In December of 2021 I had an online debate with Walter Block comparing the approaches to economics associated with the Chicago and Austrian schools. When I asked him what version of Austrian economics he wanted to defend he pointed me at Man, Economy and State
I like thinking of the monopsony example as the theorist being wrong about the relevant marginal costs, as I explain in this newsletter (which happens to start off with your JPE paper on heating) https://pricetheory.substack.com/p/be-careful-about-costs
It seems like in all of your disputes with libertarians, you are very obviously right, much more so than in your disputes with other people. The Austians just seem to be engaging in motivated reasoning, attempting to justify libertarianism, but in doing so, they commit elementary errors, and makes leaps of reasoning that no sane person would make.
I've just finished watching the debate. Block is painful to watch, he addresses none of the issues.
I also watched the earlier debate with Murphy and I think it was much more balanced. I think Murphy is more serious, and is willing to confront the issues.
I've heard him before talk against time preference for example.
I don't think Murphy will defend Rothbard on any of the points, because the mistakes are so obvious.
Ultimately, I think the defining characteristic of an honest Austrian (say Murphy) is simply a more confident prior.
An understandable position in the current climate.
¨How do we know that this hypothetical envious one loses in utility because of the exchanges of others?¨
Like it or not social status is a major human concern, which is proven by the fact that so many luxury brands make fortunes by selling the same thing as generic brands but at many times a higher price, so that their customers can signal social status.
An additional point on the “income tax” argument: it seems to me that if a person’s demand for money were highly inelastic (say, dominated by fixed costs for housing), raising the person’s income tax might cause the person to work more, not less.
That was a fun read! Do you also have/know of any (similarly elementary) writeup comparing Chicago school to the current mainstream economics? What are the main points of disagreement/most controversial claims that cause economists not to identify with the Chicago school?
In Rothbard, I like the ordinal value theory approach, which I see like a subset of the neoclassical function with fewer unrealistic assumptions. But even in this case, any representation of an agent's preferences remains a model, to be tested. I don't understand the "synthetic a priori truth" kantian goobledygook or the "apodictic truth" stuff and I believe that the Austrian's neglect of empirical economics disserves them.
For example, Tullock has a model of the minimum wage (HT Tyler Cowen) in which it doesn't necessarily increase unemployment by much but can instead reduce the in-kind benefits for workers, increase managerial pressure, and more generally degrade their working conditions(*). This model is perfectly compatible with Austrian economics and ordinal value theory, but does it reflect adequatly the complexity of the labor market? How does the trade-off between wage, employement and working conditions work in practise? What is the equilbrium? These are empirical questions, so an a priori reasoning cannot say whether the minimum wage raises unemployement in such a model. There are lots of similar examples.
(*) Source: The minimum wage: A new perspective on an old policy, in The best of the new world of economics-and then some (5th ed) by Gordon Tullock
“. It becomes impossible to answer important questions economists are asked, such as whether minimum wage laws or tariffs are a good or bad thing.”
I think Mises would say there is no scientific answer to the question, as you have worded it; that economic science should be able to say what effects followed from such policies, and so whether or not they would live up to their advocates' rhetoric. But whether we think of those effects as good or bad is up to us.
Incidentally, there is a longer version of the article at:
http://www.daviddfriedman.com/Ideas%20I/Economics/Critique%20of%20a%20Version%20of%20Austrian%20Economics.pdf
I like thinking of the monopsony example as the theorist being wrong about the relevant marginal costs, as I explain in this newsletter (which happens to start off with your JPE paper on heating) https://pricetheory.substack.com/p/be-careful-about-costs
It seems like in all of your disputes with libertarians, you are very obviously right, much more so than in your disputes with other people. The Austians just seem to be engaging in motivated reasoning, attempting to justify libertarianism, but in doing so, they commit elementary errors, and makes leaps of reasoning that no sane person would make.
I've just finished watching the debate. Block is painful to watch, he addresses none of the issues.
I also watched the earlier debate with Murphy and I think it was much more balanced. I think Murphy is more serious, and is willing to confront the issues.
I've heard him before talk against time preference for example.
I don't think Murphy will defend Rothbard on any of the points, because the mistakes are so obvious.
Ultimately, I think the defining characteristic of an honest Austrian (say Murphy) is simply a more confident prior.
An understandable position in the current climate.
I think this Caplan posts is relevant here:
https://www.econlib.org/archives/2016/12/they_doth_prote.html
Also contra Rothbard
¨How do we know that this hypothetical envious one loses in utility because of the exchanges of others?¨
Like it or not social status is a major human concern, which is proven by the fact that so many luxury brands make fortunes by selling the same thing as generic brands but at many times a higher price, so that their customers can signal social status.
An additional point on the “income tax” argument: it seems to me that if a person’s demand for money were highly inelastic (say, dominated by fixed costs for housing), raising the person’s income tax might cause the person to work more, not less.
That was a fun read! Do you also have/know of any (similarly elementary) writeup comparing Chicago school to the current mainstream economics? What are the main points of disagreement/most controversial claims that cause economists not to identify with the Chicago school?
In Rothbard, I like the ordinal value theory approach, which I see like a subset of the neoclassical function with fewer unrealistic assumptions. But even in this case, any representation of an agent's preferences remains a model, to be tested. I don't understand the "synthetic a priori truth" kantian goobledygook or the "apodictic truth" stuff and I believe that the Austrian's neglect of empirical economics disserves them.
For example, Tullock has a model of the minimum wage (HT Tyler Cowen) in which it doesn't necessarily increase unemployment by much but can instead reduce the in-kind benefits for workers, increase managerial pressure, and more generally degrade their working conditions(*). This model is perfectly compatible with Austrian economics and ordinal value theory, but does it reflect adequatly the complexity of the labor market? How does the trade-off between wage, employement and working conditions work in practise? What is the equilbrium? These are empirical questions, so an a priori reasoning cannot say whether the minimum wage raises unemployement in such a model. There are lots of similar examples.
(*) Source: The minimum wage: A new perspective on an old policy, in The best of the new world of economics-and then some (5th ed) by Gordon Tullock
“. It becomes impossible to answer important questions economists are asked, such as whether minimum wage laws or tariffs are a good or bad thing.”
I think Mises would say there is no scientific answer to the question, as you have worded it; that economic science should be able to say what effects followed from such policies, and so whether or not they would live up to their advocates' rhetoric. But whether we think of those effects as good or bad is up to us.