Back to School: Austrian School

 

What has Government Done to Our Money?Please take this as penance for my recent, and recently-deleted, post regarding the Fed. Out of that regrettable conversation came, I hope, one good thing: an opportunity to open a door for the genuinely curious who wonder what I’m so worked up about. Specifically, let me present a good launching point. It isn’t a massive scholarly tome, but it isn’t (or at least isn’t merely) opinionated handwaving.

What Has Government Done to Our Money? and The Case for the 100 Percent Gold Dollar is Murray Rothbard’s famous manifesto on sound money. First published in 1963 in the style of a pamphlet designed for mass distribution, it is one of his most influential works.

Murray Rothbard needs no introduction in libertarian economic circles. For the rest, Rothbard might best be characterized as an economist analogue of David Horowitz. Raised by parents of the Left, he was intellectually unable to reconcile cant with reality, but sincere in his belief in freedom, both in the abstract as a moral good in itself, and in practice the best vehicle for improving the lot of the less fortunate.

Rothbard, a student of Ludwig von Mises and hence the Austrian school of economics, begins with a brief apologia for taking freedom as a guiding principle in discussing money. It isn’t likely to convince the unconvinced, but is characteristic of any student of von Mises, who was a stickler for making assumptions as explicit as possible. “If we favor the free market in other directions,” Rothbard writes,” if we wish to eliminate government invasion of person and property, we have no more important task than to explore the ways and means of a free market in money.”

Part II, “Money in a Free Society,” is worthwhile by itself as an excellent capsule summary of Austrian monetary theory. He quickly argues the value of exchange generally:

If no one could exchange, if every man were forced to be completely self-sufficient, it is obvious that most of us would starve to death, and the rest would barely remain alive. Exchange is the lifeblood, not only of our economy, but of civilization itself.

He surveys primitive barter schemes and their limits: “Clearly,” he observes, “any sort of civilized economy is impossible under direct exchange.” Next he treats indirect exchange: “At first glance, this seems like a clumsy and round-about operation. But it is actually the marvelous instrument that permits civilization to develop.’ From this, he concludes:

A most important truth about money now emerges from our discussion: money is a commodity. Learning this simple lesson is one of the world’s most important tasks. So often have people talked about money as something much more or less than this. Money is not an abstract unit of account, divorceable from a concrete good; it is not a useless token only good for exchanging; it is not a “claim on society”; it is not a guarantee of a fixed price level. It is simply a commodity. It differs from other commodities in being demanded mainly as a medium of exchange. But aside from this, it is a commodity—and, like all commodities, it has an existing stock, it faces demands by people to buy and hold it, etc. Like all commodities, its “price”—in terms of other goods—is determined by the interaction of its total supply, or stock, and the total demand by people to buy and hold it. (People “buy” money by selling their goods and services for it, just as they “sell” money when they buy goods and services.)

He notes the benefits of money. Because of it, “an elaborate ‘structure of production’ can be formed, with land, labor services, and capital goods cooperating to advance production at each stage and receiving payment in money.”

Next he treats monetary units, noting that “the free market will choose as the common unit whatever size of the money-commodity is most convenient. If platinum were the money, it would likely be traded in terms of fractions of an ounce; if iron were used, it would be reckoned in pounds or tons. Clearly, the size makes no difference to the economist.” If the size makes no difference, neither does its shape. He then considers private coinage:

Champions of the government’s coinage monopoly have claimed that money is different from all other commodities, because “Gresham’s Law” proves that “bad money drives out good” from circulation. Hence, the free market cannot be trusted to serve the public in supplying good money. But this formulation rests on a misinterpretation of Gresham`s famous law. The law really says that “money overvalued artificially by government will drive out of circulation artificially undervalued money.”

In the section treating the “proper” supply of money you’ll find a pillar of his critique of central banking; to wit, that the decision about the “proper” supply should be left to the market:

Aside from the general moral and economic advantages of freedom over coercion, no dictated quantity of money will do the work better, and the free market will set the production of gold in accordance with its relative ability to satisfy the needs of consumers, as compared with all other productive goods.

“The critic of monetary freedom is not so easily silenced, however,” he concedes: 

There is, in particular, the ancient bugbear of “hoarding.” The image is conjured up of the selfish old miser who, perhaps irrationally, perhaps from evil motives, hoards up gold unused in his cellar or treasure trove—thereby stopping the flow of circulation and trade, causing depressions and other problems. Is hoarding really a menace?

He believes not:

Money is only useful for exchange value, true, but it is not only useful at the actual moment of exchange. This truth has been often overlooked. Money is just as useful when lying “idle” in somebody’s cash balance, even in a miser’s “hoard.” For that money is being held now in wait for possible future exchange—it supplies to its owner, right now, the usefulness of permitting exchanges at any time—present or future—the owner might desire. …

We have seen that society cannot satisfy its demand for more money by increasing its supply—for an increased supply will simply dilute the effectiveness of each ounce, and the money will be no more really plentiful than before. People’s standard of living (except in the non-monetary uses of gold) cannot increase by mining more gold. If people want more effective gold ounces in their cash balances, they can get them only through a fall in prices and a rise in the effectiveness of each ounce.

There goes Keynes.

In another pillar of his argument against central banking, he points out that those who seek to “stabilize the price level” must necessarily overrule freedom, “[s]ince the price of money would admittedly fluctuate on the free market.” Indeed, “[a]rtificial stabilization would, in fact, seriously distort and hamper the workings of the market.” Money he concludes, “is not a ‘fixed yardstick.’ It is a commodity serving as a medium for exchanges. Flexibility in its value in response to consumer demands is just as important and just as beneficial as any other free pricing on the market.”

Nor does he see the need for a single currency. To the contrary: “The free market is eminently orderly not only when money is free but even when there is more than one money circulating.

What kind of “standard” will a free money provide? The important thing is that the standard not be imposed by government decree. If left to itself, the market may establish gold as a single money (“gold standard”), silver as a single money (“silver standard”), or, perhaps most likely, both as moneys with freely-fluctuating exchange rates (“parallel standards”)

But where will these currencies be stored? Worry not. “There is every reason to believe that gold warehouses, or money warehouses, will flourish on the free market in the same way that other warehouses will prosper.” 

In sum, he argues:

[F]reedom can run a monetary system as superbly as it runs the rest of the economy. Contrary to many writers, there is nothing special about money that requires extensive governmental dictation. Here, too, free men will best and most smoothly supply all their economic wants. For money as for all other activities, of man, “liberty is the mother, not the daughter, of order.”

You could stop there and have a better understanding of money than 98 percent of the populace, whether you agree with Rothbard’s conclusions or not. Such is the quality of Rothbard’s exposition.

In Part III, “Government Meddling With Money,” Rothbard the teacher gives way to Rothbard the polemicist. “The Economic Effects of Inflation,” “Permitting Banks to Refuse Payment” (AKA “Bank Holidays”), “Central Banking: Removing the Checks on Inflation,” “Going Off the Gold Standard,” etc., all explain, in detail, the central lie of central banking: It doesn’t control inflation; it creates it, and usually on purpose:

We have seen that, over the centuries, government has, step by step, invaded the free market and seized complete control over the monetary system. We have seen that each new control, sometimes seemingly innocuous, has begotten new and further controls. We have seen that governments are inherently inflationary, since inflation is a tempting means of acquiring revenue for the State and its favored groups. The slow but certain seizure of the monetary reins has thus been used to (a) inflate the economy at a pace decided by government; and (b) bring about socialistic direction of the entire economy.

Furthermore, government meddling with money has not only brought untold tyranny into the world; it has also brought chaos and not order. It has fragmented the peaceful, productive world market and shattered it into a thousand pieces, with trade and investment hobbled and hampered by myriad restrictions, controls, artificial rates, currency breakdowns, etc. It has helped bring about wars by transforming a world of peaceful intercourse into a jungle of warring currency blocs. In short, we find that coercion, in money as in other matters, brings, not order, but conflict and chaos.

Part IV, “The Monetary Breakdown of the West,” is Rothbard the teacher again, in my opinion at his best. Economic theory, to qualify as scientific, must show explanatory and predictive power. Here Rothbard uses his command of Austrian monetary theory to look at the Classical Gold Standard of 1815-1914, World War I, the Gold Exchange Standard of 1926-1931, the Fluctuating Fiat Currency regime of 1931-1945, the Bretton Woods agreement of 1945-1968, Bretton Woods Unraveling 1968-1971 (a period I personally remember), Bretton Woods’ End in 1971, The Smithsonian Agreement 1971-1973, and Fluctuating Fiat Currencies 1973-?Folks my age can fill in the blanks: the Carter years and Carter bonds; Reagan, Friedman, and Volker’s Fed, etc.

In Rothbard’s view,

As we face the future, the prognosis for the dollar and for the international monetary system is grim indeed. Until and unless we return to the classical gold standard at a realistic gold price, the international money system is fated to shift back and forth between fixed and fluctuating exchange rate,s with each system posing unsolved problems, working badly, and finally disintegrating. And fueling this disintegration will be the continued inflation of the supply of dollars and hence of American prices which show no sign of abating. The prospect for the future is accelerating and eventually runaway inflation at home, accompanied by monetary breakdown and economic warfare abroad. This prognosis can only be changed by a drastic alteration of the American and world monetary system: by the return to a free market commodity money such as gold, and by removing government totally from the monetary scene.

The conjoined volume, “The Case for the 100 Percent Gold Dollar,” takes a few pieces of the first volume, elaborates on how they abet the central bank in inflating, addresses some popular objections, and presents a rough plan for returning to a classical gold standard. Of these, I’d say only the last is essential, but it’s just a sketch. For more detail, you’ll need one of the scholarly tomes. If there’s any interest, I may write about one of them next. Fair warning.

So here it is. Yes, I’m angry. Not as angry as Rothbard, but angry. However, my anger is not directed toward any individual on Ricochet, and I was wrong preemptively to forestall debate from those I am admittedly already satisfied are wrong — not evil, just wrong. The right thing to do is make what case I can, and let that speak for itself. I hope this first attempt is of value to someone.

 

There are 101 comments.

Become a member to join the conversation. Or sign in if you're already a member.
  1. Tuck Inactive
    Tuck
    @Tuck

    Nice post.  I was starting to enjoy the other thread… ;)

    • #1
  2. Midget Faded Rattlesnake Contributor
    Midget Faded Rattlesnake
    @Midge

    Ah… Much better ;-)

    • #2
  3. Rodin Member
    Rodin
    @Rodin

    Is the argument that by adopting a gold standard with a finite supply of bullion that the markets can sort out the value of productive capacity wherever performed and governments have limited ability to manipulate valuation?

    • #3
  4. Great Ghost of Gödel Inactive
    Great Ghost of Gödel
    @GreatGhostofGodel

    Rodin:Is the argument that by adopting a gold standard with a finite supply of bullion that the markets can sort out the value of productive capacity wherever performed and governments have limited ability to manipulate valuation?

    Yes.

    A staple of the Austrian definition of money is that money be effectively infinitely divisible, so a nearly-constant (modulo mining and improvements in mining technology) money supply adapts on the low end by this division process. Other sources, including others by Rothbard, point out this is the literal meaning of “pieces of eight,” referring to a Spanish silver coin that was scored in such a way as to be easily broken into eight pieces.

    Conversely, improvements in productivity accrue to the whole population, meaning the purchasing power of money goes up. This is the great bugbear of central banking fans, “deflation.” But secular deflation through genuine wealth creation is a social good. The deflation to fear is debt-deflation: bubbles bursting, the collapse of too much (funny) money chasing too few goods, etc. Austrian economics says, paraphrasing: don’t study the Great Depression looking for the problem. Study the Roaring Twenties after the founding of the Fed in 1913.

    For more on this aspect of the Austrian School, please see An Austrian Taxonomy of Deflation, With Applications to the U.S.

    • #4
  5. Titus Techera Contributor
    Titus Techera
    @TitusTechera

    So if these people are scientists of some modern kind, what are their predictions for the future? It’s twenty years now since Rothbard died. Did he think either himself or others with whom he agreed could come to understand what’s going on in the economy sufficiently well to allow for predictions?

    Did he think political changes are too unpredictable & that ultimately politics is more fundamental than economics?

    Or that economics is the bedrock of necessity & eventually politics must collapse because it ignores necessity?

    Is the abandonment of the gold standard supposed to lead to a permanent collapse or just endlessly survivabable crises?

    • #5
  6. Great Ghost of Gödel Inactive
    Great Ghost of Gödel
    @GreatGhostofGodel

    Titus Techera:So if these people are scientists of some modern kind, what are their predictions for the future? It’s twenty years now since Rothbard died. Did he think either himself or others with whom he agreed could come to understand what’s going on in the economy sufficiently well to allow for predictions?

    Very broadly speaking, the Austrian School is skeptical of specific predictions (“the NYSE will drop X% on date Y”) and what, today, we’d call “econometrics” generally. von Mises himself is responsible for articulating the economic calculation problem, and another of his famous disciples, Friedrich Hayek, elaborated on it, firmly establishing the relationship between economics and information theory, although information theory itself would not be identified as such until Claude Shannon’s seminal 1948 paper, while Hayek’s The Role of Knowledge in Society was published in 1945.

    That said, Austrians are not especially averse to pointing out the ultimate logical consequences of their monetary or business cycle theories, although their insistence on avoiding specifics leaves them open to accusations such as that a stopped clock is right twice a day, or having predicted nine of the last two recessions. One claim that I think is fair on Austrian grounds is that cycles are getting shorter and more intense over time, and that seems to be borne out in practice.

    Cont’d.

    • #6
  7. Great Ghost of Gödel Inactive
    Great Ghost of Gödel
    @GreatGhostofGodel

    It’s worth pointing out that some self-confessed Austrians, notably Peter Schiff, achieved some level of notoriety for predicting the 2008 recession, although you might have a reasonable claim that everyone but the neoclassical synthesists did. Dr. Steve Keen:

    But these pre-crisis statements remain important, because they indicate that, without the blinkers that neoclassical economic theory puts over the eyes of economists, the crisis now known as the Great Recession was not an unpredictable ‘Black Swan’ event, but an almost blindingly obvious certainty. The only question mark was over when it would occur, not if.

    Dr. Keen is not an Austrian. He notes a survey of analysts who predicted the 2008 recession:

    Only analysts were included who: provided some account of how they arrived at their conclusions. went beyond predicting a real estate crisis, also making the link to real-sector recessionary implications, including an analytical account of those links. the actual prediction must have been made by the analyst and available in the public domain, rather than being asserted by others. the prediction had to have some timing attached to it. Bezemer came up with twelve names: myself and Dean Baker, Wynne Godley, Fred Harrison, Michael Hudson, Eric Janszen, Jakob Brøchner Madsen and Jens Kjaer Sørensen, Kurt Richebächer, Nouriel Roubini, Peter Schiff, and Robert Shiller.

    Of these, only Schiff and Shiller are considered Austrians.

    • #7
  8. Titus Techera Contributor
    Titus Techera
    @TitusTechera

    I find it hard to take seriously the claim that you’ve got a science that cannot do what all the other sciences do all the time.

    Without really impressive predictions, there’s no way for economists to upstage politics…

    • #8
  9. Midget Faded Rattlesnake Contributor
    Midget Faded Rattlesnake
    @Midge

    Titus Techera:I find it hard to take seriously the claim that you’ve got a science that cannot do what all the other sciences do all the time.

    You mean like climate science? Which, pace our conservatives crankiness at the political hype surrounding it, is in fact a legitimate field of scientific research and does contain several real scientists doing real science-y stuff.

    Without really impressive predictions, there’s no way for economists to upstage politics…

    Who said the point of economics (or anthropology, or math, or physics, or any number of disciplines whether called “hard sciences” or “soft sciences”) is to upstage politics?

    Anyhow, upstaging politics is tough, since so much of politics is grandstanding. As long as they’re not doing too much damage, why not let the politicians have their moments in the spotlight, while the rest of us get on with real inquiry in peace? ;-)

    • #9
  10. Midget Faded Rattlesnake Contributor
    Midget Faded Rattlesnake
    @Midge

    (OK, admittedly heavy centralized state funding for science is a political problem for scientists. But that’s just noting that political incentives can corrupt science, especially in the more complex disciplines, not proof that science itself isn’t science.)

    • #10
  11. Great Ghost of Gödel Inactive
    Great Ghost of Gödel
    @GreatGhostofGodel

    Titus Techera:I find it hard to take seriously the claim that you’ve got a science that cannot do what all the other sciences do all the time.

    Without really impressive predictions, there’s no way for economists to upstage politics…

    That’s an odd claim to post following the observation that 12 economists (or teams) successfully predicted the 2008 recession, along with the criteria used to judge what counted as a “prediction!”

    That, by the way, is from Debunking Economics – Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned? by Dr. Steve Keen, who has also developed the Minsky software, to whose Kickstarter campaign I contributed.

    More broadly, Midge is spot on: economics, like climate, deals with large, complex dynamical systems—in this case, of human beings. You can do some modeling, simulation, and model-fitting (that’s what Minsky does); you can try to derive some overarching principles (and Austrian economics focuses on this in its praxeology). But like any other science of complex dynamical systems, especially with human beings as inputs, there are hard limits as to the fineness of granularity or time horizons over which you can say much that’s meaningful.

    • #11
  12. Barkha Herman Inactive
    Barkha Herman
    @BarkhaHerman

    G3 – you wrote an article that got deleted?

    Well!  I may have to step up my game :-D.

    • #12
  13. Barkha Herman Inactive
    Barkha Herman
    @BarkhaHerman

    If Austrian Economics is not a science due to it’s lack of predictions, then does Keyensian Economics predict things better?

    Speaking of Kenesian:

    • #13
  14. Midget Faded Rattlesnake Contributor
    Midget Faded Rattlesnake
    @Midge

    Barkha Herman:G3 – you wrote an article that got deleted?

    Well! I may have to step up my game :-D.

    On behalf of the mods:

    • #14
  15. Barkha Herman Inactive
    Barkha Herman
    @BarkhaHerman

    BTW Anyone going to the Hoppe Conference this month?

    • #15
  16. Barkha Herman Inactive
    Barkha Herman
    @BarkhaHerman

    Personally, though, this entire idea of making it illegal for parties other than the central government the ability to print money is hogwash.  If it had not been made illegal, we would all be trading in Dixies right now.

    This is why I am so into dogecoin.

    • #16
  17. Great Ghost of Gödel Inactive
    Great Ghost of Gödel
    @GreatGhostofGodel

    Barkha Herman:This is why I am so into dogecoin.

    Personally, I’m expecting a Beenz comeback.

    • #17
  18. Great Ghost of Gödel Inactive
    Great Ghost of Gödel
    @GreatGhostofGodel

    My man, Tim Sweeney, CEO and Tech Head of Epic Games:

    • #18
  19. Titus Techera Contributor
    Titus Techera
    @TitusTechera

    Midget Faded Rattlesnake:

    I’m not sure anyone’s got a way to go from ‘legitimate field of scientific research’ to science, but if economists want a reputation alike to climate scientists–or weathergirls, for that matter–sure, have at it.

    Without really impressive predictions, there’s no way for economists to upstage politics…

    Who said the point of economics (or anthropology, or math, or physics, or any number of disciplines whether called “hard sciences” or “soft sciences”) is to upstage politics?

    Midge, I think your vasty wisdom has again blown you way off course. Those of us who are mere vulgar mortals ask ourselves, if this is a science, what good does it do? Whatever the case is with climate science, you can measure temperatures, can you not? That helps with all sorts of things.

    Your peaceful inquiries are, as you suggest, your private business. Science is something different. Economics used to be called a practical science. Then in the modern world, it turns out no science is practical: That were unscientific: But some science is applied science & that applications is supposed to do lotsa good.

    Economists cannot persuade politicians or parties or electorates to do what supposedly would be good for them. Then the science is worthless, or nearly, not to say enslaved… Of course, if peddling the science gets you a job somewhere, that’s worth something to you; or if it keeps people quiet & away from annoying the rest of us, maybe that’s good, too.

    • #19
  20. Titus Techera Contributor
    Titus Techera
    @TitusTechera

    Great Ghost of Gödel:

    Titus Techera:I find it hard to take seriously the claim that you’ve got a science that cannot do what all the other sciences do all the time.

    Without really impressive predictions, there’s no way for economists to upstage politics…

    That’s an odd claim to post following the observation that 12 economists (or teams) successfully predicted the 2008 recession, along with the criteria used to judge what counted as a “prediction!”

    That fails to satisfy, does it not? Did those people predict anything else? If they cannot predict the motions of the economy throughout their careers, there is no reason to take them seriously now–there may have been, once, before 2008…

    That, by the way, is from Debunking Economics – Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned? by Dr. Steve Keen, who has also developed the Minsky software, to whose Kickstarter campaign I contributed.

    More broadly, Midge is spot on: economics, like climate, deals with large, complex dynamical systems—in this case, of human beings. You can do some modeling, simulation, and model-fitting (that’s what Minsky does); you can try to derive some overarching principles (and Austrian economics focuses on this in its praxeology). But like any other science of complex dynamical systems, especially with human beings as inputs, there are hard limits as to the fineness of granularity or time horizons over which you can say much that’s meaningful.

    In short, it’s damn near useless?

    • #20
  21. Titus Techera Contributor
    Titus Techera
    @TitusTechera

    So far as I understand modern science–keeping in mind how involved in politics & political philosophy the originators were–it does three things. It makes the world more predictable by predicting events; it makes the world more predictable by getting people to do what they’re told is good for them, as opposed to fighting holy wars, for example; & it makes everybody richer & longer-lived because of its experimental power.–Why mathematical geniuses like Descartes advertised a future where science gives mankind medicine, even though nobody seems to have known much about medicine back then. Mankind does not care about philosophy or math, but mankind cares about not dying & not living in pain. You give people the goods, you get to have a science.

    The conditions of possibility for science in any regime are difficult, but the unprecedented, unparalleled success of modern science in modern democracy is not an accident–the modern regimes were designed with a view to benefiting from & tolerating scientists. That comes with a price. Part of the bargain struck is, scientists would replace priests when it comes to telling people the future. The future is the same as getting what you want, if you think about it. So you’ve got predictions or people will get what they want another way. So far as I see, politicians of various kinds use economics & economists to get what they want even if they have no respect for their supposed knowledge, predictive or otherwise… Economics seems enslaved to politics.

    • #21
  22. Fricosis Guy Listener
    Fricosis Guy
    @FricosisGuy

    Great Ghost of Gödel:

    Titus Techera:I find it hard to take seriously the claim that you’ve got a science that cannot do what all the other sciences do all the time.

    Without really impressive predictions, there’s no way for economists to upstage politics…

    That’s an odd claim to post following the observation that 12 economists (or teams) successfully predicted the 2008 recession, along with the criteria used to judge what counted as a “prediction!”

    That, by the way, is from Debunking Economics – Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned? by Dr. Steve Keen, who has also developed the Minsky software, to whose Kickstarter campaign I contributed.

    More broadly, Midge is spot on: economics, like climate, deals with large, complex dynamical systems—in this case, of human beings. You can do some modeling, simulation, and model-fitting (that’s what Minsky does); you can try to derive some overarching principles (and Austrian economics focuses on this in its praxeology). But like any other science of complex dynamical systems, especially with human beings as inputs, there are hard limits as to the fineness of granularity or time horizons over which you can say much that’s meaningful.

    Austrians are skeptical of claims that economics is, or could ever be, a science. Modeling climate appears to be trivial compared to modeling “human action.”

    • #22
  23. Great Ghost of Gödel Inactive
    Great Ghost of Gödel
    @GreatGhostofGodel

    Titus Techera:

    That fails to satisfy, does it not? Did those people predict anything else?

    Sure, but again, it’s a science that involves people and complex non-linear dynamics, so it (provably) doesn’t lend itself to calculation.

    If they cannot predict the motions of the economy throughout their careers, there is no reason to take them seriously now–there may have been, once, before 2008…

    I would instead suggest, if anything good has come out of the Great Recession, it’s a bit of warranted skepticism toward the Neoclassical Synthesis, which doesn’t even model money, debt, or banking.

    In short, it’s damn near useless?

    Only to the extent, and for the same reasons, fluid dynamics is.

    • #23
  24. Great Ghost of Gödel Inactive
    Great Ghost of Gödel
    @GreatGhostofGodel

    Fricosis Guy:

    Austrians are skeptical of claims that economics is, or could ever be, a science.

    von Mises and Rothbard weren’t. They were quite adamant that economics is an “a prioristic science,” as opposed to the measure-and-categorize science they took, e.g. the German Historical School to be. It’s actually one of Austrian economics’ most notable flaws (“a prioristic science” being an oxymoron).

    Modeling climate appears to be trivial compared to modeling “human action.”

    Have you actually studied climate modeling (or modeling any complex dynamical system) and read Human Action or Man, Economy, and State?

    • #24
  25. Fricosis Guy Listener
    Fricosis Guy
    @FricosisGuy

    Yeah, I’ve read them — I’m a George Mason economics grad — but I’m more of a Hayek guy than a Rothbardian. I’ve never heard a living Austrian refer to economics as a science…except as an insult to those who think it is. At best they consider it a more mathematical expression of psychology.

    And, no, I’ve never studied climate modeling other than as an interested layman. The real-world practical experience I have is implementing SAP in global firms.

    • #25
  26. Barkha Herman Inactive
    Barkha Herman
    @BarkhaHerman

    Fricosis Guy:Yeah, I’ve read them — I’m a George Mason economics grad — but I’m more of a Hayek guy than a Rothbardian. I’ve never heard a living Austrian refer to economics as a science…except as an insult to those who think it is. At best they consider it a more mathematical expression of psychology.

    And, no, I’ve never studied climate modeling other than as an interested layman. The real-world practical experience I have is implementing SAP in global firms.

    Hayek is a gateway drug to Rothbard…

    And … Praxeology…

    • #26
  27. Great Ghost of Gödel Inactive
    Great Ghost of Gödel
    @GreatGhostofGodel

    Fricosis Guy:Yeah, I’ve read them — I’m a George Mason economics grad — but I’m more of a Hayek guy than a Rothbardian. I’ve never heard a living Austrian refer to economics as a science…except as an insult to those who think it is. At best they consider it a more mathematical expression of psychology.

    In general, I’m with you (Hayek more than Rothbard). That’s probably unsurprising, since I’m a computer scientist very familiar with information theory. In fact, my thesis is that economics, algorithmic information theory, and machine learning are actually the same thing.

    And, no, I’ve never studied climate modeling other than as an interested layman. The real-world practical experience I have is implementing SAP in global firms.

    My slightly tongue-in-cheek point is that the mathematics of climate modeling and the logic of human action—von Mises’ praxeology—are roughly on par for their complexity and predictive power, which is to say, easy to overstate for both.

    • #27
  28. Fricosis Guy Listener
    Fricosis Guy
    @FricosisGuy

    Great Ghost of Gödel:

    Fricosis Guy:Yeah, I’ve read them — I’m a George Mason economics grad — but I’m more of a Hayek guy than a Rothbardian. I’ve never heard a living Austrian refer to economics as a science…except as an insult to those who think it is. At best they consider it a more mathematical expression of psychology.

    In general, I’m with you (Hayek more than Rothbard). That’s probably unsurprising, since I’m a computer scientist very familiar with information theory. In fact, my thesis is that economics, algorithmic information theory, and machine learning are actually the same thing.

    And, no, I’ve never studied climate modeling other than as an interested layman. The real-world practical experience I have is implementing SAP in global firms.

    My slightly tongue-in-cheek point is that the mathematics of climate modeling and the logic of human action—von Mises’ praxeology—are roughly on par for their complexity and predictive power, which is to say, easy to overstate for both.

    Yeah, I’m coming at it from the opposite direction: my training and experience re: the folly of measure-and-categorize re: human action -> climate.

    Hayek has proved very useful as a foundation for communicating the complexity of an ERP implementation. IT folk typically don’t understand what they’re getting into. They look at a full-boat SAP implementation as akin to the single-function — i.e., business function — application they developed 10 years ago.

    Once they — and their “business” counterparts — realize that they’re modeling their entire business, in real-time, they get a little more respect for what they — and the software — are trying to do. Senior managers sit in on change control meetings and their best people serve as product owners.

    There’s a bit of the fatal conceit in the Mises/Rothbard strain: we’ve discovered the elements of human action, and here’s the prescription. It’s all a bit too pat. Hayek and his acolytes recognized there’s an aspect of human behavior and interaction that is emergent.

    • #28
  29. Great Ghost of Gödel Inactive
    Great Ghost of Gödel
    @GreatGhostofGodel

    Fricosis Guy:

    There’s a bit of the fatal conceit in the Mises/Rothbard strain: we’ve discovered the elements of human action, and here’s the prescription. It’s all a bit too pat. Hayek and his acolytes recognized there’s an aspect of human behavior and interaction that is emergent.

    That’s a nice articulation of my problem with praxeology: it implies human action can be deduced using good ol’ modus ponens on some set of axioms. Pretty laughable.

    • #29
  30. Midget Faded Rattlesnake Contributor
    Midget Faded Rattlesnake
    @Midge

    Titus Techera:So far as I understand modern science–keeping in mind how involved in politics & political philosophy the originators were–it does three things. It makes the world more predictable by predicting events; it makes the world more predictable by getting people to do what they’re told…; & it makes everybody richer & longer-lived because of its experimental power.

    So you understand science like a politician. Which is to say, you don’t really get it ;-)

    Positivists of the duller sort often pretend that science is only about predictive power. It’s not, though. It’s about developing a true (in practice, truer) understanding of how the physical world works. Evaluating predictive power goes into this, but a prediction-generator that’s pinched, prodded, and stuffed with fudge merely to improve predictions for the foreseeable future does not a better theory make. I suppose to a politician it would, since to a politician, science is just a black box that magically spits out a superior class of predictions (how does the black box do it? gnomes maybe?). But to someone actually doing science, it doesn’t.

    Now, scientists themselves (more interested in doing than explaining what they do) are often guilty of claiming to non-scientists “it’s all about the predictive power”. But predictive power is just evidence that the theory is good, not good theory itself. Scientists also call theories that appear to produce improved prediction but not much else “ugly” (that is, unsatisfactory) for a reason.

    • #30
Become a member to join the conversation. Or sign in if you're already a member.

Comments are closed because this post is more than six months old. Please write a new post if you would like to continue this conversation.