Per-Olof Samuelsson On Richard Salsman's Anti-Austrian Views
Apparently, Richard Salsman has written some kind of list detailing 12 complaints he has about Austrian economics, published on Facebook. Per-Olof Samuelsson has now written a point by point response to it which you can read here.
I basically agrees with most of Samuelsson's responses, though I would like to make a few additional points:
1) Contrary to what Samuelsson writes, praxeology per se is not linked to Mises' Kantian epistemology. Praxeology is a deductive system based on a few axioms, most importantly the action axiom. While praxeology like all other sciences of course needs some form of epistemological justification, it does not in itself contain any epistemology, and certainly not Kantian epistemology. It can just as well, or actually better, be justified with epistemological Aristotelianism or Objectivism.
2) I believe in Mises' view, as opposed to Reisman's, theory of the basic rate of profits. I similarly do not agree with Reisman's rejection of the concept of opportunity cost.
3) As Samuelsson notes, Austrian economícs do not "disdain" math in general. It only disdains its use where it is unnecessary or for other reasons improper. Mathematical techniques like Matrix algebra and Lagrange multipliers reduces, not increases, our understanding of for example consumer choices, and are moreover a distraction from the real issues. For more on this subject see my post "The Real Problem With Non-Austrian Economics".
4) Samuelsson comments on Salsman's criticism of Austrian economics for quote "10) their neglect (or ridicule) of the marginal tax-rate theory of supply-side economists." by saying he is not familiar with that issue.
My comment on this is that (most) Austrians do recognize that higher marginal rates of taxation reduce productive activities. I certainly do. And most Austrians would probably also agree that when tax rates are high enough, tax rate reductions can in fact increase tax revenues because of for example increased productive activities and decreased tax avoidance. It is highly likely that the Kennedy tax cuts of the 1960s (which reduced the top rate of taxation from 91% to 70%) in fact increased revenues.
But it is a lot less likely that at the more moderate tax rates we have today, tax cuts are self-financing. Bush's reduction of the top federal rate of taxation from 39.6% to 35% probably increased economic growth, but not by enough (even also considering decreased tax avoidance) to increase tax revenues.
I basically agrees with most of Samuelsson's responses, though I would like to make a few additional points:
1) Contrary to what Samuelsson writes, praxeology per se is not linked to Mises' Kantian epistemology. Praxeology is a deductive system based on a few axioms, most importantly the action axiom. While praxeology like all other sciences of course needs some form of epistemological justification, it does not in itself contain any epistemology, and certainly not Kantian epistemology. It can just as well, or actually better, be justified with epistemological Aristotelianism or Objectivism.
2) I believe in Mises' view, as opposed to Reisman's, theory of the basic rate of profits. I similarly do not agree with Reisman's rejection of the concept of opportunity cost.
3) As Samuelsson notes, Austrian economícs do not "disdain" math in general. It only disdains its use where it is unnecessary or for other reasons improper. Mathematical techniques like Matrix algebra and Lagrange multipliers reduces, not increases, our understanding of for example consumer choices, and are moreover a distraction from the real issues. For more on this subject see my post "The Real Problem With Non-Austrian Economics".
4) Samuelsson comments on Salsman's criticism of Austrian economics for quote "10) their neglect (or ridicule) of the marginal tax-rate theory of supply-side economists." by saying he is not familiar with that issue.
My comment on this is that (most) Austrians do recognize that higher marginal rates of taxation reduce productive activities. I certainly do. And most Austrians would probably also agree that when tax rates are high enough, tax rate reductions can in fact increase tax revenues because of for example increased productive activities and decreased tax avoidance. It is highly likely that the Kennedy tax cuts of the 1960s (which reduced the top rate of taxation from 91% to 70%) in fact increased revenues.
But it is a lot less likely that at the more moderate tax rates we have today, tax cuts are self-financing. Bush's reduction of the top federal rate of taxation from 39.6% to 35% probably increased economic growth, but not by enough (even also considering decreased tax avoidance) to increase tax revenues.
posted by stefankarlsson at 12:16 AM
11 Comments:
Thanks for posting this, Stefan! My only comment so far is that I agree that the "thin overlay" of Kantianism in misesian praxeology can be peeled off. I think I will do it myself some time, but it will require time and patience.
And thanks, too, for the information on Salsman's "objection 10". I delivered a "non-answer" to this, since I wasn't sure what Salsman was talking about - although I suspected it had something to do with the "Laffer curve". Maybe I will later add a comment on this to my essay.
Mr. Karlsson,
if it's not too much trouble, could you please elaborate why exactly you don't agree with Reisman on the theory of profit and the concept of opportunity cost.
Thanks!
Stephan,
What year were you referring to that didn't increase in tax revenue? I haven't seen one, at least before the meltdown. Either way, the real issue is not whether a tax cut pays for iteself, but rather the extent to which the government crowds out, hobbles and interferes with the productive sector. You could cut the tax rate down to zero, but as long as the government can just print money to increase its spending, it will still ultimately kill the economy.
You're welcome, Per-Olof!
Vladimir: I'll probably return to these issues later in later posts, though I can't promise any date.
Danmcl: looking at the crude empirical record is not really a valid method for determining exact ceteris paribus quantitative effects as a lot of other factors are involved (The meltdown that you mentioned have of course lowered revenues, but then again, the preceding bubble increased them).
You are certainly right however that maximizing tax revenues is hardly the best premise for deciding optimal tax policy.
But since supply-siders often base their case for tax cuts on the assertion that tax rate cuts will increase tax revenues, and since Salsman was criticizing Austrians for neglecting or disputing that theory, the validity of that theory needed to be discussed in this context.
Regarding your first objection: I think praxeology is linked to a Kantian epistemology for the simple reason that Mises himself presents it in a Kantian language or a Kantian "conceptual framework". He speaks of it in such terms as "a priori categories" or the "structure of the human mind" - as if it were not a matter of reality "in itself" but rather of our own perception of reality.
Now, I know that Rothbard and others have tried to get away from this Kantianism by talking about another kind of "apriorism" - what they call "Aristotelian apriorism". But I'm not quite happy with that. I don't think it gets to the core of the issue. It strikes me as just playing with the concept of "apriorism" or "a priory knowledge".
But, so far, this is just an issue I am struggling with. If and when I find a full answer, I will publish it in some form.
Per-Olof, Rothbard regarded praxeology as "a priori" with emphasis on the quotation marks, or only "a priori" in the same sense as for example the truths of "1+1=2" or "A is A". This is to say, it is empirical in the sense that it is not innate knowledge, but by the standards of Popperian falsificationist empiricism which regards any truth that is not falsifiable as “non-empirical”, it is “a priori”. Here is Rothbard's explanation of this:
"Whether we consider the Action Axiom “a priori” or “empirical”
depends on our ultimate philosophical position. Professor Mises, in the neo-Kantian tradition, considers this axiom a law of thought and therefore a
categorical truth a priori to all experience. My own epistemological position rests on Aristotle and St. Thomas rather than Kant, and hence I would interpret the proposition differently. I would consider the axiom a law of reality rather than a law of thought, and hence “empirical” rather than “a priori.” But it should be obvious that this type of “empiricism” is so out of
step with modern empiricism that I may just as well continue to call it a priori for present purposes. For (1) it is a law of reality that is not conceivably
falsifiable, and yet is empirically meaningful and true; (2) it rests on universal
inner experience, and not simply on external experience, that is, its evidence is reflective rather than physical; and (3) it is clearly a priori to complex
historical events."
Well, I have already read this article by Rothbard. I think it is a step in the right direction. If I ever get around to write "Praxeology Refuted" (or "Praxeology Vindicated", should I change my mind), this is something I will take up.
@ Stefan:
One small side note, I know it's very common for austro-libertarians to put Mises in a philosophical tradition called 'neo-Kantianism', but this can give the wrong impression when reading this: http://en.wikipedia.org/wiki/Neo-Kantianism
On the praxeology/economics issue I'd like to add that imho Rothbard's justification of the use of the praxeological method suffices for its application in economics. But the meta-justification, i.e. the justification of praxeology as such, as the embodiment of a distinct field of science, namely the science of human action, does imply some elaboration in stead of just saying, "we use the deductive-nomological model of scientific explanation wherein we have the axiom "humans act" as the a priori/non-falsfifiable axiom wherefrom we derive the complete science of human action".
Also, one can see in the English version of Mises' Human Action, in the first chapters, that references to the neo-Kantian tradition were omitted in order to adapt the treatise to its Anglo-Saksian audience. One is at a loss to find explicit references to the Kantian double dichotomy of "a priori-a posteriori, analytical-synthetic" propositions. Although Mises of course is making some kind of Kantian case which is elaborated on in Hans Hoppe's "Economic Science and the Austrian Method".
I wonder what you mean with Aristotelian and/or Objectivist epistemology in praxeology other than that the first implies causal-realism (which implies of course a lot philosophically speaking; which is used by Austrian scholars as Salerno, Klein) and that the second implies the axiom, "reality exists", which comes across to me as somewhat odd as a epistemological input of praxeology, because it seems to me to imply the to Kant dedicated fallacy of total idealism which Mises solved with stating the axiom of Human Action. (IMHO he solved the truthness of the implicit knowledge contained in Descartes' "I think, therefor I am" because the axioms of human action solves the alleged separation between mind and body, between the res extensa and the res cogitans. The axiom "reality exists" doesn't do that.
Best regards,
Arend
The subtitle of the reply to Salsman is "or: Richard Salsman is a Moron".
That ad hominem language is in poor taste - I have seen Richard lecture at Harvard and other "lion's dens" where he provides very persuasive and rational discourse. He is no moron, and calling him one does not lend credence to your points.
I found Salsman's points on Youtube here (http://www.youtube.com/watch?v=pChh2wtHZnQ). They are simply *points*, not fully fleshed out arguments.
it's so great. I never saw a great article like this before. thanks for letting me know.
It's Andy from http://howtotrade.biz
Post a Comment
<< Home