Thursday, July 3, 2014

A Wannabe Worm Grunter Attacks Austrian Economics

By Robert Wenzel

Noah Smith has proclaimed at Bloomberg thus about Austrian economics:
The Austrian worldview is like a brain worm that has infected large swathes of our financial industry, commentariat and general public. Even you, dear reader, may carry one or two of its wriggling larva inside your gray matter.
Over the last couple of days, several EPJ readers sent me links to this story, but I chose not to respond. If Smith wants to understand what worms are really about, the venue for him should be the  Sopchoppy Worm Gruntin’ Festival. Once he gets earthworms down, he can move onto brain worms. This, though, won't provide him with an ounce of knowledge about Austrian economics or Austrian school business cycle theory, and it wouldn't come close to Smith being able to compete with Austrian economist and Noble prize winner Friedrich Hayek when it comes to brain worms, never mind economics. One of Hayek's grandfathers was a biologist. And when it comes to the brain and brain worms, I would like to see Smith top Hayek's credentials in this field. Hayek studied in Constantin von Monakow's Institute of Brain Anatomy, where Hayek spent much of his time staining brain cells.

Who was Constantin von Monakow? According to Wikipedia:
Monakow made numerous contributions in his analysis of the sensory and motor pathways of the brain. He was interested in the functional relationships amongst the different regions of the brain, and conceptualized that in faculties such as intellect, coordination was needed among its many diverse parts. From his brain research, he introduced the terms "chronogenic localization" and "diaschisis".
In 1914 Monakow coined the term "diaschisis" to describe how an injury to the brain can create behavioral deficiencies that may be followed by eventual recovery. The word is derived from Greek, meaning "shocked throughout". He believed the brain to exist as a delicate balance between its different components, and if a component became disturbed through injury it could affect other parts of the brain not seemingly associated with the site of injury. Therefore, if the damage wasn't too severe, functional behaviour would recover once the period of diaschisis wore off.

His name is lent to "Monakow's nucleus" (lateral cuneate nucleus) and to the "bundle of Monakow" (rubrospinal fasciculus). In addition, "Monakow's syndrome" bears his name, defined as contralateral hemiplegia, hemianaesthesia and homonomous hemianopsia due to occlusion of the anterior choroidal artery.

He was responsible for identifying the arcuate fasciculus as the fibre tract that connected the Broca's and Wernicke's speech areas. This anatomical link (which is now questioned)[ “soon became a dogma in neurology and still today provides the backbone of anatomical models of language.”
Got that? Hayek seemed to have studied with  Monakow as sort of a curiosity, a hobby if you will. What can Noah tell us about the brain that matches this, other than a poorly constructed analogy that brain worms somehow impact the cognitive part of the brain, specifically with regard to economics? What part of the brain would you stain to show us this going on, Noah?

As for Noah's discussion about Austrian theory, it appears to match his surface understanding about brain worms and nothing more. There is no discussion of the regression theorem, the process of imputation, time preference, Hayek's triangles, or any other Austrian insights. What do you think about Fritz Machlup's book on the stock market from an Austrian perspective, Noah?

 I really feel no need to deal any further with Noah, he is a drive-by Keynesian gang banger that couldn't grunt a worm out of the ground, much less rattle a serious Austrian scholar. Dr. Block probably feels much the same way. His letter, reproduced below in full, states that he will only respond if Smith's criticism appears in a refereed journal. Not going to happen.-RW

Dear Noah (if I may):

Even though I’m an Austrian economist, I loved your piece on Austrian brain worms:

Please allow me to introduce you to a friend of mine, Brian Caplan (Biran, I hope and trust this statement of mine is true). He is the author of this:

Caplan, Brian. 1996. “Why I Am Not An Austrian Economist”

Brian originally published this in a blog, I think. Then, when he got it into a journal,

Caplan, Bryan. 1999. "The Austrian Search for Realistic Foundations," Southern Economic Journal,April, Vol. 65, No. 4, pp. 823-838;

A whole bunch of us jumped on him:

Caplan debate

Block, 1999, 2003, 2005, 2007; Caplan, undated, 1999, 2001, 2003, 2008; Callahan, 2003; Carilli and Dempster, 2003; Hoppe, 2005; Hulsmann, 1999; Machaj, 2007; Murphy, 2008; Murphy, Wutscher and Block, 2010; Rajsic, 2010; Stringham, 2001, 2008; Stringham and White, 2004

Block, Walter. 1999. “Austrian Theorizing, Recalling the Foundations: Reply to Caplan,” Quarterly Journal of Austrian Economics, Vol. 2, No. 4, winter, pp. 21-39;; errata:
Block, Walter. 2003.  “Realism: Austrian vs. Neoclassical Economics, Reply to Caplan,” Quarterly Journal of Austrian Economics, Vol. 6, No. 3, Fall, pp. 63-76;

Block, Walter. 2005. “Rejoinder to Caplan on Bayesian Economics,” Journal of Libertarian Studies. Vol. 19, No. 1, Winter, pp. 79-95;

Block, Walter. 2007. "Reply to Caplan on Austrian Economic Methodology" Corporate Ownership & Control, Vol. 4, No. 2, November, pp. 312-zz.

Caplan, Bryan. Undated. “Why I am not an Austrian Economist.”

Caplan, Bryan. 1999. "The Austrian Search for Realistic Foundations," Southern Economic Journal,April, Vol. 65, No. 4, pp. 823-838;

Caplan, Bryan. 2001. “Probability, Common Sense, and Realism: A Reply to Huelsmann and Block,”Quarterly Journal of Austrian Economics; Vol. 2, No. 4, summer, pp. 69-86;

Caplan, Bryan. 2003. “Probability and the Synthetic A Priori:  A Reply to Block.” Quarterly Journal of Austrian Economics; Vol. 6, No. 3, Fall, pp. 77-83;

Caplan, Bryan. 2008. “The Trojan Horse Example” June 16;

Callahan, Gene. 2003. “Choice and Preference,” February 10

Carilli, Anthony M., and Dempster, Gregory M. 2003. "A note on the treatment of uncertainty in economics and finance" Journal of Education for Business 79.2 Nov. 1, pp. 99-103.

Hoppe, Hans Hermann. 2005. “A Note on Preference and Indifference in Economic Analysis.”Quarterly Journal of Austrian Economics, Vol. 8, No. 4, Winter, pp. 87-91;

Hülsmann, Jörg Guido. 1999. “Economic Science and Neoclassicism.” Quarterly Journal of Austrian Economics, Vol. 2, Num. 4, pp. 1-20;

Machaj, Mateusz. 2007. “A Praxeological Case for Homogeneity and Indifference.” New Perspectives on Political Economy, Vol. 3, No. 2, pp. 231 – 238;

Murphy, Robert P. 2008. “Austrian Realists.” July 17

Murphy, Robert P., Robert Wutscher and Walter E. Block. 2010. “Mathematics in Economics: An Austrian Methodological Critique.” Philosophical Investigations, January, Vol. 33, No. 1, pp. 44-66;;

Rajsic, Predrag. 2010. “Did Rothbard ‘Borrow’ the Income and Substitution Effects?” April 8;

Stringham, Edward. 2001. "Kaldor-Hicks Efficiency and the Problem of Central Planning" Quarterly Journal of Austrian Economics, Vol. 4, No. 2 (Summer) 41-50.

Stringham, Edward. 2008. "Economic Value and Cost Are Subjective" in The Handbook of Austrian Economics, Peter Boettke (editor), Cheltenham, UK: Edward Elgar Publishing,

Stringham, Edward, and White, Mark. 2004. "Economic Analysis of Tort Law: Austrian and Kantian Perspectives" in Law and Economics: Alternative Economic Approaches to Legal and Regulatory Issues, Margaret Oppenheimer and Nicholas Mercuro (editors) New York: M.E. Sharpe, 374-92;

We can do so for you too.

So the two of you, you and Brian, will have something in common.

By the way, I once taught at Stony Brook early in my career, so you and I also have something in common.

If ever you scholarize your brain worm piece and get it published in a refereed journal, I promise to write and publish a rejoinder. I’m sure others will, too.

Best regards,


Walter E. Block, Ph.D.
Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics
Joseph A. Butt, S.J. College of Business                   
Loyola University New Orleans


  1. Dr Block has that hussy's number!

    I'm glad he waited to respond, and then responded with this Judo move.

  2. 'The Sensory Order' is among the most absorptive of Hayek's works, capable of completely transforming the way someone might perceive this world. One the most striking quotes from that particular book is -- "We are studying mental and not physical events, and much that we believe to know about the external world is, in fact,knowledge about ourselves". Noah Smith's take provides us a glimpse into his own mind's inability to comprehend nuances than any real perspective on any outside phenomenon or Austrian School.

  3. I will attempt to post the following at "Noahopinion". I assume the comments are moderated and it will not appear:

    I have been an Austrian since 1973 at age 21. Over that period, I have never come across a single critic of the Austrian School who had the slightest familiarity with, much less an understanding of, basic Austrian concepts such as catallactics and/or most importantly, economic calculation. Mr. Smith says he is throwing Peter Boettke under the bus. Mr. Boettke has written the best explanation of economic calculation available. I am certain that Mr. Smith has attacked Mr. Boettke and the rest of the Austrian School because he has no understanding whatsoever of basic Austrian concepts analysis. This will be confirmed when he fails to demonstrate such an understanding.

  4. Apparently, “Noahpinion” is not moderated so my comment was published. No response yet from THE MAN to my challenge. I'm certain that Mr. Smith will produce a scholarly reply real soon.