Hayek seems like the man of the day.
Barron’s offers an excellent commentary by Thomas G. Donlan, in which he recounts Hayek’s stunning Nobel lecture, which, by the way, the Institute has newly in print.
When Friedrich Hayek won the Nobel Prize for economics in 1974, he embarrassed many economists by noting their failures. Speaking in the midst of a great inflation that caused a greater loss of stock-market wealth in the U.S. than the Great Depression, he noted that the inflation was “brought about by policies which the majority of economists recommended and even urged governments to pursue.” He added, “We have indeed at the moment little cause for pride: As a profession, we have made a mess of things.”
Hayek pronounced the failure of economics to be rooted in a “scientistic” attitude that employed the habits and methods of physical science where they were not appropriate. He faulted particularly, “the assertion that there exists a simple positive correlation between total employment and the size of the aggregate demand for goods and services; it leads to the belief that we can permanently assure full employment by maintaining total money expenditure at an appropriate level.”
Hayek conceded that there was quantitative evidence for the assertions and beliefs adduced by John Maynard Keynes and his followers, but he warned that the evidence was not good enough: “In the study of such complex phenomena as the market, which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process…will hardly ever be fully known or measurable.”
Economists, Hayek continued, “happily proceed on the fiction that the factors which they can measure are the only ones that are relevant. The correlation between aggregate demand and total employment, for instance, may only be approximate — but as it is the only one on which we have quantitative data, it is accepted as the only causal connection that counts. On this standard, there may thus well exist better ‘scientific’ evidence for a false theory, which will be accepted because it is more ‘scientific,’ than for a valid explanation, which is rejected because there is no sufficient quantitative evidence for it.”
Hayek, of course, was on the side that had less quantitative evidence.
Second, Mark Nugent worked long and hard hours on this piece for Doublethink Online, in which he presents Austrian business cycle theory. It is an excellent presentation.
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“Saying that government intervention was ineffective in bringing the economy out of the Depression is like saying that despite repeated blows to the head, the patient failed to regain consciousness: It’s true enough, but evades the problem of causality.”
I wish I had thought of this excellent analogy first.
When I first read Hayek I was very much a novice as it related to Austrian theory, but even economics in general. The first work of Hayek I read was related to competing currencies and de-nationalising money; I was shocked! My shock had nothing to do with the theory per se, but I could not conceive of a money not issued by government. In hindsight (and reading more Hayek), I have become a real admirer of the notion of competing currencies but more importantly, the man himself. It makes me happy to see him given some mainstream attention and I can only hope to see his legacy continue and some of his ideas come to fruition.
http://www.youtube.com/watch?v=RCCMtlM7vEY
A short bio of von Hayek, and people he associated with and praised.
On youtube, found this scathing diatribe about Hayek, the most slanderous discussion ever. Guilt by being german, the Chile issue I thought was blamed on the Chicago School and Milton. Interesting to hear the other side as most post here are a mutual admiration society.
Anyrate, i figure his crap would be rebutted here.
This guy is a total Oakland CA wack job, but none the less critical (false otherwise)
Problems:
1> we need to be more like FDR, spend & arrest.
2> hapsburg (didn’t they start free serfs & liberial)
3> america was slave to the british
4> Carl Menger-critical of Austrian aristocracy
5> we should encourge “crashes” or not discourage
6>…
I cant listen to any further, but you get the point, later he goes on to associate the Hayek to hitler.
Ken
I seems that discussing Economic Theories and debating which ones make more sense is like arguing about the cause(s) of GLOBAL WARMING (GW) (climate change, more PC).
With GW, no one wants to prove the other side right or wrong, There’s no MONEY in it.
But with Economics, how can we debate one side’s success or failure when its never been fully, or even partially, implemented; namely Austrian Economics?
Good Lord! That video is pure ignorance and hate! I have never seen such a display of mental retardation.
The existence of the guy that created that idiocy is a waste of air, water, food and organs.
My recomendation: dont take him seriously, you are only going to make him believe he has a point. Besides, experience tells me that it is IMPOSSIBLE to convince people like that, any argument with them is just a waste of precious time.
Anarca,
Don’t be surprised, that’s how these people work. When they can’t logically attack your argument, they try to persuade others to ignore you by destroying your image and/or reputation.
I went through this when I confronted the Global Warming Alarmist with a purely Natural phenomenon as the cause of global temperature change.
My proposed natural process explained nearly 80% of the variability in global temperatures, ocean temperatures, and atmospheric carbon dioxide concentrations.
Quite the experience!!!!
Global Warming alarmists are nothing compared with the video posted by Ken… Seriously, it freaked the living heck out of me.
The comments are also disturbing.
Anarca,
You are VERY, VERY correct.
But I didn’t hear the names Mendicis, Rothchilds, Soros, etc.
Although I kind of agree with the British conspiracy theory. Read the House of Morgan and The Secrets of the Temple, and the White Pass for starters
Anarca,
Something even more true and scary occurring as we speak. This perfectly says what MANY would just as SOON ignore or DENY and I think Hayek is WARNING US ALL.
“Hayek’s ‘The Road to Serfdom’ in Five Minutes”
http://www.youtube.com/watch?v=mkz9AQhQFNY
Hayek’s remarks on his fellow-economists is pretty rich, coming as it does from an exponent of an unfalsifiable pseudo-science which is unable to offer novel predictions, and which evades falsification at every turn.
Top-flight philosophers of science Imre Lakatos (Karl Popper’s finest student) and Spiro Latsis looked closely at the “scientific credentials” of Friedman’s and Hayek’s economics: here is a description of what they found, taken from the Wiki for Imre Lakatos:
“The Milton Friedman neoclassical economics case study
In August 1972 a case study of the methodology of neoclassical economics by Lakatos’s London School of Economics colleague Spiro Latsis published in The British Journal for the Philosophy of Science found Milton Friedman’s methodology to be ‘pseudo-scientific’ in terms of Lakatos’s evaluative philosophy of science, according to which the demarcation between scientific and pseudo-scientific theories consists of their at least predicting testable empirical novel facts or not.[5] Latsis claimed Friedman’s instrumentalist methodology of neoclassical economics had never predicted any novel facts.[6] In its defence in a three-page letter to Latsis in December 1972, Friedman counter-claimed that the neoclassical monopoly competition model had in fact shown empirical progress by predicting phenomena not previously observed that were also subsequently confirmed by empirical evidence.[7]But he notably never actually identified any specific economic phenomenon as an example of any such successfully predicted positive novel fact.[8]
In early 1973, as Editor of the Journal, Lakatos invited Friedman to submit a discussion note based on his December 1972 letter to Latsis for publication in a symposium on the issue of the scientific status or not of neoclassical economics . Lakatos even assured Friedman he would have the last word.[9] But Friedman never took up Lakatos’s invitation. Three years later, in 1976 Friedman was awarded the Nobel Prize for Economics without this outstanding charge of ‘pseudo-science’ ever having been publicly conclusively rebutted. The citation for Friedman’s prize said it was awarded “for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilisation policy.” But four Nobel Prize laureates protested at Friedman’s award, and most notably the 1974 joint laureate of the Economics award, Gunnar Myrdal, complained that Friedman’s prize (and also Hayek’s) was undeserved because the economics did not qualify as a science, thus apparently concurring with Latsis’s judgment that Friedman’s economics was ‘pseudo-scientific’.”
If Austrian Economics is re-cast as a hypothetico-deductive Methodological Scientific Reasearch Programme, as I discussed with Pat Gunning some time ago, we might get somewhere with it. As long as it’s an axiomatized deductive system, with “inductively-derived axioms” (a logical impossibility, since inuction is a lost cause, philosophically speaking), all it can do is produce tautologies.
Science is not geometry…
Regards,
Tony Hollick
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