Friday, November 30, 2012

Schiff, Austrians, got everything wrong. MMT got everything right!


JK said...

"If man were meant to fly, then God would have given him wings!" :)

Anonymous said...

I used to be a fan of the Austrians till I discovered:

1) They say the banking system is unjust but oppose restitution for the population.

2) They claim to be libertarian but are in favor of a government-backed gold standard.

3) They claim deflation is necessary to "purge the malinvestments" but enough deflation would purge ANY investment.

4) They have been wrong in their predictions of hyperinflation; they apparently don't understand banking.

5) They are pro usury and advocate money forms (e.g. precious metals) that require it.

Tom Hickey said...

Austrian economics is correct in assuming that economics is based on human action. Austrian economics is incorrect in its dogmatic, unscientific, teleological approach to human action.

Same is true of neoclassical economics wrt to its view of utility. Keynesianism is better with its assumption of uncertainty and animal sprits, but that view is still primitive and under-developed.

Karl Marx correctly understood that understanding of individuals in society is based on ontological, epistemological and ethical views and that there is no overarching philosophical system. He proposed one that he considered scientific in terms of his times, but history has not borne that out. Marx also understood that economics is subset of social and political philosophy, from which the social sciences have spun off. Since Marx's time there have been great advances in the life sciences and social sciences, rendering many of his views that are characteristic of his era outdated.

However, Marx's basic approach was correct, in that he realize that human knowledge is an integrated whole, and it is not possible to make assumptions about human action in abstraction from the whole of knowledge, however imperfect it may be at any point of time.

The approach to economics in general has not been based on such an understanding, and it has also not kept pace with the development of knowledge as a whole. The result is truly "the dismal science." In fact, I would say "the abysmal science."

People approaching economics from other fields, like some here including myself are left scratching their heads, muttering WTF?

Anonymous said...

Actually Tom, the same goes for psychology, think for example the nature-nurture debates and how many psychologists think they can test different effects independently rather than believing like the nurture side does that it's a combination of nature and the environment at any given moment.

Tom Hickey said...

Right. When philosophers looks at such, they seek to understand the hidden assumption about ontology, epistemology, ethics, language, etc.that are underlying. Any developed theory needs to make these assumptions explicit.

For example, materialist psychology that is reductionist, like Skinnerian behaviorism, assumes that subjectivity (mind, consciousness) does not exist because it cannot be explained through the methodology. That is just begging the question by assuming the conclusion in claiming that animals including humans are "nothing but" stimulus-response mechanisms. That's just avoidance of a fundamental issue instead of admitting that the model doesn't deal with that. to be sure, animals are stimulus-response mechanisms in some respects but that is not proof of all respects.

Robert said...

Love this site! You're one of the economists who has helped with my re-education.

MBA, University if Chicago Booth School

Unknown said...


Vincent Cate said...

I am an Austrian who understands MMT. I can also use the equation of exchange with different definitions of the money supply. I have a hyperinflation simulation using M2 definition. But I do it with a sort of MMT view where I imagine all money from bond sales or taxes is burned and all money spent or used for paying off bonds is printed. I think you can learn about hyperinflation from this model/simulation.