"Don’t hire more police officers just teach the criminals not to commit crimes!"
fatal-conceit said: Could you go through in a bit more detail your criticisms of Austrian Economics?
Some points of disagreement:
- I think the “a priori” only contains tautological systems such as mathematics and formal logic. There is a very solid philosophical wall which prevents concrete facts of experience from being derived through pure logic. Tautological (a priori true) systems are by their nature consistent with any set of facts. For this reason I reject praxeology.
- Since factual theories are not a priori true, I think such theories ought to be tested against empirical statistical evidence. Theories that are unable to be tested by statistical evidence are sterile. Furthermore, evidence ought to be the guide for theorising.
- I think the mathematical method is very useful in economics. Many things are difficult to grapple with only verbal logic. However I agree that mathematics should be used with great caution.
- I find Rothbardian economics to be dogmatic and myopic. It has essentially walled itself off from the remainder of the field meaning that innovative ideas never reach it or are treated with hostility. For example, there is really no justification whatsoever for the Rothbardian hostility towards public choice theory, game theory, the random walk hypothesis, search theory, and the Coase Theorem.
- Rothbard’s rejection of the idea of public goods and externalities, as well as his treatment of monopoly theory, is pretty much indefensible.
- I also think the Economic Calculation Problem is overrated. To illustrate, imagine the politburo is deciding how much food to produce. All they need to do is work out their population size, work out how many calories people ought to consume, what is a healthy diet, and then they know roughly how much ought to be produced. Austrians often make it sound like the reason there were famines in the Soviet Union is because they didn’t know how much food to produce, which sounds ridiculous when stated explicitly.
I have many other more minor disagreements.
The FDA’s mission is to ensure the safety and effectiveness of pharmaceuticals. In doing so, FDA officials can make two types of errors. They can approve a drug that has unanticipated dangerous side effects, or they can disapprove or delay a drug that is both safe and effective.
FDA officials have unequal incentives to avoid these two types of errors. If the FDA official errs on the side of under-caution — approving a dangerous drug — the victims are visible, and he is held directly accountable. If he errs on the side of over-caution — holding up approval of a safe and effective drug — who’s to know? The cost and the victims are invisible. Politicians and bureaucrats prefer invisible victims."
Don’t let Bernanke tell you otherwise. The Fed has in fact made this process much harder and much more treacherous, as we have seen, as capital structure profitability becomes highly illusory.
The great Austrian tradition and the market forces it elucidates in its a priori methodology for economic understanding provides an equally important, though unappreciated, methodology for investing.
It seems to me that “tail hedging”, as I’ve been practicing it for about 15 years now (and I dare not speak for any others who are so new to the game), could be called “central bank hedging”—or, better yet, “Austrian investing.”31 Indeed, this activity over my career likely would have been much less interesting without the insights of Dr. Mises and the actions of Drs. Greenspan and Bernanke."
— Mark Spitznagel Chief Investment Officer of Universa "The Austrians and the Swan: Birds of a Different Feather"
LTMC: A Whole Foods market just opened up about a half hour from where I live. I went there yesterday, and they were selling “organic” rotisserie chickens for $15. I can get the same product at my local grocery store for $5, but without the “organic” label.
Herein lies yet another problem with the unscientific hysteria over GMO: companies like Whole Foods are exploiting customer’s fears to charge them outrageous prices on the presumption that they’re buying healthier food. But GMO’s have never shown to be harmful to health. As former anti-GMO activist Mark Lynas said last year at Oxfam:
[T]he GM debate is over. It is finished. We no longer need to discuss whether or not it is safe – over a decade and a half with three trillion GM meals eaten there has never been a single substantiated case of harm. You are more likely to get hit by an asteroid than to get hurt by GM food. More to the point, people have died from choosing organic, but no-one has died from eating GM.
I highly suggest reading or watching Lynas’s speech in full. It goes in depth into policy reasons why GMO technology is not only safe, but essential to feeding the world’s growing population.