Topic: Ron Paul vs. Paul Krugman (Read 8830 times)

The problem of the Austrians is that they don't understand Popper, classify him as a positivist.

The problem of Hoppe in this case is bad education (Habermas).  Almost all opponents of Popper (Feyerabend, Kuhn, Habermas) seem to share the same error - a simple replacement of verification by falsification, but everything else remains as in positivism.  The number of people who understand that falsification is also only hypothetical, and not certain, or that it is not a particular statement, but a whole theory, even combinations of different theories, which have to give falsifiable predictions, seems minimal.

If one reads Mises, there are a few reasonable points about the difference between natural sciences and economics. In fact, we know from ourself how human society works - there are individuals with particular interests, and they try to realize them. Such things we don't know about atoms or quarks. So there is indeed a difference. And, of course, also the other one that our theories, if known, are able to change the game itself.  That's also impossible for quarks. 

But from a fundamental point of view it doesn't change much. So I agree with Popper that there is a unique scientific method, even if there are large gradual differences.

Given that the Austrians have not understood Popper, so that they are arguing, in fact, against variants of classical positivism, they are in some sense right: Theories cannot be derived from experience. One needs something a priori.  Now they make the Kantian error - a priori, means, not based on experience, means, it needs an independent justification, some sort of laws of thinking. 

Nice, but does not give much in comparison. If the Popperian is right, fine. If falsified, the falsification is also only hypothetical, not final.  He has now different possibilities - to modify the theory somehow. Or the assumptions about the initial data.  Or other assumptions and simplifications. Or to question the data. Given the complexity of human societies, one can always find ways to modify the theory so that it fits the data.

Don't worry, as an anarchist I'm used to harsh language in online discussions.  I guess I'm not fair to Keynesians too.

I don't disagree that they make falsifiable predictions (but doesn't almost all pseudo-science). However, the issue is with the pseudo-scientific reliance on confirmation rather than refutation. If we are right, then it confirms our predictions. If we are wrong, well our theory does not admit empiricism.

The person you link to (as primarily representing your views) actually seems pretty sensible and therefore I feel like I am not being fair to you. Sorry about that, I will save my abusive language for people more deserving.

I believe different approaches are possible. The Anarchism in Spain, which one could also call non-authoritarian, non-centralized socialism, did not fail because of economic reasons, but because they lost the civil war against the fascists and Franco. I also believe a resource based economy is possible (Zeitgeist/Venus Project), because of course computers can measure demand and produce accordingly, I just don't like the centralism they imply.

The scientific method is just an algorithm for learning about the world around you. People may use statistics as a substitute for thinking about their results, or argument from authority/consensus as a substitute for drawing conclusions. I like this figure:




The whole point of science is that logic can only get you to "construct hypothesis". However, if practical experiments are not possible (system too complex, etc), that may be all you can do for now.

It is not a hypothesis.  It is an economic argument http://en.wikipedia.org/wiki/Parable_of_the_broken_window


Its not that simple. I would agree that the Austrians, in methodological considerations, overemphasize the case against quantitative measurements in economics. But in fact they also make falsifiable predictions - for example they predict the economic failure of socialism.

By the way I'm not an Austrian, similar to http://econfaculty.gmu.edu/bcaplan/whyaust.htm except that I have a higher opinion about the Austrian theory of the business cycle than Caplan.

Clearly, you didn't read the article carefully, since it discusses models incorporating fully optimizing forward-looking agents (i.e. agents who anticipate that deficit spending implies an increased future tax burden and therefore increase their current savings accordingly)

As for your example, if you find a way of defining "harmful", "speculation", and "fair price" so that they are objectively measurable, then these terms can be part of a scientific theory. As these words are commonly used, they are not objectively measurable and thus are not going to yield falsifiable predictions. As always, the psuedoscience/science distinction boils down to whether a theory generates predictions that can be falsified through empirical tests/

Question: Is the broken window "fallacy" falsifiable?

If not, then it is pseudoscience. If it is falsifiable, then it is science. It is that simple.

Has any Austrian economist tried to refute the broken window fallacy using empirical data...

I need to read upon this. Sadly, I don't have the time at the moment but I'm sending the paper to my kindle.

Its clearly not that easy to distinguish pseudoscience.

The very point (a Popperian one) is that there is no theory-independent observation. You start with theories, and, then, use empirical evidence interpreted in the light of these theories, to test them, as well as to measure open parameters and so on. So, once the theories are pseudoscience, the empirical results will be pseudoscience too.

For example, there is the question how much of the price increases is caused by speculation. (The question already strongly suggests nonsense science.)  So one creates a simple model of what should be the true, fair price.  And, in this model, the difference between the fair price and the market price is caused by speculation.
Of course, using now such "empirical evidence", you can prove whatever you like about how harmful is speculation, and that it does not play the positive role suggested by Austrians.

It doesn't. In fact, the argument of the paper is that if you use the same methodological principles which allow to justify ordinal utility, and add probability theory to the game, you can justify cardinal utility by the same standards.

So there remain two possibilities: Or ordinal utility doesn't follow, or cardinal utility follows, once we have a world full of probabilities.

I think you are referring to the hypothesis that increasing the gov't budget deficit increases short-term GDP growth. This is a difficult and unresolved empirical question. Here is a review which describes the modern scientific literature on the subject.

http://relooney.info/0_New_11268.pdf

Regardless of your interpretation of the evidence (it's mixed), the term pseudoscience does not apply.

Pseudoscience rejects or accepts hypotheses irregardless of empirical evidence. The psuedoscientific approach is only advocated by Austrians.
 

Why do Austrians mull over 70 year-old debates instead of engaging with contemporary economics?

The rejection of cardinal utility follows from the subjectivist methodology. I'm a fan of Popperian falsificationism and I actually sometimes use it, to great annoyance of some pseudo-Austrians who see their positions as quasi-religion. There's no need to dismiss Popper if you're an Austrian. Regarding frequentist vs. bayesian, I would need to read upon that.

Keynesianism is analogous to, in the words of Oliver Kalkofe:

There are, of course, some pseudo-scientific aspects in austrian economics. There is, first, the rejection of cardinal utility (http://ilja-schmelzer.de/papers/utility.pdf).  Then there is the whole issue of methodology, which is worth to be criticized from a Popperian point of view (http://ilja-schmelzer.de/papers/againstCertainty.pdf). A third point is the use of the frequentist interpretation of probability instead of the Bayesian one (http://ilja-schmelzer.de/papers/frequentism.pdf).

But, sorry, in comparison Keynesian macroeconomics is much more pseudoscience. It is simply the broken window fallacy transformed into a theory.

Actually, I'm not looking for meaning.  I'm looking for how you choose to answer such a question.  Well done, until you assumed my motive.

And I do believe meaning is subjective.  However, just because it is limited to an individual, or other subset of the population, does not mean that it is imaginary.  It does mean that it isn't provable universally.

I readily admit that logic cannot explain everything. In many cases, I would even say that it is of little practical use:

Also, most people probably are not very excited about highly abstract arguments. Nevertheless, I think I already quoted Nassim Taleb "It's better to be approximately correct than entirely wrong". Also, my father was a physicist.

I provide what is probably a very boring answer, in that it's a combination of two contradictory assumptions. Or I can provide an arrogant one, "I don't care". They are both logically correct, but probably not what you want to hear. It's not the type of answer you are looking for. You are looking for meaning. Logic cannot provide that. Meaning needs to be made up. That is, I think, what Pratchett was trying to say.

notme, lonelyminer: I'm extremely interested on how your conversation will play out. Please continue the discussion in this very polite, sane and open manner. Keep at it guys, your solving a huge problem!

I'm all for logic as a tool, but if logic can explain the whole of the universe, then logic is greater than the universe.  I don't believe this is true, and if you do, it sounds like you believe in something beyond the universe.  Besides, ask a physicist.  They'll make it clear that the universe is probabilistic, not deterministic.  The field of probabilistic logic is very new, but very intriguing.

Also, since you are insistent that people answer questions posed to them, please answer this one for me:
What is the sound of one hand clapping?

This is caused by cultural backgrounds. There are cultural groups who do not share the respect for private property, and I'm not even talking about sociopaths.

The reason why theft even exist is human action, which implies scarcity of resources. Only if a resource is scarce is it possible for the concept of theft to make sense. Scarce resources cannot be consumed by more than one user simultaneously, and this creates the possibility of conflict. In the libertarian approach, it is he first occupant whose claim is considered morally superiour to subsequent occupants (homesteading principle). However, purely theoretically, other systems of justice are thinkable.

This is actually quite funny, because even though I agreed with various proponents of alternative justice systems that the homesteading principle is not the only logically consistent one, none of these proponents were able to formulate them in a consistent way, throughout a course of several years. They usually very quickly ended up contradicting themselves. This leads me to conclusion that they do not really understand their own positions. There were only two exceptions, unfortunately I was unable to comprehend their arguments (which quite possibly was my own fault).

I do not call this spirituality. I call it subconsciousness.

I thank you for your kind words. However, they are unnecessary. I am not interested in believing. Indeed I try very hard not to believe in anything and be the ultimate sceptic. I am interested in logic and in finding ways of proving which claims contradict each other. I'm the type of guy who demands that others disprove his arguments and gets angry at those who avoid answering questions.

The credit should go entirely to Terry Pratchett. I just copy and mix.

I am a fan of Hogfather, but I still don't agree with you.  Spirituality and moral values are absolutely empirical for me.

Again, from wikipedia:

I believe you should not steal because I have observed what happens to people who steal.  I'm not talking about laws and punishments, I'm talking about how it affects their psyche regardless of whether or not they get caught.

I believe that people are able to communicate nonverbally on a level that isn't explainable by simply observing them externally.  But if you are one of those people, your observation is that a message was communicated clearly.  In my experience, this only happens with people you are very close to, and verbal discussions afterwards can confirm the internal observation.  To me, it is precisely this type of connection that I call "spirituality".  Extended beyond individuals, this same type of connection exists with the universe itself.  When I come to a roadblock, by communicating my intentions to no person, but simply my surroundings the universe often clears a path for me.  Spirituality is about interconnectedness, and if you are blind to it, I will pray for you.  It exists in this universe, on this planet, in every breath and every thought.  There is no need to draw a line and separate the interconnected reality from your reality.  It is possible, but the line only keeps you from experiencing the fullness and richness of life.  Open your mind, and more importantly, your heart, and you will find truth.