Abstract
In this paper, I compare the methodology of the Austrian school to two alternative methodologies from the economic mainstream: the 'orthodox' and revealed preference methodologies. I argue that Austrian school theorists should stop describing themselves as 'extreme apriorists' (or writing suggestively to that effect), and should start giving greater acknowledgement to the importance of empirical work within their research program. The motivation for this dialectical shift is threefold: the approach is more faithful to their actual practices, it better illustrates the underlying similarities between the mainstream and Austrian research paradigms, and it provides a philosophical foundation that is much more plausible in itself.
Highlights
In this paper, I compare the methodology of the Austrian school to two alternative methodologies from the economic mainstream: the ‘orthodox’ and revealed preference methodologies
[I]f you ask a mainstream economist a question about almost any aspect of economic life, the response will be: suppose we model that situation and see what happens [...]
Peter Boettke (2012) offers a set of three commitments he regards as characteristic of the contemporary Austrian school. This set includes (1) methodological individualism, the idea that social phenomena are explained in terms of how they result from the behavior of individuals; (2) the methodological priority of exchange over allocation, the idea that economics is primarily about “exchange behavior and the institutions within which exchanges take place” (xii) rather than mere allocative concerns; and (3) methodological dualism
Summary
Before comparing the mainstream and Austrian paradigms, it is necessary to explain at least roughly what they are and how they differ. It assumes that we already know what people choose in some situations, and uses this data to deduce what they will choose in other situations (2011, 8-9, emphasis in original) This description of the revealed preference methodology carries substantive commitments, at least by implication. What Rothbard is denying is that there’s enough stability in a person's values over time to license understanding her choices in terms of some stable set of psychological dispositions This objection can be traced back to Mises (1998, 103), but it continues to enjoy attention from contemporary Austrians (Block and Barnett 2012), and hasn’t gone unnoticed by the mainstream (Grüne-Yanoff and Hansson 2009). This turns out to have other benefits: it is more consistent with some of the most important contemporary ideas produced by the Austrian school, and more consistent with the mainstream research program
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