April 2, 2016

Austrian blather

Reply to Major.Freedom on 'Fiscal multiplier studies — it's far worse than I thought'


(i) I did not ask you for a “good piece of advice”, so do not pester me with it.

(ii) My pivotal point is that there is NO such thing as a BEHAVIORAL AXIOM in economics because axioms have to be ‘certain, true, and primary’. This is definitively not the case with the maximization axiom HC3 of Neoclassics and the action axiom of Praxeology.

Strictly speaking, a ‘behavioral axiom’ is an oxymoron. This has been known to scientists of all ages: “The bifurcation of motion into two fundamentally different types, one for natural motions of non-living objects and another for acts of human volition ... is obviously related to the issue of free will, and demonstrates the strong tendency of scientists in all ages to exempt human behavior from the natural laws of physics, and to regard motions resulting from human actions as original, in the sense that they need not be attributed to other motions.” (Brown, 2011, p. 211)

From the general proposition that human action is original or, alternatively, target-oriented with any number of possible targets NOTHING specific follows. So, after the first step one is already at the end of the road.

This in turn explains why Praxeology is a failed approach: “Now, at any rate, we have an explanation for why the assumptions of economic theory about individual action have not been improved, corrected, sharpened, specified, or conditioned in ways that would improve the predictive power of the theory. None of these things have been done by economists because they cannot be done. The intentional nature of the fundamental explanatory variables of economic theory prohibits such improvement.” (Rosenberg, 1992, p. 149)

For cogent methodological reasons: (1) economic theory cannot be built upon a behavioral assumption like the maximization axiom or the action axiom or any other, for that matter, and (2), as a matter of principle, NO way leads from the explanation of individual human behavior to the explanation of how the monetary economy works. Because of this, ALL subjective-behavioral approaches are bound to fail.

(iii) You say about the action axiom “It is IMPOSSIBLE for it to be proven false.” Obviously, you did not realize that this is NOT a strong point but, just the contrary, the very antithesis of science: “But a method that can explain everything that might happen explains nothing.” (Popper, 1960, p. 154)

To recall, when the ancient Greek thinkers, who invented science, heard a man saying “I can explain everything, Zeus did it, and you cannot prove me wrong” they showed him the way to the temple and threw him out of the academy.

(iv) This thread is about testing. As long as Austrians cannot produce a testable proposition about the overall profit of the monetary economy they have nothing worthwhile to say. Who does not understand profit understands nothing. Folk psychology is not economics.

(v) I do not engage in criticizing Praxeology or Austrianism. I understand that there must be something like an economics for the scientifically retarded and I am quite content that you faithfully stick to it.

(vi) If you wish to prove the structural-axiomatic approach wrong it suffices to empirically refute the Profit Law. All else is obsolete Austrian blather.

Brown, K. (2011). Reflections on Relativity. Raleigh, NC: Lulu.com.
Popper, K. R. (1960). The Poverty of Historicism. London, Henley: Routledge and Kegan Paul.
Rosenberg, A. (1992). Economics - Mathematical Politics or Science of Diminishing Returns? Chicago, IL: University of Chicago Press.

Immediately preceding post 'The futility of testing economics blather'.

Related 'Hayek was not an economist'.

REPLY to Major.Freedom on Apr 2

You say: “It [Praxeology] is strictly a theory of human action.” It is obviously beyond your horizon that human action is the realm of the so-called social sciences (psychology, sociology, anthropology, political science, history, etc.). Economics is about the behavior of the monetary economy. So, economics is a system science (2014). The so-called social sciences have been accurately characterized by Feynman as cargo cult sciences (see Wikipedia). Praxeology is a case in point.

So there is no need at all to clarify the finer points of Praxeology just as there is not need to quarrel about whether geo-centrism worked with 20 or 25 epicycles because geo-centrism has been buried long ago and everybody — except flat-earthers and Austrians — understands by now that epicycles are nonentities like angels and the Easter Bunny.

You say: “But we are not God, and we are not superhuman. We are human.” Trivially true, but not much follows from brain-dead tautologies.

Folk psychology and the "subtle and sophisticated process of self-reflection" is not economics. Praxeology is scientific garbage and more is not to say about it.

Science is well-defined as formal and empirical consistency (Klant, 1994, p. 31). No genuine scientist ever had a problem with this definition. Curiously, those who are known not to have produced one tiny piece of science can exactly explain why the scientific method does not work.

Here is the collection of the most ridiculous excuses: “Economics is a strange sort of discipline. The booby traps I mentioned often make it sound as it is all just a matter of opinion. That is not so. Economics is not a Science with a capital S. It lacks the experimental method as a way of testing hypotheses. . . . There are always differences of opinion at the cutting edge of a science, . . . . But they last longer in economics . . . and there are reasons for that. As already mentioned, rival theories cannot be put to an experimental test. All there is to observe is history, and history does not conduct experiments: too many things are always happening at once. The inferences that can be made from history are always uncertain, always disputable, . . . You can’t even count on a long and undisturbed run of history, because the ‘laws’ of behavior change and evolve. Excuses, excuses. But the point is not to provide excuses. (Solow, 1998, pp. x-xi)

The obvious explanation is missing: scientific incompetence of economists. The first thing to understand is that there are no ‘laws of behavior’ but that there are objective and testable systemic laws.

After more than 200 years economists can still not tell the difference between profit and income. Economics is at the level of medieval physics before the concept of potential and kinetic energy was properly understood. Austrians, too, cannot explain how the economy works but they have any number of excuses of why they have achieved nothing of scientific value.

You say: “We’re pigeons playing chess, pooping on the board and flying away.” Again trivially true, dear Austrians, but now take your poop and play somewhere else. As Shaw put it "People who say it cannot be done should not interrupt those who are doing it."

Kakarot-Handtke, E. (2014). Objective Principles of Economics. SSRN Working Paper Series, 2418851: 1–19. URL
Klant, J. J. (1994). The Nature of Economic Thought. Aldershot, Brookfield, VT: Edward Elgar.
Solow, R. M. (1998). Foreword, volume William Breit and Roger L. Ranson: The Academic Scribblers. Princeton, NJ: Princeton University Press, 3rd edition.

Immediately following post 'The zombie wars are over'.