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Why I am looking forward to Richard Carey’s talk this Friday about Austrian Economics

The speaker at my next Last Friday of the Month meeting will be Richard Carey of Libertarian Home, and the title of his talk is: Austrian Economics: What It Is and How It Relates To Libertarianism.

And yes, Friday March 29th is not any old Friday. It is Good Friday, which may thin out the ranks of attenders somewhat. Not too much, I hope.

About what he will be saying, Richard Carey says this:

What I intend to look at is as follows: the Austrian School: what it is; what it was; its relationship to libertarianism and its relevance to today. I’d like to look at how it fits into the development of economic thought, its distinguishing features, the main protagonists, some of the most important works. If the task of answering such questions is beyond me, I should at least be able to provide a guide to where such answers can be found.

Here is some video of Richard Carey talking on another subject, about doing libertarian politics. And here is the list of his recent bloggings for Libertarian Home.

I have a very selfish motive in getting Richard Carey to talk about Austrian Economics, which is that I personally find it rather hard to get to grips with this subject, and with subjects like this. What I mean by “subjects like this” is subjects which consist of a lot of logically interconnecting concepts, each of which you have to understand, and the interconnections between which you likewise have to understand, in order to make sense of it all.

What makes me want to make sense of Austrian Economics is that I have become entirely convinced, as have millions of others in recent years and decades (years especially), that Austrian Economics doesn’t just supply the best explanation of what has been going on in the financial world lately (and for that matter for the last several decades and even several centuries); it supplies the only explanation. All else in the way of economics is statistically disguised, fumbling, blundering nonsense, enlivened with many amusing details and incidental truths, but nevertheless, underneath it all, when it comes to the most important questions of all, just plain wrong. I already feel about Austrianism (as I like to abbreviate it) in the way many self-declared Marxists felt about Marxism when the Great Crash and then the Great Depression were unfolding. They didn’t really understand Marxism, but they had heard enough to be utterly convinced that This Is It, as in: This is the place to keep looking to work out what the hell is happening, and what the hell to do about it. The difference being that whereas the Marxists were all deluded and stuck up an intellectual and political blind alley, the Austrianists, and I, are not.

My problem is that I find the great Austrian School writings very hard to actually read, and I typically find your average spoken exposition of Austrianism, by someone long steeped in the subject, very hard to follow.

Part of this is that I am a slow and easily distracted reader, slow partly because so easily distracted, but also just slow. And when listening to a talk, I likewise get easily distracted (for example with trying to get my head around the previous interconnected concept but one, even as the latest one is being expounded), and if the talk is the kind of talk with a logical thread to it (as it so often is when the subject is Austrian Economics), any distraction guarantees that I lose that thread.

But I have another problem, which is that a great deal of Austrian School writing consists of belabouring the obvious.

Consider the following paragraph, taken pretty much at random and got to literally in a few seconds of searching for something appropriate to make my point, from Murray Rothbard’s mammoth tome, Man, Economy and State (p. 86):

It is clear that the things that must be exchanged are goods, which will be useful to the receiving party. The goods may be present or future goods (or claims to future goods, which may be considered as equivalent to future goods), they may be capital goods or consumers’ goods, labor or nature-given factors. At any rate, the objects of an exchange must be scarce means to human ends, since, if they were available in abundance for all, they would be general conditions of human welfare and not objects of human action. If something were a general condition of human welfare, there would be no need to give something up to acquire it, and it would not become the object of exchange.

Yeah. I kind of know this. It is, as Rothbard himself starts the paragraph by saying, “clear”. I do not think that my inability to stay, as it were, riveted by such explication is entirely my fault.

Now do not get me wrong. I am not criticising Rothbard for writing paragraphs like this. They are essential to what he is trying to accomplish. The reason why the obvious keeps having to be emphasised by Austrianists is that regular economics is bedevilled with assumptions about reality which we all, including even most economists, know to be untrue, but which economists have felt it necessary to assume anyway, because that way they can erect an intellectual structure that resembles one of the “proper” sciences, like physics, far more than it otherwise would. Such assumptions enable economists to make what have at least the superficial appearance of exact predictions.

Austrian Economics, on the other hand, is based on assuming nothing about human thought processes and human behaviour that is not true. It is in a perpetual dialogue with regular economics, seeking to draw mis-educated minds away from falsehood and towards the truth. It does not ignore regular economics. It contests it at every turn. So it is that explications of Austrian Economics often contain an enormous number of statements which (a) correct false assumptions embedded in regular economics, but which (b) are not merely true, but clearly true. And then, on the basis of these clear truths, other truths that are not so clear are identified and elaborated upon.

The idea is to give the regular, non-Austrianist and anti-Austrianist eonomists no wiggle room. The Austrianists are concerned to cleanse economics of all untruths, to make it the truth, the whole truth and nothing but the truth, to be as honestly sure as we can possibly be about whatever in economic life it is possible to be sure of, and to be honestly unsure about the rest.

Unsureness about many things being a typical Austrian stance. A characteristic Austrian statement of the obvious is that, when it comes to future economic behaviour, then what with economic life consisting of people making free choices rather than reacting like molecular robots to an absurdly restricted range of stimuli (to say nothing of government officials doing whatever crazily unpredictable things they may or may not take it into their crazily unpredictable heads to choose to do), we just don’t know.

Are you more excited by the spurious certainty with which the regular economists predict, in the manner of chemists pondering the contents of a test tube, what “the economy” will definitely do next year, if Policy X is applied now, than you are by Austrianist assertions that sooner or later things are going to go pop in an Austrian sort of way, but that nobody can possibly know exactly when or exactly how?

Are you bored or frustrated by the mere truth? Too bad. The truth does not care how entertained or enriched or empowered you may or may not be by it; it does not care whether it holds your attention or lines your pocket or stops the populace from hating you. It is what it is.

This relentless belabouring of the obvious (Man, Economy and State runs to 1438 pages), however, is liable to be a problem for someone like me who has never been immersed in regular economics, but who has instead inhabited an intellectual milieu steeped in Austrian doctrines, even if I’ve never read much of the stuff very carefully myself. To me, all this Austrian obviousness has no scandal value, no shock-of-the-different quality, the way it might have for a second-year student of regular academic economics, deep into the swamp but still not beyond redemption. To me, a lot of the obviousness is merely obvious. So, when the bits where the not-so-obvious stuff cuts in, I am liable not to have been paying proper attention.

Going by his words quoted at the beginning of this, Carey is going to approach things historically, which always appeals to me. The development of Austrian School ideas will be told as the story of the people who thought them, which I always find to be a good way to understand ideas, even if in the end it’s the ideas themselves that matter. There will, I presume, be a lot of who said what, when, where, in response to whom. He will present it as a human drama, a journey of intellectual discovery, and not merely as a finished intellectual edifice.

There is the further advantage, for me, that Carey, just like me, only started taking Austrian Economics seriously rather recently. Listening to him talk will, I hope, be like being guided a bit further up a mountain by a rather better mountaineer than me, but as of now one who is only a few steps ahead of me. That may work rather well, and rather better than merely being shown a relief map of the entire thing.

Meanwhile, I really need to read this, properly I mean. Should’ve done this years ago.

Email me if this meeting, or future Last Friday of the Month meetings at my home in London SW1, are of interest to you. To do that, go here and click top left where it says “Contact”.

20 comments to Why I am looking forward to Richard Carey’s talk this Friday about Austrian Economics

  • Austrian Economics, on the other hand, is based on assuming nothing about human thought processes and human behaviour that is not true. It is in a perpetual dialogue with regular economics, seeking to draw mis-educated minds away from falsehood and towards the truth. It does not ignore regular economics. It contests it at every turn. So it is that explications of Austrian Economics often contain an enormous number of statements which (a) correct false assumptions embedded in regular economics, but which (b) are not merely true, but clearly true. And then, on the basis of these clear truths, other truths that are not so clear are identified and elaborated upon.

    Rather like going back to axioms in geometry, or going back to first principles in philosophy.

    Great essay, and I’m green with envy at what is likely to prove to be a great talk.

  • Alsadius

    One of the great things that bothers me about Austrian economics is the effort to treat economics as mathematics or one of the rigid philosophies – unwilling to accept any simplifying assumptions, but demanding perfection, and writing off anything that is imperfect as irrelevant. I find this to be a deeply misguided approach. There is real value in fields like econometrics, but they can’t exist without simplification. It’d be like trying to write a biology textbook without any reference to concepts at a higher level than physical chemistry – in principle it’s possible, in practice it’s insane and useless.

    I’m okay with getting as far as you can with axiom, but where you can get isn’t very far. After that, it’s time to break out the machete. (Just make sure you don’t had it to your idiot kid from Brussels or Washington)

  • Bob, Henchman at Large


    My understanding is a little different. Mises, of course one of the Pantheon, expressly avoided mathematicalization of what he named “Praxeology”, or the study of [human] action.

    _Human Action_ is a big book, and, in it, one point he makes is that simply that humans change their behavior to take advantage of a set of circumstances, and also further the changes in their actions based on observed and predicted changes to those circumstances. This dynamic makes measuring hard to do and hard to use.

    I really enjoyed his discussion of “the perfectly rotating economy”, and his note that this is simply an idealized case for explanatory purposes.

    I apologize if I have offended by presuming to explain things you probably are familiar with. Perhaps others are not.

    Best Regards.

  • One of the great things that bothers me about Austrian economics is the effort to treat economics as mathematics or one of the rigid philosophies – unwilling to accept any simplifying assumptions, but demanding perfection, and writing off anything that is imperfect as irrelevant.

    And what I like about the Austrian school of economics is that you actually need no math at all to understand it 😀

    Indeed I would say it can be condensed down to: it is about the limits of knowledge and the ‘fatal conceit’ of thinking human action can be best directed by a hierarchy rather than within a network of several nodes.

    A pretty simple concept really.

  • Laird

    To the contrary, Alsadius, I would reply that it is “conventional” (largely Keynsian) economics which tries to treat economics as mathematics. In an attempt to convert what is clearly a social science into a “hard” science, economists have spent a century attempting to quantify everything, and to create predictive mathematical formulas. The “simplifying assumptions” you so admire are necessary for that exercise, but as with climate science they result in an intellectual edifice which bears little relationship to reality. Simplifying assumptions and simple equasions (the IS/LM curve, for example) are useful for helping to grasp concepts, but they are useless for actual prediction. Nonetheless, the economics profession persists in using these increasingly complex but ultimately meaningless models to issue “forecasts” detailed down to the decimal point. That is not an error made by Austrian economists. In this context “simplifying assumptions” is a fancy way of saying “garbage in, garbage out.”

  • David C

    Try Henry Hazlitt ‘Economics in one lesson’ as a primer. Simple, straightforward, entirely credible.

  • David C

    PS. Would love to come, but live too far away!

  • “the ‘fatal conceit’ of thinking human action can be best directed by a hierarchy rather than within a network of several nodes.”

    This nodes vs hierarchy thing is a theme no?


  • Paul Marks

    Mathematics and logic are not the same thing.

    Although mathematics (like other things) depends on logic.

    If A is not A – then forget 1+1=2.

    Austrian economics depends on the idea of reasoning (choosing) individuals.

    Carl Menger Aristotelian (from Franz Branteno) conception.

    The universe is real – their are real physical things.

    Humans (“acting man”) makes choices to satisfy end.

    “But what about different races and different historical periods?”

    Ludwig Von Mises (drawing not just on the Aristotelian tradition – but also the Kantian E. Cassier) denied that they were of fundemental importance.

    Denying the German “Historical School” (that Carl Menger engaged in the “War of Method” with in the late 19th century).

    And denying the concepts of “Jewish logic and Nordic logic”, “Capitalist logic and worker logic” – to Mises (as for Menger) there is just reason – without “historical stage”, “race” or “social class” varieties of it.

    There he is similar to a mathmatician – for a mathmatician denies there is any such thing as “Jewish mathematics” or “Nordic mathematics” – there is just correct and incorrect mathematics. Someone may get a bit of mathematics right in the middle of the Roman Empire – or get it wrong. It is not “right in this historical stage” and wrong in another “historical stage”.

    I would like it if Ludwig Von Mises was more of an Aristotelian like Carl Menger. Menger does go senile – but he never produces anything like the infamous page 46 of Mises “Human Action” where most, although not all, human beings are reduced to nonagents (without free will)- cattle or “sheep” fit only to be controlled, in total contradiction to the sort of philosophy that Carl Menger was influenced by and in contradiction to E. Cassier also. Although by the end even of the infamous page 46 Mises is rowing back, saying that the humans (the nonbeings sneered at as subhuman, nonagent, cattle only a few lines before) do choose after all.

    One can not really place “acting man” (in the sense of reasoning, choosing humans) at the centre of one’s entire view of economics – and then hold to the opinion that humans are not beings (that they are scum, sheep, fit only to be slaughtered or enslaved – indeed that there are no free beings there to be enslaved), especially if (even on the infamous page 46) one admits that some humans are beings – do actually think and make (real) choices.

    What is biologically different about these few human beings – and the majority of subhuman nonagents without free will?

    Nothing – nothing at all.

    So the position of page 46 (that most humans are nonbeings) is dropped – because it does make sense. Humans may be lazy, and they may be decieved – but they do have the CAPACITY to make choices (real ones – not “illusions”). Although whether they will make the effort to actually use their capacity…. is quite another matter.

    If one does not like the Aristotelian way of putting things, then the Cassirer (Kantian) way of putting things is available – which is what Mises normally holds to.

    We all need editors.

    Unless the problem was actually with the editor (in this case Henry Hazlitt).

    Even if one formally rejects both Legal and Logical Positivism (as Mises and F.A. Hayek both did) one can still be influenced by the ideas that dominate one’s time (in this sense there are historical stages – it is harder for a Roman to oppose slavery, even in his own mind, that it is for us…. although with a real effort that Ancient Roman can do it).

    Both Mises and(even more) Hayek were influenced(in a backdoor way – they suddenly say something vile and one thinks “where the f…. did that come from”, and then they seem to fight back and return to right reason) by the very doctrines they denounced – both Legal Positivism (the idea that a crime is just whatever the state, in its whims, says is a crime – that the law is a matter of “legislation” from Hobbes to Hans Kelson) and Logical Positivism (the idea that right and wrong, and so on, are just “boo and cheer words” so if you are the ruler and you like burning people, light up the night…..).

    Of course these false conceptions of jurisprudence and philosophy might be said to have little to do with economics – but, in the end, they effect.

    Take, for example, Mises’ passion for truth.

    To Mises courage for truth is the supreme virtue. That is what led him to follow logic in economics – regardless of where it led.

    But what if someone “does economics” who does not have this passion?

    Someone for whom truth does not matter – and “virtue” is just a word, and a silly one at that (which is how the intellectual elite thought….)

    Then we are in the world of Krugman and Stiglitz – people who do NOT just make “mistakes”, people who LIE.

    Not just “bad economists” but BAD PEOPLE.

    So perhaps, contra Mises, economics is not so “value free”(in a moral sense) at all.

    Truth (and the courage to rish one’s life for it) is itself a moral value.

    This is not the moral blackhole of Logical Positivism (or the vile doctine of American Pragmatism).

    It is not even the moral calculation of the act or rule utilitarian (who may decide that lying is for the greatest good of the greatest number). Although that is vastly superior to either Logical Positivism or Pragmatism (and Mises does declare in favour of rule utilitariaism).

    It is more like Charlton Heston in the film “El Cid”.

  • Paul Marks

    Benevolence is a virtue.

    Hardwork is a virtue.

    Honesty is a virtue.

    Courage is a virtue.

    If you do not care about people (if you think they are just subhuman scum – better off…..) you are not likely to be a good economist (why bother to study it).

    If you choose not to work hard (to study and think) you are not likely to be a good economist.

    If you are dishonest – if you lie rather than telling the truth, then there is no point in listening to you (or reading your word).

    If you lack courage – if you fear the implication of your and so run away from conclusions (and do not overcome your fear), you will be of no use.

    In short – the personal motto of Ludwig Von Mises (loyal officer of the Hapsburgs) from Virgil…

    “Do not hide from evil – but proceed, ever more boldly, against it”.

    Is a good motto for economist.

    But it is not exactly “value free”.

  • Snorri Godhi

    A few random thoughts:
    I, too, am increasingly sympathetic to Aust(e)rianism.
    However i see no need for it in microeconomics: only in macroeconomics.

    When i first read a textbook on Keynesian macroeconomics, i did not really understand anything, other than Keynesians think that there is such thing as a free lunch. Perhaps naively, i think that the main point of the Austerian view is TANSTAAFL.

    Without going into details of the many ideas i got from Hayek (and i am not sure how far the other Austerians agree with Hayek) let me say that i’d like to agree with Perry’s take … and yet, it seems to me that there is a kernel of truth in Alsadius’ comment: Austerians, or at least Mises+Rothbard, do give the impression that they aspire to start from first principles, disregarding all empirical evidence, to reach Absolute Truths. There seems to be a tension between this aspiration and the notion of fatal conceit.

    Also worth discussing is the is/ought dichotomy, the divide between Austerian economics and Austerian economic policy. Unfortunately i am not qualified to discuss it.

  • I think that the only logical conclusion from the principles on which Austrian economics are based is that there should be no economic policy. Which is not necessarily to say that the world should be run according to these principles, only that this is the only logical conclusion.

  • Paul Marks

    Ludwig Von Mises always made the point that an economist (as an economist) could only say what would happen if certain policies were followed – not whether these policies should be followed.

    For example, an economist (as an economist) could say that the adoption of a minimum wage law, where the new minimum wage was above the market rate (NOT where it was not) would increase unemployment.

    Ditto that a rent control law (where the new maximum rent was below the market rate – NOT where it was not)would reduce the properties available for rent.

    What an economist (as an economist) could NOT do was to say “and increasing unemployment is a bad thing”. Or “increasing homelessness is a bad thing”.

    The basic principles of economic logic are (all other factors being equal – a rather big qualification) “absolute truths” (independent of racial or other stuff).

    But they are also LIMITED truths.

    If a ruler says (for example) “I want to increase unemployment – I will declare the minimum wage to be one hundred Pounds an hour”.

    Or “I want to increase homelessness – I will order the maximum rent to be one Pound a year”.

    All an economist (as an economist)can say is…..

    “These policies will indeed achieve your objectives, oh mighty one”.

    Where creatures such as Stiglitz and Krugman fail as economists (as well as fail as human beings) is that they PRETEND (and it is a pretence – not an honest mistake) that policies will achieve results very different (indeed sometimes the exact opposite) of the results they will achieve.

    My point is that if truth has no moral value – why should economists like Stiglitz and Krugman tell the truth?

    As lying is the road to success and happiness (“Nobel” prizes, money, praise from everyone for your “compassion” and……) who would not lie?

    If happiness is the goal of life why not lie and cheat to achieve personal happiness?

    Especially if the alternative is to end up degraded and hated by all.

    This is what Harold Prichard was getting at in his essay “Is Moral Philosophy Based Upon A Mistake?” (Mind – 1913).

    The question is, of course, discussed in what we call “The Republic” – but (like Prichard) I find the reply of “Socrates” (Plato) deeply unconvincing.

    I have long believed that in the world as it is, one must choose between happiness and honour.

    The path of honour (of right) is the path of humiliation and pain.

  • Paul Marks

    To give an example.

    The “other man from Peru Indiana” (people tend to remember Cole Porter – but not the person I am going to mention now) Frank Fetter.

    Frank Fetter was the economist who refuted Henry George (and the whole Ricardian tradition) on land, and refuted Irving Fisher (and the whole idea of monetary expansion) on “monetary policy” (Alsia is correct – the logical conclusion of Austrian School principles is an end to “policy”, but this still has to be proved logically and this difficult task was performed, in these areas, by Frank Fetter).

    Now Frank Fetter had a modestly successful life – although even in the 20th century it was those who were in error (such as Irving Fisher) who got the prizes and the praise (Milton Friedman on Irving Fisher “the greatest American economist of the 20th century” – yes, and I am Ming the Mercyless from the planet Mongo).

    But what if an evil demon had appeared before the young Frank Fetter and said the following…….

    “Hello Frank – you may tell the truth, but I will ensure that your life is one long torment. Dead end jobs, the contempt of everyone, till you end up dying in the gutter…… or…….

    “If you lie I will ensure that you will have a wonderful life – all the prizes and positions, the praise of all for your “compassion” and “caring” attiude – you will live many more years and in comfort, and even after you die your name will be prased by all those of importance”.

    Which life should young Frank choose?

  • Brian Micklethwait (London)


    You are Ming the Merciless from the planet Mongo?

    This explains a lot.

  • Snorri Godhi

    If Paul can be Ming the Merciless, then I want to be Conan the Barbarian from Cimmeria.

  • Allan Ripley

    One commenter has remarked on how Austrian economists belabor the obvious. One ought to be careful on their critisism of the belaboring of the obvious because the obvious is not measurably obvious to most people. What may seem plain to you and me appears to be quite obscure to most of our fellow travelers.

    The beauty of Austrian Economics is that it does, in fact, belabor the obvious, which we were not able to discern before.

  • Paul Marks

    Conan would win – I like Conan.

    Allan Ripley – agreed.