In the past year I have noticed a gratifying trend among undergraduates interested in Austrian economics that bodes well for the future of Austrian economics as a challenger to the prevailing positivist orthodoxy for the title of “mainstream economics.” Here are a few examples of this trend in the past month.
This past Thursday I was invited to participate on a panel at Temple University in Philadelphia to discuss the new fiscal stimulus package proposed by the Obama administration. The sponsoring organization was the Temple Economics Society which is the university’s official student economics club. TES is an extremely active organization that, for the past four or five years, has been led by successive groups of Misesian-Rothbardian students interested in Austrian economic theory and libertarian political economy.
These students have been very adept at both obtaining resources and maintaining the Austrian orientation of the organization over time. They have an office on campus that features a library of classic economic literature prominently featuring Austrian works. When I spoke on a panel at Temple two years ago, a senior was the President and the current President was a sophomore. When he graduates this year, a current sophomore will step in to head up the club.
What is especially unique and promising about the students associated with TES is that, on their own, they have concluded that “Austrian” economics is actually a neglected strand of mainstream economics. They also have the intellectual maturity to recognize that, if they wish to pursue Austrian economics as a vocation while earning their living as academic or research economists, they have the best chance of doing so by enrolling in top-notch mainstream graduate programs. Importantly, although they view mathematics as irrelevant to economic theory, they do not shy away from taking math courses. Nor do they make the common error of applying only to graduate economics programs that have an “Austrian” sympathizer or two or even a “free market” economist on the faculty.
For example, the current President of TES is a dual economics and mathematics major. He has been accepted into Syracuse’s Ph.D. program which emphasizes applied economics. Syracuse’s Ph.D. track in Urban Economics, the field he is interested in, includes urban, regional and real estate economics and ranks third in the U.S. and in the world. He is also waiting for a decision from University of Pennsylvania’s Ph.D program in Applied Economics, which is located in the prestigious Wharton School of Business . This program features tracks in Urban and Real Estate Economics, Behavioral Economics, and Public Economics and Political Economy, among others.
Applied Ph.D. programs like Syracuse’s and Wharton’s are amenable to Austrians because they deal more directly with real-world policy issues than conventional mainstream programs and avoid the empty mathematical modeling for its own sake that characterizes the latter. However, the applied programs do heavily stress econometrics so one must be well prepared mathematically.
This brings me to a second senior associated with the leadership of TES whom I spoke to. After graduation, he is taking next year off to beef up his quantitative skills by taking additional math courses. He too is inclined to enroll in an applied graduate economics program and is looking at Vanderbilt’s Graduate Program in Economic Development. This program features tracks in Finance and Banking, International Development, and Development of Institutions. While it is designed for those seeking a terminal M.A. degree, it also can serve as a pre-doctoral program. Participants who are interested in pursuing a Ph.D. at a later date are permitted to substitute core requirements by their corresponding Ph.D. courses, or to take Ph.D. courses as electives.
When I went to lunch after the panel with four Rothbardian TES members I was not asked once to recommend an “Austrian” graduate program–much to my surprise and delight. Rather the discussion revolved around the pros and cons of the grad programs they themselves had researched and applied to. None of them fretted that he would be “intellectually isolated”–a ridiculous complaint in this age of the Internet , Facebook networking, Mises.org, etc.
Nor did I hear any fear expressed that they would face hostility and resentment from faculty and fellow grad students. After all these students had sufficient intellectual fortitude to live and thrive, lead a well-funded student organization, and teach themselves and others Misesian-Rothbardian economics at a major urban university with no Austrians or libertarians whatever on the faculty. In fact my two co-panelists were left-leaning poli sci professors–one extremely so–who were seemingly pleased with the intellectual excitement and diversity these students brought to the campus. The TES was also able to engage as moderator a leading business and economics columnist for the Philadelphia Inquirer.
Here is one last example of the promising trend Iam talking about. Three weeks ago, I participated in a panel on the Global Recession at Stockton State College in New Jersey, sponsored by the Stockton Economics Society, the student economics club. I was invited by a freshman who is a hard-core Rothbardian and will be attending Mises University this summer. He too recognizes that he requires math skills to maximize his chances for admission to a good graduate program and is planning on combining a math minor with his economics major. The former coordinator of the department is a friend of mine and a quantitative economist herself who is sympathetic to Austrian economics. She will help shepherd our young Rothbardian through the requisite math courses.
It has become increasingly clear to myself and other senior Austrian economists over the past decade that advising Austrian-oriented undergraduates to enroll in specific graduate programs based on the number of Austrian, Austrian-friendly, or free-market economists that are on the faculty is a strategy doomed to failure. It is, therefore, very encouraging that Austrian undergrads have begun to recognize this on their own and, without any prompting, are turning their backs on this strategy.
In sharp contrasts, the enthusiastic and impressionable young Misesian-Rothbardians who enroll in so-called “Austrian” programs are invariably misled by the charisma, reputation or rhetoric of particular professors into thinking that what they are being taught is “Austrian” economics when in fact it is almost always a potpourri of different approaches combined with a libertarian bias toward policy analysis Moreover, the advice to seek out programs by counting the number of self-identified Austrians on the faculty severely and needlessly limits the number and quality of graduate programs that the student applies to. It is far better for students with a serious interest in pursuing a vocation in Austrian economics to be encouraged to explore the full range of mainstream graduate programs available, including applied economics, real estate and regional economics, management, entrepreneurship, organizations and institutions, business strategy, etc, with the understanding that these are simply alternative means to their goal of teaching and doing research in Austrian economics. Moreover, because Austrian economics is a unified body of theory with analytical implications for all of these real-world topics, the young Austrian with the requisite math skills has a comparative advantage in writing a dissertation and peer-reviewed papers in these diverse areas. It is far better to learn math than to unlearn the Austrian economic theory that one once knew as an undergraduate.
{ 60 comments }
← Previous Comments
JKB,
Here is another example. I suppose everyone here is comfortable with the idea that the present value of a financial asset is equal to the discounted value of the future income stream.
That is a mathematical concept, and, indeed, a concept that I have found, to my surprise, that most people who are not trained in economics – even many technically trained people and people in business management – are quite ignorant of.
A more advanced example along the same lines is the old debate about capital “reswitching†as a result of changes in the interest rate. Without trying to revive that debate here, I think I can safely assert that it is difficult to address that issue one way or the other without approaching it mathematically.
And the reswitching debate is relevant to Austrian economics, specifically to the concept of “roundaboutness†of production processes: see, e.g., Bob Murphy’s discussion at. http://mises.org/daily/1148 . (For whatever it is worth, I myself independently reached the same conclusion as Bob reaches: reswitching shows that a naively physicalistic concept of “roundaboutness†is mistaken, but it does not vitiate the Bohm-Bawerkian/Hayekian analysis as applied to the real world.)
Math is not bad. Sometimes, even in economics, math is necessary.
The misuse of math, which occurs in many disciplines besides economics (consider the naïve faith in computer models in so many fields!) is of course bad.
Dave
David H. Miller,
Well put. I would clarify that Austrians don’t have problems with the use of math in economics per se. The issue is the belief that human action can be derived from/explained by/predicted by mathematical models based upon data (i.e. historical prices, past behaviors etc.). The erroneous assumption is that there is some implicit quantitative/fixed (or mechanical) relationship between observable economic phenomena. Value scales exist. But we can’t observe them. How do we know they exist? From surveying market participants? Nope.
Andy,
Yeah, I know there is no logical reason for Austrians to hate mathematics: after all, Rothbard’s undergraduate degree was in math, and, indeed, in his later years, Murray evidently retained an interest in math (I was surprised to find out that he and I shared an interest in the foundations of set theory – of course, Murray was a polymath who was interested in pretty much everything!).
On the other hand, the Austrian criticism of the misuse of math in economics is often taken to be an attack on math per se in economics: as JKB and I have pointed out, even Austrians do, and must, use some math in economics. And, I do have the impression, reinforced by some of the discussion here, that some young Austrians are disinclined to learn the math needed to communicate with “mainstream†economists. (I realize that no one here is saying that such a refusal to learn the relevant math is a good thing.)
I just wanted to add my “two cents†to what I think is the consensus here: that young Austrians had better learn the math needed to communicate with their non-Austrian peers.
There is, also, I think, a broader point here: in some sense, there is really no such thing as “Austrian economics.†I do not mean of course that Hayek and Keynes (or Rothbard and Friedman) are indistinguishable: in a historical and sociological sense, the Austrian school does indeed exist.
However, in an ultimate, logical sense, there is only good economics and bad economics. Keynes was wrong because his reasoning and analysis were deeply flawed: he ignored how price level changes (specifically deflation of the price level) can adjust the nominal supply and demand for money, he ignored the effects of expansions of the money supply via the credit markets on the value of financial assets and the real structure of production, etc.
Any competent economist should be able to understand this: it should not be necessary to “convert†to Austrianism or somehow “buy into†Austrianism to understand such things.
That’s one of the reasons I endorse Joe Salerno’s main point: intellectually and logically, there is no reason for Austrians to consider themselves part of a ghetto (I understand that sociologically it may often seem that way!).
In my own field of physics, there is no “Einsteinian school.†Einstein simply was correct (by and large – e.g., on relativity), and it is simply taken for granted that any competent physicist recognizes that fact: it is “non-Einsteinian†physicists, if any exist, who would be the weirdos.
In the same way, on the central points of dispute that involve the Austrians – the disruptive effects of active monetary policy, the socialist calculation debate, the futility of a good deal of mathematical economics, etc. – reality is simply on the side of the Austrians. Austrian economics is just economics.
I know enough of the history (and indeed I had the experience myself of making “Austrian†points in high school and college classes almost forty years ago) to understand why Austrians tend to feel themselves to be separate from the mainstream of economics.
But in an ultimate sense, it is the Keynesians, Marxists, neo-Ricardians, etc. who are out of the historical mainstream of economics. It is they who are the flaky crack-pots.
Austrians need to remind themselves that they are not some strange little sect: they are simply real economists trying to do economics right. I think that is part of the point of Joe’s initial post.
Dave
Dave,
In my opinion, I find that mathematics applied in the search to explain a phenomenon of interest only provides an insight to the same, but the equation representing the occurrence is not the holy grail. That often seems to be forgotten. Through mathematics, many individuals gain a false sense of security.
I find when the phenomenon begins to deviate from the math designed to model the same, then is the time to re-evaluate the chosen variables, if not, the parameters of the equation, but many times this is not done….
But as is attempted today, Many scientists (Psychologists) assume that human behavior can be explained by math, if not, ignored and many appear to forget about the Copenhagen Interpretation as applied to human intervention and bias. If human behavior purely could be explained using math, then no Free Will exists and we are all ROBOTS with no Free Thinking. In this case, human growth and advancement would be impossible.
“Socialists assert that all human actions and reactions depend upon environment. The theory is that human beings are mere robots, responding only to “external stimuli”, and that heredity and the accumulated experience of countless centuries, should be disregarded. This is part of what socialists call the “pragmatic approach….”
ehmoran wrote:
>In my opinion, I find that mathematics applied in the search to explain a phenomenon of interest only provides an insight to the same, but the equation representing the occurrence is not the holy grail. That often seems to be forgotten. Through mathematics, many individuals gain a false sense of security.
Yes, I think we all agree on that: although math has its uses even in economics, as JKB and I have pointed out, it is not a magic wand that can substitute for thought. As computer programmers say, “Garbage in, garbage outâ€: feed some bad ideas into math and you still only have some bad ideas.
You also wrote:
>If human behavior purely could be explained using math, then no Free Will exists and we are all ROBOTS with no Free Thinking. In this case, human growth and advancement would be impossible.
I’m not sure that is true; indeed, I am not even sure exactly what “free will†means – philosophers have spent a lot of ink on that topic over the centuries without yet even agreeing on a definition!
On the other hand, quantum physics appears not to be deterministic (I emphasize “appearsâ€: we physicists have been arguing about this for eighty years now!), and, yet, mathematics works very nicely indeed for describing quantum mechanics.
And, as JKB and I have emphasized, there are parts of economics in which pretty much everyone, even Austrians, find some use of math to be necessary.
The issues of free will vs. determinism and of the use of mathematics in economics seem to me separate issues.
The real problem of the misuse of math in economics is that it has been used when complicated math was unnecessary or, so often, when the underlying economics is simply wrong. No amount of math can correct for false economics (or physics or whatever), but it can serve nicely to hide one’s errors.
There are in fact good reasons which we all know and some of which I have alluded to above why math has been shown to have limited uses in economics – the inherent complexity and unpredictability of human action, the inability to measure economic “variables,†the fact that economic actors are themselves always trying to come up with new “models†for explaining the economic reality around them, etc.
But the bottom line is that math has tended not to be too productive in economics, whatever the reasons. In truth, everyone, of all economic persuasions, knows this: how many econometric models predicted the economic events of the last year?
The real problem is that despite this universal knowledge of the failure of pseudo-math in economics, too many economists have a quasi-religious belief that the misuse of math will somehow make their bad economics better.
Given that everyone actually does know that mathematical economics has not done very well in explaining the real world, the real problem here is not intellectual but psychological and sociological.
Dave
Dave,
That was Beautiful, Dave.
But Free Will pertaining to humans might be what some would call an “unpredictable person”. Like an ex-boss expecting me to hide, miss-represent, and/or change the results of the data as he sees fit because he knows I need a job to pay my bills, but I tell him to go to hell and QUIT on the spot………
Now, that’s free will, granted if he knew I had a strong sense of integrity and morals he wouldn’t have done that, or even better, he wouldn’t have hired me. But he did. Likely being the arrogant individual he likely was, he probably thought he could change me due to circumstances and force the issue…. Guess Again…..
I’ll think of a few more examples.
Dave,
“But the bottom line is that math has tended not to be too productive in economics, whatever the reasons. In truth, everyone, of all economic persuasions, knows this: how many econometric models predicted the economic events of the last year?”
A little diddy, economic downturns like the one during the past year have occurred at every change in U.S. President…….
So, someone knows what’s going on!
ehmoran wrote:
> But Free Will pertaining to humans might be what some would call an “unpredictable person”. Like an ex-boss expecting me to hide, miss-represent, and/or change the results of the data as he sees fit because he knows I need a job to pay my bills, but I tell him to go to hell and QUIT on the spot………
Well, actually, I had a boss like that too, and I too quit, and, yeah, he was probably surprised that I had the integrity to do so.
But people who knew me well would not have been surprised. And I suspect the same is true for people who know you well.
For people of good character, their “freest†acts may actually be their most predictable acts, at least for those who know them well.
I’m not arguing against free will. I simply, really do not know what “free will†means, and I am doubtful that anyone else does either. I suspect our knowledge of the human mind and of consciousness (and, for that matter, our knowledge of physics) is still too primitive to really answer questions such as this.
The real point, on which I think that you and I agree, is that human beings are far, far too complicated for anyone to realistically believe that he can accurately, definitively predict human behavior in general.
We cannot, after all, even predict the weather out a month in advance, and we think we understand the physical laws underlying the weather quite well. To think we can accurately predict the behavior of a few hundred million (or a few billion) human beings, considering that humans are enormously more complicated than cold fronts, clouds, etc., is simply bizarre.
This is especially true since those human beings are constantly trying to come up with new ideas, new plans, etc. that no one has ever thought of before. In a sense, they are trying to outwit any analysis or prediction anyone might come up with.
You do not need to appeal to any complicated metaphysical analysis of free will, etc. The truth is that everyone who follows economic forecasts, anyone interested in the historical predictions of various futurists, etc. knows that attempts to predict the future have been laughably unsuccessful.
It just has not worked.
Will someone someday come up with a predictive approach that will work? Maybe… but personally, I really doubt it for reasons I have mentioned earlier.
The empirical case against the general predictability of human behavior is so enormous that I am content to rest on that empirical evidence.
Dave
Thanks Dave.
Well, only those that are arrogant didn’t have the skill to predict our next move: but was it “the arrogance of ignorance or the ignorance of arrogance”.
I do have somethings on human behavior.
I guess if you think about human behavior on a 2-dimensional level, greed and fear, human action could be predicted for the majority or the masses.
Have you noticed while watching a Rock concert when the audience joins in with the band, the audience sings in harmony, in tune with the song. We know that many couldn’t hold a note with a bucket and many have a perfect singing voice. The average human tone of the audience, however, is in TUNE.
I have found a natural phenomenon that models human behavior of greed or fear, although I assume it’s more like exuberance and depression…….
I think this thread has been very useful and revealing and warrants a few summary thoughts.
1. I was very surprised–but not at all unhappy–that my initial post, which was a general reply to Walter Block’s memo on Mises.org and mentioned neither GMU nor Pete Boettke stirred up such a hornet’s nest of controversy. My intention was to offer an alternative to the conventional wisdom of advising students regarding the best way to pursue a career in Austrian economics. But many carried on as if I had just spat out the consecrated communion host and invoked Satan in the midst of a packed Easter Mass in a Cathedral in medieval Europe. I must confess it is exhilarating to have one’s ideas on such a mundane matter taken so seriously.
2. One interesting revelation was that there seems to exist an Orwellian doublethink in GMU circles to the effect that the GMU program both is and is not a program dedicated fully to Austrian economics. As I noted early in the thread Pete stated in his podcast interview with Russ Roberts that “research at GMU is a stew of Menger, Boehm-Bawerk, Mises, Hayek, Rothbard, Kirzner, Lachmann, Alchian, Buchanan, Coase, Demsetz, and North.” Also, in this thread Pete himself referred to the program as “a broader program in philosophy of economics and political economy.” All well and good—GMU is an interestingly eclectic program in political economy with some Austrian influences. But then later in the thread Pete went on to say that GMU students may, if they want, “study Austrian economics in depth.” I fear that these are mutually contradictory positions, only one of which can be correct. Either the GMU program is a full-blown dedicated Austrian program or it is not. It may well be true that the GMU Ph.D. program integrates more elements of Austrian economics into its curriculum than any other program currently extant. But this is a far cry from an Austrian Ph.D. program as often advertised. So I am not against what GMU really is; I am against it claiming that it is something that it is not. I am arguing for is truth in advertising so that we all can more accurately advise our students on graduate schools. As John Lennon sang: “All I want is the truth. Just gimme some truth.”
3. In this vein, I look forward to the publication of the paper by Boettke, Coyne and Leeson on “Comparative Historical Political Economy,†which in Pete’s words “lays out the research program as we see fit [it?]– the way to take the Mises/Hayek/Kirzner paradigm in economics into the literature on political economy.†This will finally reveal the core research program of Masonomics in black and white. This will be an extremely useful document for those such as myself who advising Austrian-oriented students of the alternative grad programs available to them. It will also lead to more substantive and academic discussions of what constitutes Masonomics.
4. The one new argument that was brought up and merits serious consideration concerns the fact that students who enroll in a standard mainstream program do so without the benefit of an Austrian “mentor.” By mentor, as Pete and Walter use the term, is meant an intellectual (and material) caregiver who, cash in hand, actively recruits a student, takes him under his wing, carefully molds his research program to reflect contemporary trends and, above all else, assists him in finding a job. But this New Age concept of mentor as glorified sugar daddy/job counselor sharply conflicts with the classic understanding of a mentor as a master of his discipline who is eagerly sought out by the aspiring student. In the classic model the student MAY after a time be accepted by the master as his protégé if he shows a spark of creativity; if not he is cast aside as a nuisance. The mentor offers nothing to the student but the opportunity to observe and familiarize himself in an intimate setting with the mentor’s thought and work. He is not often a warm and fuzzy drinking buddy but a stern and aloof, and even curmudgeonly, taskmaster. Thus Boehm-Bawerk and Wieser sought out Menger; Mises sought out Boehm-Bawerk (who was always lukewarm at best toward Mises’s work); Rothbard sought out Mises and Dorfmann (his dissertation adviser at Columbia); Huelsmann sought out Hoppe and so on. The classic mentor-protégé model is intended primarily to foster protégés who are ruggedly independent thinkers and are expected to go beyond and even contradict the work of the mentor–after fully absorbing his body of thought. New Age mentorship is designed primarily to procure careers for as many students as possible, some of whom do and some of whom do not become independent thinkers and contribute to the discipline. Whichever model one prefers, the point is that the classic model can and does exist in the absence of the formal professor-student relationship in a common academic institution. (For those who are interested, a very good recent film depicting the classic mentor-student relationship is “Copying Beethoven.â€
← Previous Comments
Comments on this entry are closed.