Wednesday, November 20, 2013

A Simple Question for Austrian Apriorists

The Austrian school is famous for its apriorist economic method called praxeology. This, in its Misesian form, takes up the notion of Kantian synthetic a priori knowledge and holds that praxeology can arrive at economic theories that describe reality and in an a priori manner with necessary and apodictic truth, so that empirical evidence cannot refute praxeological theories.

A simple question can demonstrate the absurdity of his approach:
Can you sit in an armchair and use deduction from the action axiom to determine how all prices are actually set in real world capitalist economies and with apodictic truth?
The notion that anyone can do this is just ridiculous, and anyone who claims they can would quickly be shown to be deluded and mistaken.

One can no doubt construct abstract analytic a priori models, but those models must be given an empirical hearing and checked against reality to determine whether they do in fact describe the real world.

The point is that the really interesting and important questions about real world market economies can only be determined by hard empirical research and study, not by mere deduction from a few trivial axioms.

For more on Austrian praxeology and its failings, see here.

30 comments:

  1. This just drives me crazy about these guys. We can't be wrong, we don't need evidence, do as we say or it's a disaster. Absurd.

    Equally absurd is their insistence that only they use or understand counterfactuals! I have seem them repeatedly assert that engineering, physics, biology never use counterfactuals, as if saying "the shuttle exploded because the O ring froze" isn't one. They only see ceteris paribus as a logical get out of jail free card.

    I like Keshav Srinivasan's question: why hasn't anyone formalized Austrian axiomatics? Then non-Austrians can check their rigor.

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    1. "I like Keshav Srinivasan's question: why hasn't anyone formalized Austrian axiomatics?"

      That is the key question, to which the answer is: they simply cannot.

      When Mises's Human Action was first published, one astute review called G. J. Schuller pointed out:

      “Acceptance of Mises’ stated axioms does not necessarily imply acceptance of the ‘principles’ or ‘applications to reality’ which he has drawn from them, even though his logic may be impeccable. When a logical chain grows beyond the limits set by stated assumptions, it uses unstated assumptions. The number of unstated assumptions (axioms, postulates, or other) in Human Action is enormous. If Mises denies this,let him try to rewrite his book as a set of numbered axioms, postulates, and syllogistic inferences using, say, Russell’s Principia or, closer home, Von Neumann’s Theory of Games as a model” (Schuller 1951: 188).
      Schuller, G. J. 1951. “Mises’ ‘Human Action’: Rejoinder,” American Economic Review 41.1: 185–190, at p. 188.
      ---------

      This is one of the most devastating points against Mises's praxeological method ever made.

      If modern Austrians think that every praxeological theorem is derived by valid and formal deduction from the action axiom, why can't it be formally set out in clear deductions with every axiom and premise given?

      Contrast praxeology with a real analytic a priori system like Russell and Whitehead's Principia Mathematica.

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    2. Ah Lord Keynes,i don´t think they need to argue at all in future they lost that battle long ago.They changed tactic,and i even fear they might use force in the future! Here you have the new kind of Austrian schoolers:
      Ex-Pro Wrestler Kane Re-invents Himself As An 'Austrian Economist'
      http://www.youtube.com/watch?v=YrwoSKSAvYk

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  2. Its obvious you have never read Human Action. Perhaps some parts here or there, definitely not in its entirety and most likely from other sources that quote it. The Austrian school explicitly acknowledges aposteriori. You should read Hoppes "Praxeological Foundation of Epistemology."

    "Everything which is not an action must necessarily be categorized causally. There is nothing to be known a priori about this range of phenomena except that it is structured causally—and that it is structured according to the categories of propositional logic, arithmetic and geometry. [66] Everything else there is to know about this range of phenomena must be derived from contingent observations and thus represents aposteriori knowledge. In particular, all knowledge about two or more specific observational events being causally related or not is aposteriori knowledge. Obviously, the range of phenomena described in this way coincides (more or less) with what is usually considered to be the field of the empirical natural sciences"

    The problem with this blog - unlike say Consulting by RPM - is that you first misrepresent your opponents position - because you clearly have not studied it appropriately or you just dont understand it - and proceed to attack straw men.

    I think Lord Keynes has very insightful points some times and I dont intend offense but truth be told - for Lord Keynes benefit - this blog is flat out embarrassing sometimes.

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    1. I am well aware that Austrians accept the empirical method in the natural sciences and certain other areas, but unless you're saying that praxeology isn't an apriorist system, then it is only you who are showing us your ignorance here.

      "The problem with this blog - unlike say Consulting by RPM - is that you first misrepresent your opponents position "

      I see! So Misesian praxeology does not claim to be apriorist and Mises never said that no empirical evidence can refute praxeological theorems?

      Only he did:

      “Praxeology is a theoretical and systematic, not a historical, science. .... Its statements and propositions are not derived from experience. They are, like those of logic and mathematics, a priori. They are not subject to verification and falsification on the ground of experience and facts. They are both logically and temporally antecedent to any comprehension of historical facts. They are a necessary requirement of any intellectual grasp of historical events” (Mises 2008: 32).

      “Even the most faithful examination of a chapter of economic history, though it be the history of the most recent period of the past, is no substitute for economic thinking. Economics, like logic and mathematics, is a display of abstract reasoning. Economics can never be experimental and empirical. ” (Mises 2008: 864).

      “What assigns economics its peculiar and unique position in the orbit both of pure knowledge and of the practical utilization of knowledge is the fact that its particular theorems are not open to any verification or falsification on the ground of experience. Of course, a measure suggested by sound economic reasoning results in producing the effects aimed at, and a measure suggested by faulty economic reasoning fails to produce the ends sought. But such experience is always still historical experience, i.e., the experience of complex phenomena. It can never, as has been pointed out, prove or disprove any particular theorem.” (Mises 1949: 858).

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    2. "The problem with this blog - unlike say Consulting by RPM - is that you first misrepresent your opponents position "

      Taking as a point of reference the first article on consulting at this very moment.

      http://consultingbyrpm.com/blog/2013/11/blog-steal-krugmans-kollapsing-klaims-about-healthcare.gov.html

      “But the future of the reform depends not on policy per se but on whether the IT issues can be fixed well enough soon enough, a subject on which I have zero expertise.” ~ Krugman

      "There we go…Krugman has no clue. He had no business saying that anything would work. It took almost 2 months, but he got there." ~ Rossini

      "Flawless victory" ~ Murphy

      This is a pretty obvious miss-representation of position, Krugman says he doesn't have expertise in IT projects (which has the benefit of being a true statement) and Murphy implies he says he has no expertise in policy. Of course the dopes at Murphy's blog are all lapping it up with glee.

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    3. Murphy's fans are some of the worst know-nothings you'll find anywhere.

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    4. They really are. It's sometimes truly astounding the level of ignorance. One poster has used his computer to upload to a server the argument, which is then transmitted to my computer, that machines do not communicate information. I don't know how many times I've had to explain very simple ideas evolutionary biology, over and over.

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    5. At one point in time I thought of collecting the howlers. But eventually they were just too many of them. The south did not want to extend slavery, chamberlain was right at Munich, lend lease was a bad idea, Man did not evolve, biology is not a science, science does not involve empirical testing, all mathematical axioms are true, and the list just goes on and on

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    6. Ken B,

      I am entirely sympathetic to anyone who is reduced to utter exasperation by these people and their irrationality and ignorance.

      Take a look at M_F's comment here:

      http://consultingbyrpm.com/blog/2013/11/fellow-rothbardians-the-jig-is-up.html#comment-83431

      It is completely incoherent, as far as I can see.

      He is saying there is no such thing as a actual market clearing price/level to which a price can fall or rise to, but then says that "ALL prices and price changes tend towards clearing."

      If that is so, to what do they "tend" towards?

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  3. "The point is that the really interesting and important questions about real world market economies can only be determined by hard empirical research and study, not by mere deduction from a few trivial axioms."

    No, they can't be established rigorously at all because economics is a social "science".

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  4. Master Keyns, I found very important information:

    pages 34 - 37 about interventionist bents Menger and Bov Baverk.

    http://library.mises.org/books/Ralph%20Raico/Classical%20Liberalism%20and%20the%20Austrian%20School.pdf

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    1. Dear Lord Keynes, you're mistaken with Izzy Marmolejo that Menger was a liberal in the economy.

      Here, read:

      Appendix: A Note on Carl Menger's Social Philosophy

      http://mises.org/daily/4113

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  5. Yes once again Mises is correct. "Things", whether pieces of money or baseball cards or anything else can never 'act' - they cannot set prices or supply/demand schedules. All this can only be done by 'Human Action' - individual actors decide. The only knowledge of determinants of individuals can only be deduced from praeological axions. You can use empirical research and gather facts of price movements up or down here or there but thats statistics and econometrics not economics.

    Rothbard:
    "Aggregative economics is a drastic misrepresentation of reality. The aggregates are merely an arithmetic cloak over the real world, where multitudes of firms and individuals reach and interact in a highly complex manner. The alleged "basic determinants" of the Keynesian system are themselves determined by complex interactions within and between this aggregates...

    The breakdown of the economic system into a few aggregates asumes that these aggregates are independent of each other, that they are determined independetly and change indepently. This overlooks the great amount of interdependnce and interaction among the aggregates..."

    Aggregates are meaningful only in the world of arithmetic not in the real world.

    Again, Rothbard:
    "The Keynesian theory is based on a 'model' of the economic system - a model that drastifcally oversimplifies reality...[the model] assume that the following things be considered as given(or constant): the existing state of all techniques, the existing efficiency, quantity, and distribution of all labor, the existing quantity and quality of all equipment, the existing distribution of national income, the existing structure of relative prices, the existing money wage rates, and the existing structure of consumer tastes, natural resources, and economic and political institutions..."

    See Rothbards "Spotlight on Keynesian Economics" Oct 20, 1947

    and the decimating "Fisher's Equation of Exchange: A Critique" Oct, 1952 that absolutely destroys the arithmetic fallacies in economics.

    The worst part about it is that Keynes so-called "Model" is not even new: its a butchered version of mercantilism, medievalism and silvio gessel with sprinkles of fascism and statist worship. Keynes wasn't an economist. He was a bureaucrat and a central banker and an anti-semite.

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    1. No, anonymous, you have not refuted anything I have said above.

      (1) "Things", whether pieces of money or baseball cards or anything else can never 'act'

      And who said they did? I certainly did not.

      If you actually assumed that I believe that prices move magically without human action, then you are quite clearly unhinged.

      (2) you have not refuted the quite clear argument that if you want to know how prices are set in the real world, empirical research is necessary.

      (3) "The only knowledge of determinants of individuals can only be deduced from praeological axions."

      So you think you can obtain absolutely certain knowledge of how prices are set in all markets by mere deduction from the action axiom? Is that correct?

      How, pray tell?

      (4) "You can use empirical research and gather facts of price movements up or down here or there" etc.

      You can ask businesses how they set prices and in a well sampled survey of firms.

      This is how we do in fact understand how prices are set.

      (5) the rest of your rant is wrong or worthless. The idea that Keynesianism thinks that all economic variables remain constant is just absurd.

      By the way, Hayek was also most probably an anti-Semite:

      http://socialdemocracy21stcentury.blogspot.com/2012/01/hayek-ethnic-bigot-and-perils-of-ad.html

      Do you think that means that all of Hayek's economic theories are now discredited merely because he was a racist bigot?

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    2. It doesn't matter how the firms set their prices. The fact is that they choose them. And consumers decide f they are willing to pay them. It still fits the praxeological method for action, choice, and exchange.

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    3. "It doesn't matter how the firms set their prices"

      If that were true, then most of the main theories of Austrian economics would simply collapse: the idea of a market tendency to full use of resources, the idea that recessions cure themselves, the Misesian position in the Socialist calculation debate, the idea that prices communicate information, etc. etc.

      You -- like many other Austrians -- are too dense to see this.

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    4. Dense...

      This debate certainly lends itself to that thought. I feel the same way. I guess, and I know this is a tall order, I think if you ever intend to convince an austrian that they're wrong and have been, you'd have to do a couple things that I don't think you've managed so far.

      1. Follow through either Human Action, or Man, Economy, and State, and pinpoint the moment in the logical structure where you find fault or disagreement and why. I wonder where do you begin to disagree, or if you ever agree. i.e. all voluntary exchanges are mutually beneficial. That's pretty early on in the chain. Are you still with the program at that point or do you deny this all together?

      2. You've got to do a better job of explaining to someone who ardently rejects the empirical method in economics, why the conclusions drawn from looking at data can't be rejected as speculative as they cannot prove much of anything without the ability to set up an experiment where there is only one variable. One where causation can therefore be applied with some level of certainty. Why should anyone trust speculative interpretation of statistics if it is the opposite of the logic?

      I think the debate rages on mostly out of stubbornness. Neither party is interested in giving up the theories they've spent years learning and developing. Even in the face of what seems to me on my end, and probably to you on yours, a coup de grace.

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  6. I cannot reply in place due to my browser. Nic the NZer is misrepresenting I think. The Krugman quote is preceded by claims *about programming fix timing* from Krugman. The charge is not that he has no clue on policy as Nic say but that *he has no clue on IT yet made reassurances about IT anyway*. This is an accurate charge. It's also unfair, since Krugman never claimed it was his assessment of the code that lay behind his reassurances, but reassurances others repeatedly gave.

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    1. Lol. Ken, it was completely accidental and I interpreted it how I thought it was intended to play to the Murphy audience, and you are absolutely correct.

      There is also this sentence from the original
      "Now that we have Healthcare.gov out of the way, let's build on this admission of ignorance. Let's move on to Economics...."

      I don't think its worth discussing though because this is hardly the most flagrant straw-man argument put up on the Murphy blog, and its absolutely hilarious what's going on there right at the moment on the same post.

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  7. LK (aka Darth Vader) & Nic
    They are going nuts over there! Just look at the responses to my rather mild and still Krugman-faulting notice that this isn't a real gotcha. Or MF's absurd response to Keshav.

    What I have pointed out to them repeatedly and they just don't get is that I am their target audience. I am a pro market civil libertarian who wants less govt. If they can't persuade me they are in trouble. And they seem to take pride in being so purist and doctrinaire that I am the enemy! Both funny and sad at the same time.

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    1. Ken B, don't you understand that to MF and co. everyone who isn't a Rothbardian is an "evil" socialist? :)



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    2. Nope. I am working so hard trying to understand the fundamental concept of economic calculation that I haven't time for anything else. I wasn't born in Austria is the problem; I hear only Austrians can grasp it.

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    3. The thread beginning "Since Krug has no IT expertise I will let him in on a little secret" is particularly funny. It starts out "The people hired by the guv, attempted to use Java, which simply means they tried to use YOUR computer to facilitate this" and then goes on to show Mr Gambles amazing IT skills. The only Java related issue with the site is apparently that an article about the problems was posted onto JavaWorld. None of the technologies mentioned have much to do with Java, the closest being Oracle which is related in that Oracle brought Sun a while back and owns Java technology. Notably however the Oracle database engine was not written in Java and existed years before Oracle brought Sun.

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    4. Is it just me or does Murphy seem to be getting crazier this week? Aside from the Krugman disaster, he's going on about Pangloss and conspiracies about JFK.

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  8. I don't think that many self-styled austrians actually understand terms such as "synthetic a priori" or "apodictic truth". But since austrians are after marxism the most politicized school of economics, they won't be persuaded by any rational arguments which conflicts with their ideology.

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