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I found this comment especially puzzling:

"The key economic story of the last 70 years is the triumph of the mixed economy in growing both economic output and living standards."

The economic story of the last 70 years is riddled with financial instability, fiscal catastrophe and hyperinflation. The economic growth that we have perceived is entirely contingent upon a continuous expansion in the supply of money, beyond the demand for money, so that interest rates are arbitrarily suppressed. Only under this condition (and the use of spurious measures of inflation rates) can the growth rates of the last 70 years even come close to the growth rates of the period that preceded it.

This 'economic triumph' is so fragile, that interest rates merely need to rise by a few percentage points in order to trigger torrential financial cataclysms (the federal funds rate rose to ~6% in 2006). Also, I hope he realizes that modern, mainstream economics is founded upon those very same 'apriori,' unscientific assumptions.

I agree completely with the points here about the reading, and had agreed with your initial Cato post. But what I think has happened here is that Barro (maybe unwittingly?) stumbled into an open question among Austrians.

He didn't just make up the a priorist stuff off the top of his head, after all. And there are people responding to the post who have also spent decades studying economics and who consider themselves Austrians that agree on the a priorist point.

It seems to me Barro isn't strictly wrong so much as he is someone who has been caught in the cross-fire of a decades long civil war (which, of course, is harder to appreciate if you're a participant in that civil war).

"The key economic story of the last 70 years is the triumph of the mixed economy in growing both economic output and living standards."

That's the post hoc fallacy. Logically, and historically, we know that state intervention in the economy retards growth. So the story is more likely the power of the market in spite of massive interference by the state.

I am not sure what it is important to try to correct Josh Barro's wilfull misunderstandings. (Such as his idea that Hayek was making a prediction about the future of Britain rather than a statement about the incompatibility of comprehensive economic planning and the rule of law, as Hayek defined it.) Is it because his last name is Barro? Perhaps. Is it because he writes for Bloomberg? Perhaps. But I think it is more important to make our points by doing our work. The age of the internet makes responding to every thought of every writer seem important. It is not. Tomorrow it will be forgotten when, for example, Mitt Romney makes another mistake. This is the world of journalism.

Steve, good points here, but I don't even understand the premise of Barro's argument. It sounds like he's saying:

(1) Yes Steve, I do *so* know that modern Austrian economists don't believe in empirical analysis.

(2) You know how I know? I read Hayek's Road to Serfdom, which made a bunch of empirical claims that are wrong.

That doesn't make any sense, even on the face of it. It would be like me saying, "Krugman believes in a priori economics, because he called for the Fed to cause a housing bubble in 2002 and that clearly didn't bode well."

(Daniel Kuehn, right, there are some modern Austrians who would push the a priori stuff to the wall, but Barro isn't citing them. He's citing the most "squishy empirical" Austrian economist of all, who explicitly rejected Mises' a priorism. This makes absolutely no sense.)

Bob -
My read of that argument was that Barro said modern Austrians are still into things like the Road to Serfdom because they are not as empirically minded. I read it again and I don't see him saying that Hayek is offering RTS as a methodological text. He's saying RTS is still read and promoted because modern Austrians aren't particularly empirically minded. So I'm not sure the way you're using that part of the post makes sense.

I personally see people get whacked by Austrians if they say RTS is just about totalitarian socialism and they get whacked by another group of Austrians if they say it's broader. That's why I don't wade into RTS discussions. Being in the cross fire of internecine disputes is not particularly fun.

Here's a comparison that might clear up the point that Barro is making. Mainstream economists don't teach the General Theory in macroeconomics classes. They teach it in history of thought classes. Why? Because Keynesian macro theory has been repeatedly revised as additional empirical and theoretical work comes in. Barro gets the impression that Austrians still go right back to Hayek and Mises. I think relative to a lot of other economists this is probably true, although it's not strictly true.

Here's a better comparison: you don't see modern Keynesians teaching Economic Possibilities for Our Grandchildren in seminars.

Why? Because it didn't pan out empirically. When you see discussions of it, it's about how Keynes was wrong.

That's the point Barro was trying to make, I think.

Daniel, they do teach IS-LM ;-)

Also, what's the mainstream? If anything we've seen the (New) Keynesians slamming the (New) Classicals and vice-versa.

Not to mention Neo-Keynesians such as Samuelson slamming the New Keynesians before his death, and the Market Monetarists slamming the representatives of the Old Monetarists.

Hasn't Krugman dragged up Keynes a thousand times now in his columns when it came to Say's law or to what the Classicals have been saying?

Whatever empirics there are in Macro, it doesn't seem to have a tremendous amount of effect now does it?

The 'best' part of economics where no one is in disagreement is the a priori stuff of Micro.

Martin -
That's pretty much restricted to undergrads, and that sort of proves my point - that's not Keynes! That's people who found problems with Keynes and provided remedies.

And the version of IS-LM that's usually taught now, IS-MP (although maybe it's not so extensive... I don't know) is a further revision of IS-LM.

Micro is a priori? Micro empirics is more fertile than macro empirics! (for reasons completely outside of the control of macroeconomists, I should add).


I believe your point was that economists do not teach Keynes General Theory in macroeconomics classes. If you accept IS-LM as basically the mathematical and graphical rendition of Keynes' General Theory which was I believe the purpose of Hicks (1937), then that point seems falsified ;).

Also correct me if I am wrong, but MIT still teaches IS-LM in Macro I or taught until relatively recently for graduates if Krugman is a reliable source on this:

Further, micro empirics might be fertile, but microeconomic theory is pretty much a priori it seems. Micro empirics is what Austrians would call 'economic history', and as far as I know, micro theory precedes micro empirics in the same way that economic theory precedes economic history.

Professor Horwitz claims that there is no evidence that Barro has any familiarity with Austrian economics. Unfortunately Barro clearly points out in his article that he studied Austrian economics for about year:

I will admit that I was never able to finish Ludwig Von Mises' main work, "Human Action." It is a very unpleasant read in part because Mises is fond of making up his own words. (Note: As far as I can tell, "praxeology" means getting from the "axiom of human action" to policy prescriptions without looking at data.) But I attended enough lectures on it -- in the Charles G. Koch Summer Fellow Program, in the Koch Associate Program (an entire year of Thursdays spent discussing this sort of thing!), and at various IHS events -- to get the gist.

“Some people think that nonsense is too silly to answer. But not answering it can just allow nonsense to prevail.” — Thomas Sowell

Jake, how would you respond to if Barro had said that he never finished Varian's intermediate micro text, but did take classes on microeconomics? Not only that he is now telling people who have read Varian's book, what is in it.

Josh Barro makes things up & 'reports' falsehoods at 'facts' & isn't honest enough to correct factual mistakes when he learns about them.

Tens of thousands of policy interested people have learned that about Josh Barro, and that is the important thing.

Josh Barro is not to be trusted as a journalist & reporter.

That's what people will remember about Josh Barro when they see the Josh Barro byline -- he reports falsehoods as "facts" and he does not correct his falsehoods when they are brought to his attention.

This may be common among 'journalists' -- but it is important to know exactly which ones are fast and loose with the facts, and aren't responsive to facts, and which ones have a truth ethics.

Josh Barro is not one of those with a truth ethics.

And tens of thousands now know it.

Martin - this is starting to get far afield so feel free to email me if you still want to hash this out. But the whole point is it's not Keynes and Keynes said as much and no Keynesians seem particularly bothered by the fact that they're not teaching what Keynes actually thought.

Thanks for this great article!

Daniel, doesn't it ever concern you that you are constantly having to say words to the effect, "Right right, I agree that if you take the plain meaning of this guy's words, he is wrong. But what I *think* maybe he meant is..."

That happens with you more than any other human being I have encountered. :)

I honestly don't know what you're talking about, Bob. I say this about you too all the time and you don't seem to see it either. I think our brains are just wired differently.

I definitely don't see what you are talking about in this context.

Barro wrote: "This head-in-the-sand approach is why libertarians are still so into Hayek's "The Road to Serfdom," published in 1944, which predicted an inevitable slide from the mixed economy into socialist tyranny. Sixty-eight years later, that prediction has proved false, yet the book remains wildly popular."

The plain English of that seems to be that he thinks an anti-empirical streak gets people to keep embracing things like Road to Serfdom.

If you can explain to me how those two sentences don't communicate my interpretation in plain English, be my guest.

Fine I'll grant you that narrow point, Daniel, but that doesn't rescue his overall post. He is telling Steve, "I do so know about Austrian economics and its a priorism, because you led me in a seminar that had a bunch of Hayek's political works."

So I will amend my earlier post and put in Constitution of Liberty and take out Road to Serfdom.

That quote was from this most recent post, sir.

I agree with Steve's point here about the role of the readings at the IHS seminar, which are absolutely not economic or methodological. Indeed, that's why I started my comment above with "I agree completely with the points here about the reading"! What I disagree with is how you are interpreting what Barro said about Road to Serfdom.

I guess somewhere between Mario Rizzo and Tom Sowell, one draws a line.

I take "empirical" to mean fact-based or grounded in an external reality. As Murray Rothbard repeatedly observed, Human Action is empirical in that it is based on how man thinks and acts.

The Road to Serfdom is certainly fact-based. Hayek developed the book's thesis by observing the rise of fascism and Nazism.

Making a factual error certainly does not imply one doesn't believe in empirical analysis. Making factual errors is an inevitable consequence of engaging in empirical analysis. (Not that I am accepting there are important empirical errors in RTS.)

Bob Murphy wins the internet today:

"Daniel, doesn't it ever concern you that you are constantly having to say words to the effect, "Right right, I agree that if you take the plain meaning of this guy's words, he is wrong. But what I *think* maybe he meant is..."

That happens with you more than any other human being I have encountered. :)"

Empirical work is premised on certain notions of political economy, and so, when it comes down to it, a disagreement over the proper reading of history is really a debate over how best to understand and conceptualize civil society. Frankly, I don't find empirical arguments at all worthwhile, and I think Dr. Rizzo's point about likening it to journalism is a good one. Austrians need to go back to their roots and always and everywhere emphasize the pervasiveness and inescapability of uncertainty, human fallibility, and social complexity. These sort of arguments topple and demolish any proposed scheme for government regulation and reform.

But this is not so. The libertarian programme -- sponsored by organizations like IHS and Koch -- is too much captured by idealistic notions of human liberty and individual entrepreneurial activity. This leads to slogans like "socialism" and "bureaucracy" rather than "ignorance" and "ideology," which is what the libertarian programme should be championing.

Government is not a hindrance to the market; rather, it is a means for the enforcement of systematic failure, because unlike the market, government action is effected by law (commands). This is not so with the market. That is how the argument should be put. Characterizing the issue as a dichtomoy between the market (good) and government (bad) misconceives the fundamental problem. The only advantage with the market is that it promotes and facilitates HETEROGENEITY.

Oh man, I know I should just walk away, especially since Steve said I already won the Internet. But I can't help myself...

Daniel Barro ended his recent post like this:

If Horwitz thinks the heart of modern Austrian economic work is empirical, he should urge groups like IHS to put down "The Road to Serfdom" and start promoting those empirical papers.

I am saying, that doesn't make any sense, even if we put aside Steve's point that The Road to Serfdom isn't an economics text. If one didn't know any better, he would have been quite sure from the above quotation that Friedrich Hayek was a leading proponent of a priorism among Austrian economists, and that the Road to Serfdom was filled with tautologies.

Look, the actual hardcore Misesians who don't think economic theories need to be tested, don't run around running regressions and then ignoring them when the coefficient on government spending turns out to be really big. No, they don't talk about regressions because they think they aren't part of economic theory.

So I still maintain that the entire premise of Barro's post is nonsensical. He is trying to prove that Austrians on principle reject empiricism, but claiming they ignore uncomfortable counterevidence to their beliefs. That's not a strong leg to stand on, and it's certainly not enough to say it "amuses" you when actual professional Austrian economists object to your claims.

For an analogy Daniel, it would be like me saying, "Krugman hates poor people." Then you ask me for proof, and I say, "Well look, he keeps promoting stimulus spending, even though the record clearly shows it doesn't work. So obviously Krugman hates poor people."

That wouldn't follow at all, now would it? By the same token, the fact that a lot of Austrians still like reading RTS, is hardly evidence that they are a priorists in economic theory.

Speaking of empiricism, contrary to Barro's implication, von Mises did not invent the word praxeology, as the master clearly stated and footnoted very early in "Human Action."

Bob - I agree with everything in your post except this:

"If one didn't know any better, he would have been quite sure from the above quotation that Friedrich Hayek was a leading proponent of a priorism among Austrian economists, and that the Road to Serfdom was filled with tautologies."

You already said above you granted the point I was making against this sort of argument. Why are you going back to this again? He doesn't suggest this anywhere - quite the opposite in fact.

And for the last several months for a reason I still don't understand exactly, Steve is hardly a fair judge of disputes involving me. Now granted, while everyone else has been swooning over Scott Sumner I've always thought Bob Murphy pretty much dominates the econblogosphere. But not for the comment that Steve is endorsing.

Steve -
Bob granted my point at 2:48 yesterday, so I'm not sure what's got you so excited. What's happened to you man? You used to be one of the nice ones that we non-Austrians could actually get along with without being harassed.

FC--thanks. That's what I thought but didn't take time to check out. Looks like Barro is the one who's been making stuff up.

Anybody ever read 1 Kings 18? If so...then what does it teach us...if anything...about empiricism?

If you haven't read it then I highly recommend doing so...

Barros also grossly misunderstands RTS. Given his horrendous reading comprehension skills, I don't know why anyone takes that fool seriously.

From what I can tell, Barro would never be able to pass one of my rhetoric classes.

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