Critique of Austrian Economics: A Critique [Part 1]

So someone actually made a longer critique of the Austrian School of Economics(ASE) and it didn't look as bad as they normally do[1]. Austrians always have an advantage, since we're forced to learn mainstream economics in school. Mainstream economists on the other hand know almost nothing about Austrian theory. This is why many of the so-called critiques out there are quite funny.

Critique of Austrian Economics: Introduction[2]

AC: Youtuber AustrianCritique(AC from now on) starts by stating that ASE is a "...branch of laissez-faire economics..."

Really: Economics is a value-free science. If one values economic welfare and human well-being, then understanding Austrian economics does usually lead to advocating laissez-faire. But it doesn't have to be so. E.g. you can be a communist and an Austrian economist at the same time(that would make sense for misanthropes).

AC: Paul Samuelson says deduction and a priori reasoning are wayyy overrated. Mark Blaug says that Austrian methodologies are(I think it should be "methodology is") "so cranky and idiosyncratic that we can only wonder that they have been taken seriously by anyone."

Really: Obviously this is a clear case of Argument from Authority. Ironically he quotes Samuelson, who wrote things on the Soviet Union that should discredit him completely[3]. And how many absolute economic laws has positivist mainstream methodology produced? The answer: none

AC: The mainstream doesn't agree with the Austrians, which automatically means the Austrians are wrong. In 1974 Hayek wins the Nobel Prize in economics "...for a contribution to monetary theory..." and ASE "...receives a huge burst of academic attention. But it was quickly rejected..."

Really: The mainstream isn't always right. A world where that was the case would be a world without change. Hayek won(shared with Gunnar Myrdal) the prize "for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena[4]." Not just "for a contribution to monetary theory." And I don't know what "huge burst of academic attention" AC is talking about. People were a little suprised when Hayek received a Nobel, but that was it.

AC: "In classic crank tradition, Austrians have a conspiracy theory to explain ... [their] failure." AC quotes Patrick Gunning(an Austrian), who says that there are two reasons for the failure of subjectivist economics. "The first is that ordinary people cannot tell the difference between good and bad economics. The second is that the training ground for professional economics is the university. ... In a democracy, government funding [of universities] implies (1) a competition for funds and (2) bureaucracy. Both of these characteristics favor positivism."

Really: Who the hell is Patrick Gunning and why should we care? I've heard a dozen or so theories for why no one cares about ASE. Some of them are probably correct, some probably aren't. And more to the point: Is anything Gunning says there untrue? Does AC even know what a conspiracy theory is?

AC: ASE "...is kept alive by the Ludwig von Mises Institute, a think-tank financed entirely by wealthy business donors." LvMI is just another right-wing institute founded by institutions such as the Bradley, Coors or Koch family foundations, and these right-wing ties help Austrians get on conservative talk shows etc. And something about FEE(Foundation for Economic Education) helping LvMI out.

Really: If we go by AC's definitions, then this would certainly constitute a "conspiracy theory", would it not? LvMI is funded by "...thousands of donors in 50 states and 80 foreign countries.[5]" I don't even know why FEE was mentioned, not that this paragraph had any point to it anyway(guilt by association maybe?). People at the LvMI usually reject the right/left separation, so I don't know why AC identifies them as right-wingers.

Conclusion

AC: Mainstream economists use the scientific method, while Austrians deduce truths from a priori knowledge(pre-scientific).

Really: Good enough, but I've never heard anyone describe deduction as "pre-scientific." Whatever.

AC: Mainstream economists rely heavily on statistics, while Austrians think they have very little value, because of their limitations.

Really: I think the more important distinction is that Austrians use statistics for illustration, not as proof.

AC: Mainstream scientists believe in both objective(absolute) and subjective(personal) truth; Austrian believe only in subjective.

Really: Why did "economists" become "scientists" suddenly? Anyway this is abject nonsense. I don't even know what AC is trying to say, but it sure as hell doesn't have anything to do with Austrian economics. Since when is economics about "believing" in different kinds of "truths?"

AC: "Mainstream scientists seek to explain human behavior on many different different levels: the gene, the individual, the group and the specie. Austrians believe that all explanations of human behavior can be traced back to the individual."

Really: Austrians simply say that only individuals act. AC makes it look like Austrians completely ignore the things he cites. They don't.

AC: Mainstream economists think monopolies can arise for various reasons, while Austrians say only governments cause monopolies.

Really: There is no way for me to explain this briefly, so I'll just point to Rothbard[7]. But AC is 97% right here. But for example Mises believed that some monopolies could emerge under laissez-faire.

AC: Mainstream economists favor fiat money, Austrians favor the gold standard.

Really: Austrians usually favor the money that the market chooses. Historically it has been gold, which is why they talk about it so much. Austrian economics itself doesn't recommend any money, it's simply a theory on money(value-free).

AC: "Mainstream economists assert that the mystery of the business cycle is deep and poorly understood; Austrians claim the government causes it."

Really: This is false. Even a stateless society could have business cycles, if the banking system operated on fractional reserves. The government has only made the process worse.

To be continued...

[1] The Austrian School Deception : Why the Austrian School of Economics would result in Global Genocide
The Hangover Theory by Krugman
[2] Critique of Austrian Economics
[3] Keynesian Predictions vs. American History [17:35 - 24:25]
[4] The Royal Swedish Academy of Sciences
[5] About the Mises Institute
[6] Chapter 10 - Monopoly and Competition