Methodology: Austrian School vs. Neoclassical/Chicago School

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    I’m in a debate/formal discussion with a former-Austrian now turned Neoclassical (Lucas Westman) who blogs at the Analytical Economist.

    Here is my argument –

    Here is Westman’s

    I’ve used a lot of what I’ve learned from Mises’ Human Action, Rothbard’s writings on methodology from Economic Controversies, arguments & lectures from Roderick Long and Hans Hermann Hoppe’s at Mises University, exerps from the first 3 modules from LibertyClassroom’s AE Step-by-Step.

    I would sincerely appreciate any feedback on this especially given the fact methodology has gotten a lot of attention with the Murphy vs. Friedman debate as well as the whole brouhaha happening over at Bleeding Heart Libertarian with Jason Brennan with confusing Rational/Purposeful Behavior/Praxeology with so-called Behavioral Economics.


    I think that you and Westman are taking past each other. Misesians and Neoclassicals use the phrase “economic theory” to refer to two different bodies of knowledge. But, Westman seems to be assuming that Misesians are attempting to discover the same body of knowledge that the Neoclassical economists are attempting to discover, namely, underlying relationships that can be tested empirically by their implications. Instead, Misesians are trying to discover what is universally true about human action. Recognizing this helps clarify the issues at stake in the debate.


    Thank you for taking the time to respond and weigh in on our discussion.

    When both Luke Westman and I agreed to have a civil discussion, we agreed the context would be the methodology for “doing economics” specifically to investivate, explain, & elaborate the laws of human action.

    In my piece, I tried to explain the perspective the Austrians (and those in the methodological dualist school) approach to “economics” or what Mises coined “Catallactics” which involves the area of interpersonal exchange.

    Naturally, I expected Luke to claim that “doing economics” is an empirical science which uses the empricial scientific method with forming hypothetical propositions which needed to be either falsified or confirmed by some type of testing of data, etc.

    So, I agree with you that he and I do in fact disagree with each other on what constitutes “economic theory” and what constitutes “economic history” or “economic forecasting”. I plan to issue a reply on this fundamental disagreement/confusion on what is or what is not “economics” proper.


    As far as what I presented as the Austrian (dualist) methodology argument, do you think I present a good case that accurately summarizes the major points?


    What you presented was fine. In a back-and-forth discussion, it helps to see what you and your opponent agree upon in order to focus on key points of difference. If Westman agrees with you that Misesian “economic theory” refers to a different aspect of knowledge about human action from that of neoclassical “economic theory,” then you can probe elsewhere. And then you can find out if he whether he thinks that the abstract knowledge gained in Misesian economic theory, what F.A. Hayek called the logic of action, helps us understand actual real human action. The next step might be to pose that the Misesian approach to understanding events that occur in the world is “economic history” whereas the neoclassical approach is empirically testing models. In other words, the abstract theory of Misesians is used to explain the empirical evidence of events in the world by using judgment to weigh the importance of the various causal factors that produce the evidence. The neoclassical abstract model is used to explain empirical evidence by empirically testing implications drawn from it. Use an example, like the Great Depression, to illustrate. After that you might point out the major criticisms Misesians make of the modelling technique in discovering real economic laws, i.e., universally true cause and effect relationship in human action. (Of course, you’ve already done this in your previous post.) And finally you might concede that empirical hypothesis testing may be able to establish historically contingent correlations. Such knowledge is not not vacuous, but its not everything we can know about human action. To get at this other knowledge we must proceed in a different way.


    Thanks Dr. Herbener for the advice on how to best proceed and be productive in this type of back/forth.

    I agree that his view is pretty typical for neoclassicals to hold that the body of knowledge they call “economics” can only be “if/then” propositions which are contingent and non-necessary. Austrians disagree with this.

    So, I’ll be sure to point out we DO disagree and hold different positions on the specific dichotomoy between theory (praxeology) and history/forecasting (thymology & entrepreneurship)

    Much appreciated!

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