Thursday, October 8, 2015

Walter Block’s An Austrian Critique of Mainstream Economics: A Critique on Epistemology

This is a talk by Walter Block on Austrian economics and its disagreements with neoclassical economics, given at the Mises Institute in Auburn, Alabama, the US, on 21 July, 2015.

I want to focus on epistemological issues here.

Let us review the epistemological problems here one by one:
(1) the Austrians badly misunderstand the philosophy and epistemology of the logical positivists.

For Austrians like Block the expression “logical positivism” is simply an ignorant term of abuse for all empiricists whom they regard as their opponents. However, there are (to my knowledge) virtually no logical positivists today, and strict logical positivist philosophy is not what is used by empiricist modern opponents of Austrian praxeology. In fact, logical positivism had had its day and had been largely abandoned by the 1950s. Modern moderate empiricism is not logical positivism.

The central element of logical positivist philosophy was the verifiability criterion for meaningfulness: the view that if a statement could (1) not be categorised as a true analytic a priori statement and (2) was not a synthetic a posteriori statement that could be verified, then it was a meaningless metaphysical proposition. This idea of course has very serious problems and proved the Achilles’ heal of logical positivism, and one of the many reasons for its reject in mainstream analytic philosophy. Even the leading British logical positivist A. J. Ayer admitted that the core of logical positivism was wrong and it was badly flawed as a complete, coherent philosophy.

But moderate empiricists in mainstream analytic philosophy today are not logical positivists and do not accept the verifiability criterion, facts which Austrians seem ignorant of. These embarrassing philosophical errors are also committed by the Austrian Hans-Hermann Hoppe.

(2) If (1) isn’t bad enough, Block conflates logical positivism with Popper’s falsificationist principle. Popper thought that all the empirical propositions of science must pass the test of not being falsified: as long as a current scientific theory has not been falsified, then a rational person should accept it, but it must still be subject to testing in the future so that continued acceptance of a theory must depend on it continuing to pass the falsifiability test.

But that Popperian epistemological principle of falsificationism is not logical positivism, which was instead concerned with the verifiability of empirical propositions as a test of their meaningfulness.

Worse still, Block seems (if I am not mistaken) to imply that modern empiricists and the older logical positivists never accepted the necessary truth of analytic or pure mathematical statements, yet again the same mistake made by Hans-Hermann Hoppe. For the real logical positivist perspective on epistemology, see here.

(3) Block’s fails to mention or make explicit that the epistemological basis of Mises’ praxeology is Kantian synthetic a priori knowledge: the idea that there are statements both empirical (synthetic or non-analytic) and necessarily true of the real world. Kantian synthetic a priori knowledge, however, cannot be accepted as real nor defended anymore, and all alleged synthetic a priori statements can be re-interpreted as either analytic statements or (2) empirical statements (= synthetic a posteriori). As Block notes, even mainstream neoclassicals reject Mises’ praxeology because even they cannot accept such a flawed and unconvincing epistemological basis to economic science.

Yet, as Block notes, the Austrian school itself is divided over the very epistemological foundations of economics: there are Austrians who follow Hayek in rejecting praxeology and apriorism and who embrace a moderate empiricist method. Thus the Austrian school cannot even agree itself on whether praxeology is right or wrong.

(4) in Block’s argument about the exchange of a pen for a tie, he has not proved anything with necessary truth, for the simple reason that the person taking the tie might actually be mentally ill and have no opinion about the pen or the value of the tie at all, or alternatively he might be lying and hate the pen and like his tie more but be merely pretending to like it. The assumption that the person must by necessity value the pen more than the tie is sloppy logic and plainly untrue.

(5) Block’s assertion that there is a necessary tendency for profits to fall to zero in Mises’ evenly rotating economy would be necessarily true, but only as an analytic a priori statement asserted of a purely imaginary world or abstract model. The point is: it would not be an empirical statement, and so its necessary truth is a property of its analyticity. The only way one could maintain the necessary truth of something empirical (or synthetic) is to defend Kantian synthetic a priori knowledge. But, as we have seen above, the Austrian epistemology of Mises based on Kantian synthetic a priori knowledge cannot be seriously sustained or defended and this is why Austrian attempts to assert necessary truths of the real world fail time and again.

(6) Block also appears to be arguing that there is a necessary tendency for profit rates to be equalised in capitalism. This is untrue, and requires assuming certain assumptions about the real world that are not true, such as an unrealistic degree of competition across markets, no significant market power, no or minimal barriers to new entry, no strong patent rights giving (certain companies a great advantage unavailable to competitors), no aggressive use of capacity utilisation as a barrier to entry, and no significant, persistent differences in profit mark-ups in different sectors and industries.

To what extent there is a tendency for profits to be equalised in real world capitalism is nothing but an empirical question.

(7) So too regarding the idea that minimal wage laws always cause unemployment when this is asserted as a necessary truth, it remains nothing but an analytic a priori statement asserted of a purely imaginary world or abstract model. The question whether any particular minimal wage law tends to cause unemployment in the real world is an empirical question.
Further Reading
“Why Should we reject the Existence of Synthetic a priori Knowledge?,” May 23, 2014.

“Hoppe’s Caricature of Empiricism,” September 10, 2013.

“Hoppe on Euclidean Geometry,” September 11, 2013.

“Hoppe on Euclidean Geometry, Part 2,” September 14, 2013.

“Hayek on Mises’ Apriorism,” May 23, 2011.

“Mises versus Ayer on Analytic Propositions and a priori Reasoning,” March 16, 2014.

“Kirzner on Hayek on Prices,” May 22, 2013.

“Does the Market Tend to Drive Profits to Zero?,” January 11, 2014.

“Sraffian Long-Run Equilibrium Prices of Production and Post Keynesianism,” April 11, 2015.

“Epistemology in Modern Analytic Philosophy: A Review,” September 17, 2013.

Tuesday, October 6, 2015

Why A. J. Ayer was a Great Philosopher

It can be summed up just by watching his comments here in the video below in an interview with Bryan Magee.

Remember that Bryan Magee’s opening question (“But now it must have some real defects: what do you now in retrospect think that the main shortcomings of the movement were?”) refers to Ayer’s philosophy of logical positivism.

Why was Ayer a great philosopher? Because in contrast to so many other philosophers whose work has obviously been debunked and refuted, but who continue to defend their discredited ideas like the hacks they are, A. J. Ayer cheerfully admitted that the core of logical positivism was wrong (“nearly all of it was false,” he laughs), and it was badly flawed as a coherent philosophy. He moved on with his philosophy and work, without some endless, dogmatic defence of logical positivism.

That may seem like a trivial point, but it is not. How many Postmodernist or Poststructuralist charlatans would gracefully admit their theories are wrong (and they are), and move on to some other research program?