Daniel Hausman is an influential philosopher of economics, and in a recent interview in the New York Times, he has much to say that will be of interest to Austrians. He agrees with Austrians that economists cannot predict particular events: “Scientists (and I include economists) are not fortunetellers.” His reason for holding this view. though, differ from that of Mises and Rothbard. Praxeology, according to them, deals with the general features of every action rather than with particular actions. Hausman, by contrast, sees economics as an “inexact science” that limits itself to only a few causal factors. For praxeologists, economic theory is deduced from an incontrovertible axiom; but for Hausman, only empirical testing can show whether a theory is true. Unfortunately, he thinks, it is almost impossible to reach a verdict: “As a philosopher of economics, I have the benefit of knowing some economics and also of having reflected on the formidable difficulties of establishing or refuting economic theories. There’s no way to look at what happens in the economy and conclude with confidence that some economic theory is true or false.”
Hausman makes an important point about value judgments in economics. Many economists assume that their policy advice is value-free. They are simply trying to tell people how best to satisfy their preferences. Hausman locates an unstated assumption in this approach: “Since economists regard people’s preferences as motivating their choices as well as indicating what is good for them, they evaluate policies almost exclusively by examining how well they satisfy people’s preferences.” As Hausman rightly notes, this is not the only possible criterion to assess policy. Freedom, rights, and justice, e.g., are not reducible to people’s preferences.
Austrians will be unhappy not only with Hausman’s claim that “Ben Bernanke’s grasp of macroeconomics arguably prevented a second Great Depression after the 2008 global crisis” but also with his apparent lack of awareness that this assessment is controversial.
