The more progress I make through Mises' 'Human Action' and the more I absorb and learn about true economics -- Austrian callactics -- the more I've come to realize that the so-called "difference" between Austrian economics and other schools of economics, that of apriorism and positivism, really doesn't exist at all. At least not completely. It's impossible. The followers of other schools of thought think that positivism can completely explain economic phenomena, but they cannot avoid the existence of apriori assumptions and since half the time they're not even aware they hold them, they end up being horrificly fallacious and poorly reasoned.
What do I mean? Well let's examine a few non-Austrian schools of thought. The modern progressive view of, for example, the 2008-9 economic recession/depression is that it was brought on by (what they view as) deregulation. Their positivist method? The passing of the Gramm-Leach-Bliley Act in 1999 and the Commodity Futures Modernization Act of 2000 (plus some grumblings about Reagan's marginal tax rate cuts and Bush's tiny tax cuts).
The monetarist view, which was held by Milton Friedman and is still held by the still-living Anna Schwartz (and even held by one Austrian individual I know of named Kaz Vorpal who thinks that deflation caused our crisis because of money leaving the economy from the war, thus leading to a deflationary depression), held that the gold standard causes economic recession/depression by leading to a deflation that induces more individuals to hoard and starve the marketplace by inducing more people to "put money under their mattress" so to speak instead of invest and speculate with it.
Both of these views are positivist ones. One of Milton Friedman's key texts was even titled "Essays in Positive Economics." But the truth of the matter is that their view of the depression is not based on positivism. It is still based on human action, though an analysis INFORMED by positivism.
The progressives (perhaps best represented today by radio talk show host Thom Hartmann) believe that free markets in such fields as banking (not that they exist at ALL right now in banking) lead to recession/depression by too much wild speculation. The monetarists/Friedmanites (best representated by Friedman/Schwartz, as well as Kaz Vorpal) believe deflation-induced hoarding causes these woes. Both of their explanation are rooted in how they believe humans act in certain circumstances, but are informed more by positive examination methods instead of apriori deductive axioms.
However, though this may be true, there is still a need for apriorism, because many different actions take place that could lead certain positivists to blame X action or Y action for (continuing with our prior example) the 2008-9 recession/depression. For instance, the Gramm-Leach-Bliley and Commodity Futures Modernization Acts amounted to deregulation, but there was also an INSANE slice of interest rates by that former champion of gold Alan Greenspan. In order for a positive progressive to maintain that these (so-called) deregulations caused the crisis, there STILL must be an element of apriori knowledge that leads the progressive to favor the "deregulations" over the interest rate cuts as the leading culprit of the crisis. For if the interest rate cuts are more massive in potential impact than the so-called deregulations (most view them as such, though this is subjective) what explains their bias towards blaming deregulation?
Thus, positivism can only inform various principles that people hold apriori. Most of these principles are not rational and foolishly concocted (ex// the belief that free markets lead to wild speculation fueled by greed, never mind the fact that the only way that these people can MAKE a continual profit is to make SOUND economic predictions -- whoever made a fortune just by "gambling" on various hedges?). Austrian economics/catallactics is entirely deduced from apriori axioms, but ones that are reasoned through soundly: the market provides signals (prices, interest rates) that coordinate economic activity, this cannot be altered except by fraudulent intervention through fractional-reserve banking or a coercively-established central bank, etc.)
Wednesday, February 17, 2010
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