How long is “long run”?
The U.S., e.g., hasn’t had equal exports and imports since 1975; the combined deficit is now many trillions of dollars. How do you think this has been financed, and what are the effects of that finance?
You certainly wouldn’t like the political repercussions.
I was aware of the different definitions of liberal in the US and Europe. It’s hilarious that we have both adopted this silly insult (ultra-liberal) for amusement purposes. I don’t know about you, but I could apply it to myself in both continents.
Well there is mainstream economics, crank economics and … fringe economics. Marxism and the Austrian school are on the fringe because there are professors who publish papers in those traditions that have some of the trappings of real scholarship. I understand George Mason University has a number of Austrian economists running around. Cranks exist mostly outside of the university: they range from supply side economics (there are no universities that push that stuff) to the Timecube guy. Reference. (Poor scholarship within the university is referred to as quackery.)
Austrian methodology or praxeology involves the idea that hypothesis testing is unnecessary because the axioms of economics are known to be true a priori. Hypothesis testing isn’t useful according to this view. They generally do not discuss econometrics because their rejection of the tools of scientific investigation occurs at an earlier level as it were.
There are a lot of mainstream economists with pretty conservative views, for example the real business cycle guys who think that recessions are driven by a change in the taste for working on the part of laborers as well as changes in technology. They are part of mainstream economics, as they don’t reject the scientific method.
No, those were procedural votes to end debate. No vote has been taken in the Senate on the underlying bill.
You really aren’t up in how the Senate works these days, are you? It’s not like this is a new thing.
I am up on how the Senate works “these days”; it doesn’t mean it has to or that it should work that way.
The Iran Nuclear Agreement Review Act of 2015, passed by a vote of 98-1 in the Senate, 400-25 in the House, and signed by the President, specifically called for a vote, one way or the other, on approval or disapproval.
A bipartisan majority of the Senate disapproves of the Agreement, yet 42 Democratic Senators have repeatedly filibustered having the vote provided by the Act. So that the President doesn’t have to exercise his veto. Nuts to that.
Would Milton Friedman fringe? Seems to me he rose to popularity, and converted thousands to a free market approach by explaining real life in the same way an Austrian economist would. What would an economics professor say if you turned in a paper and you concluded empirically that rent controls did not create shortages? He’d tell you that you probably did something wrong. This is based on a priori reasoning, not his memorization of the literature. It’s not so cut and dry as you make it appear, although I appreciate to the attempt to understand an alternative point of view.
Milton Friedman is mainstream. Actually he is ultra-mainstream in a way as he pushed logical positivism pretty hard in his 1953 paper, the Methodology of Positive Economics. It’s peculiar in its own way, but it provides a full throated embrace of the scientific method, which Austrian methodology rejects.
In terms of applications, A Monetary History of the United States puts monetary policy in a central position in driving US economic fluctuations. It blames the Federal Reserve for the Great Depression, because it maintains that they did not loosen policy enough. The Fed did loosen policy during that era and they felt they were constrained by the gold standard. Friedman thinks they could have gone further: his argument isn’t entirely persuasive.
At any rate, Austrians thought the Fed was too loose during the Great Depression, IIRC. Not too tight as Friedman and most mainstream economists maintain. You can read the Monetary History as an extended if oblique smackdown of the Austrian school. Milton Friedman was anything but a monetary permahawk. It is possible to view Scott Sumner as one of his intellectual heirs.
If we’re a wealthy country with a lot of foreign competition for our manufactured goods, I see no reason why we shouldn’t use our capital as leverage to garner business from foreign companies.
Though I am near-certain (as a libertarian-cynic) that this bank has all sorts of back-door cronyism at play.
In the end, it seems to me a net plus. So long as these are loans being granted to foreign companies and not free cash.
I understand all that. Pardon me, but it appears you didn’t get what I was saying. Mainstream economists use a priori reasoning all of the time. Milton Friedman’s most popular writings, and most persuasive, were all a priori. He was an excellent critic of rent controls not because of his positivism, but because he gave a priori arguments.
There are Austrian economists who reject praxeology. You present it as positivist vs. praxeology, but it’s more of a spectrum in practice.
I was going to amplify that last point, so I’m glad you brought it up. I just checked to be sure and unsurprisingly George Mason has an econometrics requirement like everyone else. I’m guessing that there are more than a few Austrians who have submitted mainstream work to mainstream journals: they reserve their praxeology for Austrian journals. But with respect this stuff is fringy and I’m really not that familiar with it.
First he’d ask if there’s a bug in your code. Then if he was satisfied there wasn’t, he would ask if there was an artifact in the data: maybe your code is clean but you are not picking up what you think you are picking up. These are standard empirical approaches.
I disagree though that a pro-rent control paper would be rejected out of hand. I can point to the profession’s struggles with minimum wage policy. Card and Krueger reported that to the surprise of most an increase in the minimum wage didn’t lead to higher unemployment and they had a natural experiment to back it up. They studied bordering counties in New Jersey and Pennsylvania where one state had raised the minimum wage while the other had kept it constant. The result wasn’t summarily dismissed, though there was some back and forth with the empirics. (Neumark and Wascher got other results, Krueger and Card revisited the issue a couple of years later.)
I’m honestly not sure where the issue settled out, but some thought that efficiency wage theory was driving the results. What economists didn’t do was automatically reject these empirical results because they conflicted with neoclassical economic theory. That’s just unscientific.
I personally take a very dim view of pure praxeology, but I don’t reject Austrian economics on those grounds since I’m guessing some level of common sense, professionalism and heck careerism wins out in the end. I’m also not overwhelmingly agitated by this issue: I mean sheesh Mises developed these methodologies in the freaking 1940s, before the widespread use of mainframe computers in economics, never mind PCs. To be sure lots of mainstreamers thought Mises was nuts, but then again I understand a lot of Austrians were pretty lukewarm as well. That said, I confess to empirical leanings or biases, so I don’t hesitate to call out arguments that I consider poorly grounded. To some extent this is a matter of personal taste.
I think some skepticism is warranted: it’s pretty easy to imagine this program turning into a boondoggle. My take though is that if it feeds money to the treasury every year and the implicit subsidies are regularly evaluated and manageable (and at $200 million/yr they are) then I’ll give this cronyism, if that’s what it is, a pass. I’ll admit I’d have some sympathy for research backed reform proposals though. I’m guessing that after crushing a few thousand American jobs Hensarling will cave and we’ll return to the status quo. Sort of the worst of both worlds, given that opportunities for reform tend to be fleeting.