Thursday, April 15, 2004

Why I Am Not an Austrian Economist

I've just run across this page by Bryan Caplan, that gives a wonderful dressing-down of the whole Austrian Economics "school" of (confused) thinking. For what claims to be an alternative to mainstream neoclassical thought, Austrian Economics has remarkably little to say about economics per se, as opposed to its philosophy, its history, and other areas that are tangential to the meat and potatoes of the subject; in short, there's no there there. Anyone who can still argue, after reading Caplan's piece, that Austrian Economics represents any sort of alternative to the neoclassical mainstream, has got to have more than a few screws loose upstairs, though I'm sure it would be most entertaining to see some brave (or rather foolhardy) defender of Austrianism attempt a rebuttal.

Although I'm a libertarian by inclination, I'm not a dogmatist - I like to have firm reasoning and solid empirical evidence behind the positions I adopt - but I can see the appeal that Austrianism has for those for whom libertarianism is more akin to a religious dogma than a reasoned position. Life is so much simpler when one can just disregard all that bothersome trawling through econometric data, and one can do away entirely with all that nasty mathematical model-building, with its unpleasant penchant for turning up counter-intuitive results. For such people, who are only looking for a substitute religion, rather than an opportunity to see their ideas methodically developed, and possibly fatally critiqued, via careful reasoning, Austrianism, with its a priori dismissal of mathematical techniques other than the most elementary sort, is a godsend. The frightful alternative would be that some overweening egos might peer into a textbook like Rudin's Principles of Mathematical Analysis or Munkres' Topology, struggle in vain to understand, say, the distinction between Tychonoff spaces and locally compact regular spaces, and then come to the unacceptable conclusion that - horror of horrors - some things are simply beyond their intellectual grasp! No, that would never do, which is precisely why a priori dismissals of sophisticated mathematical techniques are so convenient.

PS: For those tempted not to bother actually reading Caplan's article, let me make clear that his attitude towards the use of mathematical techniques in economics is a lot less positive than mine; let there be no suspicion that I've cherrypicked a work by a cheerleader for mathematics in order to make Austrianism look bad. The way I see Caplan's take on the role of mathematics is that he doesn't really have a firm grasp of what mathematicians actually do if he imagines that intuition plays any less of a role for mathematicians in the initial arrival at insights. On the contrary, intuition usually preceeds firm proof by a considerable period, going on hundreds of years in some cases, Fermat's Last "Theorem" and Kepler's Conjecture being two cases in point. Where mathematical rigor as commonly understood does play a role is after the initial conjectures are arrived at, helping to turn gut insights into rock-solid results established for all time, and with a known degree of generality. The hope is that sophisticated mathematical techniques can play a similar role in economic research, and I've seen no decent explanation of why this hope must be a forlorn one.

PPS: This other essay by Bryan Caplan is also worth taking a look at. For one thing, it's a lot shorter and far less technical than the main one I've linked to above.