{"id":21497,"date":"2016-08-16T13:16:31","date_gmt":"2016-08-16T18:16:31","guid":{"rendered":"http:\/\/olduvai.ca\/?p=21497"},"modified":"2016-08-16T13:17:05","modified_gmt":"2016-08-16T18:17:05","slug":"21497","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=21497","title":{"rendered":"5 Reasons Why Austrian Economics Is Better than the Mainstream"},"content":{"rendered":"

5 Reasons Why Austrian Economics Is Better than the Mainstream<\/a><\/h3>\n
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Noah Smith has acknowledged the failings of mainstream macroeconomics<\/a>, but he says that none of the \u201coutside ideas\u201d offer a better replacement. He failed to mention the Austrian school, but we can still show how the Austrian tradition parries his criticisms with ease.<\/p>\n

1. Quantitative Models Totally Miss the Nature of Human Action<\/strong><\/h4>\n

Smith dismisses all outside approaches that do not produce quantitative forecasts, even though the best, newest, and high-powered quantitative macroeconomic models have failed recently.<\/p>\n

The quantitative approach, however, totally misses the nature of human action, the fundamental starting point for economics. All economics boils down to individuals making choices, the outcome of which is dependent on individuals\u2019 preferences.<\/p>\n

Unfortunately, you can\u2019t even do basic math with people\u2019s preferences for two reasons: preferences are subjective, and preferences are ordinal. You can\u2019t measure or compare something you can\u2019t observe, and you can\u2019t do math with ordinal figures. Adding 2nd\u00a0place to 3rd\u00a0place doesn\u2019t get you 5th\u00a0place or 1st\u00a0place. It gets you nowhere, which is exactly where mainstream macro is today.<\/p>\n

2. The Micro\/Macro Separation is Baseless<\/strong><\/h4>\n

Smith dedicated his article to problems with macro theories, but Austrians understand that there is no meaningful distinction between micro- and macroeconomics. The only difference is one of scale and focus, but the fundamentals of economics are the same no matter if you are looking at individual consumers and firms, or the effects of credit expansion and inflation.<\/p>\n

Mainstream economists find their way into smaller and smaller categories. Now, there is \u201chealth economics\u201d and \u201cdevelopment economics\u201d and \u201cenergy economics.\u201d\u00a0There is also a major divide between those who do macro and everybody else, to the point that neither side really understands what the other is doing.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

5 Reasons Why Austrian Economics Is Better than the Mainstream Noah Smith has acknowledged the failings of mainstream macroeconomics, but he says that none of the \u201coutside ideas\u201d offer a better replacement. He failed to mention the Austrian school, but we can still show how the Austrian tradition parries his criticisms with ease. 1. Quantitative […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[2125,5040,366,14204,966,6058],"class_list":["post-21497","post","type-post","status-publish","format-standard","hentry","category-economics","tag-austrian-economics","tag-business-cycles","tag-global-economy","tag-jonathan-newman","tag-ludwig-von-mises","tag-mises"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21497","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=21497"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21497\/revisions"}],"predecessor-version":[{"id":21499,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21497\/revisions\/21499"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=21497"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=21497"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=21497"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}