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My brother recently told me that Austrian economics is well known to be a dead end and that no one takes it seriously anymore. I’m curious if that’s really a ge

My brother recently told me that Austrian economics is well known to be a dead end and that no one takes it seriously anymore. I’m curious if that’s really a generally held view among modern economists. It does seem to me the Austrian theories had decent predictive power when it comes to the boom / bust cycles and inflation baked into the current monetary systems.

ogogmad 4y ago
Not an expert but my guess is: A purely deductive approach to economics shouldn't work because economics is not mathematics. Austrian economics is an attempt to justify economic policies many would consider overly individualistic using pure deduction. An example of deduction failing unexpectedly can be found here: https://en.wikipedia.org/wiki/Unexpected_hanging_paradox https://en.wikipedia.org/wiki/Unexpected_hanging_paradox
- christophilus 4y ago
  Maybe I don’t understand the problem, but I don’t see how that shows deduction failing. You can deduce that the time of the event will be a surprise and thus cannot be deduced from the available facts.
mbustamanter 4y ago
Mark Spitznagel wrote a superb book on austrian investing [0] (risk management with an austrian perspective, so not exactly the same). Personally as a mathematician, I prefer this to the economists who think that because the use lagrangians their ideas are somehow more valid, or worse yet, sophisticated. Either case, I don't see why austrian economics get more dirt than say, MMT. EDIT: Spitznagel works with Taleb and his fund, Universa Investments, had a 4000% return at the beginning of the covid-19 pandemic. [0] The Dao of Capital
- eth0up 4y ago
  Any opinion on Friedrich Hayek, particularly The Road to Serfdom? I had difficulty absorbing it and lent it to a book snatcher before finishing. I do remember admiring the bits I thought I understood.
  - mbustamanter 4y ago
    The book of Spitznagel, even if it's about investing, is a great introduction. If you're aiming for something more broad, the Incerto series by Taleb has much more than you need but it sets the right context about risks and philosophiccal thought (remember Hayek above all was a philosopher). Then I would jump to his books. This may not be the perfect approach but it worked for me.
  - abecedarius 4y ago
    Of the other Hayek I've read, none of it's any easier to read. I do think he's worth the time to get his point of view to sink in. (I don't think the same of Austrians in general.) Perhaps most relevantly he wrote a book on the idea of competing private currencies (Denationalisation of Money -- it seemed meant for people with more knowledge of economics or finance than me).
- jackcosgrove 4y ago
  It's not that mathematical models make a theory more valid or sophisticated. They make it testable, which is why neoclassical economics > both Austrian and MMT. If Austrian school economists want to gain mindshare, they should develop models, backtest them, and report the results. Same for MMT. By the way MMT is a political phenomenon. There are very few professional economists who think it is workable.
  - SnowHill9902 4y ago
    Not everything is testable. That’s a modern reductionist approach to reality. Scientifically oriented people tend to think the opposite because scientists are strongly biased towards studying testable phenomena, providing a false impression of general testability.
- logicchains 4y ago
  >Either case, I don't see why austrian economics get more dirt than say, MMT. Austrian economics is explicitly anti-central-banking, and most economists are funded by a central bank or a government with a central bank. "It is difficult to get a man to understand something when his salary depends upon his not understanding it".
mr_toad 4y ago
In relation to monetary policy specifically, or in general? There are still many concepts from the Austrian school that are foundational to modern economics.
reducesuffering 4y ago
"No one takes it seriously anymore." Completely biased 'lefty' hogwash. Even the Fed Chair until 2014, Keynesian Ben Bernanke, had this to say about key Austrian Milton Friedman: "Among economic scholars, Friedman has no peer. His seminal contributions to economics are legion, including his development of the permanent-income theory of consumer spending, his paradigm-shifting research in monetary economics, and his stimulating and original essays on economic history and methodology." "Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again." U of Chicago is still a top 5 Economics University. https://www.federalreserve.gov/boarddocs/speeches/2002/20021108/ https://www.federalreserve.gov/boarddocs/speeches/2002/20021...

ogogmad 4y ago

Not an expert but my guess is: A purely deductive approach to economics shouldn't work because economics is not mathematics. Austrian economics is an attempt to justify economic policies many would consider overly individualistic using pure deduction. An example of deduction failing unexpectedly can be found here: https://en.wikipedia.org/wiki/Unexpected_hanging_paradox https://en.wikipedia.org/wiki/Unexpected_hanging_paradox

christophilus 4y ago
Maybe I don’t understand the problem, but I don’t see how that shows deduction failing. You can deduce that the time of the event will be a surprise and thus cannot be deduced from the available facts.

mbustamanter 4y ago

Mark Spitznagel wrote a superb book on austrian investing [0] (risk management with an austrian perspective, so not exactly the same). Personally as a mathematician, I prefer this to the economists who think that because the use lagrangians their ideas are somehow more valid, or worse yet, sophisticated. Either case, I don't see why austrian economics get more dirt than say, MMT. EDIT: Spitznagel works with Taleb and his fund, Universa Investments, had a 4000% return at the beginning of the covid-19 pandemic. [0] The Dao of Capital

eth0up 4y ago
Any opinion on Friedrich Hayek, particularly The Road to Serfdom? I had difficulty absorbing it and lent it to a book snatcher before finishing. I do remember admiring the bits I thought I understood.
- mbustamanter 4y ago
  The book of Spitznagel, even if it's about investing, is a great introduction. If you're aiming for something more broad, the Incerto series by Taleb has much more than you need but it sets the right context about risks and philosophiccal thought (remember Hayek above all was a philosopher). Then I would jump to his books. This may not be the perfect approach but it worked for me.
- abecedarius 4y ago
  Of the other Hayek I've read, none of it's any easier to read. I do think he's worth the time to get his point of view to sink in. (I don't think the same of Austrians in general.) Perhaps most relevantly he wrote a book on the idea of competing private currencies (Denationalisation of Money -- it seemed meant for people with more knowledge of economics or finance than me).
jackcosgrove 4y ago
It's not that mathematical models make a theory more valid or sophisticated. They make it testable, which is why neoclassical economics > both Austrian and MMT. If Austrian school economists want to gain mindshare, they should develop models, backtest them, and report the results. Same for MMT. By the way MMT is a political phenomenon. There are very few professional economists who think it is workable.
- SnowHill9902 4y ago
  Not everything is testable. That’s a modern reductionist approach to reality. Scientifically oriented people tend to think the opposite because scientists are strongly biased towards studying testable phenomena, providing a false impression of general testability.
logicchains 4y ago
>Either case, I don't see why austrian economics get more dirt than say, MMT. Austrian economics is explicitly anti-central-banking, and most economists are funded by a central bank or a government with a central bank. "It is difficult to get a man to understand something when his salary depends upon his not understanding it".

mr_toad 4y ago

In relation to monetary policy specifically, or in general? There are still many concepts from the Austrian school that are foundational to modern economics.

reducesuffering 4y ago

"No one takes it seriously anymore." Completely biased 'lefty' hogwash. Even the Fed Chair until 2014, Keynesian Ben Bernanke, had this to say about key Austrian Milton Friedman: "Among economic scholars, Friedman has no peer. His seminal contributions to economics are legion, including his development of the permanent-income theory of consumer spending, his paradigm-shifting research in monetary economics, and his stimulating and original essays on economic history and methodology." "Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again." U of Chicago is still a top 5 Economics University. https://www.federalreserve.gov/boarddocs/speeches/2002/20021108/ https://www.federalreserve.gov/boarddocs/speeches/2002/20021...