Some Austrians have no methodological objection to empirical work.
Mainstream economists have a dogmatic, narrow view of what counts as "empirical evidence."
Some Austrians have done good empirical work.
Unfortunately, Horwitz combines these sensible points with a serious
case of what my colleague Daniel Klein calls "myside bias." Horwitz
is right to point out neglected Austrian achievements, but trivializes
major Austrian shortcomings. He is right to point out mainstream
economists' methodological blinders, but neglects two decades of the
mainstream's growing methodological pluralism. He is right to
emphasize the importance of actors' beliefs, but neglects behavioral
economists' tremendous progress in empirically studying actors' beliefs.
Last, Horwitz doesn't even consider an awkward fact about recent
Austrian empirical work: There's nothing distinctively "Austrian" about
it. Austrians like Peter Leeson and Chris Coyne are achieving
mainstream academic success by making claims mainstream economists can
accept without further ado. (notes removed)
An alternate title of my piece could have been, "Josh Barro's got a point."
[Horwitz claims] that [c]ritics like Josh Barro are mistakenly relying on "the pronouncements
of various advocates of Austrian economics on blogs and Internet
forums, rather than engaging with the professional research being
published in the peer-reviewed journals by practicing Austrians."
But what would Barro discover if he followed Horwitz's advice? There
are two main outlets for distinctively Austrian research. The first, The Review of Austrian Economics,
was edited by Rothbardians for its first ten years (1987-1997) before
passing to other Austrians more to Horwitz's liking. The second, The Quarterly Journal of Austrian Economics,
has been edited by Rothbardians since its inception in 1998, and is
still being published. Similar Rothbardian/non-Rothbardian ratios hold
for Austrian books. Critics could reasonably conclude that Austrian
resistance to empirical research is even worse than they imagined.
My favorite part faults the Austrians for their lack of interest in empirical psychology:
Horwitz highlights the importance of "subjectivism":
Economics is radically subjectivist in the sense that
human action depends upon the perceptions of the world held by the
actor. All explanations of praxeological phenomena, i.e., any
application of economics to the real world, must start with the actor
and her beliefs about the world, including the limits to our knowledge
and ability to optimize.
All true. But Horwitz ignores the existence of a massive
intellectual movement that spent the last forty years developing these
insights: behavioral economics. If you really want to learn about
human's "beliefs about the world," the "limits of our knowledge," or our
"ability to optimize," read Daniel Kahneman's magnum opus Thinking, Fast and Slow.
Kahneman elegantly and carefully explains dozens of major discoveries
about how people think. Compared to this fountain of knowledge,
Austrian talk about subjectivism is empty generalities.
I anticipate a lively discussion after the other two reaction essays by George Selgin and Antony Davies go up.