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Where I Learned All About Austrian Economics
This month, Cato Unbound has had a debate about, basically, whether Austrian economics is a pseudoscience. It was sparked by a blog post I wrote alleging, in part:
Austrian economists reject empirical analysis, and instead believe that you can reach conclusions about correct economic policies from a priori principles. It's philosophy dressed up as economics.
Several of the Cato debaters took shots at me, arguing that I am only pretending to have an awareness of Austrian thinking. Professor Steven Horwitz writes of my "a priori" claim:
To say so is to misinterpret what Mises meant by the word praxeology and therefore fail to understand what he recommended as the appropriate methods for economists. It is also to rely on interpretations of what people like Mises and Rothbard had to say, as well as the pronouncements of various advocates of Austrian economics on blogs and Internet forums, rather than engaging with the professional research being published in the peer-reviewed journals by practicing Austrians.
George Selgin adds:
His essay amounts to nothing more than the crudest of caricatures of Austrian economics, free of the least indication that Barro actually read any of the works he so sweepingly condemns. On the contrary: the essay gives one the distinct impression that Mr. Barro, finding himself in the mood for some conservative-bashing, reached for the nearest hard object and just happened to grab The Road to Serfdom.
This is particularly amusing to me because of where I got my most extensive exposure to Austrian economics. It's not blogs and Internet forums. It's a series of programs put on by the Institute for Humane Studies and the Charles Koch Institute, two of the leading promoters of Austrian thinking in Washington D.C.'s nonprofit space.
Prof. Horwitz may not remember, but in the fall of 2008, we spent nine hours together in a conference room at the Hilton Alexandria Old Town. He was leading an IHS weekend seminar called "Hayek On Liberty," in which we broke down the minutiae of "The Constitution of Liberty" and a few other Hayek works.
Which, yes, I have read. I'm happy to show him my copy, filled with margin notes, if he wants proof. I also have two other copies, not filled with margin notes, because you can't walk five feet in libertarian Washington without someone handing you a free copy of a Hayek book.
I will admit that I was never able to finish Ludwig Von Mises' main work, "Human Action." It is a very unpleasant read in part because Mises is fond of making up his own words. (Note: As far as I can tell, "praxeology" means getting from the "axiom of human action" to policy prescriptions without looking at data.) But I attended enough lectures on it -- in the Charles G. Koch Summer Fellow Program, in the Koch Associate Program (an entire year of Thursdays spent discussing this sort of thing!), and at various IHS events -- to get the gist.
But Horowitz is right about something important: When I talk about "Austrian economics," I'm talking about Austrian economics as it is used by policymakers and advocates in Washington. Peter Leeson may be doing outstanding empirical work on pirates, but the components of Austrianism that impact the political discourse are strictly non-empirical.
And there is a reason for this. The key economic story of the last 70 years is the triumph of the mixed economy in growing both economic output and living standards. Only an anti-empirical approach to economics could lead to the conclusion that ideological libertarians want: that drastically small governments are better for the human condition than mid-size ones of the sort that exist throughout the advanced world.
This head-in-the-sand approach is why libertarians are still so into Hayek's "The Road to Serfdom," published in 1944, which predicted an inevitable slide from the mixed economy into socialist tyranny. Sixty-eight years later, that prediction has proved false, yet the book remains wildly popular.
If Horwitz thinks the heart of modern Austrian economic work is empirical, he should urge groups like IHS to put down "The Road to Serfdom" and start promoting those empirical papers. As Bryan Caplan notes, he'll have a fight on his hands, since the value of empirical study is a controversial topic among Austrians. He'll also face a fight because ideological libertarians do not want to subject themselves to methods of investigation that might force them to change their policy views.