Thursday, September 2, 2010

This deserves its own post...

From commenter "stickman" on the Tom Sargent blog post (I couldn't agree more):

"In a (quasi) related note... I started watching the following Leo Roysten interview with Hayek yesterday:

In answering a question starting about his intellectual development from the surroundings of Fabian socialism (+/- 3.55min mark), Hayek says: "... Both the Marxists and Freudians had the dreadful habit of insisting that their theories were irrefutable; they [were] logically and absolutely cogent... And that led me to see that a theory that cannot be refuted is not scientific..."

The funny thing is that this is almost exactly how I feel about the praexology crowd - or, at least a large portion of them. I'm not disputing the logic of Mises' general assertion that people undertake conscious actions to improve their situations (a claim completely unremarkable in of itself), but I certainly see problems of application and, of course, broader issues of falsifiability.

So much of Austrian economics seems, to me at least, wrapped up in an infinitely tight tautology. "These are the inviolable tenets of human action; only they can explain the economic phenomena that we observe in the world around us." I really sense a severe intolerance of other ideas, opinions or methods (in this case, mathematics), which I find pretty startling.

Gotta run now - so don't have time to expand - but I'll just leave this as food for thought.

Of course, I'm certainly open to having my misgivings corrected if some you think I've unfairly interpreted the principles of Mises. But I'm not particularly sure I'll be swayed on the mindset of a large section of his followers."


  1. Wow - listen to the whole thing. This is a great interview.

    I respect Hayek for a lot of things - indeed, he's probably the Austrian I respect most. But he is bafflingly bad on methodological questions. I have two or three points already that I find completely wrong-headed, all dealing with his confusion on methodological questions. Listen to it - see what you think - and maybe I'll get around to writing this up in a future post.

  2. "I really sense a severe intolerance of other ideas..."

    You could say the same thing about evolution or Newton's three laws.

    Intolerance of "The Stupid" isn't really intolerance.

  3. Hayek was not a praxeologist. Neither is Reisman. This its one more reason why Hayek its not received well in the Mises/Rothbard community.

  4. ...and its one more reason why he was recognized as making a significant contribution to our understanding of the economy with a Nobel prize, while Mises and Rothbard were not.

    Oh right... they don't understaaaaand!!!!!!

  5. Actually, Hayek never quite understood why he was awarded a Nobel prize ... though he speculated it was partly a politically influenced award so that Myrdal could get enough votes in order to win the prize. So it likely has nothing to do with his views on praxeology.

  6. I don't think you can go as far as to claim that Hayek was not a praxeologist. I think, for the most part, he was. The main difference was that he believed theory could be refuted through empirical observation (i.e. if your theory did not explain the events it was set out to explain then it's not correct), in the sense that it meant that there was some gap in the logic.

    Nevertheless, Hayek's methodology was completely influenced by Menger and Mises.

  7. Daniel,

    "...and its one more reason why he was recognized as making a significant contribution to our understanding of the economy with a Nobel prize, while Mises and Rothbard were not."

    I'm not sure if this is a serious comment.

  8. To be clear, I don't think Hayek isn't a praxeologist (honestly - I don't really know what I would respond if someone asked me if he was).

    I do think he makes points that stricter praxeologists could learn from.

    Xenophon - I also know that praxeology had little to do with the Nobel - that was more of a jab at Mattheus :)

    I find the point about Myrdal interesting. If anything I would have guessed that the Nobel committee recognized the real contributions of Hayek, but were afraid of the political implications of choosing him, and therefore chose the relatively less illustrious Myrdal to balance him out.

    Myrdal was an important public figure and intellectual. He spoke wisely to many important issues - Asian development, racial issues in the United States, etc. - but I don't think he really revolutionized economics and I think that was quite clear at the time too. Hayek was the superstar of the 1974 award - even at the time, not Myrdal.

  9. "I'm not sure if this is a serious comment."

    Its not :)

    Granted - if I were on the Nobel committee I would consider Hayek and I would not consider Mises or Rothbard - but I'm not under the impression that the methodological point that Mattheus raised had anything at all to do with it - that was just a jab.

  10. I'm suggesting that from a nationalist perspective a section of voters wanted to give it to Myrdal (or that is Hayek's claim), but they had to tack on Hayek to do that. Anyway, read Eberstein's bio of Hayek and make up your own mind.

  11. @ Mattheus
    "Hayek was not a praxeologist."

    Yup, that's why I was focusing on Mises.
    (It certainly doesn't detract from the irony. In fact, I kind of feel that it reinforces it...)

    @ Xenophon
    "You could say the same thing about evolution or Newton's three laws... Intolerance of "The Stupid" isn't really intolerance."

    Come on, dude... That's an unconvincing metaphor. Mainstream economics – for lack of a better description; I loathe using terms like "mainstream" – is certainly not a medieval, Church-sponsored pit of ignorance. (And I've read several Umberto Eco books, so I'm, like, totally smart and in the know about this kinda stuff.)

    There have been a huge number of very intelligent and capable people that have studied, argued and debated, agreed and disagreed, and, ultimately, advanced the field of economics with this "mainstream" (cringe) banner over many decades. To be honest, the more I look into the underpinnings of the different schools of economic though, the more I notice broad agreement about important issues; something I find eminently reassuring... Not all the issues of course; there are clearly some pretty major disagreements, although that is a topic for another day. (I think Daniel has done good service discussing some of these issues on this blog.)

    Talking directly to the dogmatic praxeology I referenced earlier; to dismiss an entire catalogue of economic theory out of hand because it embraces mathematical formulation or, worse still, seeks empirical validation for its claims... To me, this is tantamount to preaching wilful ignorance. It is an almost perfect case of epistemic closure.

  12. * schools of economic thoughT

  13. By the by... I recall reading somewhere that Myrdal thought it an insult to have shared the Prize with Hayek, whom he considered a "reactionary". (Not sure exactly what he meant by that though.)

  14. Stickman,

    It was just a jab.

    Myrdal also included Friedman in the "reactionary" category. Which basically means anyone who doesn't believe in my panopticon state.

  15. good word!!!!!

    You still have our Foucault exchange on the brain, don't you?

  16. @ Xenophon

    Apologies for being sensitive. To quote the best film of the last fifteen years: that was me being very "un-dude".

    Guess I just wanted some justification to expand upon my original point ;)

  17. Actually, I was thinking more of Scott's "Seeing Like a State." Legibility, etc.

  18. Wasn't Myrdal always bitching about how he came up with the main details of "The General Theory" ten years before Keynes?

  19. eh - tell it to Foster and Catchings.

    I hadn't heard of that - I might look into that. I don't know Myrdal very well, personally. I'm not even sure what he ostensibly won the prize for.

    There are a lot of claims about beating Keynes to the punch floating around out there. In the end, all miss or omit pieces. The bulk of the story, of course, long preceded Keynes. It's amazing how Keynesian a lot of the 18th century American monetary theorists covered by Dorfman sound. That's a little early for the demand insights - but all the liquidity preference pieces are already there. By Malthus at the latest you have the demand piece.

    I think the only person that really has a claim to beating Keynes to the full Keynesian system might be Hicks - but then again, he waited too long to publish. And who knows if he "beat him" to the idea itself. Keynes had it all floating around in his head for awhile. But I would certainly credit Hicks with being a co-discoverer of what we now label "Keynesian economics".

  20. that's just some armchair history of thought for you... i'm always interested in clarification and additional information. That's just what I've personally pieced together.

  21. See this:

    "L. Albert Hahn was influenced early on by L. Lincoln Hausmann's The Gold Craze, which anticipated Keynesian inflationary theory; in 1920, Hahn published Volkswirtschaftliche Theorie des Bankkredits (Economic Theory of Bank Credit). Although this book never became as popular as John Keynes's General Theory, probably due in large part to the difference in timing — Keynes's magnum opus was published in the midst of the Great Depression — L. Albert Hahn nevertheless developed many of the theories Keynes would later claim as his own. Hahn himself compared Economic Theory of Bank Credit with The General Theory while writing The Economics of Illusion. Ironically, as detailed below, The Economics of Illusion was his dedicated critique of Keynesian theory."

    I don't know of an English translation of Hahn's book, so unfortunately my article doesn't really get into much more detail than that.

  22. What do you suppose they mean by "Keynes's inflationary theory"?

  23. Hayek was basically a critical rationalist and evolutionary epistemologist, at least later in life. Everything he says pretty much makes sense when interpreted in that context. In The Fatal Conceit he cites Karl Popper as someone who he usually agrees with philosophical issues. That same book was edited (and almost co-authored) by W.W. Bartley, one of Popper's students, and a strong advocate of critical rationalism.

  24. "Everything he says pretty much makes sense when interpreted in that context."

    Yes, but the jury is still out about why the praxeology crowd cling to their perfectly circular arguments.

    (For what it's worth, I think it's pretty clear that my original point is positively dripping with Popperian thought.)

  25. And Lee Kelly has made similar points on here w.r.t. praxeology - I'm not sure there's necessarily an argument there.


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