August 2021

Sun Mon Tue Wed Thu Fri Sat
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31        
Blog powered by Typepad

« "When The Rubber Hits The Road, They Cave" | Main | The "Too Big To Fail" Fallacy »


Feed You can follow this conversation by subscribing to the comment feed for this post.

"economics is the sexiest of all disciplines. The argumentative structure is a thing of beauty"

I always suspected Pete had a thing for the curves we draw on the board!

I completely agree.

Professor Boettke,

Maybe this isn't the best forum, but I would like to get your thoughts on graduate school.

In the past, you've advised that one should "never pay for a Ph.D. Ever." Could you elaborate on this point? Specifically, if the relevant alternative is not getting a Ph.D. at all, does your advice still apply? Or is it only applicable when your choices are paying at a very good school vs. getting a full ride at some other school?

I am currently facing a choice of going to and paying for a Ph.D. program, or not going to graduate school at all. In this case, is it better to just go and pay?


Go pay! That is, if you have really exhausted all avenues for getting paid through grad school.


That is a tough question. Why didn't you get funding? If you math GRE is low, but you have a high GPA, think about Law School as an alternative. If your GRE is low and your GPA is not super high, then perhaps an MA program might be better.

I would stick by the general rule on PhD programs --- go to the best school that will pay your full way. But this year is a tough year as budgets are cut way back. Still, I might go to an MA in econ and then JD from law to give myself maximum flexibility in the coming economy.

Advice over the internet however should be valued at the price you pay to receive it :). Talk to the DGS at the different schools you applied, and find out the reasons for admission but not funding. Then make an informed decision.


Thanks, Pete. After a brief chat with the admissions people, looks like funding decisions aren't set in stone yet, so I'll have to wait to be fully informed.

PS. I got an 800 on the GRE in math, but I may be an otherwise terrible person.

This is an intellectually incoherent position, Pete.

Colander and other have established how the incentive and filter processes of the economics profession are set up to produce "idiot savants" and "rocket scientists" -- proof of "smartness" at doing math and "testing" has replaced competent understanding of the process of the economy BECAUSE of the incentive and filter structure of the profession.

E.g. math and "testing" are easy to teach, are what the journals encourage, what the top 5 grads schools demand, etc.

The problem ISN'T a sophisticated & carefully considered alternative understanding of "methodology" -- this isn't what give us bad science and bad understanding in economics -- it is the institutional structure of the profession itself which demands bad science and encourages stupid understanding.

The filter process and the incentive structure guarantee un-thinking / brain dead "methodology" of the pseudo-scientific sort found in every economic journal and demanded by every top 5 econ department.

It's the professional set-up and hierarch and peeking order that inevitably spits out the "methodology" and the "ideological" priors -- this is inevitable given the guild structure of your profession, and the incentives for research, teaching, evaluation, etc.

Like everyone else, economists are essentially lazy, and the equation:

formal competence = test of understanding

is the equation that has massive payoff in terms of what is easy. Easy to teach. Easy to produce journal articles. Easy to evaluate grad students. Easy to justify to people who don't understand your specialty, etc.

This isn't rocket science. These are sociological facts that people like Colander and Coase and many others have easily identified.

You support an "understanding" conception of the market process and good economics -- and an institutional framework which is ruthlessly structured to eliminate that sort of thing from the profession.

"I fully embrace the profession of academic economist, though wanting to hold a unique identity in that profession. I accept its pecking order, but I reject its methodology for doing science. I accept its hierarchy, but I reject its "ideological" priors."

Let me be clear.

Math and "testing" ability are substitutes for understanding in the economics profession.

Economics is professionally structured under the assumption that:

math & "testing" ability = understanding

The structure of the profession in fact spits out people who believe this, and put their personal ego behind it. You can't read economists talk about other economists without them talking about who is "the smartest guy in the room" or the "smartest guy in my graduate class". In other words:

math ability = smart = superior understanding

Which is bogus.

Why are math and "testing" used as substitutes for real understanding?

Because math ability is easy to test.

Because math ability is formalize on a numeric metric.

Because math ability is "objective".

Because math ability is something non-economists or people outside your specialty can understand -- it justifies itself when employment and advancement decisions are made.

Because math ability is something that easily translates into "new research" and hence publications. And these "productivity" is easily ranked in a metric which is "objective" and understandable even to those who don't understand your specialty.


The kind of understanding that Peter Boettke has is not "objective", it has no "objective" metric, it can't be easily tested in a formal math test, it doesn't produce "objective" research results in the "objective" journals. It isn't easily taught, it isn't easily tested, it isn't easily quantified for those in other specialties or outside economics. Etc.

I would suggest you ask the department what the odds are that you will get funding if you do well in your first year courses and pass the qualifying exams. It may be that they think you have promise, but there are questions about your background. If you show them first hand that you are a quality student, they might find some money for you.

It's weird that a "market process" economists would be so happy with a profession that has been dominated and re-invented under the pressure of military and government funding; which has a guild/union structure (e.g. the AEA & its funding and control of professional publications); which is effectively unaccountable to its customers (students and trustees); which is tied by money and status to governmental / guild institutions like the Fed and the military / government research bodies (see Larry White's article on how the econ profession is in bed with the Fed); etc.

Mr Ransom:

Although it is true that the sociology of the academia has several major shortcomings, there are many counterexamples of heterodox economists being successful without being brain-dead, such as Coase, Buchanan, etc.

I'm a university researcher, albeit not in economics, and much less than optimal incentives are the norm probably in all faculties. Bad incentives makes bad economics? Probably in many cases it is true, but there are counterexamples. If Austrians are considered more like marxians than like neo-institutionalists (there are many ways to be heterodox, and not all of them are worth being proud of) it may be because of the adversarial approach they have had in the last decades.

For sure, there will be more chances to improve economics if Austrians engage in academic rent seeking rather than if they engage in masochistic self-seclusion. Who's more likely to influence XXI economics, PhD students from MIT or blog readers?

Self-seclusion does not help making the mainstream more Austrian and does not help making better Austrian economics.

The problem is like libertarians in politics: they don't have many chances, but if they don't even try there will be an adverse selection in favor of illiberal politicians and policies.

PS Mankiw makes an (involuntary?) mockery of mathematics in this post:

It appears that there is no real rationale for all that math other than path-dependency and - as you say - misguided attempts to test for economic understanding by math proficiency.

Greg and others,

I didn't say things were perfect, but compared to the alternatives I think academic economics is a worthy profession and in fact one that students should want to enter if they are serious about economics.

I also think you read into modern economics the worst excesses, whereas I do see opportunities for improvement in the conversation all the time.

BTW, I would not refer to Coase and Buchanan as heterodox, nor would I think of new institutionalism as heterodox. This might be the reason for part of our confusion.



As you know, I agree that each of us needs to first look at himself or herself before blaming disappointments on some supposed injustices in modern economics. And I agree being a college professor is great work and honorable no matter the institution. Don't whine if you have tenure; it's bad form. I would like to challenge one of your remarks, however.

You said, "the biggest rewards in our profession go to those who can excel at publishing original research, influencing their peers, and training PhD students who will hopefully excel at these three endeavors." Is that right? Aren't there rents to be gotten outside of academia and aren't those rents distorting the academic market? If you are a really good macroeconomist you might get to be Fed chairman, Treasury Secretary, or head of the IMF. Lots of “scholarship” is directed to such extra-academic rents. Doesn't that rent seeking create serious distortions in the academic market?

Greg is suggesting that the glass is somewhat more than half empty (that is, a lot less than half full). Pete is suggesting that if you run a time series there is an upward tendency towards half full (possibly at a statistically significant level).

Of course statistical tendencies are very unreliable (a la Taleb on Black Swans). What if we are approaching a turning point due to the growing number of Austrians (approaching a critical mass?) and the way they are overcoming the traditional put downs (too ideological, weird epistemology, no empirical research, don't uderstand math etc)?


Good point. Dan Klein has published several essays in EJW highlighting some of the distortions you mention. The Fed, the World Bank and IMF, etc. have really impacted the way research is done, and the questions that are asked.

But still, I would suggest that within academic economics in general the people we respect the most as members of that profession are those that succeed along the dimensions I mention, rather than those who have either political influence or popular appeal. In other words, we still value the John Bates Clark Award and Nobel Prize winners over those who testify or those who write in the NYT. If my claim is correct, then I think we know what the criteria of success are in our profession, etc. We know, in short, what it means to ultimately "win" this game of professional academic economics.

But my claim could be factually wrong and we only pay lip service to the academic game, but reward the peddling of policy advice and the promotion of popular fallacies.


Mr Champion:

I'm interested in one item in this list you provided:

"[Many Austrians] are overcoming the traditional put downs (too ideological, weird epistemology, no empirical research, don't uderstand math etc)?"

I agree with excessive ideology, lack of empirical work and ignorance in math (I add: econometrics), but I had a mixed opinion on "weird epistemology".

I've always read Mises's arguments about epistemology in this way:

(1) We can get some general knowledge out of logic, which he called theory;
(2) We can use this general knowledge to understand something about the real world, which he called history;
(3) This general knowledge is, however, insufficient for a satisfactory understanding of the real world.

That doesn't sound weird, it appears to be commonsense. Remove point (3), and it all looks absurd.

However, I have sometimes read restatements of Mises's epistemology which neglected the third statement, which have resulted in an overstatement of the power of theory and a loss of interest in historical analysis.

That is how the Austrian method is read by most amateurs (like, me), that is how most critics see it (Samuelson's critic is well known), but is it how it should be, considering Mises's writings? Without statement (3) Mises seems a weird hyper-rationalist, with statement (3) everything looks commonsense.

At the very end, I think that most economists know that falsification is almost impossible in economics. King and Plosser, for instance, made a model of neutral money which mimicked the time series properties which were considered proofs of non-neutrality, showing that monetary neutrality or non-neutrality couldn't be decided empirically (that's my interpretation). David Romer's textbook "Advanced Macroeconomics" explicitly says that most macro models (the new-keynesians) have evolved by adding ad hoc hypotheses to take into account new empirical observations, making falsification impossible (It appears to me that this method looks like adding epicycles to epicycles in a Ptolemaic system: with the difference that, if Mises view of economics is right, there will never be a Copernicus explaining everything in just a few words).

Besides, apriori (theoretically driven) model building is the norm in most works: most times people assume general equilibrium, assume Nash equilibria, everybody assume maximizing behaviour. Small predictions can be tested (Phillips curves, for examples), but big models can't.

Are we sure that there is a difference, other than the lexicon and the twin mythologies of almighty apriorism (among some Austrians) and of methodological positivism (among some orthodox economists), in methodology?

Sorry for the length and the partial O.T.

My "Ignorance in math" doesn't sound very polite. I could charge my english for it but it would be ridicolous, as I just didn't read it twice: "lack of interest in math" sounds better. :-)


That seems about right to me.

"But my claim could be factually wrong and we only pay lip service to the academic game, but reward the peddling of policy advice and the promotion of popular fallacies." Eh! You always have the true church and the earthly church. I think the earthly church is corrupted by external rents and so on. But I agree with your view that the true church lives in the earthly church anyway.

Rafe and Liberty First,

I don't think the profession is as rigid even on methodology. I was just asked to write the entry in a major encyclopedia on economic methodology for the 21st century. The piece is wide ranging and will discuss more than just "Austrian" methodology, in fact, my discussion of "Austrian" ideas will be in the context of idea of "analytic narrative" approach to modern political economy --- which I would argue fits Liberty First points 1-3. But I also discuss experiments, field experiments, computer simulation, etc. The world has changed drastically since 1960s and 1970s.

Plus economists have branched out into even more flexible academic disciplines in business, law and policy. Roger Koppl calls the emerging economics BRICE --- I hope he will post on this to the readers here because whatever my disagreements with Roger he captures better than anyone the intellectual excitement in modern economics that creates intellectual space for Austrian economics in a way that many of our teachers never could have imagined and in fact because they couldn't imagine are failing to see it!!! This is true for followers of the school as well.

Reject heterodox labels, we are fully situated in the mainline of economic research and teaching. And we have the spots on the syllabus, invitations to university seminars, organizations of panels at conferences, publications in the journals, editorships, and books with major publishers to show it. What we must recognize is that the internet crowd while loud and still important, is in a fundamental sense behind the times when it comes to the academic progress Austrians have made --- even if the internet community remains a vital resource for students and the interested layman.

Roger --- please tell everyone about the exciting developments in our discipline.


Libertyfirst is right : most of what passes as "Austrian economics" these days is just a lot of idiosyncratic commentary on some often misunderstood, confused, out-of-context ideas, very little analytical value or interest (this goes on in other schools as well, but given the small numbers of self-described Austrian Economists the diseases is more critical here).

I mean, just one example, how could people waste so much paper and bites on beating a dead horse like "a priori" while not even going to read the original philosophical sources ?!

Roger Koppl, on the other hand, is equally right about the political distortions of the so called mainstream. There's a huge quantity of so called scholarship produced each year to simply give some "intellectual" justification to government programs. For instance, by regulation, every measure that the European Commission takes must have several prior and post application studies ! of course without exception, these studies that take the need for those measures as axioms and if they challenge something it's only some marginal questions and their application.

The "ideology" part : yes it's true its an obstacle to express your opinions in some places and in some moments, but it's not - or it shouldn't be an obstacle - of thinking through problems and finding the best arguments. I mean Herbert Spencer was as radical as any self-described "anarcho-capitalist" today, but he could offer perennial insights in many questions that even those who didn't accept his views found challenging and had to accept. Not the same can be said today of many self-described "anarcho-capitalist" who myopically rant on some obsessive points and completely supress the larger background and the many other issue that are equally important and have to be recognised as such and tackled even if they don't contribute to the abolition of the stae as it were". This "poverty" of focus and understanging is a big barrier in this case to good scholarship.


I think you are completely underselling Austrian economics. Yeah, sure, some of the time we try to think about "apriorism" and such. Even there, however, I think critics often come up short. I mean when Lakatos says "hard core," we all nod, but when Mises says "a priori" everyone runs screaming from the room. Goodness! Mises was decades ahead of the curve on methodology, anticipating Lakatos. And yet no one seems to see the connection.

Anyway, that stuff is simply NOT "most of what passes as 'Austrian economics' these days." Most of what passes for Austrian economics today is tough, well reasoned, deeply empirical work on applied problems. Who are the young stars? There is Pete Leeson famous for his deeply empirical work on pirates and other problems in decentralized social cooperation. There is Chris Coyne, famous for his deeply empirical work on foreign aid and nation building. The Financial Times called Chris's recent book the most important on the topic *in fifty years*! There is Ben Powell who has done some fine experiments as well as deeply empirical work on sweat shops. And so on. It is just factually wrong to say we're all gazing at our belly buttons. Even the older generations such as Steve Horwitz and Pete Boettke mostly do deeply empirical applied work. And when we do "think" pieces, they are simply not rehashing tired methodological arguments. My stuff on complexity theory and algorithmic information theory might be an example. Or Mario Rizzo's work on slippery slopes. Or Glen Whitman on internalities. Update your model.

And all this exciting deeply empirical applied work has an audience that didn't exist when I was coming up. "Empirical" used to mean "econometrics." And that used to mean that you had a structural model informed by theory and a stochastic error term you arbitrarily assumed to be normally distributed. Today, "emprical" means laboratory experiments, field experiments, analytical narratives, and so on. And when you do econometrics today, you may use nonparametric computation rich methods of the sort Buzz Brock has touted. The basic insight that we need to do comparative institutional analysis has footing in today's mainstream. That fact gives Austrians a non-Austrian audience for their empirical studies. The rise of complexity theory has brought on a mathematics that is quite compatible with Austrian logic. George Selgin and Peter Klein, for example, have restated Menger's theory of the evolution of money using nonlinear Polya urn processes pioneered by Brian Arthur and his co-authors. New Institutional economics and evolutionary game theory have brought evolutionary logic back to the mainstream, thus opening up an audience for many Austrian arguments on spontaneous order. And so on. Right now the profession is willing to listen to "Austrian" arguments. Indeed, the mainstream is now *making* arguments that were made only by Austrians when I was an undergraduate.

Pete Boettke is right to celebrate "the exciting developments in our discipline." The emerging new orthodoxy is highly "Austrian" in many ways and it gives us an opportunity to put up or shut up. Methodological prejudices are no longer boxing out Austrians. We have a huge opportunity right now. Let's grab on with both hands.

OK, point taken about updating my model. But I am actually aware, in part, of the more recent that you cite and it is my opinion - which might be wrong, of course - that none of them has been able to make an important advancement in the "core" arguments typically connected with the Austrian School of Economics, of the kind Lucas for instance did with Friedman's legagy. This doesn't make these works any less important, but there is an intellectual sclerosis here somewhere if I were to put a diagnosis. My - maybe - harsh comment above was ment much like as a restatement of the old saying : "Where there is a lot of smoke, there must also be a fire". Anyway, I actually agree with many things that you say, including the "Austrianisation" of mainstream. Maybe it's me who is myopic or misunderstands the situation.

That sounds pretty reasonable to me, Bogdan, although I don't really see the sclerosis you mention. Boettke's work on formal vs. informal rules is "core" stuff IMHO. Steve Horwitz's integration of Austrian macro and Yeagerian macro is core stuff. Roger Garrison's recent book on macroeconomics shows that the Austrian cycle theory is in part an over-investment theory. That's pretty fundamental stuff, IMHO. I think the whole school has taken a major epistemic turn post-Lachmann and I think that's very much a "core" issue. And so on. It all depends on how high you set the bar, but I don't think the contemporary Austrian school comes up short on theory at all. On the contrary, I think that a strong suit for us.

Theoretical knowledge can grow in three ways : intensively, extensively and synthetically. It's very important to show that it can apply also to this or that matter; it's very important that it can mesh with this or that theory or insight from a certain author/school...but it is very important for knowledge to reflect on itself and look for missing questions and new questions that, in the end, might generate a restatement of that knowledge itself... I hope I haven't been very opaque here, so let me give an example. Austrians talk a lot of the importance of disequilibrium, and some economists have even introduce to some extent disequilibrium in mathematical expressions of economics, but the entire edifice of economics is actually based more or less on the maximisation postulate, the insight that gains must in the end more or less equate the effort expended. But what if this whole framework, for instance, could be replace with something else that is more encompassing for all the other insights? Maybe it cannot be done, but it's worth asking more than trying to explain the life in ninja villages of pre-modern Japan through the notion of spontaneous order or game theory, for instance. Anyway, now I digress so you can ignore this comment because I don't really have a disagreement.

Koppl's discussion of the "new orthodoxy" is right on. Roger saw this sooner than most of us because he had his finger on the pulse of the profession --- never a head in the sand Austrian, Roger was a professionally engaged Austrian. That is why he was in the J of Econ Perspectives, that is why he found ways to be on panels at the AEA meetings, that is why he is an editor at one of the top journals in the social sciences -- JEBO (rank 29 I believe).

My advice to young "Austrians" be professional engaged like Koppl, and strive to be creative like Koppl. Be a responsible professional like Koppl.


Dear professor Boettke,

I'm as engaged as I can possibly be for now, and if, one day, I will stil be alive and will find a school that I think cares more about scholarly debate than personal prestige, power politics, quantity of paper wasted per year, the size of my nose and other caprices (plus i'll get some subsidies for another few years - I've learned what leverage is the hard way) I'll probably be professional in your sense as well. Anyway, I'm begining to feel that I'm the contrarian commenteer on this blog and I'm starting to feel unconfortable with such a conventional position. What you're saying is of course true and even commonsense, and I enjoyed many of the comments you made on this blog


It is perfectly fine to be a contrarian, but it is another think to be cranky. Try to love your job for what it offers and enjoy your colleagues and going to work everyday. Once you come to appreciate how wonderful it is to live the "life of the mind" and be amazed that you are getting paid to live that life, then you will really find your place.

I don't think anyone gets into this to grasp power, obtain prestige or waste paper. Everyone is just trying to figure it all out.


I had to look for the word crancky in the dictionnary because I didn't really the exact meaning of it other than "crazy". It seems to have some bad connotation (ill-tempered) and some, at least originally, rather neutral connotations (eccentric). I'm actually neither one - not the kind of "let's blow the government", "down with authority" "anarchist" student you probably have in mind (eccentricity - as far as I'm concerned - is an art, I'm just plainly myself, a very boring person in fact). In any case, I take it from your comment that we have had quite different experiences with university level educational systems. And the direct conversation we have here is actually a proof to that.


We do have different experiences I am sure, but also I think a different perspective on the experiences we do share in common. I hope you find the joy in academic life because you are obviously very well read, and very skilled as a thinker. Don't be cranky, laugh at the silliness that does go on, and concentrate hard on the good stuff.

Look I don't buy the philosophy of science implicit in this for economics, but I think to me the quest described by Richard Feynman in his book The Pleasure of Finding Things Out about sums up our task and why it is so cool. As I tell students and family members --- think about it, I get to play with ideas all day long, I get paid to read books and articles, debate them, and then talk to students about them. How cool is that?!

Anyway, see this interview with Feynman ---

Despite the contrary impression that I seem to have created, I'm actually someone who has a very high respect for learning and academic life. And despite your perception, I really wish to deny - with the risk of being wrong, of course - that I'm "cranky", just maybe a little more direct in questionning some things. But even though experience partly erroded my once high regards and expectations from academia, I also hope to pursue and academic career. Maybe one day.


The distinction is between "being a crank" and "being cranky." The former is someone who is viewed as being somewhat crazy, probably pushing a theory or view that others view as incorrect. Some (but not all) mainstream economists view some (or even all) Austrians as being "cranks," although that term is really more applicable to someone who is convinced that they have invented a machine to travel faster than the speed of light or backwards in time.

"Being cranky" is really just being sort of socially unhappy and complaining excessively. One's ideas may be perfectly reasonable and sound, indeed, I know more than one Nobel Prize winner who could be described as being "cranky." However, as someone who is probably viewed here by many as being himself somewhat cranky, I am not the best person to judge your degree of crankiness here.

The comments to this entry are closed.

Our Books