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Thanks, Pete! And I want to emphasize, as you state, that I am not attacking modeling in the sense of organized arguments: assumptions, theories, implications. Rather I am attacking the *hyper-modeling* that has developed without a grip on reality over the past generation, especially.

I first became interested in economics because of my interest in philosophy. The lack of methodological rigor is no anything unique to economic science, however, there is a lot of logically inadmissable 'evidence' and 'spherical cow' theorizing that goes on everywhere from biology to history. Most people who attend and graduate universities are interested in getting a degree and getting a job, and if someone will pay incompetents to parrot gibberish, incompetents will be found to do this.

Yes philosophy is great, but it is no easy matter. The study of philosophy at its core requires a serious reading of metaphysics. And I know many Austrians fancy themselves philosophical because they have read Mises, but I will never forget the reaction of one of my good friends who is currently a graduate student in philosophy upon perusing the contents of Mises' 'Theory and History' and 'The Ultimate Foundation of Economic Science.' It was like he knew immediately that Mises was a joke philosophoically. To propose to deal with complicated issues like metaphysics, means and ends, human knowledge, natural laws etc in ONLY a few pages is, according to my friend, the very acme of folly and pretension. So it is great that Austrians are interested in philosophy, but they should not take Mises as their guide. That would be unfair to those who really study philosophy. And I know Austrians have written papers that quote from serious thinkers, like the Boettke and Leeson paper that uses the work of Kant, but I suspect that these Austrians have never thoroughly read Kant's major works or the serious treatises that his system helped to produce. That is what philosophy calls for. Oh, and another example. Economists' have read Hume's few essays on gold and money, but have totally neglected his major works on perception and sceptical empiricism (most philosophers do too because they can't get around it! And no, Kant did not provide a satisfactory answer to Hume's challenge). They would also have to read the medieval scholastics, Aristotle, Plato, Descartes, Leibniz, Locke, Heidegger, Hegel, etc. etc.

What is "cheap philosophy", though important, are areas like the philosophy of science, natural science (Darwinism, biology, etc.), ethics, etc. And this is what I think most philosophically minded economists would naturally be disposed to learning. Yea, when I was a young gun, I thought philosophy was important and exciting when I was first studying economics and reading Mises and Hayek, but then I ACTUALLY tried to study it. Just try to read a few pages from Kant or Leibniz and tell me what you think. Hell, buy a "Guide to..." book and try to understand it! Let's face it: most economists are math nerds who don't have a large vocabulary or a patience for sustained reasoning.

Check out Barry Smith on the metaphysics of the Austrian school.

Smith sums up the Aristotelian program with seven general points and some extra points applied especially to the social sciences.

1. The world exists, independently of our thinking and reasoning activities.

2. There are in the world certain simple `essences' or `natures' or `elements', as well as laws, structures or connections governing these, all of which are strictly universal.

3. Our experience of this world involves in every case both an individual and a general aspect.

4. The general aspect of experience need be in no sense infallible (it reflects no special source of special knowledge), and may indeed be subject to just the same sorts of errors as is our knowledge of what is individual.

5. We can know, albeit under the conditions set out in 4., what the world is like, at least in its broad outlines, both via common sense and via scientific method. ,

6. We can know what this world is like, at least in principle, from the detached perspective of an ideal scientific observer.

7. The simple essences or natures pertaining to the various different segments or levels of reality constitute an alphabet of structural parts.

8. The theory of value is to be built up exclusively on `subjective' foundations, which is to say exclusively on the basis of the corresponding mental acts and states of human subjects.

9. There are no `social wholes' or `social organisms'.

10. There are no (graspable) laws of historical development.

"From the Aristotelian apriorist perspective, however, it might begin to appear as if the principles underlying both sorts of economic methodology might possess some grain of truth. For Austrian economics might then be conceived not as an alternative to the economics of model-building and prediction but as a preliminary activity of establishing this missing connection to ground-level economic realities. Austrian economics might, in other words, be conceived as a safe harbour for a practice which at present takes place among neo-classicists only surreptitiously and unsystematically a practice sometimes referred to under the rubric of `taking subjectivism seriously'. This practice might also be conceived as the attempt to exert control in the direction of greater commonsensical realism over the model-building tendencies of mathematical economists. The exercise of such control might lead from this admittedly somewhat idealized perspective to the construction of different kinds of models."

A question for people with both better mathematical ability and greater familiarity with Austrian business cycle theory than I have*:

how difficult would it be to 'translate' Austrian BC into formal mathematics? If this is way too hard, how hard would it be to do a second- or third-best version? I ask because it seems as though Austrian business cycle theory is not lacking for the verbal component nor for the worldly examples, and that the mathematical version would be, in a sense, the marketing tool to reach neoclassical economists.

*Sadly (from my perspective), these two criteria do not shrink the universe very much at all...

Although Mario hopes that "greater philosophical sophistication would put economists in closer touch with the real world," I wouldn't expect too much. It seems to me that most philosophers are also "more interested in getting on with the job than in spending time in deciding whether the job is worth getting on with." At least, this is a problem I always encounter when trying to discuss philosophy. Moreover, it seems to be those who are the most educated in philosophy who are also the most intolerant of discussing such matters.


Look at Roger Garrison's work --- especially his Time and Money, but also earlier works that attempt to put Austrian economics into a common analytical framework with other major contending theories of the macroeconomy.

His presentation is primarily graphical in nature, but as you know if you are drawing curves, you are representing functions. So you can see the mathematical representations that Garrison is working with.

Also, several individuals have "tested" ABTC with econometric analysis as well from the older paper by Wainhouse to more modern attempts by Keeler and others. Finally, see Tyler Cowen's Risk and Business Cycles for a discussion of the relevant translation and the empirical analysis that he thinks relates.

However, you raise an interesting question as to why there isn't more formal treatments. First, ABCT relies on two propositions that defy formalistic treatments --- non-neutrality of money, and heterogeneity of the capital structure. Second, statistical analysis of aggregate data miss the microeconomic data analysis that would be more relevant to ABCT.

Let me add one other point. Why insist the Austrian theory isn't understood by mainstream thinkers? First, Hayek won the Nobel Prize for it. Second, Robert Clower and Axel Leijonhufvud represented the Wicksellian connection with their coordination Keynesianism (a close cousin to the ABCT). Third, Vernon Smith has been working on boom-bust cycles in experiments inspired by Hayek (Abel Winn actually wrote his PhD thesis on this under Smith's direction).

Do Paul Krugman and Brad DeLong make less than complimentary comments about ABCT? Of course they do? But does Lucas?! Actually not, look at his work Understanding Business cycles and his "island model". That actually might be your 3rd best approximation.

Also, for a different twist, look at Frydman and Goldberg's Imperfect Knowledge Economics book that was just published by Princeton. Coordination problems of the sort the Austrians were attempting to capture in their theory.


Prof Boettke,

First, on your 'other point': of course. I did not mean to suggest that it isn't understood (though, based on the comments here and on what one reads in modern macro journals, it either isn't understood or isn't applied as widely as would be considered optimal here, no?). Rather, that because it is not rendered in the same form as the other mainstream neoclassical approaches (i.e., mathematical formalism starting from representative agent microfoundations or some such), it does not get the same attention in much of the technical discussion. So really, the question I asked was pointed at the fact that there isn't one blessed (explicit) citation of Austrian RBC in my graduate macro textbook, and I don't believe that's because everybody decided it was no good.

For me, in such situations, thoughts turn to marketing.:-)

And yes, Snowdon & Vane provide discussions of the features of both Lucas's work and modern RBC theory that strongly resemble Austrian theory, though they (and Prof Wagner) did suggest that much of the similarity is superficial (which I suppose is, indeed, third best).

I am wondering why money non-neutrality (which has received a great deal of attention in the new neoclassical synthesis) and capital heterogeneity (which has, apparently, not) "defy formalistic treatments", but before I ask more about that I will take your recommendations and read them. Thank you for the reading list.

To Mgm, Mr. Champion, and Mr. Kelly. I am still studying philosophy, however I can say that many philosopher dislike Mises' methodology because of a recent mass rejection of the analytic/synthetic a priori distinction. Dr. Quine's famous essay "Two Dogma's of Empiricism" presented a powerful argument against the distinction.

Actually, Ludwig Lachmann is respected by some of my philosophy buddies.

Let me clarify,they do not like the fact that Mises says that he is axiomatic from synthetic a priori principles.

Many philosophy students reject the "hyper-modeling" along with Mr. Rizzo. Philosophy students prefer Hegelian dialectic and Gadammer(ic?) Hermeneutical method. They see Mises' "rational man" as fundamentally flawed. Why these students are so attracted to these philosophers in unknown to me; though I have a theory.

Eric Jenson,

I haven't read enough of Mises' work to get a clear understanding of his methodology and philosophy, though my suspicion is that he was concerned with different problems than people like Quine. In fact, "Two Dogmas of Empiricism" might be an excellent example of being "more interested in getting on with the job than in spending time in deciding whether the job is worth getting on with." It seems to me that Quine, like most philosophers, absorbed the expectations of the profession and uncritically accepted the same goals of investigation. When I consider the standards which a "solution" must satisfy, I realise that most of the "problems" aim at ends that I do not share. Quine's famous essay is just another example.


If you think Quine's paper was an example of "more interested in getting on with the job than in spending time in deciding whether the job is worth getting on with," you probably haven't understood it. That paper, in fact, among other things implicitly lays out exactly what is and is not worth getting on with in philosophy.

Also, if one agrees with the conclusions of that paper, it is true that one isn't going to find Mises's philosophizing all that convincing. It doesn't matter whether Mises and Quine had different concerns. However, I think Mises's approach to social science was fundamentally sound, and that it was merely his own philosophical description of this approach that was inaccurate and, quite frankly, a bit embarrassing.

It's probably worth mentioning here that it was Otto Neurath's philosophical response to the same fashionable Viennese empiricism to which Mises was responding that laid the groundwork for Quine's work on the analytic/synthetic distinction - something Quine acknowledged by quoting Neurath in a related context. In this connection, at least, I think Neurath was right and Mises was wrong.

See also Stefan Karlsson's criticisms

Just a small note. I am not fond of Mises's version of the axiomatic method. In his hands many important economic concepts like "interest" lose a clear link with real-world interest rates. Interest has nothing much to do with action now versus action later as he would have it. I believe Roger Garrison had an article about this in the Journal of Libertarian Studies quite a few years ago. Israel Kirzner has also admitted, at least in conversation, that it is hard to connect Mises's idea of "orginary interest" to what is normally meant by interest.

It would be good to think about the limits to the axiomatic method more generally, and not just the mathematical axiomatic method.

There's no way Mises could be using the methods he describes and be coming up with anything that even approximately corresponds with how the world really is. Surely he is coming up with descriptions that most closely correspond the real world and that at the same time correspond with his central presuppositions or axioms or whatever you want to call them.

On the subject of originary interest he writes:

"An imaginary construction is a conceptual image of a sequence of events logically evolved from the elements of action employed in its formation. It is a product of deduction, ultimately derived from the fundamental category of action, the act of preferring and setting aside. ... Thus we conceive the notion of originary interest from an imaginary construction in which no distinction is made between satisfactions in periods of time equal in length but unequal with regard to their distance from the instant of action."

So we have an image that is "logically evolved" from elements of action and that is a product of "deduction" that is "derived" from a category of action that is itself an act and from which originary interest is "conceived".

This is complete hocus pocus and there is no way any of this makes sense, let alone accurately describes what he is doing.


I spent many an unproductive hour trying to figure out what the significance of all of this is.

Mises at his worst.

Mr. Braun
Solid post you are very correct. I am still a student, but my intuition is that what matters more are results and not strict adherence to the method that produced them. Rizzo made a wonderful point; “The search by most macroeconomists is constrained by a certain set of unquestioned methodological precepts.” Sometimes, we need to eliminate the foundations to move on. Wilfrid Sellars remarked, when discussing the myth of the given, that “science, is rational, not because it has a foundation but because it is a self-correcting enterprise which can put any claim in jeopardy, though not all at once.”
With that said, as a student of economics, Mises, Lachmann, Kirzner, and Hayek (whom I owe more study) taught me more about how social coordination work then economists from other schools (although they do their part). I try to tell those in haughty (well not always) philosophy departments that the Austrians helped explain economic phenomena in significant ways, and that they do care about empirical facts.

PS, I am not sure how I should address some of you (Mr./Mrs. or Dr.)...please feel free to correct me as needed.


Yes, I think we're on the same page. Mises surely got a lot right - often ingeniously - despite his own understanding of his method. To correct what I wrote above, I believe he came up with descriptions that both corresponded with reality and COHERED with his central presuppositions, propositions, axioms, or whatever you want to call them. That's what we all do, but most of take our presuppositions from an implicit scheme rather than coming with with anything as bananas as "man acts" and then kidding ourselves that we're engaged in some weird deductive process. Mises's economics surely was and his legacy surely is the poorer for his methodological shenanigans.

Sellars is a great philosopher. Again, the "put any claim in jeopardy, though not all at once" quote is pretty much a paraphrase of that man Otto Neurath's suggestion that science is a boat that must be rebuilt plank-by-plank. I keep mentioning Neurath, as it was his ideas about socialization that led Mises to respond with his economic calculation argument.

Mario, Chris and Eric,

Let's not throw the baby out with the bathwater!

First, once you place Mises in the right philosophical context (turn of the century continental philosophy) his position takes on a different significance. Alfred Schutz's (Mises's student) synthesis of Husserl and Weber to reconstruct Mises represents something different than the Hilbertian axiomatics.

Second, the deductive arguments of economics and in particular the pure logic of choice is not to be scoffed at, but instead to be embraced as an essential element in economic reasoning. And the scorn thrown at it by philosphers or other social scientists should be weighed against the productive output that has followed from the economic way of thinking. The rational choice model has produced a lot of important concepts about the economy, the polity and society.

Third, as is hinted here, Mises's statements are different from his practice. But even more, his statements are misunderstood by those who both appreciate and despise his practice. There is confusion. A classic example of this is the status of Hayek 1937 paper --- is it a break from Mises, or the fulfillment of Mises's system. In that paper, the pure logic of choice is argued to be a necessary, but not sufficient componenet of a theory of the market economy. Hayek tells us he was concerned that Mises would break with him, but Mises didn't break with him over this paper. I think this is because everyone has misunderstood Mises's system --- which I contend sees economics as divided into 3 realms --- the realm of pure theory (pure logic of choice), the realm of applied theory (logic of choice + empirically contingent institutional environments), and the realm of economic history (or contemporary policy analysis). I actually think you can find this distinction clearly stated by Bohm-Bawerk in his discussion of the theory of price, and as well as in Menger.

But for the battle against historicism, it was important to defend the role of theory in historical interpretation. Theroy provides the eyeglasses which enables all reading of history possible. Facts do not become economic facts until read through economic lens. See Hayek's essay "The Facts of the Social Sciences" let alone Mises's various defenses of the realm of theory.

But this insistence of the necessity of theory for interpretation does not mean that theories are immune from criticisms. Again, this is a willful misreading. The question is how refutation of a theory takes place, and how irrelevance of a theory can be demonstrated.

Anyway, translating Mises into a Hilbertian exercise of pure deduction from soup to nuts sets him up for dismissal, but contextualizing his contribution in the late 19th and early 20th century traditions of methodological dualism in German language philosophy and social science, and reconstructing his argument in light of post-positivist philosophy of science, actually sets Mises up as one of the most significant methodologists of the social sciences to ever pick up pen and put it to paper. He is only at his "worst" if we choose to read him that way, but if we read him more charitably, that assessment will change.

Whether, given the existence of these uncharitable readings by both friend and foe, it makes sense to fight this battle is one that each individual must decide on. Mises himself did not concern himself with making sure that all readings of Menger and Bohm-Bawerk were accurate, but instead got on with the practice of doing his economics and putting it out there, as he put it, again and again for critical evaluation by his peers. Perhaps that would be the best way to honor his legacy --- not to fight over it, but to just do economics and attempt to make sense of the world around us.


P.S.: Chris's mention of Neurath is extremely important intellectual history wise --- he is the reason why both Mises and Hayek saw an interconnection between socialism and scientism that they fought against their entire careers.


It is very difficult to find Misesians who will say Mises was wrong on any particular issue. Kirzner used to use words like "subtle" or "not obvious" instead. I do believe in charitable readings of authors, especially those who are generally good. However, Mises goes well beyond the pure logic of choice and this is where he is at his worst. He wants to DERIVE the phenomenon of interest from the very notion of action itself. He wasn't satisfied with Boehm-Bawerk's or Frank Fetter's idea of a psychological law of time preference. Many economists believe in the pure logic of choice, including me. But they do not believe in the lengths to which Mises took things. As a Hayekian, I can utter the words, "Mises was wrong" here. In general, I think Mises's apriorism is the source of a tendency among some lesser minds in the Austrian community (about whom you have written) to reduce every interesting issue to a tautology. Mises is not entirely to blame, however. But there we are!

Nancy Cartwright, Jodi Cat and others have done a Neurath revival, parallel to the ongoing interest in logical positivism as an academic cottage industry.
Cartwright Nancy, J. Cat, L. Fleck, and T. Uebel, 1996. Otto Neurath: philosophy between science and politics. Cambridge University Press
Cohen R. S. and M. Neurath (eds.) 1983. Otto Neurath: philosophical papers. Reidel
Cohen, R. S. and T. Uebel (eds.) 2004. Otto Neurath: economic writings 1904–1945. Kluwer

Demonstating that Bohm-Bawerk was over-optimistic to think if you give a bad idea a good long run it will fall over.

Mr. Braun
"To correct what I wrote above, I believe he came up with descriptions that both corresponded with reality and COHERED with his central presuppositions, propositions, axioms, or whatever you want to call them."
Yes, we are on the same page. Also, are you familiar with Donald Davidson? I have read "On the Idea of a Conceptual Scheme" several times and, for the time being, buy Davidson's argument. (I am wondering what the status of that debate is). Also, I had forgotten about that metaphor completely! I have not been able to read Otto Neurath but I will start when I can (so many books, so little time!)
Dr. Boettke
Let me first say that I greatly enjoy reading your work. When I first became interested in Austrian Economics, through your old students Dr. Steele, and Dr. Wenzel, I started by reading you, Ikeda, and Rizzo, then later Mises, Kirzner, and Lachmann.
Now, on to the post.

First, once you place Mises in the right philosophical context (turn of the century continental philosophy) his position takes on a different significance.

Thank you for bringing this to my attention; I need to explore and compare the history of economic and philosophical thought in Germany again perhaps. Hey, at least we are not positivists!

But for the battle against historicism, it was important to defend the role of theory in historical interpretation. Theroy provides the eyeglasses which enables all reading of history possible.

Hmm, I wonder if "theory helps us make sense of history" or "theory answers the gnawing 'why' that confronts us". Philosophy of science has a lot of literature, and I have only begun reading it. Actually, we may have to be careful on how strong that metaphor is; the idea of completely untranslatable conceptual schemes looms and I wonder if this would lead to some form of polylogism (and Mises did contribute to that debate). However, I doubt you embrace the idea of completely alien and untranslatable conceptual schemes, as some did after reading Sellars, Kuhn, and Quine for the first time. (I am a fan of Davidson and Gadamer, along with Sellars, Kuhn, and Quine).

In addition, I am trying to put down or disqualify Mises. To the contrary, I happen to think the Austrian School may have been a Kuhnian paradigm change, particularly with Mises’ theory of money. I simply do not agree with many of the Miseans I have met who claim that Mises is infallible because of his method. Methods are there to help cope with the world, not strait jacket us in a vocabulary (or world).

Dr. Rizzo,
I think Mises's apriorism is the source of a tendency among some lesser minds in the Austrian community (about whom you have written) to reduce every interesting issue to a tautology. Mises is not entirely to blame, however. But there we are!

Too true, many of my contemporaries do this often; then, they grow frustrated when the method becomes a strait jacket.


If there's a Neurath cottage industry, then it's hard to find. English-language books about him hardly outnumber English-language books listing Neurath as author or editor. Describing serious scholarship such as that contained in the Cartwright et al book as part of a "cottage industry" is actually rather offensive. "Cottage industry" to me in this context suggests countless books that contain very little, nothing new, nothing intelligent, or even senseless nonsense about a popular subject. They tend not to get written by four serious scholars based (as they were at the time) between Harvard and the LSE.

As for the Böhm-Bawerk line, the lack of any falling down relates more to Neurath's helping shape the modern philosophical positions of epistemoligical holism and physicalism, which are both in rude health, than to whether anyone is spending time writing and publishing about Neurath himself.

His extreme ideas on barter and socialization were bad, and they have indeed fallen over.

Economics in economics. Philosophy is philosophy. History is history etc etc

All are intertwined, but all are distinct too.

In my view the issue we're discussing here is simple to summarize.

Pete writes: "I think this is because everyone has misunderstood Mises's system --- which I contend sees economics as divided into 3 realms --- the realm of pure theory (pure logic of choice), the realm of applied theory (logic of choice + empirically contingent institutional environments), and the realm of economic history (or contemporary policy analysis)."

Yes, and he generally calls the first of those praxeology.

But the real point here is - did Mises put too much into Praxeology? This is the difficult and interesting question.

Chris Braun and Mario Rizzo are concerned about time-preference because Mises tried to put that in Praxeology and lots of people think that it belongs in the study of characteristics of the market.

The problem then - for time-preference - is that every action must happen at a particular time. That doesn't imply a rate of time-preference, but it does mean that it is always a consideration.

These broad dividing lines are a problem. When does observations of the institutional environment give way to more complicated empiricism for example?

To give a concrete example of this, when does a very liquid commodity become money?

Like cigarettes in a concentration camp or a prison?

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