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Kjetil

Can Austrian economics be falsified?

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A friend wrote to me:

A scientific theory must be falsifiable, must be able to predict events, and must be verifiable. However, scientific theories cannot be proved. I was not aware that Austrian economics could make predictions and was falsifiable.

What should I answer to this?

Edited by Kjetil

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A friend wrote to me:

A scientific theory must be falsifiable, must be able to predict events, and must be verifiable. However, scientific theories cannot be proved. I was not aware that Austrian economics could make predictions and was falsifiable.

What should I answer to this?

I do not know the full context of the conversation, but my first impression is that his error consists of changing the scale and making poor comparisons between incomparable objects as a result.

In other words, Austrian economics is not falsifiable in the sense that the theory of Evolution and psychoanalysis are not falsifiable. You can't take the whole theories and plop them into labs and disprove them. Individual aspects of both could be, and whole theories could be disproved(theoretically...heheh) by disproving all of their components.

Integrated thinking and philosophical induction is the only approach possible with that level of abstraction. Trying to apply empiricism as your standard of proof is extremely useful at a very concrete level but whenever it stretches past that concrete level, like evolutionary psychology for example, you end up with a bunch of "just so" stories that mainly serve to reaffirm the researchers initial premises.

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You have to question why is falsifiability, prediction, and verification the basic criterion, here? Do we ask for whether the Pythagorean Theorem can be falsified, or should we have to conduct empirical testing of 2+2=4, and ask ourselves what future events we can predict with it? First, we have to mention that there are different methodologies to be applied to the social sciences and the physical sciences. The reason for this is, at root, the fact of human volition and the impossibility of subjecting economic data to controlled experimentation. Second, we can mention that the Popperian criterion (hey that rhymes) of falsifiability is not, in Objectivist epistemology, a basic criterion for truth anyway: evidence and proof are.

We have to understand the Austrian school's praxeological methodology, which differs substantially from the logical positivism of mainstream economics. Their method is not about collecting an arrangement of statistical facts and looking for empirical trends, but rather it is rooted in the nature of man and of the fact of our goal-directed behavior. Starting from the undeniable truth that man acts and uses means to achieve ends, economics draws out logically all of the facts contained within that statement. To the Austrians, economics is a logical science based on observation of man's nature and deduction based thereupon, not mathematical or statistical. So this means that, unlike the physical sciences, the data of economics are not tentative hypotheses which, or the inferences from which, must be tested and verified by experimentation. On the contrary, economic conclusions are rigorous deductions from undeniable facts, and thus are necessarily true. Each step of the logical chain rests on necessarily true propositions and so give us facts about the real world (e.g. like the Pythagorean Theorem, or 2+2=4), and therefore are not subject to verification and falsifiable the way the physical sciences are. If we did come up with a false conclusion, it would simply mean there was either an error in your reasoning, or that one of the premises you used in the proof was lacking.

Positivist economics, on the other hand, can know a great deal of facts about particular instances, but without a knowledge of their necessary causal interrelations, are often misled to false conclusions, thus say the Austrians.

The issue of prediction is also very important for mainstream economics, it is basically the whole point of economics in their eyes. Even though the Austrians have been http://www.youtube.com/watch?v=MnekzRuu8wo, they don't view prediction has the essential basis of economics, rather it is the science of exchanges.

You can find much writing about this in the Austrian literature, as well as their criticisms of logical positivism and mathematical economics.

Edited by 2046

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The idea that a statement must be falsifiable in order to be scientific has become popular in mainstream science nowadays. It originated with Carl Popper, if I'm not mistaken. He called it Critical Rationalism. With Critical Rationalism as your epistemology, you basically make up random ideas, and as long as they can be proven wrong, but haven't been proven wrong yet, they're the truth. Correct me if I'm wrong, someone.

The correct approach to arriving at truth isn't to accept whatever hasn't been proven false yet. It's to accept things that have been justified. Objectivist epistemology is, in some sense, a justificationist one, whereas Popper was opposed to justificationism. (I don't know a lot about this though, so like I said, correct me if I'm wrong about anything.)

I think falsifiability as a requirement for scientific statements was originally a counter to religious dogma. And like Skepticism, Critical Rationalism winds up rejecting things that are absolutely true, on the grounds that they can't be proven false.

For example. The Objectivist axioms (Existence, Identity, Consciousness) can't be proven false. Under Critical Rationalism, you would reject them for that very reason.

Edited by Amaroq

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The idea that a statement must be falsifiable in order to be scientific has become popular in mainstream science nowadays. It originated with Carl Popper, if I'm not mistaken. He called it Critical Rationalism. With Critical Rationalism as your epistemology, you basically make up random ideas, and as long as they can be proven wrong, but haven't been proven wrong yet, they're the truth. Correct me if I'm wrong, someone.

You're wrong.

Falsifiability is not identical with Popper's theories of confirmation and falsification does not just mean that if you pick up a random theory and it can be falsified, then it's the truth. Falsification just says that it's a valid scientific hypothesis. It might not be a terribly good one, such as "All giraffes are Martians", but it's falsifiable. All you have to do is find one giraffe that is not a Martian.

As for Austrian Economics, my limited understanding of its principles is that it is based on certain axioms of human action. If these axioms are held fixed, the rest of the Austrian tradition is supposed to follow deductively. Austrian economics is therefore much more based in pure philosophy and some mathematics than most economic theories are. I would say that many of the claims of the Austrian can be falsified, but Austrians will always hold to their axioms.

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We have to understand the Austrian school's praxeological methodology, which differs substantially from the logical positivism of mainstream economics.

According to Wikipedia (on Praxeology)

"von Mises rejected the standard scientific approach of relying upon empirical observation in the study of economics, and instead, favored the use of logical analysis, a logic which is influenced by Immanuel Kant's analytic–synthetic distinction."

But Objectivism rejects this distinction!

http://aynrandlexicon.com/lexicon/analytic-synthetic_dichotomy.html

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According to Wikipedia (on Praxeology)

"von Mises rejected the standard scientific approach of relying upon empirical observation in the study of economics, and instead, favored the use of logical analysis, a logic which is influenced by Immanuel Kant's analytic–synthetic distinction."

But Objectivism rejects this distinction!

http://aynrandlexicon.com/lexicon/analytic-synthetic_dichotomy.html

Yes, but this isn't a necessary feature of praxeology. One must distinguish between the content of economic methodology and Mises' particular views on epistemology, which were Kantian. Earlier economists, such as the French classical economist JB Say, and the earlier Austrians were not Kantians, and did not share Mises' views, as well as Mises' student Rothbard, who demonstrated praxeology is quite compatible with all the standard options in epistemology, including direct realism.

Say, Menger, Böhm-Bawerk, and Rothbard would say that the fundamental axioms of praxeology are based empirically and inductively on the nature of man, whilst Mises is really alone in saying they were based on the logical structure of the human mind, which creates pure a priori forms of knowledge.

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According to Wikipedia (on Praxeology)

"von Mises rejected the standard scientific approach of relying upon empirical observation in the study of economics, and instead, favored the use of logical analysis,...

I understand. Any concrete examples of how to apply this method?

Though von Mises claims to follow this epistemological approach, it is not what he actually does. One cannot actually come up with much without a lot of observation.

The false epistemology mostly makes his books much more tedious and opaque than they otherwise might have been.

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Though von Mises claims to follow this epistemological approach, it is not what he actually does. One cannot actually come up with much without a lot of observation.

The false epistemology mostly makes his books much more tedious and opaque than they otherwise might have been.

I'll chime in, since I'm reading a number of his books right now. While he uses Kantian terminology, he generally seems to believe that his a priori categories are both a structure of the human mind and a feature of the world. Our categories reflect the nature of reality. He gives an evolutionary explanation for this, basically saying that entities whose minds did not conform to the structure of reality died out, and we are the entities who succeeded by having categories that match reality. Mises wasn't an impositionist Kantian along the lines of the German Idealists. He (and Hans-Hermann Hoppe) are realist Kantians who interpret Kant almost (but not quite) as a sort of Aristotelian.

And regardless, Rothbard was an Aristotelian who viewed the axioms of praxeology as empirical in the broadest sense of the term -- that our minds come to know them through experience, but they are present in all experience of human beings as actors (and we act continuously). Rothbard still used the terminology of "a priori" because he thought these "a priori" axioms and concepts and statements were so broadly empirical as to still be effectively a priori. Rothbard basically used "a priori" to mean something almost identical to the use of the term "axiom" in Objectivism -- it is a statement/concept which is implicit in all experience and which any argument against it will necessarily be self-contradictory. One can't reject "humans act" because to argue against it is to be a human that is acting. Personally, I find Rothbard's usage totally unobjectionable, and have actually started using "a priori" in a similar fashion myself.

As for whether or not praxeology can be falsified, it depends on what one means. If you can demonstrate there is a problem in one of the arguments, then yes. But the primary assumptions are certain -- they are obvious to everyone and at least some of them are literally irrefutable.

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