What Austrian Economics IS and What It Is NOT

by Steve Horwitz*

Since the start of the financial crisis and recession, there has been a renewed interest in the ideas of Austrian economics by scholars, public intellectuals, and even the media.  For the first time in a long time, the analytical framework of Austrian economics is being taken note of, if not taken seriously, by a variety of opinion makers.  This is, of course, a good development.

However, at the same time, this popularity has led to many people using the “Austrian” label to refer to their views on issues beyond those involving the analytical framework they bring to economics.  In particular, “Austrian” has become the near-equivalent of “free market” or “libertarian” not only indirectly, but directly through the use of terms such as “Austro-libertarian” to describe particular policy preferences or broader worldviews.  The result is that, despite the additional publicity, what Austrian economics IS has often been distorted into something it is NOT.

For example, earlier this month, columnist J. D. Hamel wrote “Viewed through an Austrian perspective, public policy judgments [by Austrians] are hastily rendered and motives easily impugned” and referred to “the Austrian school’s disdain for American foreign policy and willingness to call Lincoln a tyrant.”  Austrians should view as troubling the beliefs that: a) our “perspective” involves “hastily rendered” policy judgments; b) our perspective means one needs to impugn the motives of others; and c) Austrian economics requires that one have a particular view on US foreign policy or the Civil War.

When this is what people associate with Austrian economics, we have failed in communicating its basic ideas and we have especially failed in communicating that it is an approach to the study of human action and the social world, not a set of policy conclusions.  If we really want to understand the world for the purpose of improving it, we need the ideas of Austrian economics and we do not need to be pushing people away by creating the impression that Austrian economics requires that one believe things (some of which may be perceived as “nutty,” rightly or wrongly) that are not part of that analytical framework.

I would argue that the blame for this situation is two-fold.  First, many journalists and commentators either don’t take the time to understand what Austrian economics is really about despite the abundance of high-quality information on the web and/or have their own biases that lead them to accept whatever caricature of Austrians they can find or invent.  Second, self-described Austrians bear blame for this situation too by not making clear the distinctions among “Austrian economics,” “libertarianism,” and their particular views on historical or policy issues.  The irony is that Austrians historically, and particularly Mises, were very clear about the idea of “value freedom” and the differences between theory and historical application or understanding.

So as a help to those who want a clearer understanding of what Austrian economics IS so as to also help understand what it is NOT, I would suggest a reading of co-blogger Pete Boettke’s entry on “Austrian Economics” at the Concise Encyclopedia of Economics, which is precisely the sort of source that responsible journalists could look at.  There, he offers 10 propositions that define Austrian economics.  I will list them below, then offer a few comments afterward.

  1. Only individuals choose.
  2. The study of the market order is fundamentally about exchange behavior and the institutions within which exchanges take place.
  3. The “facts” of the social sciences are what people believe and think.
  4. Utility and costs are subjective.
  5. The price system economizes on the information that people need to process in making their decisions.
  6. Private property in the means of production is a necessary condition for rational economic calculation.
  7. The competitive market is a process of entrepreneurial discovery.
  8. Money is nonneutral.
  9. The capital structure consists of heterogeneous goods that have multispecific uses that must be aligned.
  10. Social institutions often are the result of human action, but not of human design.

Pete does a terrific job in explicating these propositions in the linked article, and there’s no need for me to repeat what he has to say.  Instead, I just want to point out how each of these is a statement about the nature of the socio-economic world and/or how we should be analyzing it.  Not one of them offers a policy conclusion on economic issues or anything else.  To repeat:  Austrian economics is a set of ideas useful for analyzing and understanding the world;  it is not a set of policy conclusions.  There are plenty of non-Austrian economists who hold strongly libertarian policy views (e.g., Bryan Caplan) and there are economists who would accept most if not all of the propositions above, but who are not self-described libertarians (e.g., Roger Koppl).  And there are plenty of people who believe Lincoln was a tyrant and US foreign policy is an imperialist nighmare who are not Austrians (and there are Austrians who would disagree with both of those claims).

To get from Austrian economics to conclusions on policy, one has to import some basic non-economic beliefs, such as that social cooperation, peace, and prosperity are desirable and that no other values are more important.  In addition, making such claims, especially when they rest on historical understanding, also involves the interpretive judgment of the economist in ways that take him beyond Austrian economics strictly speaking.   To say something about policy or history requires that the economist use knowledge from other areas and invoke her understanding of history and the actors of the present.  Austrian economic theory alone cannot render such policy judgments or provide such historical understanding.

Consider what Mises says about the task of the historian:

In dealing with a historical problem the historian makes use of the knowledge provided by logic, mathematics, the natural sciences, and especially by praxeology.  However, the mental tools of these nonhistorical disciplines do not suffice for his task. They are indispensible auxiliaries for him, in themselves they do not make it possible to answer those questions he has to deal with….

He cannot solve this problem on the ground of the theorems provided by all other sciences alone. There always remains at the bottom of each of his problems something which resists analysis at the hand of these teachings of other sciences.  It is these individual and unique characteristics of each event which are studied by the understanding.  … It is the method which all historians and all other people always appply in commenting upon human events of the past and in forecasting future events.  (Human Action pp. 49-50)

Austrian economics (praxeology) has nothing to say in and of itself about issues such as US foreign policy, the Civil War, whether the Federal Reserve System was the product of a secret bankers’ conspiracy, whether the Bush family has ties to the Nazis, whether same-sex marriage should be legalized, whether Israel is a rogue state, whether intellectual property is legitimate, or whether the atomic bombing of Japan was justified.  Again, Austrian theoretical ideas will be, of course, of use in our attempts to understand these issues (as Chris Coyne’s work on US foreign policy demonstrates), but there is nothing, repeat, nothing, that “requires” that someone using Austrian ideas take one position or another on those issues.  And no position so taken can rightly be described as “the” Austrian view of the issue.

In addition, Austrian economics has nothing to say about “natural rights.”  In fact, Mises denied the existence of natural rights and it isn’t clear what use economics of any school is if one prefers natural rights arguments over consequentialist ones.

Austrian economics IS a set of analytical propositions about the world and how to study it. It is NOT a set of policy conclusions or settled interpretations of history. Whatever one’s views on these other issues, it is incumbent upon Austrians to make clear that they are not a necessary component of making use of an Austrian framework for analysis.  And if we can do a better job in making that very Misesian distinction clear, we will be even more likely to get our ideas not just heard but accepted by divorcing them from specific positions on issues that have no necessary connection to Austrian economics and frequently drive away those who might otherwise be sympathetic.

*This has been originally posted at the blog Coordination Problem. It is cross-posted here because of its general importance to those interested in Austrian economics.




33 thoughts on “What Austrian Economics IS and What It Is NOT

  1. If I may emphasize, too, that even Mises — however strongly he felt as a classical liberal on a wide variety of policy issues — always tried to make clear that economic theory and public policy were two distinct and different things.

    In 1932, in a debate over the causes of the economic crisis in the pages of a German-language economic journal, he went out of his way to say:

    “I am an economist, not a preacher of morality who wishes to judge, avenge, or punish. I do not look for guilt parties but for causal connections. And if I speak of interventionism, I am not making accusations against the ‘state’ or against ‘labor.’ I only attempt to point out to what consequences a system, a policy, an ideology must necessarily lead.”

    In the German-speaking academic world between the two World Wars, Mises was one of the most adamant supporters of Max Weber’s argument for “value-freedom” in social analysis (against the highly “value-laden” views of members of the German Historical School).

    And earlier, in 1889, Carl Menger was very forceful in stating:

    “It is the task of science to be concerned solely with fact and not with value. Science has to teach us what has been, what is, and how what is has come to be; but not what ought to be”

    This is a very clear emphasize on the difference between the “positive” statements of economic theory and the “normative” preferences expressed in an economic policy. And Menger, too, clearly had many of the German Historical School members in mind.

    I should also mention that there have been “leftists” among the Austrian School. Paul N. Rosenstein-Rodan, was a prominent member of the Austrian School in the late 1920s and early 1930s, who was already sympathetic to socialist policies, and later developed the idea of government-planned “balanced growth” for underdeveloped nations.

    There were a variety of British socialists who, at first, adopted Hayek’s theory of the trade cycle, and drew their own policy conclusions from the analysis (different from, say, Hayek’s or Lionel Robbins, at the time).

    These British socialist “Austrians” included E. F. M. Durbin and H. T. Gaitskell, both of whom became prominent members of the British Labor Party leadership. M. A. Abrams wrote a very clear exposition of Hayek’s ideas on the structure of production, the problems with price level stabilization, and the distorting affects from interest rate and monetary manipulation in 1934, called “Money and a Changing Civilization.” The concluding chapter proposes that the only “solution” to the business cycle, therefore, is government nationalization of banking!

    Recent biographical studies of Oskar Morgenstern have bought out the extent to which he worked with and proposed policies for and compatible with the authoritarian and fascist-oriented government of Austria from 1934 to 1938, before the annexation of the country in to Nazi Germany.

    And this does not even mention Hans Mayer (senior economics professor at the University of Vienna and protegee of Friedich von Wieser) for his notorious collaboration with the Nazi regime beginning in 1938. Including an address published in “Weltwirtschaftsliche Archiv” in March 1939, arguing the compatibility of Austrian Economics with National Socialist ideology, and making Austrian Economics serve the goals of Germany’s “new order.” (“My Fuhrer, I can walk!” — for those who remember the movie,”Dr. Strangelove.”)

    Given certain normative views — the value of individual freedom, the desirability of consumer-oriented wealth-generating production and improvements in standards of living, a focus on longer-run implications and consequences from policies vs. a more narrow attention to the immediate or “short-run” impact from a policy, etc. — Austrian conceptions of and insights about imperfect and decentralized human knowledge, competition as a “discovery procedure,” the nature and significance of “economic calculation” for market-oriented decision-making, the role and place of the entrepreneur in market discovery and coordination, and so on, easily leads to certain policy conclusions and criticisms of “activist” and interventionist government.

    But . . . nonetheless, conceptually and logically, Austrian Economics remains, and should (must) remain distinct and separate from the issue and problem of policy values, beliefs, and attitudes.

    Otherwise, in economics (including Austrian Economics), as in any field of scientific understanding, there runs the risk of a dangerous blurring of the essential distinction between “fact” and “value.”

    Richard Ebeling

  2. The difficult thing about this matter is that some of us seek to integrate our Austrian economics into a broader world view. It is tempting to present that integration (with various value judgments and empirical estimations and judgments about feasibility) under one label. And that tends to mislead some non-experts. It can also be something encouraged by the unscrupulous who wish to tar the one with the perceived faults of the other. But also some wish to convince people of liberalism or Austrianism who already accept only one.

  3. It has often be remarked that frequently people come to study economics because they are interested in various social or policy issues.

    For example, they are bothered or deeply concerned about “poverty,” or what they perceive as “injustice,” and they are looking for answers to solve or reduce these
    “social problems.”

    If you have a strongly held “a priori” belief about “equality” or “social justice,” you may fall into the trap of searching for particular economic ideas that confirm or rationalize the “answers” that you think are “right” or “moral” or “justice.”

    Or . . . your study of economics may result in you, maybe slowly but surely, rethinking about what your values and prior beliefs, because economics makes you aware that there is a way that the world “works.” And at least some of your values and beliefs may not be consistent or attainable in the way you thought when you started out your quest.

    Thus, will minimum wage laws improve the income conditions of low skilled workers if that law sets the mandatory wage above the “market clearing” wage? Or will redistribution of wealth through modern democratic means of fiscal transfer actually help those you are most concerned with raising out of poverty in the longer run?

    The particular quality to much of Austrian Economics is that asks us to see the world in a way that challenges many of the taken-for-granted conceptions concerning social policy.

    For example, Hayek’s arguments that: (a) planners and regulators may suffer from inescapable limits to the knowledge they can every hope to master and manage to plan or regulate markets to better affect than “spontaneous” coordination via a functioning price system and competitive discovery; or (b) that a spontaneous order, by definition, has no “purpose” or designed goals and thus the concepts of “just” reward or earned “merit,” may be undefinable outside of an imposed or agreed-upon hierarchy of shared values or standard of “deservedness,” which may be inconsistent with the very working of much or all of that spontaneous order, if it is attempted to be implemented.

    In the same way, the desire to improve the general standard of living of humanity as a whole through socialist central planning is shown to be fundamentally flawed by the type of argument developed by Mises concerning the nature of and requirements for “economic calculation,” due to the incompatibility of efficient use and allocation of scarce resources in an ever-changing world if private, competitive markets for the factors of production are abolished by nationalization of the means of production under government monopoly control.

    This, then, leads the open-minded student to rethink about the relationship between short-run “fixes” and longer-run “solutions” to the economic problems about which he was drawn to the study of economics. It makes him more aware than he otherwise may have been about the “unintended consequences” of human action, and “what is seen” and “what is not seen.”

    Thus, having started out thinking how wonderful the world would be if only pink elephants could fly by flapping their big ears, he comes to realize that the actual and inescapable nature of elephants and the actual and inescapable laws of gravity make it unlikely or, indeed, impossible that any such reality can ever come into existence.

    It does not mean that he no longer thinks of a “better world,” but his “positive” or “value-free” study of how the economic world works transforms his conception and beliefs about what “better” can mean, and the means and methods to try to attain the modified notion of the possible.

    To use Thomas Sowell’s terms, after starting out with an “unconstrained vision” of man and society (that is, if only we have the will and the good intentions anything that we consider “good” can be brought about), he starts to appreciate the limits and real world potentials of the possible; that is a “constrained vision” of inescapable scarcity, trade-offs, limited knowledge, and the confines of time-consuming processes of change.

    His study of economics (and especially Austrian Economics) influences his views on the “possible,” the “desirable,” and the “better.”

    And as, perhaps, it is psychologically understandable his understanding of the “is,” gets wrapped up with his ideas, now, of the “ought.”

    Thus, Austrian Economics and a “discovered” policy view often labeled as “classical liberal” becomes connected together in his own mind, and gets connected in other peoples’ minds when he argues for or against various policy proposals.

    But they, nonetheless, remain two distinct things — the understanding of the “is,” and the values expressed in the “ought.”

    But like in the Venn diagram, the circles become overlapping in people’s minds and in their discussions about public policy.

    Richard Ebeling

  4. To add to Mario’s point, most of us don’t consider our policy views to be *divorced* from our views as economists. We hold the policy views we do partly *because* we think they’re consistent with a correct understanding of how the economy works. (For instance, Pete’s Austrian principles 5 and 6 certainly lend support to more market-oriented policy positions.) Less charitably, the causation may work in the other direction; people may choose the Austrian school because they believe it supports their previously chosen policy views. Realistically, I suspect the causation runs both ways. In any case, I don’t think the positive correlation between libertarian politics and Austrian economics is an accident, even though Steve is absolutely correct that they are conceptually distinct.

  5. You could say that Austrians adopt an ecological approach to economic systems, with special attention to the downstream effects of actions and interventions.

  6. Your post is quiet interesting. You say that “Utility and costs are subjective.” What about expectations? What of the radical subjectivist Austrians who believe expectations are also subjective? In my opinion, Austrians are better divided into:

    (1) the Anarcho-capitalists, like Rothbard and Hoppe.

    (2) The minimal state/Classical liberal Austrians like Mises (with his praxeology and rule utilitarianism).

    (3) Hayek’s economics, with a minimal state.

    (4) Moderate subjectivist Austrians (like Israel Kirzner and Roger Garrison; Garrison even does “Austrian macroeconomics,” which seems peculiar to me given that other Austrians reject the whole concept of macroeconomics).

    (5) Radical subjectivists like Ludwig Lachmann, and Austrians influenced by him (I am not sure if this includes O’Driscoll and Rizzo?).

    There are some limited similarities between Austrians of type (5) and the Post Keynesian economists like Paul Davidson. I note that O’Driscoll and Rizzo have also said this:

    “[i]t is evident that there is much more common ground between post-Keynesian subjectivism and Autrian subjectivism …. the possibilities for mutually advantageous interchange seem significant.” The Economics of Time and Ignorance (Oxford, UK, 1985, p. 9).

  7. My point about the Post Keynesians was about economic analysis and not political economy or policy. I felt that the overture was rejected by Paul Davidson in his Critical Review article.

    I noted in a post some time ago on ThinkMarkets that Keynes and Hayek shared some methodological presuppositions. But I gladly acknowledge that Keynes’s subjectivism was, in some instances, out of control. He was more willing than most Austrians to think that agents were likely to be subject to irrational fears that a simple determination on the part of government to spend could remedy.

    How far one should go in “subjectivism” may be a fruitful topic to discuss with non-Austrian subjectivists.

  8. So to clarify:

    (1) Would you put yourself in category (4) above (with Roger Garrison), if you had to be classified?

    (2) You would reject Ludwig Lachmann’s radical subjectivism? And also reject the idea that expectations are subjective?

    I ask these questions as someone who has read a great deal of The Economics of Time and Ignorance, found it useful and rewarding to read.

    Thank you

  9. Another point that interests me is the role of empirical evidence in Austrian economic methodology. John Pheby (in New directions in post-Keynesian economics) says that

    … O’Driscoll and Rizzo, following Hayek, seem to envisage a moderate role for empirical tests in establishing whether or not particular interpretative theories are applicable to specific real-world situations (O’Driscoll and Rizzo, 1985, ch. 2), John Pheby, New directions in post-Keynesian economics, p. 65

    Is this a fair comment or a distortion of your views?

  10. So much good stuff here, including in the comments. I think Lord Keynes’ division of Austrians seems about right (keeping in mind that such divisions are for clarity only — one can probably fit into more than one). I also think that a discussion of the nature of subjectivism is something that can and should be raised and made more clear (perhaps along the lines of Hayek’s piece on the two kinds of individualism).

    For me, Austrianism is attractive because it is the only methodology that is truly scientific as a social science. And it is more open to the further development of such social-scientific methods (consider Emily Chamlee-Wright’s article in the latest Advances in Austrian Economics, in which she argues for interviewing people as a legitimate method — what other school of economics would even begin to consider it as legitimate?). As someone who has majored in molecular biology, minored in chemistry, and gotten graduate degrees in English and in the humanities, I very much believe in methodological pluralism. The methods of physics are inappropriate for all of chemistry, let alone biology. It is even less applicable for psychology, and even less so for the social sciences or the humanities. The methodology of the humanities comes closer to being legitimate than does that of physics (I would argue that the methodology of the social sciences as a whole come between those of the humanities and psychology).

  11. @ LK

    FWIW, I wrote a radically subjectivist book on expectations that nevertheless uses a fair bit of econometrics to test my ideas. It is Big Players and the Economic Theory of Expectations, Palgrave Macmillan 2002. I explicitly address “the Lachmann problem” of having an empirically meaningful, radically subjectivist theory of economic expectations.

  12. The problem with “Austrian Economics” is not popular use or perception of its ideas – Marxism was doing GREAT when people who could not write called themselves Marxists, pop-psychoanalysis never did any harm to psychoanalysis theory proper, there are enough pop versions of Keynesian theory out there etc The problem is that a number of professional, academic, whatever you one call them, self-described and/or recognised “Austrian economists” have ceased to debate and inquire substantial questions, they cut themselfs off from the broader intellectual environment (not only the economics environment – but from everything else) and started to quarell over the footnotes in Human Action or over how should economists understand the meaning of a priori or whatever…And it’s too bad, because there are some great ideas in this body of work, very fertile ideas – the fact that some “mainstream” and “out of the mainstream” non-self-described “Austrian economists” found them interesting and drew on them in their work is a proof to this.

    P.S. Troy, there is no “Austrian” theory of literature; there is some great fin de siecle & interwar Austrian literature, but no “Austrian” theory of literature as far as I know.

  13. Bogdan,

    You clearly did not understand what I meant by “Austrian.” I did not mean it in the sense of the country or culture, but in the sense of Austrian economics (which should have been obvious from the context of this discussion). I meant “Austrian” in the same sense as there is a Marxist tradition of the interpretation of literature. And there is such an Austrian economics approach. I have contributed to it here:


    and there is a book on it by Paul Cantor and Stephen Cox, found here:

    Click to access literature_and_liberty_cantor.pdf

    And I have a blog on it here:


  14. Looking over my comment, I am wondering, though, where you got the idea that I support an “Austrian” approach to literature (I do, but it’s not clear that I do from my comments above).

  15. Troy, I have read about your idea of an “Austrian” theory of literature in a comment of yours here or in another forum, don’t remeber exactly. I wanted to comment then, but didn’t for some expedient reason, the idea stuck with me however and took the opportunity now. I like literature, but personally I don’t think it’s a good idea; there cannot be an “Austrian” (or Keynsian etc) theory of you name what; but I can of course be wrong and you can of course disagree.

  16. May I recommend you read at least the introductory chapter of the Cantor-Cox book. Marxism has been used for a long time in literary studies, to discuss the representation of economics in works of literature and to discuss the methods and social structures of artistic/literary production. It seems to me that if human action is represented in stories, then praxeology is a valuable tool to help understand that action. If economic interactions are represented in stories, then bringing an understanding of how the economy works is going to help us to understand what is going on in the story. And if we want to understand artistic and literary production, then we need a good theory of social organization — for which I nominate Hayek’s spontaneous order theory. For about a century now, Marxism has been the only economics used to analyze literature. I don’t think it’s a good way to analyze social reality, whether it be actual or represented in art — which is not to say that insights haven’t nevertheless been made because of Marxist analyses. I similarly don’t think that a Keynesian approach would tell us much, either — but, again, such an approach would no doubt uncover something of interest (and would be an improvement over Marxism in any case). I think Austrian economics is one of the best ways of interpreting social reality — which is why I am interested in further developing it to help interpret literary representations of that reality as well.

    Aside from that, I also believe evolutionary psychology (most broadly understood) is a good interpretative model for literature, and I am equally engaged in using it:


    Overall, I am in favor of any interpretive strategy that helps us to understand the creation of and meanings of literature. I think that some are better than others, and I think that some have outlived their usefulness (for currently existing literature — old methods can still be productively used for new works, of course).

  17. Why did you leave out the most problematic aspect of Austrian school? It rejects the usage of empirical data.

    It’s the creationism of economics.

  18. Austrian economics does not reject the usage of empirical data. It rejects scientism and mathematical utopianism.

    Neoclassical economics posits that an all-knowing, all-powerful being acts instantaneously. Neoclassical economics argues about how many angels can dance — atemporally — on the head of a pin. This is about as unrealistic a view of the world as one could imagine. With its obsession with equilibrium, it’s also a theory of a dead economy — as any system at equilibrium is dead.

    Socialism simply tries to put the angelic being in charge — it is the true creationism of economics.

    Keynesianism, with its irrational “animal spirits” and mathematical oversimplifications with its collectivist “aggregates,” calls for wise interventionists (who somehow don’t succumb to “animal spirits”) to take care of us all — it is the intelligent design of economics.

    Austrianism argues that the economy is a complex self-organizing process that cannot be reduced to mathematical oversimplifications. It argues that a real economy has texture/heterogeneties, so cannot be smoothed out into aggregates. It is rationalist/logical/theoretical and empirical simultaneously — rejecting neither one nor the other. In other words, it’s a real social science.

    Neoclassicism pretends to be a science by taking on improper methods appropriate to physics (physics envy helps no one). Socialism isn’t even science. Keynesianism pretends to be a science in the same way intelligent design pretends to be a science. They both acknowledge complexities, it’s true, but their analyses of why there are complexities and how to understand them are all wrong.

    So please, let’s at least get our categories right, shall we?

  19. Adam:

    It simply ain’t so.

    I’m not sure about all that Troy says, but it’s just not true that Austrians reject the use of empirical data.

    The Austrian theory of the trade cycle has generated some econometric studies by Austrians. Andew T. Young probably counts as an Austrian, and he has plenty of empirical (=includes econometric estimates) stuff on his CV. He has a forthcoming review of empirical studies of the Austrian cycle theory that you can download from the website of the Review of Austrian Economics.

    I confess that I am proud of this econometric study:

    Click to access 572893.pdf

    I don’t know whether you would restrict “empirical” to “econometric,” but we should not. We should also recognize the work in “economic history” is utterly “empirical,” and Austrians have a lot of economic history in their work as illustrated by, well, really a lot of work. Boettke on the old Soviet system, Leeson on pirates, Coyne of foreign intervention, White on free banking, and many, many others who should be listed. It’s kind of our thing. That’s empirical.

    Finally, several of us do experiments, which are also “empirical.” For example Ben Powell and Ryan Oprea have done some interesting experiments.

    All in all, it demonstrably false to claim that Austrian economists are somehow averse to empirical work.

  20. Yes, Austrian economics is about the questions that you ask and the theories or policies that you test, not the methods that you use.

    The old chestnut about Austrians not doing empirical work probably dates from the time when there were hardly any Austrians and they felt obliged to keep alive the theory and subjective methods. Some still do but that is another story.

  21. I agree with Koppl. I don’t know Young and I read only two papers of his, but his view that econometrics has a role to play is perfectly compatible with Mises’s epistemology.

    Unfortunately, the quotations of Block, Barnett and Murphy in Young’s rejoinder makes me think that radical (non-misesian) apriorism is really believed by someone to be the method of Austrian economics. It just wasn’t so for Mises, and it isn’t so for most Austrian economists at present.

    Mises’s argument was much less rationalistic than most think, both critics (like Hayek) and supporters (like Rothbard) of radical rationalism.

    In Human Action there is a clear point: relevance is not to be estblished by argument, it is an aposteriori question, it is an empirical problem.

    Apriorism is about the logic of economic arguments: it’s what every economist does when drawing demand and supply curves, reasoning about substitution effects, etc. In Mises it was probably something more than this.

    Relevance, i.e., the applicability of theory to real phenomena, is not a theoretical issue. It is a historical problem, to be tackled with the methods of history.

    As far as I can say, the best summary of what misesian epistemology really is, and of its limitations, is the first part of Koppl’s book on “Big Players”.

  22. Lord Keynes said:

    “(1) the Anarcho-capitalists, like Rothbard and Hoppe.

    (2) The minimal state/Classical liberal Austrians like Mises (with his praxeology and rule utilitarianism).

    (3) Hayek’s economics, with a minimal state.”

    This is all quite confusing, since it is not clear according to which criterion this classification of the mentioned authors is made:
    (1) is a statement of the political philosophy of Hoppe and Rothbard, not of their economic doctrine or methodology. On the methodological level, they should be subsumed under (2) since they accepted Mises’ praxeology.

    Further, Hayek was not an advocate of minimal state, far from that. He was politically a neoliberal, a third-way moderate who harshly criticized laissez-faire and strove to use the government power to improve the market outcomes in some cases where no minimal state liberal would not.

    It is not clear what all of this has to do with economics.

  23. Austrian economics should never been used to inform policy because it is vehemently anti-empirical. Like Marxism, it has a place in academia and the social sciences but deductions made from “a priori” knowledge should not determine the fate of the most powerful nation on the planet…..at the risk of sounding somewhat jerkish I think that some of the popular support for austrian economics comes because you don’t have to look at many charts or read SAS output to understand it……the coup de grace against austrian economics is its fundamental rejection of any use of any real data. Again, that doesn’t mean its not interesting or can’t inform social theory in an academic setting but it should NOT be used to inform public policy. Regrettably, I think it does more of the latter than it does the former.

  24. This is 2 years late but I’ll comment anyway.

    I think your entire article is too innocent. The face of the Austrian School on the internet is the Mises Institute, it’s the most visible organization advancing something that comes from the historical thinking of Carl Menger and his disciples. If you care to read a couple of articles on the front page or dare to discuss with people that uses mises.org as a source of what they believe you’ll see why Austrian schoolers are considered nuts by anyone that at least is not a believer in some type of ideology. If you wish to blame someone you can blame Murray Rothbard who advanced exactly what he believed as being “the Austrian School” and mises.org is exactly that, a diatribe of Rothbard and his disciples against the world.

    Here are exactly the type of things that is advanced as Austrian type of analysis:



    The second article is telling about why this association with the Austrian school and Mises Institute is bad for (serious) Austrian economists and why nobody takes it seriously, besides not citing any number outside of the debt session and making loud assertions without any data to support it. Bear in mind I did not said anything about the growth of the public debt which is a contentious issue for different economists depending on their beliefs.

    About Mises let me say, there were Austrians economists before him and they did not exactly exposed any of the views close to Rothbard’s Mises Institute, Wieser, Mises’ professor was believed by Mises to be socialist trying to pass as a liberal, Machlup, Mises’ student was not exactly fond of Mises methodology that culminated with his praxeology. Then there’s also Schumpeter who was also a Wieser’s student and followed a totally different path than Mises.

    Mises just followed through the Menger’s side on Methodenstreit in creating his praxeology, that all, this does not mean that to be Austrian you must be Misean.

  25. I have read a few good stuff here. Certainly worth bookmarking for revisiting. I wonder how much effort you put to create such a fantastic informative web site.

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