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I was completely unsuprised when the New York Times wrote back in August that Paul Ryan is a fan of the economist Friedrich von Hayek, a member of the Austrian school of economics. After all, the Ryan budget takes from those mooching poors and gives to the rich ├╝bermenschen who've earned the upward redistribution of wealth because CAPITALISM! Ayn Rand couldn't have designed a more sociopathic budget herself, and we're talking about a woman who thought there was something praiseworthy about William Edward Hickman.

But in the same way that libertarians generally espouse Rand's ideas about the evilness of traditional values like altruism and equality, they've also decided to endorse yet another fantasy world where the rules are made up and the facts don't matter. If you don't know much about the Austrian school, they're so far up their own asses that they think Milton Friedman is a socialist. That's not even the looniest part about the Austrian school, the favored economic system of most Randists and Libertarians.

If you're like me, you may have found yourself yelling some version of "there are four lights!"  or "Two Plus Two Equals Four!" at republicans on television over the past few months. You may have loved Bill Clinton's mathtastic takedown of the Republican party at the DNC. But Paul Ryan's economic theory is much harder to rubble, because it relies on special magic math that is immune, in the eyes of its beholders, from any kind of outside criticism.

That's because the Austrian School under Ludwig von Mises ran into a pretty big problem. They just knew their economic theories were right, but there was all this pesky data that got in the way which said the opposite. The facts didn't say what von Mises and the other Austrian economists wanted them to say. In the 1940's, Von Mises had a brilliant realization. The problem wasn't with their right, perfect, and holy economic ideas. The problem was that the scientific method doesn't work! And thus, with the sweep of a pen, Von Mises created the "Praxeological Method" where the math always says exactly what the Austrians want it to say.

You may have heard all your life that 2+2=4. It may be widely taught that 2+2=4, but friends, this is just a socialist conspiracy. 2+2 does not equal four. According to Austrian Economics, 2+2=Potato.

This is why I'm looking forward to the debate tonight. I can't wait to see what Joe Biden does when he gets his hands on Ryan. Austrians tend to become enraged when people say things they don't like and can't just easily ignore.

Paul Ryan is no different. Remember how Paul Ryan got testy because of a question he didn't like? Most people who like Hayek get pretty testy in response to people who disagree with them, because they're intellectually lazy. They're used to a fantasy world where reality is whatever they say it is, not a place of hard facts and evidence.

And the Obama Administration has already noticed this fact about Paul Ryan's character, as you can see from this new video titled "Paul Ryan's Rhetoric Can't Hide Reality."

Now it is my hope that we'll see plenty of epic takedowns of Paul Ryan tonight, but we're not going to see much engagement with the foundations of Paul Ryan's beliefs. It's hard to make debating economic models interesting, and there are more politically effective ways of attacking Paul Ryan.

So since Joe won't do it, I thought I'd just post this diary to explain why everything that Paul Ryan believes about the economy is silly and wrong. Follow me over the great orange bear claw for my rundown of Austrian Economics, Paul Ryan's economic worldview.

Intro

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Stepping into a world of crazy where 2+2=Potato and Milton Friedman is a godless socialist, we find Ludwig von Mises(1881-1973), and Friedrich von Hayek(1899-1992), the giants of the Austrian Economic school. Both of these men went through hell in the first half of the 20th century.

Much the same way as Ayn Rand's childhood in Lenin's Russia impressed on her the idea that governments are evil, the same thing was impressed on Hayek and Mises. They watched as the Austro-Hungarian Empire collapsed, as chaos broke out in the Balkans, as the unfair conditions placed on Germany after the First World War led to the rise of Hitler, and as Hitler used his position as head of the government to turn the industrial might of Germany against millions of innocent people.

These were the first people who looked at Communism and Fascism and saw no comprehensible difference. And yes, I know that communists argue for a worldview where all property is held by the state supposedly for the people, and a fascist state is the union of corporate and governmental power for the service of a strong leader and the ruling Moneyed class, but Von Mises and his kind didn't. They're all Statists and they're all just as bad, in his view. Remember that we're dealing with a magical world where 2+2=Potato, and a socialist is anyone who thinks that a government might have done something right at some point in its history.

Governments, to these men, were absolutely irredeemably evil, and were so corrupt that even when they tried to do good, they would do evil. And that emotional idea is the bedrock on which all libertarian economic views are built. If I was born to a similar socio-economic class in Austria in the 1880's instead of America in the 1980's, I might have emphatically agreed with them about the evils of government.

After living through a world war, watching his country fall apart, and dodging nazis for a few years, Von Mises migrated to the United States in 1941. Here, he wrote his magnum opus, Human Action.

Von Mises wrote Human Action in response to a problem with his economic model. There was a huge counterexample to the idea that all governments are evil even when they try to be good. The heroic counterexample to that emotional European theory is us. We plucky Americans over here in the good old US of A with our New Deal, our Tennessee Valley Authority, Works Projects Administration, Rural Electrification, and Federal Deposit Insurance Corporation were the monkey wrench in the Austrian system that broke the whole model to hell. We proved quite clearly that good government, well run, could be an integral part of a powerful economic engine that turned the United States from a second-rate backwater into the most powerful economy that the world has ever seen. The United States was the counterexample that completely shattered his economic theories.

Those facts don't matter, though, because if you're Von Mises you just know that government is a great and irredeemable evil, and you don't need no stinking facts. Von Mises decided that it was time to fix those pesky little "facts" that didn't agree with his theory, so he created a magical world where the numbers always say exactly what the Austrians want them to say. Where no research is neccesary. Where the only experiments are thought experiments. And that's what he wrote about in Human Action.

Get ready to wade through the thickest bog of complete bullshit you've ever read. Von Mises writes in a way that is so dense, so hard to get through, that it's almost as if he made it intentionally difficult just to keep people from realizing that he's making it all up as he goes along.

In historical experience we can observe only complex phenomena, and an experiment is inapplicable to such a situation. Sometimes it is said that a mental experiment (Gedankenexperiment) could take its place. However, a mental experiment, logically considered, has an entirely different meaning from a real experiment. It involves thinking through the implications of a proposition in the light of its compatibility with other propositions that we accept as true. If these other propositions are not derived from experience, then the mental experiment makes no reference to experience.
To translate, If I create a thought experiment that isn't based on any evidence, then you can't use evidence to disprove it, because I just made up a rule that says so! Instead, you have to have to use all this other bullshit I made up to disprove the new bullshit I just made up! And you can't use anything as part of an argument that isn't bullshit that I already agree with. Suck on it, socialists!

And then there's the "Action Axiom." I don't want to inflict more Von Mises on you, so here's some Murray N. Rothbard talking about the Action Axiom and Praxeology.

Praxeology rests on the fundamental axiom that individual human
beings act, that is, on the primordial fact that individuals engage in conscious actions toward chosen goals. This concept of action contrasts to purely reflexive, or knee-jerk, behavior, which is not directed toward goals. The praxeological method spins out by verbal deduction the logical implications of that primordial fact. In short, praxeological economics is the structure of logical implications of the fact that individuals act. This structure is built on the fundamental axiom of action, and has a few subsidiary axioms, such as that individuals vary and that human beings regard leisure as a valuable good. Any skeptic about deducing from such a simple base an entire system of economics, I refer to Mises's Human Action. Furthermore, since praxeology begins with a true axiom, A, all the propositions that can be deduced from this axiom must also be true. For if A implies B, and A is true, then B must also be true.
Did you see what he did there? If you disagree with me, just go read Von Mises' Human Action. Your disagreement is a sign that you don't understand! Furthermore, because human beings act, everything I say is true! Furthermore because the action axiom is true, the praxeological method is true because the action axiom is true because the praxeological method is true because the action axiom is true because the praxeological method is true because the action axiom is true because the praxeological method is true because the action axiom is true... et cetera ad nauseum. Austrian Economics is the most epic case of circular reasoning ever constructed. A therefor B therefor C therefor D therefor A.

The best part: we KNOW that this is all bullshit, and we can prove it with facts and evidence (which is why facts and evidence are illegal under the praxeological model.)

From the viewpoint of von Mises human action cannot be studied with experiments, which means the entire field of psychology goes right out the window. Take the example of the 'Bystander Effect'. This principle states that people are less likely to offer aid to someone obviously in need when other people are present. Studies have been done on this and there is the famous case of Kitty Genovese. Under a praxological  view this entire principle goes out the window simply because I wouldn't stand by and let something like that happen, would you? No? K, then the bystander effect is false because our thought experiment says so.

The Milgram Experiment, too, goes right out the window because I would never shock a human being to death just because a lab scientist told me to. Would you ever shock a human being to death because a lab scientist told you to? I mean, sure, the Data says otherwise, but you and I just did a thought experiment, and because we didn't use any evidence, that means you can't use evidence to disprove us! See how easy it is to completely disregard the data?

I'm going to go write a horribly written and mind mindbogglingly dense book where I use unnecessary wordiness to hide the fact that our new theory about human behavior is complete bullshit! And if anyone ever disagrees with you, tell them to read my horrible book!

Under the Austrian model, informed people are incapable of making huge world-destroying mistakes. Evidence completely disproves that idea but again, you can't tell them this because "the mental experiment makes no reference to experience." Because Von Mises and Hayek don't use evidence, you can't use Kitty Genovese or the Milgram Experiment as a rebuttal.

Von Mises and Hayek created a world where math does exactly what they want it to do. To break it down even further, Praxeology is based on the following three things:

  • First, it rejects the scientific method, instead deciding that you can just make shit up.  You have to look at what human beings would rationally do, and that thought experiment will tell you all you need to know.  It's true as long as it agrees with the "Action Axiom" and all the other bullshit already made up by Austrians. Hence, 2+2=Potato if Von Mises and Hayek say so.
  • Second, all economic models, all statistics, all data is automatically flawed and untrustworthy, because otherwise it's really really bad for the Austrian argument. They have this whole spiel about human action being complex that flies in the face of what we know about psychology.
  • Third, testability, the foundation for all intellectual discourse, is impossible in economics. Never again would Von Mises have to hear those horrible words "If that were true, would work differently."
  • And that last point is the most important. You cannot test the Austrian theory, because the Austrian Theory is automatically Correct According to the Austrian theory. A therefor B therefor C ... therefor Y therefor Z therefor A. Or to condense it. A, therefore A.

There's more to this citadel of cow manure, but the good news is that it's all built on the toothpicks of anti-empirical, flimsy, emotional thought experiments. You don't have to attack the Action Axiom or any of Von Mises' economic ideas to disprove the Austrian school. All you have to do is prove that the intellectual theory it's built on is nonsense, and the rest falls to shambles, and that is absurdly easy to do.

All you have to do is refuse to accept any argument that isn't based on hard, empirical evidence. Throw up a wall of reality, and prevent them from bringing anything across that line unless they use empirical evidence to prove it. Say "If it's true, there will be evidence to back it up."

Austrians never want to talk about whether Praxeology and the Action Axiom actually work under the scientific method, because the position is entirely indefensible. So if you get into a debate with an adherent of the Austrian school about these principals, they're likely to rage quit, and run into the night screaming about socialism (just like Von Mises did when his arguments couldn't stand up to the facts.)

That's a true story by the way. Quoting Milton Friedman on Von Mises, who he knew personally:

[It] happened at the initial Mont Pelerin meeting when he got up and said, "You're all a bunch of socialists." We were discussing the distribution of income, and whether you should have progressive income taxes. Some of the people there were expressing the view that there could be a justification for it.

Another occasion which is equally telling: Fritz Machlup was a student of Mises's, one of his most faithful disciples. At one of the Mont Pelerin meetings, Fritz gave a talk in which I think he questioned the idea of a gold standard; he came out in favor of floating exchange rates. Mises was so mad he wouldn't speak to him for three years.

I'm not joking when I say that Austrians will throw epic temper tantrums when you ask them to rely on facts or data, or bring in any kind of evidence that they don't automatically agree with.

Here's the issue: When someone has created a special world where they're always right and 2+2=Potato, you can't actually sit down and debate them like you would anyone else, because according to their own rules, they're right. And if you're not careful, you'll end up playing by their rules.

And here's where it gets fun. All of Austrian economics is built on a logical fallacy, called begging the question. In a court of law, it's objectionable: "assuming facts not in evidence." When you start an argument assuming that you're already right, and refuse to let people question whether you're right or not, you're begging the question.

OF COURSE, 2+2=Potato if you make up a magical world where 2+2 always equals potato. OF COURSE, Milton Friedman is a socialist when you define socialist as "anyone who thinks that governments aren't irredeemably evil." OF COURSE, Von Mises is right when he creates a special world in which he's always right.

If you do this to another human being you're in a relationship with, it's a kind of emotional abuse referred to as gaslighting. The abuser makes up a fantasy world where they're not really an abuser.

Don't even bother talking about the Action Axiom or the value of money. It's all bullshit because it's built on bullshit, and you're never going to beat them if you follow them into Nutty Narnia. You have to stand at the door to the magical wardrobe, point to it, and explain to them that they've departed the real world and need to come back to reality if you're even going to begin to have a discussion with them. Yes, talking lions may exist in Narnia, but we're not having a debate about the thought experiment that is Narnia, we're having a debate about the real world where lions are quite incapable of discussing the finer points of moral philosophy.

You wouldn't argue about the Garden of Eden with a creationist, because once they've gotten you to the point where you agree that The Garden of Eden exists, you've already lost the debate.

But that's where Austrians want to start the debate about libertarian economics, with you already assuming that economic models don't work, that facts are irrelevant, that all governments are evil, and that everyone who disagrees is a socialist. If you let them pull the wool over your eyes, you'll start the argument agreeing that 2+2=Potato.

The Austrian Theory is a fantasy where the rules are made up and the facts don't matter. It is the young-earth creationism of the economic world, and isn't the sort of thing that intelligent people should actually believe, but the man who would be our Vice President has bought this nonsense hook, line and sinker.

I wish that "Facts matter" wasn't a mind-blowing revolutionary statement, but that seems to be where we are in the world today. We live in a world where facts matter, where data matters, the conservative movement has decided that reality is whatever they want it to be. That's incredibly dangerous.

Luckily the Obama Administration has noticed. Mitt Romney came to the last debate pretending to be a different person from the man he's been for the past two years. If Paul Ryan tries the same nonsense tonight, I think Joe will be ready for it. They're not going to let Paul Ryan hide from reality. And I don't think they'll let Mitt do it again.

This Diary was originally almost twice as long. I had a special section on Arguing with Austrians, which I've condensed into the previous few paragraphs. If you'd like to read a second diary on debating people from the Austrian School, let me know in the comments.

10:04 PM PT: Wanted to add a word of thanks to the Rescue Rangers for putting this up on Community Spotlight. Thanks!


Extended (Optional)

Originally posted to Writing by Will McLeod: A Better World is Possible on Thu Oct 11, 2012 at 12:09 PM PDT.

Also republished by Community Spotlight.

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