Josh Barro’s and David Frum’s Pathetic Attack on Austrian Economics

James Miller rips the attack apart: 

Josh Barro of Bloomberg has an interesting theory. According to him, conservatives in modern day America have become so infatuated with the school of Austrian economics that they no longer listen to reason.  It is because of this diehard obsession that they reject all empirical evidence and refuse to change their favorable views of laissez faire capitalism following the financial crisis.  Basically, because the conservative movement is so smitten with the works of Ludwig von Mises and F.A. Hayek, they see no need to pose any intellectual challenge to the idea that the economy desperately needs to be guided along by an “always knows best” government; much like a parent to a child. CNN and Newsweek contributor David Frum hasjumped on board with Barro and levels the same critique of conservatives while complaining that not enough of them follow Milton Friedman anymore. 

To put this as nicely as possible, Barro and Frum aren’t just incorrect; they have put their embarrassingly ignorant understandings of Austrian economics on full display for all to see.
First off, no conservative, besides perhaps Michele Bachman, has shown any interest in the Austrian school as of late.  In most aspects, Ron Paul can hardly be considered a conservative.  If Frum, with all his political credentials, can show me another true blooded conservative that has read through Human Action or Man, Economy, and State, I am all ears.  The fact remains that traditional conservatives aren’t brushing up on their Mises when they aren’t attending Tea Party rallies or asking their Congressman to nuke Iran into smithereens. 

On the subject of Austrian economics itself; the school isn’t against empirical evidence per say.  What it opposes is methodological positivism which is using empirical data by itself to formulate theories about how an economy functions. 

Austrians don’t see the social sciences as one in the same with the physical sciences like chemistry.  Closed experiments can’t be conducted on humans that will always yield the exact same results.  Because humans posses the ability to make choices, there are no constants in human behavior.  As economist Robert Wenzel puts it 

In the science of physics, we know that water freezes at 32 degrees. We can predict with immense accuracy exactly how far a rocket ship will travel filled with 500 gallons of fuel. There is preciseness because there are constants, which do not change and upon which equations can be constructed. 

There are no such constants in the field of economics since the science of economics deals with human action, which can change at any time. 

Austrian economics relies on deductive reasoning and one a priori law that Ludwig von Mises worded as “human action is purposeful behavior.”  That is, man acts to achieve ends or otherwise he would not act.  This statement is what Murray Rothbard, considerably the most known Austrian economist next to Mises and Hayek, called “radically empirical” since it is absolutely self evident to any observer.  A few subsidiary axioms can then be derived from the human action axiom such as “individuals vary” and that people “regard leisure as a valuable good.”

Austrians don’t reject empirical evidence but look at it with the theory of human action in mind.  They don’t see an increase in ice cream sales coinciding with an increase in kidnappings and automatically assume that as people eat more ice cream, they become more prone to abducting people.  They may consider that because warmer weather tends to result in more people going outside for leisurely activity, the opportunities for kidnappings to occur increases as does the appetite for ice cream.  This isn’t a rejection of empirical evidence but merely viewing the world with a theory to help explain the complex happenings of society.

Read the rest here.