Mondays with Murray: The Problem with Empirical Studies

 Last week I discussed the fallacies with the analysis of one of the chief propagandists for Keynesian economic policies, Paul Krugman, as he joyously celebrated possible errors in an empirical study that attempted to prove that government "austerity" programs helped the economies of countries that undertook them. Krugman and others believe that these errors disprove the worth of austerity programs (which in their minds relates to cutting government spending, though "austerity" in this sense has largely been a myth), and thereby prove the worth of the government deficit spending that Keynesians advocate.In that piece I wrote:

The problem lies in methodology. Keynesians believe that their economic policies can be proven and that others can be debunked simply be performing empirical studies.  ”Country A had massive deficit spending. The economy of Country A improved. This proves deficit spending is good.”Students of the Austrian school know that the ideas of economics are derived from logical deductions based on the axiom of human action. All humans act, and act according to a set of preferences they hold. Everything we know about economics can be logically deduced from this fact. No studies are needed, nor are they relevant.

Rothbard describes this well in an Appendix to Chapter 1 of his economic treatise Man, Economy, and State, where he discusses the Austrian method of economic analysis, known as praxeological analysis:

This analysis takes as its fundamental premise the existence of human action. Once it is demonstrated that human action is a necessary attribute of the existence of human beings, the rest of praxeology (and its subdivision, economic theory) consists of the elaboration of the logical implications of the concept of action. Economic analysis is of the form:

1. Assert A- action axiom
2. If A, then B, then C; if C then D, etc. - by rules of logic
3. Therefore, we assert the truth of B,C,D, etc.

This is an important distinction to make between the Austrian school of economics and the more "mainstream" Keynesian view, which emphasizes models and formulas of all kinds for determining the "proper" level of government intervention in the economy. This ignores individual human action entirely, tossing logic out the window along with it.Rothbard continues discussing praxeology and the faulty obsession that many economists have with "logistics" (empiricism):

The suggestion has been made that, since praxeology and economics are logical chains of reasoning based on a few universally known premises, to be really scientific it should be elaborated according to the symbolic notations of mathematical logic. This represents a curious misconception of the role of mathematical logic, or “logistics.” In the first place, it is the great quality of verbal propositions that each one is meaningful. On the other hand, algebraic and logical symbols, as used in logistics, are not in themselves meaningful. Praxeology asserts the action axiom as true, and from this (together with a few empirical axioms—such as the existence of a variety of resources and individuals) are deduced, by the rules of logical inference, all the propositions of economics, each one of which is verbal and meaningful. If the logistic array of symbols were used, each proposition would not be meaningful. Logistics, therefore, is far more suited to the physical sciences, where, in contrast to the science of human action, the conclusions rather than the axioms are known. In the physical sciences, the premises are only hypothetical, and logical deductions are made from them. In these cases, there is no purpose in having meaningful propositions at each step of the way, and therefore symbolic and mathematical language is more useful.Simply to develop economics verbally, then to translate into logistic symbols, and finally to retranslate the propositions back into English, makes no sense and violates the fundamental scientific principle of Occam’s razor, which calls for the greatest possible simplicity in science and the avoidance of unnecessary multiplication of entities or processes. Contrary to what might be believed, the use of verbal logic is not inferior to logistics. On the contrary, the latter is merely an auxiliary device based on the former. For formal logic deals with the necessary and fundamental laws of thought, which must be verbally expressed, and logistics is only a symbolic system that uses this formal verbal logic as its foundation. Therefore, praxeology and economics need not be apologetic in the slightest for the use of verbal logic—the fundamental basis of symbolic logic, and meaningful at each step of the route.

These are fundamental ideas that must be understood by anyone looking to learn or teach others about Austrian economics, and the ideals of liberty.  It is important to never abandon logic. There are no empirical studies that can ever prove or disprove logical deductions.The Keynesians of course will tell you differently, and continue to point to empirical studies. And they will continue to be wrong.Receive access to ALL of our EXCLUSIVE bonus audio content – including “Conspiracy Corner”, “Degenerate Gamblers” and the “League of Liberty Podcast” by joining the Lions of Liberty Pride and supporting us on Patreon!Check out our past editions of Mondays with Murray!4/22/13 - The Real Story of the Whiskey Rebellion4/15/13 - What is an Entrepreneur?4/8/13 - Rothbard on Intellectual Property4/1/13 - The Five Key Questions for the Libertarian Movement3/25/13 - The Six Stages of the Libertarian Movement3/18/13 - Rothbard on the Future Prospects for Liberty3/11/13 - Rothbard on Lysander Spooner3/4/13 – Rothbard on Statism2/25/13 – Rothbard on John Bolton and Ann Coulter2/18/13 – Rothbard vs. Krugman on $9 Minimum Wage2/11/13 – Time To Hoard Nickels2/4/13  - The Death of Keynesian Economics1/28/13 – Competition and Monopoly1/21/13 – Rothbard Down The Memory Hole?1/14/13 – We Are Not The Government1//7/13 – Why Does Someone Become A Statist?12/10/12 – Rothbard on Conspiracy Theory12/3/12 – Rothbard on Secession11/26/12 – Rothbard on the Drug War11/19/12 – Rothbard on the Euro Crisis11/12/12 – Rothbard on the Lions of Liberty11/5/12 – Rothbard on Voting and Gas Lines10/29/12 – Mythbusting the “Free Market Cartel”10/22/12 – Rothbard on the Two Party Charade10/15/12 – Rothbard on Private Roads10/8/12 – Rothbard on Private Law10/1/12 – Rothbard on Ron Paul9/24/12 – Rothbard on QE