Spreading Hayek, Spurning Keynes
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Spreading Hayek, Spurning Keynes
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Re: Spreading Hayek, Spurning Keynes
#2Austrian economics always struck me as kind of hand wavy. I never made it more than 1/3 of the way through the Wikipedia article on it before realizing I didn't know what it was talking about.
Does Austrian economics make an testable predictions? Is it based on empirical data? Does it have models? It seems more like a statement of beliefs to me.
What am I missing?
Re: Spreading Hayek, Spurning Keynes
#3"What I'm really worried about is an endless cycle of deficits, debt, and debasement of currency," Mr. Boettke says. "What we've done is engage in a set of policies that's turned a market correction into an economy-wide crisis."
Which is what a lot of people believed made the 1930s depression Great: first Hoover (an engineer) and then FDR engaged in massive and unprecedented intervention in the economy (pre-Keynes-ian, seeing as how his major work presenting his theories on the subject was published in 1936). (Which is not to say that recovering from over-leveraging is ever easy.)
Those didn't exactly take the shape of the above (from memory, aside from FDR seizing the nation's gold at the traditional $20/oz price and the repricing it at $35/oz), but certainly we're entitled to question a "stimulus" bill that cost more than the Iraq war (http://www.americanthinker.com/2010/08/does_barely_true_mean...) that doesn't even look it will accomplish the traditional (e.g. FDR) goal of it winning elections for the party in power.
Re: Spreading Hayek, Spurning Keynes
#4Austrian economics always struck me as kind of hand wavy. I never made it more than 1/3 of the way through the Wikipedia article on it before realizing I didn't know what it was talking about. Does Austrian economics make an testable predictions? Is it based on empirical data? Does it have models? It seems more like a statement of beliefs to me. What am I missing?
I have to wonder if you're asking too much out of macroeconomics. There's so many variables, you can't do clean let alone repeatable experiments, etc.
It does make testable predictions, but given the above one can always argue about how thus and so made the result irrelevant (either way).
Look at the current remaining faithful Keynesians, who say the only problem with the "stimulus" was that it wasn't big enough while the more honest admit it wasn't Keynesian at all to begin with.
So let me ask you this: can you or anyone else extract rigorous useful data WRT to all this from Japan's two lost decades?
Re: Spreading Hayek, Spurning Keynes
#5Austrian economics always struck me as kind of hand wavy. I never made it more than 1/3 of the way through the Wikipedia article on it before realizing I didn't know what it was talking about. Does Austrian economics make an testable predictions? Is it based on empirical data? Does it have models? It seems more like a statement of beliefs to me. What am I missing?
they make qualitative predictions rather than the quantitative ones you need to be considered a science. Of course AE claim that economics is a deductive discipline rather than the inductive ones orthodox economists assume. I sympathize with this view because it would seem that social sciences can never really meet the prerequisites for actual empiricism (controlled variables). statistical regression often has elements of hand waving as well.
Re: Spreading Hayek, Spurning Keynes
#6Austrian economics always struck me as kind of hand wavy. I never made it more than 1/3 of the way through the Wikipedia article on it before realizing I didn't know what it was talking about. Does Austrian economics make an testable predictions? Is it based on empirical data? Does it have models? It seems more like a statement of beliefs to me. What am I missing?
http://johnquiggin.com/index.php/archives/2009/05/03/austria...
Also,
http://www.marginalrevolution.com/marginalrevolution/2010/04...
And, this is the most readable, but keep in mind that it's written by a Keynesian:
Austrian economics, at its core, is based on praxeology and mostly rejects models, math and science.
Re: Spreading Hayek, Spurning Keynes
#7Austrian economics always struck me as kind of hand wavy. I never made it more than 1/3 of the way through the Wikipedia article on it before realizing I didn't know what it was talking about. Does Austrian economics make an testable predictions? Is it based on empirical data? Does it have models? It seems more like a statement of beliefs to me. What am I missing?
http://johnquiggin.com/index.php/archives/2009/05/03/austria... Also, http://www.marginalrevolution.com/marginalrevolution/2010/04... And, this is the most readable, but keep in mind that it's written by a Keynesian: http://www.slate.com/id/9593 Austrian economics, at its core, is based on praxeology and mostly rejects models, math and science. http://en.wikipedia.org/wiki/Praxeology
I'd be a lot more interested in publications and comments from Austrians; the above are all from their critics and could all too easily be strawmen.
The only useful way to approach this is to look at what Austrians themselves have said and what then happened.
Re: Spreading Hayek, Spurning Keynes
#8Austrian economics always struck me as kind of hand wavy. I never made it more than 1/3 of the way through the Wikipedia article on it before realizing I didn't know what it was talking about. Does Austrian economics make an testable predictions? Is it based on empirical data? Does it have models? It seems more like a statement of beliefs to me. What am I missing?
They make predictions, but they tend to be more qualitative and less useful for central control than Keynesian policies.
The main reason for that is Keynesian economics reduces the many sectors of our economy to a few simple aggregate quantities - e.g., rather than having demand for housing, demand for pizza, demand for computers, we simply have "aggregate demand". An uncharitable person would say that this is simply because Keynes was not very good at math.
If you simply do this calculus, we should never have a recession. Therefore, Keynesian economics assumes these curves behave in certain tricky ways - this imposes recessions and stimulus comes out as the remedy.
Austrian economics, or at least their more modern variants, does not accept the reduction of a complex economy to simple calculus. It views recessions as being caused by misallocation of resources between sectors (i.e., too much housing, too little something else) and recessions as being caused by a lag [1] in re-adjustment. Fine tuning such a complex system is tricky (not to mention many parameters are unknown), and most predictions would simply be qualitative. Such a system is also not amenable to simple calculus (you need big ODE/graph models), which makes it somewhat unpopular.
[1] An unemployed construction worker may be unwilling to accept a non-construction job or to leave his hometown. Or he may be willing to make such a move, but not know where to move to. Until his attitudes change or he becomes more knowledgeable, he remains unemployed.
Re: Spreading Hayek, Spurning Keynes
#9'Peter J. Boettke, shuffling around in a maroon velour track suit or faux-leather rubber shoes he calls "dress Crocs," hardly seems like the type to lead a revolution.'
The Austrian school is not new. Why does Boettke have to be leading a 'revolution' to justify the article? It should be enough to be interesting. Or even just right.
Re: Spreading Hayek, Spurning Keynes
#10Austrian economics always struck me as kind of hand wavy. I never made it more than 1/3 of the way through the Wikipedia article on it before realizing I didn't know what it was talking about. Does Austrian economics make an testable predictions? Is it based on empirical data? Does it have models? It seems more like a statement of beliefs to me. What am I missing?
http://johnquiggin.com/index.php/archives/2009/05/03/austria... Also, http://www.marginalrevolution.com/marginalrevolution/2010/04... And, this is the most readable, but keep in mind that it's written by a Keynesian: http://www.slate.com/id/9593 Austrian economics, at its core, is based on praxeology and mostly rejects models, math and science. http://en.wikipedia.org/wiki/Praxeology
Praxeology doesn't reject models or science at all. It rejects reductionism - the claim is that you can't predict human behavior in a complex system based on observations of human behavior in simplified systems.
Praxeology simply claims that you can't predict the economy based on experiments where you stick 30 college students into some iterated prisoner's dilemma scenario.
Austrians strongly favor models, math and science. They just want robust models which are not sensitive to parameters, and econometrics of revealed preferences rather than highly controlled experiments.