Amanojack comments on Open Thread, May 1-15, 2012 - Less Wrong
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Block and Rothbard do not understand Austrian economics and are incapable of defending it against serious rationalist criticism. Ludwig von Mises is the only rigorous rationalist in the "school". His works make mincemeat of Caplan's arguments decades before Caplan even makes them. But don't take my word for it - go back and reread Mises directly.
You will see that the "rationalist" objections Caplan raises are not new. They are simply born out of a misunderstanding of a complex topic. Rothbard, Block, and most of the other "Austrian" economists that followed merely added another layer of confusion because they weren't careful enough thinkers to understand Mises.
ETA: Speaking of Bayesianism, it was also rejected for centuries as being unscientific, for many of the same reasons that Mises's observations have been. In fact, Mises explains exactly why probability is in the mind in his works almost a century ago, and he's not even a mathematician. It is a straightforward application of his Austrian epistemology. I hope that doesn't cause anyone's head to explode.
This intrigues me, could you elaborate?
Sure. He wrote about it a lot. Here is a concise quote:
Also:
Claiming Ludwig in the Bayesian camp is really strange and wrong. His mathematician brother Richard, from whom he takes his philosophy of probability, is literally the arch-frequentist of the 20th century.
And your quote has him taking Richard's exact position:
When he says "class probability" he is specifically talking about this. ...
Which is the the precise opposite of the position of the subjectivist.
And Ludwig and Richard themselves were arch enemies. Well only sort of, but they certainly didn't agree on everything, and the idea that Ludwig simply took his philosophy of probability from his brother couldn't be further from the truth. Ludwig devoted an entire chapter in his Magnum Opus to uncertainty and probability theory, and I've seen it mentioned many times that this chapter could be seen as his response to his brother's philosophy of probability.
I see what you're saying in your post, but the confusion stems from the fact that Ludwig did in fact believe that frequency probability, logical positivism, etc., were useful epistemologies in the natural sciences, and led to plenty of advancements etc., but that they were strictly incorrect when extended to "the sciences of human action" (economics and others). "Class probability" is what he called the instances where frequency worked, and "case probability" where it didn't.
The most concise quote I could find to make my position seem much more plausible:
And here's a dump of all the quotes I could find on the topic, reading all of which will make it utterly clear that Ludwig understood the subjectivist nature of probability (emphasis mine, and don't worry about reading much more than just the emphasized portions unless you want to).
First:
Second:
Third:
Fourth:
Fifth:
Sixth:
Etc. Probability is in the mind. It is subjective, and dependent upon the current state of knowledge of the observer in question. He seems very clear on this matter.
Back to you:
Is it? Let's analyze the full quote:
All he's saying is that taking one's knowledge of the behavior of a class of events the behavior of the individuals of which one knows nothing, and putting it into mathematical notation, does not magically reveal anything about those individual components.
For example (taken from that Mises Wiki link), if you know approximately how many houses will catch fire per year in a neighborhood, but you don't know which ones they will be, transforming this knowledge into mathematical probability theory is no more than a potentially more concise way of describing one's current state of knowledge. It of course cannot add anything to what you already knew.
In fact, this isn't even relevant to the topic at hand. Believe it or not, some people thought probability theory was magical and could help them win at games of chance. This was him responding to that mysticism. I certainly don't see how it makes him not a subjectivist on probability theory, especially when the whole analysis is about states of knowledge etc.
I didn't say he was in the Bayesian camp, I said he had the Bayesian insight that probability is in the mind.
In the final quote he is simply saying that mathematical statements of probability merely summarize our state of knowledge; they do not add anything to it other than putting it in a more useful form. I don't see how this would be interpreted as going against subjectivism, especially when he clearly refers to probabilities being expressions of our ignorance.
It's been a while since I read Man, Economy, and State, but it seemed to me that Rothbard (and therefore possibly von Mises) anticipated chaos theory. There was a description of economies chasing perfectly stable supply and demand, but never getting there because circumstances keep changing.
Double post