[johnhenry07]

I should first say that I have never received any mainstream economic training, so my insights into modern economic analysis has been primarily through Austrian criticisms. My general question is this: is modern economic analysis more inductive or deductive? From what I’ve gathered Austrians seem to criticize mainstream methodology on both fronts. They criticize inductive methods for not having adequate theory to accurately interpret the data, but also (seemingly) deductive methods for being too mathematical in abstracting away from reality through over-aggregation. Any comments on this topic would be great, as would any suggested reading material (I’ve read the material you suggested in your lecture), even perhaps an intro of mainstream methods might be helpful. Thanks!

[porphyrogenitus]

Austrians critique it on both fronts because while it claims to be inductive, it is often deductive – that is, they sneak in a proiri premises of their own while claiming to have none – and the Austrian critique isn’t just a tu quoque but that these premises are wrongheaded.

Note that almost all Austrian Economists with a PhD got theirs in “mainstream” economics, so they do know both arguments. Professor Herbner can certainly add more here but outside of LC, Robert “Bob” Murphy has given the best compare-and-contrast I’ve seen – he really breaks down the differences in a clear way. But this one by Walter Block is pretty decent too.

Edit: I also really like the two Israel Kirzner lectures that start with this one, which go into the whole background of the difference and the development, the intellectual history of the whole divergence.

[johnhenry07]

hey, thanks for the response. I am going to give those lectures a listen. I appreciate it.

[jmherbener]

Austrians hold that economic laws are universal, conceptual principles of human action. They exist as part of the cause and effect nature of the world. They can be discovered through deduction because we have basic knowledge of the nature of human action from introspection. From these beginning premises, we can deduce economic laws. Because we lack introspective knowledge of the nature and working of physical objects we cannot discover the laws of cause and effect in the natural world by praxeology. Forming abstract models which generate testable hypotheses seems to work in discovering laws of nature.

Austrians have nothing against deduction or induction when used in their proper realms. If neoclassicals think they can discover economic laws by applying the method of the natural sciences, Austrians say such laws can be discovered more definitively by praxeology. The analogy is that the Pythagorean Theorem can be proven by deduction from basic axioms, not by drawing and measuring the sides of all right triangles. If neoclassicals think they can discover economic regularities by applying the method of the natural sciences, Austrian say that there are no quantitative constants in human action. Any regularity in the past can change in the future and thus, past regularities cannot be the sole basis for making predictions.

Take a look at Hans Hoppe on method:

http://library.mises.org/books/Hans-Hermann%20Hoppe/Economic%20Science%20and%20the%20Austrian%20Method.pdf

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