More on the Austrianness of Contemporary Austrian Economics

I appreciate George Selgin’s reply for a variety of reasons, not the least of which is his sympathy for what I was trying to argue. George raises several points I want to say a little more about, including his discussion of the word “economics” and its relationship to “applied economics” and “economic history.” He is right on target in pointing out the ambiguity in the word “economics.” I did indeed use the word, as is common practice these days, to mean both the “theorems” of economics and the doing of applied economics, not just the former as many self-described Misesians use it. The non-Austrian critics of Austrian economics are presumably using it in the broader way as well, as they refer to Austrian claims about historical phenomena or current policies as being examples of “economics” that is non- or anti-empirical. How else to understand the Josh Barro–type argument that claims that Austrians need not offer any empirical evidence for their economic arguments about the Great Recession because they know “a priori” that government intervention is bad?

I am quite aware of the differences among economic theory, applied economics, and economic history, but all are “economics” in the eyes of actual professional economists. So in defending the claim that Austrian economics has empirical content, I used the word “economics” in this commonly understood fashion.

George also raises the same question Bryan did, though from a different angle, about the “Austrianness” of the empirical work I cited. George’s point is that nearly all of what I cited is work coming out of the George Mason program, which was influenced by the “eclectic” views of the late Don Lavoie. Don’s version of Austrian economics, George argues, might not reflect the broader trends in the school of thought. I want to make several comments about this claim.

First, George has a point. The older set of empirical work mentioned in my first entry was by my generation of Austrians, and we were indeed students of Don’s who largely agreed with his then-eclectic views. It was Don who encouraged us to get our hands dirty in the archives and in the field doing the nitty-gritty empirical work necessary to support the explanations we were providing for the puzzles we were trying to solve. Whatever the validity of the philosophy of science that motivated Don, it was sound advice about how to actually address those puzzles and provided a much needed appreciation for the need to get empirical in those ways.

That said, I don’t think Don’s views are the ones guiding the current applied and empirical work in Austrian economics. He died in 2001, and since then it has been Pete Boettke’s students who are mostly responsible for this work. Pete has articulated his own conception of what he thinks constitutes good economics, and it is what he has termed “analytical narrative.” For me, that’s just another way of saying “how do we tell a good story, complete with evidence, that can explain the puzzles we observe in the real world?” What makes those narratives “Austrian” is that the “conflict” and “plot structure” make use of the analytical propositions of Austrian economics, a point I have noted several times. I should add that good analytical narratives can also borrow propositions from other traditions, such as the Virginia school of public choice and the Bloomington school associated with the late Elinor and Vincent Ostrom. The work of Pete’s students cited in my opening essay makes use of all of them. I think that’s a productively broad set of ideas to inform a good analytical narrative. So rather than Lavoie being the invisible hand behind this work, I would argue that it is the very visible and very hard-smacking fist of Pete Boettke.

And this brings me to my final point about George’s claim. Is this work really the exception rather than the rule in modern Austrian economics? I think the answer depends on what the sample of Austrian economics is. In the last decade or so, the Austrian program at GMU has produced more than 20 Ph.D.s, almost all of whom have academic appointments. The clear majority of those Austrian academics are publishing their work in a variety of peer-reviewed economics journals, both Austrian and not, as well as in edited volumes and their own books. They also write for think tanks and policy organizations as well as in the blogosphere and op-eds. The self-described Austrian work in the profession of economics is strongly dominated by, for lack of a better term, GMU-style Austrian economics, which itself is dominated by the empirically informed analytical narrative work. When well-regarded non-Austrian economists, or academic presses, want the Austrian perspective included in an edited volume or reference work, it is largely to this group that they turn. In that sense, the work I referred to is the rule not the exception.

Of course there are lots of other people out there calling themselves “Austrian economists,” including those who are “consumers” of Austrian economics, not producers. If one casts the term “Austrian economics” more widely, then perhaps the focus shifts and the GMU-style work looks like a minority. There’s no objective answer to the question of which sample is the relevant comparison group. I will just note that Austrian economists from Menger to Mises to Hayek to Kirzner consistently took account of the puzzles that were of interest to the economics profession and aimed their explanations of those puzzles at that audience of their professional peers. Ludwig von Mises was a Distinguished Fellow of the American Economic Association, and F. A. Hayek received the Nobel Prize in Economics. I’ll happily take their success within the economics profession as a model for whom Austrians should be in conversation with and, by implication, what constitutes the relevant comparison group.

Also from This Issue

Lead Essay

  • The Empirics of Austrian Economics by Steven Horwitz

    Professor Horwitz makes the case that the Austrian school of economics isn’t just a bunch of armchair theorists. Ludwig von Mises’s “praxeology” should not prevent and has not prevented economists from doing vital, real-world, empirical work on subjects including monetary policy, disaster recovery, communist political economy, and even piracy. Horwitz takes us on a tour of some of this work and suggests that the Austrian school can offer mainstream economics a number of vital insights.

Response Essays

  • Horwitz, Economy, and Empirics by Bryan Caplan

    Bryan Caplan argues that the Austrian school remains in general much more hostile to empiricism than mainstream economics. Austrian subjectivism is well and good, but its neglect of behavioral economics then constitutes a puzzling shortcoming. And even in the work Horwitz praises, there is little that is distinctively “Austrian”—little that necessarily relies on the distinctive methodological or conceptual apparatus of the Austrian school.

  • How Austrian Is It? by George Selgin

    George Selgin argues that part of the disagreement at hand is semantic: Where von Mises and other Austrians used the word “economics” to denote what we now call “theoretical economics,” we need not be bound by this convention, particularly not if it tends to obscure. That said, a real disagreement remains, because many in the Austrian school have failed to grasp that a deduced theorem of economics can still be “in the (common) sense”—that is, it may still have no explanatory power over events in the real world. When such cases arrive, Selgin finds that Austrians are all too often flummoxed.

  • Complementary Approaches by Antony Davies

    Antony Davies expresses admiration for Austrian-school economics as a “complementary approach” to the problems he tries to solve using modeling and mathematics. He finds Austrians at their most incisive in their critique of modern macroeconomics, which is based not on individual behavior, but on an “accounting identity.” He argues that both quantitative and non-quantitative methods can reveal important truths, and he suggests that Austrians should deploy the former in refuting their opponents’ theories.

The Conversation