Austrian Economics - PhD student

[green73]

Wrong.. You can't change the rules of the game. You guys claimed hyperinflation with the current inflation measuring, if you can't win, don't change the rules.

Links please.

 

[MRoCkEd]

Great, you seem to have figured things out at your top school. Do you mind actually posting your arguments against Austrian economics?

 

[kozel]

Your own "dude" already has provided arguments against it

http://econfaculty.gmu.edu/bcaplan/whyaust.htm

 

[MRoCkEd]

Your own "dude" already has provided arguments against it

http://econfaculty.gmu.edu/bcaplan/whyaust.htm

Not sure how he is my "dude." Are you willing to articulate your own views, or must I assume you agree with everything in that article?

 

[enter`name`here]

Suggestion: post actual critiques people could focus on and hopefully start an intelligent conversation.

Or

Continue with strawmen and and name calling and watch down on us peasents from up there on your high horse, and expect a reply in kind.

 

[revned]

Wrong.. You can't change the rules of the game. You guys claimed hyperinflation with the current inflation measuring, if you can't win, don't change the rules.

You have GOT to be the most obvious troll I have ever witnessed on these forums. Why don't you actually bring logical debate to the argument instead of just saying things are wrong; we love and value debate here, but you obviously don't have the pride to stick by your guns. Only but a few have prematurely claimed hyperinflation and it's because we are very close to the brink of it and now is the time for people to be aware. I don't blame those who have claimed it, but I also don't look to them as the all-knowing either. If that is your argument against Austrian economics, it's a very useless and highly flawed one.

 

[kozel]

my view is that ABCT assumes that enterpreneurs are making systematic errors (i.e. when CB lowers interest rates, they blindly invest in new longer-term projects, which subsequently become unprofitable when rate goes up) and thus completely ignores the role of expectations. Also, since austrians hate both math and econometrics, they never write a formal model and estimate it - so even if ABCT was true, we have no idea how much of business cycle it really explains.

There are other problematic things with austrian economics (especially with more hardcore part of it, e.g. Mises Institute), like a crazy methodology which refuses empirical testing of theories, general ignorance of any new mainstream economics since circa 1950, and annoying libertarian ramblings. I hope you get the idea.

 

[seraphson]

Hello, I'm a grad student at a top20 in economics... When I was 17 or so, I used to watch Ron Paul videos, etc.. I was one of you guys

But, after being exposed to real economics, I must say. Austrian economics is marginalized, and even made fun of, not because there is a conspiracy going on, but because its un-scientifical, and downright funny.

So. Stop trolling "keynesian" videos. Stop harassing good researchers. Study "mainstream" before attacking it blindly. Thank you

I believe you're taught how to write persuasive essay's in middle school. Perhaps now that you finished your PhD you can overview your middle school teachings and (try to)write a proper criticism of austrian economics. At the very least elaborate for a few measly paragraphs. You provide zero evidence for your claims.

 

[Jovan Galtic]

You cannot build a "formal model" of human action. Humans are not physical particles that abide the laws of physics. They have reason and behave differently in each case. That's why you can't "empirically test theories" in economics like they do in physics or chemistry.

 

[kozel]

That's funny though, isn't it? Austrian models human behaviour, in a very 40's kind of way (ignore rational expectations, assume humans are half-retarded). If it was true that you guys never modeled behavior, what about the "low interest rates causing bad investments" cycle? A very shitty theory, but it does model behavior. You check-mated yourself there

 

[Jovan Galtic]

Mises, in "Human Action":

It was a fundamental mistake of the Historical School of Wirtschaftliche Staatswissenshaften in Germany and of Institutionalism in America to interpret economics as the characterization of the behavior of an ideal type, the homo oeconomicus. According to this doctrine traditional or orthodox economics does not deal with the behavior of man as he really is and acts, but with a fictitious or hypothetical image. It pictures a being driven exclusively by "economic" motives, i.e., solely by the intention of making the greatest possible material or monetary profit. Such a being, say these critics, does not have and never did have a counterpart in reality; it is a phantom of a spurious armchair philosophy. No man is exclusively motivated by the desire to become as rich as possible; many are not at all influenced by this mean craving. It is vain to refer to such an illusory homunculus in dealing with life and history.

Even if this really were the meaning of classical economics, the homo oeconomicus would certainly not be an ideal type. The ideal type is not an embodiment of one side or aspect of man’s various aims and desires. It is always the representation of complex phenomena of reality, either of men, of institutions, or of ideologies.

Similar to what I said above - you can't create an "abstract model" of a person and then "deduct" theorems about people's behavior. That's nonsense. And also very dangerous philosophically.

 

[brandon]

You're not even stating the argument right. The argument isn't that low interest rates are a problem. The argument is that when interest rates are set by non-market forces problems arise. No it's not an empirical model. It's a deductive conclusion.

 

[kozel]

Uhmm, I'm pretty sure the argument is that low interest rates generate a boom bust cycle..

 

[Jovan Galtic]

"Low interest rates" are not a problem by itself. The problem is manipulation of interest rates. In a free market, interest rates reflect amount of savings. Think about your personal finances - if you have a lot of money in the bank, you can start riskier, longer-term projects. Interest rate (in a free market with sound money) tells us, as a society, "how much do we have in the bank", "how much we can spend on long-term stuff". Then it's clear why manipulation of interest rates creates business cycle - people undertake longer term projects, we run out of money before they are completed and they have to be liquidated. Companies are closed, unemployment rises etc. And your teachers are stunned and surprised - "how the hell did this happen", "nobody saw it coming"... Right.

 

[Danan]

my view is that ABCT assumes that enterpreneurs are making systematic errors (i.e. when CB lowers interest rates, they blindly invest in new longer-term projects, which subsequently become unprofitable when rate goes up) and thus completely ignores the role of expectations. Also, since austrians hate both math and econometrics, they never write a formal model and estimate it - so even if ABCT was true, we have no idea how much of business cycle it really explains.

There are other problematic things with austrian economics (especially with more hardcore part of it, e.g. Mises Institute), like a crazy methodology which refuses empirical testing of theories, general ignorance of any new mainstream economics since circa 1950, and annoying libertarian ramblings. I hope you get the idea.

https://mises.org/daily/2673
http://www.la.org.au/ipaper/280710/...business-cycle-theory-prisoner’s-dilemma-or-n

Why don't you go ahead and formulate the model and test it econometrically if that gives you peace.

Btw, I agree with you that many Austrians are totally ignorant of some neo-classical theories and obnoxiously attacking strawmen. The same goes for most neo-classicals in response to Austrian Economics, though. You are the living proof for that.

 

[kozel]

"Low interest rates" are not a problem by itself. The problem is manipulation of interest rates. In a free market, interest rates reflect amount of savings. Think about your personal finances - if you have a lot of money in the bank, you can start riskier, longer-term projects. Interest rate (in a free market with sound money) tells us, as a society, "how much do we have in the bank", "how much we can spend on long-term stuff". Then it's clear why manipulation of interest rates creates business cycle - people undertake longer term projects, we run out of money before they are completed and they have to be liquidated. Companies are closed, unemployment rises etc. And your teachers are stunned and surprised - "how the hell did this happen", "nobody saw it coming"... Right.

Low interest rates were caused by savings, external savings. And btw, you continue to model behavior, going against your own theory "interest rates creates business cycle - people undertake longer term projects"

Oh, and that video doesn't impress anyone. A broken clock is right two times a day. These guys have been predicting doom for 30 years, eventually you are going to be right.. but what about the other 25 years you were wrong? And anyone who followed his instructions to short on the dollar in 2008 lost a lot of money, not to mentiion the hyperinflation stand-up comedy.

 

[wizardwatson]

What perplexes me about all this economic theory is this.

Isn't the necessity and/or usefulness of economic theory directly proportional to the opaqueness of market and monetary data?

Given any economic scenario if we have access to all the knowledge about the resources involved, the "means" and we know what problem we are trying to solve why do we even need economic theory?

 

[dannno]

That's funny though, isn't it? Austrian models human behaviour, in a very 40's kind of way (ignore rational expectations, assume humans are half-retarded). If it was true that you guys never modeled behavior, what about the "low interest rates causing bad investments" cycle? A very shitty theory, but it does model behavior. You check-mated yourself there

"Everything Else Being Equal" if you lower interest rates it will cause more malinvestment. Malinvestment will occur either way, but lowering interest rates encourage it.

That is different than trying to model 100 million strands of the economy into an econometrics formula.

But what you don't seem to understand at all is, can you explain what good use an econometrics formula has in a free market economy?

 

[dannno]

Low interest rates were caused by savings, external savings.

External? Like the Illuminati or China? Are you a conspiracy theorist? I mean, fuck, our country is in debt, have you ever looked at a chart? Why do we get low interest rates if we're in debt?

 

[Danan]

Similar to what I said above - you can't create an "abstract model" of a person and then "deduct" theorems about people's behavior. That's nonsense. And also very dangerous philosophically.

That's exactly what most neo-classical micro-economists do too. You formulate theories based on axioms and deduct what logically follows. To realize the conclusions of your model is not difficult. The task of the economist (according to Mises) is to find out which assumptions apply to a given scenario. Empirical tests can't ever falsify logic, they can only show you that you might have made a mistake in applying your assumptions, by either leaving some out or wrongly assuming others. Most modern Austrians and neo-classicals don't really disagree on micro-foundations very much. Whether you have to call it a priori reasoning or axiomatic reasoning doesn't really matter to me. That's a pretty obscure topic, imho.

The problem with testing those theories, however, is that almost all behavioral economics is based on the assumption that preferences never change. You most certainly know that already. Not only is that an assumption that can not be verfied or falsified (thus ironically deviating from the scientific method), but also it is essential for all conclusions drawn from empircal testing. With changing preference relations "everything goes" and no predictions nor meaningful conclusions from empirical data are possible. The problem is, though, preferences do change. So do other factors in the environment. Holding "all other things constant" is most of the times a futile task in economics. Even staunch positivists like Chicago School economists don't believe studies that show that a minimum wage increases employment. But why not? Why do they keep twisting the data until an econometric study shows what they believe to be true? Mises wasn't against this approach because he hated to be falsified. He believed that this method is generally unfit for studies of human behavior and if you fully agree with him or not, he does make a good argument for his case.

Also, not all Austrians are either "Misesians" or "Rothbardians". Personally I don't need a label to feel good about myself. I don't agree with everything Mises and Rothbard said and neither of them would have wanted that to be the case.