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Criticisms

General criticisms

Some economists have argued that Austrians are often averse to the use of mathematics and statistics in economics.[83] Economist Bryan Caplan argues that Austrians have often misunderstood modern economics, causing them to overstate their differences with it. For example, many Austrians object to the use of cardinal utility in microeconomic theory; however, microeconomic theorists go to great pains to show that their results hold for all strictly monotonic transformations of utility, and so are true for purely ordinal preferences.[84][85] Economist Paul Krugman has stated that because Austrians do not use "explicit models" they are unaware of holes in their own thinking.[86] Economist Benjamin Klein has criticized the economic methodological work of Austrian economist Israel M. Kirzner. While praising Kirzner for highlighting shortcomings in traditional methodology, Klein argued that Kirzner did not provide a viable alternative for economic methodology.[87] Economist Jeffrey Sachs argues that among developed countries, those with high rates of taxation and high social welfare spending perform better on most measures of economic performance compared to countries with low rates of taxation and low social outlays. He concludes that Friedrich Hayek was wrong to argue that high levels of government spending harms an economy, and "a generous social-welfare state is not a road to serfdom but rather to fairness, economic equality and international competitiveness."[88] Austrian economist Sudha Shenoy responded by arguing that countries with large public sectors have grown more slowly.[89]

Methodology

Critics generally argue that Austrian economics lacks scientific rigor and rejects scientific methods and the use of empirical data in modelling economic behavior.[10][83][90] Some economists describe Austrian methodology as being a priori or non-empirical.[10][25][83][91] Economist Mark Blaug has criticized over-reliance on methodological individualism, arguing it would rule out all macroeconomic propositions that cannot be reduced to microeconomic ones, and hence reject almost the whole of received macroeconomics.[92] Economist Thomas Mayer has stated that Austrians advocate a rejection of the scientific method which involves the development of empirically falsifiable theories.[90][91]

Monetary theorist Richard Timberlake, an advocate of free banking, rejects von Mises' view that inflation must refer to an increase in the money supply. Timberlake notes that economists since the time of John Stuart Mill have recognized the distinction between increases in the money stock and increases in the general level of money prices.