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From the usual source:

The Austrian praxeological method is based on the heavy use of logical deduction from what they assert to be undeniable, self-evident axioms or irrefutable facts about human existence. The primary axiom from which Austrian economists deduce further certain conclusions is the action axiom, which holds that humans take conscious action toward chosen goals.[43] Austrian economists focus on goal-directed action and say that it is undeniable because in order to deny action, one would have to employ action in the act of denial.

Methodology is the one area where Austrian economists differ most significantly from other schools of economic thought. Mainstream schools such as the neoclassical economists, the Chicago school of economics, the Keynesians and New Keynesians, adopt "empirical" mathematical and statistical methods, and focus on induction to construct and test theories--while Austrian economists reject this approach in favor of deduction and logically deduced inferences. According to Austrian economists, deduction is preferred, since if performed correctly, it leads to certain conclusions and inferences that must be true if the underlying assumptions are accurate. However Austrian economist Robert Murphy has stated that those using Austrian theories can still err in their interpretations of history, even if based on a theory formulated by deduction.[44] Caplan makes a similar point about quantitative significance, explaining that a theory, such as one which logically relates minimum wage and unemployment, tells nothing of the approximate quantity of change in unemployment one can expect upon minimum wage increases.

Austrian economists hold that induction does not assure certainty like deduction, as real world economic data are inherently ambiguous and subject to a multitude of influences which cannot be separated or quantified, one cause or correlation from another. Austrians therefore claim that mainstream economics has no way of verifying cause and effect in real work economic events, since economic data which can be correlated to multiple potential chains of causation.[45] Mainstream economists counter that conclusions that can be reached by pure logical deduction are limited and weak.[46]

Critics of the Austrian school contend that by rejecting mathematics and econometrics, it has failed to contribute significantly to modern economics. Additionally, they contend that its methods currently consist of post-hoc analysis and do not generate testable implications; therefore, they fail the test of falsifiability as prescribed by the scientific method.[10][47] Austrian economists counter that testability in economics is virtually impossible since it relies on human actors who cannot be placed in a lab setting without altering their would-be actions.

So are they assuming inflation is an inevitable outcome of conscious economic choice? I.e. thinking causes inflation?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Jan 31st, 2011 at 01:43:01 PM EST
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