Saturday, May 21, 2011

My Economic Foundations with Book Links

I am a believer in "behavioral economics," and am convinced human nature is neither rational nor predictable at the individual level. The "Austrian School" of economics, which is closer to my views on economics than any other general school, suggests that mathematical models in economics generally overstate the predictability of humans. I am seldom stunned or shocked when economic predictions are "unexpectedly" off the mark. Too many economists are convinced they conduct "science" when they are closer to the randomness of human psychology. I dislike generalities, but mentioning the Austrian School helps place my views in some context.

Note: I have argued and will continue to argue too many "sciences" should have some other label. It would be best to simply call these disciplines "studies" than sciences. Economics is one such field. I love it, but is it science? Not like physics is a science. One reason the Austrian School is considered "on the fringe" today is because it admits to uncertainty.

Like most influenced by the Austrian School, I do not reject all modeling, economic pattern theories, and statistically based research. It is a mistaken assumption to dismiss modern economists with Austrian foundations as "non-scientific" if by that you want to imply a lack of intellectual discipline. To date even the best "scientific models" of economic behavior have demonstrated fallibility. Sadly, too many politicians, economists, and social theorists have a misplaced faith in economics.

It is convenient for "mainstream" economists to dismiss Austrian theorists as "unscientific" — a clear insult — instead of addressing the underlying arguments of libertarian-leaning economics. Economists on the left and right pretend to scientific certainty, a conceit or self-deception that leads government economists to make some of the most outlandish forecasts (predictions), which inevitably are off the mark.

Again, I do not pretend to be a purist wedded to any one school of thought. Economics is too complex to believe there is one true predictor of economic patterns and overall systems. But, if you are reading this blog you will find I am not a Keynesian. I'm much closer to Friedrich Hayek. You won't find purity on this blog, but you will always find a defense of freedom and choice.

If you haven't read Hayek, you should. I also suggest reading Ludwig Heinrich Edler von Mises' works (Socialism, in particular). Then again, I believe in reading everything you can so you can appreciate the strengths and weaknesses of various economic theorists. You cannot understand modern economists without reading Keynes or Milton Friedman, for example, two opposites whose theories have shaped modern governmental policies. Though I don't respect him as much as I once did, you must also read Paul Krugman if you want to understand economics and politics in the United States.

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