anna Schwartz refused to contribute to _Feminist Economics_ and, for the same reason, I have grave doubts about identifying economists by their ethnicity.  The four leading Austrian-born economists of this century, Mises, Hayek, Strigl and Morgenstern, are associated with four different schools of thought.  There is no more an Austrian economics than there is a Feminist or a Black economics.

It would be more accurate to consider Menger and Mises forerunners of this authors Axiomatic School while making Hayek the founder (and Böhm-Bawerk the forerunner) of the Hayekian School.  Menger, Mises and this author are the only truly subjectivist economists. Böhm-Bawerks average period of production demonstrates that he was still mired in the labor theory of value.  Hayeks backwards triangle and his use of the terms earlier stages and later stages is no better.  Skousen gives plenty of lip-service to subjectivism but is belied by his instructions for compiling the APS (1990, pp. 184-185), which depend on remembering the date of an items manufacture and when its costs of production were paid.  Making everybody save their receipts is not that much different than Böhm-Bawerks trying to remember the one hundred working days that were expended in the production of a consumption good.

Thus, for this reason and because Mises praxeological method and his regression theorem somewhat inspired this authors postulate set, I insist on claiming Mises as my forerunner and on asking the economists now called Austrians (e.g. Garrison and Skousen) to call themselves Hayekians.




> By 1978, the headlong retreat from Mises and the praxeological paradigm had begun in earnest....  Rothbard clearly recognized that the rapid spread of the Lachmannian strand of nihilism and the calculated apotheosizing of the methodologically tolerant Hayek and shunting aside of the allegedly dogmatic Mises, which was fostered by the new institutional arrangements, was leading to decay and retrogression....  Lew Rockwell gave us the hard-core institute; Murray Rothbard gave us the hard-core journal.  With these institutional means at our disposal we have achieved our goal of putting the modern Austrian revival back on track (2002, p. 121-125).


This is a remarkable thing for the editor of the QJAE to say only a year after devoting an entire issue (Fall 2001) to apotheosizing the methodologically tolerant Garrison and shunting aside Mises dogmatic insistence that economics be deduced from a few general axioms. Garrison writes, Lachmanns ideas about expectations and the market process served as an inspiration for many of my own arguments... the reader will not fail to notice Hayeks influence in virtually every chapter  and in virtually every graph  of this book (2001, p. xiv). He refrains from speculating, with Rothbard, on whether this might lead to decay and retrogression.

Salerno writes that Rothbard seized upon [QJAE] as the main instrument for reclaiming Austrian economics from those who had stripped it of its essential Misesian content in search of acceptance by mainstream economists (2002, p. 124).  I too would like to see the essential vision, though not necessarily the content, of Mises reclaimed.  However, I believe that the only way to vindicate Mises vision of economics as a deductive science is the discovery of an axiomatic system that actually works.  Like mine.

A word to the wise:  There is no such thing as acceptance, only submission.  What QJAE contributors need is not to look more like mainstream economists, but a bigger stick to beat them with.  If it was not clear in the seventies, it is now:  Austrian economics is inadequate.  But it is inadequate because the axioms were chosen badly, not because economics cannot be deduced from a few general axioms.  While Mises does not deserve the ostracism that he gets in the mainstream journals, neither is he worthy of the adulation that he gets from QJAE contributors.  Leadership of an outsider organization should go to one who does not value followers who worship him so much as enemies who fear him.

See my Critique of Austrian Economics to read the rest of this paper.

----------


## yongrel

This is foolishness. You didn't invent a new school of economics, so much as you said, "It's Tuesday! Let's do something crazy!"

Foolishness.

----------


## nayjevin

As far as I can tell this 'war' between the two schools has been invented out of thin air by the same persons who are asking for a 'ceasefire'

----------

