I'm curious how many here have read the alternatives?

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EconomistInTraining replied on Fri, Jun 17 2011 7:08 PM

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Thanks for thee birthday wishes, indeed I do get the feeling we're arguing past each other. Or perhaps now I'm retreating with my tail between my legs in the face of two people agreeing with each other, both of whom are quite a bit more educated than one another (that's what I get for using a physics analogy out of ignorance I guess!)

But let me try to restate my postition a little more clearly, I think you can (and modern economic theory does) state a few laws about human behaviour, my first example would be diminishing marginal utility (something Austrians agree with) that are self evident and should be taken as axioms. But other than that I don't think there are too many other laws of human behaviour, there are empirical regularities and assumptions that we can make, but it seems to me (and correct me if I'm wrong) there are many more laws in physics than there are in economics. After this its necessary to applies this little economic theory combined with some empirical observations or assumptions to specific situations in the form of a model, using statistical methods to find the fit of the model. To take an earlier example I used, look at IO, if we come up with model in which one firm moves first by deciding the quantity it will produce and whether or not to merge and make a few reasonable assumptions about costs then you can come up with a model that does a pretty good job explaining merger waves. Of course, this model omits plenty of factors and its up to empirical methods to decide whether those missing factors would change the implications in any meaningful way, of course the name of firm for example wouldn't. Moreover, basic economic theory is important in all of this. If you change the basic facts of economic thinking such as diminishing marginal utility the demand curve would be very different etc. 

But the fact remains that without some heavy empirical work about how firms set prices or how firms interact (sequential or not) you're basic facts of economic reasoning aren't going to get you much mileage. I guess the key point I'm making is that we need an interaction between theory and empirics that I think Austrian economics is a little short on. You start with some very basic facts and then use these to explain empirical phenomena, you develop a model and put it to the test against the data and then see how well it does. No doubt, you fail to explain something and then you use the existing body of economic theorizing to look at why. You change to model and put it to the test again, and so on and so forth. And this is how we can expect our body of economic knowledge to grow.

By the way, I read this recently and found it interesting, maybe you might too: http://economiclogic.blogspot.com/2011/03/modelling-without-theory.html

I don't think I've said this yet (and maybe even called you a little arrogant) but I actually enjoy your posts, they're informed and cause me to think pretty deeply over these issues more than most of the stuff on this forum (even if you're still wrong :p) so props to you for that. 

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EconomistInTraining replied on Fri, Jun 17 2011 7:26 PM

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I wasn't necessarily agreeing with your assertion.  I was just pointing out how you refuse to even mention that Austrian theory is the most caricatureized of any.  What is the point of accusing a wrong that you yourself are guilty of?  Even if the other side is guilty as well, how in the world does that help your case?  You seem to think that "two wrongs don't make a right" is a valid trump of being a pot calling a kettle "black."

I agree Austrian economics is caricatured, and I don't think "two wrongs make a right" is a valid trump of being a pot who happens to be calling a kettle African American. Of course, I do think that if Austrians want to be taken seriously they should start taking their opponents seriously, you guys are only making yourselves easier to dismiss by attacking ridiculous strawmen of modern economics.

Seriously, is the Internet getting so crowded that teenage girls are spilling over into economics forums?

If only attractive (late) teenage girls well spilling over in economics forums! But seriously, I didn't really want to get into an inane bout of quibbling over who has mentioned Keynes and when. For what its worth, the data is that there's at least ten pages of Mises daily articles mentioning Keynes, so he's definitely somewhat talked about on t hese parts of the internet.

1) You have no idea who I am or what I've read.  You really don't want to go there.

2) I wasn't asking for examples of "a decent Intermediate Micro/ Macro II book".  I was asking for examples of this "lot of stuff that flies well under the radar of most Austrian discussion".  Please provide some specifics as to significant and important aspects of economics that are found in intermediate textbooks that are ignored in Austrian discussion.

Actually, I kinda do want to go there. See, asbkebabs has credibility because he's taken courses in the stuff that he disagrees with. If you've not done the same then I think I'm going to assign a little less crediblity to your arguments when updating my priors! So please, list the classes in economics you've taken or at least the textbooks you've read. If the list is to extensive a represenative sample of your economics education will suffice.

Basically any model in macro besides IS-LM, every model in IO, a whole bunch of awesome micro stuff and a lot of the stuff in public economics (except the stuff that suits libertarians, like rational voting, log rolling and the rest of public choice). Like I said, the list is pretty big so you'd best go check the textbooks yourselves, who knows, you might learn something. 

Austrians don't have problems with thought experiments.  They have problems with forming policy based on untrue assumptions.

Austrians make assumptions true, such as "firm names don't count that much when you're trying to explain a recession" or "color of headquartes of firms doesn't explain differences of wealth all that much". They're pretty realistic and common sense, but they can't be deduced from any axiom. That's the thing though, you can't tell how important these assumptiond are unless you actually take a lot at the data, which I don't think Austrians do enough.

By the way, Austrian economics does make unrealistic assumptions. Like, the fact that people only have one discount rate is kinda not true according to most experimental/ behavioural research.

Which recession are you asserting Austrian theory did not predict or cannot explain?

I'm asking you to show which ones it did explain rather than blithely asserting it!

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z1235 replied on Fri, Jun 17 2011 7:29 PM

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EconomistInTraining:

But other than that I don't think there are too many other laws of human behaviour, there are empirical regularities and assumptions that we can make, but it seems to me (and correct me if I'm wrong) there are many more laws in physics than there are in economics.

So what? Must non-existent laws be invented just so papers can be published and academic careers maintained?

No doubt, you fail to explain something and then you use the existing body of economic theorizing to look at why. You change to model and put it to the test again, and so on and so forth. And this is how we can expect our body of economic knowledge to grow.

In real sciences that's called curve-fitting and it's useless most of the time. It's used by pseudo-scientists to make themselves look sophisticated and scientific in layman's eyes. And to publish papers, of course. Every new curve-fit, accomodating fresh data, is a justification for yet another paper that "improves" on the ones before. 

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EconomistInTraining replied on Fri, Jun 17 2011 7:31 PM

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I'd like all of the elusive commentators that pop up here frequently with hit and run posts about math to start giving their background.  Mine:  I won an award for the highest math score in my county and generally pretty much aced math all through school (random calculation errors and all that) while skipping grades.  "Wild" guess: they are all Joe Average.  (Minus sarcasm: I guarantee they are internet posers.)

Well, here's my background. I'd say I'm an individual of above average intelligence who is pretty curious about all economics and all that stuff and enjoys the course he's taking. Of course, while I do enjoy quibbling over these things on the internet from time to time, I have other preferences that get in the way of really mastering the subject or getting good grades. These include, but are not limited to drinking beer, playing tennis & golf, eating good food, chasing tail and getting in some quality broments. 

Posing over! 

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Caley McKibbin replied on Fri, Jun 17 2011 8:54 PM

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I was talking about people like claudius (p.1).

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archon replied on Wed, Jun 22 2011 8:00 PM

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True... no one "school" of economics is perfect, but Austrian is much closer than Keynes.  I, for one, think the greatest benefit to society from this current economic recession/ depression/ whatever is that Keynesians are almost completely discredited by their failure either to predict it or to fix it.  I don't recall any Keynesians who saw it coming, and the Keynesians who tried to fix it all failed in their predictions that spending $3 trillion would make it better.  Quite the opposite - the economy seems to be worse off after all that extra government spending.

Of course, I don't expect the Keynesians to admit failure... like Krugman, they'll all say it didn't work because the government didn't spend *enough* - "It would have worked if we spent $8 trillion instead of $3 T".