If Hayek and Bastiat were econometricians, what kind of data and analyses would they run? Which major, well known datasets would each use?
I've been thinking about this recently and I may try to write up a little note on it, but it seems somewhat odd to me. When you think about it, it's kind of strange that Hayekians like Bastiat so much. Hayek makes a big deal about using aggregated data, and presumably he would prefer to use microdata to explain economic processes at a less aggregated level.
Bastiat of the broken window, on the other hand, is a classic macroeconomist. He knows that there are spillover effects which cause macroeconomic elasticities to be different from microeconomic elasticities. He knows that if you don't have a solid counter-factual you're screwed. He knows that if you restrict yourself to disaggregated data, you're going to get excited about new employment for the glassmaker but miss the falling employment for the shoemaker.
So why do Hayekians like Bastiat so much? They seem to be at different ends of the aggregation question. I think this contradiction would be more apparent if more Austrians did empirical work, but since they largely don't it often gets glossed over.
Anyway - I was thinking about this yesterday when I revisited some half-finished work on a job creation tax credit paper I've been working on for the last year. I use macro data, because that's what's available - and I came across LaLonde and Smith's (1999) chapter in the handbook of labor economics arguing that macro data is really the only appropriate data to use to get impact estimates for labor market programs - precisely because microeconomic experiments that are so common overlook the problem of spillovers, displacement, and crowding out. LaLonde and Smith (1999) tell a very Bastiatian story.
Anyway - I welcome thoughts. And let's play pretend here - no comments about how these two would never be econometricians. But it seems like they are fundamentally at odds, and that's been concealed because of how Austrian economics gets done.
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