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richardhutnik on 08 August 2011
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Kasz216 said:
richardhutnik said:
Kasz216 said:
richardhutnik said:
mrstickball said:
An example of a non-government created bubble would be the .com bubble that burst in 2000. It was due to many, many over-valuations of internet based IPOs. Wasn't created by the government.

The Austrian school argues that every bubble is actually created by government interference with markets, in the sense that the central bank ends up making interest rates too low, and causes malinvestment to happen, which then drives a bubble.

They don't suggest EVERY bubble is created by that... just the really bad ones that have happened so far.

Afterall, bubbles existed before there was government interfernece within markets.

The difference was they were more frequent but smaller.

Aside from which, the main point of Austrian economics is that it's stupid to attribute any one thing to another thing, because economics is inherently untestable.

It's treated more as a hard science like chemistry or phsycis when the reality is, that the basis of economics is in fact people who are individual agents who all act differently to change.

To study why the economy is acting how it is, one must study the individual.

And that main point of Austrian economics you bring up, puts it on very shaky grounds.  It puts economics in the realm of personal preference and opinion, with everyone reaching their own conclusions that placate them, rather than being able to at least have a degree of probabilistic causality, which can say this or that can cause things to happen or not happen.  

I also have to wonder, if economics is inherently untestable, then how can one even speak of "The Laws of Economics"?


You're not a fan of the social sciences are you.

There is far more then just quantitative means to science and to put things into perspective rather then "personal preference."

Heck, Consumer Psychology has a number of qualitative methods used all the time very effectivly to stimulate economic demand on a company by company basis.

I was addressing the Austrian economics belief that economics is inherently untestable.  People don't say that about social sciences.  You are able to test things.  I would also say, about the Austrian school, that is you make claims that can't be verified, you have a hard time making basis stating economics has laws behind it, which is what is said.    I would argue that the social sciences are where you could validate what the Austrian school says.

More on the Austrian school:

http://www.theamateurfinancier.com/blog/topics/moneyisms/

Criticism of the Austrian School

The most common criticism of Austrian School economics is that it lacks intellectual rigor.  With its emphasis on logically deducted conclusions and rejection of using numbers to support their conclusions, the Austrian School economists tend to be dismissed from economics journals due to an absence of supporting calculations.

Similarly, Austrian theories come under attack for not using empirically derived data in their theories.  Frequently, these theories are also unfalsifiable, making it impossible to test them and determine whether they apply to the real world.  This untestable nature of Austrian economics, and the aggressive attempts by some Austrians to incorporate any empirical data, put them at odds with the broader economic field.

Another criticism is that, while the Austrian School is quick to criticize other economic theories (including Keynesianism and Monetarism, our earlier Money-isms), it does not provide viable alternatives.  Both Paul Krugman (a neo-Keynesian) and Milton Friedman (the founder of Monetarism) rejected the Austrian explanation of business cycles, one example of where alternate schools have rejected specific Austrian policies.