New Thinking in Austrian Economics \ stacker news ~econ

New Thinking in Austrian Economics doi.org/10.1146/annurev-economics-082322-021346

4390 sats \ 19 comments \ @scottathan 6 Jan econ

Exceptional 2023 overview of essential contributions of Austrian economics over the last 25 years. Each major area of study is given a 30,000 ft view, with ample links to further reading. I would highly recommend it to anyone who wants to better understand the continuing Austrian economics research project.

Topic areas:

robust political economy
macroeconomics
monetary economics
entrepreneurship and the market process
development economics
behavioral economics
governance
social economy
collective action challenges related to natural disaster recovery and infectious disease
war and defense

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1089 sats \ 17 replies \ @elvismercury 6 Jan

This is helpful -- from time to time I wonder what Austrian econ has to further contribute to the world, since my sense, from reading HA, is that it basically draws a tight circle on the things it can opine on, and then opines on all those things. Bryan Caplan has a more elaborate and well-informed take that amounts to the same thing, more or less.

So I'll be interested to have a look at this.

448 sats \ 2 replies \ @Undisciplined 6 Jan

I see it more as the low hanging fruit has been picked and further advances using that methodology will be more challenging.

The debate about whether Bryan Caplan is (or should be) an Austrian is a very fun bit of inside baseball.

476 sats \ 1 reply \ @elvismercury 6 Jan

Didn't realize that Boettke was also at Mason -- that must make for some interesting faculty lunches.

0 sats \ 0 replies \ @Undisciplined 6 Jan

The Mason faculty is awesome, in general. They've built a really distinctive program over there. Sadly, Walter Williams is no longer part of it.

476 sats \ 13 replies \ @scottathan OP 6 Jan

That's a fair take. Older Austrian work does often feel like beating a dead horse these days. I'm a fan of Bryan Caplan's work and his points make a lot of sense, yet I do think Austrian economics may still have more to offer us.

For one thing, the recent debates over behavioral economics have opened the door for a deeper analysis of rationality that Austrian economics is uniquely suited to help with. Austrian economists have recently been forced by behavioralists to experiment with what rationality means, which is easier from an Austrian context given its historical differences from the neoclassical conception of rational choice.

In addition, I feel like the knowledge-centric (epistemic) approach is still a very open ended research project. Hayek's work started off the conversation on how the price-system aggregates distributed knowledge. But just as Michael Shannon's first paper on information theory opened the doors to decades of research on networks that continues today, there is so much more that can be done with knowledge in economics, especially if combined with recent work on graph theory and chaos theory.

Finally, as we enter an age where big data and economics are working closer and closer together, there is a lot of interesting work to be done on with building algorithms and mathematics around Austrian axioms. I'd suggest this paper if that idea interests you.

There is one other paper I ran into recently diving into this further if you want to give it a look, although I sadly haven't had the chance to read it yet. Austrian Economics as a Relevant Research Program

271 sats \ 1 reply \ @Voldemort 9 Jan

Hayek is one of my favorite economists of all time, but I do not consider myself an Austrian economist. To be clear, I have a PhD in econ so I am an economist by training. I have always found their views on the use of mathematics in economics short sighted.

I would argue the paper about complexity science in economics demonstrates this. Effectively they have been so opposed to math in econ for so long that, instead of figuring out how to use math in econ, they more or less waited until others developed a method that fits their worldview. Not only that, they need to convince other Austrian economists it could be useful.

0 sats \ 0 replies \ @Undisciplined 10 Jan

This is a view I've always held, as well. Bob Murphy is one Austrian who I think understands the value of mathematics in economic analysis.

Most of the older Austrians conflated "math" with the kind of real analysis that's so common in mainstream theory. I think many of the Austrian critiques of relying on that type of mathematics are fine.

What they miss is that the kind of work Kenneth Arrow did is also highly mathematical. He was making use of powerful deductive tools that apply to the strict paradigm of ordinal preferences that Austrians rightly emphasize.

0 sats \ 9 replies \ @Undisciplined 6 Jan

There's a strong complementarity between the Austrians and the main stream of the profession. As the main stream expands into new areas for the discipline, they generally do so with less rigorous methods than the Austrians. That leaves room for the Austrians to sort of bat cleanup. When they weigh in on the new topics, many errors get corrected and some new insights get added.

0 sats \ 8 replies \ @Voldemort 9 Jan

How do you define rigorous methods? Certainly, opining from an armchair can't be considered rigor.

272 sats \ 4 replies \ @scottathan OP 9 Jan

The biggest piece of rigor is the Austrian treatment of value, rationality, and knowledge.

Value

Austrians consider value to be subjective, or at the very least that people will act as if it is subjective. No other tradition rigorously maintains this precept. Classical and Marxist economists consider value to derive from labor, and neoclassicals see it as deriving from cost more generally.

In addition, Austrians don't consider value and preferences to be static, but that they will constantly change and shift, even moment to moment, depending on the individual.

Rationality

Neoclassical economists essentially consider all people to be purely rational economic actors. Behavioral economists question this precept, but end up maintaining that we are permanently irrational.

Austrians focus more on actions being purposeful; people take intentional actions that make sense to them given their immediate situation. In addition, they see people as capable of learning and improvement, becoming more rational over time. This is a far more realistic view of the human condition that produces more rigorous results.

Knowledge

The neoclassical school considers knowledge to propagate instantly throughout society. Austrians such as Hayek reject this. Contemporary Austrians have actually started to study how quickly knowledge will propagate, which is a far more rigorous framework and research project.

485 sats \ 0 replies \ @Voldemort 10 Jan

I fundamentally disagree with everything you said about value. At no point in my several years of economics training did I learn that value is derived from labor. Quite the opposite actually. The only time I heard that value was derived from labor was in philosophy of economics when covering Marx.

I also disagree with your premise "no other tradition maintains this precept". That is only because the vast majority of economists don't consider themselves part of a tradition. They just do economics research. There is a whole host of people who do research that would align with various Austrian viewpoints.

Please define how you are measuring the rigor of a result. Nevertheless, suppose I grant that this is true, you are assuming that the rigor of a result is the metric to prioritize. What is the value of a rigorous result without understanding e.g., precision?

Let me suppose the rigor of a result is measured by the generalizability of results. IE, if minimum wage is above market wages, unemployment will increase. This is a rigorous result under my supposed definition as it is widely generalizable. Why is that better to know than something less generalizable but more precise?

As far as knowledge goes, Non-Austrian economists call this friction. Models assume no friction to glean insights. All economists know that in the real world there is friction.

372 sats \ 1 reply \ @elvismercury 9 Jan

Classical and Marxist economists consider value to derive from labor,

Really? Who in the modern era, other than Marxists, buys into the labor theory of value?

1021 sats \ 0 replies \ @Undisciplined 9 Jan

Basically, no one: The Classical economists were Smith, Ricardo, Mill, Malthus, and Marx.

Most modern economists are neo-classical, which is sort of classical + subjective value theory.

0 sats \ 0 replies \ @Undisciplined 9 Jan

Nice summary. Value and Rationality represent core Austrian insights that the rest of the school of thought is built on. The propagation of knowledge is one of the main theoretical contributions. At least that's how I look at it.

21 sats \ 2 replies \ @Undisciplined 9 Jan

Deductive reasoning from first principles is not "opining from an armchair". Logic can be checked for consistency.

The reason I say it's more rigorous is that they make fewer unrealistic assumptions about preferences than most mainstream economists do, which makes their findings more general.

485 sats \ 1 reply \ @Voldemort 10 Jan

I subjectively view the generalizability of results as less valuable than the precision of results.

0 sats \ 0 replies \ @Undisciplined 10 Jan

That's fine, you do you.

I think there's a lack of clarity on how I'm using "rigorous", because I mean it in the sense of developing theory.

My work is predominantly empirical and "rigorous" means something entirely different in that context. Many economic questions are inherently empirical and Austrians at best could give directional answers from theory alone.

0 sats \ 0 replies \ @elvismercury 6 Jan

Those are interesting links, appreciated!

0 sats \ 0 replies \ @TNStacker 6 Jan

⚡🧡TNStacker Recommended 🧡⚡

Even to read the abstract is enough to inform and update the average new bitcoiner.

However, this is an excellent literature review! I am so grateful you added this value by sharing with the Stacker Community!