Austrian Castles In The Air

From VIENNA AND CHICAGO: FRIENDS OR FOES? Tale of Two Schools of Free-Market Economics, excerpted here. After discussing the many areas of agreement between the Austrian and Chicago schools, the section on disagreements begins:

First, methodology. The Austrians, following the writings of Ludwig von Mises, favor a deductive, subjective, qualitative, and market-process approach to economic analysis. The Chicagoans, following the works of Milton Friedman, prefer historical, quantitative, and equilibrating analysis. Friedman and his followers demand empirical testing of theories and, if the results contradict the theory, the theory is rejected or reformed. Mises denies this historical approach in favor of extreme apriorism. According to Mises as well as his disciples Murray Rothbard and Israel Kirzner, economics should be built upon self-evident axioms, and history (empirical data) cannot prove or disprove any theory, only illustrate it, and even then with some suspicion.

I don't know if this characterization is true, as I don't know a lot about the Austrian school. But the discipline described in the paragraph above is not a science, in the sense that mathematics is not a science. I happen to love math, and the elegant structures therein do describe a world, albeit an ideal one, existing in the imagination. And sometimes elements of that world and our real world are in concordance, and the airy apriori castles become useful in understanding the messy empirical world.

But it remains true that mathematics is not a science, as its theories are not empirically falsifiable. If we think that some mathematical object maps to a real one, and the latter acts in a way which contradicts our axiomatically-established behavior, we abandon the map, not the math. In order to make math useful, we must apply it in scientific contexts like chemistry, physics, or engineering, where equations are selected, tested, and rejected based on accordance with reality.

If Austrian economics is also not falsifiable, then it too is an exercise in cloud castles. It may well be useful if applied by the meta-economist, who selects, tests, and rejects Austrian theories based on accordance with reality. But by definition, that meta-economist [*] is not an Austrian, nor is an Austrian a scientist.

There is nothing wrong with not being a scientist - I quite enjoyed my undergrad math major. But you cannot effectively apply such knowledge to the messy real world without embracing science and diving into the empirical. Without testing, without validation, without feedback, you are merely building castles in the air. And you have as much chance of accurately describing the imensely complex feedback structure of the economy as someone who draws up, from scratch, a set of blueprints for a car without ever testing any module or component does of having it start.

[*] So I met a economist the other day....

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