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Steven 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.
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 nightmare 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.
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I completely agree, and consider Boettke's summary close to perfect as a description of what AE is.
It is sad that it is necessary to repeat so often that AE is not an ideology, because it is often difficult to discern the two things in the practice of many internet or media commentators, both pro and contra AE.
Very well stated, Steve. I think focusing on those ten points is also essential for a dialogue between Austrians and other schools of thought in economics. I would suggest that the majority of those points are broadly agreed on, but the minority that aren't are important AND quite reasonable to hold. An Austrian school that focuses on those ten points can discuss the merits of those points with others. An Austrian school that assumes an unfriendliness to liberty or unfriendliness to the market on the part of non-Austrians can't be nearly as productive. It's a good set that Peter offers.
I think someone oughta bring attention to the elephant in the room here: the Mises Institute. There's a fine line between further name-calling and simply noting that a lot of the ideologization, politicization, and hostility perceived to be part and parcel with the Austrian school comes from the Mises Institute. The thing is, they do a lot of good work too in making essential texts available. But the rhetoric, I think, is ultimately damaging to you guys.
Maybe it's not a fight that the hosts of this blog want to pick right now, but I'm sure others are thinking it besides me - so I just wanted to put that out there.
Anyway, this is all good. I blog about the Austrian school and about libertarianism a lot - in many cases agreeing with the different perspective they bring, but often disagreeing. I think I distinguish between libertarians and Austrians fairly well, and I think I note the views of "some Austrians" rather than "Austrian economics", but I'll take this post as an opportunity to pay more attention to the language that I use around that.
Too true, Steve.
I am not an Austrian, because I am not an economist. But am quite sure Larry White is an Austrian, so imagine my surprise when I encountered a discussion on the Mises Institute forum about a week ago with people claiming otherwise. The commentators took exception to White's recent EconStories videos about ABCT where he mentioned the potential problem of an excess demand for money following a bust --apparently that is all it takes to be branded non-Austrian.
Of course, I know the commentators were not serious scholars -- just enthusiastic amateurs (like myself!). But why does Austrian economics attract so many people of this type? Do other schools of economics have the same problem to such an extent?
My impression is that reading Rothbard is very bad for some people. He wrote very well, and made complex topics seem simple. He is exciting to read, for he weaves a good story, full of heroes and villains. Rothbard's passion and rhetoric seems to intoxicate particulars kinds of minds. The effect seems to be overconfidence and righteousness, and a blurring or conscious abolition of Mises's "value freedom". This is not to belittle the real contributions to economic science that Rothbard made, but merely my impression of hoe his works seem to influence some people.
Folks,
See my new edited book The Handbook on Contemporary Austrian Economics (Edward Elgar) --- http://www.amazon.com/Handbook-Contemporary-Austrian-Economics-Boettke/dp/1847204112
I know it is expensive, but 2 things to keep in mind --- Elgar sells to libraries so fill out the library card at your university and request a copy. And for faculty, I know that Elgar is willing to offer a deep discount for teaching and packaging. So I believe a deal can be worked out if you use both this book along with my older Elgar Companion to Austrian Economics (1994), which is available in paperback. You just have to talk to an editor/representative at Elgar to work out the deal for the packaging.
Lee Kelly -
1. I think other schools of thought have these excitable types, but I'm not sure the school of thought itself inspires them in the same way. There are obnoxious radical leftists that ally themselves with Keynesians, but you cannot read Keynes and have him turn you into an obnoxious radical leftist. As you note, you can read Rothbard and potentially come out an obnoxious libertarian. This is probably less true of Hayek and Mises, although Mises had his share of saber-rattling I believe.
2. On Rothbard's heroes and villains - I couldn't say, but I always think this sort of history is suspicious. History is full of heroism and villany to be sure, but if your history is densely populated with heroes and villains, something is very wrong. I can only think of a handful of true "villains" and at the moment I can't think of any unalloyed "heroes" (although a few come close). People too easily confuse the quality of heroism and villany with its personification.
Great post, very clear. I especially like the bit on natural rights. I was already familiar with Pr Boettke's entry on Austrian economics, but I must admit that I'm wondering whether those ten points are too broad. I feel like the first five point and the last one are generally agreed by economists, though they probably wouldn't word it like that (and as clearly I might add). Isn't the essence of austrian economics really somewhere within points 6 to 9? It feels to me like the gist of Austrian economics is something that would bridge between those 6 more generally agreed points and those 4 decidedly austrian theories.
Mathieu - I would hope we could add #6 to the "agreed on, but don't always word it in the same way" too! I'm always surprised when people think the socialist calculation debate is still a debate.
"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."
This seems strange. Do you want to suggest that the AE is generally inconsistent with the natural rights position? That you must be a consequentialist in order to be an economist?
More generally, someone said this, not so long ago:
"The term "Austrian economics" has become as much a hindrance to the advancement of thought as a convenient shorthand to signal certain methodological and analytical presumptions..We have always been among those who attempted to offer resistance to this use of the term. It has become evident to us that our efforts have been futile. Rather than resist the pure ideological identification, we are choosing to devote our efforts elsewhere. The name Austrian economics has been lost as a focal point for a tradition of economic scholarship, and is now a focal point for something else. We have to let it go."
I wonder: what has changed in the meantime? Why are you again so eager to define, redefine, polish the thing that has been "lost" anyway? Did your google searches performed in the meantime indicate that the AE included now more references to Mises, "analytical thinker" rather than an "ideological symbol", or that the references to the ABCT do not include anymore crazy anti-Fed talk? I don't quite understand why don't you simply let those crazy anti-government, anti-Lincoln, anti-Fed crackpots to call themselves the "Austrians" and you stick to your "Coordination Problemism" and be happy.
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