Monday, October 24, 2011

Is [Austrian] Economics a Real Science?

"The economics of the Austrian School has a very firm scientific methodology as a foundation. "

I hate to nit-pick such an otherwise excellent article, but this is , unfortunately, an extremely misleading statement as read.

There is nothing in the Austrian methodology [nor in any other school of economics for that matter], that can bear any resemblance to the methodology of the physical sciences [i.e physics chemistry etc.], which use the only truly scientific methodologies that I am aware of.

Economics is a social science, not a physical science like, for example, physics or chemistry.

All Austrian economic insights are supposed to be derived from the consistent application, to preceding economic events, of logic [i.e. ratiocination and deductive reasoning], in retrospect, after the fact; and that post-event reasoning always starts from the  assumption that all individuals are both unique, and have unique [and constantly changing/evolving] value systems.

Given the fact that all individuals are unique, what Von Mises himself called " methodological individualism" [ and the _true_ bedrock of all Austrian theory, and the starting assumption from which every other Austrian theory always proceeds], in no way can Austrian Economic theory therefor be reliably used to predict future economic events, such as the collapse of the $ US or Euro, or the collapse of a nation/state,or any other economic event, in any manner comparable to what can be quite reliably and accurately predicted in the physical sciences, where molecules etc. can be repeatedly experimented on in completely controlled laboratory environments, in order to reach conclusions about the way those molecules will behave in the future when subjected to the exact same conditions.

What About the Austrian Business Cycle Theory, Isn't That Predictive?

Although , as I would be the first to admit, there definitely is a business cycle, as the Austrians have repeatedly demonstrated, given the realities of human action, unlike the physical sciences, there is simply no way to know in advance at what stage of the business cycle we ever really are, or for how long a boom, a recession or a depression might conceivably last. There are simply too many known and unknown human action variables that can never be reliably measured [even if known], let alone accurately predicted.

At best, using Austrian theory at any point in a recession, or in a boom period, we can make educated guesses about what caused the present state, what might end it, and what might be next, but since all knowledge is finite, it is impossible to know with absolute certainty what is just over the horizon. It could be a depression, it could be a recovery, it could be something else- there is no way to know in advance using any supposedly "scientific",  "predictive" properties of economic theory.

Summary: Austrian Business Cycle Theory can be very useful in trying to determine, after the fact, what might have caused an economic climate/event/scenario, but it has, no differently from any other school of economics , absolutely no use as a predictive tool that can accurately forecast future economic events, climates or scenarios.

As Always,The Economic Future Remains Unknown, and Unknowable

The US nation state might collapse next week, or it could stagger on for another 50-100 years , nobody knows for sure - the exact same thing can be said about its fiat currency [or that of any other nation]; the $US could fold soon, or it might recover and hang around for a lot longer - no one can be certain, despite what many claim _must_ happen, based on their understanding of Austrian theory,[ which I would suggest, is a simple misunderstanding].

Your [Free!] Financial Safety Services Summary:

SAVERS BEWARE! Do not believe any "investment professional" who attempts to "blind you with science" with his/her assumptions and predictions about the future performance of any investment he/she sells and whose results have been derived from graphics [charts etc.], or who claims that economics , whether it be Classical, Keynesian, Austrian, or something else entirely, is based on scientific principle , and that therefor, his/her predictions about the future are reliable .

Instead , start to construct a long term savings plan for your savings that is mostly immune to the unpredictable ups and downs of booms, recessions, depressions etc.

Regards, onebornfree.

**********************************************

FINANCIAL SAFETY SERVICES DISCLAIMER:

Financial Safety Services is NOT an investment advisory service. Financial Safety Services is an educational service that teaches the interested individual non-original [i.e. invented by others far more intelligent than myself], time-tested safe methods/principles that might be successfully used by the individual for relatively low risk speculations in various financial markets.

ACCURACY OF INFORMATION : Financial Safety Services MAKES NO CLAIMS AS TO THE ACCURACY OF ANY INFORMATION EITHER GIVEN AT THIS BLOG SITE, OR IN PERSON TO PAYING CLIENTS. All information given/sold, must be understood to have been acted on AT THE INDIVIDUALS OWN RISK .

********************************************************************

More About Financial Safety Services

[Free phone consultations via "Skype". To set a time/date email: onebornfreeatyahoodotcom ]
Financial Safety Services is a private , mostly off-line, international, person to person consulting service that attempts to show its real-time [i.e. non-internet derived] clients how to speculate safely with money that they can afford to lose. Money that the client cannot afford to lose should never be risked in these speculations

For more than 20 years, nearly all of Financial Safety Services clients to date have been found via direct [i.e off-line, in-person] referral from previously satisfied clients only.

No attempts are made to procure clientele via the selling of the sporadic, deliberately incomplete online information posted at this site. All valuable information is sold to clients, via e-mail, or preferably in person, on a "need to know" customized basis, depending on their specific speculative wants/needs.

Therefor any/all posts at this site are for the reference and possible benefit of pre-existing , real-world, paying clients only as part of my services [and to perhaps help emphasize a particular point I make to them in private], and never for the benefit of the general reading public and casual internet reader at large.

Internet posts arer not made on a regular schedule in order to build an on-line audience; only when I feel that so doing is beneficial to my actual existing clientele.

I have no interest in gaining clients first hand from any posts made either here or elsewhere [if it happens, it happens!] - as I previously stated, to date [20 years+], nearly all of my previous clients have come to me via direct, in-person referral from other satisfied clients- that is, [1]an existing client personally recommends my services to a close friend, [2] the friend contacts me, [3]we discuss their wants/needs, [4] I make a decision as to whether or not I can really help them, [5] We come to a financial agreement- or not :-) .

None- Client Questions?

Should a casual reader/none client have a serious question about an assertion I make on this site, they must write to me at: onebornfreeatyahoodotcom and I will do my best to answer their question. Their first question will usually be answered for free. After that, fees may apply.

Current Client Questions.

All existing, paying client questions are of course, answered for free [usually via private e-mail]- it is part of the service!
onebornfreeatyahoodotcom


Regards, onebornfree 

2 comments:

  1. I find math the only true fact. Physics and chemistry is not 100% proven to be true! Mathematics is! ..just elaborate on that a little O:)

    ReplyDelete
  2. Thank you for reading and taking the time to comment. However your comment is a little too vague for me to really say much about, except yes, you are right, scientific theories in both physics and chemistry do change/evolve/get disproved over time. Regardless, mathematics is used to prove/ disprove those theories even as they change/evolve.

    My main point was only that the [laboratory] scientific methodology itself used so successfully in the sciences of physics and chemistry is wholly unsuited for the "science" of economics. Probably the best exposition of this is from Von Mises , in his essay "The Ultimate Foundation of Economic Science".

    However, despite Von Mises and a few others, practically the entire modern economics profession is engaged in an ongoing attempt to masquerade as a "serious" science [just like those "real" scientists!] as it pretends to be able to utilize the exact same methodology as those physical sciences; it then "proves" its "scientifically derived" conclusions via mathematical formulas to further extend the mimicry, and, presumably,[and falsely] lend those "scientifically derived" theories more credibility and believability, which, for most layman, is exactly what they succeed in doing. It's called "blinding 'em with science". Regards, onebornfree.

    P.S Of course economics is a serious science, but as Von Mises pointed out, it is a serious social science with its own separate methodology, not a physical science, in case that was not clear to anyone.

    ReplyDelete