Quote:
Originally Posted by wig
Mainstream economists and the overwhelming majority of higher education in economics considers the Austrian school to be social theorists more so than economists. They are shunned because they don’t provide anything that is considered robust economic analysis. They provide no formulas or mathematical models. It's ideology, not economics.
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First of all the reason the Austrian school doesn't get a lot of attention from the mainstream media and from politicians is because Austrian Economists can clearly explain what causes the Boom and Bust cycle: Government intervention in the economy (and more specifically central banks artificially adjusting the interest rate). This totally opposes the Keynesian view that can be easily used by politicians as an excuses for endless borrowing of funds they use to buy peoples' votes.
On methodology: Yes there is a huge difference in methodology between the Austrian School and the schools of thought that get most of the media attention these days.
The Austrian School uses an axiomatic-deductive method (which btw used to be the most commonly used method in economics until the neo-liberals like Friedman started promoting the empiric-scientific method.)
According to the empiric-scientific method it is impossible to be certain about something. Economists who use this method formulate hypotheses and then they test and retest these hypotheses. Afterwards they can for example state that hypothesis A was not disproved in 10 of their tests and that hypothesis B was disproved in 8 out 10 of their tests.
Austrian economists totally reject this empirical-scientific method for 2 reasons:
- It is possible to be certain about certain things. For example If I state that all objects that are completely blue cannot at the same time be completely red than you know that that statement is correct. Even though it is clearly impossible to test this statement in an empirical-scientific way. Another example: 2 objects cannot occupy the same physical space at the same time.
- While the empirical-scientific method is useful when investigating the natural sciences (physics, chemistry etc) it is impossible to use these techniques when investigating how the economy works. While it is possible to isolate 1 or more chemical elements in a lab and for example test at what temperature they melt or burn or vaporize, it is impossible to place the entire economy in a lab. It is not possible to measure all activities, ideas etc. It is impossible to put people in a lab and monitor their behavior without affecting their behavior.
The Austrian school uses an axiomatic-deductive method. This means they start with an axiom (a statement that is true) and use a known method (Logic) to deduct things from that axiom. So If your axiom is true and if you have not made any logical errors, than whatever you have deducted from that axiom must also be true.
I recommend you take a look at 'praxeology'. The axiom here is that "people act" (It is impossible to disprove that people act because by trying to do so you would be performing an act and contradict yourself) and it is remarkable to see how much economic laws can deducted from that simple axiom.
Critics of the Austrian School often try to take a shortcut and instead of arguing based on content they simply try to dismiss or discredit the Austrian method as 'religion'. Of course by doing so these critics are dismissing logic and reason itself and even other axiomatic-deductive sciences like mathematics.
If the use of an axiomatic-deductive method were mere religion and if it were impossible to be certain about something than a high school maths teach would for example not be able to teach his students about the Pythagorean theorem because than that would be mere religion.