The Shadow Science of Economics - The Derb on the Austrian School

4 posts

Niccolo and Donkey
The Shadow Science of Economics

Taki's Magazine

John Derbyshire

June 2, 2011

I spent the Memorial Day weekend as a guest of Professor Hans-Hermann Hoppe’s Property and Freedom Society at their annual conference in Bodrum, Turkey. It was a wonderfully relaxing break, for which I am very much obliged to the good professor, his charming wife, and their co-organizers. I gave a talk about China and got to see some of Turkey (a country that was new to me), and I listened to some interesting and instructive lectures.

The PFS exists to help promote the economic and political libertarianism of Ludwig von Mises and Murray Rothbard . I was in Bodrum because Prof. Hoppe was kind enough to invite me, not because I am a particularly dogmatic disciple of those gents. I approve of them and their doctrines in a vague, general sort of way, as I approve of anything much to the right of the statist elephantiasis dominant in the modern West and which looks to be sailing into some great crisis in the near future.

On the other hand I have issues with libertarianism—with free trade , for instance, and with the open-borders dogma that too many libertarians (though not all the ones at Bodrum, perhaps not even a majority) cling to with religious zeal.

If I had to be marooned on a desert island with an economist, I’d much prefer it to be someone from the Austrian School, merely for their devotion to liberty; but like other economists, the Austrians seem to be uninterested in the crooked-timber aspect of human nature. (I might exempt some behavioral economists from that observation, but as Nikolay Gertchev demonstrated in his talk at Bodrum, the Austrians look askance at behavioral economics. The title of Nikolay’s forceful address was “Psychology Ain’t Economics.”)

I have never read anything by an economist—though I confess I have read far too little in the field—or heard any lecture by an economist that did not leave me thinking, “If this guy’s fundamental assumptions about human nature were true, human history would have been utterly different.”

Still, I suppose someone has to do economics, and the Austrians do it closer to my own political tastes than any others. There was even something calming about listening to their airy abstractions there at Bodrum. I came away feeling about the Austrian school somewhat the same way I feel about the Anglican Church : unable to assent wholeheartedly to the doctrines, but sympathetic at some deep level and wishing them well.

Back home in New York, I checked through the mail that had arrived in my absence. It included my subscription copy of The Economist . Page 87, “ The Future of Mobility ”:
Really? According to a number of different different studies , that is not true. So what is the non-economist to think? Perhaps the same thing he finds himself thinking when surveying the list of recent Nobel Prize winners in economics and noticing that for every large opinion that has won a Nobel, the contrary opinion has also won one. Real sciences don’t work like that.
And then (going back to The Economist ):
Oh. The Economist article (it is actually a book review) is illustrated with a photograph of some young black African men, presumably the leading edge of that “next big wave.”

I suppose the Economist reviewer would be shocked speechless to know that some large majority of Europeans and Americans, presented with that picture, imagine not fresh, keen young workers coming to help ease their labor shortage. Instead, in their wicked human hearts, they see sowers of discord , destroyers of civil peace , inmates of penitentiaries , carriers of disease , agents of social and economic entropy , and consumers of welfare .

That’s economics for you—and economists, and The Economist . The world of their imagination is a cool, well-lit world in which thoughtful human beings, responding to rational incentives, move along paths defined by elegant mathematical formulas. It is a shadow world, a dream of perfection. It resembles, but only as shadows resemble objects, the grimy, gamy, half-mad world of actual humanity—the substance of human affairs.

The human beings who populate the economist’s—certainly The Economist ’s—imagination are mere tokens. They have no allegiance to nation, faith, family, or the huge old inbred extended families we call races . Still less do they exhibit features so evident to those of us who live outside great universities: pride, stubbornness, folly, misplaced loyalty, and the occasional irresistible urge to cut off one’s nose to spite one’s face. They are not biological entities at all.

Economics can have a future, if the human race does. It will not be a container of large truths, though, unless it somehow incorporates facts about human nature that the earthier human sciences—genetics, paleoanthropology, evolutionary biology, neurophysiology, and psychometrics—are only beginning to wrestle into submission.

Until it is willing to do this, and actually can do it, economics will be a discipline of shadows, not substances. Worse yet, it will continue to be a plaything of ideologues , as it has so disastrously been in the past . Human nature, and a true understanding thereof, precedes everything in the human world.
Are you expected to be taken seriously on the topic?

This is just an abuse of readership.

Anyways, some substance to the complaints would be nice.

I read the article. Waste of time.

Yeah, humans may act irrational, yeah in fact, in some areas and during some periods indeed they acted at most irrational, but modern man, despite certain instances of irrationality tends to exhibit a certain model of behaviour: a) to strive for economic well-being b) to emulate those he sees achieving economic well-being.

Austrians build on that.

Right. So I don't understand why he clumps all kinds of economics together into some nonsense about "human nature doesn't follow formulas"

He admits ignorance and the pontificates.