A strong Keynesian argument that speaks to the American people

Tom's citation is basically why there's even an Austrian Economics school to begin with. They decided a long time ago to construct their own reality, after all.

Gotta love those people.

Is there any credence to what I was reading there? as far as I can tell, they fudged the numbers and said that the market would've self corrected.

/goes off on relative reality symbolic-interactionism tangent, gets the thumped, and then gets the thread locked, before appealing the mods and getting it unlocked again.

Anyhow, how about we refute the claim on its merits, Tomu? Can't convince people you're right if your argument boils down to "I'm right because you're wrong and stupid for even suggesting that."

No, especially since there model has never worked.

If I could prove Austrian economics is false, it wouldn't exist.

Look, if we look at the actual data pattern of this recession, the predictions made by the Keynesian model used by Krugman fit perfectly, whereas those of the Chicago school fail. What about the Austrian school? Well, they don't like to use science in the first place.

That's a bit of an oversimplification mind you. But it's just a faith based theory of economics. It doesn't make any predictions other than "When the storm has passed the sea shall be calm."

If I could prove Austrian economics is false, it wouldn't exist.

The sort of heavy free market system led to this crash. So there's a little bit of evidence against it.

Sure, there's evidence. There's tons of evidence to suggest a Keynesian model-in particular, robust models that are repeatedly tested with real world data, and then adjusted to account for said data-are better. But it's not a direct proof in the way that would really get Austrians to shut up.

Ok, let's do some definitions here, because I'm slightly confused:

• Keynesian
• Chicago
• Austrian

TBH, my focus is in micro. You won't get a better response than just reading the Wikipedia articles out of me.

The Chicago school are the guys talking to Paul Ryan, as I understand it.

Chicago refers to the Chicago school of economics.

Austrian refers to the Austrian school of economics. Its bullshit. its pseudoscience. It eschews mathematical modeling and empirical testing in favor of a narrative approach termed 'praxeology'. they say that statistics cannot predict human interactions without giving any reasoning and then substituting Praxeology, based on "unquestionable axioms." That itself should send up red flags.

They're both libertarian schools of economic thought.

edited 7th Oct '11 7:28:57 PM by Enkufka

...well, assuming Keynesian economics as "correct," which is less wrong, Austrian or Chicago? Or are they different names for only slightly different concepts?

As far as I can tell, Austrian is pure bullshit backed by specious logic, while Chicago has some statistical evidence to back it up, but they both are for the same things (lazzefaire economics, gold standard, small government, etc.)

Wait, I didn't think Chicago school endorsed the gold standard. Do they really? I could have sworn that was one of the distinctions between the Chicago school and Austrians... hmm...

Needs more research.

...which one is Randian?

Neither. Randianism sets moral guidelines of self-importance. Economics schools don't do that. Theoretically. Except maybe Marxism.

Wait, Chicago isn't gold standard. My bad.

Well, to my knowledge, Objectivism included economics.

Anyhow, how would a Keynesian address each point of, say, Chicago economics and what it advocates doing which is wrong?

How ironic. :p

So, part of the "appeal" of the more Libertarian schools is they free individuals to just worry about their own business, make the most of it, and the rest of the system sorts it out. That's "what's in it for them", as it were. What's "in it" for the American public then, in regards to Keynesian? In other words, if we can figure out as many of the positive outcomes as possible, those can be the selling points.

edited 7th Oct '11 7:40:48 PM by Ratix

Here's Austrian Economics 101, as I understand it:

It is based around the concept of an economic equilibrium. In a perfect system, supply, demand, and prices will, given time and no external inputs, reach a static equilibrium.

However, due to a combination of imperfect information and the fact that there will always be external inputs, said equilibrium can never be a static point. It is always shifting, moving up and down depending on economic and social trends. This shifting inevitably creates some economic loss, but is natural, so the alternative of not allowing for it is far worse and would lead to financial collapse. (Think of failed ecologies, it's a similar concept.)

The goal of government policy under Austrian economics is to eliminate as many extraneous factors as possible that would either lead to greater economic fluctuations or limit the ability of existing economic fluctuations to occur. This tends to practically translate to minimizing government regulation that would lead to increased business costs, and also minimizing alteration of currency rates beyond that needed to keep up with population changes. Hence why they advocate gold standard (prevents currency-based inflation [yes, Tomu, I'll use your definition this once]) and minimal government.

I don't actually agree with most of their practical policies, other than limitations on printing of new money (not tied to the gold standard, though). If you want more reading (and can put up with Libertarian bias), I recommend checking out the Uncle Eric series of children's books by Richard Maybury. They do a good job of explaining it in even more layman-ish terms.

of course, the flaw with austrian is how they reject all data and models for being flawed and instead work off the idea that studying human behavior can predict the market, nevermind human behavior is inherently unpredictable.

They have their own line of reasoning for that too (albeit a dated one), but I'd rather not get into that here, as it's too much of a derail.

Well, I'd be disappointed if any (macro)economist didn't at least take a course or two in sociology.

All the models in the world are for naught if you don't take into account the human factor.

Joyflower, it comes from the United Kingdom because in the 1930's, we were still the worlds hyperpower.

Austrian economics basically say "humans are complex so fuck it."

Honestly USAF, I'm kind of surprised you're not an Austrian with how you go on about sociology and whatnot.